SinoMab BioScience Limited — Annual Report 2021

Apr 27, 2022

Contents

• Corporate Information
• Highlights
• Chairman's Statement
• Production Base
• Management Discussion and Analysis
• Directors and Management
• Corporate Governance Report
• Environmental, Social and Governance Report
• Report of the Directors
• Independent Auditor's Report
• Consolidated Financial Statements
• Consolidated Statement of Profit or Loss
• Consolidated Statement of Comprehensive Income
• Consolidated Statement of Financial Position
• Consolidated Statement of Changes in Equity
• Consolidated Statement of Cash Flows
• Notes to the Financial Statements
• Definitions

Corporate Information

DIRECTORS

Executive Director

Dr. Shui On LEUNG (Chairman and Chief Executive Officer)

Non-executive Directors

Dr. Haigang CHEN Mr. Xun DONG Mr. Senlin LIU Ms. Wenyi LIU Ms. Jie LIU (appointed on 14 December 2021) Mr. Lei SHI (appointed on 17 December 2021)

Independent Non-executive Directors

Mr. George William Hunter CAUTHERLEY Mr. Ping Cho Terence HON Dr. Chi Ming LEE (appointed on 15 June 2021) Mr. Dylan Carlo TINKER

AUDIT COMMITTEE

Mr. Ping Cho Terence HON (Chairman) Mr. George William Hunter CAUTHERLEY Dr. Chi Ming LEE (appointed on 15 June 2021) Mr. Dylan Carlo TINKER

REMUNERATION COMMITTEE

Dr. Chi Ming LEE (Chairman) (appointed on 15 June 2021) Mr. Ping Cho Terence HON Dr. Shui On LEUNG

NOMINATION COMMITTEE

Dr. Shui On LEUNG (Chairman) Mr. Ping Cho Terence HON Mr. Dylan Carlo TINKER

COMPANY SECRETARY

Ms. Pui Yin Peony WONG

AUTHORISED REPRESENTATIVES

Dr. Shui On LEUNG Mr. Jianping HUA

REGISTERED OFFICE

Level 54, Hopewell Centre 183 Queen's Road East Hong Kong

AUDITOR

Ernst & Young Registered Public Interest Entity Auditor

LEGAL ADVISER

As to Hong Kong law Paul Hastings

As to PRC law Zhong Lun Law Firm

HONG KONG SHARE REGISTRAR

Computershare Hong Kong Investor Services Limited Shops 1712-1716 17th Floor, Hopewell Centre 183 Queen's Road East Wanchai, Hong Kong

COMPANY WEBSITE

www.sinomab.com

STOCK CODE

3681

FINANCIAL SUMMARY

A summary of the results and of the assets and liabilities of the Group for the last four* financial years, as extracted from the audited financial information and financial statements is set out below:

	For the year ended 31 December
	2018	2019	2020	2021
	RMB'000	RMB'000	RMB'000	RMB'000
Operating results
Research and development costs	(47,283)	(214,342)	(103,402)	(199,113)
Loss before tax	(83,610)	(276,282)	(122,600)	(288,194)
Loss for the year	(83,610)	(276,282)	(122,600)	(288,194)
Loss attributable to owners of the parent	(83,610)	(276,282)	(122,600)	(288,194)
	RMB	RMB	RMB	RMB
Loss per share — Basic and diluted	(0.12)	(0.33)	(0.12)	(0.29)
		As at 31 December
	2018	2019	2020	2021
	RMB'000	RMB'000	RMB'000	RMB'000
Financial position
Non-current assets	38,549	69,123	195,169	445,970
Current assets	50,270	1,215,042	934,354	595,685
Non-current liabilities	32,994	45,574	83,708	263,065
Current liabilities	28,419	106,675	58,804	98,364
Total equity	27,406	1,131,916	987,011	680,226

* Shares were listed on the Main Board of the Stock Exchange under Chapter 18A of the Listing Rule on November 12, 2019.

Chairman's Statement

Dr. Shui On LEUNG

Chairman, Executive Director and Chief Executive Officer

Dear valued Shareholders,

On behalf of the Board, I hereby present the annual report of the Company (together with its subsidiaries) for the year ended 31 December 2021. This year is of particular significance as it marks the 20th anniversary of the Company, an important development milestone. We would like to express our wholehearted gratitude towards your abiding trust and support that witness our growth and accompany us through the years.

Business Overview

The year 2021 is still a challenging year. Since the outbreak of COVID-19 at the end of 2019, new variants including Delta and Omicron, have wreaked havoc around the world. Hong Kong, Mainland China and other parts of the world have been trying to control the pandemic. All staff of the Company remained committed to working with a professional and responsible attitude and made contributions to the Company's business activities and research and development ("R&D") work, achieving fruitful pharmaceutical R&D attainments and breakthroughs. Our flagship product Suciraslimab (SM03) for treating rheumatoid arthritis ("RA") has completed the enrolment of 530 patients for Phase III clinical trial in China on 31 December 2021, which is higher than the targeted enrolment of 510 patients. The Phase III clinical trial is a multi-centre, randomized, double-blind, placebo-controlled, parallel group study to confirm the clinical efficacy and long-term safety in active RA patients receiving methotrexate (MTX). The primary analysis readout is expected in the third quarter of 2022. The efficacy and safety of SM03 has been evaluated in a phase II clinical study in moderate-to-severely active RA patients and has achieved desirable results. Both high-dosage group and low-dosage group met the primary endpoint and showed significantly better performance than the placebo group. We plan to submit the New Drug Application ("NDA") to the National Medical Products Administration ("NMPA") in the first half of 2023 and expect to realise the commercialization of SM03 in the second half of 2023. In the meantime, we will promote the clinical study on the treatment of systemic lupus erythematosus ("SLE"), Sjogren's syndrome ("SS") and other indications with SM03, expanding the scope of SM03 to fulfil unmet medical needs. The Phase II clinical study for SLE is expected to be initiated in China in the second half of 2022.

Chairman's Statement

The R&D of drug candidate SN1011, our key product and third-generation covalent reversible Bruton's tyrosine kinase ("BTK") inhibitor, has also achieved progresses. The Phase I study (first-in-human clinical trial) of SN1011 was conducted in Australia and China in early 2021 and completed in July 2021, which has demonstrated good safety and pharmacokinetics profile. Following the approval of Investigational New Drug ("IND") applications of SN1011 for SLE and Pemphigus by the NMPA on 27 August 2020 and 23 June 2021, respectively, we will launch the Phase II clinical study for pemphigus (for both pemphigus vulgaris ("PV") and pemphigus foliaceus ("PF")) in China in the third quarter of 2022. Besides, after the Reporting Period, the IND application of SN1011 for multiple sclerosis ("MS") has been accepted by the Center for Drug Evaluation, NMPA on 28 January 2022, and the approval is expected in the second quarter of 2022. We plan to initiate the global Phase II clinical trial for MS in China and the United States in the third quarter of 2022.

We have submitted the IND application for the Company's First-in-Class asthma therapeutic product SM17 (humanised anti-IL17RB monoclonal antibody for injection) to the U.S. Food and Drug Administration ("FDA"), and the application has been approved. SM17, the world's first monoclonal antibodies targeting IL17BR co-developed by us and LifeArc (a medical research charity based in the United Kingdom), covers a wide range of indications, including indications with large market volumes such as asthma and diseases with high mortality rates such as idiopathic pulmonary fibrosis, and potentially displaying differential clinical benefits over other currently drugs available in the market. We plan to initiate the First-in-Human (FIH) clinical study in the United States in the first quarter of 2022 at the earliest.

Another drug candidate, SM06, is a second-generation humanised anti-CD22 antibody derived from SM03 that works with the same mechanism of action. We believe that SM06 will be less immunogenic and thus more suitable for treating chronic diseases requiring long-term administration, such as SLE, RA and other immunological diseases. We are currently in the process of optimising production for SM06, collecting process and pre-clinical data for speedy filing of SM06 in the U.S. for global clinical studies. We expect to submit the first IND application for SM06 in 2022 at the earliest.

Our innovative R&D strength and the market prospects of drug candidates also bring us greater financial support. In September 2021, we entered into the first license agreement to grant the right of developing and commercializing SN1011, a major product of the Company, in the field of treatment of renal diseases worldwide, which manifests the potential of SN1011 through industrial recognition. The Company has received US\$4 million upfront payment in 2021 under the License Agreement and is entitled to up to US\$183 million development and sales milestone payments. We will continue to seek more cooperation opportunities to further diversify our portfolio of drug candidates and expand our global reaches.

We have two production bases that can provide the foundation for the stable clinical and commercial productions of portfolio product candidates. We have been constructing our Suzhou plant with a production capacity of 32,000 litres in the Suzhou Dushu Lake High Education Town, China. The headquarters together with the plant in the same site has a total area of about 75,000 sq.m., which consists of a manufacturing plant, a pilot plant, an R&D centre, a quality control facility, a clinical study centre and an administration building. The construction of a pilot facility, including administrative offices, process development and quality control laboratories and R&D laboratories in the Suzhou base was completed in 2019. The administration facilities have been in operation since late-2020 to support ongoing and new product development projects. In alignment with the Company's development plan of expanding R&D and product development capacities, we have established a new R&D and CMC laboratories in the Suzhou base, which is commissioned with a full set of equipment and has been put into service in December 2021. We also have a production base with a capacity of 1,200 litres in Haikou, the total operation area of which has been expanded from approximately 4,526 sq.m. to approximately 19,163 sq.m. The base consists of a clean area for processing, a controlled-not-classified (CNC) area for supporting activities, utility rooms, quality control laboratories, warehouses and administrative offices, which can satisfy the clinical and preliminary marketing requirements.

Chairman's Statement

We have developed a platform across the whole industry chain, which consists of target identification, drug candidate development, clinical trials, pre-clinical research, clinical production, quality control, quality assurance, regulatory approval and commercial-scale production. Leveraging our full-spectrum platform that leads in the Greater China region, plus the constantly expanding R&D and production capacities in Hainan and Suzhou, we manage the product development programs more effectively, resulting in improved efficiency of expanded R&D activities, speedy clinical studies and commercialization of antibody drugs, reinforcing our commitment to growing into an innovation-driven biopharmaceutical company with strengths in R&D, production and commercialization of diversified products for sustainable growth and development.

Sustainability response to COVID-19

Faced with the COVID-19 pandemic, the Company cares about the physical and mental health of staffs and takes a series of epidemic prevention and control measures to protect the staffs. In addition to arrangements for conducting temperature checks and distribution of masks in the workplace, we offer flexible working programmes where applicable. To follow the social distancing policy and to reduce group gatherings, we also apply digital communication devices to hold board and board committee meetings, and staffs' meetings. Meanwhile, we strengthen the hygiene and cleaning procedures to comply with the guidelines issued by health authorities.

Outlook

In the macro environment where the world is fighting the COVID-19, public health becomes the focus of the world, and the pharmaceutical sector receives much attention in the capital market. In February 2022, nine departments, namely the Ministry of Industry and Information Technology, the National Development and Reform Commission, the Ministry of Science and Technology, the Ministry of Commerce, the National Health Commission, the Ministry of Emergency Management, the National Healthcare Security Administration, the NMPA and the National Administration of Traditional Chinese Medicine, jointly released the Plan for Development of Pharmaceutical Industry over the 14th Five-Year Plan Period. The document sets the goals of strengthening the innovation capacity, improving industry chain and supply chain, improving the supply support mechanism, upgrading the manufacturing level, intensifying the industrial upgrading and enhancing the international competitiveness. In view of the favourable factors of international environment and national policies, we expect a promising prospect. We will devote to the vision of independent innovation, advance the novel drug target identification, further expand the product portfolio, develop greater scope of indications for drug candidates and strengthen product R&D, production and commercialization capacities, hoping to grow into a global leader in novel treatments of immunological diseases who continuously contributes towards the pharmaceutical field.

In its 20 years of history, the Company has been committed to antibody R&D. With the original aspiration, we will remain dedicated to discovering and developing novel drug targets, advancing treatments for immunological diseases to fight for patients' well-being; continue to explore cooperation opportunities, consolidate our position in the capital market and fulfil the commitments to shareholders and the society. Last but not least, on behalf of the Board and management of the Company, I hereby express the sincerest gratitude again to all shareholders and investors for the enduring support, to all employees for the unremitting effort and to everyone for the unselfish contribution in the pandemic. I sincerely hope that we will embrace a more prosperous year together!

Chairman, Executive Director and Chief Executive Officer Dr. Shui On LEUNG 21 March 2022

Production Base

Haikou Production Base

Haikou Production Base, located in Haikou, Hainan Province. Our Haikou Production base consists of a total operational area of approximately 19,163 square meters with a production capacity of 1,200 litres which serves for our clinical and initial marketing needs.

Suzhou Production Base

Our Suzhou Campus consists of a manufacturing shop, a pilot plant, an R&D centre, a quality control facility, a clinical study centre and an administration building. Upon completion of the Suzhou campus, the production base would be over 32,000 litres.

Suzhou Campus, located in Suzhou Dushu Lake High Education Town* Topping-out ceremony for our Suzhou Campus in December 2021

OVERVIEW

We are the first Hong Kong-based listed biopharmaceutical company dedicated to the research, development, manufacturing and commercialization of therapeutics for the treatment of immunological diseases, primarily monoclonal antibody ("mAb")-based biologics. Headquartered in Hong Kong, we strive to become a leading global biopharmaceutical company for the development of novel drugs to fulfil unmet medical needs through our Hong Kong-based R&D and innovation, and PRC-based manufacturing capabilities. We have been dedicated to R&D since our inception, and have built a pipeline of mAb-based biologics and new chemical entities ("NCE") addressing indications against a plethora of immunological diseases.

Our flagship product, SM03 (Suciraslimab), is a potential global first-in target mAb for the treatment of rheumatoid arthritis ("RA") and potentially for the treatment of other immunological diseases such as systemic lupus erythematosus ("SLE"), Sjogren's syndrome ("SS") as well as non-Hodgkin's lymphoma ("NHL"), and other indications. The phase III clinical trial in RA has completed on 31 December 2021 its enrollment of 530 patients, which is beyond the original target of 510 patients. The primary analysis readout is expected in the third quarter of 2022. We plan to file our New Drug Application ("NDA") with the National Medical Products Administration of the People's Republic of China ("PRC") (the "NMPA") in the first half of 2023 and expect to commercialize Suciraslimab by the second half of 2023.

Our key product, SN1011, is a third generation covalent reversible Bruton's tyrosine kinase ("BTK") inhibitor, and was designed for high selectivity and superior efficacy for potentially the long-term treatment of patients with chronic immunological disorders. A phase I study has been completed in China and Australia, and demonstrated good Pharmacokinetics ("PK") and safety profile. A phase II study in pemphigus vulgaris ("PV") is scheduled to be initiated in the third quarter of 2022. An IND application in multiple sclerosis ("MS") was submitted and accepted by the Center for Drug Evaluation (the "CDE") of the NMPA in January 2022. The Company is planning a parallel IND submission for multiple sclerosis (MS) in the U.S. in the second quarter of 2022, and subsequent initiation of a global phase II trial in the third quarter of 2022. In addition to the above indications, the compound has also received regulatory approval for conducting clinical studies on systemic lupus erythematosus (SLE) in China.

Another key product, SM17, is a first-in-class and first-in-target humanised anti-IL 17RB antibody. The IND application was submitted and accepted by the U.S. Food and Drug Administration ("FDA") in February 2022 and was subsequently approved by the FDA in March 2022. The First-in-Human (FIH) study is expected to start by the first quarter of 2022 at the earliest. The compound has the potential for treating asthma, atopic dermatitis, and idiopathic pulmonary fibrosis.

Our other drug candidate, SM06, is a second-generation humanised anti-CD22 antibody derived from SM03 (Suciraslimab) with the same mechanism of action. The compound is at IND enabling stage for U.S. submission, and currently in the process of optimization for clinical studies by the first quarter of 2023.

Our vision is to become a global leader in the innovation of therapeutics for immunological and other debilitating diseases.

BUSINESS REVIEW

The Group is principally engaged in research and development of pharmaceutical products.

The operating performance and the progress of the Group's clinical projects during the year under review and future prospects are contained in the preceding Chairman's Statement and in this section.

The Group has no immediate plans for material investments or capital assets, other than as disclosed in the section headed "Business Overview" in the preceding Chairman's Statement and in this section.

A brief review on the business operation and clinical projects currently undertaken by the Group is set out below.

PROGRESS OF CLINICAL PROJECTS

Product pipeline

Flagship product

SM03 (Suciraslimab)

Our self-developed SM03 (Suciraslimab) is a potential first-in-target anti-CD22 mAb for the treatment of rheumatoid arthritis (RA) and potentially for other immunological diseases such as systemic lupus erythematosus (SLE), Sjogren's syndrome (SS) as well as non-Hodgkin's lymphoma (NHL). Suciraslimab adopts a novel mechanism of action, which differentiates itself from the current treatments available in the market. Suciraslimab for RA is currently in Phase III clinical trials in China, and we expect it to be our first commercially available drug candidate.

We plan to rapidly advance the development of Suciraslimab. On 31 December 2021, Suciraslimab (SM03) phase III clinical trial for RA has completed its enrollment of 530 patients, which is beyond the original target of 510 patients. The Phase III clinical trial is a multi-center, randomized, double-blind, placebo-controlled, parallel group study to confirm the clinical efficacy and long-term safety in active RA patients receiving methotrexate (MTX). The efficacy and safety of Suciraslimab was previously evaluated in a phase II clinical study in moderate-to-severely active RA patients. The study results were published recently and shown that Suciraslimab at a dose of 600 mg with 4 and 6 infusions respectively, were both efficacious and well-tolerated throughout the 24 weeks of treatment when compared with the placebo group. Suciraslimab was effective in suppressing disease activity and alleviates symptoms of moderate-to-severely active RA patients receiving stable doses of background MTX. The primary analysis readout for Phase III studies is expected in the third quarter of 2022. We plan to file our New Drug Application ("NDA") with the National Medical Products Administration of the People's Republic of China ("PRC") (the "NMPA") in the first half of 2023 and expect to commercialize Suciraslimab by the second half of 2023. In addition to our efforts to develop Suciraslimab as a therapeutic for RA, we will advance Suciraslimab clinical trials for SLE, SS and other indications to broaden the therapeutic uses of Suciraslimab for addressing other unmet medical needs. We expect to initiate Phase II clinical study for SLE in China in the second half of 2022.

Key products

SN1011

SN1011 is a third generation, covalent reversible Bruton's tyrosine kinase ("BTK") inhibitor designed for higher selectivity, superior efficacy and improved safety for the long-term treatment of systemic lupus erythematosus (SLE), pemphigus vulgaris (PV), multiple sclerosis (MS), and other rheumatology or neuro-immunological diseases. SN1011 differentiates from existing BTK inhibitors currently available in the market, such as Ibrutinib, in terms of mechanism of action, affinity, selectivity and safety.

The phase I study (First-in-Human) was conducted in Australia and China in 2019, and was completed in July 2021. The study has demonstrated good safety and Pharmacokinetics ("PK") profile. An IND application of SN1011 for the treatment of Pemphigus was also approved by the NMPA on 23 June 2021. Following SN1011 IND approval for Pemphigus and SLE, the Company is initiating Phase II clinical study targeting Pemphigus (for both pemphigus vulgaris (PV) and pemphigus foliaceus (PF)) in China. A phase II study in PV is scheduled to be initiated in the third quarter of 2022. In addition, a new IND submission in multiple sclerosis (MS) was submitted to the NMPA CDE in January 2022, and approval is expected to be granted in the second quarter of 2022. The Company is planning a parallel IND submission for multiple sclerosis (MS) in the U.S. in the second quarter of 2022, and subsequent initiation of a global phase II trial in the third quarter of 2022. In addition to the above indications, the compound has also received regulatory approval for conducting clinical studies on SLE in China. Please also refer to the Company's announcements dated 14 November 2019, 29 January 2020, 29 June 2020, 1 September 2020, 15 January 2021, 24 June 2021, 23 July 2021 and 7 February 2022 for further information about the latest R&D progress of SN1011.

SM17

SM17 is developed to treat eosinophilic asthma via blockage of IL25 signalling via the IL17RB receptor expressed on specific subgroup of lymphoid cells known as ILC2. The antibody is specific to IL17RB, which is found to be significantly upregulated in biopsy tissues of asthmatic patients. When evaluated in a murine-based Ovalbumin (OVA)-induced Allergic Asthma Model, blockage of receptor signaling by the antibody enhanced protection against airways resistance, and significantly reduced cell infiltration into the lungs and serum levels of antigen specific immunoglobulin E (IgE). This potential first-in-class and first-intarget antibody was further humanized by the Group's international partner, LifeArc (a medical research charity based in the United Kingdom), using their proprietary humanisation technology. The antibody is also found to exhibit other therapeutic potential, including other T2 helper cell pathway involved allergic diseases, such as atopic dermatitis ("AD"), type II ulcerative colitis and idiopathic pulmonary fibrosis ("IPF").

The IND application was submitted and accepted by the FDA in February 2022 and was subsequently approved by the FDA in March 2022. The First-in-Human (FIH) phase I clinical study is expected to commence in the U.S. in the first quarter of 2022 at the earliest. The phase I clinical study consists of SAD (single ascending dose) and MAD (multiple ascending doses) in healthy volunteers to evaluate the PK/pharmacodynamics ("PD") parameters and safety profile. Please also refer to the Company's announcements dated 16 February 2022 and 14 March 2022 for further information about the latest R&D progress of SM17.

Other drug candidates

SM06

SM06 is a second-generation anti-CD22 antibody that is humanised using our proprietary framework-patching technology. SM06 is a humanised version of Suciraslimab (SM03) with the same mechanism of action. It is contemplated to be a less immunogenic and more human-like antibody with potentially improved safety profiles. We believe that SM06 will be less immunogenic and thus more suitable for treating chronic diseases requiring long-term administration, such as systemic lupus erythematosus (SLE), rheumatoid arthritis (RA) and other immunological diseases. We are currently in the process of optimising chemistry, manufacturing and control processes (CMC) for SM06, collecting process and pre-clinical data for speedy filing of SM06 in the U.S. for global clinical studies. We expect to submit the first IND application for SM06 in the U.S. in 2022 at the earliest.

SM09

SM09 is a framework-patched (humanised) anti-CD20 antibody that targets an epitope different from that of other marketapproved anti-CD20 antibodies such as rituximab, obinutuzumab and ofatumumab for the treatment of NHL and other autoimmune disease with significant unmet medical needs.

TNF2

TNF2 is a humanised version of infliximab for the treatment of rheumatological diseases with characteristic elevated level of TNF-α. The antibody blocks binding of TNF-α onto its receptors with affinity and specificity comparable to infliximab, and efficiently inhibits TNF-α induced death of L929 cell, which is a murine fibroblast cell line.

COLLABORATION

On 16 September 2021, a license agreement was entered into between the Company, Suzhou Sinovent Pharmaceutical Technology Co., Ltd.* (蘇州信諾維醫藥科技股份有限公司), now known as Evopoint Bioscience Co., Ltd.* (蘇州信諾維醫藥 科技股份有限公司), together with the Company as licensor, and Everest Medicines II (HK) Limited, as licensee, to out-license the right to develop and commercialize SN1011 globally for the treatment of renal diseases.

Pursuant to the License Agreement, the Company has received in 2021 US\$4 million upfront payment, and is entitled to up to an aggregate of US\$183 million in total development and sales milestones. The Company retains all other immunological rights for all indications (other than immunological related renal diseases) relating to SN1011 and will continue its research and development, including phase II clinical study currently initiating in China.

Please refer to the paragraph headed "CONNECTED TRANSACTIONS" under "Report of the Directors" section for more details.

PRODUCTION

We carried out our manufacturing activities at our Haikou production base, where we manufacture our drug candidates for pre-clinical research, clinical trials and future large-scale production. The Haikou production base has a production capacity of 1,200 litres which is sufficient for clinical and initial marketing needs. The plant has an operational area consisting of a clean area for processing, a controlled-not-classified (CNC) area for supporting activities, utility rooms, quality control laboratories, warehouse and administrative offices. During the Reporting Period, the Haikou production base has expanded its total operational area from approximately 4,526 square metres to approximately 19,163 square metres.

Construction of the administrative facilities, testing laboratories and R&D laboratories of our Suzhou base in China was completed in 2019. The administrative facilities have been in operation since late-2020 for supporting ongoing and new product development projects. To cope with the Company's business development plan in expanding R&D and product development capacity, a new research laboratory will be established in the Company's new Suzhou campus and the production capability of our Suzhou base as reported in our 2020 Annual Report will also be taken up by the new Suzhou campus. During the Reporting Period, the R&D laboratories of our Suzhou base have been fully equipped and have come into full operation since December 2021.

As previously reported, the Company, on 24 June 2020, purchased a piece of land of 43,158 square metres in Suzhou Dushu Lake High Education Town, China, where the Company plans to build its PRC headquarters, an R&D centre as well as another production base of the Group, with a total floor area of approximately 75,000 square metres. This new Suzhou campus consists of a manufacturing shop, a pilot plant, an R&D centre, a quality inspection centre, a clinical study centre and an administration building. The superstructure works have been completed in December 2021 and the interior fitting-out works are planned to commence in the first half of 2022. The development of the new Suzhou campus will be completed and come into operation in phases. Phase I development with a production capacity of 6,000 litres is expected to come into operation in early 2023. Upon completion of the new Suzhou campus, the production capacity of the production base would be over 32,000 litres.

^* for identification purpose only

INTELLECTUAL PROPERTY

Core technology of main drugs (products)

For SM03 (Suciraslimab), the Company has two invention patents which are granted and registered in the PRC, of which one invention patent is also applicable to SM06, and four invention patents which are granted and registered in the United States, all of which are also applicable to SM06.

For SN1011, the Company has one invention patent registered in the United States which was granted during the Reporting Period.

For SM09, the Company has two invention patents granted and registered in the PRC. The Company also holds three invention patents granted and registered in the United States for SM09.

During the Reporting Period, the Company has filed two invention patent applications for Suciraslimab which are also applicable to SM06 in the United States. The two previously filed Patent Cooperation Treaty (PCT) patent applications, both of which are also applicable to SM06, have entered national phase in the United States, Europe, and the PRC, respectively in 2021. As at 31 December 2021, the Company has four pending patent applications in the United States, two pending patent applications in the PRC, and two pending patent applications in the Europe.

Well-known or famous trademarks

The Company conducts its business under the brand name of "SinoMab" ("中國抗體"). As at the end of the Reporting Period, the Company had various registered trademarks in Hong Kong and the PRC and trademark applications pending approval in the PRC.

Patents

Item	As at 31 December 2021	As at 31 December 2020
Number of invention patents owned by the Company*	25	19

* including patent pending and granted patent

HUMAN RESOURCES

As at 31 December 2021, the Group had a total of 283 employees in Hong Kong and China. For the year ended 31 December 2021, the Group incurred approximately RMB55.1 million employee costs (including directors' remuneration but excluding any contributions to pension scheme, director fees and share-based payment). Employees are important resources for the Group's sustainable operation and steady development. The Company has formulated policies related to employees' remuneration, rights and interests and conducted various staff training, details of which are further set out in the "Environmental, Social and Governance Report" in this annual report. The Company has also established its restricted share unit scheme and share award scheme, details of which are set out in the paragraph headed "SHARE INCENTIVES" under "Report of the Directors" in this annual report.

R&D PERSONNEL

	Number at the end of	Number at the beginning of
	the Reporting	the Reporting
Education level	Period	Period
PhD	8	7
Master	17	11
Undergraduate or below	13	7
Total number of R&D personnel	38	25

The above number of R&D personnel does not include our employees in manufacturing, quality assurance or quality control for the clinically related operation.

MAJOR GOVERNMENT R&D GRANTS, FUNDING, SUBSIDIES AND TAX PREFERENCE

During the Reporting Period, the Company received a total of 5 government grants.

FUTURE AND PROSPECTS

We strive to become a leading global biopharmaceutical company for the development of novel drugs to fulfil unmet medical needs through our Hong Kong-based R&D and innovation, and PRC-based manufacturing capabilities. Our vision is to become a global leader in the innovation of therapeutics for immunological and other debilitating diseases.

Our portfolio of drug candidates encompasses the entire immunological field which, we believe, will enable us to provide comprehensive treatment options for field-wide indications to patients. We believe our dedication, experience and achievements in the field of immunology have expedited the process, and elevated the industry standard, for the discovery and development of novel therapeutics against a variety of immunological diseases. As a result, we have accumulated significant experience in the discovery of new treatment modalities for immunological diseases, which will allow us to better capture a substantial share of the immunological disease market. We believe that our strategic specialisation and dedicated focus on immunological diseases is an effective way to differentiate ourselves from our peers. By specialising in innovative treatments of immunological diseases, we seek to solidify our leading position in the field, thereby creating a higher barrier to entry for our peers to compete with us in the development of first-in-target or first-in-class drug candidates.

Further, our product pipeline is backed by our established full-spectrum platform integrating in-house capabilities across the industry chain, for instance, our strong and independent target identification, drug candidate development, pre-clinical research, clinical trials, clinical production, quality control, quality assurance, regulatory approval and commercial-scale production up to the commercialisation stage, as well as all other processes in the discovery and development of our drug candidates. We believe that this full-fledged capability is matched by only a few biopharmaceutical companies in the Greater China region.

With a diverse and expanding product pipeline, we believe that we are well positioned to become an industry leader in the development of treatments for immunological diseases.

The Group will continue to focus on the advancement of our flagship product SM03 (Suciraslimab) towards commercialisation, further progress our existing product pipeline, discover and develop novel drugs for the treatment of immunological diseases by leveraging our R&D capabilities, expand our production scale to support our product commercialisation and strengthen our global presence through leveraging our position as a Hong Kong-based biopharmaceutical company.

The Company is committed to educating its current and potential investors in respect of the Company's products and pipeline development, for example, through non-deal roadshows.

Clinical development plan

We will continue to advance clinical trials for SM03 (Suciraslimab) for RA and other autoimmune diseases. As previously mentioned, we expect to file our Suciraslimab NDA for RA with the NMPA in the coming years. In terms of the broader indication development, we will advance clinical trials for SLE, SS and other autoimmune diseases. We expect to initiate phase II clinical study for SLE in China in the second half of 2022. We are also in the process of further broadening therapeutic area of SM03 (Suciraslimab), seeking regulatory pathways to extrapolate the clinical indications of neuroimmunological diseases for SM03.

We will continue the global clinical development programme for SN1011 in the immunological disease area. Based on INDs obtained from NMPA for the treatment of SLE and Pemphigus, and the completed phase I trials for healthy subjects in China, the Company is initiating Phase II clinical study targeting Pemphigus in China. The Company is also preparing global trial in MS and is expected to obtain IND in both China and the US in 2022. The Company also plans to apply for other INDs and/or proof-of-concept clinical studies for SN1011 in the near future.

In respect of SM17, we plan to enter into human clinical trials in the U.S. by the first quarter of 2022 and the earliest time for phase I results will be in the first half of 2023. Proof-of-concept studies will then be conducted to evaluate the primary efficacy of SM17 in Asthma or other indications, if supported by good tolerability and safety results from phase I, which is expected.

As for SM06, we will advance the first IND application process, aiming for a bio-better product development for known indications based on good therapeutic potential of SM03 or further exploration for other immunological diseases with unmet medical needs.

Pre-clinical R&D

We are in the process of building a pre-clinical R&D platform for studying pathogenesis of autoimmune diseases, as well as exploring and identifying solid treatment for them. Our internal R&D team is in the process of discovering novel mechanisms for treatment of multiple autoimmune diseases areas for rheumatology, neuro-immunology, respiratory and dermatology. Our R&D team possesses the capability of generating pre-clinical pharmacology internally and are developing in-depth collaboration with well-known clinical KOLs from our on-going clinical programs. By utilizing established business and cooperation relationship with vendors/patterners, the Company is in the process of generating and collecting the INDenabling data package for our multiple products under pre-clinical development, such as SM17 and SM06, and will thereafter conduct pre-clinical studies to test their efficacies, safety and PK/PD, and fulfil other regulatory requirements.

The Company continues to optimize production and preclinical research for SM09 and TNF2. It is expected that these preclinical researches will complete in one year, after which the Company will engage NMPA and/or FDA to initiate clinical trials.

Novel drug targets identification

The Company has been actively exploring novel targets identification. The Company has engaged D2M Biotherapeutics Limited ("D2M") for a long-term collaboration for the identification of novel drug targets, for which the Company is entitled to conduct subsequent researches, development and commercialization with regards to qualified drug targets which are chosen by the Company from the original results of D2M's target identification works according to a prioritized targetselection mechanism.

Production

As previously reported, on 24 June 2020, the Company purchased a piece of land of 43,158 square metres in Suzhou Dushu Lake High Education Town, China, where the Company plans to build its PRC headquarters, an R&D centre as well as another production base, with a total floor area of approximately 75,000 square metres. This new Suzhou campus consists of a manufacturing shop, a pilot plant, an R&D centre, a quality inspection centre, a clinical study centre and an administration building. The superstructure works have been completed in December 2021 and the interior fitting-out works are expected to commence in the first half of 2022. The development of the new Suzhou campus will be completed and come into operation in phases. Phase I development with a production capacity of 6,000 litres is expected to come into operation in early 2023. Upon completion of the new Suzhou campus, the production capacity of the production base would be over 32,000 litres.

Commercialisation

Albeit uncertainties associated with COVID-19, we expect to build up our sales team by 2022. The leader of sales and marketing was on board in February 2022. Our commercialisation team is expected to cover a majority of provinces and municipalities in China and to support the future commercialisation of our drug candidates. We are actively exploring and identifying opportunities for collaboration and/or partnership, including but not limited to licensing in or licensing out, to enhance our sales and business development capabilities.

COVID-19

Where the outbreak of COVID-19 continues and/or worsens, the Company's clinical trial development will continue to be affected. As of the date of this report, the pandemic has affected one clinical trial in the PRC since a number of out-patient clinics have closed temporarily, patients or subjects have generally avoided to visiting hospitals and certain hospitals have put on hold the enrollment of patients or subjects for clinical trials. Save as disclosed in this report, as at the date of this report, all other operations of the Company have been conducted as normal so far, but can be impacted if the pandemic continues.

FINANCIAL REVIEW

Other income and gains

Our other income and gains consist primarily of bank interest income, changes in fair value on a financial asset at fair value through profit or loss, government grants and foreign exchange gain. Total other income and gains were approximately RMB28.8 million for the Reporting Period, representing a decrease of approximately RMB29.7 million from the year ended 31 December 2020, mainly due to (i) a decrease in fair value gain on financial assets at fair value through profit or loss amounting to approximately RMB26.9 million; (ii) a decrease in government grants amounting to approximately RMB12.0 million and offset by (iii) an increase in foreign exchange gain, net of approximately RMB9.9 million.

R&D costs

	Year ended 31 December
	2021	2020
	RMB'000	RMB'000
Laboratory consumable and experiment costs	151,707	79,891
Employment costs	35,427	17,228
Others	11,979	6,283
	199,113	103,402

Our R&D costs mainly include laboratory consumables, experiment costs, employment costs of R&D employees, depreciation of right-of-use assets relating to leases of research facilities and depreciation of research and testing equipment.

For the years ended 31 December 2021 and 2020, we incurred R&D costs of approximately RMB199.1 million and RMB103.4 million, respectively. The increase in our costs of business development in R&D during the Reporting Period, was mainly attributable to (i) an increase in the laboratory consumable and experiment costs of approximately RMB71.8 million for our R&D or clinical projects; and (ii) an increase in the employment costs of approximately RMB18.2 million for the expansion of our clinical department.

Administrative expenses

Our administrative expenses primarily consist of employee costs of administrative personnel, depreciation of right-of-use assets relating to leases of office space, depreciation and amortisation, rental and property management fees, consulting and auditing expenses, legal and other professional advisory service fees, office expenses, transportation costs and others.

For the years ended 31 December 2021 and 2020, our total administrative expenses were approximately RMB133.4 million and RMB72.0 million, respectively. The increase was mainly due to (i) the increase in the recognition of a non-cash sharebased payment (being the grant of restricted share units ("RSUs") under the RSU scheme of approximately RMB28.0 million); (ii) an increase in the employment related costs for our business expansion of approximately RMB11.4 million; and (iii) an increase in the depreciation of property, plant and equipment, right-of-use assets and amortisation of intangible assets of approximately RMB7.5 million.

Liquidity and capital resources

The Group has always adopted a prudent treasury management policy. The Group places strong emphasis on having funds readily available and accessible and is in a stable liquidity position with sufficient funds in standby banking facilities to cope with daily operations and meet its future development demands for capital.

As at 31 December 2021, our bank balance and cash totalled RMB563.0 million, as compared to RMB810.4 million as at 31 December 2020. The decrease was mainly due to (i) the capital expenditures of subsidiaries in Suzhou and Hainan, of approximately RMB211.3 million; (ii) the purchase of shares under the share award scheme of approximately RMB59.7 million; (iii) an investment in D2M Biotherapeutics Limited, of approximately RMB16.2 million; (iv) the expenses paid for operating activities, of approximately RMB147.1 million; and offset by (v) the increase in the net bank borrowing of approximately RMB138.3 million; and (vi) the sales proceeds received from the disposed of the investment in the China Healthcare Fund which is a segregated portfolio of New China Overseas Opportunity Fund SPC of approximately RMB92.0 million.

The following table sets forth a condensed summary of the Group's consolidated statement of cash flows for the years ended indicated and analysis of balances of cash and cash equivalents for the years ended indicated:

	31 December 2021 RMB'000	31 December 2020 RMB'000
Net cash flows used in operating activities	(147,063)	(141,338)
Net cash flows used in investing activities	(137,702)	(179,218)
Net cash flows from/(used in) financing activities	57,515	(18,808)
Net decrease in cash and cash equivalents	(227,250)	(339,364)
Cash and cash equivalents at the beginning of the year	810,370	1,200,868
Effect of foreign exchange rate changes, net	(20,137)	(51,134)
Cash and cash equivalents at the end of the year	562,983	810,370
Analysis of balances of cash and cash equivalents Cash and bank balances Non-pledged time deposits with original maturity of less than	399,983	77,606
three months when acquired	163,000	732,764
Cash and cash equivalents as stated in the statement of cash flows	562,983	810,370

As at 31 December 2021, cash and cash equivalents were mainly denominated in Renminbi, United States dollars and Hong Kong dollars.

Bank borrowing and gearing ratio

As at 31 December 2021, the Group's outstanding borrowing of RMB198.8 million (31 December 2020: RMB60.5 million) were denominated in RMB and carried at a variable rate of interest ranging from the People's Bank of China RMB Loan Prime Rate minus 0.30% to the People's Bank of China RMB Loan Prime Rate plus 0.25%.

The Group monitored capital using gearing ratio. Gearing ratio is calculated using interest-bearing bank borrowing less cash and cash equivalents divided by total equity and multiplied by 100%. During the Reporting Period, the Group always maintained a net cash position.

Details of the maturity profile of the borrowings of the Group as at 31 December 2021 are set out in note 22 to the consolidated financial statements.

LOSS PER SHARE

The basic and diluted loss per share are RMB0.29 for the year ended 31 December 2021 (2020: RMB0.12). Details of the calculations of basic and diluted loss per share are set out in note 12 to the consolidated financial statements.

BANK BORROWINGS

Particulars of bank borrowings of the Group as at 31 December 2021 are set out in note 22 to the consolidated financial statements.

PLEDGE OF ASSET

As at 31 December 2021, land use right of net carrying amount of approximately RMB15.5 million was pledged to secure the bank loan borrowed by the Group (2020: Nil).

CAPITAL COMMITMENTS

Particulars of capital commitments of the Group as at 31 December 2021 are set out in note 29 to the consolidated financial statements.

CONTINGENT LIABILITIES

As at 31 December 2021, the Group had no contingent liability (2020: Nil).

MATERIAL ACQUISITIONS OR DISPOSALS OF SUBSIDIARIES OR ASSOCIATES

During the Reporting Period, there were no material acquisitions or disposals of subsidiaries or associates of the Company.

SIGNIFICANT INVESTMENT HELD AND DISPOSED

During the Reporting Period, the Company completed its disposal of 775,347.912 units of Class A participating shares (the "Investment") in the China Healthcare Fund, which is a segregated portfolio of New China Overseas Opportunity Fund SPC ("New China Overseas"). The Investment was made by the Company on 22 January 2020 at a cost of HK\$78 million. On 4 February 2021, the Company (as seller) and Dragon Capital Special Opportunities SPC for and on behalf of its segregated portfolio named Dragon Capital Special Opportunities 2 SP (as purchaser) entered into a contract to sell the Investment at a consideration of approximately HK\$110.6 million (the "Disposal") which represented approximately 8.24% of the total assets of the Company for the financial year ended 31 December 2020. The Disposal was completed on 18 February 2021 and the Company recognised unrealised gain from change in fair value of the Investment of approximately RMB28.3 million (approximately HK\$32.6 million, representing approximately 41.76% return on Investment) for the financial year ended 31 December 2020.

New China Overseas is an open-ended investment company incorporated in the Cayman Islands with limited liability on 17 October 2014 and registered as an exempted segregated portfolio company with the Registrar of Companies of the Cayman Islands.

The Investment served as a corporate investment strategy to maintain and generate possible future income of the Company and was a means to better utilise the Company's current financial resources, and fell under "other general corporate purposes" of the Company's planned use of proceeds from the Company's listing. The Investment matured on 22 January 2021 and could be redeemed since then.

Please refer to the Company's announcements dated 4 February 2021 and 5 February 2021, and the paragraph headed "SIGNIFICANT INVESTMENTS HELD" under "Management Discussion and Analysis" section of the Company's 2020 Annual Report for more details. Save as disclosed, the Company did not hold and dispose of any significant investment with a value greater than 5% of the Company's total assets as at 31 December 2021.

CHANGE IN USE OF PROCEEDS

As reported in the announcement dated 21 March 2022, the Board resolved to change the use of the unutilised net proceeds. The change in use of proceeds was made to facilitate efficient allocation of financial resources and strengthen the future development of the Group. Further details are disclosed under the section headed "USE OF PROCEEDS FROM LISTING" in the Report of the Directors to this annual report.

MATERIAL EVENT — POSSIBLE ISSUE OF CONVERTIBLE BONDS UNDER SUBSCRIPTION AGREEMENT (LAPSED)

As reported in the Company's 2020 Annual Report, a subscription agreement (the "Subscription Agreement") was entered into on 22 December 2020 between the Company (the issuer) and Haiyao international Group Limited (the "Investor") in respect of the subscription by the Investor for convertible bonds in an aggregate principal amount of HK\$100,000,000 ("Convertible Bonds"). The Subscription Agreement has lapsed on 22 June 2021.

Details of the Subscription Agreement and the proposed issue of the Convertible Bonds, and the lapse of the proposed issue of Convertible Bonds were disclosed in the announcement of the Company dated 22 December 2020, 14 January 2021 and 22 June 2021 and the circular of the Company dated 27 January 2021.

BOARD OF DIRECTORS

Executive Director

Shui On LEUNG 梁瑞安, 62

Chairman of the Board, Chief Executive Officer, Member of Remuneration Committee and Chairman of Nomination Committee

Appointed to the Board: 27 April 2001 Joined the Group: April 2001

Dr. Leung was appointed as a Director and the chairman of our Board in April 2001 and subsequently appointed as our chief executive officer in January 2003 and subsequently designated as an executive Director in June 2019. He is primarily responsible for formulating overall strategic directions, overseeing scientific and clinical R&D activities and managing overall operations of our Group.

Dr. Leung has over 30 years of experience in the field of molecular immunology and therapeutic monoclonal antibodies. Dr. Leung has been a member of the first session of Biotech Advisory Panel of the Stock Exchange since April 2018. He is also a director of the Hong Kong Genome Institute. Dr. Leung currently also serves as an adjunct professor of the Army Medical University (中國人民 解放軍陸軍軍醫大學, formerly known as the Third Military Medical University (中國人民解放軍第三軍醫大學)) and China and the Air Force Medical University (中國人民解放軍 空軍軍醫大學), formerly known as the Fourth Military Medical University (中國人民解放軍第四軍醫大學). He has also been an adjunct professor of The Hong Kong University of Science and Technology since September 2018. From 2011 to 2014, Dr. Leung was an adjunct professor of Fudan University, China (復旦大學). Prior to joining our Company, Dr. Leung served as the managing director of The Hong Kong Institute of Biotechnology Limited, which is currently a biotechnology R&D arm of The Chinese University of Hong Kong, from September 2000 to August 2003. Dr. Leung was an adjunct professor of The Chinese University of Hong Kong from February 2001 to January 2004. From May 1991 to in or around August 2000, he held several positions in Immunomedics, Inc. ("Immunomedics"), a U.S. leading antibody-drug conjugate company, including an associate director of the molecular biology department and an executive director of the biology research department. During his term with Immunomedics, Dr. Leung was awarded grants by the U.S. Department of Health and

Human Services multiple times for his research programs, including "Engineering a Unique Conjugation Site on AB Light Chain" and "A Humanised Antibody for Breast Cancer Treatment". In October 1996, Dr. Leung was appointed as an adjunct assistant member of the Centre for Molecular Medicine & Immunology at Garden State Cancer Centre. Dr. Leung was also engaged in postdoctoral research at Yale University, U.S.A. from July 1990 to June 1992.

Dr. Leung obtained his bachelor's and master's degrees in biochemistry from The Chinese University of Hong Kong in December 1984 and October 1986, respectively. He earned his Ph.D. in molecular biology from the University of Oxford in Oxford, England in May 1989.

Dr. Leung is a director of certain subsidiaries of the Company. He is also a substantial shareholder (within the meaning of the SFO) of the Company.

Non-executive Directors

Haigang CHEN 陳海剛, 39

Appointed to the Board: 31 August 2017 Joined the Group: August 2017

Dr. Chen was appointed as a Director in August 2017 and subsequently designated as a non-executive Director in June 2019. Dr. Chen is primarily responsible for providing overall guidance on business and strategic development of our Group based on his work experience, professional background and expertise.

Dr. Chen has nearly 10 years of investment experience in the pharmaceutical industry. He has served as an investment director of Shanghai Yueyi Investment Centre (Limited Partnership) (上海月溢投資中心(有限合夥)), the co-general partner of Xingze Xinghe, one of our Pre-IPO Investors and our Shareholders, since September 2016. Prior to that, Dr. Chen served as an analyst at Beijing Shennong Investment Management Co., Ltd.* (北京神農投資管理股份有限公司) from December 2015 to August 2016. In September 2013, Dr. Chen started working at China International Capital Corporation Limited (中國國際金融股份有限公司), shares of which are listed on the Stock Exchange (stock code: 3908), and was holding the position of vice president of its research

department when he left such employment in December 2015. From April 2011 to August 2013, Dr. Chen served as a senior manager at CITIC Securities Company Limited (中 信証券股份有限公司), shares of which are listed on the Stock Exchange (stock code: 6030). From May 2010 to April 2011, Dr. Chen served as an analyst at Guizhou Huachuang Securities Broker Co., Ltd.* (華創證券有限責任公司).

Dr. Chen earned his Medical Doctor degree in clinical medicine from Peking Union Medical College (北京協和醫學 院) in July 2009. He obtained the securities qualification certificate issued by the Securities Association of China in June 2015.

Dr. Chen is also a director of certain subsidiaries of the Company.

Xun DONG 董汛, 47

Appointed to the Board: 23 December 2019 Joined the Group: December 2019

Mr. Dong was appointed as a non-executive Director on 23 December 2019.

Mr. Dong has over 20 years of experience in the pharmaceutical industry. Between 1996 and 2004, Mr. Dong worked for Yunnan Baiyao Group Co., Ltd (雲南白藥集團股 份有限公司) ("Baiyao Group"). The shares of Baiyao Group are listed on the Shenzhen Stock Exchange (stock code: 000538), and it is one of the ten Key Large Enterprises in Yunnan Province (雲南省十戶重點大型企業), one of Top 100 Enterprises in Yunnan Province (雲南省百強企業) and one of the first national innovative enterprises. Baiyao Group operates through four segments, namely pharmaceuticals, health products, Chinese medicine resources and pharmaceutical logistics, and is principally engaged in chemical raw material, chemico-pharmaceutical preparations, proprietary Chinese medicines, Chinese medicinal material and biologic products. During the said employment, he rose through the ranks and held the position of assistant department manager before his departure from Baiyao Group to further his education. He rejoined Baiyao Group in 2006 as a vice president of sales of the native medicine division, and has held various positions since then. Mr. Dong currently serves as a director of Yunnan institute of materia medica (formerly known as Yunnan institute of medicine), a director of both of the strategic development center and the office of the strategic committee and a general manager of the innovative research and development centre of Baiyao Group.

Senlin LIU 劉森林, 37

Appointed to the Board: 15 February 2019 Joined the Group: February 2019

Mr. Liu was appointed as a Director in February 2019 and subsequently designated as a non-executive Director in June 2019. Mr. Liu is primarily responsible for providing overall guidance on business and strategic development of our Group based on his work experience, professional background and expertise.

Mr. Liu has over 10 years of experience in corporate finance and investment. Mr. Liu has served at China International Capital Corporation Limited (中國國際金融股份有限公司), shares of which are listed on the Stock Exchange (stock code: 3908), since December 2011. Mr. Liu currently serves as a managing director of CICC Capital Management Co., Ltd.* (中金資本運營有限公司), a subsidiary of China International Capital Corporation Limited.

Mr. Liu obtained a bachelor's degree in biomedical engineering and a master's degree in management science and engineering from Tsinghua University, China (清華大學) in July 2006 and July 2008, respectively.

Mr. Liu is also a director of certain subsidiaries of the Company.

Wenyi LIU 劉文溢, 35

Appointed to the Board: 31 August 2017 Joined the Group: August 2017

Ms. Liu was appointed as a Director in August 2017 and subsequently designated as a non-executive Director in June 2019. Ms. Liu is primarily responsible for providing overall guidance on business and strategic development of our Group based on her work experience, professional background and expertise.

Ms. Liu has years of experience in investment and operational management in the pharmaceutical industry. She has served as a general manager at Apricot Capital (上 海杏澤投資管理有限公司), the co-general partner of Xingze

Xinghe and the sole general partner of Xingze Xingzhan, each being our Pre-IPO Investor and our Shareholder, since October 2015. Prior to that, Ms. Liu worked as Deputy General Manager at Jumeirah Himalayas Hotel Shanghai* (上 海證大喜瑪拉雅有限公司卓美亞喜瑪拉雅酒店) from September 2013 to December 2015. From March 2011 to September 2013, she served as Equity Analyst at Guotai Asset Management Co., Ltd.* (國泰基金管理有限公司).

Ms. Liu received her bachelor's degree in economics from the University of Southampton in Southampton, England in June 2009 and master's degree in economics from the University of Warwick in Coventry, England in November 2010. Ms. Liu is currently pursuing her Ph.D in healthcare management in a cohort-based program in collaboration between Johns Hopkins Bloomberg School of Public Health and the Institute for Hospital Management of Tsinghua University, China (清華大學). Ms. Liu obtained the securities qualification certificate issued by the Securities Association of China in November 2011.

Ms. Liu is the spouse of Mr. Jing QIANG, a substantial shareholder of the Company. Ms. Liu is also a director of certain subsidiaries of the Company and a substantial shareholder (within the meaning of the SFO) of the Company.

Jie LIU 劉潔, 44

Appointed to the Board: 14 December 2021 Joined the Group: December 2021

Ms. Liu was appointed as a non-executive Director on 14 December 2021. Ms. Liu is primarily responsible for providing overall guidance on business and strategic development of our Group based on her work experience, professional background and expertise.

Ms. Liu is currently a deputy general manager and the chief research and development engineer of Hainan Haiyao Co., Ltd. (海南海藥股份有限公司) ("Hainan Haiyao"). Hainan Haiyao is a substantial shareholder of the Company and its shares are listed on the Shenzhen Stock Exchange (Stock Code: 00566). From July 2005 to September 2018, she served as a staff, a deputy director of chemistry department, the director of chemistry department and the director of antibiotic department of Hainan Institute For Drug Control (海 南省藥品檢驗所). Ms. Liu obtained a master's and a doctorate degree in pharmaceutical analysis from China Pharmaceutical University.

Lei SHI 石磊, 36

Appointed to the Board: 17 December 2021 Joined the Group: December 2021

Mr. Shi was appointed as a non-executive Director on 17 December 2021. Mr. Shi is primarily responsible for providing overall guidance on business and strategic development of our Group based on his work experience, professional background and expertise.

Mr. Shi is currently a deputy general manager and secretary of the board of directors of Hainan Haiyao. Hainan Haiyao is a substantial shareholder of the Company and its shares are listed on the Shenzhen Stock Exchange (Stock Code: 00566). From July 2013 to May 2015, Mr. Shi served as an intellectual property specialist and a senior manager of intellectual property research center of China Institute of Marine Technology & Economy of China State Shipbuilding Corporation (中國船舶工業綜合技術經濟研究院). From May 2015 to July 2019, he served as a senior legal manager of the policy and regulation department of China State Shipbuilding Corporation (中國船舶工業集團有限公司). From July 2019 to September 2021, Mr. Shi served as a vice director and the director of legal affairs department of Xinxing Jihua Pharmaceutical Holdings Co., Ltd. (新興際華 醫藥控股有限公司). Mr. Shi obtained a master's degree in civil and commercial law from Beijing University of Chemical Technology in 2013.

Independent Non-executive Directors

George William Hunter CAUTHERLEY, 79

Member of Audit Committee (appointed on 23 March 2020 and effective from 1 April 2020)

Appointed to the Board: 23 December 2019 Joined the Group: December 2019

Mr. Cautherley was appointed as an independent nonexecutive Director on 23 December 2019.

Mr. Cautherley has over 55 years of experience of distributing a wide range of medical products and pharmaceuticals in Hong Kong, China and South East Asian countries and for the past 40 years through companies of which he has been CEO and substantive shareholder. For almost 20 years, his principal business groups have also been involved in manufacturing medical devices and pharmaceuticals in China. In addition to his core business interests, Mr. Cautherley has been an investor in a number of biotechnology start-up/early stage enterprises in Europe and Hong Kong and has served on the boards of several of these companies.

Mr. Cautherley was awarded an Honorary Doctorate of Business Administration by Edinburgh Napier University, United Kingdom and the holder of the award of Office of the British Empire conferred by Queens Elizabeth II of the United Kingdom.

Chi Ming LEE 李志明, 68

Member of Audit Committee and Chairman of Remuneration Committee

Appointed to the Board: 15 June 2021 Joined the Group: June 2021

Dr. Lee was appointed as an independent non-executive Director with effect from 15 June 2021. Dr. Lee is primarily responsible for supervising and providing independent judgment to our Board and ensuring a high standard of overall governance.

Dr. Lee has over 30 years of experience in academic and biopharmaceutical arena. Dr. Lee served as a director of the Office of Research and Knowledge Transfer Services at The Chinese University of Hong Kong from 2016 to 2020. Before the latest appointment mentioned above, Dr. Lee had held senior positions in various multinational pharmaceutical and biotechnology companies and academic institute between 1992 to 2013. His longest employment was with AstraZeneca with positions of an executive director of Translational Science in the areas of CNS and Pain Innovative Medicines in Sweden from 2011 to 2013, an executive director between 2007 to 2011 and a director from 2004 to 2007 of Translational Science in the areas of CNS and Pain Control Research Area in the USA, and the global product director in CNS therapy area from 2002 to 2004 in Sweden. Prior with AstraZeneca, Dr. Lee had worked at Bayer Corporation between 1993 and 1998 and served as an associate director of the Institute for Dementia Research. From 1992 to 1993, Dr. Lee served as a senior group leader of Exploratory Neurodegeneration at Abbott Laboratories. Dr. Lee also served as a senior lecturer at the Department of Biochemistry, Faculty of Medicine of The Chinese University of Hong Kong from 1982 to 1992. Dr. Lee has extensive experience in working at the interface of R&D, developing global drug discovery strategy, forming collaborative joint ventures, evaluating licensing opportunities and facilitating strategic alignment of the tasks and goals of the discovery and development functions.

Dr. Lee has been actively engaged in promoting scientific activities. He was an active member of the FNIH Biomarker Consortium Neuroscience Steering Committee, the European Innovative Medicine Initiative (IMI) on NEWMEDS

and the Institute of Medicine (IOM) Neuroforum, which focus on biomarkers and translational R&D for CNS diseases.

Dr. Lee received his Ph.D. from Cambridge University and did his post-doctoral training at John Hopkins University.

During 2015 to 2019, Dr. Lee was an independent nonexecutive director of YiChang HEC Changjiang Pharmaceutical Co., Ltd. (宜昌東陽光長江藥業股份有限公 司) (stock code: 01558), a company listed on the Stock Exchange.

Ping Cho Terence HON 韓炳祖, 62

Chairman of Audit Committee, Member of Remuneration Committee and Member of Nomination Committee Appointed to the Board: 18 October 2019 (effective from 31 October 2019) Joined the Group: October 2019

Mr. Hon was appointed as an independent non-executive Director with effect from 31 October 2019. Mr. Hon is primarily responsible for supervising and providing independent judgment to our Board.

Mr. Hon has over 35 years of experience in accounting, treasury and financial management. Mr. Hon has served as an independent non-executive director of Xiabuxiabu Catering Management (China) Holdings Co., Ltd. (stock code: 520), 361 Degrees International Limited (stock code: 1361), and Daphne International Holdings Limited (stock code: 210), all of which are companies listed on the Stock Exchange. Mr. Hon was also an independent non-executive director of Jimu Group Limited (stock code:8187), a company listed on the Growth Enterprise Market of the Stock Exchange from December 2017 to May 2021. He was previously the chief financial officer and company secretary of DTXS Silk Road Investment Holdings Company Limited (stock code: 620), a company listed on the Stock Exchange, from June 2016 (as chief financial officer) and November 2016 (as company secretary) until September 2018. Prior to that, Mr. Hon worked at a number of companies, including at Auto Italia Holdings Limited (stock code: 720) as chief financial officer and company secretary between December 2013 and April 2016, China Dongxiang (Group) Co., Ltd. (stock code: 3818) as chief financial officer between December 2010 and October 2012, Ka Wah Construction Materials (Hong Kong) Limited as chief financial officer between September 2008 and December 2010, TOM Group Limited (stock code: 2383) between June 2001 and February 2008 with his last position as the group finance director, and Ng Fung Hong Limited as a company secretary of the group between 1996 and 2001. Before moving to the commercial sector, Mr. Hon worked in an international accounting firm.

Mr. Hon is a fellow member of the Association of Chartered Certified Accountants, a member of the Hong Kong Institute of Certified Public Accountants and a member of the Institute of Chartered Accountants in England and Wales. He obtained a master's degree in business administration (financial services) from The Hong Kong Polytechnic University in November 2004.

Dylan Carlo TINKER, 53

Member of Audit Committee and Member of Nomination Committee

Appointed to the Board: 18 October 2019 (effective from 31 October 2019) Joined the Group: October 2019

Mr. Tinker was appointed as an independent non- executive Director with effect from 31 October 2019. Mr. Tinker is primarily responsible for supervising and providing independent judgment to our Board.

Mr. Tinker has over 25 years of experience in investment banking and capital raising transactions in the field of telecommunications, media and technology in Asia and has held senior positions in equity research, corporate finance and fund management. Mr. Tinker is currently the chief executive officer of AsiaTech Capital Advisors Pte Ltd in Singapore. Previously, Mr. Tinker served as a managing director in Technology Banking and the head of telecommunications, media and technology, at Avista Advisory Partners Pte Ltd in Singapore from 2017 to 2018. From 2012 to 2015, Mr. Tinker served as a Portfolio Manager at OCP Asia Capital in Singapore. Between 2000 and 2005, Mr. Tinker served as the Head of Asian Telecom equity research at UBS Investment Bank in Hong Kong. From 1993 to 1999, Mr. Tinker served as the Head of Asian Telecom equity research at Jardine Fleming (currently known as JP Morgan).

Mr. Tinker obtained a B.A. from American University, School of International Service in 1991, with a joint degree in Economics and International Relations. Mr. Tinker attended graduate school at the Paul H. Nitze School of Advanced International Studies of Johns Hopkins University in Washington, D.C., the United States from 1991 to 1993.

SENIOR MANAGEMENT

Jianping HUA 華劍平, 40

Mr. Hua has served as the chief financial officer of our Company since January 2019 and is primarily responsible for overall financial operations, financing and investment activities of our Group.

Mr. Hua has more than 17 years of experience in financial and investment matters. Prior to joining our Group, Mr. Hua served as a vice chief financial officer, member of the executive board of the president, vice president of medical technology management committee and held a number of positions comprising deputy general manager of the finance department of Shanghai Fosun Pharmaceutical (Group) Co., Ltd.* (上海復星醫藥(集團)股份有限公司, Shanghai Stock Exchange: 600196 and Stock Exchange: 2196) from February 2011 to January 2019. He also served as an executive director from March 2018 to January 2019, and as the chief financial officer from February 2014 to January 2019, of Sisram Medical Ltd (Stock Exchange: 1696). From August 2005 to February 2011, Mr. Hua served as a manager i n the assurance department a t PricewaterhouseCoopers Zhong Tian Certified Public Accountants Co., Ltd. (普華永道中天會計師事務所有限公 司). Mr. Hua obtained his bachelor's degree in English from Shanghai University, China (上海大學) in July 2005.

Lixin ZHANG Auberson 張麗馨, 58

Dr. Zhang Auberson joined our Company in August 2021 as the Chief Medical Officer and is leading the Clinical Development to be responsible for global Clinical Development strategy, regulatory affairs, study design and execution.

Dr. Zhang Auberson has over 20 years of experience in Clinical Development in biomedical industry and had served in senior positions in various multinational pharmaceutical companies. Prior to joining our Group, Dr. Zhang Auberson was the Global Medical Director at UCB S.A. and served as the clinical lead for α-SYN antibody program in Parkinson's disease. Before that, she worked at Novartis Pharma AG from 2006 to 2019, and led numbers of global clinical programs in Neurology as a Global medical director and senior director. Her last position held was Global Program Clinical Head in Neurodegeneration.

Dr. Zhang Auberson is a board-certified neurologist. She received her M.D. from Hebei Medical University in 1984 and earned her D. Phil in Anatomy & Neurobiology from the University of Kentucky in 2004. She also obtained the European Center of Pharmaceutical Medicine Certificate from the University of Basel in 2013.

Other senior management team

Our senior management also include Dr. Shui On LEUNG, see "Board of Directors" above for biographical details of Dr. Shui On LEUNG.

MANAGEMENT

Ming Hon YAU 游明翰, 43

Dr. Yau joined our Company in January 2012 as a research project manager (R&D), subsequently as an associate director (R&D) from January 2015 to March 2019 and a managing director (downstream process) from April 2019 to September 2020, and has served as a senior director (production) of our Company since October 2020. Dr. Yau is primarily responsible for supervising downstream purification process development, overseeing manufacturing operations of antibody products, establishing associated GMP system, and supervising operation compliance and planning of Suzhou production base.

Dr. Yau has over 15 years of experience in the fields of research, development and manufacturing of biological products. From July 2011 to December 2011, he served as an assistant manager of Nano and Advanced Materials Institute Limited (納米及先進材料研發院有限公司). From February 2008 to June 2011, Dr. Yau worked as an R&D assistant manager and subsequently as a manufacturing project manager at New A Innovation Limited (新意康生物科 技有限公司), a company in Hong Kong focusing on life science and animal health, responsible for overseeing all upstream process development, establishing pilot production sites in different locations in China, establishing and operating a GMP-compliance manufacturing facility at

Directors and Management

New Zealand and technology transfer. From April 2006 to April 2008, Dr. Yau served as a full-time postdoctoral fellow in the Li Ka Shing Faculty of Medicine of the University of Hong Kong, focusing on monoclonal antibody production and immunoassay development to provide tools for the early diagnosis of diabetes and cardiovascular diseases.

Dr. Yau received his bachelor's degree, master's degree and Ph.D. in biochemistry from The Chinese University of Hong Kong in December 2000, December 2002 and December 2005, respectively. Dr. Yau was registered as a registered quality manager with the Hong Kong Quality Management Association in September 2012.

Kwan Yin SIU 蕭君言, 43

Dr. Siu joined our Company in November 2011 as a research scientist, subsequently as a principal senior scientist (bioprocess) from January 2015 to March 2019, an associate director (manufacturing/upstream processing group) from April 2019 to December 2021, and has served as a director (process development) of our Company since January 2022. Dr. Siu is primarily responsible for supervising process, analytical method development and optimization.

Dr. Siu has over 12 years of experience in the area of R&D of cell culture and related process. Prior to joining our Group, Dr. Siu served as a stem cell scientist at Asia Pacific Stem Cell Science Limited (亞太幹細胞科研中心有限公司), a cord blood storage services company in Hong Kong, from June 2009 to September 2011, responsible for stem cell research. From January 2009 to May 2009, Dr. Siu served as an assistant engineer at Sundart (M&E) Limited (承達機電 工程有限公司).

Dr. Siu received his bachelor's degree in science, master's degree and Ph.D. in molecular genetics from the University of Hong Kong in November 2001, December 2004 and November 2008, respectively.

Ka Wa Benny CHEUNG 張嘉華, 42

Dr. Cheung joined our Company in January 2010 as a research scientist, subsequently as a principal senior scientist from January 2015 to December 2021, and has served as a director (quality control) of our Company since January 2022. Dr. Cheung is primarily responsible for managing R&D laboratory in Hong Kong and Quality Control Department in different sites.

Dr. Cheung has over 14 years of experience in the area of R&D of drugs. Prior to joining our Group, Dr. Cheung served as a technical officer and subsequently as a senior technical officer at the Department of Paediatrics and Adolescent Medicine at the University of Hong Kong from September 2007 to January 2010, respectively, in charge of overseeing R&D projects.

Dr. Cheung obtained his bachelor's degree in biochemistry, master's degree in immunology and Ph.D. in immunology from the University of Hong Kong in November 2001, December 2004 and November 2008, respectively.

COMPANY SECRETARY

Pui Yin Peony WONG 黃佩彥

Ms. Wong was appointed as our company secretary on 23 March 2020 with effect from 1 April 2020. Ms. Wong is currently a senior manager of Corporate Services of Tricor Services Limited.

Ms. Wong is currently the company secretary of Sino Gas Holdings Group Limited (stock code: 1759) and Channel Micron Holdings Company Limited (stock code: 2115), the shares of which are listed on the Stock Exchange.

Ms. Wong is a member of the Hong Kong Institute of Certified Public Accountants and a member of the CPA Australia. She holds a Bachelor of Commerce (Accounting and Finance) and a Master of Business Administration from the University of New South Wales.

The Board is pleased to present the corporate governance report of the Company for the year ended 31 December 2021.

CORPORATE GOVERNANCE PRACTICES

The Board is committed to achieving high corporate governance standards.

The Board believes that high corporate governance standards are essential to providing a framework for the Group to safeguard the interests of shareholders, enhance corporate value, formulate its business strategies and policies, and enhance its transparency and accountability.

The Company has applied the principles and code provisions of the CG Code throughout the Reporting Period as the basis of the Company's corporate governance practices. The Board regularly reviews the Company's corporate governance practices and relevant policies to comply with the prevailing standards and requirements of good corporate governance. To comply with the increasingly stringent regulatory requirements, revision of the existing practices and policies, and introduction of appropriate new measures will be implemented as and when required.

During the year ended 31 December 2021, the Company has complied with all applicable code provisions as set out in the CG Code, except for code provision A.2.1 as explained below.

MODEL CODE FOR SECURITIES TRANSACTIONS

The Company has adopted the Model Code.

Specific enquiry has been made of all the Directors and the Directors have confirmed that they have complied with the Model Code throughout the year ended 31 December 2021.

The Company has also adopted the Model Code as its written guidelines (the "Employees Written Guidelines") in respect of securities dealings by relevant employees who are likely to be in possession of unpublished price-sensitive information of the Company. No incident of non-compliance of the Employees Written Guidelines by the relevant employees was noted by the Company.

BOARD OF DIRECTORS

The Company is headed by an effective Board which oversees the Group's businesses, strategic decisions and performance and takes decisions objectively in the best interests of the Company.

The Board regularly reviews the contribution required from a Director to perform his responsibilities to the Company, and whether the Director is spending sufficient time performing them.

Board Composition

The Board currently comprises eleven Directors, consisting of one executive Director, six non-executive Directors and four independent non-executive Directors.

During the year ended 31 December 2021 and up to the date of this report, the composition of the Board comprises the following Directors:

Executive Director

Dr. Shui On LEUNG (Chairman and Chief Executive Officer)

Non-executive Directors

Dr. Haigang CHEN Mr. Xun DONG Mr. Senlin LIU Ms. Wenyi LIU Ms. Jie LIU Mr. Lei SHI

Independent Non-executive Directors

Mr. George William Hunter CAUTHERLEY Mr. Ping Cho Terence HON Dr. Chi Ming LEE Mr. Dylan Carlo TINKER

During the year ended 31 December 2021, changes to the composition of the Board were as follow:

• Mr. Michael James Connolly HOGAN, for the purpose of devoting more time to his personal business engagement, retired from office by rotation and did not offer himself for re-election at the 2021 annual general meeting;
• Dr. Chi Ming LEE was appointed as an independent non-executive Director of the Company with effect from 15 June 2021;
• Mr. Jing QIANG and Mr. Huiyuan MA resigned as non-executive Directors of the Company with effect from 14 December 2021;
• Ms. Jie LIU was appointed as a non-executive Director of the Company with effect from 14 December 2021; and
• Mr. Lei SHI was appointed as a non-executive Director of the Company with effect from 17 December 2021.

The biographical information of the Directors is set out in the section headed "Directors and Management" on pages 22 to 28 of this annual report.

Mr. Jing QIANG is the spouse of Ms. Wenyi LIU. Save as disclosed, none of the members of the Board is related to one another.

Chairman and Chief Executive Officer

Code provision A.2.1 stipulates that the roles of chairman and chief executive should be separate and should not be performed by the same individual.

Dr. Shui On LEUNG is currently both the Chairman and Chief Executive Officer of the Company.

The Board believes that Dr. Leung is the Director best suited, among all Directors, to identify strategic opportunities and focus in view of his extensive understanding of the Company's business as a founder and the chief executive officer. The Board further believes that the combined role of chairman and chief executive officer will not impair the balance of power and authority between the Board and the management of the Company, given that: (i) decisions to be made by the Board require approval by at least a majority of the Directors; (ii) Dr. Leung and other Directors are aware of and have undertaken to fulfill their fiduciary duties as Directors, which require, amongst other things, that they act for the benefit and in the best interests of the Company as a whole and will make decisions for the Company accordingly; (iii) the balance of power and authority is protected by the operations of the Board, which consists of an executive Director (Dr. Leung), six non-executive Directors and four independent non-executive Directors, and has a fairly strong independence element; and (iv) the overall strategies and other key business, financial, and operational policies of the Company are made collectively after thorough discussions at both the Board and senior management levels. Therefore, the Board considers that it is in the best interests of the Group for Dr. Leung to take up both roles for business development and effective management, and the deviation from the code provision A.2.1 of the CG Code is appropriate in such circumstances.

Independent Non-executive Directors

During the year ended 31 December 2021, the Board at all times met the requirements of the Listing Rules relating to the appointment of at least three independent non-executive Directors representing one-third of the Board with one of whom possessing appropriate professional qualifications or accounting or related financial management expertise.

The Company has received written annual confirmation from each of the independent non-executive Directors in respect of his independence in accordance with the independence guidelines set out in Rule 3.13 of the Listing Rules. The Company is of the view that all independent non-executive Directors are independent.

Each of the independent non-executive Directors has signed a letter of appointment with the Company for an initial term of three years and subject to re-appointment, retirement by rotation and re-election in accordance with the Articles and the Listing Rules.

Appointment and Re-election of Directors

The non-executive Directors (including independent non-executive Directors) of the Company are appointed for a specific term of three years, subject to renewal after the expiry of the then current term. The executive Director has entered into a service contract with the Company for an initial term of three years.

All the Directors of the Company are subject to retirement by rotation and re-election at the annual general meetings. Under the Articles, at each annual general meeting, one-third of the Directors for the time being, or if their number is not three or a multiple of three, the number nearest to but greater than one-third, shall retire from office by rotation. Every Director, including those appointed for a specific term, shall be subject to retirement at least once every three years. The Articles also provide that any Director appointed by the Board to fill a casual vacancy or as an addition to the Board, shall hold office only until the next following annual general meeting of the Company and shall then be eligible for re-election.

Responsibilities, Accountabilities and Contributions of the Board and Management

The Board should assume responsibility for leadership and control of the Company; and is collectively responsible for directing and supervising the Company's affairs.

The Board directly, and indirectly through its committees, leads and provides direction to management by laying down strategies and overseeing their implementation, monitors the Group's operational and financial performance, and ensures that sound internal control and risk management systems are in place.

All Directors, including non-executive Directors and independent non-executive Directors, have brought a wide spectrum of valuable business experience, knowledge and professionalism to the Board for its efficient and effective functioning. The independent non-executive Directors are responsible for ensuring a high standard of regulatory reporting of the Company and providing a balance in the Board for bringing effective independent judgement on corporate actions and operations.

All Directors have full and timely access to all the information of the Company and may, upon request, seek independent professional advice in appropriate circumstances, at the Company's expenses for discharging their duties to the Company.

The Directors shall disclose to the Company details of other offices held by them.

The Board reserves for its decision all major matters relating to policy matters, strategies and budgets, internal control and risk management, material transactions (in particular those that may involve conflict of interests), financial information, appointment of directors and other significant operational matters of the Company. Responsibilities relating to implementing decisions of the Board, directing and co-ordinating the daily operation and management of the Company are delegated to the management.

The Company has arranged appropriate insurance coverage on Directors' and officers' liabilities in respect of any legal actions taken against Directors and officers arising out of corporate activities. The insurance coverage will be reviewed on an annual basis.

Continuous Professional Development of Directors

Directors shall keep abreast of regulatory developments and changes in order to effectively perform their responsibilities and to ensure that their contribution to the Board remains informed and relevant.

Every newly appointed Director has received a formal and comprehensive induction on the first occasion of his/her appointment to ensure appropriate understanding of the business and operations of the Company and full awareness of Director's responsibilities and obligations under the Listing Rules and relevant statutory requirements.

During the year ended 31 December 2021, the Company organized training sessions conducted by the legal advisers for all Directors. The training sessions covered a wide range of relevant topics including directors duties and continuing obligations of listed issuer under the Listing Rules. In addition, relevant reading materials including compliance manual/legal and regulatory updates/seminar handouts have been provided to the Directors for their reference and studying.

The records of the continuous professional development that have been received by the Directors for the year ended 31 December 2021 are summarised as follows:

Directors	Type of Training (Note 1)
Executive Director
Dr. Shui On LEUNG (Chairman and Chief Executive Officer)	✓
Non-executive Directors
Dr. Haigang CHEN	✓
Mr. Xun DONG	✓
Mr. Senlin LIU	✓
Ms. Wenyi LIU	✓
Ms. Jie LIU (Note 2)	✓
Mr. Lei SHI (Note 3)	✓
Mr. Huiyuan MA (Note 4)	✓
Mr. Jing QIANG (Note 4)	✓
Independent Non-executive Directors
Mr. George William Hunter CAUTHERLEY	✓
Mr. Ping Cho Terence HON	✓
Dr. Chi Ming LEE (Note 5)	✓
Mr. Dylan Carlo TINKER	✓
Mr. Michael James Connolly HOGAN (Note 6)	✓

Notes:

• 1. During the year ended 31 December 2021, all Directors received training and training materials, including from the Company's external legal adviser, about matters relevant to their duties as directors of a listed company. They also kept abreast of matters relevant to their role as Directors by such means as attendance at seminars and conferences and/or reading materials about financial, commercial, economic, legal, regulatory and business affairs.
• 1. Appointed on 14 December 2021
• 1. Appointed on 17 December 2021
• 1. Resigned on 14 December 2021
• 1. Appointed on 15 June 2021
• 1. Retired on 15 June 2021

BOARD MEETINGS AND DIRECTORS' ATTENDANCE RECORDS

During the year ended 31 December 2021, the Board conducted regular meetings and scheduled to meet at least four times at approximately quarterly intervals in accordance with the CG Code. Apart from regular Board meetings, the Chairman also held meeting annually with the independent non-executive Directors without the presence of other Directors.

The attendance records of the Directors at the Board meetings and the general meetings held during the year ended 31 December 2021 are as follows:

Name of Directors	Attendance
	Board Meetings	General Meetings
Executive Director
Dr. Shui On LEUNG (Chairman and Chief Executive Officer)	6/6	3/3
Non-executive Directors
Dr. Haigang CHEN	6/6	3/3
Mr. Xun DONG	5/6	3/3
Mr. Senlin LIU	6/6	3/3
Ms. Wenyi LIU	6/6	3/3
Ms. Jie LIU (Note 1)	0/0	0/0
Mr. Lei SHI (Note 2)	0/0	0/0
Mr. Huiyuan MA (Note 3)	5/5	3/3
Mr. Jing QIANG (Note 3)	5/5	3/3
Independent Non-executive Directors
Mr. George William Hunter CAUTHERLEY	6/6	3/3
Dr. Chi Ming LEE (Note 4)	4/4	1/1
Mr. Ping Cho Terence HON	6/6	3/3
Mr. Dylan Carlo TINKER	6/6	3/3
Mr. Michael James Connolly HOGAN (Note 5)	2/2	2/2

Notes:

• 1. Appointed on 14 December 2021
• 1. Appointed on 17 December 2021
• 1. Resigned on 14 December 2021
• 1. Appointed on 15 June 2021
• 1. Retired on 15 June 2021

BOARD COMMITTEES

The Board has established three committees, namely, the Audit Committee, Remuneration Committee and Nomination Committee, for overseeing particular aspects of the Company's affairs. All Board committees of the Company are established with specific written terms of reference which deal clearly with their authority and duties. The terms of reference of the Audit Committee, Remuneration Committee and Nomination Committee are available on the Company's website and the Stock Exchange's website and are available to shareholders upon request.

Audit Committee

The Audit Committee was established in 2019. The terms of reference of the Audit Committee are of no less exacting terms than those set out in the CG Code.

The Audit Committee currently comprises the following members:

Independent Non-executive Directors:

Mr. Ping Cho Terence HON (Chairman of the Committee) Mr. George William Hunter CAUTHERLEY (Member) Dr. Chi Ming LEE (Member) Mr. Dylan Carlo TINKER (Member)

Mr. Michael James Connolly HOGAN retired as independent non-executive Director and member of the Audit Committee with effect from 15 June 2021 and Dr. Chi Ming LEE was appointed as independent non-executive Director and member of the Audit Committee with effect from 15 June 2021.

The main duties of the Audit Committee are to assist the Board in reviewing the financial information and reporting process, risk management and internal control systems, effectiveness of the internal audit function, scope of audit and appointment of external auditor, and arrangements to enable employees of the Company to raise concerns about possible improprieties in financial reporting, internal control or other matters of the Company.

A summary of work performed by the Audit Committee during the year ended 31 December 2021 is set out as follows:

• (i) reviewing the accounting principles and policies adopted by the Group;
• (ii) reviewing the audited consolidated financial statements of the Group for the year ended 31 December 2020 and the interim results of the Group for the six months ended 30 June 2021;
• (iii) reviewing any significant findings by the independent auditor during the financial audit and other audit issues;
• (iv) recommending the Board on the re-appointment of external auditor at the 2021 annual general meeting; and
• (v) monitoring and reviewing the effectiveness of the risk management and internal control systems including the adequacy of resources, staff qualifications and experience, training programs and budget of the Company's accounting and financial reporting function.

During the year ended 31 December 2021, two Audit Committee meetings were held, of which both of them were attended by the Company's external auditor regarding the review of the Company's financial report and accounts. The attendance records of the members of the Audit Committee during the year ended 31 December 2021 are as follows:

Attendance
2/2
2/2
1/1
1/1
2/2

Remuneration Committee

The Remuneration Committee was established in 2019. The terms of reference of the Remuneration Committee are of no less exacting terms than those set out in the CG Code.

The Remuneration Committee currently comprises the following members:

Executive Director:

Dr. Shui On LEUNG (Member)

Independent Non-executive Directors:

Dr. Chi Ming LEE (Chairman of the Committee) Mr. Ping Cho Terence HON (Member)

Mr. Michael James Connolly HOGAN retired as independent non-executive Director and chairman of the Remuneration Committee with effect from 15 June 2021 and Dr. Chi Ming LEE was appointed as independent non-executive Director and the chairman of the Remuneration Committee with effect from 15 June 2021.

The primary functions of the Remuneration Committee include reviewing and making recommendations to the Board on the remuneration packages and the terms of service contracts of individual Directors and senior management, the remuneration policy and structure for all Director and senior management, and establishing transparent procedures for developing such remuneration policy and structure to ensure that no Director or any of his/her associates will participate in deciding his/her own remuneration.

A summary of work performed by the Remuneration Committee during the year ended 31 December 2021 is set out as follows:

• (i) reviewing the Company's policy and structure for the remuneration of all Directors and senior management;
• (ii) assessing the performance of the executive Directors and the senior management; and
• (iii) reviewing the remuneration packages of the individual Directors and the senior management and make recommendation to the Board of their remuneration.

Details of the remuneration of the senior management by band are set out in note 9 to the consolidated financial statements.

During the year ended 31 December 2021, three Remuneration Committee meetings were held. The attendance records of the members of the Remuneration Committee during the year ended 31 December 2021 are as follows:

Name of members of the Remuneration Committee Attendance

Dr. Chi Ming LEE (Chairman of the Committee)
(appointed on 15 June 2021)	0/0
Mr. Michael James Connolly HOGAN (Chairman of the Committee)
(retired on 15 June 2021)	3/3
Mr. Ping Cho Terence HON	3/3
Dr. Shui On LEUNG	3/3

Nomination Committee

The Nomination Committee was established in 2019.

The Nomination Committee currently comprises the following members:

Executive Director:

Dr. Shui On LEUNG (Chairman of the Committee)

Independent Non-executive Directors:

Mr. Ping Cho Terence HON (Member) Mr. Dylan Carlo TINKER (Member)

The principal duties of the Nomination Committee include reviewing the Board composition, developing and formulating relevant procedures for the nomination and appointment of Directors, making recommendations to the Board on the appointment and succession planning of Directors, and assessing the independence of independent non-executive Directors.

In assessing the Board composition, the Nomination Committee would take into account various aspects as well as factors concerning Board diversity as set out in the Company's Board Diversity Policy. The Nomination Committee would discuss and agree on measurable objectives for achieving diversity on the Board, where necessary, and recommend them to the Board for adoption.

The Board has delegated its responsibilities and authority for selection and appointment of Directors to the Nomination Committee.

In identifying and selecting suitable candidates for directorships, the Nomination Committee would review the structure, size, composition and diversity (including without limitation, gender, age, cultural and education background, ethnicity, professional experience, skills, knowledge and length of service) of the Board. The Nomination Committee would also consider candidates on merit and against the objective criteria that are necessary to complement the corporate strategy and achieve Board diversity, where appropriate, before making recommendation to the Board. The ultimate decision will be based on merit and contribution that the selected candidates will bring to the Board. The Nomination Committee will review the procedure and criteria for the nomination of Directors, as appropriate, to ensure its effectiveness.

A summary of work performed by the Nomination Committee during the year ended 31 December 2021 is set out as follow:

• (i) reviewing the size and composition of the Board;
• (ii) making recommendations to the Board on the appointment and succession planning of Directors; and
• (iii) assessing the independence of the independent non-executive Directors and make recommendation on the re-election of retiring Directors.

During the year ended 31 December 2021, two Nomination Committee meetings were held. The attendance records of the members of the Nomination Committee during the year ended 31 December 2021 are as follows:

Attendance
2/2
2/2
2/2

Board Diversity Policy

The Company has adopted a Board Diversity Policy which sets out the approach to achieve diversity of the Board and is available on the website of the Company. The Company recognizes and embraces the benefits of having a diverse Board and sees increasing diversity at the Board level as an essential element in supporting the attainment of its strategic objectives and its sustainable development.

Pursuant to the Board Diversity Policy, the Nomination Committee reports annually the structure, size and composition of the Board and where appropriate, make recommendations on changes to the Board to complement the Company's corporate strategy and to ensure that the Board maintains a balanced diverse profile. In relation to reviewing and assessing the Board composition, the Nomination Committee is committed to diversity at all levels and will consider a number of aspects, including but not limited to gender, age, cultural and educational background, ethnicity, professional experience, skills, knowledge and length of service.

The Company aims to maintain an appropriate balance of diversity perspectives that are relevant to the Company's business growth and is also committed to ensuring that recruitment and selection practices at all levels (from the Board downwards) are appropriately structured so that a diverse range of candidates are considered.

The Board will consider setting measurable objectives to implement the Board Diversity Policy and review such objectives from time to time to ensure their appropriateness and ascertain the progress made towards achieving those objectives. The Nomination Committee will periodically review the Board Diversity Policy, as appropriate, to ensure its effectiveness.

Corporate Governance Functions

The Board is responsible for performing the functions set out in the code provision D.3.1 of the CG Code.

During the year ended 31 December 2021, the Board reviewed the Company's corporate governance policies and practices, training and continuous professional development of directors and senior management, the Company's policies and practices on compliance with legal and regulatory requirements, the compliance of the Model Code and Written Employee Guidelines, and the Company's compliance with the CG Code and disclosure in the Corporate Governance Report.

RISK MANAGEMENT AND INTERNAL CONTROLS

The Board acknowledges its responsibility for the risk management and internal control systems and reviewing their effectiveness. Such systems are designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss.

The Board has the overall responsibility for evaluating and determining the nature and extent of the risks it is willing to take in achieving the Company's strategic objectives, and establishing and maintaining appropriate and effective risk management and internal control systems.

The Company has adopted and implemented comprehensive risk management and internal control policies in various aspects to achieve effective and efficient operations, reliable financial reporting and compliance with applicable laws and regulations. The Audit Committee reviews the risk management and internal control system twice a year and assists the Board at least annually, in leading the management and overseeing their design, implementation and monitoring of the risk management and internal control systems. Risks identified by management will be analyzed on the basis of likelihood and impact, and will be properly followed up, mitigated and rectified by the Company and reported to the Board.

During the year ended 31 December 2021, the Company has engaged an independent consultant ("Independent Consultant") to carry out the analysis and independent review of the adequacy and effectiveness of the risk management and internal control systems of the Company and its subsidiaries. The review included making enquiries with appropriate management and key process owners and performing walkthrough tests to identify the major risks and significant deficiencies, and making recommendation for improving and strengthening the internal control system to the Audit Committee for approval. The management then conducts follow-up review at least in a quarterly basis on the effectiveness of any adopted measures for improving and strengthening the internal control system, and report back to the Audit Committee.

The Company's risk management and internal control systems have been developed with the following principles, features and processes:

Risk Management

• • The Audit Committee will (i) oversee and manage the overall risks associated with our business operations, including reviewing and approving our risk management policy to ensure that it is consistent with our business strategies; (ii) reviewing and approving our corporate risk tolerance; (iii) monitoring the most significant risks associated with our business operations and our management's handling of such risks; (iv) reviewing our corporate risk in the light of our corporate risk tolerance; and (v) monitoring and ensuring the appropriate application of our risk management policies within the Company and the Group.
• • Mr. Hua, the Chief Financial Officer of the Company, is responsible for (i) formulating and updating our risk management policy and target; (ii) reviewing and approving major risk management issues of our Company; (iii) promulgating risk management measures; (iv) providing guidance on our risk management approach to the relevant departments in our Company; (v) reviewing the relevant departments' reporting on key risks and providing feedback; (vi) supervising the implementation of our risk management measures by the relevant departments; (vii) ensuring that the appropriate structure, processes and competences are in place in the Company; and (viii) reporting to the Audit Committee on our material risks.
• • The Company has adopted various policies to ensure compliance with the Listing Rules, including but not limited to aspects related to risk management, connected transactions and information disclosure.
• • The relevant departments in the Company, including the finance department, the legal department, and the human resources department, are responsible for implementing our risk management policy and carrying out our day-to-day risk management practice. In order to formalize risk management in our Company and set a common level of transparency and risk management performance, the relevant departments will gather information about the risks relating to their operation or function and conduct risk assessments.

It is believed that the Directors and members of our senior management possess the necessary knowledge and experience in providing good corporate governance oversight in connection with risk management.

Internal Control

It is the responsibility of the Board to ensure that the Company maintains a sound and effective internal control system. During the year 2021, our engaged Independent Consultant performed certain agreed-upon procedures (the "Internal Control Review") in connection with the internal control during the period from 1 January 2021 to 31 December 2021 of our Company and our major operating subsidiaries in certain aspects, including financial reporting and disclosure controls, corporate level controls, information system control management and other procedures for our operations. In the year under review, no material issues on the Group's internal control system have been identified in the reviewed areas and reported to the Audit Committee. The Independent Consultant also performed follow-up review on the remedial actions undertaken by the management of the Group on the control deficiencies identified during the course of the Internal Control Review conducted in 2021.

During the year ended 31 December 2021, the Company has regularly reviewed and enhanced our internal control system. Below is a summary of the internal control policies, measures and procedures the Company has implemented or planned to implement:

• • We have adopted various measures and procedures regarding each aspect of our business operation, such as protection of intellectual property, environmental protection and occupational health and safety. For more information, see "— Intellectual Property Protection" and "— Health and Safety" to the ESG Report. We provide periodic training about these measures and procedures to our employees as part of our employee training program. We also constantly monitor the implementation of those measures and procedures.
• • Our Directors (who are responsible for monitoring the corporate governance of the Company) with assistance from our legal advisors, periodically review our compliance status with all relevant laws and regulations.
• • Our Audit Committee (i) makes recommendations to our Directors on the appointment and removal of external auditor; and (ii) reviews the financial statements and render advice in respect of financial reporting as well as oversee internal control procedures of our Group.
• • We have arranged anti-corruption and anti-bribery compliance training periodically to our senior management and employees to enhance their knowledge and compliance with applicable laws and regulations.
• • We plan to provide our directors, senior management and relevant employees with continuing training programs and updates regarding the relevant PRC laws and regulations on a regular basis with a view to proactively identify any concerns and issues relating to any potential non-compliance.
• • We intend to maintain strict anti-corruption policies among our sales personnel and distributors in our sales and marketing activities after we obtain marketing approvals for our drug candidates. We will also ensure that our sales and marketing personnel comply with applicable promotion and advertising requirements, which include restrictions on promoting drugs for unapproved uses or patient populations, and limitations on industry-sponsored scientific and educational activities.

The Board conducts a review of its risk management and internal control systems annually and, supported by the Audit Committee, reviewed the risk management and internal control systems, including the financial, operational and compliance controls, for the year ended 31 December 2021, and considered that such systems are effective and adequate. The annual review also covered the financial reporting and staff qualifications, experiences and relevant resources.

The Company has developed its disclosure policy which provides a general guide to the Company's Directors, senior management and relevant employees in handling confidential information, monitoring information disclosure and responding to enquiries in a timely manner in accordance with applicable laws and regulations. Senior executive managements are delegated with responsibilities to control and monitor the proper procedures for disclosing the inside information. Directors and employees are restricted from dealing in the Company's securities when they are in possession of unpublished inside information. Control procedures have been implemented to ensure that unauthorised access and use of inside information are strictly prohibited.

DIRECTORS' RESPONSIBILITY IN RESPECT OF THE FINANCIAL STATEMENTS

The Directors acknowledge their responsibility for preparing the financial statements of the Company for the year ended 31 December 2021.

The Directors are not aware of any material uncertainties relating to events or conditions that may cast significant doubt upon the Company's ability to continue as a going concern.

The statement of the independent auditor of the Company about their reporting responsibilities on the financial statements is set out in the Independent Auditor's Report on pages 102 to 105.

AUDITOR'S REMUNERATION

The remuneration paid or payable to the Company's external auditor, Ernst & Young, in respect of audit services and nonaudit services for the year ended 31 December 2021 is set out below:

Service Category	Fees paid and payable RMB'000
Audit service
Annual audit services	2,000
Non-audit service	–
Total	2,000

COMPANY SECRETARY

Ms. Pui Yin Peony WONG was appointed as the Company's company secretary with effect form 1 April 2020. Ms. Wong is a senior manager of Corporate Services of Tricor Services Limited, a global professional services provider specializing in integrated business, corporate and investor services.

All Directors have access to the advice and services of the company secretary on corporate governance and board practices and matters. Mr. Jianping HUA, the Chief Financial Officer, has been designated as the primary contact person at the Company which would work and communicate with Ms. Wong on the Company's corporate governance and secretarial and administrative matters.

For the year ended 31 December 2021, Ms. Wong has undertaken not less than 15 hours of relevant professional training respectively in compliance with Rule 3.29 of the Listing Rules.

SHAREHOLDERS' RIGHTS

The Company engages with shareholders through various communication channels.

To safeguard shareholder interests and rights, separate resolution should be proposed for each substantially separate issue at general meetings, including the election of individual Director. All resolutions put forward at general meetings will be voted on by poll pursuant to the Listing Rules and poll results will be posted on the websites of the Company and of the Stock Exchange after each general meeting.

Convening a General Meeting

General meetings may be convened by the Directors on requisition of shareholder(s) of the Company representing at least 5% of the total voting rights of all the shareholders having a right to vote at general meetings or by such shareholder(s) who made the requisition (as the case may be) pursuant to Sections 566 and 568 respectively of the Companies Ordinance (Chapter 622 of the laws of Hong Kong) (the "Companies Ordinance").

Shareholders should follow the requirements and procedures as set out in the Companies Ordinance and where applicable, the Articles, for convening a general meeting.

Putting Forward Proposals at Annual General Meetings and General Meetings

Pursuant to Section 615 of the Companies Ordinance, shareholders representing at least 2.5% of the total voting rights of all shareholders; or at least 50 shareholders (as the case may be) who have a right to vote at the relevant annual general meeting, may request to circulate a resolution to be moved at an annual general meeting.

Pursuant to Section 580 of the Companies Ordinance, shareholders can request the Company to circulate to shareholders entitled to receive notice of a general meeting, a statement of not more than 1,000 words with respect to a matter mentioned in a proposed resolution to be dealt with at that meeting or other business to be dealt with at that meeting, if such shareholders represent at least 2.5% of the total voting rights of all shareholders; or at least 50 shareholders (as the case may be) who have a relevant right to vote.

Shareholders should follow the requirements and procedures as set out in the Companies Ordinance and where applicable, the Articles, for circulation of statement for general meeting and resolution for annual general meeting.

Putting Forward Enquiries to the Board

For putting forward any enquiries to the Board, shareholders may send written enquiries to the Company. The Company will not normally deal with verbal or anonymous enquiries.

Contact Details

Shareholders may send their enquiries or requests as mentioned above to the following:

Address:	Units 303 and 305-307, No. 15 Science Park West Avenue, Hong Kong Science Park,
	Pak Shek Kok, New Territories, Hong Kong
	(For the attention of the Board of Directors)
Fax:	(852) 3426 9433
Email:	message@sinomab.com

For the avoidance of doubt, shareholder(s) must deposit and send the original duly signed written requisition, notice or statement, or enquiry (as the case may be) to the above address, apart from the registered office of the Company, and provide their full name, contact details and identification in order to give effect thereto. Shareholders' information may be disclosed as required by law.

COMMUNICATION WITH SHAREHOLDERS AND INVESTOR RELATIONS

The Company considers that effective communication with shareholders is essential for enhancing investor relations and investor understanding of the Group's business performance and strategies. The Company endeavours to maintain an ongoing dialogue with shareholders and in particular, through annual general meetings and other general meetings. At the annual general meeting, directors (or their delegates as appropriate) are available to meet shareholders and answer their enquiries.

During the year ended 31 December 2021, the Company has not made any changes to the Articles. An up-to-date version of the Articles is also available on the Company's website and the Stock Exchange's website.

Policies relating to Shareholders

The Company has in place a shareholders' communication policy to ensure that shareholders' views and concerns are appropriately addressed. The policy is regularly reviewed to ensure its effectiveness. The Board has reviewed and confirmed the effectiveness of the policy during the Reporting Period.

DIVIDEND POLICY

The Company has adopted a dividend policy on payment of dividends. The Company does not have any pre-determined dividend payout ratio. Depending on the financial conditions of the Company and the Group and the factors including but not limited to the operations, earnings, cash requirements and availability, capital expenditure, future development requirements, business conditions and strategies, interests of shareholders, and any restrictions on payment of dividends, the Board may propose and/or declare dividends during a financial year and any final dividend for a financial year will be subject to shareholders' approval.

1. ABOUT THE REPORT

1.1 Report Description

This report aims to objectively disclose the 2021 environmental, social and governance ("ESG") performance of SinoMab BioScience Limited ("SinoMab" or "the Group" or "the Company" or "Company" or "We"). This report has been prepared in accordance with the Environmental, Social and Governance Reporting Guide ("the Guide") contained in Appendix 27 of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited. For detailed information on the Company's governance, it is recommended to read this report in conjunction with the "Corporate Governance Report" section in the Company's 2021 Annual Report to have a more comprehensive view of the Company's management performance.

In preparing this report, we meet the four reporting principles stipulated in the Guide — "materiality", "quantitative", "balance" and "consistency".

Materiality: This report follows the Guide for materiality assessment. Our work procedures include: (i) identifying relevant ESG issues, (ii) assessing the materiality of the issues, and (iii) reviewing and confirming the assessment process and results by the Board. We report ESG matters based on the materiality assessment results. Please refer to the subsection "Materiality Analysis" below for details of the materiality assessment work.

Quantitative: This report follows the Guide and refers to applicable quantitative standards and conventions and adopts quantitative methods to measure and disclose applicable key performance indicators. The measurement standards, methods, assumptions and/or calculation tools for the key performance indicators in this report, as well as the sources of conversion factors used have been explained in the corresponding places (if applicable), and the relevant environmental objectives are disclosed in the subsection "Green Operation".

Consistency: The preparation method of this year's Environmental, Social and Governance Report is consistent with that of previous years, and any changes that may affect meaningful comparison with previous reports have been explained in the corresponding positions.

Balance: This report provides objective disclosure of both positive and negative information to ensure that the content presents an unbiased view of the Group's ESG performance during the reporting period.

1.2 Scope of the Report

Unless otherwise stated, the scope of this report covers the ESG performance of SinoMab in the People's Republic of China and the main operating regions of the Hong Kong Special Administrative Region for the period 1 January 2021 to 31 December 2021.

1.3 Source of Information and Reliability Guarantee

The source of information and cases within this report was mainly derived from SinoMab's statistical reports, relevant documents and internal communication documents. SinoMab undertakes no false records or misleading statements in this report, and takes responsibility for the authenticity, accuracy and completeness of the information in this report.

1.4 Access and Respond to the Report

This report is published and available in both traditional Chinese and English. If there is any discrepancy between the texts, the English version shall prevail for all purposes. The electronic version is available on the website of the HKEx at www.hkexnews.hk and the website of SinoMab at www.sinomab.com. If you have any comments or suggestions on the ESG management of the Company, please contact us via message@sinomab.com. We look forward to your valuable feedback.

2. BOARD STATEMENT

The Board is ultimately responsible for the environmental, social and governance work of the Company and is responsible for overseeing and managing the implementation of ESG-related matters of the Company. All ESG functional departments are responsible for implementing the ESG work and reporting to the Board.

The Board has participated in assessing, prioritizing, and managing ESG matters, including risks and materiality to the Group's business. Please refer to the Corporate Governance Report in the Group's 2021 Annual Report and the following sections captioned "Materiality Analysis" for details of the risk management and materiality assessment work. The key ESG risks have been incorporated into the Company's comprehensive risk management system. The Board has reviewed these key risks and was aware of the measures taken and made recommendations.

During this year, the Board of Directors established environmental objectives related to its business operations and reviewed and discussed the establishment and progress of these objectives.

This report also discloses the above ESG-related issues in detail, which have been reviewed and approved by the Board on 21 March 2022.

3. ESG MANAGEMENT SYSTEM

3.1 ESG Concept

The vision of SinoMab is to become a global leader in the innovation of therapeutics for immunological diseases. We strive to become a leading global biopharmaceutical company to develop novel drugs to fulfill unmet medical needs. As an industry pioneer in the Greater China Region, we actively practice the concept of ESG. We dedicate to R&D and quality assurance. Meanwhile, we attach great importance to environmental protection and the employee's legitimate rights protection, expect to develop together with employees and partners. Looking forward, based on the current portfolio of drugs and R&D capabilities, the Company will accelerate the R&D and marketing of drugs, enhance globalized cooperation and technological innovation, further integrate the concept of sustainable development with the Company's operations and continue to improve the ESG management ability. We are dedicated to evolving into an important force in the global healthcare industry to pursue patients' well-being while advancing together with scientists, governments, regulatory authorities, shareholders, investors and society.

3.2 ESG Governance Structure

Based on our current organizational structure, we have established an ESG governance structure led by the Board and joined by multiple functional departments for better implementation of the Company's development philosophy and ESG work.

The Board: As the highest decision-making body for ESG governance, the board is responsible for overseeing the Company's overall ESG strategy and annual ESG objectives, reviewing ESG risks and the materiality assessments result, so as to ensure that the Company has appropriate and effective ESG risk management and internal control systems in place. The board also reviews and approves disclosures information, including ESG reports.

The ESG functional department: The primary responsibility is to formulate departmental ESG objectives and work plans according to the ESG management policy and strategy, implement key tasks based on them, and promptly monitor the achievement of the objectives. Functional departments should report regularly to governance on the development of ESG work in their departments and submit annual ESG information and disclosure materials.

3.3 Stakeholder Engagement

We have attached great importance to communication and feedback from stakeholders. This year, we continued to identify and proactively respond to the concerning ESG issues to all stakeholders, including government and regulatory agencies, shareholders and other investors, employees, customers and patients, suppliers, media and NGOs, communities, etc.

Main stakeholders	Key ESG concerns	Major communication channels
Governments and regulators	Labor standards Product responsibility Anti-corruption	Policy consultations Incident reporting Information disclosure
Shareholders and investors	Product responsibility Anti-corruption	Shareholders' meetings Annual report Regular announcements Official websites
Employees	Employment Health and Safety Development and training Labor standards	Communication meetings Face-to-face communication Social media

Main stakeholders	Key ESG concerns	Major communication channels
Customers and patients	Product responsibility	Information disclosure Social media
Suppliers	Supply chain management Anti-corruption	Supplier assessment Phone E-mail
Media and NGOs	Emissions Use of resources Environmental and natural resources Employment Supply chain management Product responsibility	Press conferences and exchanges Social media Official websites
Community	Emissions Community investment Climate change	Community interaction Public welfare programs Social media

3.4 Materiality Analysis

We use the following process to identify ESG issues that are important to the Company's sustainability and stakeholders.

1. Identication of potential important issues

We set out potentially important topics with reference to the following information:

• Environmental, Social and Governance Reporting Guide
• Industry ESG Key Issues

2. Stakeholder communication and analysis of key issues

• We conducted the materiality analysis through the aforementioned communication channels with key stakeholders to understand their views on relevant ESG issues
• We also took into account the results of our peer group materiality assessment and external expert opinion

3. Conrmation of important topics

• Based on the results of the stakeholder analysis, the Company's key ESG issues were identied and used to inform the preparation of this report and the direction of the Company's next steps.

During the reporting period, we identified Product Responsibility, Development and Training, Employment and Supply chain management are the most relevant material issues. Meanwhile, other material issues include Health and Safety, Anti-corruption, Emissions, Use of Resources, Climate Change, Labor Standards, Environmental and Natural Resources and Community Investment.

A matrix of the results of our materiality issue assessment is shown below.

4. RESPONSIBLE OPERATION

Under the policy of "integrity, innovation, pragmatism, efficiency, and collaboration", the Company carries out responsible operations by ensuring compliance with relevant laws and regulations, assuring product quality, focusing on R&D, and promoting the joint development of the industry.

4.1 Product Responsibility

In line with our vision to become a global leader in the innovation of therapeutics for immunological and other debilitating diseases, we have been dedicated to R&D since its inception. We have continuously expanded a pipeline of complementary mAb-based biologics and new chemical entities ("NCE") addressing indications against a plethora of immunological diseases. The Company now comprises a full-spectrum platform that consists of target identification, drug candidate development, pre-clinical research, clinical trials, clinical production, quality control, quality assurance, regulatory approval and commercial-scale production. The Company provides comprehensive and effective assurance for the quality and safety of products through the implementation of a management system and enforcement throughout the life cycle.

SM03, our flagship product, is the global first innovative "Recombinant Human anti-CD22 mAb" for the treatment of rheumatoid arthritis ("RA") and potentially for the treatment of other immunological diseases. SM03 for RA has been recognized as one of the significant special projects of Significant New Drugs Development of the Twelfth Five-Year Plan and Thirteenth Five-Year Plan; the enrolment in the Phase III clinical trial was completed in November 2021.

4.1.1 Product Quality Assurance

With the goal of "continuously providing innovative biopharmaceuticals with excellent quality and global trust", the Company is committed to exercising a high standard of quality control. We strictly abide by the laws and regulations such as Drug Administration Law of the People's Republic of China (《中華人民共和 國藥品管理法》) and Good Manufacture Practice of Medicinal Products (《藥品生產品質管制規範》, "GMP"). We focus on the trend of changes in relevant international standards and respond timely. We have formulated a series of quality standards, operating procedures and production management procedures have been formulated regarding the international standards and carry out drug production and quality management accordingly.

The Company has established and continuously improved its quality management system and conducts comprehensive risk assessments and tests its reasonability in accordance with standards and procedures under our quality management system. We have built a professional quality control team led by the Chief Executive Officer ("CEO") of the Company:

• • CEO is responsible for overall product quality and ensures that the Company achieves the quality goals and produces drugs in compliance with GMP requirements.
• • The qualified person and the quality management leader are responsible for establishing and operating the quality management system to ensure the safety and effectiveness of our products.
• • The Quality Assurance Department ("QA"), the Quality Control Department ("QC") and the Verification Department headed by the quality management leader. QA is primarily responsible for establishing and improving the quality assurance system, conducting self-inspection against GMP to ensure that the quality management is carried out effectively. Other responsibilities include establishing the quality control system, formulating relevant policies and standards on quality management, and conducting quality inspection, verification and analysis of raw materials, auxiliary materials, packaging materials, intermediate products, bulks, semi-final products and final products. The Validation Department within is mainly responsible for formulating validation strategies, developing main plans for validation, tracking and monitoring implementation to ensure that facilities, equipment, and processes are validated.

Full-cycle quality control

The Company implements full-cycle quality control from product development, material selection, production to clinical trials (as currently the product has not been commercialized, the product cycle has not yet covered product listing and delisting):

• Product quality control in R&D

For products in the research and development stage, whether they are self-developed or introduced from third parties, the Company will conduct comprehensive and professional testing on the safety and effectiveness and continuously improve the quality of products based on the testing results and related procedures.

• Quality control in the selection and collection stage

Our Purchasing Department, Production Departments as well as quality management departments jointly conduct supplier development and assessments. This year, we reorganized the material management hierarchy and further optimized the material management system. At the same time, we updated our supplier management system and improved the review content of our annual material management. We implemented a strict control process for production materials and established corresponding management and operational procedures for each node in the process. We implement a "three-tier check" on the quality of raw materials, including warehousing check, issue check and workshop handover check, and enforce the Four-Eye principle in the review of high-risk materials.

• Quality Control for Production

The Company attaches great importance to quality control in the production process, inviting external experts to guide the optimization of the Company's quality system, revising and perfecting quality management system documents relating to manufacturing technique, technical operations, batch records, such as Correction and Prevention Management Regulations 《糾正與預防措施管理規程 ( 》), Deviation Management Regulations 《 偏 差 處 理 管 理 規 程 》 ( ), Change Control Management Regulations 《變更控制管理規程 ( 》). At the same time, this year, we upgraded the production process procedures for upstream products, further refining the manufacturing technique and standardizing the production process to make product quality more stable. We added new informatization management procedures, such as the Computerized System Electronic Data Assurance Management Regulations 《 計 算 機 化 系 統 電 子 數 據 保 障 管 理 規 程 》 ( ), Computerized System Standardized Use Management Regulations 《 計 算 機 化 系 統 規 範 化 使 用 管 理 規 程 》 ( ) and Computerized System Life Cycle Management Regulations 《計算機化系統生命周期管理規程》 ( ), to enhance the management control capability in our production and inspection activities by means of technology.

• Quality review and analysis: We conduct a review and analysis of the previous year's quality operation at the beginning of each year, based on the summary and statistical analysis of the inspection data generated from raw and auxiliary materials, intermediate products, raw liquids and finished products in the previous year, and evaluate from the product technology, product quality and other levels. In the case of Out of specification ("OOS"), we strictly conduct a comprehensive investigation into the five dimensions of human, machine, material, law and environment, and implement corresponding corrective and preventive actions.
• Laboratory Management System Update: In this year, the company introduced a new Laboratory Information Management System ("LIMS"), which uploads data about sample management, sample retention management, instrument management, stability management and other processes to the server in real time, and avoids data loss through off-site backup; it can also achieve standardized, normalized and information-based management through audit trail and personnel permission management, reducing the risk of data being tampered and deleted. Automated data capture and statistics improve work efficiency, saving manforce and material resources while effectively reducing human errors.
• Laboratory optimization: In this year, we invited a professional team to design the new laboratory according to GMP, starting from all aspects of Design Confirmation, Installation Confirmation, Function Confirmation and Performance Confirmation to improve the laboratory testing environment and optimize the deployment of laboratory functions in order to further meet GMP requirements for laboratory quality management.

• Quality Control for Final Products

We have formulated quality control procedures for products that will proceed to commercialization. The final product will be tested by QC according to relevant specifications and verification and will be comprehensively reviewed by QA before being reviewed and released by the qualified person before releasing. We introduced a fully automated product packaging line to reduce the risk of human error and ensure the quality of finished products.

The Company identifies, evaluates and disposes of non-conforming products in accordance with the Non-conforming Product Management Regulations (《不合格品管理規程》). Quality problems will be reported truthfully and handled following the Company's Regulations.

• Drug Quality Control during Clinical Trials

We exercise strict control over the quality and safety of medicines in clinical trial activities. During the year, we continued to follow the relevant guidelines such as Good Clinical Practice (《藥物臨床試驗 質量管理規範》, "GCP") and the requirements of the International Council for the Harmonization of Medicines for Human Use ("ICH") and updated Clinical Trials Medicines Quality Assurance Regulations 《臨床試驗用藥質量保證協議》 ( ) to provide detailed regulations on the storage and transportation of trial drugs, the use of medicines in clinical trials and the disposal of expired medicines. The main areas include:

• Drug storage: We strictly monitor the storage conditions of test drugs in the warehouse, set up dedicated drug storage and transfer facilities for clinical trial centers and implement 24-hour electronic temperature monitoring. If the storage environment fails to meet relevant requirements, we will take proper actions in strict accordance with corresponding regulations.
• Drug transportation: We select a service provider with cold chain transportation of drug qualification and enter into a quality assurance agreement. When receiving the medicine, we confirm that the packaging is complete and undamaged, and check proof materials that demonstrate storage conditions for the medicine have been met during transportation. If the packaging is damaged or the medicine is over-temperature, we will store the medicine separately and conduct evaluation in a timely manner to see whether the delivered medicine meets the relevant standards. This year, we added the COVID-19 testing program for cold chain transportation to ensure the safety of the cold chain transportation process.

• Clinical trials: The Company selects clinical trial hospitals and researchers with relevant qualifications and a good reputation as partners. We sign the Agreement of Quality Assurance for Clinical Trial Drug (《臨床試驗用藥品質保證協議》) with the sponsor of the clinical trial. We review inspection reports for each batch of clinical trial drugs, archive the release reports for inspection, and review the drug management policies of the clinical trial institutions frequently to ensure the quality and safety of the clinical trial drug. In order to cope with the impact of the COVID-19 epidemic on clinical trials, the Company formulated the Emergency Plan for Clinical Research Response to COVID-19 (《臨床研究應對新冠肺炎應急預案》) to protect the orderly clinical trials and drug safety.

• Dispose of expired drug: The Company has established a complete drug tracking system to strictly review the validity period of drugs. For drugs that are about to expire, relevant test personnel will be promptly notified, and the corresponding batches of drugs will be frozen in our drug distribution system. For expired drugs, we require staff to fill out a recall form and implement recall procedures. We entrust a third party with relevant qualifications to count and destroy expired drugs and acquire related destruction reports after the destruction is completed.

• Monthly coordination meeting: Our Clinical Department conducts monthly coordination meetings together with the Production Department, Quality Control Department, and Material Department to coordinate quality control issues encountered during production, supply, storage, and transportation of clinical drugs, and summarize the causes of problems for improvements in a timely manner.

• Pharmacovigilance system

During the year, the Company established a pharmacovigilance management system and set up a pharmacovigilance post in accordance with the requirements of GMP and regulations such as Code of Practice for the Quality Management of Pharmacovigilance (《 藥 物 警 戒 質 量 管 理 規 範 》) and Management Measures for the Reporting and Monitoring of Adverse Drug Reactions (《藥品不良反應 報 告 和 監 測 管 理 辦 法 》), with dedicated personnel responsible for pharmacovigilance and other related work of post-marketing products. In addition, with reference to the requirements of regulations, the Company formulated five management documents, such as Adverse Drug Reaction Reporting and Monitoring Management Regulations 《藥品不良反應報告和監測管理規程》 ( ) and Drug Safety Issues Management Regulations 《 藥 品 安 全 問 題 處 理 管 理 規 程 》 ( ), as well as ten standard operating procedures, such as Post-marketing Adverse Drug Reaction Reports Standard Operating Regulations 《上市後個例藥品不良反應報告處理標準操作規程》 ( ) and Preparation and Submission of Periodic Safety Update Reports Standard Operating Regulations (《藥品定期安全性更 新報告撰寫及遞交標準操作規程》), to comprehensively strengthen pharmacovigilance management.

• Quality Awareness Raising

The Company is committed to promoting risk awareness and quality awareness among all employees. Under the leadership of the Quality Assurance Department, quality-related training has been incorporated into the training matrix, with well-developed quality generalist, quality professional and quality hands-on courses. At the same time, we also invite external experts to conduct special training. These training activities enhance employees' understanding of drug-related laws and regulations and quality control standards and help improve their professionalism and analysis capabilities. Meanwhile, we carry out GMP self-inspection no less than once a year and on-site inspections to strengthen quality supervision and ensure continuous improvement of quality management.

• Complaints and Recall Procedures

We have not yet commercialized our products since the end of the reporting period. However, we attach great importance to establishing product complaint and recall systems. We have identified the requirements of the relevant laws and regulations such as the Law of the People's Republic of China on Protecting Consumers' Rights and Interests (《中華人民共和國消費者權益保護法》), the Drug Administration Law of the People's Republic of China (《 中 華 人 民 共 和 國 藥 品 管 理 法 》) and established a product complaint response process and recall procedures in accordance with relevant regulations including the Administrative Measures for Drug Recalls (《藥品召回管理辦法》) and GMP. The Quality Assurance Department is responsible for drug recall. Once a potential safety hazard is identified through evaluation, we will implement the drug recall process to protect consumer rights.

According to the management requirements for user complaints in Chapter 10 Section 9 of GMP, we have established a user complaint management system and formed User Complaint Management Policy (《用戶投訴管理制度》), which clearly stipulates the pathway, processing process and time limit for product complaints and feedback on opinions, forming a complete workflow to ensure compliance with GMP and to safeguard patients' medication safety and legitimate interests as far as possible.

During the reporting period, we did not receive any customer complaint or initiate any product recall.

4.1.2 Privacy Protection

The Company attaches great importance to protecting the private information of customers and subjects in clinical trials. We strictly abide by the GCP, establish and continuously improve corresponding management systems, and have a designated team responsible for managing customers' privacy information and clinical trial subjects.

We have conducted a series of measures to protect the medical data and other private information of clinical trial subjects:

During the reporting period, we did not experience any significant information leakage, theft or loss of customer and subject information.

4.1.3 Intellectual Property Protection

The protection of our drug candidates and their methods of use form important parts of our strategy to develop and commercialize novel medicines. We recognize the importance of intellectual property rights (IPRs) to our success and are committed to IPR development and protection. We strictly abide by China's intellectual property related laws and regulations such as the Trademark Law of the People's Republic of China (《中華人民共和國商標法》), Patent Law of the People's Republic of China (《中華人民共和國專利法》) and Trade Marks Ordinance (《商標條例》), Patents Ordinance (《專利條例》) in Hong Kong. We carry out intellectual property protection actively and fully respect the intellectual property of others.

We proactively identify the critical risk points for IPRs management and manage IPRs against the identified risks. In our day-to-day operations, we use a combination of patents, trademarks, trade secret protection and employee and third-party confidentiality agreements to protect intellectual property. Currently, we have obtained IPRs for our proprietary technologies, both within and outside of China, and seek additional patent protection where appropriate to safeguard our future innovation efforts. We have also engaged professional third-party organizations to register domestic and international trademarks to reduce the risk of trademark infringement.

Meanwhile, we respect other parties' IPRs. For example, for employees who used to work for other biotechnology or pharmaceutical companies, we reach into agreements on proprietary rights, nondisclosure and non-competition in connection with their previous employment. Whether it is a selfdeveloped product or an imported project, the Company will conduct a comprehensive background investigation. If there is a situation that may cause intellectual property disputes, we will re-evaluate the product development plan and prospects to ensure that the IPRs of other parties are not infringed. The Company complies with the paid purchase for clinical trial-related technical scales and standards involving intellectual property rights, such as the European League for Rheumatology DAS-EULAR, EQ-5D.

As of the end of 2021, we had been granted 17 invention patents worldwide and 4 pending patent applications in the United States. The Patent Cooperation Treaty ("PCT") application for "SM03" entered the national patent application phase in 2021.

4.1.4 Advertising and Publicity Management

During the reporting period, we had not yet commercialized our products, so we did not advertise our products to the public. However, we have identified the relevant requirements on drug advertisements in the Administrative Measures for the Classification of Prescription Drugs and Over-the-Counter Drugs (Trial) 《處 方 藥 與 非 處 方 藥 分 類 管 理 辦 法(試 行)》 ( ) and the Measures for the Examination of Pharmaceutical Advertisements (《藥 品 廣 告 審 查 辦 法》) to avoid potential false promotion and misleading advertising or product descriptions, laying a solid foundation for product commercialization in the future.

4.2 Anti-Corruption

The Company strives to create a clean and honest working environment and advocate an integrity corporate culture.

We strictly abide by Prevention of Bribery Ordinance of the Hong Kong Legislation (香港特別行政區《防止賄賂條例》), the Company Law of the People's Republic of China (《中華人 民共和國公司法》), the Anti-Money Laundering Law of The People's Republic of China (《中華人民共和國反洗錢法》), and other applicable laws and regulations. We adhere to a zero-tolerance attitude towards any form of illegal business practices, such as offering or receiving bribes, money laundering and fraud. During the year, we invited the Integrity Commissioner of the Independent Commission Against Corruption of Hong Kong to conduct training on Anti-

Corruption Talks to the directors and all staff of the Company. A total of three talks on anti-corruption systems and case studies were conducted in both on-site and video conference formats to continuously strengthen the integrity awareness of all staff.

We have established policies such as Anti-fraud Management Policy (《反舞弊管理制度》), Code of Ethics for Directors and Senior Management Staff (《董事及高級管理人員道德守則》), Code of Ethics for Employees (《員 工道德守則》), Regulations on Avoiding Conflicts of Interest and Preventing Bribery (《避免利益衝突和防止受賄 管理規定》). We require employees to sign the Anti-fraud Management Policy (《反舞弊管理制度》) statement and prohibit employees from engaging in any illegal or unethical business behavior and seeking benefits from it, as well as requires immediately reporting if any conflict of interest is involved. At the same time, we established an anti-fraud management policy for suppliers and implemented strict management and audit procedures to prevent corruption during the procurement process and ensure transparency.

We have set up a reporting channel such as hotlines and email for employees to report actual or suspected corruption, fraud and other violations of professional ethics. In the event of a violation, the violator will receive disciplinary measures such as dismissal or judicial investigation by regulatory agencies. The Company attaches importance to protecting the privacy and safety of whistleblowers in the investigation and will deal seriously with cases of infringement of whistleblower privacy or retaliation against whistleblowers.

During the reporting period, we did not have any reported major corruption, fraud or money laundering cases.

4.3 Supply Chain Management

SinoMab is committed to working closely with suppliers in the field of sustainable development to jointly improve the industry's sustainable development performance. During the reporting period, our major suppliers included equipment suppliers, raw material suppliers and service providers. We require suppliers to abide by the laws and regulations of the places where they operate and establish relevant management policies and management procedures. Following the principle of Fairness, Justice and Openness, we continuously improve the supplier management system, jointly managed by the Procurement Department and other relevant departments. At the same time, we actively focus on suppliers' environmental and social risk management. We gradually deepen ESG risk management of suppliers while establishing long-term and stable cooperative relations with suppliers.

4.3.1 Procurement and Supplier Entry

The Company has established a unified procurement system. We have formulated the Procurement/ Payment Management Regulations (《 採 購/付 款 管 理 規 定 》), the Equipment Management and Bidding Process (《 設 備 採 購 管 理 及 招 標 流 程 》) and other policies to standardize the management of the procurement process. This year, we addressed the problems in management and classification of materials by formulating the management regulations (manufacturers, sellers), entrusted production, entrusted inspection, computerized system supplier, and the new secondary document Supplier Audit Standard Operating Regulations 《 供 應 商 審 計 標 準 操 作 規 程 》 ( ) for further improving the supplier management system.

1. Initial screening

We invite a number of potential candidates with relevant capabilities to participate in the bidding through multidimensional research at the supplier sourcing stage;

2. Supplier approval

We require potential suppliers to provide certicates such as business qualication, quality system certication, and quality accident management program certication. We take full consideration of the product quality, reputation, compliance in operation and ESG-related risks of suppliers, and select the optimal one. For procurements where there are less than three supplier candidates, detailed reasons shall be provided in the approval process and the formal record should be retained.

4.3.2 Supplier Audit

We focus on the ESG risk management of our suppliers. We build a list of qualified suppliers, conducting on-site audits for main raw material suppliers to assess product quality as well as social and environmental management. The Quality Assurance Department fills in the Supplier Quality Review Evaluation Form (《供 應 商 質 量 回 顧 評 價 表 》) every year, and will not cooperate with suppliers with quality problems after evaluation. We also require contractors to strictly conduct environmental protection and safety work.

In 2021, the Company conducted an annual evaluation of its major suppliers and established a supplier management and audit plan for 2022. The Company will request the suppliers who can rectify the risks identified in the annual evaluation; for suppliers with significant risks or who fail to complete improvement measures, we will terminate cooperation with them.

4.3.3 Management of Clinical Trials

As many of our products are in or about to enter the clinical trial stage, we attach great importance to supplier management in clinical trial activities. When selecting service providers related to clinical trials and registration filings, we have established an internal management system and enforced the bidding procedures such as forming an internal expert panel, one or more rounds of supplier negotiations, scoring by the panel internally and forming a unanimous resolution. We choose third-party pharmaceutical R&D ("CROs") and clinical trial service providers with relevant qualifications, rich experience and a good reputation in the field of clinical research, as partners. We closely monitor and manage the performance of our partners, including but not limited to:

• • Requiring suppliers to strictly abide by GCP and other related regulations and provide supporting documents for filing with the National Medical Products Administration before screening
• • Requiring suppliers to carry out work in strict accordance with the requirements of the Clinical Trial Program (《臨床試驗方案》)
• • Conducting audits
• • Conducting timely and strict review on the work documents provided by suppliers

Suppliers in clinical trial activities must comply with the National Medical Products Administration guide and policies relating to clinical trials, as well as general industry practices. We also set relevant qualification and capability requirements for clinical trial hospitals, researchers and other clinical trial service providers to standardize their management.

5. GROWING TOGETHER

Employees are our most valuable asset. We strive to create a fair, safe and comfortable workplace, respect and protect the rights and interests of employees, and provide diverse growth opportunities and benefits to support our employees. We hope to grow with our employees together.

5.1 Employment

We strictly abide by the Labour Law of the People's Republic of China (《中華人民共和國勞動法》), the Labor Contract Law of the People's Republic of China (《中華人民共和國勞動合同法》), Chapter 57 – Employment Ordinance of the Hong Kong Legislation (《香港法例》第57章《僱傭條例》) as well as other applicable laws and industry regulations. We have formulated internal policies, such as Personnel Evaluation and Employment Management Regulations (《人員考核聘用管理規程》) and Overtime Management Measures (《加班管理辦法》). This year, we revise Employee Handbook (《員工手冊》) to further regulate and manage employee recruitment, employment, compensation, benefits, performance, working hours, development and promotion. We encourage diversity and inclusion, prohibit discrimination, child labor and forced labor.

5.1.1 Legal Recruitment

We have established Personnel Evaluation and Employment Management Regulations (《人員考核聘用管 理 規 程 》), and formulated recruitment plans based on the Company's strategic plan. We recruit talent through diverse methods such as online social recruitment, campus recruitment, job fairs, and internal employee reference. The identity of each onboarding employee is strictly verified to lower the risk of child labor. This year, no child labor incident occurred.

We adhere to the principles of fairness and impartiality and prohibit any differential treatment on the basis of gender, race, religious belief, sexual orientation or cultural background, etc. We sign a legal employment contract with each employee and handle the dismissal or termination of employees in accordance with applicable laws and regulations. Relevant clauses are listed in the labor contract.

Table of Employment Key Performance Indicators

age group and geographical region.		Unit	2021 KPI
Total number of employees		People	303
By Gender	Male	People	141
	Female	People	162
By Employment Type	Full-time employees	People	303
	Part-time employees	People	0
By Age	Under 30 years old Between 30 and 50 years old	People	99
	(not inclusive)	People	195
	50 years old (inclusive) and above	People	9
By Region	The Chinese Mainland Hong Kong	People People	268 35
KPI B1.2 Employee turnover rate by gender,
age group and geographical region.		Unit	2021 KPI
Total number of turnover employees		People	67
Employee turnover rate		%	18.11
By Gender	Male	%	20.79
	Female	%	15.63
By Age	Under 30 years old	%	23.26
	Between 30 and 50 years old
	(not inclusive)	%	14.85
	50 years old (inclusive) and above	%	25.00
By Region	The Chinese Mainland Hong Kong	% %	17.28 23.91

KPI B1.1 Total workforce by gender, employment type,

5.1.2 Compensation and Benefits

The Company provides employees with competitive remuneration packages and attaches great importance to employee benefits. Our staff remuneration package generally includes remuneration and allowances. Staff remuneration is tied to employees' performance to motivate our employees. We formulate a compensation plan, giving equity incentives to our core staff, recruiting and retaining the talent, and binding the employees together.

Employees can enjoy annual leave, paid sick leave and other legal holidays. We offer multiple benefits, including medical care, housing subsidies, transportation subsidies, communication subsidies, pensions, work injury insurance, accident insurance, traveling insurance and other additional benefits such as the year-end awards, holiday benefits, free annual medical examinations, free work meals and commuting shuttle. This year, the Company further optimized the employee benefits by:

To protect the health and safety of employees during COVID-19, the Company implemented flexible commuting by offering employees two available working hours.

5.1.3 Assessment and Promotion

We provide employees with dual development channels in management and professionalism for promotion. To encourage employees to improve their personal quality and professional abilities, we conduct a fair and comprehensive annual performance evaluation every year. In 2021, we continued to implement the Performance Evaluation Management System (《績效考核管理制度》) to help employees look back at their performance and understand their strengths and weaknesses. We revised the employee performance evaluation form to save filling time, quickly identify the employee performance and coordinate problems at work. There is also a public performance communication channel for employees better communicate with department supervisors so that they can understand the problems, find solutions and keep making progress.

5.1.4 Employee Activities

The Company attaches importance to the work-life balance of employees and actively organizes diverse activities, including badminton, development activities, annual meetings, holiday dinners, staff trips, etc. We expect to promote employee communication and enhance team cohesion, together with happiness sensed by employees through these activities.

This year, the Company held a development activity named Passionate Team Building, Cohesion Achieves Dream. This is the rst time since the establishment of the Company that colleagues from Suzhou, Beijing, Shanghai and Shenzhen have been brought together in this activity, which enhanced cross-regional and cross-departmental cohesion.

This year, the Company added quarterly birthday party for employees to help them integrate into the Company's family and maintain a better working attitude.

5.1.5 Communication

The Company pays attention to employees' feelings at the workplace. We establish an open and transparent communication mechanism and design various internal communication channels such as the social platform, mailboxes and communication meetings. We listen to our employees' opinions and advice carefully, encourage the rational expression of demands, and provide timely feedback on their opinions, suggestions, or demands.

5.2 Health and Safety

The Company strives to provide a healthy and safe work environment for employees. We strictly comply with Law of the People's Republic of China on Safety in production (《中華人民共和國安全生產法》), Law of the People's Republic of China on the Prevention and Control of Occupational Diseases (《中華人民共和國職業病防 治 法 》), the Regulations on Work-related Injury Insurance (《 工 傷 保 險 條 例 》) and other relevant laws and regulations. We keep following internal health and safety management policies and procedures such as Production Safety Management Protocol 《生產安全管理規程 ( 》), Safety Incident Management Protocol 《安全事 ( 故管理規程》), and Hazardous Waste Management Protocol (《危險廢物管理規程》). During the reporting period, there were no work-related injuries or work-related deaths of our employees.

We established and improved the Company's Environment, Health and Safety ("EHS") management system, comprehensively identified and evaluated potential risk areas, risk factors and key risk positions, and adopted a variety of measures to reduce health and safety risks.

• • We arranged EHS specialists to ensure that the Company's environmental protection, health and safety comply with relevant national policies and regulations. Our EHS specialists conduct standardized management of hazardous operations and special equipment, perform regular safety inspections, also assist the person in charge of the Company in implementing the organization, formulation, rehearsal and improvement of emergency response program.
• • We established a safety training management system. New employees would receive the "three levels" of safety education. We would also conduct training sessions for related parties before entering the factories.
• • In terms of laboratory safety, operations involving biohazards and chemical toxicity have to be processed in biosafety cabinets or chemical hoods following relevant instructions in our internal safety regulations.
• • Special hazardous chemical substances will be transferred to qualified parties for processing.
• • We encourage all employees to report the hidden safety hazards they have identified. Relevant departments will be appointed to carry out safety rectification measures should any problem be placed to ensure the health and safety of employees.

In order to improve employees' safety awareness and emergency response capabilities, we formulate plans for emergency drills and regularly organize relevant training courses, including fire-fighting training, workshop production safety training, laboratory safety training, equipment safety training, etc., to ensure employees 'health and safety at work.

In 2021, we conducted re safety training for all staff to help them become familiar with the use of re hydrants, re extinguishers and other re equipment and escape routes. At the same time, we carried out re drills to practice the idea of implementing safety responsibilities and promoting safe development.

Since the outbreak of the Covid-19, we actively responded to government calls and requirements, rapidly organized management to discuss epidemic prevention and control strategies, and comprehensively deployed and implemented epidemic prevention and control measures to effectively protect employees' health and safety.

Under the regular epidemic, we remain highly vigilant. We insist on daily disinfection and cleaning the office and temperature measurement for each employee when entering and leaving the office. We also reduce gathering activities, on-site meetings and business trips to reduce the risk of infection. To ensure our employees 'safety and stable operation, we evaluate the operation situation every day and examine if our employees wear masks or adopt other protective measures.

5.3 Training and Development

We adhere to the Selection, Training, Promotion and Retention strategy and have established a three-level training system to provide comprehensive training sessions for employees. Based on job functions and responsibilities, we develop corresponding training matrix, set up pre-service training, regular training, continuous training and other types of training, and systematically follow up the progress and learning effect of staff training through examinations and hands-on inspection mode. Each year we draw up an annual training plan, covering all staff at different levels, from frontline production staff to managers. This year, we strengthened training related to product quality, led by Quality Assurance Department, a training management position was set to ensure the supervision of QA for training, improving the quality of training.

We actively enrich internal and external training lecturer resources and promote the building of our technical talent team. In 2021, we developed External Training Management System (《外部培訓管理制度》) to standardize the management of external training, meet the needs of employee development, improve knowledge and skills, thus make the external training more scheduled, targeted and effective. This year, we invited experts to conduct GMP management training on deviations, changes and risk identification and control. In addition, we continue to implement the Technical Grade Evaluation Management Measures 《技術等級評定管理辦法》 ( ) to clarify the professional competency requirements for technical staff and to motivate them to continuously learn and improve their skills.

Table of Employment Training Key Performance Indicators

KPI B3.1 The percentage of employees trained
by gender and employee category.		Unit	2021 KPI
Percentage of trained employees by gender	Male	%	92.20
	Female	%	84.57
Percentage of trained employees by employee category	Management	%	84.21
	Others	%	89.02

KPI B3.2 The average training hours completed per employee
by gender and employee category.		Unite	2021 KPI
The average training hours completed by gender	Male	Hours	54.37
	Female	Hours	73.30
The average training hours employees completed by	Management	Hours	47.91
employee category	Others	Hours	68.33

5.4 Contributing to Society

Being a responsible corporate citizen, we are committed to giving back to the community while making good products and solving life and health problems for patients. As our company continues to grow and develop, we are increasingly determined to take responsibility for social welfare. We have established a communication mechanism with the communities where we operate. We have built long-term ties with them to better understand their needs and provide the timely and necessary support to contribute to harmonious community development.

Guided by the national strategies of "developing the country through science and education" and "strengthening the country through talents", we focus on investing in the education sector. Over the years, we have maintained close communication with neighboring schools and other institutions. We combined our business characteristics to assist universities in developing bioscience-related courses, assigning 7 employees and inviting industry experts to share biological knowledge and industry experience with students help the development of education.

6. GREEN OPERATION

The Company adheres to an environmentally responsible attitude, commits to reducing its environmental impact, and actively responds to the global challenge of climate change risks.

We strictly abide by the Environmental Protection Law of the People's Republic of China (《中華人民共和國環境保護 法》), Energy Conservation Law of the People's Republic of China (《中華人民共和國節約能源法》), the Law of the People's Republic of China on the Prevention and Control of Environmental Pollution by Solid Waste (《中華人民共和 國固體廢物污染環境防治法》), Chapter 354 — Waste Disposal Ordinance of the Hong Kong Legislation (《香港法例》 第354章《廢物處置條例》) and other applicable laws and regulations, improve our EHS management system, ensure compliance of emissions, and adopt a number of energy-saving and emission-reduction measures. We hire qualified professional institutions to design environmental protection plans for proposed projects, conduct environmental impact assessment work in accordance with relevant environmental protection laws and regulations and analyze the possible environmental impact of planned project and form response measures. During the reporting period, we did not have any material violations of environmental laws and regulations.

The Company's main resource consumption and emissions come from the production process, and the Company's production activities are currently concentrated in Haikou plant. In order to further promote the strengthening of environmental management within the Company, we have set the following environmental targets:

Energy consumption: In 2021, Haikou's per capita electricity consumption was 31 MWh per person. In 2022, Haikou will continue to promote electricity conservation, achieving a 1% reduction in per capita electricity consumption in 2022 compared with 2021.

Emissions: From 2022, all laboratory bottle washing wastewater will be required to be neutralized in pH before discharge. At the same time, the company's hazardous waste will be disposed of 100% of the year in compliance.

Water resources: We will promote the use of sensor switches, circulating water in green areas irrigation and other measures.

6.1 Resource Conservation

Our main operating model concerns daily office work, laboratory operations, and small-scale drug production (used for pre-clinical research and clinical trials). The consumed resource consists mainly of electricity, steam, gasoline, tap water and paper. We have established the Daily Management System for Energy Conservation and Emission Reduction (《節能減排日常管理制度》), which provides a basis for systematic resource management in all operating processes. The Administration Department is responsible for promoting the effective implementation of management policies. This year, we continue to implement a series of measures to improve the efficiency of resource use.

In terms of electricity consumption, we use energy-saving lamps in all office areas, set up independent lighting switches, and frequently remind employees to turn off the lights in a timely fashion. Unused facilities and systems are shut down timely to reduce unnecessary energy loss. We analyze suitable temperatures for different working areas, set the temperature of the air conditioners accordingly and encourage the use of the ventilation system for cooling to save electricity while ensuring a comfortable working environment. In the production workshop, we strengthened the indoor heat insulation effect and reduced the usage rate of air conditioners by installing color steel tile.

In order to improve the efficiency of water resource utilization, we installed the sensor switches, irrigated green areas by using circulating water and adopted other measures to reduce the waste of water resources.

In terms of the steam usage, the Engineering Department is responsible for the approval of steam use, through which the activation/deactivation should be approved before/after continuous production to reduce energy waste.

The Company's gasoline consumption mainly comes from the use of official vehicles. We strengthen the management of official vehicles, implement the concept of green travel, and encourage employees to use public transportation as much as possible. At the same time, employees are encouraged to use teleconferences and the Internet for cross-regional communication, which reduces energy consumption caused by unnecessary traveling.

We actively promote green offices by encouraging employees to use electronic documents instead of paper documents as much as possible. When printing is needed, we use environmentally friendly paper and set doublesided printing as the default.

6.2 Emissions

Our emissions are mainly greenhouse gases, production waste gas, wastewater, non-hazardous waste and hazardous waste. We place paramount importance to ensure compliance of emissions and have formulated relevant policies including the Laboratory Waste Management Protocol (《 實 驗 室 廢 棄 物 管 理 規 程 》), the Hazardous Waste Management Protocol (《危險廢物管理規程》), the Three Waste (Waste Gas, Waste Water; Industrial Residue) Management Protocol (《 三 廢 管 理 規 程 》), the Inactivation of Production Appliances and Wastes Operation Protocol (《 生 產 器 具 及 廢 料 滅 活 操 作 規 程 》) and other policies to standardize the implementation of emission management works by specialists.

We have established emission management measures for greenhouse gases, waste gas, wastewater, nonhazardous waste and hazardous waste.

• • Greenhouse Gases Emission: Greenhouse gases are mainly generated from the use of energy, such as electricity, steam and gasoline. We adopt a variety of measures to effectively reduce greenhouse gases emissions.
• • Waste Gas Emission: The waste gas mainly comes from laboratory and production processes for clinical samples, and we process it through medium-efficiency and high-efficiency filter equipment to ensure legal compliance. For small amounts of uncaptured emissions, we discharge them to a sanitary containment area around the plant.
• • Wastewater Treatment: The wastewater is mainly production and laboratory wastewater and domestic sewage. For solutions such as biologically active cell suspensions and cell culture media in production and laboratory wastewater, we use strong oxidants or inactivation tanks to inactivate them at high temperatures and then discharge them with other production and laboratory wastewater and domestic wastewater to the wastewater treatment ponds for unified pre-treatment and discharge them into the municipal network after meeting the discharge standards.
• • Non-hazardous Waste: The non-hazardous waste is mainly daily office waste. We classify it according to recycling value. For non-hazardous waste with recycling value, we hand it over to waste recyclers to promote waste recycling. For other non-hazardous waste, we transfer them to designated garbage stations for disposal.
• • Hazardous Waste: The hazardous waste generated in the course of the company's operation mainly includes hazardous waste generated in the production and experimental processes such as waste chemical reagents, empty glass reagent bottles and waste drugs left-over from clinical use, as well as hazardous waste generated in the daily office such as waste toner cartridges and waste fluorescent tubes. All hazardous wastes are entrusted to qualified third-party agencies or suppliers for compliant disposal.

Our facilities for the treatment of microbial waste are regularly inspected and calibrated, and the treatment is carried out in accordance with operating procedures in facilities that meet the corresponding safety level. At the same time, we have achieved good results of 0 microbial contamination in production batches for the 5th consecutive year.

6.3 Response to Climate Change

The global impact of climate change is becoming more and more apparent. SinoMab continues to pay attention to the impact of climate change on the Company's operations. To effectively deal with climate change, we are working towards the following two directions:

	Identify risks and opportunities and make active responses	Reduce greenhouse gas emissions (Please refer to the Emission section of this chapter)
Types of Risks	Scope	Potential Risks	Responses
physical risks	Acute risks: (extreme weathers such as typhoons, storms, etc.)	• Damage office buildings, production workshop, laboratory, etc. resulting in loss of assets; • Interrupt production and affect stable operation.	• Formulate emergency response plans for environmental emergencies; • Install drain valves, sandbags, and strengthen the waterproof function of colored concrete tiles to prevent rainwater from infiltrating into the workshop in extreme weathers such as typhoons; • Install anti-typhoon windows and Regularly check the security of facilities and equipment; • Increase investment, strengthen infrastructure, and store necessary materials to deal with bad weather and natural disasters; • Conduct emergency drills on a regular basis
	Chronic risks: rising sea levels, continuous high temperatures, etc.	• Purchase more refrigeration facilities due to rising temperatures.	• Increasing the use of high-efficiency refrigeration equipment; • Continue to adopt energy-saving measures.
Transition risks	Policies and legal risks	• National low-carbon related laws, policies and other compliance requirements have increased.	• Closely monitor changes in environmental laws, regulations and policies and respond to them in a timely manner.
	Market risks	• Inability to effectively respond to changes in the Company's pharmaceutical market demand caused by climate change.	• Continue to track changes in pharmaceutical market demand and improve R&D and production capabilities.

	Opportunities	Responses
Energy Efficiency	• Adopt circulation technology; • Reduce the consumption of water and electricity;	• Actively explore new technologies; • Improve R&D and production capacity, and actively explore the market.
Products and Market	• Climate change triggers an increase in the incidence of new diseases or existing diseases, and thus create more market opportunities.

6.4 Key Environmental Performance Indicators

The key environmental performance indicators for SinoMab in 2021 are listed below. Unless otherwise stated, the statistical scope of environmental data covers the Company's operation locations in Hong Kong, Hainan, Suzhou and Shenzhen. By the end of 2021, the Shanghai operating site shared office buildings with other companies, so the environmental data cannot be calculated separately. Therefore, it is not included in this year's report scope, however, we will disclose relevant information in due course based on actual operation circumstances.

Index	Unit	2021 KPI
Total energy consumption(2)	MWh	9,844.25
Direct energy consumption, including:	MWh	269.64
Gasoline	MWh	269.64
Indirect energy consumption, including:	MWh	9,574.61
Power	MWh	5,595.47
Steam(3)	MWh	3,979.14
Energy consumption per floor area(4)	MWh per square meter	0.12
Total water consumption(5)	tonnes	32,881.04
Water consumption per floor area	tonnes per square meter	0.39

6.4.1 Key Performance Indicators for Energy and Resource Consumption(1)

Notes:

• (1) During the reporting period, we have not yet commercialized our products and hence do not involve the use of product packaging.
• (2) Total energy consumption is calculated based on direct and indirect energy consumption according to the conversion factors listed in the National Standards of the People's Republic of China General Principles for Calculation of the Comprehensive Energy Consumption (GB/T 2589-2020) (中華人民共和國國家標準《綜合能 耗計算通則》(GB/T 2589-2020)).
• (3) The steam consumption is calculated based on the corresponding conversion factor listed in Chemical Process Design Manual (2009) (《化學工藝設計手冊(2009)》) published by Chemical Process Press.
• (4) During the reporting period, our main energy consumption was purchased electricity, gasoline and steam.
• (5) The water resources used by the Company are from the municipal water supply, we do not have any problem in obtaining suitable water resources.

Index Unit 2021 KPI Total GHG emissions(1) (Scope 1 and 2)(2) tCO2e 4,695.59 Direct GHG emissions (Scope 1), including: tCO2e 69.01 Gasoline tCO2e 69.01 Indirect GHG emissions (Scope 2), including: tCO2e 4,626.58 Power tCO2e 3,050.84 Heat tCO2e 1,575.74 GHG emissions per floor area tCO2e per square meter 0.0550 Total oxynitride emissions tonnes 0.0005 Total hazardous waste tonnes 3.31 Total non-hazardous waste(3) tonnes 12.35 Total hazardous waste per floor area kilogram per square meter 0.04 Total non-hazardous waste per floor area kilogram per square meter 0.14 Wastewater tonnes 20,511.20

6.4.2. Key Performance Indicators for Emissions

Notes:

• (1) GHG emissions are presented in carbon dioxide equivalents. The GHG includes carbon dioxide, methane and nitrous oxide, which are produced from purchased power, fuel and steam. Scope 1 GHG covers greenhouse gas emissions directly generated from the Company's operations; Scope 2 GHG covers greenhouse gas emissions produced indirectly accompanied by the Company's internal power consumptions (through purchase).
• (2) Carbon emissions from power are calculated based on CO2 emission factors for electricity in different regions, which for operating sites in the Chinese Mainland are based on Average CO2 Emission Factors for China's Regional Power Grids in 2011 and 2012 published by the National Development and Reform Commission, and for the operating site in Hong Kong Special Administrative Region are calculated in accordance with the relevant emission factor coefficients provided by the Company's power supplier, CLP Group. As of 2021, the emission factor coefficient provided by CLP Group is 0.39 kg for carbon dioxide equivalent; carbon emissions from steam are calculated according to the Greenhouse Gas Emission Accounting Methods and Reporting Guidelines (Trial) issued by the National Development and Reform Commission; carbon emissions from gasoline are accounted for in accordance with the IPCC 2006 Revised Guidelines for National Greenhouse Gas Inventories 2019, published by the Intergovernmental Panel on Climate Change (IPCC), and the IPCC's Sixth Assessment Report.
• (3) The non-hazardous wastes mainly come from the domestic wastes in the office and such wastes are treated by the environmental protection department of the development zone, and as the non-hazardous wastes cannot be measured separately, we estimate the wastes in Shenzhen and Hainan in accordance with the First National Census on Pollution Sources — Manual for Waste Generation and Discharge Coefficients in Urban Households (《第一次全國污染源普查城鎮生活源產排污係數手冊》) issued by the State Council of PRC.
• (4) During this year, all wastewater was discharged into a third-party sewage treatment tank for the third party to uniformly treat and discharge in compliance, so the chemical oxygen demand and ammonia nitrogen in the wastewater were not monitored.

APPENDIX

the change.

THE STOCK EXCHANGE OF HONG KONG LTD. ESG REPORTING GUIDE CONTENT INDEX

	ESG Issues Description		Correspondent Chapter
	Mandatory Disclosure
(i) (ii)	Governance Structure A statement from the board containing the following elements: a disclosure of the board's oversight of ESG issues; the board's ESG management approach and strategy, including the process used to evaluate, prioritizes and manage material ESG-related issues (including risks to the issuer's businesses); and	2. 3.	BOARD STATEMENT ESG MANAGEMENT SYSTEM
(iii)	how the board reviews progress made against ESG-related goals and targets with an explanation of how they relate to the issuer's businesses.
	Reporting Principles A description of, or an explanation on, the application of the following Reporting Principles in the preparation of the ESG report:	1.1	ABOUT THE REPORT — Report Description
	Materiality: The ESG report should disclose: (i) the process to identify and the criteria for the selection of material ESG factors; (ii) if a stakeholder engagement is conducted, a description of significant stakeholders identified, and the process and results of the issuer's stakeholder engagement.
	Quantitative: Information on the standards, methodologies, assumptions and/or calculation tools used, and source of conversion factors used, for the reporting of emissions/energy consumption (where applicable) should be disclosed.
	Consistency: The issuer should disclose in the ESG report any changes to the methods or KPIs used, or any other relevant factors affecting a meaningful comparison.
	Reporting Boundary

A narrative explaining the reporting boundaries of the ESG report and describing the process used to identify which entities or operations are included in the ESG report. If there is a change in the scope, the issuer should explain the difference and reason for 1.2 ABOUT THE REPORT — Scope of the Report

ESG Issues	Description	Correspondent Chapter
	Comply or Explain
A Environmental
Aspect A1: Emissions
General Disclosure	Information on: (a) the policies; and (b) compliance with relevant laws and regulations that have a significant impact on the issuer relating to air and greenhouse gas emissions, discharges into water and land, and generation of hazardous and non-hazardous waste.	6.2 GREEN OPERATION — Emissions
KPI A1.1	The types of emissions and respective emissions data.	6.4 GREEN OPERATION — Key Environmental Performance Indicators
KPI A1.2	Direct (Scope 1) and energy indirect (Scope 2) greenhouse gas emissions (in tonnes) and, where appropriate, intensity (e.g. per unit of production volume, per facility).	6.4 GREEN OPERATION — Key Environmental Performance Indicators
KPI A1.3	Total hazardous waste produced (in tonnes) and, where appropriate, intensity (e.g. per unit of production volume, per facility).	6.4 GREEN OPERATION — Key Environmental Performance Indicators
KPI A1.4	Total non-hazardous waste produced (in tonnes) and, where appropriate, intensity (e.g. per unit of production volume, per facility).	6.4 GREEN OPERATION — Key Environmental Performance Indicators
KPI A1.5	Description of emissions target(s) set and steps taken to achieve them.	6.2 GREEN OPERATION — Emissions
KPI A1.6	Description of how hazardous and non-hazardous wastes are handled, and a description of reduction target(s) set and steps taken to achieve them	6.2 GREEN OPERATION — Emissions

ESG Issues	Description	Correspondent Chapter
Aspect A2: Use of Resources
General Disclosure	Policies on the efficient use of resources, including energy, water and other raw materials.	6.1 GREEN OPERATION — Resource Conservation
KPI A2.1	Direct and/or indirect energy consumption by type (e.g. electricity, gas or oil) in total (kWh in '000s) and intensity (e.g. per unit of production volume, per facility).	6.4 GREEN OPERATION — Key Environmental Performance Indicators
KPI A2.2	Water consumption in total and intensity (e.g. per unit of production volume, per facility).	6.4 GREEN OPERATION — Key Environmental Performance Indicators
KPI A2.3	Description of energy use efficiency target(s) set and steps taken to achieve them.	6.1 GREEN OPERATION — Resource Conservation
KPI A2.4	Description of whether there is any issue in sourcing water that is fit for purpose, water efficiency target(s) set and steps taken to achieve them.	6.4 GREEN OPERATION — Key Environmental Performance Indicators
KPI A2.5	Total packaging material used for finished products (in tonnes) and, if applicable, with reference to per unit produced.	Not applicable, already explained
	Aspect A3: The Environment and Natural Resources
General Disclosure	Policies on minimizing the issuer's significant impact on the environment and natural resources.	6. GREEN OPERATION
KPI A3.1	Description of the significant impacts of activities on the environment and natural resources and the actions taken to manage them.	6. GREEN OPERATION
Aspect A4: Climate Change
General Disclosure	Policies on identification and mitigation of significant climate-related issues which have impacted, and those which may impact, the issuer.	6.3 GREEN OPERATION — Response to Climate Change
KPI A4.1	Description of the significant climate-related issues which have impacted, and those which may impact, the issuer, and the actions taken to manage them.	6.3 GREEN OPERATION — Response to Climate Change

ESG Issues	Description	Correspondent Chapter
B Social
	Employment and Labour Practices
Aspect B1: Employment
General Disclosure	Information on: (a) the policies; and (b) compliance with relevant laws and regulations that have a significant impact on the issuer relating to compensation and dismissal, recruitment and promotion, working hours, rest periods, equal opportunity, diversity, anti-discrimination, and other benefits and welfare.	5.1 GROWING TOGETHER — Employment
KPI B1.1	Total workforce by gender, employment type (for example, full- or part-time), age group and geographical region.	5.1 GROWING TOGETHER — Employment
KPI B1.2	Employee turnover rate by gender, age group and geographical region.	5.1 GROWING TOGETHER — Employment
Aspect B2: Health and Safety
General Disclosure	Information on: (a) the policies; and (b) compliance with relevant laws and regulations that have a significant impact on the issuer relating to providing a safe working environment and protecting employees from occupational hazards.	5.2 GROWING TOGETHER — Health and Safety
KPI B2.1	Number and rate of work-related fatalities occurred in each of the past three years including the reporting year.	5.2 GROWING TOGETHER — Health and Safety
KPI B2.2	Lost days due to work injury.	5.2 GROWING TOGETHER — Health and Safety
KPI B2.3	Description of occupational health and safety measures adopted, how they are implemented and monitored.	5.2 GROWING TOGETHER — Health and Safety

ESG Issues	Description	Correspondent Chapter
Aspect B3: Development and Training
General Disclosure	Policies on improving employees' knowledge and skills for discharging duties at work. Description of training activities.	5.3 GROWING TOGETHER — Training and Development
KPI B3.1	The percentage of employees trained by gender and employee category (e.g. senior management, middle management).	5.3 GROWING TOGETHER — Training and Development
KPI B3.2	The average training hours completed per employee by gender and employee category.	5.3 GROWING TOGETHER — Training and Development
Aspect B4: Labour Standards
General Disclosure	Information on: (a) the policies; and (b) compliance with relevant laws and regulations that have a significant impact on the issuer relating to preventing child and forced labour.	5.1 GROWING TOGETHER — Employment
KPI B4.1	Description of measures to review employment practices to avoid child and forced labour.	5.1 GROWING TOGETHER — Employment
KPI B4.2	Description of steps taken to eliminate such practices when discovered.	5.1 GROWING TOGETHER — Employment

ESG Issues	Description	Correspondent Chapter
Operating Practices
Aspect B5: Supply Chain Management
General Disclosure	Policies on managing environmental and social risks of the supply chain.	4.3 RESPONSIBLE OPERATION — Supply Chain Management
KPI B5.1	Number of suppliers by geographical region.	4.3 RESPONSIBLE OPERATION — Supply Chain Management
KPI B5.2	Description of practices relating to engaging suppliers, number of suppliers where the practices are being implemented, how they are implemented and monitored.	4.3 RESPONSIBLE OPERATION — Supply Chain Management
KPI B5.3	Description of practices used to identify environmental and social risks along the supply chain, and how they are implemented and monitored.	4.3 RESPONSIBLE OPERATION — Supply Chain Management
KPI B5.4	Description of practices used to promote environmentally preferable products and services when selecting suppliers, and how they are implemented and monitored.	4.3 RESPONSIBLE OPERATION — Supply Chain Management
Aspect B6: Product Responsibility
General Disclosure	Information on: (a) the policies; and (b) compliance with relevant laws and regulations that have a significant impact on the issuer relating to health and safety, advertising, labelling and privacy matters relating to products and services provided and methods of redress.	4.1 RESPONSIBLE OPERATION — Product Responsibility
KPI B6.1	Percentage of total products sold or shipped subject to recalls for safety and health reasons.	Not applicable, already explained
KPI B6.2	Number of products and service-related complaints received and how they are dealt with.	4.1 RESPONSIBLE OPERATION — Product Responsibility
KPI B6.3	Description of practices relating to observing and protecting intellectual property rights.	4.1 RESPONSIBLE OPERATION — Product Responsibility
KPI B6.4	Description of quality assurance process and recall procedures.	4.1 RESPONSIBLE OPERATION — Product Responsibility
KPI B6.5	Description of consumer data protection and privacy policies, how they are implemented and monitored.	4.1 RESPONSIBLE OPERATION — Product Responsibility

ESG Issues	Description	Correspondent Chapter
Aspect B7: Anti-corruption
General Disclosure	Information on: (a) the policies; and (b) compliance with relevant laws and regulations that have a significant impact on the issuer relating to bribery, extortion, fraud and money laundering.	4.2 RESPONSIBLE OPERATION — Anti-corruption
KPI B7.1	Number of concluded legal cases regarding corrupt practices brought against the issuer or its employees during the reporting period and the outcomes of the cases.	4.2 RESPONSIBLE OPERATION — Anti-corruption
KPI B7.2	Description of preventive measures and whistle-blowing procedures, how they are implemented and monitored.	4.2 RESPONSIBLE OPERATION — Anti-corruption
KPI B7.3	Description of anti-corruption training provided to directors and staff.	4.2 RESPONSIBLE OPERATION — Anti-corruption
Community
Aspect B8: Community Investment
General disclosure	Policies on community engagement to understand the needs of the communities where the issuer operates and to ensure its activities take into consideration the communities' interests.	5.4 GROWING TOGETHER — Contributing to society
KPI B8.1	Focus areas of contribution (e.g. education, environmental concerns, labour needs, health, culture, sport).	5.4 GROWING TOGETHER — Contributing to society
KPI B8.2	Resources contributed (e.g. money or time) to the focus area.	5.4 GROWING TOGETHER — Contributing to society

The Board is pleased to present its report together with the audited consolidated financial statements of the Group for the Reporting Period.

PRINCIPAL ACTIVITIES

We are the first Hong Kong-based listed biopharmaceutical company dedicated to the research, development, manufacturing and commercialisation of therapeutics for the treatment of immunological diseases, primarily monoclonal antibody ("mAb")-based biologics.

We have been dedicated to R&D since our inception, and have built a pipeline of mAb-based biologics and new chemical entities ("NCE") addressing indications against a plethora of immunological diseases. Under the leadership of our management team, consisting of members with rich experience in scientific research and business management, we have established a business model that integrates elements from the entire industry chain encompassing R&D, clinical trials and production.

Details of the principal activities of the Company's subsidiaries are set out in note 1 to the consolidated financial statements. There were no significant changes in the nature of the Group's principal activities during the Reporting Period.

BUSINESS REVIEW AND RESULTS

A review of the business of the Group during the Reporting Period is provided in "Management Discussion and Analysis" of this annual report. An analysis of the Group's performance during the Reporting Period is provided in the "Financial Review" on pages 17 to 19 of this annual report.

The results of the Group for the Reporting Period are set out in the Consolidated Statement of Profit or Loss and the Consolidated Statement of Comprehensive Income on pages 106 to 107 of this annual report.

DIVIDEND

No interim dividend was paid to the Shareholders during the year.

The Directors have resolved not to recommend the payment of a final dividend to the Shareholders for the year ended 31 December 2021 (2020: Nil).

ANNUAL GENERAL MEETING

The 2022 Annual General Meeting of the Company will be convened to be held on Monday, 13 June 2022. Relevant notice of the meeting will be contained in the circular of the Company relating to the re-election of Directors and the general mandates to issue and buy back Shares (the "Circular") to be sent to the Shareholders, together with this Annual Report.

CLOSURE OF THE REGISTER OF MEMBERS

For the purpose of ascertaining Shareholders' entitlement to attend and vote at the 2022 Annual General Meeting, the register of members of the Company will be closed from Wednesday, 8 June 2022 to Monday, 13 June 2022, both days inclusive, during which period no transfers of Shares will be registered. In order to be entitled to attend and vote at the 2022 Annual General Meeting, all transfers of Shares, duly accompanied by the relevant share certificates and transfer forms must be lodged with the Company's share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, no later than 4:30 p.m. on Tuesday, 7 June 2022.

USE OF PROCEEDS FROM LISTING

On 12 November 2019, Shares were listed on the Stock Exchange and the Company raised net proceeds of HK\$1,272.80 million ("Net Proceeds") and the unutilized balance of Net Proceeds as at 31 December 2021 was approximately HK\$522.5 million. In respect of the use of proceeds in the prospectus dated 31 October 2019 (the "Prospectus") and subsequent change in use of proceeds announcement issued by the Company dated 22 July 2020 (the "Announcement"), the Board has resolved to change the use of the unutilized Net Proceeds.

Change in use of proceeds

To better use the unutilised Net Proceeds, the Company decides to reallocate HK\$50 million from the use of net proceeds from "For the purchase of land from the Suzhou Dushu Lake Higher Education Town and other expenses related to the expansion of our Suzhou production base" to (i) HK\$10.0 million to "For our working capital, expanding internal capabilities and other general corporate purposes"; (ii) HK\$30.0 million to "For the R&D and commercialization of our core product, SM03, to fund clinical trials for SM03"; and (iii) HK\$10 million to "To further advance our R&D programs, expand our R&D team, build our commercialization team, develop our proprietary technology and enhance our full-spectrum platform".

Cost saving measure and budgetary control have been strictly in place on the construction project of our Suzhou production base since the land is purchased and the commencement of construction. The project has been in good progress and in good control of financing. The superstructure works have been completed and a topping up ceremony was held in December 2021. In view of the plentiful planned resources to the Suzhou project, the Board considered that HK\$50 million out of the original planned applications could be reallocated to other segments.

In considering the current balance of unutilised net proceeds for the R&D and commercialization of our core product, SM03, the Board considered that it would be appropriate to relocate HK\$30 million for SM03 for its commercialization in 2023.

During the Reporting Period, the Company has added a number of new indications into its pipeline and successfully expanded its pipeline. The Board recognized the importance of expanding the pipeline and considered it would be appropriate to reallocate HK\$10 million to further advance our R&D programs, expand our R&D team, develop our proprietary technology and enhance our full-spectrum platform.

Considering the rapid expansion of our Group, the Board also considered that it would be appropriate to reallocate HK\$10 million for the use of our working capital, expanding internal capabilities and other general corporate purposes.

The Board considered the impact of the proposed change in the use of the proceeds on the Group's business and believes that, in view of the Group's operation and business development, the reallocation of the unutilised Net Proceeds will facilitate efficient allocation of financial resources and strengthen the future development of the Group, and it is appropriate and in the interests of the Company and its shareholders as a whole. Save for the above, there is no other change in the use of Net Proceeds.

Use of proceeds	Planned applications(Note 1) (HK\$ million)	Revised allocation (HK\$ million)	Actual utilisation up to 31 December 2021 (HK\$ million)	Unutilised net proceeds as at 31 December 2021 (HK\$ million)	Expected timeline for full utilisation of the unutilised net proceeds(Note 2)
For the R&D and commercialization of our drug candidates For the R&D and commercialization of our core product, SM03, to fund clinical trials for SM03 including (i) ongoing and planned clinical trials in the PRC; (ii) additional clinical trials to be initiated in the PRC for additional indications; (iii) clinical trials in Australia
and the United States; and (iv) New Drug Application registration
filings and the commercial launch of SM03	190.9	220.9	190.0	30.9	By the end of 2022
To fund pre-clinical research, clinical trials, production, preparation for registration filings and potential commercial launches of the
other drug candidates in our pipeline	279.4	279.4	200.6	78.8	By the end of 2023
To further advance our R&D programmes, expand our R&D team,
build our commercialization team, develop our proprietary technology and enhance our full-spectrum platform	42.4	52.4	42.4	10.0	By the end of 2022
For the discovery and development of new drug candidates not
currently in our pipeline to diversify our product portfolio For the construction of our Suzhou production base primarily for the commercial-scale production of our core product SM03 For the purchase of laboratory equipment, primarily for the R&D of	84.9	84.9	55.7	29.2	N/A(Note 3)
SM03 and potentially for the R&D of other products in our pipeline	85.8	85.8	19.4	66.4	By the end of 2022
For the purchase of manufacturing equipment, primarily for the
production of SM03 For the construction of the Suzhou production base	59.7	59.7	–	59.7	By the end of 2022
For the construction of additional R&D facilities and purchase of laboratory equipment to aid the ongoing R&D of SM03 for the treatment of rheumatoid arthritis, systemic lupus erythematosus, non-Hodgkin's lymphoma and other potential indications, R&D of SM03 at commercialization to enhance craftsmanship for large-scale production, as well as the development of other
products in our pipeline	107.6	107.6	31.2	76.4	By the end of 2022
For the construction of an upstream production facility and downstream purification facility For the purchase of land from the Suzhou Dushu Lake Higher	88.2	88.2	–	88.2	By the end of 2022
Education Town and other expenses related to the expansion of our Suzhou production base	167.9	117.9	70.6	47.3	By the end of 2023
For our working capital, expanding internal capabilities and other
general corporate purposes Collaboration with D2M Group	127.2 38.8	137.2 38.8	101.6 38.8	35.6(Noted 4) –	N/A N/A
Total	1,272.8	1,272.8	750.3	522.5

Notes:

• (1) Planned applications as revised and disclosed in the Company's announcements dated 22 July 2020 and 14 August 2020.
• (2) The expected timeline for utilising the unutilised net proceeds is based on the best estimation made by the Group. It is subject to change based on the future development and events which may be outside of the Group's control.
• (3) As the discovery and development of new drug candidates not currently in pipeline is a continuous and ongoing process, the Company is unable to set out a detailed timeline for the utilisation of such net proceeds.
• (4) Costs of HK\$78.0 million for the Investment in China Healthcare Fund were returned to this planned application. As disclosed in the Company's announcement dated 4 February 2021 and the 2020 Annual Report, the Investment was disposed of at a consideration of approximately HK\$110.6 million. Please refer to the preceding paragraph headed "SIGNIFICANT INVESTMENT HELD AND DISPOSED" in the section headed "MANAGEMENT DISCUSSION AND ANALYSIS" to this report for more details.

Save as the changes disclosed above, such utilisation of the net proceeds was in accordance with the planned applications as set out in the above. The unutilised portion of the net proceeds will be applied in a manner consistent with the above planned applications.

R&D ACTIVITIES OF FLAGSHIP PRODUCT

Our flagship product SM03 (Suciraslimab) is a potential first-in-target anti-CD22 mAb for the treatment of rheumatoid arthritis (RA) and potentially other immunological diseases such as systemic lupus erythematosus (SLE), Sjogren's syndrome (SS) as well as non-Hodgkin's lymphoma (NHL). Suciraslimab is expected to be our first commercially available drug candidate. We hypothesised that Suciraslimab adopts a novel mechanism of action which differentiates itself from the current treatments available in the market and we are currently working towards uncovering the mechanism. We have experimental evidences supporting the hypothesis. We hypothesized and demonstrated that Suciraslimab adopts a novel mechanism of action which differentiates itself from the current treatments available in the market. Our experimental evidence indicates that upon binding to CD22, Suciraslimab converts the B cell configuration of CD22, changing it from a cis-binding configuration to a transbinding configuration. Conversion of cis-binding CD22 to trans-binding CD22 allows the B cell to differentiate self from nonself and modulates B cells that trigger autoimmune attacks on autologous tissues, thereby alleviating symptoms in autoimmune diseases such as RA.

On 31 December 2021, SM03 (Suciraslimab) phase III clinical trial for RA has completed its enrollment of 530 patients which is beyond the target number. We plan to have our readout of the phase III trial in the third quarter of 2022, the expected time to file our NDA with the NMPA is in first half of 2023 and we expect to commercialize SM03 by the second half of 2023.

The expenditure on the R&D activities of Suciraslimab primarily consisted of:

• • third party contracting costs incurred under agreements with consultants, contract research organisations and clinical trial sites that conduct R&D activities on the Group's behalf;
• • costs associated with purchases of raw materials;
• • employee salaries and related benefit costs; and
• • expenses associated with inspection and maintenance of facilities, depreciation and amortisation expenses, travel expenses, insurance, utilities and other supplies.

During the Reporting Period, the Group incurred approximately RMB126.2 million on the R&D activities of SM03 (Suciraslimab).

For details of our flagship product SM03 (Suciraslimab), please refer to "Management Discussion and Analysis" of this annual report.

Cautionary Statement required by Rule 18A.05 of the Listing Rules: The Company cannot guarantee that it will be able to ultimately develop and market SM03 (Suciraslimab) successfully.

PRINCIPAL RISKS AND UNCERTAINTIES FACING THE GROUP

R&D risk of new drugs

Classified as technical innovations, the R&D of new drugs is characterised by long R&D cycles, significant investment, high risks and a low success rate. From laboratory research to obtaining approval, new drugs have to go through a lengthy process linked by complicated stages, including pre-clinical studies, clinical trials, registration and marketing of new drugs and after-sales supervision. Any of the above stages is subject to the risk of failure.

The Company will strengthen its forward-looking strategic research, and determine the direction of new drug R&D according to the needs of clinical drug use. The Company will also formulate reasonable new drug technology solutions, continuously increase the investment in R&D of new drugs, and uphold the principle of prudence in launching R&D projects for new drugs. In particular, the Company implements phase-based assessments on product candidates in the course of R&D. If it is found that the expected result cannot be achieved, the subsequent R&D of such product candidates will be terminated at once, so as to minimise the R&D risk of new drugs.

Market competition risk

The R&D and commercialisation of new drugs is highly competitive. The Company's recent drug candidates and any new drugs that may be sought for R&D and commercialisation in the future will face competition from pharmaceutical companies and biotechnology companies around the world. The Company's commercial opportunity could be reduced or eliminated if our competitors develop and commercialise drugs that are safer, are more effective or have fewer side effects than the drugs we have developed. The Company's competitors may also obtain approval from the NMPA or FDA sooner than the Company obtaining approval for its drugs, such that the competitors may establish a strong market position before the Company is able to enter the market. The Company will maintain its market competitiveness with its rapid advancement in R&D and clinical trials of drugs, corroborant efficacy and stable production process.

Quality control risk of drugs

The quality and safety of drugs not only concern the health of drug users but also arouse wide public concern. Due to various factors, drugs are subject to quality control risks in all stages, including R&D, manufacturing, distribution and use. Therefore, risk control runs through the entire process of drug development, manufacturing, distribution and use. The Company will secure necessary resources, strengthen training in risk management, and improve various rules and regulations, so as to ensure strict compliance with the GMP standards and control the quality risk of drugs.

Risk of not making profit in short run

One of the most prominent characteristics of the biopharmaceutical industry is a long profit cycle. Generally, a biopharmaceutical enterprise at the R&D stage takes a longer time to reach profitability. As an early-stage biopharmaceutical enterprise, the Company is under a period of making significant R&D investment. With the further supplement of product pipelines, as well as rapid advancement in domestic and international clinical trials for drug candidates, the Company will continue to make significant R&D investment. Our future profit will depend on the marketing progress of drug candidates and the sale of marketed drugs. In addition, significant R&D investment, business promotion costs and operation costs create more uncertainties over making profits. Therefore, the Company is subject to the risk of not making a profit in the short run.

Risk of industry regulations and policies

In view of the various reforms in the medical industry, encouragement of innovation and reduction in drug prices by pharmaceutical enterprises have become an inevitable trend. The Company will adapt to changes in external policies and strive to enhance R&D, in order to respond to challenges through innovation. The Company will also adhere to legal compliance by adapting its business activities to changes in regulatory policies, thereby preventing policy risks.

In the face of industry and policy risks, the Company will adapt to changes in external policies by continuous improvement in capabilities of innovation and sustainable development, increased R&D investment, accelerated clinical trials and launching of innovative drugs, in order to respond to challenges through innovation. On this basis, the Company will further expand its production capacity and reduce the unit cost of its products, so as to address the trend of price reduction of drugs.

Foreign exchange risk

Foreign currency risk is the risk of loss resulting from changes in foreign currency exchange rates. Fluctuations in exchange rates between RMB and other currencies in which the Group conducts business may affect the Group's financial condition and results of operations.

In response to the foreign exchange risk, the Company seeks to limit its exposure to foreign currency risk by minimising its net foreign currency position to reduce the impact of the foreign exchange risk on the Company.

COMPLIANCE WITH RELEVANT LAWS AND REGULATIONS

The Group has established a number of governance policies and embedded into our business processes. Those governance policies covers areas of internal control, corporate governance, code of conduct of Directors, Senior Managements and Employees, environmental and social responsibilities, as well as stakeholder communication. Details of relevant policies are provided under the Corporate Governance Report and Environmental, Social and Governance Report of this report and/or on the website of the Company. During the Reporting Period, the Group was not aware of any material non-compliance with any relevant laws and regulations that may have a significant impact on the Group concerning employment, occupational health and safety or labour standards, product responsibility, anti-corruption and environmental responsibility.

RELATIONSHIP WITH STAKEHOLDERS

Employees are the assets of the Group. The Group provides competitive remuneration package and a pleasant workplace environment to attract and motivate the employees.

The Group also understands the importance of maintaining a good relationship with various other stakeholders, including the Shareholders and the community. The Group actively listens to and responds to the demands of its stakeholders.

ENVIRONMENTAL POLICY

The Group deeply understands the importance of environmental protection and resource conservation. The Group advocates environmentally responsible values and behaviours and strives to implement an environmentally friendly operating model.

Our main operating model concerns daily office work, laboratory operations, and small-scale drug production (used for preclinical research and clinical trials). The resource consumption involved is mainly electricity, tap water, steam, and gasoline. We have established the Daily Management System for Energy Conservation and Emission Reduction (《節能減排日常管理 制度》), which provides a systematic management basis for resource management in all operating links, and the Administration Department is responsible for promoting the effective implementation of the management system. At the same time, with the Human Resources Department as the main organisational department, we aim to strengthen energysaving awareness among employees.

In addition, the Group places paramount importance on the compliance management of emissions, and have formulated Laboratory Waste Management Regulations (《實驗室廢棄物管理規程》), Hazardous Waste Management Regulations (《危 險廢物管理規程》), and Three Waste (Waste Gas; Waste Water; Industrial Residue) Management Regulations (《三廢管理 規程》) and other policies to standardise the implementation of emission regulations.

During the Reporting Period, the Group did not have any material violations of environmental laws and regulations of the PRC.

MAJOR CUSTOMERS AND SUPPLIERS

For the Reporting Period, the Group's largest customer accounted for 100% of its total revenue. The details of the revenue of the Group are set out in note 5 to the consolidated financial statements.

The Group's largest supplier accounted for 19.8% of its total purchases, and the five largest suppliers accounted for 43.2% of its total purchases.

None of the Directors, their close associates or any shareholder (which to the knowledge of the Directors own more than 5% of the number of Company's issued shares) had an interest in the five major suppliers or customers of the Group.

PROPERTY, PLANT AND EQUIPMENT

Details of movements in the property, plant and equipment of the Group during the Reporting Period are set out in note 13 to the consolidated financial statements.

SUBSIDIARIES

Details of the subsidiaries of the Company as at 31 December 2021 are set out in note 1 to the consolidated financial statements.

SHARE CAPITAL

During the Reporting Period, there was no change in the share capital of the Company.

RESERVES

Details of movements in the reserves of the Group during the Reporting Period are set out in the consolidated statement of changes in equity.

DISTRIBUTABLE RESERVES

There was no distributable reserve as at 31 December 2021.

EQUITY-LINKED AGREEMENTS

During the Reporting Period, no equity-linked agreements were entered into by the Group.

SHARE INCENTIVES

Restricted Share Unit Scheme

A restricted share unit scheme (the "RSU Scheme") was conditionally adopted by the Shareholders on 18 October 2019, with effect from 12 November 2019, the principle terms of which are set out in the section headed "Statutory and General Information — E. Scheme" in Appendix IV of the Company's prospectus dated 31 October 2019. The RSU Scheme is not a share option scheme and is not subject to the provisions of Chapter 17 of the Listing Rules. On 5 March 2020, the Company appointed Computershare Hong Kong Investor Services Limited to manage the RSU Scheme. For the purpose of the operation of the RSU Scheme, on 25 March 2020, Skytech Technology Limited, a company wholly-owned by Dr. Shui On LEUNG, transferred 36,174,400 Shares to Computershare Hong Kong Nominees Limited which holds such Shares for the beneficiaries of the RSU Scheme.

The Company may grant restricted share units ("RSUs") to existing employees, Directors (whether executive or nonexecutive, but excluding independent non-executive Directors) or officers of the Group and any person(s) whether or not an employee or officer of the Group whom the Board considers to be able to enhance the operations or value of our Group.

An award of RSUs gives a participant in the RSU Scheme a conditional right to obtain either Shares or an equivalent value in cash with reference to the market value of the Shares on or about the date of exercise of the RSUs, less any tax, stamp duty and other charges applicable, as determined by the Board in its absolute discretion.

The purpose of the RSU Scheme is to incentivise the Directors, senior management and employees for their contribution to the Group and to attract, motivate and retain skilled and experienced personnel to strive for the future development and expansion of the Group, by providing them with the opportunity to own equity interests in the Company. The Board will select participants to receive RSUs under the RSU Scheme at its discretion.

The grant and vesting of any RSUs, which may be granted pursuant to the RSU Scheme will be in compliance with Rule 10.07 of the Listing Rules.

The Company will issue announcements according to applicable Listing Rules, disclosing particulars of any RSUs granted under the RSU Scheme, including the date of grant, number of Shares involved and the vesting period, and comply with Chapter 14A of the Listing Rules.

On 5 June 2020, the Company granted 10,062,404 RSUs under the RSU Scheme in respect of 10,062,404 Shares to an employee of the Company and the said RSUs were vested on the same date. Please refer to the announcement of the Company dated 5 June 2020 for further information.

During the Reporting Period, the Company granted 26,111,996 RSUs under the RSU Scheme in respect of 26,111,996 Shares to Mr. Jing QIANG (the "Grantee") (the "Grant") on 14 December 2021 and the said RSUs were vested on the same date.

As at the date of the Grant, the Grantee was a Director and the Grant formed part of his remuneration under his service contract, and was fully exempt from the reporting, announcement and independent shareholders' approval requirements under Rules 14A.73(6) and 14A.95 of the Listing Rules. Please refer to the announcement of the Company dated 23 December 2021 for further information.

After the Grant, all RSUs under the RSU Scheme have been granted and vested.

Share Award Scheme

A share award scheme as amended from time to time, (the "Share Award Scheme") was adopted by the Company on 4 February 2021 (the "Adoption Date"). The Share Award Scheme does not constitute a share option scheme pursuant to Chapter 17 of the Listing Rules.

Under the Share Award Scheme, the Board or an Authorized Person may select any eligible person and grant an award (the "Award") to the selected participants ("Selected Participants"). Computershare Hong Kong Trustees Limited (the "Trustee") has been appointed by the Company as the trustee for the Share Award Scheme. To satisfy an Award, the Company shall transfer to the trust the necessary funds and instruct the Trustee to acquire Shares through on-market transactions at the prevailing market price or through manual trades.

The Share Award Scheme will remain in force for a period of 10 years commencing on its Adoption Date.

The maximum number of award Shares throughout the duration of the Share Award Scheme is 50,312,020 Shares, being 5% of the issued Shares of the Company as at the Adoption Date. The maximum number of Shares which may be awarded to a Selected Participant under the Share Award Scheme is 20,124,808 Shares, being 2% of the issued Shares of the Company as at the Adoption Date. Details of the Share Award Scheme are set out in the announcement of the Company dated 4 February 2021.

During the Reporting Period, 18,095,000 Shares were purchased by the Trustee from the market at an average price of approximately HK\$3.97 (equivalent to RMB3.29) per Share, with an aggregate amount of HK\$71,822,420.26 (equivalent to RMB59,460,435.28).

During the Reporting Period and as at the date of this annual report, there are 18,095,500 Shares held by the Trustee and no Awards had been granted to any eligible person under the Share Award Scheme.

DIRECTORS

The Directors during the Reporting Period and up to the date of this annual report were:

Executive Director

Dr. Shui On LEUNG (Chairman and Chief Executive Officer)

Non-executive Directors

Dr. Haigang CHEN Mr. Xun DONG Mr. Senlin LIU Ms. Wenyi LIU Ms. Jie LIU (appointed on 14 December 2021) Mr. Lei SHI (appointed on 17 December 2021) Mr. Huiyuan MA (resigned on 14 December 2021) Mr. Jing QIANG (resigned on 14 December 2021)

Independent Non-executive Directors

Mr. George William Hunter CAUTHERLEY Mr. Ping Cho Terence HON Dr. Chi Ming LEE (appointed on 15 June 2021) Mr. Dylan Carlo TINKER Mr. Michael James Connolly HOGAN (retired on 15 June 2021)

Details of the Directors' biographies are set out on pages 22 to 26 of this annual report.

During the year ended 31 December 2021, changes to the composition of the Board were as follow:

• Mr. Michael James Connolly HOGAN, for the purpose of devoting more time to his personal business engagement, retired from office by rotation and did not offer himself for re-election at the 2021 annual general meeting;
• Dr. Chi Ming LEE was appointed as an independent non-executive Director of the Company with effect from 15 June 2021;
• Mr. Jing QIANG and Mr. Huiyuan MA resigned as non-executive Directors of the Company with effect from 14 December 2021;
• Ms. Jie LIU was appointed as a non-executive Director of the Company with effect from 14 December 2021; and
• Mr. Lei SHI was appointed as a non-executive Director of the Company with effect from 17 December 2021.

In accordance with Article 111(a) of the Articles, Mr. Ping Cho Terence HON, Dr. Shui On LEUNG, Mr. Senlin LIU and Ms. Wenyi LIU will retire from office by rotation at the 2022 Annual General Meeting. In addition, Ms. Jie LIU and Mr. Lei SHI who have been appointed by the Board after the 2021 annual general meeting shall hold office until the 2022 Annual General Meeting pursuant to Article 110 of the Articles. Dr. Chi Ming LEE, being appointed on the 2021 annual general meeting, together with all of the aforesaid Directors, are eligible for re-election at the 2022 Annual General Meeting.

Mr. Senlin LIU, for the purpose of devoting more time to his personal business engagement, and in accordance with the relevant requirements of retirement by rotation and re-election of director under the CG Code and the Articles, has tendered his request for retirement at the 2022 Annual General Meeting and not to offer himself for re-election after retirement. Mr. Senlin Liu confirmed that he has no disagreement with the Board and there are no other matters in relation to his retirement that need to be brought to the attention of the Shareholders.

Other than Mr. Senlin LIU, all of the above Directors being eligible, have offered themselves for re-election at the 2022 Annual General Meeting. Details of these Directors, which are required to be disclosed pursuant to Rules 13.51(2) and 13.74 of the Listing Rules, will be set out in the circular.

CHANGE IN INFORMATION OF DIRECTORS

The change in the information of the Directors of the Company, which is required to be disclosed pursuant to Rule 13.51B(1) of the Listing Rules, since the publication of the interim report of the Company for the six months ended 30 June 2021 is set out below:

Name of Director	Details of changes
Executive Director:
Dr. Shui On LEUNG	• Entitled to an annual remuneration of HK\$5,464,800 based on services rendered to the Group, commencing from January 2022. (Note (i))
Mr. Jing QIANG	• Resigned as a Non-executive Director of the Company, with effect from 14 December 2021.
Mr. Huiyuan MA	• Resigned as a Non-executive Director of the Company, with effect from 14 December 2021.
Independent non-executive Directors:

Mr. George William Hunter CAUTHERLEY	•	Note (ii)
Mr. Ping Cho Terence HON	•	Note (ii)
Dr. Chi Ming LEE	•	Note (ii)
Mr. Dylan Carlo TINKER	•	Note (ii)

Notes:

(i) An executive Director is also entitled to bonuses and other related employee benefits and allowances for the executive role in the Group, and is not entitled to any fees in acting as a Director of the Company.

(ii) Each independent non-executive Director is entitled to Directors' fee in the amount of HK\$315,000 per annum in acting as a Director of the Company with effect from 1 January 2022.

Save as disclosed above, there is no other information required to be disclosed pursuant to Rule 13.51B of the Listing Rules. The updated biographical details of the Directors of the Company are set out in the preceding section headed "Directors and Management".

Service Agreement

Dr. Shui On LEUNG has entered into a service agreement with the Company on 18 October 2019 (i) for an initial fixed term of three years commencing from 12 November 2019 and (ii) subject to re-appointment and termination in accordance with the terms thereunder.

We have issued a letter of appointment to each of Ms. Wenyi LIU, Dr. Haigang CHEN, Mr. Senlin LIU and Mr. Huiyuan MA on 18 October 2019 (i) for an initial fixed term of three years commencing from 12 November 2019 and (ii) subject to re-appointment and termination of their respective letter of appointment. We have also issued a letter of appointment to Mr. Xun DONG on 23 December 2019, Mr. Jing QIANG on 30 November 2020, Ms. Jie LIU on 14 December 2021 and Mr. Lei SHI on 17 December 2021 (i) for a term of three years with effect from the respective issue date, and (ii) subject to re-appointment and termination of their respective letter of appointment. The letters of appointment to Mr. Jing QIANG and Mr. Huiyuan MA were terminated due to their resignation on 14 December 2021.

We have issued a letter of appointment to each of Mr. Ping Cho Terence HON, Mr. Michael James Connolly HOGAN and Mr. Dylan Carlo TINKER on 18 October 2019 (i) for an initial fixed term of three years commencing from 31 October 2019 and (ii) subject to re-appointment and termination of their respective letter of appointment. We have also issued a letter of appointment to each of Mr. George William Hunter CAUTHERLEY on 23 December 2019 and Dr. Chi Ming LEE on 15 June 2021, both are (i) for a term of three years commencing from the issue date and (ii) subject to re-appointment and termination of their respective letter of appointment. The letter of appointment to Mr. Michael James Connolly HOGAN was terminated due to his retirement on 15 June 2021.

None of the Directors has a service contract which is not determinable by the Company within one year without payment of compensation (other than statutory compensation).

Permitted Indemnity Provision

A permitted indemnity provision for the benefit of the Directors is currently in force and has been in force since 12 November 2019. The Company has taken out and maintained appropriate insurance cover in respect of potential legal actions against its Directors and officers.

Directors' Rights to Acquire Shares or Debentures

None of the Directors or any of their respective associates was granted by the Company or its subsidiaries any right to acquire shares in, or debentures of, the Company or its subsidiaries, or had exercised any such right during the Reporting Period.

Competing Interest and Other Interest

None of the Directors or any entity connected with them has any material interest, either directly or indirectly, in any contract, transaction or arrangement of significance to the Group's business to which the Company, any of its holding companies, any of its subsidiaries, fellow subsidiaries was a party subsisted at the end of the year or at any time during the Reporting Period.

None of the Directors and their respective associates had an interest in a business which causes or may cause any significant competition with the business of the Group and any other conflicts of interest which any such person has or may have with the Group.

DIRECTORS' INTERESTS IN TRANSACTIONS, ARRANGEMENTS OR CONTRACTS

Save as otherwise disclosed herein, none of the Directors of the Company nor a connected entity of the Directors had any beneficial interests, whether direct or indirect, in any significant transactions, arrangements or contracts to which the Company or any of its holding companies, subsidiaries or fellow subsidiaries was a party at the end of the Reporting Period or at any time during the year.

At no time during the year was the Company or any of its holding companies, subsidiaries or fellow subsidiaries a party to any arrangement whose objects are to enable a Director to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Independence of Independent Non-executive Directors

The Company has received an annual confirmation of independence pursuant to Rule 3.13 of the Listing Rules from each of the independent non-executive Directors and the Company considers such Directors have met the independence guidelines of Rule 3.13 of the Listing Rules.

Management Contracts

No contracts concerning the management and administration of the whole or any substantial part of the business of the Company were entered into or existed during the Reporting Period.

Remuneration Policy

The Remuneration Committee was set up for reviewing the Group's emolument policy and structure for all remuneration of the Directors and senior management of the Group, having regard to the Group's operating results, individual performance of the Directors and senior management and comparable market practices.

Remuneration of Directors and Five Individuals with Highest Emoluments

Details of the emoluments of the Directors and five highest paid individuals are set out in notes 8 and 9 to the consolidated financial statements.

DIRECTORS OF SUBSIDIARIES

A list of names of the directors who held office in the Company's subsidiaries during the Reporting Period and up to the date of this annual report is available on the Company's website (www.sinomab.com).

DIRECTORS' AND CHIEF EXECUTIVE'S INTERESTS AND SHORT POSITION IN SHARES, UNDERLYING SHARES AND DEBENTURES

As at 31 December 2021, the interests or short positions of the Directors and chief executive of the Company in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO which were required to be notified to the Company and Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions in which they are taken or deemed to have under such provisions of the SFO), or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which were required to be notified to the Company and Stock Exchange pursuant to the Model Code were as follows:

Name of Director/ chief executive	Capacity/nature of interest(1)	Number of Shares	Approximate percentage of shareholding(2)
Ms. Wenyi LIU(3)	Interest in a controlled corporation and interest of spouse	285,713,036	28.39%
Dr. Shui On LEUNG(4)	Interest in a controlled corporation	129,729,200	12.89%

Notes:

• (1) All interests stated are long positions.
• (2) As at 31 December 2021, the Company had 1,006,240,400 issued Shares.
• (3) As at 31 December 2021, 212,889,400 Shares were held by Apricot Capital (上海杏澤投資管理有限公司) through Apricot Oversea Holdings Limited, West Biolake Holdings Limited, Apricot BioScience Holdings, L.P., Le Rong Limited and Zliverland Holdings Limited, which are ultimately controlled by Ms. Liu. Ms. Liu is deemed to be interested in these Shares for the purposes of the SFO. The interest in the other 72,823,636 Shares were held by Mr. Jing QIANG, of which 46,711,640 Shares were held through Grogene Technology Limited (格擎生物科技有限公司) which is wholly owned by Mr. Jing QIANG. Ms. Liu is the spouse of Mr. Qiang who is deemed to have an interest in the 72,823,636 Shares for the purposes of the SFO.

(4) As at 31 December 2021, these Shares were held by Skytech Technology, which is wholly owned by Dr. Leung.

Save as disclosed above, as at 31 December 2021, none of the Directors and the chief executive of the Company had or was deemed to have any interests or short positions in the Shares, underlying Shares or debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) that was required to be recorded in the register of the Company required to be kept under Section 352 of the SFO, or as otherwise notified to the Company and Stock Exchange pursuant to the Model Code.

SUBSTANTIAL SHAREHOLDERS' INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES

As at 31 December 2021, to the best knowledge of the Directors, the following persons/entities (not being a Director or chief executive of the Company) had interests or short positions in the Shares or underlying Shares of the Company which fall to be disclosed to the Company and Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO and recorded in the register required to be kept under Section 336 of the SFO were as follows:

			Approximate percentage of
Name of shareholder	Capacity/nature of interest(1)	Number of Shares	shareholding(2)
Mr. Jing QIANG(4)	Beneficial interest, interest in a controlled corporation and interest of spouse	285,713,036	28.39%
Apricot Capital (上海杏澤投資 管理有限公司) (5)(6)(7)	Interest in a controlled corporation	212,889,400	21.16%
Shanghai Yueyi Investment Centre (Limited Partnership)* (上海月溢投資中心 (有限合夥))(5)(7)	Interest in a controlled corporation	212,889,400	21.16%
Hainan Haiyao Co., Ltd. (海南海藥股份有限公司) (8)	Beneficial interest	158,882,115	15.79%
Skytech Technology(3)	Beneficial interest	129,729,200	12.89%
Apricot Oversea Holdings Limited(5)	Beneficial interest	108,316,600	10.76%
Ms. Sijia XU(9)	Beneficial interest	89,802,105	8.92%
West Biolake Holdings Limited(6)	Beneficial interest	72,349,000	7.19%
Yunnan Baiyao Group Co., Ltd* (雲南白藥集團股份有限公司)	Beneficial interest	51,599,400	5.13%
China Citic Bank Co., Ltd., Haikou Branch(8)	Person having a security interest in Shares	158,882,115	15.79%
Haikou City Rural Credit Cooperatives* (海口市農村信用合作聯社) (9)	Person having a security interest in Shares	51,000,000	5.07%

* For identification purpose only

Notes:

(1) All interests stated are long positions.

(2) As at 31 December 2021, the Company had 1,006,240,400 issued Shares.

(3) Skytech Technology is a company wholly owned by Dr. Shui On LEUNG.

• (4) As at 31 December 2021, 72,823,636 Shares were held by Mr. Jing QIANG of which 46,711,640 Shares were held through his wholly owned company, Grogene Technology Limited (格擎生物科技有限公司). The interest in the other 212,889,400 Shares were held by Apricot Capital (上海杏澤投資管理有限公司) through Apricot Oversea Holdings Limited, West Biolake Holdings Limited, Apricot BioScience Holdings, L.P., Le Rong Limited and Zliverland Holdings Limited, which are ultimately controlled by Ms. Wenyi LIU. Mr. Qiang is the spouse of Ms. Liu who is deemed to be interested in these Shares for the purposes of the SFO.
• (5) Apricot Oversea Holdings Limited is the overseas holding platform of Xingze Xinghe and Shanghai Jianyi Xinghe Startup Investment Center (Limited Partnership)* (上海健益興禾創業投資中心(有限合夥)) ("Jianyi Xinghe"), holding as to approximately 9.26% and 1.51% of the issued Shares as at 31 December 2021, respectively. Apricot Capital (上海杏澤投資管理有限公司) is the general partner of Jianyi Xinghe. Apricot Capital and Shanghai Yueyi Investment Centre (Limited Partnership)* (上海月溢投資中心(有限合夥)) ("Yueyi Investment") are the co-general partners of Xingze Xinghe. For the purpose of the SFO, Apricot Capital and Yueyi Investment are deemed to have an interest in the Shares held by Apricot Oversea Holding Limited.
• (6) West Biolake Holdings Limited is the overseas holding platform of Xingze Xingzhan. Apricot Capital is the general partner of Xingze Xingzhan. For the purpose of the SFO, Apricot Capital is deemed to have an interest in the Shares held by West Biolake Holdings Limited.
• (7) Save as Apricot Capital's deemed interest in West Biolake Holdings Limited and Apricot Oversea Holdings Limited pursuant to the SFO, Apricot Capital is the general partner of Xingze Xingzhan. Apricot BioScience Holdings, L.P. held approximately 1.31% of the issued Shares as at 31 December 2021. Le Rong Limited and Zliverland Holdings Limited are the overseas holding platforms of Xingze Xingzhan, holding as to approximately 1.09% and 0.80% of the issued Shares as at 31 December 2021, respectively. Apricot Capital was owned by Ms. Wenyi LIU, a non-executive Director, and Shanghai Zuohe Investment Management Co., Ltd.* (上海佐禾投 資管理有限公司) ("Zuohe Investment") as to 40% and 60%, respectively as at 31 December 2021. Zuohe Investment was owned by Ms. Liu and an independent third party as to 51% and 49% as at 31 December 2021, respectively. For the purpose of the SFO, Ms. Liu is deemed to have an interest in the Shares held by Apricot Capital and Zuohe Investment.
• (8) Pursuant to a share charge where Hainan Haiyao Co., Ltd. (海南海藥股份有限公司) ("Hainan Haiyao") charged 158,882,115 Shares to China Citic Bank Co., Ltd., Haikou Branch ("China Citic Bank"), China Citic Bank had a security interest in 158,882,115 Shares which were beneficially owned by Hainan Haiyao.
• (9) Pursuant to a share charge where Ms. Sijia XU charged 51,000,000 Shares to Haikou City Rural Credit Cooperatives* (海口市農村信 用合作聯社), Haikou City Rural Credit Cooperatives had a security interest in 51,000,000 Shares which were beneficially owned by Ms. Xu.

Save as disclosed above, as at 31 December 2021, the Directors were not aware of any other person or corporation having an interest or short position in shares and underlying shares of the Company as recorded in the register required to be kept by the Company pursuant to section 336 of the SFO.

CONNECTED TRANSACTIONS

Connected Transaction under Lease Agreement

On 22 March 2021, a Lease Agreement was entered into between Hainan SinoMab Biotech Co., Ltd.* (海南賽樂敏生物科技 有限公司*) ("Hainan SinoMab"), a wholly owned subsidiary of the Company, (as Lessee), and Haikou Pharmaceutical Factory Co., Ltd (海口市製藥廠有限公司) ("Haikou Pharmaceutical"), (as Lessor), to lease No.6 Building (SinoMab Building) for a term of 20 years from 1 April 2021 to 31 March 2041 at an annual rent of RMB3,392,500 (exclusive of management fees and other outgoing expenses).

Pursuant to the Lease Agreement, Hainan SinoMab rented the No.6 Building (SinoMab Building) located in Haiyao Industry Park, 192 Nanhai Avenue, Xiuying District, Haikou City, Hainan Province with a total gross floor area of 14,637 square metres and a land area of approximately 6,550 square metres attached to the building, together with the existing fixtures, improvements and public facilities and equipment attached to the building and the land. The entering into of the Lease Agreement could provide the Group with enhanced and necessary office, research and development and production premises to satisfy its business operation needs for SM03 (Suciraslimab). Suciraslimab is the flagship product of the Company and is expected to be commercialised by the second half of 2023.

Haikou Pharmaceutical is a subsidiary of Hainan Haiyao Co., Ltd. (海南海藥股份有限公司) ("Hainan Haiyao") which is, a substantial shareholder of the Company, and is therefore a connected person of the Company. As at the date of the Lease Agreement, Hainan Haiyao held approximately 15.79% equity interests in the Company. Therefore, the transaction under the Lease Agreement constituted a one-off connected transaction for the Company under Chapter 14A of the Listing Rules. Please refer to the announcement of the Company dated 22 March 2021 for more details.

Connected Transaction under Supplemental Agreement to BTK Transfer and Collaboration Agreement

On 16 September 2021, a supplemental agreement (the "Supplemental Agreement") was entered into between the Company and Suzhou Sinovent Pharmaceutical Technology Co., Ltd.* (蘇州信諾維醫藥科技股份有限公司) now known as Evopoint Bioscience Co., Ltd* (蘇州信諾維醫藥科技股份有限公司) ("Suzhou Sinovent") to amend the BTK Transfer and Collaboration Agreement dated 30 March 2019 ("BTK Transfer and Collaboration Agreement") entered into between the Company and Suzhou Sinovent, pursuant to which, among others, the Company and Suzhou Sinovent may together or separately license-out the BTK Rights (as defined hereinafter) such that Suzhou Sinovent will be entitled to two-thirds (approximately 67%) and the Company will be entitled to one-third (approximately 33%) of the proceeds arising from the license-out the BTK Rights of SN1011.

Pursuant to the revenue sharing arrangement under the BTK Transfer and Collaboration Agreement, the Company shall pay one-third (approximately 33%) of the proceeds from transferring any rights to sub-license in respect of the techniques and applications of SN1011 in terms of indications related to immunological diseases and all proprietary rights and interests attaching to it (the "Immunological Rights") to Suzhou Sinovent. Suzhou Sinovent retains the ownership of all the techniques and applications of SN1011 in relation to other diseases (the "Remaining IP Rights", together with the Immunological Rights, the "BTK Rights").

The purpose of entering into of the Supplemental Agreement were to increase potential licensing-out opportunities for Immunological Rights and to gain financial benefit from license-out together with Suzhou Sinovent for the BTK Rights.

As disclosed in the "Connected Transactions — Application for Waivers — (i) Waiver from Strict Compliance with the Three-Year Contractual Term and Annual Caps Requirements" in the Prospectus, the Company will re-comply with the announcement, circular and independent shareholders' approval requirements under Chapter 14A of the Listing Rules if there is any material change to the terms of the BTK Transfer and Collaboration Agreement. As the Supplemental Agreement amended the material terms of the BTK Transfer and Collaboration Agreement, it was subject to the announcement and independent shareholders' approval requirements under Chapter 14A of the Listing Rules. At the extraordinary general meeting of the Company held on 14 December 2021 (the "EGM"), amendments under the Supplemental Agreement were approved by the independent shareholders of the Company.

The Company has also obtained a confirmation from the Stock Exchange that the Company's entering into the Supplemental Agreement will not affect the waiver granted by the Stock Exchange to the Company as disclosed on pages 227 to 232 of the Prospectus (except for the waiver for the (3) Revenue Sharing Arrangements under the BTK Transfer and Collaboration Agreement — (iii) In the event that we transfer any rights to sub-license in respect of the product of the Subject in the overseas markets (other than the PRC market) as disclosed in the Prospectus).

Details of the Supplemental Agreement were disclosed in the announcement of the Company dated 17 September 2021 and the circular of the Company dated 24 November 2021 (the "Circular").

Connected Transaction and Continuing Connected Transactions under License Agreement

On 16 September 2021, a license agreement (the "License Agreement") was entered into between the Company and Suzhou Sinovent (together with the Company, as the "Licensor") and Everest Medicines II (HK) Limited (as the licensee, "Everest HK"), pursuant to which the Licensor shall grant an exclusive, sublicensable, royalty-bearing license of all patents, know-how, trademarks and technology relating to SN1011, a BTK inhibitor, in the field of treatment of renal diseases to Everest HK in worldwide. The term of the License Agreement shall be from the first business day after all the conditions precedent of the License Agreement are satisfied or otherwise waived by Everest HK in writing to the last date of royalty term which shall be up to year 2042.

Under the License Agreement, the Licensor would receive US\$12 million in upfront (US\$4 million as to the Company and US\$8 million as to Suzhou Sinovent according to the payment method under the License Agreement) and up to US\$549 million in total development and sales milestones (up to US\$183 million as to the Company and up to US\$366 million as to Suzhou Sinovent according to the said payment method), and royalties. The Company has followed the pricing policy disclosed in the Circular.

Suzhou Sinovent is a close associate of Mr. Jing QIANG and Ms. Wenyi LIU, both were non-executive Directors as at the date of the License Agreement and are therefore, the Company's connected person. Accordingly, the transactions under the License Agreement constituted connected transactions for the Company under Chapter 14A of the Listing Rules and were subject to the announcement and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

Royalties under the License Agreement will constitute continuing connected transactions of the Company. Under Rule 14A.53 of the Listing Rules, a listed issuer is required to set a monetary annual cap for the continuing connected transactions. However, it is not practicable for the Company to estimate the maximum amount payable by Everest HK to the Licensor at time of the Circular or when it seeks independent shareholders' approval at the EGM. In addition, it would create undue uncertainty for Everest HK if the License Agreement and the transactions contemplated under it would be subject to further approval by the independent shareholders of the Company after Everest HK have achieved net sales for a certain number of years. Therefore, as disclosed in the Circular, the Company has applied to the Stock Exchange for, and the Stock Exchange has granted the Company, a waiver under Rule 14A.53 of the Listing Rules from strict compliance with the monetary annual cap requirement. Since the License Agreement is longer than 3 years, the Company has also appointed an independent financial adviser to explain why the License Agreement requires a period of longer than 3 years and to confirm that it is normal business practice for agreements of this type to be of such duration.

The entering into of the License Agreement was approved by the independent shareholders of the Company at the EGM. The License Agreement became unconditional on 15 December 2021, being the first business day after all conditions precedent of the License Agreement have been satisfied.

Further details relating to the License Agreement were disclosed in the announcements of the Company dated 17 September 2021 and the Circular.

No continuing connected transactions has taken place during the Reporting Period.

PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES

Neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company's listed securities during the Reporting Period.

POTENTIAL NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

As disclosed in the Prospectus and announcement of the Company dated 17 September 2021 and the circular of the Company dated 24 November 2021, as part of the arrangements under the BTK Transfer and Collaboration Agreement entered into between the Company and Suzhou Sinovent on 30 March 2019 (as supplemented by the supplemental agreement to the BTK Transfer and Collaboration Agreement dated 16 September 2021 ("Supplemental Agreement")), the Company and Suzhou Sinovent agreed the following revenue sharing arrangements:

Under the revenue sharing arrangement of the BTK Transfer and Collaboration Agreement, the Company agreed to pay Suzhou Sinovent the following fees which will be settled annually:

(i) In relation to any future sales of the product of the techniques and applications of BTK inhibitor (which was subsequently named SN1011) in terms of indications related to immunological diseases and all proprietary rights and interests attaching to it (the "Immunological Subject") in the PRC market

Payment to Suzhou Sinovent = 5% x Proceeds (after relevant taxation) from any future sales of the product of the Immunological Subject in the PRC market

(ii) In relation to any future sales of the product of the Immunological Subject in the overseas market

Payment to Suzhou Sinovent = 10% x Proceeds (after relevant taxation) from any future sales of the product of the Immunological Subject in the overseas market

Under the revenue sharing arrangement of the Supplemental Agreement which was approved on the extraordinary general meeting of the Company held on 14 December 2021 by its independent shareholders, the Company and Suzhou Sinovent agreed to share the revenue as follow:

(iii) In the event the Company and Suzhou Sinovent together or separately license-out the BTK Rights (including any rights in respect the product of the Immunological Subject ("Immunological Rights") and the rights to all techniques and application of SN1011 in relation to other diseases ("Remaining IP Rights")):

Entitlement to Suzhou Sinovent	=	two-thirds (approximately 67%) of the proceeds arising from the license-out of the BTK Rights
Entitlement to the Company	=	one-third (approximately 33%) of the proceeds arising from the license-out of the BTK Rights

As at the date of this annual report, Ms. Wenyi LIU, our non-executive Director, controlled over 30% of the voting power at the shareholders meeting of Suzhou Sinovent. Suzhou Sinovent is a close associate of Ms. Liu and therefore, the Company's connected person. Specifically, as at the date of this annual report, Mr. Jing QIANG, a substantial shareholder and the spouse of Ms. Liu, directly held approximately 0.52% in Suzhou Sinovent. Mr. Qiang indirectly controlled in aggregate approximately 38.75% in Suzhou Sinovent, through Shanghai Lipan Enterprise Management Center (Limited Partnership)* (上海勵攀企業管理中心(有限合夥)), Ningbo Meishan bonded port Youxiao Business Management Center, L.P.* (寧波梅山保 稅港區猷霄企業管理中心(有限合夥)), Suzhou Youyao Business Management Center, L.P.* (蘇州佑曜企業管理中心(有限合 夥)) and Ningbo Meishan bonded port Chenghuaiyangguan Business Management Center, L.P.* (寧波梅山保稅港區騁懷仰 觀企業管理中心(有限合夥)) and Shanghai Xingwei Investment Partnership (Limited Partnership)* (上海杏微投資合夥企業(有 限合夥)), each a limited partnership incorporated in the PRC and was ultimately controlled by Mr. Qiang as its general partner.

In addition, as at the date of this annual report, Suzhou Sinovent was held as to 4.70% by Xingze Xinghe, one of our Pre-IPO Investors, and as to 0.53% by Hangzhou Xingze Xingfu Investment Management Partnership (Limited Partnership)* (杭州杏 澤興福投資管理合夥企業(有限合夥)), a limited partnership incorporated in the PRC with Apricot Capital (上海杏澤投資管理 有限公司), which was ultimately controlled by Ms. Liu as its general partner, respectively. Save as disclosed above, Suzhou Sinovent was held by independent third parties as to 55.50% as at the date of this annual report.

The revenue sharing arrangements under the BTK Transfer and Collaboration Agreement was determined after arm's length negotiations between the Company and Suzhou Sinovent, taking into account the fact that it is common practice to share future sales revenue and proceeds from transfer of a sub-licensing rights under comparable drug candidate transfer agreements, which in turn lowers the upfront fixed payment payable by the licensee in the Chinese biopharmaceutical market.

As disclosed in the announcement of the Company dated 17 September 2021 and the circular of the Company dated 24 November 2021, the Supplemental Agreement amended, among others, the revenue sharing arrangements under the BTK Transfer and Collaboration Agreement. The purpose of entering into of the Supplemental Agreement was to increase potential licensing-out opportunities for Immunological Rights and to gain financial benefit from license-out together with Suzhou Sinovent for the BTK Rights. Under the Supplemental Agreement, the revenue sharing arrangement between the Company and Suzhou Sinovent is not limited to the licensing-out of the Company's Immunological Rights but allows the Company to benefit from the revenue generated from the Remaining IP Rights (including but not limited to, in terms of indications related to oncological diseases) owned by Suzhou Sinovent. This is expected to generate substantial income to the Company.

Under Rule 14A.53 of the Listing Rules, a listed issuer is required to set a monetary annual cap for the continuing connected transactions. It is impracticable and extremely difficult for the Company to set monetary annual caps for the Revenue Sharing Arrangements under the BTK Transfer and Collaboration Agreement. Therefore, as disclosed in the Prospectus, the Company has applied to the Stock Exchange for, and the Stock Exchange has granted the Company, a waiver under Rule 14A.53 of the Listing Rules from strict compliance with the momentary annual cap requirement.

In addition, the duration of the BTK Transfer and Collaboration Agreement is of an indefinite term. Under Rule 14A.52 of the Listing Rules, a listed issuer is required to set a contractual term not exceeding three years. It is impracticable and extremely difficult for the Company to set a contractual term not exceeding three years in respect of the Revenue Sharing Arrangements under the BTK Transfer and Collaboration Agreement. Therefore, as disclosed in the Prospectus, the Company has applied to the Stock Exchange for, and the Stock Exchange has granted the Company, a waiver under Rule 14A.52 of the Listing Rules from strict compliance with the momentary annual cap requirement. For details of the basis for not setting annual caps for the revenue sharing arrangements and not setting a contractual term less than three years in respect of the revenue sharing arrangements under the BTK Transfer and Collaboration Agreement, please refer to the Prospectus.

The Company has also obtained a confirmation by way of a letter from the Stock Exchange that the Company's entering into the Supplemental Agreement will not affect the above mentioned waiver which were granted by the Stock Exchange to the Company, details as disclosed on pages 227 to 232 of the Prospectus (except for the waiver for the (3) Revenue Sharing Arrangements under the BTK Transfer and Collaboration Agreement — (iii) In the event that we transfer any rights to sublicense in respect of the product of the Subject in the overseas market (other than the PRC market) as disclosed in the Prospectus).

As the potential non-exempt continuing connected transactions contemplated under the BTK Transfer and Collaboration Agreement will be carried out on a continuing basis and will extend over a period of time, the Directors consider that strict compliance with the announcement and/or independent shareholders' approval requirements under the Listing Rules would be impractical, unduly burdensome and would impose unnecessary administrative costs on the Company. Accordingly, the Company has applied for, and the Stock Exchange has granted the Company, a waiver from strict compliance with the announcement and/or independent shareholders' approval requirements for three years in respect of such potential nonexempt continuing connected transactions contemplated under the BTK Transfer and Collaboration Agreement.

As the highest applicable percentage ratio in respect of each of the caps as the Company currently expects is, on an annual basis, more than 5%, apart from the requirements for three-year contractual term, setting annual cap, announcement and/or independent shareholders' approval, of which waivers have been granted, the Company will comply with the other applicable provisions under Chapter 14A of the Listing Rules in respect of the potential non-exempt continuing connected transactions contemplated under the BTK Transfer and Collaboration Agreement (as supplemented by the Supplemental Agreement) as and when necessary.

Further details relating to the Supplemental Agreement were disclosed in the announcement of the Company dated 17 September 2021 and the circular of the Company dated 24 November 2021.

RELATED PARTY TRANSACTIONS

During the Reporting Period, the Group entered into certain transactions with "related parties" as defined under the applicable accounting standards. Related party transactions are disclosed in note 30 to the consolidated financial statements.

The Company has complied with the disclosure requirements in accordance with Chapter 14A of the Listing Rules (if applicable) in respect of the above related party transactions.

PRE-EMPTIVE RIGHTS

There is no provision for pre-emptive rights under the Articles or the relevant laws of Hong Kong that would oblige the Company to offer new Shares on a pro rata basis to existing Shareholders.

MODEL CODE FOR DIRECTORS' SECURITIES TRANSACTIONS

The Company has adopted the Model Code as its own code of conduct regarding Directors' securities transactions.

Having made specific enquiries with each of the Directors, all the Directors confirmed that they had complied with such code of conduct throughout the year ended 31 December 2021.

CORPORATE GOVERNANCE

The Company is committed to maintaining high standards of corporate governance practices. As at the date of this report, the Board comprises one executive Director, six non-executive Directors and four independent non-executive Directors. The Board has adopted the code provisions set out in the CG Code as its corporate governance code. Information on the corporate governance practices adopted by the Company is set out in the Corporate Governance Report on pages 29 to 44 of this annual report.

SUFFICIENCY OF PUBLIC FLOAT

Based on the information that is publicly available to the Company and within the knowledge of the Directors, there is a sufficiency of public float of the Company's securities as required under the Listing Rules as at the date of this annual report.

FINANCIAL SUMMARY

A summary of the Group's results, assets and liabilities for the last four financial years (prepared in accordance with HKFRSs) are set out on page 3 of this annual report. This summary does not form part of the audited consolidated financial statements.

AUDIT COMMITTEE

During the Reporting Period, the Audit Committee consisted of four independent non-executive Directors, being Mr. Ping Cho Terence HON (Chairman), Mr. George William Hunter CAUTHERLEY, Dr. Chi Ming LEE and Mr. Dylan Carlo TINKER. Dr. Chi Ming LEE was appointed as a member of the Audit Committee with effect from 15 June 2021.

The primary duties of the Audit Committee are to assist the Board by providing an independent view of the effectiveness of the financial reporting process, risk management and internal control and systems of the Group and overseeing the audit process and the relationship between the Company and its auditor.

The Audit Committee has reviewed alongside the management and external auditor the accounting principles and policies adopted by the Group and the audited consolidated financial statements for the Reporting Period.

AUDITOR

The financial statements for the year ended 31 December 2021 has been audited by Ernst & Young. Ernst & Young shall retire in the forthcoming AGM and, being eligible, will offer themselves for re-appointment. A resolution to re-appoint Ernst & Young as auditor of the Company and to authorise the Directors to fix its remuneration will be proposed at the forthcoming AGM.

EVENTS AFTER REPORTING PERIOD

There are no significant events that affected the Group after the Reporting Period and up to the date of this report.

By order of the Board of SinoMab BioScience Limited Dr. Shui On LEUNG Executive Director, Chairman and Chief Executive Officer

21 March 2022

Ernst & Young 27/F, One Taikoo Place, 979 King's Road, Quarry Bay, Hong Kong 安永會計師事務所 香港鰂魚涌英皇道979號 太古坊一座27樓

Tel 電話: +852 2846 9888 Fax 傳真: +852 2868 4432 ey.com

To the members of SinoMab BioScience Limited

(Incorporated in Hong Kong with limited liability)

OPINION

We have audited the consolidated financial statements of SinoMab BioScience Limited (the "Company") and its subsidiaries (the "Group") set out on pages 106 to 169, which comprise the consolidated statement of financial position as at 31 December 2021, and the consolidated statement of profit or loss, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2021, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards ("HKFRSs") issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA") and have been properly prepared in compliance with the Hong Kong Companies Ordinance.

BASIS FOR OPINION

We conducted our audit in accordance with Hong Kong Standards on Auditing ("HKSAs") issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the HKICPA's Code of Ethics for Professional Accountants (the "Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated financial statements.

KEY AUDIT MATTERS (continued)

Risk of misstatement of research and development costs

The Group incurred significant research and development ("R&D") costs of RMB199,113,000 as disclosed in the consolidated statement of profit or loss for the year ended 31 December 2021. Service fees paid to contract research organisations ("CROs"), clinical site management operators ("SMOs") (collectively referred as "Outsourced Service Providers"), and co-development fees paid to R&D collaboration partners are included in the Group's R&D costs.

The R&D activities with these Outsourced Service Providers and R&D collaboration partners are documented in agreements and are typically performed over an extended period. These expenses are charged to the statement of profit or loss based on the progress of the R&D projects. We identified the measurement of R&D costs as a key audit matter due to its significant amount and the risk of not recording R&D costs in the appropriate reporting period.

The accounting policy and the disclosure for significant accounting judgement related to R&D costs are included in note 2.4 and note 3 of the consolidated financial statements.

Key audit matter How our audit addressed the key audit matter

We obtained an understanding of and evaluated the design, and tested the operating effectiveness of the controls related to the Group's R&D process. We reviewed the agreements with Outsourced Service Providers and R&D collaboration partners to evaluate the method adopted by the management in setting up the calculation basis for R&D costs. We inquired the R&D project managers and inspected the progress reports and correspondence to obtain an understanding of the progress of R&D projects. We re-calculated the service fees using management's method. We obtained external confirmations of service fees from Outsourced Service Providers.

OTHER INFORMATION INCLUDED IN THE ANNUAL REPORT

The directors of the Company are responsible for the other information. The other information comprises the information included in the Annual Report, other than the consolidated financial statements and our auditor's report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

RESPONSIBILITIES OF THE DIRECTORS FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA and the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the directors of the Company are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors of the Company either intend to liquidate the Group or to cease operations or have no realistic alternative but to do so.

The directors of the Company are assisted by the Audit Committee in discharging their responsibilities for overseeing the Group's financial reporting process.

AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Our report is made solely to you, as a body, in accordance with section 405 of the Hong Kong Companies Ordinance, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
• • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

• • Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
• • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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

We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

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

The engagement partner on the audit resulting in this independent auditor's report is Wu Ka Lai Cary.

Ernst & Young Certified Public Accountants Hong Kong 21 March 2022

Consolidated Statement of Profit or Loss

Year ended 31 December 2021

		2021
	Notes	RMB'000	RMB'000
REVENUE	5	25,913	–
Other income and gains, net	5	28,751	58,439
Research and development costs		(199,113)	(103,402)
Administrative expenses		(133,400)	(72,010)
Finance costs	7	(5,821)	(2,416)
Other expenses		(235)	(2,464)
Share of loss of an associate		(4,289)	(747)
LOSS BEFORE TAX	6	(288,194)	(122,600)
Income tax expenses	10	–	–
LOSS FOR THE YEAR		(288,194)	(122,600)
LOSS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT
Basic and diluted (RMB)	12	0.29	0.12

Consolidated Statement of Comprehensive Income

Year ended 31 December 2021

	2021 RMB'000	2020 RMB'000
LOSS FOR THE YEAR	(288,194)	(122,600)
OTHER COMPREHENSIVE LOSS Other comprehensive loss that will not be reclassified
to profit or loss in subsequent periods: Exchange differences on translation to the presentation currency	(20,710)	(57,687)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR	(308,904)	(180,287)

Consolidated Statement of Financial Position

31 December 2021

	2021		2020
	Notes	RMB'000	RMB'000
NON-CURRENT ASSETS
Property, plant and equipment	13	253,285	101,093
Right-of-use assets	14	102,922	44,830
Investment in an associate	15	26,933	31,897
Intangible assets	16	1,921	–
Deposits	18	2,444	1,391
Other non-current assets	17	58,465	15,958
Total non-current assets		445,970	195,169
CURRENT ASSETS
Prepayments, deposits and other receivables	18	32,702	30,926
Financial asset at fair value through profit or loss Cash and cash equivalents	19 20	– 562,983	93,058 810,370
Total current assets		595,685	934,354
CURRENT LIABILITIES
Other payables and accruals	21	85,970	44,674
Lease liabilities	14	7,394	9,130
Interest-bearing bank borrowing	22	5,000	5,000
Total current liabilities		98,364	58,804

Consolidated Statement of Financial Position

31 December 2021

	Notes	2021 RMB'000	2020 RMB'000
NET CURRENT ASSETS		497,321	875,550
TOTAL ASSETS LESS CURRENT LIABILITIES		943,291	1,070,719
NON-CURRENT LIABILITIES
Lease liabilities	14	69,288	28,247
Interest-bearing bank borrowings	22	193,777	55,461
Total non-current liabilities		263,065	83,708
Net assets		680,226	987,011
EQUITY
Equity attributable to owners of the parent
Share capital	23	1,679,126	1,679,126
Reserves	24	(998,900)	(692,115)
Total equity		680,226	987,011

Director Director

Leung Shui On Hon Ping Cho Terence

Consolidated Statement of Changes in Equity

Year ended 31 December 2021

	Notes	Share capital RMB'000	Shares held under Share Award Scheme* RMB'000	Share-based payment reserve* RMB'000	Capital reserve* RMB'000	Exchange fluctuation reserve* RMB'000	Accumulated losses* RMB'000	Total equity RMB'000
At 1 January 2021 Loss for the year		1,679,126 –	– –	35,382 –	8,637 –	(61,367) –	(674,767) (288,194)	987,011 (288,194)
Other comprehensive loss for the year:
Exchange differences on translation to the presentation currency		–	–	–	–	(20,710)	–	(20,710)
Total comprehensive loss for the year		–	–	–	–	(20,710)	(288,194)	(308,904)
Purchase of shares under the share
award scheme	27	–	(59,673)	–	–	–	–	(59,673)
Equity-settled share-based
payment expense	25	–	–	61,792	–	–	–	61,792
At 31 December 2021		1,679,126	(59,673)	97,174	8,637	(82,077)	(962,961)	680,226
				Share-based		Exchange
			Share	payment	Capital	fluctuation	Accumulated	Total
			capital	reserve	reserve	reserve	losses	equity
		Note	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
At 1 January 2020			1,679,126	–	8,637	(3,680)	(552,167)	1,131,916
Loss for the year			–	–	–	–	(122,600)	(122,600)
Other comprehensive loss for the year:
Exchange differences on translation to the presentation currency			–	–	–	(57,687)	–	(57,687)
Total comprehensive loss for the year			–	–	–	(57,687)	(122,600)	(180,287)
Equity-settled share-based payment expense		25	–	35,382	–	–	–	35,382
At 31 December 2020			1,679,126	35,382	8,637	(61,367)	(674,767)	987,011

* These reserve accounts comprise the consolidated reserves of RMB998,900,000 (2020: RMB692,115,000) in the consolidated statement of financial position. Capital reserve represents the contribution of RMB8,637,146 by a non-controlling shareholder to the Company in 2018.

Consolidated Statement of Cash Flows

Year ended 31 December 2021

		2021	2020
	Notes	RMB'000	RMB'000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax		(288,194)	(122,600)
Adjustments for:
Finance costs	7	5,821	2,416
Bank interest income	5	(16,731)	(17,346)
Fair value gain on financial instruments
at fair value through profit or loss	5	(1,344)	(28,253)
Share of loss of an associate		4,289	747
Depreciation of property, plant and equipment	6	9,427	4,042
Depreciation of right-of-use assets	6	10,893	6,631
Amortisation of intangible assets	6	335	–
Equity-settled share-based payment expense		62,897	34,903
Government grants related to assets		2,171	–
		(210,436)	(119,460)
Decrease/(increase) in prepayments, deposits and other receivables		12,644	(18,143)
Increase/(decrease) in other payables and accruals		33,998	(21,081)
Cash used in operations		(163,794)	(158,684)
Interest received	5	16,731	17,346
Net cash flows used in operating activities		(147,063)	(141,338)

Consolidated Statement of Cash Flows

Year ended 31 December 2021

		2021	2020
	Notes	RMB'000	RMB'000
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in an associate		(16,173)	(17,332)
Purchases of items of property, plant and equipment		(151,351)	(70,085)
Deposits for purchases of property, plant and equipment		(46,881)	(5,870)
Purchase of land use rights Purchases of intangible assets		(14,282) (2,405)	(16,366) –
Purchases of financial asset at fair value through profit or loss		(85,000)	(69,565)
Redemption of financial asset at fair value through profit or loss		177,046	–
Settlement received from financial instruments at fair value through
profit or loss		1,344	–
Net cash flows used in investing activities		(137,702)	(179,218)
CASH FLOWS FROM FINANCING ACTIVITIES
Share issue expenses		–	(49,253)
New bank loans	26(b)	143,316	40,179
Repayment of bank loans	26(b)	(5,000)	–
Principal portion of lease payments	26(b)	(16,436)	(6,286)
Purchase of shares under the share award scheme	27	(59,673)	–
Interest paid		(4,692)	(3,448)
Net cash flows from/(used in) financing activities		57,515	(18,808)
NET DECREASE IN CASH AND CASH EQUIVALENTS		(227,250)	(339,364)
Cash and cash equivalents at the beginning of the year		810,370	1,200,868
Effect of foreign exchange rate changes, net		(20,137)	(51,134)
CASH AND CASH EQUIVALENTS AT END OF YEAR		562,983	810,370
ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS
Cash and bank balances Non-pledged time deposits with original maturity of less than	20	399,983	77,606
three months when acquired	20	163,000	732,764
		562,983	810,370

31 December 2021

1. CORPORATE INFORMATION

The Company is a limited liability company incorporated in Hong Kong. The registered office of the Company is located at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong.

During the year, the Company and its subsidiaries (collectively referred to as the "Group") were principally engaged in the research and development of pharmaceutical products.

The shares of the Company were listed on the Main Board of the Stock Exchange of Hong Kong Limited (the "Stock Exchange") on 12 November 2019.

Information about subsidiaries

Particulars of the Company's subsidiaries are as follows:

Name	Place of incorporation/ registration and business	Nominal value of issued ordinary/ registered share capital	to the Company Direct	Percentage of equity attributable Indirect	Principal activities
SinoMab BioScience (Shenzhen) Limited (深圳賽樂敏生物科技有限公司) (note (a))	People's Republic of China/Mainland China	HKD 176,428,600	100%	–	Research and development of pharmaceutical products
SinoMab BioScience (Hainan) Limited* (海南賽樂敏生物科技有限公司) (note (b))	People's Republic of China/Mainland China	RMB 50,000,000	–	100%	Research and development of pharmaceutical products
MediNexus Pharma (Suzhou) Limited (杏聯藥業(蘇州)有限公司) (note (a))	People's Republic of China/Mainland China	RMB 200,000,000	100%	–	Research and development of pharmaceutical products
SINOMAB PTY LTD	Australia	AUD 100	100%	–	Research and development of pharmaceutical products
MediNexus Pharma (Shanghai) Limited* (興聯藥業(上海)有限公司) (note (a))	People's Republic of China/Mainland China	RMB 7,000,000	100%	–	Research and development of pharmaceutical products
Ingenious Sino Limited	British Virgin Islands	USD1	100%	–	Investment holding

Notes:

(a) These subsidiaries are registered as wholly-foreign-owned enterprises under People's Republic of China ("PRC") law.

(b) The subsidiary is registered as a domestic enterprise under PRC law.

* For identification purpose only

31 December 2021

2.1 BASIS OF PREPARATION

These financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards ("HKFRSs") (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards ("HKASs") and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA"), accounting principles generally accepted in Hong Kong and the Hong Kong Companies Ordinance.

These financial statements have been prepared under the historical cost convention, except for financial asset at fair value through profit or loss which has been measured at fair value. These financial statements are presented in Renminbi ("RMB") and all values are rounded to the nearest thousand except when otherwise indicated.

Basis of consolidation

The consolidated financial statements include the financial statements of the Group for the year ended 31 December 2021. A subsidiary is an entity (including a structured entity), directly or indirectly, controlled by the Company. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee (i.e., existing rights that give the Group the current ability to direct the relevant activities of the investee).

When the Company has, directly or indirectly, less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

• (a) the contractual arrangement with the other vote holders of the investee;
• (b) rights arising from other contractual arrangements; and
• (c) the Group's voting rights and potential voting rights.

The financial information of the subsidiaries is prepared for the same reporting period as the Company, using consistent accounting policies. The results of subsidiaries are consolidated from the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

Profit or loss and each component of other comprehensive income are attributed to the owners of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control described above. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognises (i) the assets (including goodwill) and liabilities of the subsidiary, (ii) the carrying amount of any non-controlling interest and (iii) the cumulative translation differences recorded in equity; and recognises (i) the fair value of the consideration received, (ii) the fair value of any investment retained and (iii) any resulting surplus or deficit in profit or loss. The Group's share of components previously recognised in other comprehensive income is reclassified to profit or loss or retained profits, as appropriate, on the same basis as would be required if the Group had directly disposed of the related assets or liabilities.

31 December 2021

2.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES

The Group has adopted the following revised HKFRSs for the first time for the current year's financial statements.

Amendments to HKFRS 9, HKAS 39, HKFRS 7, HKFRS 4 and HKFRS 16 Interest Rate Benchmark Reform — Phase 2

Amendment to HKFRS 16 Covid-19-Related Rent Concessions beyond 30 June 2021 (early adopted)

The nature and the impact of the revised HKFRSs are described below:

(a) Amendments to HKFRS 9, HKAS 39, HKFRS 7, HKFRS 4 and HKFRS 16 address issues not dealt with in the previous amendments which affect financial reporting when an existing interest rate benchmark is replaced with an alternative risk-free rate ("RFR"). The amendments provide a practical expedient to allow the effective interest rate to be updated without adjusting the carrying amount of financial assets and liabilities when accounting for changes in the basis for determining the contractual cash flows of financial assets and liabilities, if the change is a direct consequence of the interest rate benchmark reform and the new basis for determining the contractual cash flows is economically equivalent to the previous basis immediately preceding the change. In addition, the amendments permit changes required by the interest rate benchmark reform to be made to hedge designations and hedge documentation without the hedging relationship being discontinued. Any gains or losses that could arise on transition are dealt with through the normal requirements of HKFRS 9 to measure and recognise hedge ineffectiveness. The amendments also provide a temporary relief to entities from having to meet the separately identifiable requirement when an RFR is designated as a risk component. The relief allows an entity, upon designation of the hedge, to assume that the separately identifiable requirement is met, provided the entity reasonably expects the RFR risk component to become separately identifiable within the next 24 months. Furthermore, the amendments require an entity to disclose additional information to enable users of financial statements to understand the effect of interest rate benchmark reform on an entity's financial instruments and risk management strategy.

The Group had certain interest-bearing bank borrowings denominated in RMB based on the People's Bank of China RMB Loan Prime Rate ("LPR") as at 31 December 2021. The Group expects that LPR will continue to exist and the interest rate benchmark reform has not had an impact on the Group's LPR-based borrowings. If the interest rates of these borrowings and interest rate swap are replaced by RFRs in a future period, the Group will apply this the above-mentioned practical expedient upon the modification of these borrowings when instruments provided that the "economically equivalent" criterion is met.

(b) Amendment to HKFRS 16 issued in April 2021 extends the availability of the practical expedient for lessees to elect not to apply lease modification accounting for rent concessions arising as a direct consequence of the covid-19 pandemic by 12 months. Accordingly, the practical expedient applies to rent concessions for which any reduction in lease payments affects only payments originally due on or before 30 June 2022, provided the other conditions for applying the practical expedient are met. The amendment is effective retrospectively for annual periods beginning on or after 1 April 2021 with any cumulative effect of initially applying the amendment recognised as an adjustment to the opening balance of retained profits at the beginning of the current accounting period. Earlier application is permitted.

31 December 2021

2.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES (continued)

(b) (continued)

The Group has early adopted the amendment on 1 January 2021. No covid-19-related rent concessions was received by the Group for the year ended 31 December 2021.

2.3 ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS

The Group has not applied the following new and revised HKFRSs, that have been issued but are not yet effective, in these financial statements.

Amendments to HKFRS 3	Reference to the Conceptual Framework1
Amendments to HKFRS 10 and HKAS 28 (2011)	Sale or Contribution of Assets between an Investor and
	its Associate or Joint Venture3
HKFRS 17	Insurance Contracts2
Amendments to HKFRS 17	Insurance Contract2, 5
Amendment to HKFRS 17	Initial Application of HKFRS 17 and HKFRS 9 —
	Comparative Information2
Amendments to HKAS 1	Classification of Liabilities as Current or Non-current2, 4
Amendments to HKAS 1 and	Disclosure of Accounting Policies2
HKFRS Practice Statement 2
Amendments to HKAS 8	Definition of Accounting Estimates2
Amendments to HKAS 12	Deferred Tax related to Assets and Liabilities arising
	from a Single Transaction2
Amendments to HKAS 16	Property, Plant and Equipment: Proceeds before Intended Use1
Amendments to HKAS 37	Onerous Contracts — Cost of Fulfilling a Contract1
Annual Improvements to HKFRSs 2018–2020	Amendments to HKFRS 1, HKFRS 9, Illustrative Examples
	accompanying HKFRS 16, and HKAS 411

• ¹ Effective for annual periods beginning on or after 1 January 2022
• ² Effective for annual periods beginning on or after 1 January 2023
• ³ No mandatory effective date yet determined but available for adoption
• ⁴ As a consequence of the amendments to HKAS 1, Hong Kong Interpretation 5 Presentation of Financial Statements Classification by the Borrower of a Term Loan that Contains a Repayment on Demand Clause was revised in October 2020 to align the corresponding wording with no change in conclusion
• ⁵ As a consequence of the amendments to HKFRS 17 issued in October 2020, HKFRS 4 was amended to extend the temporary exemption that permits insurers to apply HKAS 39 rather than HKFRS 9 for annual periods beginning before 1 January 2023

Further information about those HKFRSs that are expected to be applicable to the Group is described below.

31 December 2021

2.3 ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS (continued)

Amendments to HKFRS 3 are intended to replace a reference to the previous Framework for the Preparation and Presentation of Financial Statements with a reference to the Conceptual Framework for Financial Reporting issued in June 2018 without significantly changing its requirements. The amendments also add to HKFRS 3 an exception to its recognition principle for an entity to refer to the Conceptual Framework to determine what constitutes an asset or a liability. The exception specifies that, for liabilities and contingent liabilities that would be within the scope of HKAS 37 or HK(IFRIC)-Int 21 if they were incurred separately rather than assumed in a business combination, an entity applying HKFRS 3 should refer to HKAS 37 or HK(IFRIC)-Int 21 respectively instead of the Conceptual Framework. Furthermore, the amendments clarify that contingent assets do not qualify for recognition at the acquisition date. The Group expects to adopt the amendments prospectively from 1 January 2022. Since the amendments apply prospectively to business combinations for which the acquisition date is on or after the date of first application, the Group will not be affected by these amendments on the date of transition.

Amendments to HKFRS 10 and HKAS 28 (2011) address an inconsistency between the requirements in HKFRS 10 and in HKAS 28 (2011) in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The amendments require a full recognition of a gain or loss resulting from a downstream transaction when the sale or contribution of assets between an investor and its associate or joint venture constitutes a business. For a transaction involving assets that do not constitute a business, a gain or loss resulting from the transaction is recognised in the investor's profit or loss only to the extent of the unrelated investor's interest in that associate or joint venture. The amendments are to be applied prospectively. The previous mandatory effective date of amendments to HKFRS 10 and HKAS 28 (2011) was removed by the HKICPA in January 2016 and a new mandatory effective date will be determined after the completion of a broader review of accounting for associates and joint ventures. However, the amendments are available for adoption now.

Amendments to HKAS 1 Classification of Liabilities as Current or Non-current clarify the requirements for classifying liabilities as current or non-current. The amendments specify that if an entity's right to defer settlement of a liability is subject to the entity complying with specified conditions, the entity has a right to defer settlement of the liability at the end of the reporting period if it complies with those conditions at that date. Classification of a liability is unaffected by the likelihood that the entity will exercise its right to defer settlement of the liability. The amendments also clarify the situations that are considered a settlement of a liability. The amendments are effective for annual periods beginning on or after 1 January 2023 and shall be applied retrospectively. Earlier application is permitted. The amendments are not expected to have any significant impact on the Group's financial statements.

31 December 2021

2.3 ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS (continued)

Amendments to HKAS 1 Disclosure of Accounting Policies require entities to disclose their material accounting policy information rather than their significant accounting policies. Accounting policy information is material if, when considered together with other information included in an entity's financial statements, it can reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. Amendments to HKFRS Practice Statement 2 provide non-mandatory guidance on how to apply the concept of materiality to accounting policy disclosures. Amendments to HKAS 1 are effective for annual periods beginning on or after 1 January 2023 and earlier application is permitted. Since the guidance provided in the amendments to HKFRS Practice Statement 2 is non-mandatory, an effective date for these amendments is not necessary. The Group is currently assessing the impact of the amendments on the Group's accounting policy disclosures.

Amendments to HKAS 8 clarify the distinction between changes in accounting estimates and changes in accounting policies. Accounting estimates are defined as monetary amounts in financial statements that are subject to measurement uncertainty. The amendments also clarify how entities use measurement techniques and inputs to develop accounting estimates. The amendments are effective for annual reporting periods beginning on or after 1 January 2023 and apply to changes in accounting policies and changes in accounting estimates that occur on or after the start of that period. Earlier application is permitted. The amendments are not expected to have any significant impact on the Group's financial statements.

Amendments to HKAS 12 narrow the scope of the initial recognition exception so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences, such as leases and decommissioning obligations. Therefore, entities are required to recognise a deferred tax asset and a deferred tax liability for temporary differences arising from these transactions. The amendments are effective for annual reporting periods beginning on or after 1 January 2023 and shall be applied to transactions related to leases and decommissioning obligations at the beginning of the earliest comparative period presented, with any cumulative effect recognised as an adjustment to the opening balance of retained profits or other component of equity as appropriate at that date. In addition, the amendments shall be applied prospectively to transactions other than leases and decommissioning obligations. Earlier application is permitted.

The amendments are not expected to have any significant impact on the Group's financial statements.

31 December 2021

2.3 ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS (continued)

Amendments to HKAS 16 prohibit an entity from deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognises the proceeds from selling any such items, and the cost of those items, in profit or loss. The amendments are effective for annual periods beginning on or after 1 January 2022 and shall be applied retrospectively only to items of property, plant and equipment made available for use on or after the beginning of the earliest period presented in the financial statements in which the entity first applies the amendments. Earlier application is permitted. The amendments are not expected to have any significant impact on the Group's financial statements.

Amendments to HKAS 37 clarify that for the purpose of assessing whether a contract is onerous under HKAS 37, the cost of fulfilling the contract comprises the costs that relate directly to the contract. Costs that relate directly to a contract include both the incremental costs of fulfilling that contract (e.g., direct labour and materials) and an allocation of other costs that relate directly to fulfilling that contract (e.g., an allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract as well as contract management and supervision costs). General and administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract. The amendments are effective for annual periods beginning on or after 1 January 2022 and shall be applied to contracts for which an entity has not yet fulfilled all its obligations at the beginning of the annual reporting period in which it first applies the amendments. Earlier application is permitted. Any cumulative effect of initially applying the amendments shall be recognised as an adjustment to the opening equity at the date of initial application without restating the comparative information. The amendments are not expected to have any significant impact on the Group's financial statements.

Annual Improvements to HKFRSs 2018–2020 sets out amendments to HKFRS 1, HKFRS 9, Illustrative Examples accompanying HKFRS 16, and HKAS 41. Details of the amendments that are expected to be applicable to the Group are as follows:

• • HKFRS 9 Financial Instruments: clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other's behalf. An entity applies the amendment to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first applies the amendment. The amendment is effective for annual periods beginning on or after 1 January 2022. Earlier application is permitted. The amendment is not expected to have a significant impact on the Group's financial statements.
• • HKFRS 16 Leases: removes the illustration of payments from the lessor relating to leasehold improvements in Illustrative Example 13 accompanying HKFRS 16. This removes potential confusion regarding the treatment of lease incentives when applying HKFRS 16

Save as disclosed above, the directors of the Company anticipate that application of the new and revised HKFRSs and interpretations will have no material impact on the Group's consolidated financial statements in the future.

31 December 2021

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Investments in associates

An associate is an entity in which the Group has a long term interest of generally not less than 20% of the equity voting rights and over which it is in a position to exercise significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.

The Group's investments in associates are stated in the consolidated statement of financial position at the Group's share of net assets under the equity method of accounting, less any impairment losses. Adjustments are made to bring into line any dissimilar accounting policies that may exist. The Group's share of the post-acquisition results and other comprehensive income of associates is included in the consolidated statement of profit or loss and consolidated other comprehensive income, respectively. In addition, when there has been a change recognised directly in the equity of the associate, the Group recognises its share of any changes, when applicable, in the consolidated statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and its associates are eliminated to the extent of the Group's investments in the associates, except where unrealised losses provide evidence of an impairment of the assets transferred. Goodwill arising from the acquisition of associates is included as part of the Group's investments in associates.

Fair value measurement

The Group measures its equity investments at fair value at the end of each reporting period. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

31 December 2021

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Fair value measurement (continued)

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

• Level 1 based on quoted prices (unadjusted) in active markets for identical assets or liabilities
• Level 2 based on valuation techniques for which the lowest level input that is significant to the fair value measurement is observable, either directly or indirectly
• Level 3 based on valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

Impairment of non-financial assets

Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than financial assets), the asset's recoverable amount is estimated. An asset's recoverable amount is the higher of the asset's or cash-generating unit's value in use and its fair value less costs of disposal, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs. In testing a cash-generating unit for impairment, a portion of the carrying amount of a corporate asset (e.g., a headquarters building) is allocated to an individual cash-generating unit if it can be allocated on a reasonable and consistent basis or, otherwise, to the smallest group of cash-generating units.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to the statement of profit or loss in the period in which it arises in those expense categories consistent with the function of the impaired asset.

An assessment is made at the end of each reporting period as to whether there is an indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to the statement of profit or loss in the period in which it arises.

31 December 2021

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Related parties

A party is considered to be related to the Group if:

• (a) the party is a person or a close member of that person's family and that person
• (i) has control or joint control over the Group;
• (ii) has significant influence over the Group; or
• (iii) is a member of the key management personnel of the Group or of a parent of the Group;

or

• (b) the party is an entity where any of the following conditions applies:
• (i) the entity and the Group are members of the same group;
• (ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);
• (iii) the entity and the Group are joint ventures of the same third party;
• (iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
• (v) the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group;
• (vi) the entity is controlled or jointly controlled by a person identified in (a);
• (vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity); and
• (viii) the entity, or any member of a group of which it is a part, provides key management personnel services to the Group or to the parent of the Group.

31 December 2021

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Property, plant and equipment and depreciation

Property, plant and equipment, other than construction in progress, are stated at cost less accumulated depreciation and any impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use.

Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to the statement of profit or loss in the period in which it is incurred. In situations where the recognition criteria are satisfied, the expenditure for a major inspection is capitalised in the carrying amount of the asset as a replacement. Where significant parts of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them accordingly.

Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life. The principal annual rates used for this purpose are as follows:

Production and R&D equipment	18% to 20%
Office equipment	9% to 30%
Motor vehicles	18% to 20%
Leasehold improvements	Over the shorter of the lease terms and 20%

Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately. Residual values, useful lives and the depreciation method are reviewed, and adjusted if appropriate, at least at each financial year end.

An item of property, plant and equipment including any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in the statement of profit or loss in the year the asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant asset.

Construction in progress represents a building under construction, which is stated at cost less any impairment losses, and is not depreciated. Cost comprises the direct costs of construction and capitalised borrowing costs on related borrowed funds during the period of construction. Construction in progress is reclassified to the appropriate category of property, plant and equipment when completed and ready for use.

Research and development costs

All research costs are charged to the statement of profit or loss as incurred.

Expenditure incurred on projects to develop new products is capitalised and deferred only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the project and the ability to measure reliably the expenditure during the development. Product development expenditure which does not meet these criteria is expensed when incurred.

31 December 2021

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is the fair value at the date of acquisition. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are subsequently amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end.

Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cashgenerating unit level. Such intangible assets are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether the indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for on a prospective basis.

Leases

The Group assesses at contract inception whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Group as a lessee

The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.

(a) Right-of-use assets

Right-of-use assets are recognised at the commencement date of the lease (that is the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and any impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease terms and the estimated useful lives of the assets as follows:

Leasehold land 30 to 50 years

Buildings 2 to 20 years

If ownership of the leased asset transfers to the Group by the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.

31 December 2021

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Leases (continued)

Group as a lessee (continued)

(b) Lease liabilities

Lease liabilities are recognised at the commencement date of the lease at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for termination of a lease, if the lease term reflects the Group exercising the option to terminate the lease. The variable lease payments that do not depend on an index or a rate are recognised as an expense in the period in which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in lease payments (e.g., a change to future lease payments resulting from a change in an index or rate) or a change in assessment of an option to purchase the underlying asset.

(c) Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to its short-term leases of buildings (that is those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the recognition exemption for leases of low-value assets to leases of office equipment that is considered to be of low value. Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a straight-line basis over the lease term.

Investments and other financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, and fair value through profit or loss.

The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Group's business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient of not adjusting the effect of a significant financing component, the Group initially measures a financial asset at its fair value, plus in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under HKFRS 15 in accordance with the policies set out for "Revenue recognition" below.

31 December 2021

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Investments and other financial assets (continued)

Initial recognition and measurement (continued)

In order for a financial asset to be classified and measured at amortised cost, it needs to give rise to cash flows that are solely payments of principal and interest ("SPPI") on the principal amount outstanding. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model.

The Group's business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Financial assets classified and measured at amortised cost are held within a business model with the objective to hold financial assets in order to collect contractual cash flows. Financial assets which are not held within the aforementioned business models are classified and measured at fair value through profit or loss.

All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

Financial assets at amortised cost (debt instruments)

Financial assets at amortised cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses are recognised in the statement of profit or loss when the asset is derecognised, modified or impaired.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in the statement of profit or loss.

This category includes derivative instruments and equity investments which the Group had not irrevocably elected to classify at fair value through other comprehensive income. Dividends on equity investments classified as financial assets at fair value through profit or loss are also recognised as other income in the statement of profit or loss when the right of payment has been established, it is probable that the economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.

A derivative embedded within a hybrid contract containing a financial asset host is not accounted for separately. The financial asset host together with the embedded derivative is required to be classified in its entirety as a financial asset at fair value through profit or loss.

31 December 2021

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Derecognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group's consolidated statement of financial position) when:

• • the rights to receive cash flows from the asset have expired; or
• • the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a "pass-through" arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risk and rewards of ownership of the asset. When it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of the Group's continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Impairment of financial assets

The Group recognises an allowance for expected credit losses ("ECLs") for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

General approach

ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

At each reporting date, the Group assesses whether the credit risk on a financial instrument has increased significantly since initial recognition. When making the assessment, the Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and considers reasonable and supportable information that is available without undue cost or effort, including historical and forward-looking information.

31 December 2021

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Impairment of financial assets (continued)

General approach (continued)

The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

Financial assets at amortised cost are subject to impairment under the general approach and they are classified within the following stages for measurement of ECLs except for trade receivables and contract assets which apply the simplified approach as detailed below.

• Stage 1 Financial instruments for which credit risk has not increased significantly since initial recognition and for which the loss allowance is measured at an amount equal to 12-month ECLs
• Stage 2 Financial instruments for which credit risk has increased significantly since initial recognition but that are not credit-impaired financial assets and for which the loss allowance is measured at an amount equal to lifetime ECLs
• Stage 3 Financial assets that are credit-impaired at the reporting date (but that are not purchased or originated credit-impaired) and for which the loss allowance is measured at an amount equal to lifetime ECLs

Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as loans and borrowings, or payables, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

31 December 2021

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Financial liabilities (continued)

Subsequent measurement of financial liabilities at amortised cost (loans and borrowings)

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost, using the effective interest rate method unless the effect of discounting would be immaterial, in which case they are stated at cost. Gains and losses are recognised in the statement of profit or loss when the liabilities are derecognised as well as through the effective interest rate amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance costs in the statement of profit or loss.

Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in the statement of profit or loss.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

Cash and cash equivalents

For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments that are readily convertible into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Group's cash management.

For the purpose of the consolidated statement of financial position, cash and cash equivalents comprise cash on hand and at banks, including term deposits, and assets similar in nature to cash, which are not restricted as to use.

31 December 2021

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Provisions

A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.

When the effect of discounting is material, the amount recognised for a provision is the present value at the end of the reporting period of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in the statement of profit or loss.

Income tax

Income tax comprises current and deferred tax. Income tax relating to items recognised outside profit or loss is recognised outside profit or loss, either in other comprehensive income or directly in equity.

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period, taking into consideration interpretations and practices prevailing in the countries in which the Group operates.

Deferred tax is provided, using the liability method, on all temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

• • when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
• • in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

31 December 2021

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income tax (continued)

Deferred tax assets are recognised for all deductible temporary differences, and the carryforward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses can be utilised, except:

• • when the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
• • in respect of deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and deferred tax liabilities are offset if and only if the Group has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

Government grants

Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the costs, for which it is intended to compensate, are expensed.

Where the grant relates to an asset, the fair value is credited to a deferred income account and is released to the statement of profit or loss over the expected useful life of the relevant asset by equal annual instalments or deducted from the carrying amount of the asset and released to the statement of profit or loss by way of a reduced depreciation charge.

31 December 2021

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue recognition

Revenue from contract with customer

Revenue from contracts with customers is recognised when control of goods or services is transferred to the customers at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services.

When the consideration in a contract includes a variable amount, the amount of consideration is estimated to which the Group will be entitled in exchange for transferring the goods or services to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved.

When the contract contains a financing component which provides the customer with a significant benefit of financing the transfer of goods or services to the customer for more than one year, revenue is measured at the present value of the amount receivable, discounted using the discount rate that would be reflected in a separate financing transaction between the Group and the customer at contract inception. When the contract contains a financing component which provides the Group with a significant financial benefit for more than one year, revenue recognised under the contract includes the interest expense accreted on the contract liability under the effective interest method. For a contract where the period between the payment by the customer and the transfer of the promised goods or services is one year or less, the transaction price is not adjusted for the effects of a significant financing component, using the practical expedient in HKFRS 15.

Licence revenue

The revenue from a licence is recognised over time if all of the following criteria are met:

• (i) the contract requires, or the customer reasonably expects, that the entity will undertake activities that significantly affect the intellectual property to which the customer has rights;
• (ii) the rights under the licence directly expose the customer to any positive or negative effects of the entity's activities identified in (i); and
• (iii) those activities do not result in the transfer of a good or a service to the customer as those activities occur.

Otherwise, revenue is recognised at a point in time when the customer obtains the control of the licence.

Other income

Interest income is recognised on an accrual basis using the effective interest method by applying the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, when appropriate, to the net carrying amount of the financial asset.

31 December 2021

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Shares held under share award scheme

Own equity instruments which are reacquired and held by the Company or the Group are recognised directly in equity at cost. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group's own equity instruments.

Share-based payments

The Company operates a restricted share unit scheme for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group's operations. Employees (including directors) of the Group receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments ("equity-settled transactions").

The cost of equity-settled transactions is recognised in employee benefit expense, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at the end of each reporting period until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The charge or credit to the statement of profit or loss for a period represents the movement in the cumulative expense recognised as at the beginning and end of that period.

Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group's best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions.

For awards that do not ultimately vest because non-market performance and/or service conditions have not been met, no expense is recognised. Where awards include a market or non-vesting condition, the transactions are treated as vesting irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified, if the original terms of the award are met. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payments, or is otherwise beneficial to the employee as measured at the date of modification.

31 December 2021

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Share-based payments (continued)

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. This includes any award where non-vesting conditions within the control of either the Group or the employee are not met. However, if a new award is substituted for the cancelled award, and is designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share.

Other employee benefits

Pension scheme

The Company operates a defined contribution Mandatory Provident Fund retirement benefit scheme (the "MPF Scheme") under the Mandatory Provident Fund Schemes Ordinance for all of its employees. Contributions are made based on a percentage of the employees' basic salaries and are charged to the statement of profit or loss as they become payable in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Company in an independently administered fund. The Company's employer contributions vest fully with the employees when contributed into the MPF Scheme.

The employees of the Group's subsidiaries which operate in Mainland China are required to participate in a central pension scheme operated by the local municipal government. These subsidiaries are required to contribute a certain percentage of its payroll costs to the central pension scheme. The contributions are charged to the statement of profit or loss as they become payable in accordance with the rules of the central pension scheme.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, i.e., assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. The capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalised. All other borrowing costs are expensed in the period in which they are incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

Dividends

Final dividends are recognised as a liability when they are approved by the shareholders in a general meeting.

31 December 2021

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Foreign currencies

These financial statements are presented in RMB as the major operations of the Group are within the PRC. The functional currency of the Company is the HKD and the functional currency of the subsidiaries established in Mainland China is RMB, which is the currency of the primary economic environment in which those entities operate. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Foreign currency transactions recorded by the entities in the Group are initially recorded using their respective functional currency rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rates of exchange ruling at the end of the reporting period. Differences arising on settlement or translation of monetary items are recognised in the statement of profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of a non-monetary item measured at fair value is treated in line with the recognition of the gain or loss on change in fair value of the item. (i.e., translation difference on the item whose fair value gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss, respectively).

In determining the exchange rate on initial recognition of the related asset, expense or income on the derecognition of a non-monetary asset or non-monetary liability relating to an advance consideration, the date of initial transaction is the date on which the Group initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, the Group determines the transaction date for each payment or receipt of the advance consideration.

The functional currencies of the Company, overseas subsidiaries and an associate are currencies other than the RMB. As at the end of the reporting period, the assets and liabilities of the Company, overseas subsidiaries and an associate are translated into RMB at the exchange rates prevailing at the end of the reporting period and their statements of profit or loss are translated into RMB at the exchange rates that approximate to those prevailing at the dates of the transactions.

The resulting exchange differences are recognised in other comprehensive income and accumulated in the exchange fluctuation reserve. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in the statement of profit or loss.

For the purpose of the consolidated statement of cash flows, the cash flows of non-PRC-established companies are translated into Renminbi at the exchange rates ruling at the dates of the cash flows. Frequently recurring cash flows of non-PRC-established companies which arise throughout the year are translated into RMB at the weighted average exchange rates for the year.

31 December 2021

3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

The preparation of the Group's financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and their accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets or liabilities affected in the future.

Judgements

In the process of applying the Group's accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:

Research and development costs

All research costs are charged to the statement of profit or loss as incurred.

Expenditure incurred on projects to develop new products is capitalised and deferred only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the project and the ability to measure reliably the expenditure during the development. Product development expenditure which does not meet these criteria is expensed when incurred.

Estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below.

Leases — Estimating the incremental borrowing rate

The Group cannot readily determine the interest rate implicit in a lease, and therefore, it uses an incremental borrowing rate ("IBR") to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group "would have to pay", which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when it needs to be adjusted to reflect the terms and conditions of the lease (for example, when leases are not in the subsidiary's functional currency). The Group estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such as the subsidiary's standalone credit rating).

31 December 2021

3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (continued)

Estimation uncertainty (continued)

Impairment of non-financial assets

The Group assesses whether there are any indicators of impairment for all non-financial assets (including the right-ofuse assets) at the end of each reporting period. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. An impairment exists when the carrying value of an asset or a cash-generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The calculation of the fair value less costs of disposal is based on available data from binding sales transactions in an arm's length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows.

Useful lives and residual values of property, plant and equipment

In determining the useful lives and residual values of items of property, plant and equipment, the Group has to consider various factors, such as technical or commercial obsolescence arising from changes or improvements in production, or from a change in the market demand for the product or service output of the asset, the expected usage of the asset, the expected physical wear and tear, the repair and maintenance of the asset and the legal or similar limits on the use of the asset. The estimation of the useful life of the asset is based on the experience of the Group with similar assets that are used in a similar way.

Additional depreciation is recognised if the estimated useful lives and/or the residual values of items of property, plant and equipment are different from the previous estimation. Useful lives and residual values are reviewed at the end of each reporting period based on changes in circumstances.

4. OPERATING SEGMENT INFORMATION

Management monitors the operating results of the Group as a whole for the purpose of making decisions about resource allocation and performance assessment.

Geographical information

(a) Revenue from an external customer

	2021 RMB'000	2020 RMB'000
Hong Kong	25,913	–

The revenue information above is based on the location of the customer.

31 December 2021

4. OPERATING SEGMENT INFORMATION (continued)

Geographical information (continued)

(b) Non-current assets

	2021 RMB'000	2020 RMB'000
Mainland China	408,980	157,135
Cayman Islands Hong Kong	26,933 10,057	31,897 6,137
	445,970	195,169

The non-current asset information above is based on the locations of the assets.

5. REVENUE, OTHER INCOME AND GAINS, NET

An analysis of revenue is as follows:

	Note	2021 RMB'000	2020 RMB'000
Revenue from contract with a customer	(i)	25,913	–
Disaggregated revenue information
For the year ended 31 December 2021			Licence revenue RMB'000
Type of goods or services Licence revenue			25,913
Geographical market Hong Kong			25,913
Timing of revenue recognition Licence revenue at a point in time			25,913

Note:

(i) On 16 September 2021, the Company entered into an exclusive licensing agreement with Everest Medicines II (HK) Limited ("Everest") to out-license the right to develop and commercialise Bruton's tyrosine kinase inhibitor ("BTK"), to Everest globally for the treatment of renal diseases relating to SN1011. On 21 December 2021, the Company received the non-refundable upfront payment according to the above agreement, and this upfront payment was recognised in the statement of profit or loss during the year.

31 December 2021

5. REVENUE, OTHER INCOME AND GAINS, NET (continued)

Information about the Group's performance obligations is summarised below:

Licence revenue

The Group provides licence of its patented intellectual property ("IP") or commercialisation licence to customer and revenue is recognised when the customers obtain rights to access or use the underlying IP or licence. Licence revenue is recognised at a point of time upon the customer obtains control of IP.

The consideration for a licence comprises a fixed element (the upfront payment) and variable elements (including but not limited to development milestones, sales milestones and royalties).

For licence that the Group provided for customers' right to access, upfront fee is recognised as revenue when customers have ability to use the underlying IP of the licence and variable consideration is recognised only to the extent that it is highly probable that such an inclusion will not result in a significant revenue reversal in the future.

An analysis of other income and gains, net is as follows:

	2021 RMB'000	2020 RMB'000
Other income and gains, net
Bank interest income	16,731	17,346
Foreign exchange gain, net	9,877	–
Government grants	744	12,760
Fair value gain on financial instruments at fair value through
profit or loss	1,344	28,253
Others	55	80
	28,751	58,439

The government grants mainly represent grants received from the local governments for the purpose of support for research activities and clinical trials and award for the successful listing of the Company. There were no unfulfilled conditions or contingences relating to these grants received during the year.

31 December 2021

6. LOSS BEFORE TAX

The Group's loss before tax is arrived at after charging:

		2021	2020
	Notes	RMB'000	RMB'000
Laboratory consumable and experiment costs		151,707	79,891
Depreciation of property, plant and equipment	13	9,427	4,042
Depreciation of right-of-use assets	14(a)	10,893	6,631
Amortisation of intangible assets	16	335	–
Auditor's remuneration		2,109	2,005
Lease payments not included in the measurement of
lease liabilities	14(c)	1,465	925
Employee benefit expenses (excluding directors' and chief executive's remuneration (note 8)):
Wages and salaries		50,852	27,722
Equity-settled share-based payment expense		–	34,903
Pension scheme contributions (defined contribution scheme)*		7,806	1,744
Staff welfare expenses		1,684	1,157
		60,342	65,526
Foreign exchange loss, net		–	2,276

* There are no forfeited contributions that may be used by the Group as the employer to reduce the existing level of contributions.

31 December 2021

7. FINANCE COSTS

An analysis of finance costs is as follows:

	Note	2021 RMB'000	2020 RMB'000
Interest on bank loans		6,108	2,354
Interest on lease liabilities	14(b)	3,113	1,515
		9,221	3,869
Less: Capitalised interest expense		(3,400)	(1,453)
		5,821	2,416

8. DIRECTORS' AND CHIEF EXECUTIVE'S REMUNERATION

Directors' and chief executive's remuneration for the year, disclosed pursuant to the Listing Rules, section 383(1)(a), (b), (c) and (f) of the Hong Kong Companies Ordinance and Part 2 of the Companies (Disclosure of Information about Benefits of Directors) Regulation, is as follows:

	Notes	2021 RMB'000	2020 RMB'000
Fees		2,658	1,040
Other emoluments:
Equity-settled share-based payment expense	(i)	62,897	–
Salaries, allowances and benefits in kind		4,337	4,090
Pension scheme contributions		15	16
Performance related bonuses	(ii)	–	1,734
		67,249	5,840
		69,907	6,880

Notes:

• (i) During the year, one director was granted restricted share units, in respect of his services rendered to the Group, under the restricted share unit scheme of the Company, further details of which are set out in note 25 to the financial statements. The fair value of such shares, which has been recognised in the statement of profit or loss over the vesting period, was determined as at the date of grant and the amount included in the financial statements for the current year is included in the above directors' and chief executive's remuneration disclosures.
• (ii) For the year ended 31 December 2020, certain directors of the Company were entitled to bonus payment upon success of listing.

31 December 2021

8. DIRECTORS' AND CHIEF EXECUTIVE'S REMUNERATION (continued)

(a) Independent non-executive directors

The fees paid to independent non-executive directors during the year were as follows:

	2021 RMB'000	2020 RMB'000
Mr. Dylan Carlo TINKER	249	260
Mr. Ping Cho Terence HON	249	260
Mr. George William Hunter CAUTHERLEY	249	260
Dr. Chi Ming LEE (v)	136	–
Mr. Michael James Connolly HOGAN (i)	114	260
	997	1,040

There were no other emoluments payable to the independent non-executive directors during the year (2020: Nil).

(b) Executive director and non-executive directors

		Equity-settled share-based payment	Salaries, allowances and benefits	Pension scheme	Total
Year ended 31 December 2021	Fees RMB'000	expense RMB'000	in kind RMB'000	contributions RMB'000	remuneration RMB'000
Executive director:
Dr. Shui On LEUNG (ii)	–	–	4,337	15	4,352
	–	–	4,337	15	4,352
Non-executive directors
Mr. Jing QIANG (iii)	1,661	62,897	–	–	64,558
Dr. Haigang CHEN	–	–	–	–	–
Ms. Wenyi LIU Mr. Huiyuan MA (iv)	– –	– –	– –	– –	– –
Mr. Senlin LIU	–	–	–	–	–
Mr. Xun DONG	–	–	–	–	–
Ms. Jie LIU (vi)	–	–	–	–	–
Mr. Lei Shi (vi)	–	–	–	–	–
	1,661	62,897	–	–	64,558

31 December 2021

8. DIRECTORS' AND CHIEF EXECUTIVE'S REMUNERATION (continued)

(b) Executive director and non-executive directors (continued)

	Salaries,
	allowances	Performance	Pension
	and benefits	related	scheme	Total
Year ended 31 December 2020	in kind	bonuses	contributions	remuneration
	RMB'000	RMB'000	RMB'000	RMB'000
Executive director:
Dr. Shui On LEUNG (ii)	4,090	867	16	4,973
	4,090	867	16	4,973
Non-executive directors:
Mr. Jing QIANG (iii)	–	867	–	867
Dr. Haigang CHEN	–	–	–	–
Ms. Wenyi LIU	–	–	–	–
Mr. Huiyuan MA (iv)	–	–	–	–
Mr. Senlin LIU	–	–	–	–
Mr. Xun DONG	–	–	–	–
	–	867	–	867

(i) Mr. Michael James Connolly HOGAN resigned on 15 June 2021.

• (ii) Dr. Shui On LEUNG was appointed as an executive director of the Company with effect from 12 September 2011. Dr. Shui On LEUNG was also the chief executive of the Company during the year.
• (iii) Mr. Jing QIANG was re-designated from an executive director to a non-executive director with effect from 30 November 2020 and resigned on 14 December 2021.
• (iv) Mr. Huiyuan MA was appointed as a non-executive director of the Company with effect from 29 April 2019 and resigned on 14 December 2021.
• (v) Dr. Chi Ming LEE was appointed as an independent non-executive director of the Company with effect from 15 June 2021.
• (vi) Ms. Jie LIU and Mr. Lei SHI were appointed as non-executive directors of the Company with effect from 14 December 2021 and 17 December 2021, respectively.

There was no arrangement under which a director waived or agreed to waive any remuneration during the year.

31 December 2021

9. FIVE HIGHEST PAID EMPLOYEES

The five highest paid employees during the year included two (2020: one) directors, details of whose remuneration are set out in note 8 above. Details of the remuneration for the year of the remaining three (2020: four) highest paid employees who are neither a director nor chief executive of the Company are as follows:

	2021 RMB'000	2020 RMB'000
Salaries, allowances and benefits in kind	4,995	4,565
Pension scheme contributions	101	117
Equity-settled share-based payment expense	–	34,903
	5,096	39,585

The number of non-director and non-chief executive highest paid employees whose remuneration fell within the following bands is as follows:

	Number of employees
	2021	2020
Nil to HKD1,000,000	–	2
HKD1,000,001 to HKD1,500,000	–	1
HKD1,500,001 to HKD3,000,000	3	–
HKD41,000,001 to HKD41,500,000	–	1
	3	4

During the year, no emoluments were paid by the Group to any of the directors or the five highest paid individuals (including directors and employees) as an inducement to join or upon joining the Group or as compensation for loss of office (2020: Nil).

31 December 2021

10. INCOME TAX

No Hong Kong profit tax has been made as the Company did not generate any assessable profit during the year (2020: Nil).

Under the Law of the PRC of Enterprise Income tax (the "EIT Law") and Implementation Regulation of the EIT Law, the estimated tax rate of the Group's PRC subsidiaries is 25% during the periods presented in the consolidated financial statements. No PRC Enterprise Income tax was provided for as there was no estimated assessable profit of the Group's PRC subsidiaries during the periods presented in the consolidated financial statements.

Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries (or jurisdictions) in which the Group operates.

A reconciliation of the tax expense applicable to loss before tax at the statutory rates for the countries (or jurisdictions) in which the Company and its subsidiaries are domiciled to the tax expense at the effective tax rates, and a reconciliation of the statutory tax rates to the effective tax rates, is as follows:

2021

	Hong Kong RMB'000	Mainland China RMB'000	Australia RMB'000	Others RMB'000	Total RMB'000
Loss before tax	(85,632)	(195,235)	(3,032)	(4,295)	(288,194)
Tax at the statutory tax rates	(14,129)	(48,809)	(910)	–	(63,848)
Income not subject to tax	(4,421)	–	–	–	(4,421)
Expenses not deductible for tax	15,927	318	–	–	16,245
Temporary difference not recognised	14	7,304	–	–	7,318
Tax losses not recognised	2,609	41,187	910	–	44,706
Tax charge at the Group's effective rates	–	–	–	–	–

31 December 2021

10. INCOME TAX (continued)

2020

	Hong Kong RMB'000	Mainland China RMB'000	Australia RMB'000	Total RMB'000
Loss before tax	(22,802)	(89,669)	(10,269)	(122,740)
Tax at the statutory tax rates	(3,762)	(22,417)	(3,081)	(29,260)
Income not subject to tax	(4,139)	–	–	(4,139)
Expenses not deductible for tax	5,623	–	–	5,623
Temporary difference not recognised	62	(836)	–	(774)
Tax losses not recognised	2,216	23,253	3,081	28,550
Tax charge at the Group's effective rates	–	–	–	–

The Group had accumulated tax losses arising in Hong Kong of HKD195,421,144 and HKD329,187,450 as at 31 December 2021 and 2020, respectively, subject to the agreement by Inland Revenue Department, that were available indefinitely to offset against future taxable profits arising in Hong Kong.

The Group had accumulated tax losses arising in Mainland China of RMB399,633,939 and RMB232,051,441 as at 31 December 2021 and 2020, respectively, subject to the agreement by relevant tax authorities, that will expire in one to five years for offsetting against future taxable profits arising in Mainland China.

The Group had accumulated tax losses arising in Australia of AUD4,051,052 and AUD3,423,490 as at 31 December 2021 and 2020, respectively, subject to the agreement by relevant tax authorities, that can be used to offset against future taxable profits arising in Australia.

Deferred taxation had not been recognised on the unused tax losses and deductible temporary differences due to the unpredictability of future profit streams.

11. DIVIDENDS

No dividend was paid or declared by the Company during the years ended 31 December 2021 and 2020.

31 December 2021

12. LOSS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT

The calculation of the basic loss per share is based on the consolidated loss for the year attributable to ordinary equity holders of the parent of RMB288,194,000 (2020: RMB122,600,000), and the weighted average number of ordinary shares of 994,887,333 (2020: 1,006,240,400) in issue during the year, as adjusted to exclude the shares held under the share award scheme of the Company.

No adjustment has been made to basic loss per share presented for the years ended 31 December 2021 and 2020 as the Group has no potentially dilutive ordinary shares in issue during those years.

The calculations of basic and diluted loss per share are based on:

	2021 RMB'000	2020 RMB'000
Loss Loss attributable to ordinary equity holders of the parent	288,194	122,600
	Number of shares
	2021	2020
Shares
Weighted average number of ordinary shares in issue during the year	994,887,333	1,006,240,400

31 December 2021

13. PROPERTY, PLANT AND EQUIPMENT

	Production and R&D	Office	Motor	Leasehold	Construction
	equipment RMB'000	equipment RMB'000	vehicles RMB'000	improvements RMB'000	in progress RMB'000	Total RMB'000
31 December 2021
At 1 January 2021:
Cost	14,380	5,526	824	17,767	74,441	112,938
Accumulated depreciation	(7,659)	(828)	(406)	(2,952)	–	(11,845)
Net carrying amount	6,721	4,698	418	14,815	74,441	101,093
At 1 January 2021, net of
accumulated depreciation	6,721	4,698	418	14,815	74,441	101,093
Additions	12,172	1,567	–	513	147,491	161,743
Depreciation provided during the year	(3,526)	(1,086)	(107)	(4,708)	–	(9,427)
Transfer from construction in progress	12,798	–	–	11,669	(24,467)	–
Exchange realignment	(12)	(28)	(9)	(75)	–	(124)
At 31 December 2021, net of
accumulated depreciation	28,153	5,151	302	22,214	197,465	253,285
At 31 December 2021:
Cost	39,181	7,029	810	29,810	197,465	274,295
Accumulated depreciation	(11,028)	(1,878)	(508)	(7,596)	–	(21,010)
Net carrying amount	28,153	5,151	302	22,214	197,465	253,285
31 December 2020
At 1 January 2020:
Cost	11,356	2,382	774	6,019	4,678	25,209
Accumulated depreciation	(6,380)	(318)	(300)	(1,134)	–	(8,132)
Net carrying amount	4,976	2,064	474	4,885	4,678	17,077
At 1 January 2020, net of accumulated depreciation	4,976	2,064	474	4,885	4,678	17,077
Additions	3,280	1,458	79	3,446	80,142	88,405
Depreciation provided during the year	(1,509)	(526)	(112)	(1,895)	–	(4,042)
Transfer from construction in progress	–	1,763	–	8,616	(10,379)	–
Exchange realignment	(26)	(61)	(23)	(237)	–	(347)
At 31 December 2020, net of
accumulated depreciation	6,721	4,698	418	14,815	74,441	101,093
At 31 December 2020:
Cost	14,380	5,526	824	17,767	74,441	112,938
Accumulated depreciation	(7,659)	(828)	(406)	(2,952)	–	(11,845)
Net carrying amount	6,721	4,698	418	14,815	74, 441	101,093

31 December 2021

14. LEASES

The Group as a lessee

The Group has lease contracts for buildings used in its operations. Lump sum payments were made upfront to acquire the leased land from the owner with lease period of 30 to 50 years, and no ongoing payments will be made under the terms of these land leases. Leases of buildings generally have lease terms between 2 and 20 years. Other equipment generally has lease terms of 12 months or less and/or is individually of low value. Generally, the Group is restricted from assigning and subleasing the leased assets outside the Group.

(a) Right-of-use assets

The carrying amounts of the Group's right-of-use assets and the movements during the year are as follows:

	Land use rights RMB'000	Buildings RMB'000	Total RMB'000
As at 1 January 2020	–	25,091	25,091
Additions	16,366	11,558	27,924
Lease modification	–	(1,389)	(1,389)
Depreciation charge	(318)	(6,313)	(6,631)
Exchange realignment	–	(165)	(165)
As at 31 December 2020 and
1 January 2021	16,048	28,782	44,830
Additions	14,282	49,552	63,834
Lease modification	–	5,152	5,152
Depreciation charge	(593)	(10,300)	(10,893)
Exchange realignment	–	(1)	(1)
As at 31 December 2021	29,737	73,185	102,922

31 December 2021

14. LEASES (continued)

The Group as a lessee (continued)

(b) Lease liabilities

The carrying amount of lease liabilities and the movements during the year are as follows:

	2021	2020
	RMB'000	RMB'000
Carrying amount at 1 January	37,377	33,332
New leases	49,552	11,558
Lease modification	5,152	(1,389)
Accretion of interest recognised during the year	3,113	1,515
Payments	(18,500)	(7,441)
Foreign exchange movement	(12)	(198)
Carrying amount at 31 December	76,682	37,377
Analysed into:
Current portion	7,394	9,130
Non-current portion	69,288	28,247
	76,682	37,377

The maturity analysis of lease liabilities is disclosed in note 33 to the financial statements.

The Group has applied the practical expedient to all eligible rent concessions granted by the lessors for leases of certain plant and equipment during the year.

(c) The amounts recognised in profit or loss in relation to leases are as follows:

	2021	2020
	RMB'000	RMB'000
Depreciation charge of right-of-use assets	10,893	6,631
Interest on lease liabilities	3,113	1,515
Expense relating to short-term leases (included in
administrative expenses)	1,294	882
Expense relating to leases of low-value assets (included in
administrative expenses)	171	43
Total amount recognised in profit or loss	15,471	9,071

(d) The total cash outflow for leases is disclosed in note 26(c) to the financial statements.

31 December 2021

2021 2020 RMB'000 RMB'000 Goodwill on acquisition 15,091 15,445 Share of net assets 11,842 16,452 26,933 31,897 Particulars of the associate is as follows: Name Particulars of issued shares held Place of incorporation and business Percentage of ownership interest attributable to the Group Principal activity D2M Biotherapeutics Limited ("D2M") Preferred shares Cayman Islands 29.24 Research and development of pharmaceutical products

1. INVESTMENT IN AN ASSOCIATE

On 22 July 2020, the Company entered into a share purchase agreement (the "Share Purchase Agreement") and a shareholder's agreement with D2M, among other, pursuant to which Ingenious Sino Limited, a wholly-owned subsidiary of the Group, purchased from D2M 27,780,000 series pre-A1 preferred shares, representing 38.17% equity interest in D2M, at an aggregate purchase price of USD5,000,000. Subsequent to the acquisition in 2020, D2M issued 22,220,000 series pre-A2 preferred shares to another investor, as such, the Group's equity interest in D2M diluted to 29.24% from 38.17%. During the year ended 31 December 2020, the Group settled the purchase consideration of USD2,500,000 to D2M and the remaining consideration of USD2,500,000 was fully settled by the Group during the year. As at 31 December 2021, the Group settled fully the purchase price of USD5,000,000 (RMB31,878,500).

The Group's investment in D2M is accounted for under the equity method of accounting because the Group has significant influence over D2M by way of representation on D2M's board of directors and participation in the policymaking process.

On 22 July 2020, the Company and D2M also entered into a research, development and commercialisation agreement in respect of a long-term collaboration for the identification of novel drug targets. D2M, which is considered a material associate of the Group, is a strategic partner of the Group engaged in research and development of pharmaceutical products. The Group is entitled to conduct subsequent researches, development and commercialisation with regards to the qualified drug targets, which are chosen by the Group from the original results of D2M's target identification works.

31 December 2021

15. INVESTMENT IN AN ASSOCIATE (continued)

The following table illustrates the summarised financial information in respect of D2M adjusted for any differences in accounting policies and reconciled to the carrying amount in the consolidated financial statements:

	2021 RMB'000	2020 RMB'000
Current assets	38,998	56,011
Non-current assets	1,616	272
Current liabilities	(117)	(19)
Net assets	40,497	56,264
Reconciliation to the Group's interest in the associate:
Proportion of the Group's ownership	29.24%	29.24%
Group's share of net assets of the associate, excluding goodwill	11,842	16,452
Goodwill on acquisition	15,091	15,445
Carrying amount of the investment	26,933	31,897
Revenue	646	335
Loss for the year	(14,668)	(2,553)
Total comprehensive loss for the year	(14,668)	(2,553)

16. INTANGIBLE ASSETS

	Office software
	2021	2020
	RMB'000	RMB'000
Cost at 1 January, net of accumulated amortisation	–	–
Additions	2,273	–
Amortisation provided during the year	(335)	–
Exchange realignment	(17)	–
At 31 December	1,921	–
At 31 December:
Cost	2,253	–
Accumulated amortisation	(332)	–
Net carrying amount	1,921	–

31 December 2021

17. OTHER NON-CURRENT ASSETS

	2021 RMB'000	2020 RMB'000
Deposits for purchases of property, plant and equipment	58,465	15,958

Deposits for purchases of property, plant and equipment relates to the construction of Suzhou production base primarily for the commercial-scale production of the core product SM03.

18. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

	2021	2020
	RMB'000	RMB'000
Deposits and other receivables	28,991	14,165
Prepayments	6,155	18,152
	35,146	32,317
Portion classified as non-current:
Deposits	(2,444)	(1,391)
Current portion	32,702	30,926

The financial assets included in the above balances relate to deposits and receivables for which there was no recent history of default and past due amounts. As at 31 December 2021 and 2020, the loss allowance was assessed to be minimal.

19. FINANCIAL ASSET AT FAIR VALUE THROUGH PROFIT OR LOSS

	2021 RMB'000	2020 RMB'000
Unlisted investment, at fair value	–	93,058

31 December 2021

20. CASH AND CASH EQUIVALENTS

	2021	2020
	RMB'000	RMB'000
Cash and bank balances	399,983	77,606
Time deposits	163,000	732,764
	562,983	810,370
Denominated in:
RMB	285,724	430,060
USD	248,953	347,781
HKD	27,923	31,220
EUR	248	–
AUD	131	1,305
GBP	4	4
Cash and cash equivalents	562,983	810,370

The RMB is not freely convertible into other currencies, however, under Mainland China's Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for other currencies through banks authorised to conduct foreign exchange business. As at 31 December 2021, included in the cash and cash equivalents was an aggregate amount of RMB4,126,045.10 (2020: RMB519,758.10) designated for the use of a construction project by a subsidiary of the Group in accordance with the relevant facility agreements. The Group management monitors closely the use of the fund to meet its ongoing construction expenditure and for the stated purpose.

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short term time deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group, and earn interest at the respective short term time deposit rates. The bank balances are deposited with creditworthy banks with no recent history of default.

31 December 2021

21. OTHER PAYABLES AND ACCRUALS

		2021	2020
	Notes	RMB'000	RMB'000
Other payables and accrued expenses	(i)	48,580	21,208
Costs of construction and purchase of equipment payables	(ii)	27,266	3,855
Payroll payable		7,457	1,578
Deferred revenue		1,550	1,554
Taxes other than corporate income tax		397	167
Amount due to a director	(iii)	720	–
Payable for an investment in an associate	15	–	16,312
		85,970	44,674

Notes:

• (i) Other payables and accrued expenses primarily consists of service fees payable to outsourced service providers including contract research organisations and clinical trial centres.
• (ii) Costs of construction and purchase of equipment payables mainly incurs for the construction of Suzhou production base.
• (iii) The amount due to a director was the talent introduction allowance temporarily received by the Group on behalf of Dr. Leung Shui On. The amount due thereto was interest-free and fully settled on 6 January 2022.

Other payables and accrued expenses are non-interest-bearing and repayable on demand, or within 1 year.

22. INTEREST-BEARING BANK BORROWINGS

	Notes	2021 RMB'000	2020 RMB'000
Non-current bank borrowings:
Unsecured bank borrowing	(i)	126,210	55,461
Secured bank borrowing	(ii) 193,777	67,567 55,461	–
Current bank borrowing:
Unsecured bank borrowing	(i)	5,000	5,000
		198,777	60,461

31 December 2021

22. INTEREST-BEARING BANK BORROWINGS (continued)

	2021
	RMB'000	RMB'000
Bank loans repayable analysed into:
Within one year	5,000	5,000
In the second year	10,000	5,000
In the third to fifth years, inclusive	137,567	40,000
Beyond five years	46,210	10,461
	198,777	60,461

Notes:

• (i) In July 2019, the Group entered into an unsecured loan agreement with a reputable banking institution, which agreed to provide a credit facility of RMB200,000,000 for a term of nine years at a variable rate of interest equal to the LPR plus 0.25%, and the effective interest rate was 4.9% (2020: 4.9%) as of 31 December 2021. As at 31 December 2021, the amount of utilised facilities was RMB131,210,069 (2020: RMB60,460,553).
• (ii) In September 2021, the Group entered into a secured loan agreement with a reputable banking institution, which agreed to provide a credit facility of RMB500,000,000 for a term of ten years at a variable rate of interest equal to the LPR minus 0.30%, and the effective interest rate was 4.35% as of 31 December 2021. The bank loans borrowed by the Group are secured by the pledge of the Group's land use right, which had a net carrying value of approximately RMB15,503,000 at the end of the reporting period. As at 31 December 2021, the amount of utilised facilities was RMB67,566,794 (2020: Nil).

23. SHARE CAPITAL

	2021 RMB'000	2020 RMB'000
Issued and fully paid: 1,006,240,400 (2020: 1,006,240,400) ordinary shares	1,679,126	1,679,126

24. RESERVES

The amounts of the Group's reserves and the movements therein for the current and prior years are presented in the consolidated statements of changes in equity on page 110 of the financial statements.

31 December 2021

25. EQUITY-SETTLED SHARE-BASED PAYMENT EXPENSE

The Company operates a restricted share unit scheme (the "Scheme") with effect from 12 November 2019. The purpose of the Scheme is to incentivise the directors, senior management and employees for their contribution to the Group and to attract, motivate and retain skilled and experienced personnel to strive for the future development and expansion of the Group, by providing them with the opportunity to own equity interests in the Company. Eligible persons of the Scheme include existing employees, directors (whether executive or non-executive, but excluding independent non-executive directors) or officers of the Group and any person(s) whether or not an employee or officer of the Group whom the board of directors considers to be able to enhance the operations or value of the Group.

Unless otherwise cancelled or amended, the Scheme shall be valid and effective for a period of ten years, commencing on the date of the first grant of the restricted share units (the "RSUs") (unless it is terminated earlier in accordance with its terms).

On 25 March 2020, Skytech Technology Limited (a limited company incorporated in the British Virgin Islands on 2 January 2001 and wholly-owned by Dr. Shui On LEUNG) transferred 36,174,400 shares to Computershare Hong Kong Nominees Limited ("Computershare") which holds such shares for the beneficiaries of the RSU Scheme. The maximum number of RSUs that may be granted under the RSU Scheme in aggregate shall be 36,174,400 shares, which represents approximately 3.60% of the shares in issue. Any grant of RSUs to any director, chief executive or substantial shareholder of the Company (as defined in the Listing Rules), or any of their respective associates (as defined in the Listing Rules) shall be subject to the requirements of the Listing Rules.

A grant shall be made by a letter and/or any such notice or document in such form as the board of directors may from time to time determine and such grant shall be subject to the terms as specified in the Scheme. Such RSUs shall remain open for acceptance by the selected person to whom a grant is made for a period to be determined by the board of directors. To the extent that the RSUs are not accepted within the period determined by the board of directors, they will be deemed to have been irrevocably declined and shall immediately lapse.

The following RSUs were outstanding under the Scheme during the year:

	2021		2020
	Exercise	Number of	Exercise	Number of
	price	units	price	units
	HKD per unit	'000	HKD per unit	'000
As at 1 January	–	26,112	–	36,174
Granted and exercised during the year	–	(26,112)	–	(10,062)
As at 31 December	–	–	–	26,112

During the year, the Company granted 26,111,996 (2020: 10,062,404) RSUs under the Scheme in respect of a total of 26,111,996 (2020: 10,062,404) ordinary shares of the Company to Mr. Jing QIANG, a non-executive director of the Company (2020: an employee) which was fully vested immediately. The exercise price of RSUs is nil.

31 December 2021

25. EQUITY-SETTLED SHARE-BASED PAYMENT EXPENSE (continued)

The fair value of RSUs granted during the year was HKD75,724,788 (HKD2.90 per unit) (2020: HKD38,639,631, HKD3.84 per unit), and the Group recognised an equity-settled share-based payment expense of HKD75,724,788 (2020: HKD38,639,631) during the year.

The directors of the Company have used the closing price at the grant date to determine the fair value of the RSUs granted, as the RSUs were vested on the same date of grant.

26. NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS

(a) Major non-cash transactions

The Group had non-cash additions to right-of-use assets and lease liabilities of RMB54,704,000 (2020: RMB11,558,000) and RMB54,704,000 (2020: RMB11,558,000), respectively, in respect of lease arrangements for office premises and manufacturing buildings.

The Group had non-cash additions to share-based payment reserve amounting to RMB61,792,000 (2020: RMB35,382,000) in respect of the granting of RSUs.

(b) Changes in liabilities arising from financing activities

	Bank and other borrowings RMB'000	Lease liabilities RMB'000
At 1 January 2021	60,461	37,377
Changes from financing cash flows	138,316	(16,436)
Interest paid classified as financing cash flow	–	(2,064)
Lease modification	–	5,152
New leases	–	49,552
Foreign exchange movements	–	(12)
Interest expense	–	3,113
At 31 December 2021	198,777	76,682
	Bank and other
	borrowings	Lease liabilities
	RMB'000	RMB'000
At 1 January 2020	20,282	33,332
Changes from financing cash flows	40,179	(6,286)
Interest paid classified as financing cash flow	–	(1,155)
Lease modification	–	(1,389)
New leases	–	11,558
Foreign exchange movements	–	(198)
Interest expense	–	1,515
At 31 December 2020	60,461	37,377

31 December 2021

26. NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(c) Total cash outflow for leases

The total cash outflow for leases included in the statement of cash flows is as follows:

	2021 RMB'000	2020 RMB'000
Within operating activities	1,465	925
Within financing activities	18,500	7,441
	19,965	8,366

27. SHARES HELD UNDER SHARE AWARD SCHEME

On February 4, 2021, The Company adopted a share award scheme to provide directors, senior management, employees and consultants with opportunities to own equity in the company to incentivize them to contribute to the Group, and to attract, motivate and retain skilled and experienced personnel to commit to the future development and expansion of the Group in order to promote the success of the company's business.

The Company appointed Computershare Hong Kong Trustees Limited as the trustee of the plan to purchase shares through on-exchange transactions at the prevailing market price or through manual trades, and the number of shares purchase was 18,095,500 shares. On May 17, 2021, the share purchase payment was completed, with a purchase consideration of RMB59,673,039.

Subsequent to the end of the reporting period and up to the approval date of these financial statements, no shares under the share award scheme have been granted.

28. PLEDGE OF ASSET

Details of the Group's asset pledged for the Group's interest-bearing bank loan is included in note 22 to the financial statements.

29. COMMITMENTS

The Group had the following capital commitments at the end of each reporting period:

	2021 RMB'000	2020 RMB'000
Contracted, but not provided for: Plant and machinery	364,520	64,260

31 December 2021

30. RELATED PARTY TRANSACTIONS

(a) In addition to the balances, arrangements and transactions detailed elsewhere in these financial statements, the Group had the following transaction with the related party during the year:

	Note	2021 RMB'000	2020 RMB'000
Operating lease from a related party: Haikou Pharmaceutical Factory Co., Ltd.	(i)	1,230	820

Note:

(i) The operating lease relates to a short-term lease with Haikou Pharmaceutical Factory Co., Ltd. ("Haikou Pharmaceutical"), a subsidiary of Hainan Haiyao Co., Ltd., which is a substantial shareholder the Company. The total amount paid and payable under the operating lease to Haikou Pharmaceutical was amounted to RMB1,230,000 (2020: RMB820,000) during the year. The transaction under the operating lease constituted a connected transaction as defined under Chapter 14A of the Listing Rules to the Company, but is exempted from relevant disclosures and other requirements, including, inter alia, independent shareholders' approval in accordance with the Listing Rules.

(b) Outstanding balances with related parties:

	Note	2021 RMB'000	2020 RMB'000
Other payables and accruals:
Haikou Pharmaceutical Factory Co., Ltd.		451	820
Prepayments: Haikou Pharmaceutical Factory Co., Ltd.		417	–
Lease liability: Haikou Pharmaceutical Factory Co., Ltd.	(i)	58,082	23,511

Note:

(i) The Company entered into a lease agreement with Haikou Pharmaceutical to lease equipment and a manufacturing building for a term of 10 years commencing from 1 January 2016 to 31 December 2025. As at 31 December 2021, the total lease liabilities payable to Haikou Pharmaceutical were amounted to RMB15,407,000 (2020: RMB 23,511,000). During the year, the total lease payment to Haikou Pharmaceutical was amounted to RMB8,992,000 (2020: RMB5,000,000).

The Company also entered into another lease agreement with Haikou Pharmaceutical to lease a property building for a term of 1 April 2021 to 31 March 2041, As at 31 December 2021, the total lease liabilities payable to Haikou Pharmaceutical were amounted to RMB42,675,000 (2020: Nil). During the year, the total lease payment to Haikou Pharmaceutical was amounted to RMB3,393,000 (2020: Nil).

31 December 2021

30. RELATED PARTY TRANSACTIONS (continued)

(c) Compensation of key management personnel of the Group:

	2021 RMB'000	2020 RMB'000
Equity-settled share-based payment expense	62,897	34,903
Salaries, allowances and benefits in kind	11,117	9,522
Pension scheme contributions	211	133
Total compensation paid to key management personnel	74,225	44,558

Further details of directors' and the chief executive's emoluments are included in note 8 to the financial statements.

31. FINANCIAL INSTRUMENTS BY CATEGORY

The carrying amounts of each of the categories of financial instruments as at the end of the reporting period are as follows:

As at 31 December 2021

Financial assets

	Financial assets
	at amortised
	cost
	RMB'000
Financial assets included in prepayments, deposits and other receivables	3,578
Cash and cash equivalents	562,983
	566,561

31 December 2021

31. FINANCIAL INSTRUMENTS BY CATEGORY (continued)

Financial liabilities

	Financial
	liabilities at
	amortised
	cost
	RMB'000
Lease liabilities	76,682
Financial liabilities included in other payables and accruals	76,566
Interest-bearing bank borrowings	198,777
	352,025

As at 31 December 2020

Financial assets

	Financial assets at amortised cost RMB'000	Financial assets at fair value through profit or loss RMB'000	Total RMB'000
Financial assets included in prepayments, deposits and other receivables Financial asset at fair value through profit or loss Cash and cash equivalents	4,379 – 810,370	– 93,058 –	4,379 93,058 810,370
	814,749	93,058	907,807

Financial liabilities

	Financial
	liabilities at
	amortised cost
	RMB'000
Lease liabilities	37,377
Financial liabilities included in other payables and accruals	41,375
Interest-bearing bank borrowing	60,461
	139,213

31 December 2021

32. FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS

All the carrying amounts of the Group's financial instruments approximate to their fair values.

The Group's finance department headed by chief financial officer is responsible for determining the policies and procedures for the fair value measurement of financial instruments. At each reporting date, the finance department analyses the movements in the values of financial instruments and determines the major inputs applied in the valuation. The valuation is reviewed and approved by the chief financial officer. The valuation process and results are discussed with the audit committee twice a year for interim and annual financial reporting.

The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:

The fair values of the non-current portion of financial assets included in prepayments, deposits and other receivables have been calculated by discounting the expected future cash flows using rates currently available for instruments with similar terms, credit risk and remaining maturities.

The Group invests in structured deposits, which represent a wealth management product issued by a bank in Mainland China. The Group has estimated the fair value of these structured deposits based on fair values provided by financial institutions.

The Group enters into foreign exchange contracts with a bank. The foreign exchange contracts are measured using valuation techniques similar to forward pricing and swap models, using present value calculations. The models incorporate various market observable inputs including the credit quality of counterparties, foreign exchange spot and forward rates and interest rate curves. The carrying amounts of foreign exchange contracts are the same as their fair values.

As at 31 December 2020, the Group had an unlisted investment, which represented a segregated portfolio of China Healthcare Fund. The Group had estimated the fair value of the unlisted investment based on the Group's share of the net asset value of the investment funds. The net asset value of the investment funds comprised mainly equities listed on the Hong Kong Stock Exchange, as well as the stock exchanges in the PRC and the United States. Therefore, management had determined that the net asset value of the investment funds represented the fair value as at the end of each reporting period. The unlisted investment was redeemed by the Group during the year.

31 December 2021

32 FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS (continued)

Set out below is a summary of significant unobservable input to the valuation of financial instrument together with a quantitative sensitivity analysis as at 31 December 2020:

	Valuation	Significant		Sensitivity of
	technique	unobservable input	Range	fair value to the input
Unlisted investment	Net asset value	Based on the net	HKD100.60 to	1% increase/decrease in
		asset value of	HKD142.61	net asset value would result
		the segregated		in increase/decrease in
		equity portfolio		fair value by RMB930,580

Fair value hierarchy

The following table illustrates the fair value measurement hierarchy of the Group's financial instruments:

Assets measured at fair value:

As at 31 December 2020

		Fair value measurement using
	Quoted prices
	in active	Significant	Significant
	markets	observable	unobservable
	(Level 1)	inputs (Level 2)	inputs (Level 3)	Total
	RMB'000	RMB'000	RMB'000	RMB'000
Financial asset at fair value through
profit or loss	–	–	93,058	93,058

The Group did not have any financial assets measured at fair value as at 31 December 2021 (2020: RMB93,058,000).

During the year, there were no transfers of fair value measurements between Level 1 and Level 2 and no transfers into or out of Level 3 for financial assets (2020: Nil).

31 December 2021

32 FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS (continued)

The movements in fair value measurement within Level 3 during the year are as follows:

	2021 RMB'000	2020 RMB'000
Financial asset at fair value through profit or loss
At 1 January	93,058	–
Purchase	–	69,565
Total gain recognised in the statement of profit or loss included in
other income	–	28,253
Redemption	(92,046)	–
Exchange realignment	(1,012)	(4,760)
At 31 December	–	93,058

33. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group principal financial instruments comprise interest-bearing bank borrowings, cash and cash equivalents. The main purpose of these financial instruments is to raise finance for the Group's operations. The Group has various other financial assets and liabilities such as financial assets included in prepayments, deposits and other receivables and financial liabilities included in other payables and accruals and lease liabilities, which arise directly from its operations.

The main risks arising from the Group's financial instruments are foreign currency risk, interest rate risk and liquidity risk. The board of directors reviews and agrees policies for managing each of these risks and they are summarised below.

Foreign currency risk

Foreign currency risk is the risk of loss resulting from changes in foreign currency exchange rates. Fluctuations in exchange rates between RMB and other currencies in which the Group conducts business may affect the Group's financial condition and results of operations. The Group seeks to limit its exposure to foreign currency risk by minimising its net foreign currency position.

31 December 2021

33. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

Foreign currency risk (continued)

The following table demonstrates the sensitivity at the end of each reporting period to a reasonably possible change in foreign currency exchange rates, with all other variables held constant, of the Group's loss before tax (due to changes in the fair value of monetary assets and liabilities) and the Group's equity.

	Increase/ (decrease) in rate of foreign currency	Increase/ (decrease) in loss before tax	Increase/ (decrease) in equity
	%	RMB'000	RMB'000
31 December 2021
If RMB weakens against USD	5	2,365	12,448
If RMB strengthens against USD	(5)	(2,365)	(12,448)
If RMB weakens against HKD	5	1,039	1,396
If RMB strengthens against HKD	(5)	(1,039)	(1,396)
31 December 2020
If RMB weakens against USD	5	5,038	17,389
If RMB strengthens against USD	(5)	(5,038)	(17,389)
If RMB weakens against HKD	5	76	1,561
If RMB strengthens against HKD	(5)	(76)	(1,561)

Interest rate risk

The Group's interest-rate risk arises from borrowings. Borrowings obtained at variable rates expose the Group to cash flow interest rate risk.

As at 31 December 2021, if interest rates on borrowings had been 50 basis points higher/lower with all other variables held constant, the loss before tax for the year ended 31 December 2021 would have been RMB266,000 (2020: RMB23,000) higher/lower, mainly as a result of higher/lower interest expense on borrowings.

31 December 2021

33. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

Liquidity risk

The Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management of the Group to finance the operations and mitigate the effects of fluctuations in cash flows.

The maturity profile of the Group's financial liabilities as at the end of each reporting period, based on the contractual undiscounted payments, is as follows:

		2021
	On demand or within 1 year RMB'000	1 to 5 years RMB'000	Over 5 years RMB'000	Total RMB'000
Lease liabilities	9,902	44,954	47,495	102,351
Interest-bearing bank borrowings	5,163	172,169	59,002	236,334
Financial liabilities included in other payables and accruals	76,566	–	–	76,566
	91,631	217,123	106,497	415,251
		2020
	On demand or	1 to 5	Over
	within 1 year RMB'000	years RMB'000	5 years RMB'000	Total RMB'000
Lease liabilities	9,505	27,889	4,496	41,890
Interest-bearing bank borrowing Financial liabilities included in other payables	5,163	53,090	13,238	71,491
and accruals	41,375	–	–	41,375
	56,043	80,979	17,734	154,756

Capital management

The primary objectives of the Group's capital management are to safeguard the Group's ability to continue as a going concern and to maintain healthy capital ratios in order to support its business and maximise shareholders' value.

The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Group is not subject to any externally imposed capital requirements. No changes were made in the objectives, policies or processes for managing capital during the years ended 31 December 2021 and 31 December 2020.

34. EVENTS AFTER THE REPORTING PERIOD

The Group has no other significant events after the reporting period up to the approval date of these financial statements.

31 December 2021

35. STATEMENT OF FINANCIAL POSITION OF THE COMPANY

Information about the statement of financial position of the Company at the end of the reporting period is as follows:

	2021 RMB'000	2020 RMB'000
NON-CURRENT ASSETS
Property, plant and equipment	3,562	5,065
Right-of-use assets	4,766	541
Investments in subsidiaries	410,718	393,636
Intangible assets	1,022	–
Deposits	707	–
Other non-current assets	–	531
Total non-current assets	420,775	399,773
CURRENT ASSETS
Prepayments, deposits and other receivables	364,132	104,279
Financial asset at fair value through profit or loss	–	93,058
Cash and cash equivalents	380,071	677,505
Total current assets	744,203	874,842
CURRENT LIABILITIES
Other payables and accruals	11,956	7,974
Lease liabilities	1,559	1,157
Total current liabilities	13,515	9,131
NET CURRENT ASSETS	730,688	865,711
TOTAL ASSETS LESS CURRENT LIABILITIES	1,151,463	1,265,484
NON-CURRENT LIABILITIES Lease liabilities	3,378	–
Total non-current liabilities	3,378	–
Net assets	1,148,085	1,265,484
EQUITY
Equity attributable to owners of the parent
Share capital	1,679,126	1,679,126
Reserves (note)	(531,041)	(413,642)
Total equity	1,148,085	1,265,484

Director Director

Leung Shui On Hon Ping Cho Terence

31 December 2021

35. STATEMENT OF FINANCIAL POSITION OF THE COMPANY (continued)

Note:

A summary of the Company's reserves is as follows:

	Shares held under Share Award Scheme RMB'000	Share-based payment reserve RMB'000	Exchange fluctuation reserve RMB'000	Accumulated losses RMB'000	Total RMB'000
At 1 January 2020	–	–	2,687	(345,924)	(343,237)
Loss for the year	–	–	–	(22,802)	(22,802)
Exchange differences on translation to
the presentation currency	–	–	(82,985)	–	(82,985)
Total comprehensive loss for the year	–	–	(82,985)	(22,802)	(105,787)
Equity-settled share-based payment expense	–	35,382	–	–	35,382
At 31 December 2020 and 1 January 2021 Loss for the year	– –	35,382 –	(80,298) –	(368,726) (85,632)	(413,642) (85,632)
Exchange differences on translation to the presentation currency	–	–	(33,886)	–	(33,886)
Total comprehensive loss for the year	–	–	(33,886)	(85,632)	(119,518)
Purchase of shares under the share award scheme Equity-settled share-based	(59,673)	–	–	–	(59,673)
payment expense	–	61,792	–	–	61,792
At 31 December 2021	(59,673)	97,174	(114,184)	(454,358)	(531,041)

36. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the board of directors on 21 March 2022.

Definitions

"AGM" or "2022 Annual General Meeting"	2022 annual general meeting of the Company to be held on Monday, 13 June 2022
"Articles"	the articles of association of the Company, as amended from time to time
"Audit Committee"	the audit committee of the Company
"Board"	the board of Directors and for the purposes of the Scheme, "Board" means the board of Directors or a duly authorised committee of the Board
"BTK Transfer and Collaboration Agreement"	a technology transfer and collaboration agreement entered into between the Company and Suzhou Sinovent on 30 March 2019
"CG Code"	the Corporate Governance Code as set out in Appendix 14 to the Listing Rules
"Company" or "our Company"	SinoMab BioScience Limited (中國抗體製藥有限公司), a company incorporated in Hong Kong on April 27, 2001 with limited liability
"connected person"	has the meaning ascribed to it under the Listing Rules
"Director(s)"	the director(s) of the Company
"FDA"	the United States Food and Drug Administration
"GMP"	Good Manufacturing Practice
"Group" or "our Group"	the Company and its subsidiaries
"HKFRSs"	the Hong Kong Financial Reporting Standards
"HK\$" or "HKD" or "Hong Kong Dollars"	Hong Kong dollars and cents respectively, the lawful currency of Hong Kong

Definitions

"Listing Date"	12 November 2019, the date on which the Shares were first listed on the Stock Exchange
"Listing Rules"	the Rules Governing the Listing of Securities on the Stock Exchange, as amended, supplemented or otherwise modified from time to time
"Model Code"	the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules
"NMPA"	National Medical Products Administration of the PRC
"Nomination Committee"	the nomination committee of the Company
"PCT"	Patent Cooperation Treaty
"PRC" or "China"	the People's Republic of China
"Pre-IPO Investor(s)"	the investor(s) undertaking the pre-IPO investments in the Company
"Prospectus"	the prospectus of the Company dated 31 October 2019
"R&D"	research and development
"Remuneration Committee"	the remuneration committee of the Company
"Reporting Period"	the year ended 31 December 2021
"RMB" or "Renminbi"	the lawful currency of the PRC
"RSU"	restricted share unit
"RSU Scheme"	the restricted share unit scheme of the Company conditionally adopted by the Shareholders on 18 October 2019, with effect from 12 November 2019
"SFO"	the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended from time to time
"Share(s)"	ordinary share(s) in the share capital of the Company
"Shareholder(s)"	holder(s) of the Shares
"Skytech Technology"	Skytech Technology Limited, a limited company incorporated in the British Virgin Islands on 2 January 2001 and wholly-owned by Dr. Shui On LEUNG

Definitions

"Stock Exchange"	The Stock Exchange of Hong Kong Limited
"Subsidiaries"	the Company's subsidiaries and "subsidiaries" has the meaning ascribed to it under section 2 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong) (as amended from time to time)
"Suzhou Sinovent"	Suzhou Sinovent Pharmaceutical Technology Co., Ltd. (蘇州信諾維醫藥科技有限公司) now known as Evopoint BioScience Co., Ltd (蘇州信諾維醫藥科技有限公司), a connected person of the Company
"U.S." or "U.S.A." or	the United States of America, its territories, its possessions and all areas subject to its
"United States"	jurisdiction
"we", "our" or "us"	the Company or the Group as the context requires
"Xingze Xinghe"	Shanghai Xingze Xinghe Startup Investment Centre (Limited Partnership) (上海杏澤興 禾創業投資中心(有限合夥)), formerly known as Shanghai Xingze Xinghe Investment Management Centre (Limited Partnership) (上海杏澤興禾投資管理中心(有限合夥)), a limited partnership established in the PRC on 8 January 2016
"Xingze Xingzhan"	Shanghai Xingze Xingzhan Enterprise Management Centre (Limited Partnership)* (上海 杏澤興瞻企業管理中心(有限合夥)), a limited partnership established in the PRC on 16 October 2018
"%"	per cent
* For identification purpose only