In 2022, uncertainties in the international situation continued to increase, including rising global inflation and significant volatility in international financial markets and commodity markets, which also had a significant impact on the Company's performance. The industrial incubations and investments segment successfully promoted the listing of over 60 enterprises in the last three years, among the best in the industry. However, as these investments were measured at fair value, the segment's performance was affected by the volatility of the capital market; in addition, Joyvio Group made a provision for goodwill and asset impairment in 2022 year due to factors such as rising operating costs caused by the increase in raw material prices and the interest rate hike by the Federal Reserve. Facing the challenges, the company carefully studied the layout and solidly promoted its strategy to strengthen its competitive ability while stabilizing its fundamentals and ensuring sustainable profitability.
Mr. Li Peng, Executive Director and CEO of Legend Holdings, said that during the reporting period, the company's performance recorded a considerable decrease, but the company insisted on the goal of achieving high-quality development, with "industrial operation and technological innovation" as the core of its long-term development strategy. The company's fundamentals are sound, and certain enterprises in the industrial operations and incubations & investments sectors have good long-term growth potential. The main task now is to further strengthen the existing business foundation and enhance industrial competitiveness, while actively adjusting the business portfolio and optimizing the business model to improve shareholders' returns. During the reporting period, the industrial operations segment overcame various unfavorable factors and continued to promote management improvement and operation enhancement; the industrial incubations and investments segment focused on national key fields, supporting independent innovation and industrial chain upgrades, promoting the development of specialized and innovative enterprises, and linking economic chains in line with the dual circulation strategy. At the same time, the company continued to increase investment in scientific research and frontier layout, grasp green opportunities, promote energy saving and carbon reduction, and make positive progress in various businesses.
Driven by Technological Innovation, Continuously Expand R&D Investment in Frontier Technologies
In the current context of China's implementation of science and technology innovation to lead high-quality development, Legend Holdings grasps the opportunities of the times and has been constantly improving its enterprise-led innovation system based on partnership among industry, academia and research institutes, and shaping a collaborative and efficient innovation pattern with specialized and innovative enterprises to promote the sustainable development of the enterprises.
In 2022, R&D expenses within the Legend Holdings system increased 21% year-on-year to RMB15.3 billion, with total R&D expenses of RMB37.8 billion in the past three years, representing a compound annual growth rate of 27%, with over 20,000 licensed patents, maintaining a leading position among large Chinese enterprises. Lenovo Group boosted its R&D investment by 21% year-on-year and has nine labs including artificial intelligence and enterprise cloud computing. The investment in R&D of Levima Advanced Materials increased by 21% year-on-year, and applied for 53 patents and obtained 58 granted patents during the reporting period. It focused on investment in the layout of high-end new materials, and achieved a breakthrough in the domestic production of electronic-grade hydrogen chloride and chlorine products after taking the lead in achieving the local substitution of photovoltaic film materials. The "20,000 tons/year UHMWPE (Ultra-High-Molecular-Weight Polyethylene) project" is expected to be put into operation in mid-2023, with the aim of reducing the UHMWPE import over-dependence. Fullhan Microelectronics' R&D investment increased by 20% year-on-year, mainly in chip R&D field, with R&D staff comprising 85% of its workforce.
At the same time, Legend Holdings also promoted its funds to closely follow China's national industrial plans and policy guidance and to intensively invest in national strategic industries, such as next-generation information technology, chips, new energy, new materials and AI. In 2022, the funds invested in almost 150 technology companies, and a total of 95 have been selected for the national list of specialized and innovative enterprises.
In the future, Legend Holdings will further focus on technological innovation when exploring new industrial areas and allocating resources, and will make long-term commitments in selected industries. The Company has set up the innovation and development center and planned to strengthen exchanges and cooperation with top universities and international institutions on early-stage technologies in key innovation areas.
Solidly Consolidate the Real Industry and Take Measures to Enhance the Quality and Efficiency of Real Economy
In 2022, Legend Holdings consolidated its business fundamentals, and withstood external challenges through management improvements and operational enhancements to ensure the steady progress of all businesses.
In the industrial operations segment, Lenovo Group continued to top the global PC business and was the world's No. 1 supercomputing maker, while at the same time, it fully promoted the transformation of its business to intelligent services, with the revenue share of non-PC business exceeding 40%. Among them, the Infrastructure Solutions Group has achieved rapid growth by grasping the trend of accelerated transformation of the global digital economy and the opportunity of the new computing revolution; the Solutions & Services Group, as the core business of digital and smart transformation, continues to maintain growth momentum.
Levima Advanced Materials maintained its leading edge in the new materials niche market, and expanded into new business areas to seize the opportunity of green development. During the Reporting Period, it completed the technical upgrade and capacity expansion of its EVA devices to further enhance operational efficiency, and several key projects were progressing ahead on track. The project covering lithium battery electrolyte materials completed its interim delivery and is about to be put into operation. Levima also entered the field of electronic materials by investing in electronic specialty gas. Construction of projects covering new energy materials for battery and biodegradable materials are progressing into the construction phase. The "New Energy Materials and Biodegradable Materials Integration Project" has obtained approval and is now under construction in an orderly manner.
Banque Internationale a Luxembourg ("BIL") has responded well to the challenges of the European economy and achieved good growth in all business indicators, while continuing to vigorously promote its business in China, helping Chinese enterprises issue overseas green bonds and contributing to the development of green finance; the bank's CET-1 ratio was 13.35% and its international credit ratings remained high. Joyvio Group's fruit business continued to reinforce its vertically integrated supply chain and core product strategy, and stepped up the development of new e-commerce retail channels.
On the other hand, a number of companies in the industrial incubations and investments segment have maintained their leading positions and steady development in their respective industries.
At the same time, Legend Holdings is also committed to promoting its portfolio companies to give full play to their advantages to empower the real economy.
Lenovo has been named to Gartner's Global Top 25 Supply Chain ranking for eight consecutive years and was the only Asia-Pacific high-tech manufacturer on the list, with more than 850 manufacturing suppliers, promoting mutual development with SMEs along the industrial chain. In 2022, its manufacturing bases in Tianjin and Shenzhen commenced operations, and its Hefei base was recognized as a "lighthouse" factory by the World Economic Forum. Its new IT solutions to intelligent transformation were successfully deployed by nearly 1,000 companies across various sectors.
Promote Green Development, Help Rural Revitalization and Increase Investment in Public Welfare of Science and Technology
As a company growing up under the system of the Chinese Academy of Sciences, Legend Holdings has been actively focusing on public welfare investment in the field of science and technology. In 2022, the company entered into a donation agreement with University of Chinese Academy of Sciences Education Foundation (UCASEF) to donate RMB60 million to set up the Scientific and Technological Innovation Project Fund of Legend Holdings, specifically for nurturing of the talents and basic researches in the fields of information technology, artificial intelligence, new materials and biotechnology of UCAS. Legend Capital has also set up the " Legend Capital Scholars Program" to help the construction of China's innovative talents; Lenovo Group has reached cooperation with Shanghai Jiao Tong University and Tsinghua University and initiated donations to help the cultivation of R&D talents in universities.
Rural revitalization is an important part of Legend Holdings' corporate social responsibility. In terms of industry, the company has cooperated with the China Women's Development Foundation since 2018 to help women from low-income rural families to start businesses with local features through the "Revolving Fund for Mothers Project", helping the local community to move towards the development path of quality-boosting agriculture, green-boosting agriculture and benefit-first. In terms of talents, the company has established Legend Holdings Rural Education Fund since 2004 to focus on rural education on an ongoing basis, helping students with limited family financial conditions realize their dreams of attending university.
The company continued to promote the focus on green and low-carbon development within the system, in active respond to the carbon peak and carbon neutrality strategy of the country. Lenovo is the first domestic high-tech manufacturer to pass the Science Based Targets initiative (SBTi) net-zero target validation, its Wuhan manufacturing base obtained the ICT industry's first zero-carbon factory certificate, while its Tianjin industrial park completed a pilot project that met the ICT industry's zero-carbon factory standard. As the "National Green Factory", Levima Advanced Materials has improved self-sufficiency in terms of core raw materials in the photovoltaic industry, and landed its new biodegradable material PPC project. In addition, a number of portfolio companies of Legend Holdings have also helped to achieve the goal of carbon peak and carbon neutrality through green finance.
In addition, the public welfare program "Legend Star Entrepreneurial CEO Training Course" established by the company in 2008 has trained more than 1,000 innovative and entrepreneurial talents, and 50 of the enterprises founded by the trainees have been successfully listed and 73 have been selected as national specialized and innovative enterprises.
Grasping the opportunities of the times and working hard to make contributions to high-quality development
In 2023, Legend Holdings will continue to actively improve asset quality and solidify business fundamentals through substantive investment management and services. Focusing on the long-term development, it will improve the business to position it for steady growth. In the industrial incubations and investments segment, technological innovation remains a key area. While safeguarding against potential volatility in the capital markets, the company will be creative and strive to discover new values. At the same time, the company will also take a positive attitude and innovative approaches to further adjust its business portfolio, realize returns, and find new opportunities for strategic layout, especially in the field of science and technology innovation. Meanwhile, it will further optimize the organization development, increase the introduction of scientific and technological talents, and improve and enhance the human resource structure.
Despite the evolving international situation, China's long-term positive fundamentals will not change, and Legend Holdings' prospects are promising in deploying the country's major strategic initiatives. The company will closely follow the national strategy of achieving high-quality development driven by technological innovation, carry out "Industrial operations and technological innovation", and continue to fulfill the corporate social responsibility at a strategic level, advancing the ESG work in the system.
Mr. Ning Min, Chairman and Executive Director of Legend Holdings, said that in 2022, facing the great uncertainties and challenges brought about by global changes, Legend Holdings, while consolidating its business fundamentals, insisted on strengthening investments in science and technology innovation and promoting the development of real economy, to overcome difficulties with toughness and ride out the storm, further consolidating the foundation for long-term corporate development. 2023 is the opening year of the comprehensive implementation of the spirit of the 20th National Congress of the Chinese Communist Party. With the successful convening of the Central Economic Work Conference and the gradual emergence of the effects of various policies, China's economy once again is enjoying a broader space for development. Legend Holdings will work together to seize the opportunity, continue to give full play to the enthusiasm and creativity of all employees, adhere to innovation orientation, promote industrial upgrading, work hard, actively participate in the overall high-quality national development, and continuously contribute to the construction of Chinese path to modernization.
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