Guangdong Dongfang Precision Science & Technology Co., Ltd.
Annual Report 2021
March 2022
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
Part I Important Notes, Table of Contents and DefinitionsThe Board of Directors (or the “Board”), the Supervisory Committee as well as thedirectors, supervisors and senior management of Guangdong Dongfang Precision Science &Technology Co., Ltd. (hereinafter referred to as the “Company”) hereby guarantee that thecontents of this Report are true, accurate and complete and free of any misrepresentations,misleading statements or material omissions, and collectively and individually accept legalresponsibility for such contents.Tang Zhuolin, the Company’s legal representative, Shao Yongfeng, the Company’s ChiefFinancial Officer, and Yao Bin, the Head of the Company’s Accounting Department(equivalent to Financial Manager) hereby guarantee that the financial statements carried inthis Report are truthful, accurate and complete.
Apart from the following director, other directors of the Company attended in person theboard meeting for the approval of this Report.
| The name of director who did not attend in person | The post of director who did not attend in person | Reasons for not attending the meeting in person | Consignee’s name |
| Peng Xiaowei | Independent Director | Personal Work | He Weifeng |
The future development strategies, business plans and other forward-looking statementsmentioned in this Report shall be deemed as uncertain plans instead of promises to investors.Therefore, investors are reminded to exercise caution when making investment decisions.
For possible risks with respect to the Company, please refer to “(III) Possible Risks andCountermeasures” in “XI Prospects” of “Part III Management Discussion and Analysis”herein. And investors are kindly advised to read through the aforesaid contents.
The Company planed not to distribute cash dividends, neither give away bonus shares,nor capitalize from public reserve.
This Report has been prepared in Chinese and translated into English. Should there beany discrepancies or misunderstandings between the two versions, the Chinese version shallprevail.
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
Table of Contents
Part I Important Notes, Table of Contents and Definitions ...... 2
Part II Corporate Information and Key Financial Information ...... 6
Part III Management Discussion and Analysis ...... 11
Part IV Corporate Governance ...... 75
Part V Environmental and Social Responsibilities ...... 103
Part VI Significant Events ...... 105
Part VII Share Changes and Shareholder Information ...... 119
Part VIII Preference Shares ...... 129
Part IX Corporate Bonds ...... 130
Part X Corporate Financial Statement ...... 131
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
Definitions
| Term | Definition |
| Dongfang Precision, or the “Company” | Guangdong Dongfang Precision Science & Technology Co., Ltd. and its consolidated subsidiaries, except where the context otherwise requires |
| Dongfang Precision (China) | The corrugated box packaging machinery division of Guangdong Dongfang Precision Science & Technology Co., Ltd. |
| Fosber Group | Fosber S.p.A. |
| Fosber Asia | Guangdong Fosber Intelligent Equipment Co., Ltd. |
| Fosber America | Fosber America, Inc. |
| Fosber Tianjin | Fosber Machinery (Tianjin) Co., Ltd. |
| Tiru?a Group | Tiru?a Group Industrial, S.L. |
| Tiru?a America | Tiru?a America Inc. |
| QCorr | QuantumCorrugated S.r.l. |
| Dongfang Precision (Europe)/EDF | EDF Europe S.r.l. |
| Dongfang Precision (Netherland) | Dong Fang Precision (Netherland) Cooperatief U.A. |
| Dongfang Precision (HK) | Dong Fang Precision (HK) Limited |
| Parsun Power | Suzhou Parsun Power Machine Co., Ltd. |
| Suzhou Jinquan | Suzhou High-Tech Zone Jinquan Business Management Partnership (Limited Partnership) |
| Shunyi Investment | Suzhou Shunyi Investment Co., Ltd. |
| Yinglian Digital | Foshan Yinglian Digital Printing Equipment Co., Ltd. |
| Jaten Robot | Guangdong Jaten Robot & Automation Co., Ltd. |
| Hainan Yineng | Hainan Yineng Investment Co., Ltd. |
| Dongfang Digicom | Dongfang Digicom Technology Co., Ltd. |
| Dongfang Digicom (Guangdong) | Dongfang Digicom Technology (Guangdong) Co., Ltd. |
| Corrugated board | Corrugated board is a multi-layer paper-bonding object composed of at least one sandwich layer of wavy medium (commonly known as "corrugated paper", "corrugated medium paper", "corrugated paper medium" and "corrugated base paper") and one layer of cardboard (also known as "liner board"). |
| Corrugated box | Corrugated box is a rigid paper container made of corrugated boards through die cutting, indenting, nailing or gluing. Corrugated box is one of the most widely used packaging containers in modern business and trade. |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
| Corrugated box printing and packaging machinery | Corrugated box printing and packaging machinery include corrugated box printing and packaging line and stand-alone products that integrates pre-feeding, printing, grooving, die cutting, forming and packaging functions in whole or in part, which is highly functionally integrated, highly automated and highly technical, can save the capital and manpower investment, reduce workers' workload and improve the production efficiency of box manufacturers, and requires equipment manufacturers to be highly competent in design, technological innovation, assembly and finishing of parts. |
| Corrugator lines | Corrugator lines are assembly lines comprising corrugating, gluing, agglutinating, bundle breaking, dimension board cutting and output processes, which are used to produce and process corrugated boards. A corrugator line has two independent process sections as the wet section and the dry section. The wet section, composed of the base paper stand, auto splicer, preheat pre-regulator, single-face corrugator, feeding bridge, glue machine and double facer, is used to make corrugated based paper into three-layer, five-layer and seven-layer corrugated boards of different corrugated combinations. The dry section, composed of the rotary shear, slitter indenter, cut-off knife and stacker, is used to slit, indent, cut off and stack corrugated boards as ordered. Corrugator lines are key production equipment for corrugated board and box manufacturers. |
| Pre-printing and post-printing intelligent automatic packaging machinery | Pre-printing and post-printing intelligent automatic packaging machinery refers to equipment that is compatible with the corrugated box printing line or stand-alone products and can provide functions related to pre-printing and post-printing processes of corrugated box printing and packaging. It includes the pre-feeder, stripper conveyor, intelligent stacker and folder gluer. |
| Outboard motors | Outboard motors are a kind of detachable power units that are mounted on the stern plate of a boat to drive the boat to sail. |
| General utility small gasoline motors | General utility small gasoline motors are a kind of thermo-dynamic machinery of 20kW power or less with a wide range of applicability. It is characterized by small size, light weight and easy operation, and is usually used as a power engine for a variety of terminal products. By the structure of engine and principle of work, general utility small gasoline motors can be divided into two-stroke general utility small gasoline motors and four-stroke general utility small gasoline motors. |
| CSRC | China Securities Regulatory Commission |
| SZSE, or the “Stock Exchange” | Shenzhen Stock Exchange |
| RMB yuan, RMB’0,000 | Expressed in the Chinese currency of Renminbi, expressed in tens of thousands of Renminbi |
| The “Reporting Period” or “Current Period” | The period from 1 January 2021 to 31 December 2021 |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
Part II Corporate Information and Key Financial Information
I Corporate Information
| Stock name | Dongfang Precision | Stock code | 002611 |
| Stock exchange | Shenzhen Stock Exchange | ||
| Company name in Chinese | 广东东方精工科技股份有限公司 | ||
| Abbr. | 东方精工 | ||
| Company name in English (if any) | Guangdong Dongfang Precision Science & Technology Co., Ltd | ||
| Abbr. (if any) | Dongfang Precision | ||
| Legal representative | Tang Zhuolin | ||
| Registered address | (Office Building, Plant A, Plant B) 2 Qiangshi Road, Shishan Town, Nanhai District, Foshan City, Guangdong Province, China | ||
| Zip code | 528225 | ||
| Office address | 25/F, Hisense Southern Building, 1777 Chuangye Road, Nanshan District, Shenzhen City, Guangdong Province, China | ||
| Zip code | 518000 | ||
| Company website | http://www.df-global.cn/ | ||
| Email address | ir@vmtdf.com | ||
II Contact Information
| Board Secretary | Securities Representative | |
| Name | Feng Jia | Zhu Hongyu |
| Office address | 25/F, Hisense Southern Building, 1777 Chuangye Road, Nanshan District, Shenzhen City, Guangdong Province, China | 25/F, Hisense Southern Building, 1777 Chuangye Road, Nanshan District, Shenzhen City, Guangdong Province, China |
| Tel. | 0755-36889712 | 0755-36889712 |
| Fax | 0755-36889822 | 0755-36889822 |
| Email address | ir@vmtdf.com | ir@vmtdf.com |
III Media for Information Disclosure and Place where this Report Is Lodged
| Newspapers designated by the Company for | China Securities Journal, Shanghai Securities News, and Securities Times |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
| information disclosure | |
| Website designated by the CSRC for publication of this Report | http://www.cninfo.com.cn |
| Place where this Report is lodged | Securities Department of the Company, 25/F, Hisense Southern Building, 1777 Chuangye Road, Nanshan District, Shenzhen City, Guangdong Province, China |
IV Change to Company Registered Information
| Organization code | 914406002318313119 |
| Change to the principal activities of the Company since its listing (if any) | Unchanged |
| Every change of controlling shareholder since incorporation (if any) | Unchanged |
V Other InformationThe independent auditor hired by the Company:
| Name of independent auditor | Ernst & Young Hua Ming LLP |
| Office address | 18/F, Ernst & Young Tower, 13 Pearl River East Road, Tianhe District, Guangzhou City, China (the Headquarters: Rooms 01-12, 17/F, Ernst & Young Tower, Oriental Plaza, 1 East Chang An Avenue, Dongcheng District, Beijing, China) |
| Accountants writing signatures | Feng Xingzhi and Lin Hongyan |
The independent sponsor hired by the Company to exercise constant supervision over the Company in the Reporting Period:
□ Applicable √ Not applicable
The independent financial advisor hired by the Company to exercise constant supervision over the Company in the Reporting Period:
□ Applicable √ Not applicable
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
VI Key Financial Information
Indicate whether there is any retrospectively restated datum in the table below.
□ Yes √ No
| 2021 | 2020 | 2021-over-2020 change (%) | 2019 | |
| Operating revenue (RMB) | 3,524,734,783.94 | 2,916,270,143.13 | 20.86% | 9,973,503,602.19 |
| Net profit attributable to the listed company’s shareholders (RMB) | 467,333,661.79 | 389,180,624.08 | 20.08% | 1,838,018,805.50 |
| Net profit attributable to the listed company’s shareholders before exceptional gains and losses (RMB) | 380,806,233.00 | 263,426,429.87 | 44.56% | 438,715,870.86 |
| Net cash generated from/used in operating activities (RMB) | 306,659,276.02 | 550,996,031.75 | -44.34% | 281,297,787.01 |
| Basic earnings per share (RMB/share) | 0.35 | 0.26 | 34.62% | 1.01 |
| Diluted earnings per share (RMB/share) | 0.35 | 0.26 | 34.62% | 1.01 |
| Weighted average return on equity (%) | 11.72% | 6.20% | 5.52% | 36.87% |
| 31 December 2021 | 31 December 2020 | Change of 31 December 2021 over 31 December 2020 (%) | 31 December 2019 | |
| Total assets (RMB) | 6,357,168,835.19 | 6,323,236,687.05 | 0.54% | 6,273,516,157.31 |
| Equity attributable to the listed company’s shareholders (RMB) | 3,681,970,298.39 | 4,158,538,499.75 | -11.46% | 4,337,064,607.87 |
Indicate whether the lower of the net profit attributable to the listed company’s shareholders before and after exceptional gains andlosses was negative for the last three accounting years, and the latest independent auditor’s report indicated that there was uncertaintyabout the Company’s ability to continue as a going concern.
□ Yes √ No
Indicate whether the lower of the net profit attributable to the listed company’s shareholders before and after exceptional gains andlosses was negative.
□ Yes √ No
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
VII Accounting Data Differences under China’s Accounting Standards for BusinessEnterprises (CAS) and International Financial Reporting Standards (IFRS) and ForeignAccounting Standards
1. Net Profit and Equity under CAS and IFRS
□ Applicable √ Not applicable
No difference for the Reporting Period.
2. Net Profit and Equity under CAS and Foreign Accounting Standards
□ Applicable √ Not applicable
No difference for the Reporting Period.VIII Key Financial Information by Quarter
Unit: RMB
| Q1 | Q2 | Q3 | Q4 | |
| Operating revenue | 636,432,223.23 | 764,126,740.95 | 1,071,169,589.35 | 1,053,006,230.41 |
| Net profit attributable to the listed company’s shareholders | 64,628,103.90 | 126,489,416.56 | 129,754,201.64 | 146,461,939.69 |
| Net profit attributable to the listed company’s shareholders before exceptional gains and losses | 51,969,185.59 | 104,053,646.97 | 119,708,244.58 | 105,075,155.86 |
| Net cash generated from/used in operating activities | 57,536,376.72 | 148,487,451.53 | -82,307,806.29 | 182,943,254.06 |
Indicate whether any of the quarterly financial data in the table above or their summations differs materially from what have beendisclosed in the Company’s quarterly or interim reports.
□ Yes √ No
IX Exceptional Gains and Losses
√ Applicable □ Not applicable
Unit: RMB
| Item | 2021 | 2020 | 2019 | Note |
| Gain or loss on disposal of non-current assets (inclusive of impairment allowance write-offs) | -65,995.13 | -52,742.69 | -95,745,648.97 | |
| Government grants through profit or loss (exclusive of government grants given in the Company’s ordinary course of business at fixed quotas or amounts as per the | 14,700,007.84 | 10,749,683.55 | 22,854,061.39 |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
| government’s uniform standards) | ||||
| Gain equal to the amount by which investment costs for the Company to acquire subsidiaries, associates and joint ventures are lower than the Company’s enjoyable fair value of identifiable net assets of investees when making investments | 866,489.40 | |||
| Gain or loss on fair-value changes on held-for-trading and derivative financial assets and liabilities & income from disposal of held-for-trading and derivative financial assets and liabilities and other debt investments (exclusive of the effective portion of hedges that arise in the Company’s ordinary course of business) | 73,435,063.51 | 96,118,955.74 | 1,473,114,508.83 | |
| Non-operating income and expenses other than the above | 4,779,490.65 | 33,173,454.66 | 9,007,522.57 | |
| Other gains and losses that meet the definition of exceptional gain/loss | 0.00 | 1,229,987.66 | ||
| Less: Income tax effects | 6,017,410.70 | 15,906,631.40 | 9,881,032.32 | |
| Non-controlling interests effects (net of tax) | 303,727.38 | 425,002.71 | 46,476.86 | |
| Total | 86,527,428.79 | 125,754,194.21 | 1,399,302,934.64 | -- |
Explanation of why the Company reclassifies as recurrent an exceptional gain/loss item defined or listed in the ExplanatoryAnnouncement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Exceptional Gain/LossItems:
□ Applicable √ Not applicable
No such cases for the Reporting Period.
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
Part III Management Discussion and AnalysisI Industry Overview for the Reporting PeriodDongfang Precision operates in the "corrugated packaging machinery" industry. With the strategic vision of"intelligent manufacturing", the Company is committed to the R&D, design and production of corrugated packagingmachinery, and provides customers in the industry with production lines, equipment, software and supporting servicesnecessary for the production and processing of corrugated packaging products.
According to the Guidelines for the Industry Classification of Listed Companies of the CSRC, the Company isassigned to "Manufacturing Industry - Specialised Equipment Manufacturing Industry". According to the SWS IndustryClassification Version 2021, the Company is assigned to "Machinery Equipment - Specialised Equipment - Printing andPackaging Machinery".
(I) Industry overview
1. Corrugated packaging machinery is closely related to the downstream corrugated packaging industry
Corrugated packages are very common and widely-used packaging products in food and beverage, clothing, shoesand hats, home appliance and furniture, pharmaceutical and daily chemicals, e-commerce and express and logisticsindustries. The consumption and production of corrugated packages are closely related to the "big consumption"industry. As consumer goods are in rigid demand in the national economy, higher economic and social developmentlevels, better quality of life of people and higher public consumption level are the fundamental driving forces for greaterdemand for corrugated packages, as well as the fundamental driving forces for higher capacity of corrugated packagesand greater demand for corrugated packaging machinery.
Nowadays, carbon emission reduction and carbon neutrality are the necessary solutions for global climateproblems, and green circular economy is an important way to implement it. Corrugated packages are degradable,recyclable and more environmentally friendly than plastic packages. Since 2020, when China enforced the "most strictplastic ban in history", governments at all levels have introduced specific measures to reduce the use of plastic productsin the packaging industry, which is expected to further promote the growth of the domestic market's demand forcorrugated packages.
Compared with mature markets in Europe and the United States, the packaging industry market in China is morescattered. With the continuous improvement of concentration, continuous aggregation of market shares to medium- andlarge-sized enterprises and continuous improvement of the comprehensive strength of leading packaging enterprises, thedemand for middle- and high-end capacity and machinery of the corrugated packaging industry market will soon growrapidly. For economic, environmental and policy considerations, primary and secondary plants in the corrugatedpackaging industry prefer production lines and machinery with higher production efficiency, stability and reliability anddegree of intelligence.
2. The corrugated packaging machinery industry gradually marches toward digitalization and intelligence
The development of the corrugated packaging machinery industry experienced mechanization, electrification and
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
automation stages, and is now heading intelligence and digitalization. After years of rises in labor price, land price andother production factor prices, as well as tightening environmental regulations and labor shortage and the epidemicshock over the past two years, the printing and packaging industry is facing the change of packaging and printingdemand of terminal customers toward "small size of single batches + multiple batches + customization", and it hasbecome a consensus that the production capacity is upgrading toward "intelligence, digitalization and automation". Inthe post-epidemic era, practitioners in the industry have perceived more deeply the importance of "intelligent plants"and "industrial interconnection". Leading medium- and large-sized enterprises have taken positive measures toaccelerate digital and intelligent production.As estimated, there are over 6,000 corrugator lines in the domestic market, and more corrugated box printing andpackaging machinery. In the next five to ten years, these production lines and machinery will be replaced by moreintelligent ones with higher production efficiency, stability and reliability.(II) The Company’s position in the industryMedium- and high-end corrugated packaging machinery integrates servo CNC, mechanical-electrical design,machine finishing and information-based production management, and is highly technological and valuable, fallingunder the technology-intensive and capital-intensive industry. Since its establishment, Dongfang Precision has beentargeting middle- and high-end markets. Always pursuing high product quality and excellent customer service, it hasbeen a reliable partner for large- and medium-sized enterprises in the global corrugated packaging industry over theyears.
It is estimated that the global market size of the corrugated packaging machinery industry is about RMB30 billionto RMB40 billion. Most of the first-tier manufacturers are from the United States and developed countries in Europe,including BHS (Germany) and Fosber Group (a wholly-owned subsidiary of Dongfang Precision) engaging incorrugator lines and Bobst (Switzerland), Gopfert (Germany), Dongfang Precision (China) and Dongfang Precision(Europe) engaging in corrugated box printing and packaging lines. By the size of revenue, Dongfang Precision has theoverall market share of its corrugated packaging machinery business is about 10% in the global industry market,ranking first among domestic enterprises of the same type and second in the global market of the same type incorrugated packaging machinery sector.II Principal Activities of the Company in the Reporting Period(I) OverviewThe Company's principal businesses in 2021 are as follows:
[Table 1: Principal Businesses of Dongfang Precision]
| Principal business/product | Main functions and application fields |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
| Intelligent corrugated packaging machinery | ? Corrugator lines. It is used for the production of corrugated boards of different specifications, and is the core and key machinery for corrugated packaging production. They are widely used in large- and medium-sized enterprises (primary and secondary plants) producing corrugated boards in the industrial chain. A corrugator line is composed of two process sections, namely wet-end equipment and dry-end equipment, independent of each other. The former makes corrugated base paper into three-layer, five-layer and seven-layer corrugated boards, and the latter longitudinally cuts, presses, transversely cuts and stacks corrugated boards as required by orders. ? Corrugated box printing and packaging machinery. It is used to produce and process corrugated boards into corrugated boxes of different specifications as required by customers, and it includes such processes as corrugated paper feeding, printing, slotting, die cutting and box stitching. Corrugated box printing and packaging machinery is composed of the corrugated box printing line, the corrugated box printing machine and the supporting pre-printing and post-printing machines for the printing unit including the paper feeding unit, slotting and die cutting unit, waste discharging unit, box pasting and stitching unit and the counting and stacking unit. The printing and packaging machinery is the core of corrugated box production, and is widely used by all kinds of enterprises (primary plants, secondary plants and tertiary plants) that process and produce corrugated boxes in the corrugated packaging industry chain. |
| Corrugated packaging industry Intelligent plant solutions | The Company has built an enterprise- and industry-level intelligent plant platform for customers in the corrugated packaging industry to help the customers realise a digital and network-based equipment layer, connect business, cash, and information flows, and promote comprehensive digitalisation of the production and operation layer, as well as data-based reasonable management and decision-making, in order to promote intelligent transformation, and enhance enterprise competitiveness in all respects. |
| Outboard power products | Outboard motors are a kind of detachable power units that are mounted on the stern plate of a boat to drive the boat to sail, and can be applied to boats shorter than 24m in inland rivers, lakes and coastal waters. They are widely used in water recreation, fishing, water traffic, emergency rescue, shore landing and maritime patrol. |
(II) Intelligent corrugated packaging machinery business
1. Overview of the intelligent corrugated packaging machinery business
The Company's core business is intelligent corrugated packaging machinery, in which it provides medium-and large-sized enterprise customers in the global corrugated packaging industry with core and key productionlines and machines making up the production lines necessary for the corrugated packaging production andprocessing.The Company has become a one-stop production line and machinery supplier with leading comprehensive
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
strength in the industry for corrugated packaging enterprise customers, and provides machinery products for theproduction and printing of corrugated boards and paper feeding/slotting/die cutting/waste discharging/pasting andstitching/counting/stacking of corrugated boxes of corrugator plants and corrugated box plants.
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
[Figure 1 Relationship between Corrugated Packaging Production and Industrial Value Chain and the Company's Intelligent Corrugated Packaging Machinery
Products]
Corrugated base paperKraft paper
Kraft paperCorrugated boxes
Corrugated boxes
Intelligent high-speed corrugator lines
Intelligent high-speed corrugator linesHigh-precision corrugator lines
High-precision corrugator linesCorrugated box printing and packaging lines (top printing fixed type)
Corrugated box printing and packaging lines (top printing fixed type)Corrugated box printing and packaging lines (bottom printing open-close type)
Corrugated box printing and packaging lines (bottom printing open-close type)Corrugator
2. Main products in intelligent corrugated packaging machinery business
(1) Corrugator lines
The Company's corrugator line business is mainly operated by the wholly-owned subsidiary Fosber Group(consisting of Fosber Italy, Fosber America, QCorr, Tiru?a Group, etc.) and the holding subsidiary Fosber Asia.The subsidiary Fosber Group owns S-Line, C-Line and Quantum-Line products, and its main customergroups are in Europe, North America and Latin America. The subsidiary Fosber Asia owns Pro-Line and E-Lineproducts, and its main customer groups are in China, Southeast Asia and South Asia.The Company's middle- and high-end corrugator line products are ahead of those of domestic brands ofenterprises of the same type in overall performance including velocity, width, intelligence, precision and stability,and run stably and are provided with good technical support, being greatly competitive in the global industrymarket.
(2) Corrugated box printing and packaging lines
The Company's corrugated box printing and packaging line business is mainly operated by DongfangPrecision (China) and Dongfang Precision (Europe).
Dongfang Precision (China) owns integrated corrugated box printing and packaging line products includingDongfang Star I top printing fixed type FFG inline, Dongfang Star II top printing open-close type FFG inline,Super Star I bottom printing die cutter stripper vacuum stacker converting line, Super Star II bottom printingopen-close type FFG inline and Super Star III bottom printing open-close type/FFG & stitcher line, coveringdifferent types and specifications as fixed type/open-close type and top printing/bottom printing. Besides,Dongfang Precision (China) also sells the main assemblies of the integrated line products up to dozens of differentspecifications, as well as corrugated box printing and packaging machinery products of different marketpositioning. Its integrated line products and single machine products are marketed in over 30 countries andregions in Europe, America, Asia, Africa, Latin America and Oceania.
Dongfang Precision (Europe) owns high-end integrated corrugated box printing and packaging linesincluding FD quickset top printing FFG inline and HGL quickset bottom printing FFG inline and quickset bottomprinting FFG/die cutter stripper line, and sells them in the European market. These lines can feed paper withoutcrushing and be separately controlled by the servo, is fully automatic, and is capable of high-resolution printing.Besides, it also sells pre-printing and post-printing machines of different specifications that are applicable tointegrated line products, including paper feeders, waste dischargers, intelligent stackers and folder gluer.
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
[Table 2 Main Product Matrix of the Intelligent Corrugated Packaging Machinery Business of Dongfang Precision - Corrugator Lines]
| Product type | Brand | Product image | Main characteristics |
| Corrugator lines | Width: 2.5m to 2.8m; Velocity: 250 to 470m/min Pro/Care, Pro/Quality, etc. Industrial Production Information System 4.0 | ||
| Width: 1.8m to 2.5m; Innovation Compact body and high flexibility More suitable for the production of light corrugated boards | |||
| Width: 2.2m to 2.8m; Velocity: 180 to 320m/min | |||
| The world's top three professional suppliers of corrugating rolls and pressure rolls, with leading processing and tungsten carbide processing |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
[Table 3 Main Product Matrix of the Intelligent Corrugated Packaging Machinery Business of Dongfang Precision - Corrugated Box Printing and Packaging
Lines]
technologies
Product type
| Product type | Brand | Product image | Main characteristics | |||
| Integrated | Top printing fixed type Full servo control Model change without suspension 2min quick order change Energy-saving, efficient and intelligent | |||||
| Dongfang Star I top printing fixed type FFG inline | ||||||
| Top printing open-close type Servo motor control Require only 2 to 3 operators for one integrated line | ||||||
| Dongfang Star II top printing open-close type FFG inline | ||||||
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
| Product type | Brand | Product image | Main characteristics | |||
| corrugated box printing and packaging lines | Efficient, stable, thorough cleaning Accurate counting and automatic stacking Suitable for special-shaped boxes, machine-packed boxes and pre-printed boxes, and can cut dies by continuous clicks once after being powered on, which solves the industry pain point Require only 2 to 3 operators for one integrated line | |||||
| Super Star I bottom printing die cutter stripper vacuum stacker converting line | ||||||
| A professional die cutter FFG line Suitable for efficient production of boxes requiring slotting or die cutting Servo motor control Require only 2 to 3 operators for one integrated line | ||||||
| Super Star II bottom printing open-close type FFG inline | ||||||
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
| Product type | Brand | Product image | Main characteristics | ||
| Integrated corrugated box printing and packaging lines | A well-established bottom printing FFG & stitcher All-in-one control and easy operation One machine for multiple purposes supporting order changes Fewer processes and lower labor costs | ||||
| Super Star III bottom printing open-close type/FFG & stitcher line | |||||
| High-end bottom printing fixed type line Driven by spindle servo Quick order change Complete pre-printing and post-printing supporting units | |||||
| High-end bottom printing open-close type line Servo motor control Require only 2 to 3 operators for one integrated line | |||||
3. Business model of intelligent corrugated packaging machinery business
A. R&D modelBoth the corrugator line business represented by the subsidiaries Fosber Group and Fosber Asia and thecorrugated box printing and packaging machinery business represented by Dongfang Precision (China) andDongfang Precision (Europe) are equipped work industry-leading independent design and R&D capabilities.The Company keeps building a high-level R&D innovation management mechanism, and has an R&D teamcomposed of industry-leading experts, and secure the leading position of its technology in the industry withlong-term and short-term product R&D plans, market-oriented R&D mechanism and refined R&D talent incentivepolicies.B. Procurement and production modelThe Company purchases steel plates, metal components and electric components from external suppliers,while producing core machining components and corrugating rolls by itself.
It produces most of the machinery products according to orders, and purchases raw materials from suppliers,compiles annual, quarterly and monthly production plans and reasonably arranges production according to salescontracts and raw materials on hand only after receiving customers' orders and requiring customers to pay part ofthe down payment. In production and operation management, the Company promotes "lean production" toaccurately control BOM costs and manufacturing costs and continuously improve operational efficiency.In general cases, orders of corrugator lines will be delivered in 4 to 6 months, and orders of corrugated boxprinting and packaging machinery will be delivered in 2 to 3 months.C. Marketing modelIn terms of the marketing method, the Company sells products through direct selling and distribution. Inthe domestic market, the Company sells products through direct selling. In overseas markets, the subsidiariesFosber Group and Fosber Asia sell through direct selling and Dongfang Precision (China) and Dongfang Precision(Europe) sell through agency distribution in some overseas markets.Direct selling allows the Company to directly face customers to ensure accurate demand information, promptinformation transmission and information feedback to the Company's R&D and production departments, so thatcustomers can be timely provided with overall solutions. Due to the complexity of products, the Company has anoutstanding after sales service team that is responsible for on-site installation, commissioning, training and aftersales services, which can provide 7*24h prompt response and support as required by customers.
In terms of the types of products being sold, the Company sells production lines, single machines,accessories, software and services. Integrated lines and single machines are sold only once, and the amount ofeach sale is large. Accessories, software and services are sold multiple times during the lifecycle of machines.In the industry market, the continuously increasing holding of the Company's machinery boosts ceaselesssales of the Company's accessories, software and services, and high-quality technical support and services drivesthe sales of production lines and machines, which is fully evidenced by the high re-purchase rate of theCompany's middle- and high-end machinery products, so the two support and facilitate each other.
In terms of the settlement method of sales payment, the Company enjoys a high brand awareness andsuperior bargain power in the industry, so it collects down payment in advance and payment by stages for thesales of corrugator lines and corrugated box printing and packaging machinery products. In general cases, 80% to90% of the sales payment can be collected upon the delivery of products.
(III) Overall solution business for intelligent plants in the corrugated packaging industry
Dongfang Digicom, established in 2020, is the key carrier of the implementation of the Group's"digitalisation and intellectualisation strategy". Adhering to the purpose and mission of "making the industry moreintelligent and manufacturing simpler" and with the vision of "to become a world-leading supplier of overallsolutions of intelligent plants and industrial Internet services in the packaging industry", it is specialized inbuilding an enterprise-level and industry-level industrial Internet platform for the corrugated packaging industrythat integrates new information technologies including IoT, cloud computing, big data, 5G and AI.
Aiming at the current situation that most domestic corrugated packaging enterprises are poorly capable ofproduction resources integration and in labor shortage, have unreasonable workshop layout and have a large roomfor production efficiency improvement, the intelligent logistics business team of Dongfang Digicom providescorrugated packaging enterprises in China with tailor-made intelligent logistics solutions for intelligent plantsbased on years of profound experience in global and domestic industry markets and ERP, APS, WMS/WC andMES technologies and in combination with advanced international technical concepts and the distinctivecharacteristics of the carton packaging market in China.
The Company enjoys a whole-industrial-chain layout in the corrugated packaging machinery sector, and themost complete and rich product base in the industry. With nearly 30 years of profound experience in Know-Howin the corrugated packaging machinery sector, it is the firm foundation and solid support for Dongfang Digicom.With an unswerving strategic focus, the Company continues resources input and import of talents specialized in
industrial Internet, and has developed the unique and core technical R&D force of Dongfang Digicom to outputsolutions with completely independent intellectual property rights.Figure 2 Dongfang Digicom's Overall Solutions for Intelligent Plants in the Corrugated Packaging Industry
| Intelligent operation |
| Intelligent plant |
Intelligentmanufacturing
IntelligentmanufacturingData
middle
office
Data
middle
officeTool
platform
Tool
platform
IoT
platform
IoT
platform
Supply chainfinance
| Supply chain finance | Online mall | Business synergy | Business operation | Second-hand machinery market |
Decision-making
analysis
| Decision-making analysis | Operation analysis | Abnormality monitoring and handling | Visualized (Web/app...) | Energy monitoring |
Design and manufacturing integration
| Design and manufacturing integration | Network-based synergetic manufacturing | Quality control | Cost management |
Intelligent scheduling
| Intelligent scheduling | Intelligent dispatching | Intelligent collection | Smart monitoring |
Intelligent industry
Intelligent industryAccessory management
Accessory management
Printer production management
system
Printer production management
system
Basic data
| Basic data | Order plan management |
Equipmentmanagement
| Equipment management |
| Report management |
Production
management
Production
managementQuality control
Quality controlAlgorithmanalysis
| Data warehouse | Algorithm analysis |
Low-level code
development
Low-level code
developmentData cleansing
| Data cleansing | Real-time computing | Integrated channel | Data exchange | Data modeling |
Customized
development
| Procedure guide | Report engine | Application integration | Basic services | Customized development |
Hardware integration platform
| Hardware integration platform | Edge computing |
Plant 1
Plant 1Printer
| Printer | Flat-pressing flat die cutter | FFG & stitcher | Corrugator lines | Other machinery | |
Plant 1
Plant 1Printer
| Printer | Flat-pressing flat die cutter | FFG & stitcher | Corrugator lines | Other machinery | |
Plant 1
Plant 1Printer
| Printer | Flat-pressing flat die cutter | FFG & stitcher | Corrugator lines | Other machinery | |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
[Figure 3 Application Model of the Overall Solution Business for Intelligent Plants in the Corrugated Packaging Industry]
| Data cleansing | Data processing |
DFDSplatform
(dataapplication)
DFDSplatform
(dataapplication)Corrugated packaging enterprises
Corrugated packaging enterprises
APP
| APP | Large screen dashboard | Data report |
Bog dataplatform
Bog dataplatformData storage
| Data storage | Data analysis |
Equipment access
| IOT | Equipment access | Data collection | Data storage | Rules Engine | |||
Border gateway (edge acquisition terminal + intelligent sensing terminal)
Border gateway (edge acquisition terminal + intelligent sensing terminal)
Internet of Machines
| Internet of Machines | Internet of Things | Internet of Persons | ||||
| Equipment |
Printer
| Printer | Flat-pressing flat die cutter | FFG & stitcher | Corrugator lines | Visual inspection | ||
Smartelectricmeter
| Smart electric meter | Smart water meter | Intelligent sensor for environmental monitoring | RFID/bar code tag | Field operators | |
Overall solution for intelligent corrugated packaging plants
Overall solution for intelligent corrugated packaging plantsWhole-plant intelligent logistics
Whole-plant intelligent logistics
Fast moving consumer goods
| Fast moving consumer goods | Electronics industry |
Appliance industry
| Appliance industry | Pharmaceuticals industry | Light industry |
Other industries
Other industries
End-market application
(IV) Outboard power product businessThe subsidiary Parsun Power mainly engages in the design, R&D, production and marketing of outboardmotors, and is committed to becoming a world-class outboard power supplier. Parsun Power is the leadingenterprise in the outboard motor industry in China, and enjoyed the first market share in the industry from 2018 to2020.
1. Industry situation and market position of Parsun Power
Parsun Power falls under the outboard motor industry in the marine auxiliary equipment industry. Outboardmotors are the key equipment for small- and medium-sized ships, and are widely used in water recreation, fishing,water traffic, emergency rescue, shore landing and maritime patrol, as shown below:
[Table 4 Fields and Scenarios of the Application of Outboard Motors]
| Field of application | Specific scenario | Legend |
| Recreational | Recreational fishing, recreational sailing and recreational water sports | |
| Commercial | Fishing, water traffic and waterway maintenance |
| Official and military | Emergency rescue and maritime patrol Beach landing and water reconnaissance |
According to the report by Global Market Insights Research Private Limited, the size of the global outboardmotor market in 2020 was USD9,105 million, which is expected to reach USD13,191 million by 2027, with acompound annual growth rate of 5.04% from 2021 to 2027. In 2020, the size of the outboard motor market inChina was USD228 million, which is expected to reach USD424 million by 2027, with a compound annualgrowth rate of 8.91% from 2021 to 2027, significantly higher than that 5.04% of the global market.Worldwide, the outboard motor industry is dominated by Japanese and American brands, including Yamaha,Japan (an outboard motor brand under Yamaha Motor) and Mercury, USA (an outboard motor brand underBentfield Group).
China has become one of the world's fastest-growing outboard motor markets owing to its rapid economicgrowth and changing recreational habits. With the rise of domestic brands represented by Parsun Power, domesticsubstitution has gradually become one of the mainstream trends in the development of the outboard motorindustry in China, and there is a broad market space for domestic substitution.
Meanwhile, with the increasing attention to global environmental protection and climate changes and theimplementation of China's carbon emission reduction and carbon neutrality policies, the global development trendof outboard motor products toward medium- and high-horsepower and new-energy ones is more and moredefinitive.
After years of development, Parsun Power has become a leading enterprise among domestic outboard motorbrands, its market share has been ranking the first nationwide for years, and its products are being exported to tensof countries and regions in Europe, Africa, Oceania, South America, North America, the Middle East andSoutheast Asia. Parsun Power has realized a complete product line layout of "gasoline-diesel-electric power", andhas been marching toward high-horsepower diesel outboard motors and electric outboard motors with its years of
experience in products and technology and leading market share in the field of petrol outboard motors. In thefuture, it will raise funds through a spin-off listing, and will improve its core competitiveness to become aprofessional supplier of aquatic power products in China with global competitiveness.
2. Main products of Parsun Power in outboard motor business
Parsun Power provides outboard motor products from 2hp to 115hp. The output power of an outboard motorincreases with its horsepower, so as the size or velocity of the boat assembled to it.By the source of engine power, outboard motor products of Parsun Power are divided into gasoline outboardmotors, electric outboard motors and diesel outboard motors.Gasoline outboard motors enjoy the most abundant specifications and varieties. Parsun Power hasaccumulated years of industry experience in the field, and has had a number of proprietary technologies andapplied them to products.In recent years, Parsun Power has developed medium- and high-horsepower outboard motors leading theChinese market and with domestic substitution characteristics, has achieved mass production of the maximum115hp gasoline outboard motors, and has successfully broken the long-term monopoly by internationalwell-known brands in the 115hp sector. With stable and reliable quality of its 115hp gasoline outboard motors,Parsun Power has won more and more product orders in Europe and China, contributing to domestic substitutionof medium- and high-horsepower outboard motors and the improvement of the global market share of domesticbrands. After successfully conquering the 115hp gasoline model, Parsun Power's R&D team marches towardhigher-horsepower models, and strives the make domestic-brand high-horsepower outboard motors take a place inthe global competition of the high-horsepower outboard motor market.Electric outboard motors are powered by batteries. They convert electric power into kinetic power throughmotors, and are characterized by zero emissions, low noise and easy operation, and are mainly used in scenicspots and other sectors requiring stricter environmental protection. Parsun Power's electric outboard motors aredivided into 7hp motors and 9.9hp motors, which are being sold in developed countries such as the United States.Diesel outboard motors not only retain the characteristics of easy assembly, easy maintenance and easyoperation of gasoline outboard motors but also enjoy the advantages of fuel saving, lower emissions, greatertorque and being safer, more reliable and easier for maintenance, which are mainly used in commercialtransportation and public law enforcement. Parsun Power now has diesel outboard motors, and is selling thehigh-horsepower outboard motors of 150hp to 300hp of OXE Marine (a Swedish brand) in the domestic market.
In general, Parsun Power's outboard motor products have stable quality and reliable performance, and someof them enjoy the comprehensive performance comparable to that of internationally well-known brands andemissions reaching European and American standards. In the future, Parsun Power will focus on high-horsepoweroutboard motors, enrich electric outboard motor production lines, continuously optimize the product structure ofoutboard motors, and consolidate its leading position among domestic outboard motor manufacturers.
3. Business model of Parsun Power's outboard motor business
Parsun Power runs its outboard motor business through "Design and R&D + Production + Marketing". Interms of sales model, Parsun Power gives priority to distribution, with direct selling as a supplement.
III Core Competitiveness Analysis
In the Reporting Period, the Company had no significant adverse changes in its core competitiveness.Analysis of the Company's core competitiveness is as follows:
(I) Complete layout in the corrugated packaging machinery industry chain and the most complete andrichest product portfolio in the industry
Among enterprises of the same type in the domestic corrugated packaging machinery industry, DongfangPrecision has the most complete and comprehensive industry chain layout, with its business covering almost allkey processes in the corrugated packaging production and processing business chain. A full-coverage layout in thecorrugated packaging production and processing value chain has been established.
Processes in the corrugated packaging production and processing value chain covered by the Company'sbusiness units include:
1. Corrugator production:
Fosber Group, Fosber Asia and QuantumCorrugated are the business units of the Company engaging in it.They serve large- and medium-sized enterprises in domestic and foreign corrugated board production andprocessing industries, and supply middle- and high-end corrugator line products of different specifications,different types and different market positioning.
Fosber Group has middle- and high-end corrugator lines and leading industrial Internet technologies in thefront rank of the global industry market, and also has corrugating roll production lines and high-speed corrugatorlines suitable for industrial digital printing, having a complete industrial layout in the core production line andmachinery sector in the field of corrugator production and processing.
Specifically, Tiru?a Group, a subsidiary of Fosber Group, is a time-honored, prestigious and professionalcorrugating roll supplier in Spain, and its corrugating roll products are one of the key components of corrugatorlines, and QCorr, another subsidiary of Fosber Group, has the independently-developed Quantum high-speedcorrugator line that has the unique design fitting the embedding of industrial digital printing technology.
2. Corrugated box printing and packaging: Dongfang Precision (China) and Dongfang Precision (Europe)are the business units of the Company engaging in it. They serve domestic and foreign corrugated box productionand processing industry markets, and supply middle- and integrated high-end corrugated box printing andpackaging lines and single machine products covering all units and all specifications of the production lines. Interms of corrugated box printing and packaging machinery, Dongfang Precision's products are divided into fixedtype/open-close type, top printing/bottom printing and integrated line/single machine products, and has the richesproduct portfolio among domestic enterprises of the same type.
3. Overall solution for intelligent corrugated packaging plants: Dongfang Digicom is the business unit ofthe Company engaging in it. It provides customers in the corrugated packaging production and processingindustry market with the overall solution for intelligent plants covering order management, productionmanagement, cost analysis, intelligent decision-making, intelligent logistics and supply chain management andequipment management, as well as the solution for intelligent whole-plant logistics.
With the full-coverage industry chain layout, the Company has the most complete and richest corrugatedpackaging line and machinery product portfolio in the industry, making it capable of meeting the demands forintegrated line and single machine products of different market positioning, different customer types and dozensof specifications and models, second to none in China.
Figure 4 Business Divisions and Entities of Dongfang Precision
(II) Industry-leading technology level and capability of continuous R&D and innovationThe Company's overall R&D strength and technology level are at the forefront among domestic enterprisesof the same type, with 284 technicians specialized in R&D. As at 31 December 2021, the Company was holdingnearly 300 licensed patents at home and abroad. In 2021, the Company was awarded the Provincial IndustrialDesign Center of Guangdong and the Provincial Demonstration Enterprise of Intellectual Property Right inGuangdong.
Its subsidiary Fosber Group is one of the two companies with the strongest comprehensive technical strengthin the field of high-speed and wide corrugator lines worldwide. Fosber's middle- and high-end corrugator lines areinternationally leading in the industry in velocity, width, precision, stability, reliability, failure rate andintelligence, and its high-technology-content and high-quality machinery products and technical support serviceshave won the praise of domestic and foreign enterprise customers.In the course of design and R&D of high-end corrugator lines, Fosber Group proactively practices theindustrial Internet technology and applies sensors, VR, big data and algorithms, and has launched the PROinformation-based intelligent production management system for corrugator lines with tens of years ofKnow-How experience in the middle- and high-end corrugator line industry, realizing full automation andintelligence of the whole process of corrugator production and processing. Through over 200 sensors in corrugatorlines, it monitors the temperature, humidity, heat, folds and other data of corrugator lines in real time, and alsomonitors the dashboard dynamically in the production process. Through data-based production performance
analysis and cost analysis, it helps customers improve production efficiency. Through the self-diagnosis system, itidentifies abnormal operations and sends alerts, and searches solutions in the database and outputs the solutionsautomatically. Through the "big data analysis system" module, it collects real-time data in the corrugatorproduction process through sensors, outputs recommended configuration parameters and improvements throughalgorithm analysis, and helps customers improve the effectiveness of production process control.Figure 5 How Fosber Group's PRO Information-based Intelligent Production Management System Works
The subsidiary Parsun Power is committed to independent R&D and innovation of China-made outboardmotors, and is a state-level "Little Giant" enterprise with specialties, refined management, unique technologiesand innovation, a national high-tech enterprise, the Provincial Outboard Motor Engineering and TechnologyResearch Institute of Jiangsu, a technology center recognized by Jiangsu Province, a leading enterprise in China'sinternal combustion engine industry and a council member of the Small Gasoline Motor Branch of China InternalCombustion Engine Industry Association. Its outboard motor products have won the Certificate forIndustrialization Demonstration Program under the National Torch Plan and honors including Innovative Productsin Chinese Machinery Industry, Products of Well-known Brands in Jiangsu, and Products of Well-known Brandsin Suzhou.Parsun Power has been developing in the outboard motor industry for over ten years, and has had a numberof China-leading core technologies and accumulated rich scientifically innovative achievements after long-termR&D input and technical accumulation. As at the end of the Reporting Period, it has got 53 licensed patents andwon two second prizes of the China Machinery Industry Science and Technology Award, and is one of the maindrafters of two industry standards including Outboard Gasoline Engines- General Requirements (JB/T11875-2014) and General Technical Specification of Outboard Engine (CB/T 4505-2020). In 2021, Parsun Powersuccessfully realized the mass production of 115hp outboard motors, breaking the long-standing monopoly ofinternationally well-known brands in the 115hp sector.
(III) Profound Know-How experience and experienced team in the industryDongfang Precision has an experienced team with profound Know-How experience in the industry, whichhas 20 years of experience in both global and domestic industry markets and has an in-depth understanding of theCompany's industrial layout, development planning, R&D approach, production operation, marketing and teammanagement. The core management team has a broad vision, can promptly keep up with the general developmenttrend of the intelligent corrugated packaging machinery manufacturing industry, and can enable the Company toachieve steady and sustainable development through forward-looking strategic planning and layout.As an enterprise that practices the management model of professional manager team and attaches greatimportance to authorization management, Dongfang Precision takes "a wealth of talents" and "culturalorientation" as the basis of its corporate strategy and corporate culture, and develops its organizational capacity,improves the Group's control over all business units and subsidiaries and integration of resources and assistanceand aid, improves the Group's overall operational efficiency and reduces the Group's operation cost and promotesthe Company's healthy and sustainable development by optimizing the organizational structure design,standardizing the authorization and control system, implementing medium- and long-term incentives and furtherdeveloping the corporate culture.
(IV) High brand popularity and customer recognition in the industry worldwideDongfang Precision corrugated box printing and packaging machinery, Fosber corrugator lines, Tiru?acorrugating rolls, Quantum corrugator lines and Parsun outboard motors of the Company are enjoyingconsiderable brand recognition and industry influence at home and abroad.
The Company has become an influential enterprise in the industry, as evidenced by its honors like the "Top500 Private Manufacturers of China", the "Champion in Single Aspect", and the "Leader in Industry Segment".In the business segment of "intelligent corrugated packaging machinery", the Company has established goodpartnerships with domestically leading enterprises in the corrugated packaging industry including Nine DragonsPaper, Shanying Intl, Yuen Foong Yu, HXPP, MYS, XTL, Great Shengda, Forest Packing Co., Ltd., UCPS andZhengye International, and large international groups in the corrugated packaging industry including InternationalPaper, Smurfit Kappa, DS Smith, APP Sinar Mas and Mpact.
With the constant growth in concentration and the continuous upgrading of capacity in the downstreamindustry, large- and medium-sized packaging enterprises will need more solutions for intelligent plants as well asmiddle- and high-end production lines and machinery. The Company has seized opportunities and formed a better
competitive edge by virtue of its stable business partnership during the above industry changes.(V) Global layout of business assetsThe Company mainly serves customers in the corrugated packaging industry worldwide, and has realized theglobal layout of its business assets:
In Asia, the Company has three domestic R&D and production bases in Foshan, Suzhou and Shenzhen, inEurope, it has R&D and production bases in Lucca, Bologna and Milan, Italy, and Pamplona, Spain, and in NorthAmerica, it has a production base in Green Bay, Wisconsin, USA. With such a layout in the three continents, theCompany has formed a global marketing and service network.An internationalized marketing and service network enables the Company to seize all opportunities in theglobal industry market and to provide product machinery and technical services for customers in the industry inover 100 countries and regions worldwide.
An internationalized product R&D, production and supply chain layout enables the Company to makeprompt responses worldwide and meet customer demands, and is conducive to the Company's integration ofglobal resources, improvement of resource allocation efficiency, complement of advantages, reduction of the totalcost and improvement of the allocation efficiency, so that the Company can be generally competitive in the worldwhen it is operated as a group.
Figure 6 Global Layout of the Company's Business Assets and Marketing Network
(VI) Strong strategic control and integration of business segments
Since listing, the Company has been making full use of the platform of listed companies to carry outindustrial mergers and acquisitions of appropriate subject matters in the corrugated packaging machinery industrychain. The Company attaches great importance to post-investment integration. Over the years, the Company has
developed strong strategic control and integration of its business segments through successful practices inacquiring target companies in the corrugated packaging machinery industry chain, and has accumulated richexperience in control and integration.Strategic control is the core capability that the Company relies on to manage its various business entities.After years of practice, the Company adjusted the strategic development plans, business models, product mixes,market strategies and core management teams of the target companies acquired with its in-depth understanding ofthe industry, forward-looking foresight to the development trend of the industry, clear awareness of its strategicdevelopment objectives and a well-established understanding of the capabilities and resources of all its businessentities, so that these companies can be energized for new growth and step on a new development stage.In terms of post-investment integration, the Company has formulated the legal person governancestandardization policy, the "three-board" operation mechanism and the strategic and financial control system, andimplemented decentralized authorization management, complete audits and management incentives, forming a setof measures for integrated and effective post-investment control to secure the effective implementation of thestrategic plan.In 2014, the Company acquired the shareholding right of Fosber Group, and took a number of effectivemeasures in the acquisition, helped Fosber Group adjust its strategic plan and business strategy and standardizethe authorization management system, and implemented the performance incentive policy and strengthenedfinancial control over the core management. Such measures have successfully stimulated Fosber Group's businessvitality. From 2015 to 2021, the compound annual growth rate of the operating revenue of Fosber Group wasabout 14%, and the same of its net profit was 30%.In 2015, the Company acquired the shareholding right of Parsun Power, helped Parsun Power streamline andadjust its strategies, develop the new development roadmap, increase inputs in technology, products and R&D,strengthen the marketing force, and improve the efficiency of the supply chain and production. It also supportedParsun Power to introduce excellent talents for a more powerful core team. These measures enabled Parsun Powerto realize continuous and stable growth. From 2017 to 2021, the compound annual growth rate of the operatingrevenue of Parsun Power was about 20%.In 2019 and 2020, the Company acquired the relevant business assets of Tiru?a Group, a nearly century-oldcorrugating roll manufacturer, and those of Agnati, a once splendent Italian corrugator line manufacturer. TheCompany fully streamlined the development strategies, R&D systems, product sequences, marketing and team
building of these two companies, based on which it adjusted and optimized the business strategies and outputmanagement, effectively stimulating the vitality of the two old European companies and the enthusiasm of theirmanager teams. The operating revenue and profit of the two companies significantly increased in 2021 comparedwith the same period in the previous year.Relying on its strong strategic control and integration of business segments, based on "mutual respect andmutual trust" and with an open mind seeking common ground while putting aside differences, the Companyeffectively integrated all its business entities and continuously released the synergy with the industry chain, andhas become a successful example among domestic private enterprises in integration after domestic and foreignindustrial mergers and acquisitions. The valuable experience and accumulation in industry chain mergers,acquisitions and integrations lay a solid foundation and provide strong support for the Company to promote theimplementation of the five-year strategic planning and realize steady and sustainable development.
IV Core Business Analysis(I) OverviewIn 2021, the world economy was in gradual recovery, while China's economy experienced strong growth,with GDP up by over 8% year-on-year, exceeding RMB100 trillion for the second consecutive year. Andinvestments in the manufacturing sector and high-tech industries grew well in the country.2021 marked the first year of China's "14th Five-Year Plan". Under the strong leadership of the Board ofDirectors and the management team, Dongfang Precision took active actions and seized opportunities to promotethe steady and sound development of all the business divisions.
In 2021, the Company recorded operating revenue of approximately RMB3,524 million, up by 20.86%year-on-year, and a net profit attributable to its shareholders of approximately RMB467 million, up by 20.08%year-on-year. In the Reporting Period, the Company recorded basic earnings per share of RMB0.35/share, up by
34.62% year-on-year, and weighted average return on equity of 11.72%, up by 5.52% year-on-year.
(II) Analysis of the performance of the business divisions in the Reporting PeriodIn the Reporting Period, the main business divisions of the Company and the changes in their operatingrevenue are as follows:
[Table 5 Operating Revenue of the Three Main Business Divisions of Dongfang Precision 2021Vs2020]
| Business division | Operating revenue in 2021 (RMB'0,000) | Operating revenue in 2020 (RMB'0,000) | Change (%) |
| Corrugator lines | 252,217.41 | 215,017.30 | +17% |
| Corrugated box printing and packaging lines | 66,275.31 | 50,730.87 | +31% |
| Outboard power products | 46,873.16 | 34,622.82 | +35% |
1. The division of corrugator lines: The trend of steady development continued, and the businessquality steadily improvedThe business entities of the corrugator line division include the wholly-owned subsidiary Fosber Group(including Fosber Italy, Fosber America, QCorr and Tiru?a Group) and the holding subsidiary Fosber Asia.The corrugator line division is an important component of the Company's core corrugated packagingmachinery business, contributes to the majority of the Company's total revenue from principal business, and hasbeen steadily growing for consecutive years. From 2018 to 2021, the compound annual growth rate of theoperating revenue from it was about 16%.
(1) Fosber Group
Fosber Group's businesses, assets and team members are located in Europe and the United States. Allmember companies adopt localized management and operation, and have their product design, development andproduction and manufacturing in local regions in Europe and the United States. Their main products arecorrugator lines and corrugating rolls of different market positioning, and their finished products are eventuallyused for the production and processing of corrugated packaging products of different models.Corrugated packages are rigid consumer goods in European and American countries. The officialintroduction of the plastic ban in Europe in July 2021 accelerated the development of the era of "replacing plasticswith paper" in the packaging industry in European and American countries. Amazon and other companies hadpledged to use cardboard boxes instead of one-off plastic packages in Europe. The increase in the demand for
corrugated packaging products in Europe and America will be conducive to the increase in the demand forcorrugated packaging lines and production machinery.
Since most of the downstream end users of foreign subsidiaries are in the daily consumer goods industry, sothe business is less negatively affected by geopolitics, international trade and other factors, which together withproduct characteristics of high-tech, high quality and high stability and world-leading technical support services,enable the Company to realize steady and sustainable development in the global market.In 2021, the monetary policy in American and European countries continued to get loose, and themacroeconomy recovered. Benefiting from these positive changes, Fosber Group recorded growth in both theoperating revenue and number of orders, with the overall business quality and internal synergy steadilyimproving.
In 2019 and 2020, Fosber Group acquired the relevant business assets of Tiru?a Group, a nearly century-oldhigh-end corrugating roll and pressure roll manufacturer, and those of Agnati, a once splendent Italian corrugatorline manufacturer. A series of post-investment integration, operational adjustment, and other measures were takenafter the acquisitions, and the acquisitions bore fruits in 2021: The operating results of Tiru?a Group and QCorrboth improved from the same period last year, the order sales of Tiru?a Group's corrugating roll products grewyear-on-year, positive progress was made in the order sales of QCorr's Quantum high-speed corrugator lines andthe operational efficiency of the two companies was improved.
(2) Fosber Asia
In 2021, the subsidiary Fosber Asia took full advantage of development opportunities and increased itsbusiness development efforts in the domestic and Southeast Asian markets. Coupled with the impact of the lowperformance base under the pandemic in the same period last year, its operating results grew significantlyyear-on-year. In the same year, the Company increased its shareholding in Fosber Asia, with the shareholding upto 89.2% from 56.4%.
Fosber Asia's Pro-Line and E-Line corrugator lines are developed based on the characteristics of customerdemands in Chinese and Southeast Asian industry markets, and are produced in the plants located in NanhaiDistrict, Foshan City, with the import substitution rate of parts standing at around 90%. Fosber Asia hasestablished a stable supply chain system in China. Taking full advantage of China's industry chain and supplychain advantages with the most complete industrial categories and the most complete supporting facilities in theworld, Fosber Asia is able to provide industrial customers in the Chinese and Southeast Asian industry markets
with high-quality and high-end corrugator line products made in China.In the Reporting Period, the number of orders and shipments of Pro-Line products grew rapidly. In 2021, allorders on high-end lines had been delivered to industry-leading downstream customers, and the first batch ofcustomers in the Chinese market placed new orders on the same products, proving that the products and serviceswere recognized by customers in the industry. Positive progress has also been made in market expansion inSoutheast Asia, and orders on integrated lines have been delivered to customers in the industry in Thailand andIndia.
With the successive launch of its new middle- and high-end intelligent corrugator lines made in China andthe continuous growth of its market share in China and Southeast Asia, Fosber Asia is expected to have positivegrowth of operating results in the next few years. The Company's increase of its shareholding in Fosber Asia fullyshows its confidence in the development of Fosber Asia.
2. The division of corrugated box printing and packaging lines: The total operating revenue rapidly
grew year-on-year
In 2021 and in corrugated box printing and packaging machinery business, Dongfang Precision (China)overcame difficulties including rising prices of shipping positions, fluctuating prices of raw materials and limitedtraffic due to the pandemic, and saw steady growth of operating revenue and number of orders. In the year, itsteadily promoted its cooperation with large- and medium-sized customers in the downstream industry, such asShanying Intl, MYS, HXPP, XTL and Great Shengda, first sold its machinery in several emerging marketcountries along the Belt and Road Initiative, and had rapid growth of sales of its machinery in Asian marketsoutside China. A good and stable momentum of growth was also maintained in parts and service sales business.
In 2021, Dongfang Precision (Europe) made positive progress in the expansion of the American and Africanmarkets while consolidating its market share in Europe, with its high-end corrugated box printing and packagingmachinery highly recognized by large- and medium-sized enterprise customers in Europe and America.
3. The division of outboard power products: The sales of products grew rapidly and the business
efficiency continued to improve.
In 2021, the subsidiary Parsun Power saw rapid year-on-year growth in the number of orders and shipmentsof outboard motors and general utility small gasoline motor products owing to the continuously increasingdemand for water recreations of overseas countries during the pandemic.
Parsun Power actively seized market opportunities, intensified its marketing to domestic and foreigncustomers, continuously increased R&D input and optimized the product structure. In the Reporting Period,Parsun Power saw an increase of over 50% year-on-year in the sales revenue from medium- and high-horsepoweroutboard motors, realized the mass production of independently-developed 115hp gasoline outboard motors, andbroke the long-term monopoly of internationally well-known brands in the 115hp sector.Since 2021, Parsun Power has been making breakthroughs in the agency sales of OXE Marinehigh-horsepower diesel outboard motors in the domestic market, and the diesel outboard motors it has been sellingare mainly used in commercial transportation and official law enforcement.In the Reporting Period, Parsun Power actively improved the level of operations management, and recruitedoutstanding talents in R&D, sales, production, and operation. As a result, the comprehensive strength of the teamwas further enhanced, and the development foundation was further consolidated. Furthermore, by implementinglean management, as well as improving operational efficiency and capacity utilization, Parsun Power achievedsteady improvement in shipment quality, providing support for the shipment growth of medium- andhigh-horsepower models.
4. The business of overall solutions for intelligent plants: Set sail and forge ahead steadily
The subsidiary Dongfang Digicome undertakes the overall solution business for intelligent corrugatedpackaging plants. In 2021, Dongfang Digicom completed team building, and had the number of team membersincreased from 3 at the beginning of the year to over 40 at the end of 2021, most of which were technical expertsin software R&D with experience in the Internet or high-end manufacturing industry. Besides, Dongfang Digicomalso completed the organizational structure and internal mechanism required for normal operation as anindependent company.
In 2021, Dongfang Digicom investigated the demand of downstream industry customers for industrialInternet solutions, and got a clearer roadmap for product R&D, with steady progress in the R&D of solutionproducts.
5. Epitaxial business: The implementation of the "1+N" model was promoted, and the development
space of emerging industries was expanded
During the Reporting Period, the main progress of the Company's epitaxial development business is asfollows:
A. High-end manufacturing sector: The Company invested in three enterprises in the high-end coreparts manufacturing sector
a) Investment in Guizhou Aerospace Xinli Technology Co., Ltd.
In the Reporting Period, the Company invested in Guizhou Aerospace Xinli Technology Co., Ltd. throughdirect equity participation. Aerospace Xinli is affiliated to China Aerospace Science and Technology Corporation("CASC"), and mainly engages in the R&D, production and manufacturing of high-quality alloy steel castings andforgings, non-ferrous castings and structures and new aerospace materials that are widely used in nuclear energy,nuclear power, aviation and aerospace. It is a domestically renowned manufacturer of nuclear-level parts andcomponents qualified for the R&D of national defense equipment. Aerospace Xinli undertakes not only themanufacturing of the magnets supports, shield cladding and other critical equipment for the InternationalThermonuclear Experimental Reactor (ITER) Project, one of the world's largest international research cooperationprojects, but also the R&D and production of grade I nuclear mechanical equipment components of most ofChina's nuclear power plants, with in-depth participation in the home-manufacturing process of China's nuclearpower construction. It has realized the R&D and home-manufacturing of dozens of alloy materials and criticalcomponents for nuclear power equipment, and its products have covered nuclear fission reactors of the second,third and fourth generations, many of which are the first in China. Aerospace Xinli has successfully replacedimported materials and components with the ones made in China, and has become a "little giant" enterprisehighlighted by CASC.
b) Investment in Chengdu Dajin Aero-Tech Co., Ltd. (formerly known as "Sichuan Dajin StainlessSteel Co., Ltd.)
In the Reporting Period, the Company indirectly invested in Chengdu Dajin Aero-Tech Co., Ltd. ("DajinAero-Tech") by making a capital contribution to Tianjin Hangchuang Zhijin Investment Partnership (LimitedPartnership). Dajin Aero-Tech is specialized in the precision machining and manufacturing of critical parts foraircraft engines, and has the qualification for the R&D of national defense equipment. Its core products are thecritical parts for aircraft engines, which are characterized by complex structures, great difficulties in testing andhigh tolerance. Dajin Aero-Tech enjoys a leading position in its segmentation, and is one of the private enterpriseswith strong comprehensive strength in the aviation engine parts industry in China. It is not only an importantsupplier of China's major aero-engine models but also the core supplier for the main maintenance plants of theaero-engines of air forces, and has been shouldering the great mission of acting as strong support for Aero Engine
Corporation of China, the main force in the whole-machine manufacturing of China's aero-engine industry. Whileenjoying a firm position in the aviation field, Dajin Aero-Tech has been gradually using the advancedmanufacturing technologies it has accumulated in the fields of aerospace, missiles, rail transportation andpetroleum machinery manufacturing.c) Investment in Sichuan Tengdun Technology Co., Ltd.In the Reporting Period, the Company directly invested in Sichuan Tengdun Technology Co., Ltd. ("TengdunTechnology") by making a capital contribution to Qingdao Zhongjun Xinghan No. 2 Equity Investment FundCenter (Limited Partnership). Tengdun Technology is a state-level high-tech enterprise specialized in high-endUAVs. It is the only private military UAV assembly manufacturer in China, and aims at "creating the future ofcommercialization of China's UAVs with aviation and intelligent technologies". The core team of the company iscomposed of the chief scientists of the Science and Technology Commission of the Central Military Commission,the former director of the China Helicopter Research & Development Institute, chief experts of Aviation IndustryCorporation of China and other outstanding experts in the industry, and once led or participated in the wholeprocess of R&D and production of several key models at home and abroad including the second-generationmodels, third-generation models, fourth-generation models and over ten UAV systems. The company's R&D teamgathers top experts in over 60 scientific sectors, and represents the top level in China.Successively, Tengdun Technology has developed five large- and medium-sized high-end UAVs withindependent intellectual property rights, undertaken a number of major national programs to tackle key problemsand demonstration projects, and continuously explored new scenarios for the application of UAVs, makingmultiple breakthroughs "from 0 to 1".
The Twin-Tailed Scorpion double-engine large-sized long-endurance UAV independently developed byTengdun Technology is the first large-sized double-engine fixed-wing UAV independently designed anddeveloped in China, ahead of foreign products of the same type. In October 2021, the Twin-Tailed Scorpion UAVattracted extensive attention from both domestic and foreign media in the 13th China International Aviation &Aerospace Exhibition in Zhuhai.B. Other sectors: The Company invested in 3 companies in the consumer and innovativepharmaceutical sectorsd) Investment in SF Intra-City (09699.HK)In the Reporting Period, the Company indirectly invested in SF Intra-City by making a capital contribution to
the establishment of Jiaxing Fengrong Equity Investment Partnership (Limited Partnership). SF Intra-City is thelargest independent third-party instant logistics service provider in China, a holding subsidiary of SF Holding(Stock code: 002352), and has been listed on the main board of the Hong Kong Stock Exchange at the end of2021.e) Investment in Nanjing Profeta Intelligent Technology Co., Ltd.In the Reporting Period, the subsidiary Yineng Investment invested in Nanjing Profeta IntelligentTechnology Co., Ltd. ("Profeta") through direct equity participation. Profeta is a state-level high-tech enterprisespecialized in the digitalization and innovation of oral technologies. It has established close strategic cooperationwith Peking University Hospital of Stomatology for the joint development of innovative products, intelligentsoftware and automatic equipment by integrating industries, colleges and research institutes and sharing scientificresearch achievements, so as to solve the contradiction between the rapidly growing healthcare needs of the agingsociety and the absolute shortage of dental professionals.Profeta is the only company in China that integrated dental design software, typesetting and slicing softwareand metal 3D printer, and has independent intellectual property rights. Its products can fully replace imported ones,and are China's first, filling in domestic blanks and breaking the monopoly of foreign companies.
f) Investment in Xuanzhu Biopharmaceutical Co., Ltd.In the Reporting Period, the subsidiary Yineng Investment indirectly invested in Xuanzhu BiopharmaceuticalCo., Ltd. ("Xuanzhu Biopharm") by making a capital contribution to Jiangmen Yifeng Yihe Venture CapitalPartnership (Limited Partnership). Xuanzhu Biopharm is a holding subsidiary of Sichuan PharmaceuticalHoldings, a large pharmaceutical and medical beauty group, and is specialized in innovative drugs. XuanzhuBiopharm has an excellent R&D team bringing together nearly 400 overseas scientists, and has formed a completeR&D system and independent R&D capability in the field of innovative drugs. It has two R&D platforms of smallmolecule and large molecule, and is capable of developing and industrializing innovative drugs for tumors,metabolism, anti-infection, digestion and other segmentations.
C. Impacts of epitaxial business on the overall development of the CompanyThe business purpose of Yineng Investment, the subsidiary, is to focus on the industries related to itsprincipal business and seek investment opportunities in high-end machinery manufacturing, large consumptionand bio-pharmaceuticals while carrying out industrial mergers and acquisitions based on industries, assisted bycapital, guided by its strategic planning and driven by circulation.
In the Reporting Period, Yineng Investment's team was responsible for promoting initiated projects and, inaddition to the aforesaid six investment projects, increased its shareholding in the industrial M&A project ofFosber Asia. With the minds of domineering entry and positive actions, Yineng Investment promoted theimplementation of the "1+N" development model, and made positive contributions to the Company's layout inrelevant industries.
The aforesaid equity investment projects are in line with the Company's overall strategic planning and thepurpose of epitaxial business and conducive to the Company's expansion of the development space of emergingindustries, enable the Company to fully participate in the industries that the country encourages to develop in the"14th Five-Year Plan" and share benefits in the process of growth and development along with the subject mattersof the investments, and power the Company's improvement overall profitability.
The aforesaid equity investments do not constitute related-party transactions or major assets restructuring,and exert no significant impacts on the Company's operating results or financial condition in the Reporting Period.(III) Capital operation: The capabilities to create value and seek returns for shareholders wereimproved
1. Initiation of the spin-off listing of the subsidiary Parsun Power
In the Reporting Period, the Management of the Company initiated the preliminary preparation for thespin-off listing of Parsun Power on the Shenzhen Stock Exchange with the approval and authorization of theBoard of Directors. After nearly one year of preliminary preparation, the Company's Board of Directors approvedthe plan for the spin-off listing of Parsun Power in mid-March 2022, and the subsequent work will be advancedafter the plan is approved by the Company's annual general meeting.
2. Repurchase and retirement of shares of nearly RMB1 billion to improve the earnings per share
In the Reporting Period, the Company actively promoted and completed the annual share repurchase in 2020initiated in July 2020, and repurchased a total of 212 million shares through centralized bidding, with the totalamount paid of about RMB990 million, in line with the repurchase plan.
In June 2021, the Company retired the aforesaid 212 million repurchased shares with the Shenzhen office ofChina Securities Depository and Clearing Corporation Limited. After the retirement, the total share capitalchanged from 1.54 billion shares to 1.33 billion shares, down 13.77%, which is conducive to the improvement ofthe earnings per share (EPS).
In October 2021, as approved by the general meeting, the Company initiated the new annual share repurchasein 2021. As at the end of 2021, the Company has repurchased approximately 56,797,700 shares throughcentralized bidding at the cost of about RMB335 million, accounting for 4.26% of the Company's current totalshare capital.The proposal and initiation of the share repurchase plan fully reflect the Company's recognition of its ownvalue, confidence in its future development and high attention to the return for shareholders.
3. Equity incentives were steadily promoted to stimulate the internal power
In the Reporting Period, the Company, as scheduled, steadily promoted the restricted share incentive planinitiated in 2020. In February 2021, it granted a total of 4.24 million incentive shares to 18 key personnel andmanagement personnel, and in June 2021, a total of 4.31 million incentive shares were exercised for public tradingby 37 awardees in the first unlocking period under the incentive plan.
Steady promotion of equity incentives is beneficial to the Company's sustainable and healthy developmentand gathering of internal power, so as to "stabilize the team, boost the morale, gather talents and improveperformance". By closely binding the interests of the Company's key personnel with the Company's futureperformance and the improvement of the capability to seek returns for shareholders, the Company will seecontinuous improvement in its business performance and the ability to create value.
4. Idle funds were proactively managed with controllable risks
In 2021, the Company and its subsidiary Yineng Investment invested temporarily idle funds on the accountbook in securities or entrusted to wealth management business under the premise of complying with laws andregulations, not affecting the development of the Company principal business and ensuring the capital demandand capital security in daily operation with the approval and authorization of the general meeting and the Board ofDirectors of the Company and in accordance with the Policy for Securities Investment Management. The proactivemanagement of idle funds is conducive to improving capital utilization efficiency, increasing the return on netassets, and enhancing the capability to create value.
(IV) Analysis of key financial indicators
1. Revenue and Cost Analysis
(1) Breakdown of Operating Revenue
Unit: RMB
| 2021 | 2020 | Change (%) | |||
| Operating revenue | As a % of total operating revenue (%) | Operating revenue | As a % of total operating revenue (%) | ||
| Total | 3,524,734,783.94 | 100% | 2,916,270,143.13 | 100% | 20.86% |
| By operating division | |||||
| Intelligent manufacturing | 3,524,734,783.94 | 100.00% | 2,916,270,143.13 | 100.00% | 20.86% |
| By product category | |||||
| Complete lines and individual machine units for intelligent corrugated packaging machinery | 2,061,999,014.24 | 58.50% | 1,707,235,536.74 | 58.54% | 20.78% |
| Parts for intelligent corrugated packaging machinery | 693,308,371.22 | 19.67% | 556,259,860.62 | 19.07% | 24.64% |
| Software and services related to intelligent corrugated packaging machinery | 300,695,762.82 | 8.53% | 306,546,506.92 | 10.51% | -1.91% |
| Outboard motors and general utility small gasoline motors | 468,731,635.66 | 13.30% | 346,228,238.85 | 11.87% | 35.38% |
| By operating segment | |||||
| Mainland China | 528,007,403.05 | 14.98% | 349,869,885.20 | 12.00% | 50.92% |
| Other countries and regions | 2,996,727,380.89 | 85.02% | 2,566,400,257.93 | 88.00% | 16.77% |
| By sales mode | |||||
| Direct selling | 3,096,762,855.79 | 87.86% | 2,700,416,408.47 | 92.60% | 14.68% |
| Distribution selling | 427,971,928.15 | 12.14% | 215,853,734.66 | 7.40% | 98.27% |
(2) Operating Division, Product Category or Operating Segment Contributing over 10% of OperatingRevenue or Operating Profit
√ Applicable □ Not applicable
Unit: RMB
| Operating revenue | Cost of sales | Gross profit margin | YoY change in operating revenue (%) | YoY change in cost of sales (%) | YoY change in gross profit margin (%) | |
| By operating division | ||||||
| Intelligent manufacturing | 3,524,734,783.94 | 2,555,072,059.79 | 27.51% | 20.86% | 21.72% | -0.51% |
| By product category | ||||||
| Complete lines and individual machine units for intelligent corrugated packaging machinery | 2,061,999,014.24 | 1,567,772,384.89 | 23.97% | 20.78% | 19.47% | 0.83% |
| Parts for intelligent corrugated packaging machinery | 693,308,371.22 | 394,697,198.83 | 43.07% | 24.64% | 39.00% | -5.88% |
| Software and services related to intelligent corrugated packaging machinery | 300,695,762.82 | 231,464,311.51 | 23.02% | -1.91% | 0.92% | -2.16% |
| Outboard motors and general utility small gasoline motors | 468,731,635.66 | 361,138,164.56 | 22.95% | 35.38% | 32.00% | 1.97% |
| By operating segment | ||||||
| Mainland China | 528,007,403.05 | 353,097,535.89 | 33.13% | 50.92% | 49.12% | 0.81% |
| Other countries and regions | 2,996,727,380.89 | 2,201,974,523.90 | 26.52% | 16.77% | 18.24% | -0.91% |
| By sales mode | ||||||
| Direct selling | 3,096,762,855.79 | 2,248,309,271.48 | 27.40% | 14.68% | 14.93% | -0.16% |
| Distribution selling | 427,971,928.15 | 306,762,788.31 | 28.32% | 98.27% | 114.61% | -5.46% |
Note:
Under the circumstances that the statistical caliber of the company's main business data is adjusted in the reporting period, thecompany's main business data that adjusted according to the caliber at the end of the reporting period
□ Applicable √ Not applicable
(3) Whether Revenue from Physical Sales Is Higher than Service Revenue
√ Yes □ No
| Operating division | Item | Unit | 2021 | 2020 | Change (%) |
| Intelligent manufacturing | Unit sales | Unit | 327,755 | 289,152 | 13.35% |
| Output | Unit | 309,027 | 288,738 | 7.03% |
| Inventory | Unit | 29,079 | 7,854 | 270.24% |
Any over 30% YoY movements in the data above and why:
√ Applicable □ Not applicable
At the end of the year, the inventory increased by about 270%, mainly due to the increase of sales in 2021, and the increase ofinventory reserves to cope with the increased orders.
(4) Execution Progress of Major Signed Sales Contracts in the Reporting Period
□ Applicable √ Not applicable
(5) Breakdown of Cost of Sales
By operating division and product category
Unit: RMB
| Operating division | Item | 2021 | 2020 | Change (%) | ||
| Cost of sales | As a % of total cost of sales (%) | Cost of sales | As a % of total cost of sales (%) | |||
| Intelligent manufacturing | Cost of sales | 2,555,072,059.79 | 100.00% | 2,099,148,826.36 | 100.00% | 21.72% |
Unit: RMB
| Product category | Item | 2021 | 2020 | Change (%) | ||
| Cost of sales | As a % of total cost of sales (%) | Cost of sales | As a % of total cost of sales (%) | |||
| Complete lines and individual machine units for intelligent corrugated packaging machinery | Cost of sales | 1,567,772,384.89 | 61.36% | 1,312,266,465.90 | 62.51% | 19.47% |
| Parts for intelligent corrugated packaging machinery | Cost of sales | 394,697,198.83 | 15.45% | 283,953,498.63 | 13.53% | 39.00% |
| Software and services related to intelligent corrugated packaging | Cost of sales | 231,464,311.51 | 9.06% | 229,344,819.77 | 10.93% | 0.92% |
| machinery | ||||||
| Outboard motors and general utility small gasoline motors | Cost of sales | 361,138,164.56 | 14.13% | 273,584,042.06 | 13.03% | 32.00% |
(6) Changes in the Scope of Consolidated Financial Statements for the Reporting Period
√ Yes □ No
Dongfang Digicom Technology (Guangdong) Co., Ltd. (“Digicom Guangdong”) has been incorporated by the Company inFebruary 2021 with a registered capital of RMB8 million. The Company has its 100% ownership in an indirect way.Suzhou Parsun Power Technology Co., Ltd. (“Parsun Power Technology”) has been incorporated by the Company’s subsidiaryParsun Power with a registered capital of RMB10 million. The Company has its 69.55% ownership in an indirect way.
Tianjin Hangchuang Zhijin Investment Partnership (Limited Partnership) (“Tianjin Hangchuang Fund”) has been establishedjointly by the Company and AVIC Innovation Capital Management Co., Ltd. in March 2021. As the sole limited partner of the Fund,the Company has made a capital contribution of RMB20 million, equivalent to approximately 95% ownership. This investment is inline with the Company’s development strategy considering the Fund’s investment direction, decision-making, management, incomedistribution, loss allocation, etc. From the perspective of business nature, the Company provides the absolute majority of the capitalof the Tianjin Hangchuang Fund, so it is reasonable to include the Fund in the Company’s consolidated financial statements of theReporting Period.
(7) Major Changes to the Business Scope or Product or Service Range in the Reporting Period
□ Applicable √Not applicable
(8) Major Customers and Suppliers
Major customers:
| Total sales to top five customers (RMB) | 633,943,286.53 |
| Total sales to top five customers as a % of total sales of the Reporting Period (%) | 17.99% |
| Total sales to related parties among top five customers as a % of total sales of the Reporting Period (%) | 0.00% |
Top five customers:
| No. | Customer | Sales revenue contributed for the Reporting Period (RMB) | As a % of total sales revenue (%) |
| 1 | Customer A | 263,362,372.19 | 7.47% |
| 2 | Customer B | 130,868,995.76 | 3.71% |
| 3 | Customer C | 111,965,823.90 | 3.18% |
| 4 | Customer D | 64,415,975.20 | 1.83% |
| 5 | Customer E | 63,330,119.49 | 1.80% |
| No. | Customer | Sales revenue contributed for the Reporting Period (RMB) | As a % of total sales revenue (%) |
| Total | -- | 633,943,286.53 | 17.99% |
Other information about major customers:
□ Applicable √ Not applicable
Major suppliers:
| Total purchases from top five suppliers (RMB) | 279,015,637.64 |
| Total purchases from top five suppliers as a % of total purchases of the Reporting Period (%) | 10.92% |
| Total purchases from related parties among top five suppliers as a % of total purchases of the Reporting Period (%) | 0.00% |
Top five suppliers:
| No. | Supplier | Purchase in the Reporting Period (RMB) | As a % of total purchases (%) |
| 1 | Supplier A | 154,609,666.50 | 6.05% |
| 2 | Supplier B | 38,048,680.68 | 1.49% |
| 3 | Supplier C | 34,455,510.20 | 1.35% |
| 4 | Supplier D | 26,258,213.44 | 1.03% |
| 5 | Supplier E | 25,643,566.82 | 1.00% |
| Total | -- | 279,015,637.64 | 10.92% |
Other information about major suppliers:
□ Applicable √ Not applicable
2. Expenses
Unit: RMB
| 2021 | 2020 | Change (%) | Reason for any significant change | |
| Selling expenses | 185,327,678.18 | 181,549,459.69 | 2.08% | No significant impact. |
| Administrative expenses | 272,090,728.08 | 246,973,016.40 | 10.17% | No significant impact. |
| Finance costs | -5,996,474.46 | 7,919,670.28 | -175.72% | Mainly due to the increase in interest income and reduced exchange losses. |
| R&D expenses | 99,557,565.46 | 82,082,274.75 | 21.29% | Mainly due to the increase in R&D. |
3. R&D Investments
√ Applicable □ Not applicable
| Main R&D projects | Purpose | Project progress | Objectives to be achieved | Expected impact on the Company |
| Localization of a world-leading high-end corrugator line | To introduce the world-leading high-end corrugator line and make it localized to meet the needs of Chinese customers for the highest-end and highest-speed corrugator line. | Promote as planned | Mass production for sales in the domestic market | Further enrich the Company's product portfolio which can become a new profit growth point for the Company's corrugated box printing and packaging machinery. |
| Smart fast order switching system | To achieve the fastest small order switch in Asia in response to the characteristics of orders with "Small Quantity + Multi-batch + Diversified Demands" and frequent switch for production order in the Chinese market. | Promote as planned | Mass production for sales in the domestic market | Further improve the utilization of corrugator line, improve the accuracy of the machine, upgrade the product library to have advantage in the market competition. |
| A complete set of fixed forming corrugated box printing and packaging machinery | To introduce a complete set of high-performance, cost-effective fixed corrugated box printing and packaging line with model change without suspension and quick order change. | Promote as planned | Mass production for sales in the world | Further enrich the Company's product portfolio which can become a new profit growth point for the Company's corrugated box printing and packaging machinery. |
| A complete set of forming corrugated box printing and stapling machinery | To introduce a complete set of high-performance, cost-effective corrugated box bottom printing machinery + fold gluer line. | Sales have been achieved. | Mass production for sales in the domestic market | Further enrich the Company's product portfolio which can become a new profit growth point for the Company's corrugated box printing and packaging machinery. |
| High horsepower outboard motors | To make up the blank market of high horsepower outboard motors, and further enhance the competitiveness of products. | Promote as planned | Mass production for sales in the world | Meet the demand for high horsepower outboard motors in domestic and international markets, becoming a new profit growth point for the Company. |
| Electric outboard motors | To develop a battery-powered outboard motor to further enhance product competitiveness in the new energy outboard motor market. | Promote as planned | Mass production for sales in the world | Meet market demand and become a new profit growth point for the Company. |
Details about R&D personnel:
| 2021 | 2020 | Change (%) | |
| Number of R&D personnel | 284 | 236 | 20.34% |
| R&D personnel as a % of total | 15.33% | 13.98% | 1.35% |
| employees | |||
| Educational background of R&D personnel | |||
| Bachelor’s degree | 109 | 85 | 28.24% |
| Master’s degree and above | 41 | 36 | 13.89% |
| Other | 134 | 115 | 16.52% |
| Age structure of R&D personnel | —— | —— | —— |
| Under 30 | 68 | 44 | 54.55% |
| 30-40 | 113 | 89 | 26.97% |
| Other | 103 | 103 | 0.00% |
Details about R&D investments:
| 2021 | 2020 | Change (%) | |
| R&D investments (RMB) | 99,557,565.46 | 98,696,270.15 | 0.87% |
| R&D investments as a % of operating revenue | 2.82% | 3.38% | -0.56% |
| Capitalized R&D investments (RMB) | 0.00 | 16,613,995.40 | -100.00% |
| Capitalized R&D investments as a % of total R&D investments | 0.00% | 16.83% | -16.83% |
Reasons for any significant change to the composition of R&D personnel and the impact:
□ Applicable √ Not applicable
Reasons for any significant YoY change in the percentage of R&D investments in operating revenue:
□ Applicable √ Not applicable
Reason for any sharp variation in the percentage of capitalized R&D investments and rationale:
√ Applicable □ Not applicable
It is mainly due to the fact that the Company had no project in which R&D expenses were capitalized in 2021.
4. Cash Flows
Unit: RMB
| Item | 2021 | 2020 | Change (%) |
| Subtotal of cash generated from operating activities | 3,506,294,160.56 | 3,274,395,655.64 | 7.08% |
| Subtotal of cash used in operating activities | 3,199,634,884.54 | 2,723,399,623.89 | 17.49% |
| Net cash generated from/used in operating activities | 306,659,276.02 | 550,996,031.75 | -44.34% |
| Item | 2021 | 2020 | Change (%) |
| Subtotal of cash generated from investing activities | 7,120,320,577.02 | 2,321,860,300.51 | 206.66% |
| Subtotal of cash used in investing activities | 5,814,962,692.72 | 3,505,386,890.24 | 65.89% |
| Net cash generated from/used in investing activities | 1,305,357,884.30 | -1,183,526,589.73 | 210.29% |
| Subtotal of cash generated from financing activities | 598,858,984.67 | 557,812,012.95 | 7.36% |
| Subtotal of cash used in financing activities | 1,757,363,205.25 | 1,311,605,832.73 | 33.99% |
| Net cash generated from/used in financing activities | -1,158,504,220.58 | -753,793,819.78 | 53.69% |
| Net increase in cash and cash equivalents | 398,702,538.96 | -1,366,123,500.61 | -129.18% |
Explanation of why any of the data above varies significantly on a year-on-year basis:
√ Applicable □ Not applicable
(1) Net cash generated from operating activities was RMB 306,659,300, primarily because the company's revenuegrowth during the reporting period.
(2) Net cash used in investing activities was RMB 1,305,357,900, primarily because the company's redemption oflarge-value wealth management products during the reporting period.
(3) Net cash used in financing activities was RMB 1,158,504,200, primarily because the company's payment of loandeposits, acquisition of minority shareholders' equity and implementation of share repurchase during the reportingperiod.
(4) Net decrease in cash and cash equivalents was RMB 398,702,500, primarily because the inflow of net cash flowsfrom the company's operating activities and investment activities during the reporting period.
V Analysis of Non-Core Businesses
√ Applicable □ Not applicable
Unit: RMB
| Amount | As a % of gross profit | Primary source/reason | Recurrent or not | |
| Return on investment | 98,673,106.02 | 20.54% | Mainly due to the income from securities investment in the current period and the income from by the associates companies under the equity method. | Yes |
| Gain/loss on changes in fair value | -21,357,785.81 | -4.45% | Mainly due to the comprehensive impact of securities investment and changes in fair value of minority shareholders' options. | Yes |
| Amount | As a % of gross profit | Primary source/reason | Recurrent or not | |
| Asset impairment loss | -10,936,754.10 | -2.28% | No significant impact. | No |
| Non-operating income | 5,750,547.04 | 1.20% | No significant impact. | No |
| Non-operating expenses | 1,462,018.81 | 0.30% | No significant impact. | No |
VI Analysis of Assets and Liabilities
1. Significant Changes in Asset Composition
Indicate whether the Company has adopted the new accounting standards governing revenue and leases since 2020 and restated thebeginning amounts of relevant financial statement line items in the year.Applicable.
Unit: RMB
| 31 December 2021 | 1 January 2021 | Change in percentage (%) | Reason for any significant change | |||
| Amount | As a % of total assets | Amount | As a % of total assets | |||
| Cash and bank balances | 1,664,336,339.35 | 26.18% | 885,711,053.88 | 14.01% | 12.17% | Mainly due to the transfer of some large-denomination certificates of deposit, the redemption of some wealth management products and securities investments, and the sale of part of the equity of Parsun. |
| Accounts receivable | 741,135,648.09 | 11.66% | 469,635,423.58 | 7.43% | 4.23% | Mainly due to the increase in sales this year. |
| Contract assets | 24,414,117.64 | 0.38% | 29,504,693.97 | 0.47% | -0.09% | No major changes. |
| Inventories | 867,280,013.47 | 13.64% | 734,120,595.26 | 11.61% | 2.03% | No major changes. |
| Investment property | 0.00% | 0.00% | 0.00% | No major changes. | ||
| Long-term equity investments | 84,777,596.67 | 1.33% | 72,671,204.73 | 1.15% | 0.18% | No major changes. |
| Fixed assets | 544,180,159.09 | 8.56% | 571,413,480.14 | 9.04% | -0.48% | No major changes. |
| Construction in progress | 12,298,259.58 | 0.19% | 9,062,038.52 | 0.14% | 0.05% | No major changes. |
| Right-of-use assets | 80,386,832.91 | 1.26% | 98,686,849.28 | 1.56% | -0.30% | Mainly due to the implementation of the new lease-related accounting standards. |
| Short-term borrowings | 228,312,880.73 | 3.59% | 39,533,281.84 | 0.63% | 2.96% | No major changes. |
| Contract liability | 405,842,932.51 | 6.38% | 362,792,713.35 | 5.74% | 0.64% | No major changes. |
| Long-term borrowings | 325,026,188.49 | 5.11% | 353,412,388.29 | 5.59% | -0.48% | No major changes. |
| Lease obligation | 65,213,555.87 | 1.03% | 82,805,889.63 | 1.31% | -0.28% | Mainly due to the implementation of the new lease-related accounting standards. |
Major Assets Overseas
√ Applicable □ Not applicable
| Asset | Source | Asset value (RMB) | Location | Management model | Control measures to protect asset safety | Return | As a % of the Company’s net asset value | Any material impairment risk or not |
| 100% interest of Fosber S.p.A. | M&A | 728,952,924.02 | Italy | Producing and marketing by itself | Operation management | Good | 18.90% | Not |
| 100% interest of EDF S.R.L | M&A | 26,129,838.13 | Italy | Producing and marketing by itself | Operation management | Good | 0.68% | Not |
2. Assets and Liabilities at Fair Value
√ Applicable □ Not applicable
Unit: RMB
| Item | Opening amount | Gain/loss on fair-value changes in the period | Cumulative fair-value changes recognized in equity | Impairment allowance for the period | Purchased in the period | Sold in the period | Other changes | Closing amount |
| Financial assets | ||||||||
| 1. Financial assets held for trading (exclusive of derivative financial assets) | 1,635,465,408.96 | 14,650,064.50 | 5,607,824,747.18 | 6,569,326,837.06 | 86,635,637.36 | 775,249,020.94 | ||
| 2. Derivative financial assets | 831,021.35 | 12,841,980.43 | -736,501.15 | 12,936,500.63 | ||||
| Subtotal of financial assets | 1,636,296,430.31 | 27,492,044.93 | 5,607,824,747.18 | 6,569,326,837.06 | 85,899,136.21 | 788,185,521.57 | ||
| Item | Opening amount | Gain/loss on fair-value changes in the period | Cumulative fair-value changes recognized in equity | Impairment allowance for the period | Purchased in the period | Sold in the period | Other changes | Closing amount |
| Other non-current financial assets | 5,948,588.15 | 25,029,844.93 | 132,412,131.04 | -867,044.71 | 162,523,519.41 | |||
| Total of the above | 1,642,245,018.46 | 52,521,889.86 | 5,740,236,878.22 | 6,569,326,837.06 | 85,032,091.49 | 950,709,040.98 | ||
| Financial liabilities | 110,145,525.05 | 73,879,675.67 | 104,771,579.02 | 36,121,968.12 | -5,749,568.14 | 246,925,243.48 |
Particulars about other changes:
Indicate whether any significant change occurred to the measurement attributes of the major assets in the Reporting Period.
□ Yes √ No
3. Assets to which the Company’s Rights Were Restricted as at the Period-End
Unit: RMB
| Item | Closing carrying amount | Reason for restriction |
| Cash and bank balances | 405,032,563.61 | Used to obtain bank acceptance bills and letters of guarantee. |
Fixed assets
| Fixed assets | 4,533,314.25 | Used by subsidiaries to obtain bank loans. |
| Other non-current assets | 300,150,000.00 | Used by subsidiaries as margin for bank loan. |
| Total | 709,715,877.86 |
VII Investments Made
1. Total Investment Amount
√ Applicable □ Not applicable
| Total investment amount in 2021 (RMB) | Total investment amount in 2020 (RMB) | Change (%) |
| 1,608,856,907.68 | 1,861,603,704.43 | -13.58% |
2. Significant Equity Investments Acquired in the Reporting Period
□ Applicable √ Not applicable
3. Significant Non-Equity Investments of which the Acquisition Was Uncompleted in the Reporting Period
□ Applicable √ Not applicable
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
4. Financial Investments
(1) Securities Investments
√ Applicable □ Not applicable
Unit: RMB
| Security type | Security code | Security name | Initial investment cost | Measurement method | Opening carrying amount | Gain/loss on fair-value changes in the period | Cumulative fair-value changes recognized in equity | Purchased in the period | Sold in the period | Gain/loss in the period | Closing carrying amount | Accounting title | Funding source |
| Domestically/ overseas listed stocks | - | - | 0.00 | Fair value | 0.00 | 0.00 | 0.00 | 3,924,621,914.69 | 4,001,955,994.34 | 77,334,079.65 | 0 | Financial assets held for trading | Self-funded |
| Trust products | - | - | 504,767,340.61 | Fair value | 504,767,340.61 | 5,951,168.61 | 0.00 | 110,000,000.00 | 615,247,090.20 | 7,111,322.60 | 6,631,573.01 | Financial assets held for trading | Self-funded |
| Funds | - | - | 619,890,000.00 | Fair value | 619,890,000.00 | 8,055,849.06 | 0.00 | 300,000,000.00 | 301,136,060.92 | 9,253,985.66 | 628,007,924.74 | Financial assets held for trading | Self-funded |
| Others | - | - | 511,639,089.70 | 511,639,089.70 | 643,046.83 | 0.00 | 1,273,202,832.49 | 1,650,987,691.60 | 6,755,292.60 | 140,609,523.19 | Financial assets held for trading | Self-funded | |
| Total | 1,636,296,430.31 | -- | 1,636,296,430.31 | 14,650,064.50 | 0.00 | 5,607,824,747.18 | 6,569,326,837.06 | 100,454,680.51 | 775,249,020.94 | -- | -- | ||
| Disclosure date of the board announcement approving the securities investments | The company held its board meeting on March 29, 2021 to consider and approve the resolutions related to securities investment in 2021. The securities investment is valid for 12 months from the date of approval at the general meeting of shareholders, and the announcement date of the resolutions of the board is March 30, 2021. | ||||||||||||
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
| Security type | Security code | Security name | Initial investment cost | Measurement method | Opening carrying amount | Gain/loss on fair-value changes in the period | Cumulative fair-value changes recognized in equity | Purchased in the period | Sold in the period | Gain/loss in the period | Closing carrying amount | Accounting title | Funding source |
| Disclosure date of the general meeting announcement approving the securities investments (if any) | The company held a general meeting of shareholders on April 19, 2021 to approve the resolutions related to securities investment in 2021. The announcement date of the resolutions of the general meeting of shareholders is April 20, 2021. | ||||||||||||
(2) Investments in Derivative Financial Instruments
□ Applicable √ Not applicable
No such cases in the Reporting Period.
5. Use of Raised Funds
□ Applicable √Not applicable
VIII Sale of Major Assets and Equity Investments
1. Sale of Major Assets
□ Applicable √ Not applicable
No such cases in the Reporting Period.
2. Sale of Major Equity Investments
□ Applicable √ Not applicable
IX Principal Subsidiaries and Joint Stock Companies
√ Applicable □ Not applicable
Principal subsidiaries and joint stock companies with an over 10% effect on the consolidated net profit:
Unit: RMB yuan
| Name | Relationship with the Company | Principal activities | Registered capital | Total assets | Net assets | Operating revenue | Operating profit | Net profit |
| Fosber Group | Subsidiary | R&D, processing, manufacturing and marketing of corrugator lines and parts, as well as provision of after-sales services | EUR1.56 million | 1,860,272,746.08 | 728,952,924.02 | 2,149,242,698.15 | 276,192,997.51 | 221,879,267.72 |
| Shunyi Investment | Subsidiary | Production of general utility small gasoline motors, shipboard power (outboard motors) and its accessories, as well as provision of after-sales service | RMB10 million | 409,633,798.32 | 246,784,791.72 | 468,680,560.33 | 66,707,243.30 | 59,276,316.98 |
Subsidiaries acquired or disposed of in the Reporting Period:
□ Applicable √ Not applicable
X Structured Bodies Controlled by the Company
√ Applicable □ Not applicable
In March 2021, the Company held the 3rd meeting of the M&A Review Committee in 2021 and approved toestablish Tianjin Hangchuang Zhijin Investment Partnership (Limited Partnership) (the "Tianjin Hangchuang Fund" orthe "Partnership") with AVIC Innovation Capital Management Co., Ltd. The Company, as the sole LP of the Fund,subscribed for the Partnership's contribution share of RMB20,000,000; AVIC Innovation Capital Management Co., Ltd.,as the GP of the Fund, Fund manager and managing partner, subscribed for the Partnership's contribution share ofRMB1,000,000. The Fund is a special fund which is to invest in the equity of Sichuan Dajin Stainless Steel Co., Ltd.(now renamed as Chengdu Dajin Aero-Tech Co., Ltd.).Investment decision and management of Tianjin Hangchuang Fund: As the GP and managing partner of the Fund,AVIC Innovation Capital Management Co., Ltd. served as the Fund Manager and was responsible for all mattersincluding management, control, operation and decision making of the Fund's operation, investment and other activities.The distribution mechanism of Tianjin Hangchuang Fund:
During the existence and liquidation period, distributions will be made to the extent of the cash balance in the Fundcustody account in the following order, after all partnership expenses are paid.
1. Distribution is made first to all partners until the total accumulated paid-in capital is recovered by them.
If the cash balance of the custody account is insufficient to return the total accumulated paid-in capital of allpartners, the cash balance shall be distributed in proportion to the ratio of the paid-in capital held by eachpartner to the total accumulated paid-in capital of the partnership on the date of distribution of such assets, andthe portion of the paid-in capital not fully returned shall be made up at the next distribution until the balance ofthe total accumulated paid-in capital of all partners is zero.
2. If there are still surplus funds after the distribution of step 1 above, if the accumulated surplus funds do not
meet the accrued benchmark for performance compensation, the fund manager will not receive anycompensation. All surplus funds will be distributed according to the ratio of the paid-in capital held by eachpartner to the total accumulated paid-in capital of the partnership on the date of distribution of such assets.If there are still surplus funds after the distribution of step 1 above, if the accumulated surplus funds meet theaccrued benchmark for performance compensation, the fund manager will first distribute the income to allpartners in proportion to their paid-in amounts based on the accrued benchmark for performance compensation,then withdraw 10% of the surplus funds after distributing the income as performance compensation, and therest portion will be distributed to all partners in proportion to their paid-in amounts.
3. The accrued benchmark for performance compensation is that the yield of paid-in capital fund of all partners
accounts for 8% of the annual yield.Loss sharing mechanism of Tianjin Hangchuang Fund:
The limited partners of the Fund are liable for the partnership's debts to the extent of their subscribed capitalcontributions. The general partner has unlimited joint liability for the debts of the partnership.This investment is in line with the Company’s development strategy considering the Fund’s investment direction,decision-making, management, income distribution, loss allocation, etc. From the perspective of business nature, theCompany provides the absolute majority of the capital of the Tianjin Hangchuang Fund, so it is reasonable to includethe Fund in the Company’s consolidated financial statements of the Reporting Period.
XI Prospects(I) The Company's development strategy
1. Company vision
Business purposes of the Company: To become an industrial group with high influence in its areas, trust fromcustomers and shareholders, and respect from employees; uphold the business philosophies of "Integrity,Innovation and Excellence", and achieve mutual benefits with customers, shareholders, employees and thesociety.
2. Corporate strategy
According to its strategic plan for the third five-year period (2018-2022), based in China and with a globalvision, the Company will adhere to the strategic idea of "1+N", with the strategy of "a wealth of talents" and"culture orientation" as the solid support, and promote the five strategies of "industrial cluster", "epitaxialdevelopment", "globalization", "digital operation" and "synergy" to achieve the goal of "to become an industrialgroup with high influence in its areas, trust from customers and shareholders, and respect from employees".
Figure 7 The Company's strategic plan for the third five-year period (2018-2022)
Details are as follows:
? Industrial cluster strategy: Focus on the core business and strengthen the endogenous growthconstantly, meanwhile, promote the subsidiary Parsun Power to further expand and strengthen
| To become an industrial group with | ||
| high influence in its areas, trust from customers and shareholders, and respect from employees | ||
"1+N" development model
"1+N" development model"A wealth of talents" strategy × cultural orientation strategy
"A wealth of talents" strategy × cultural orientation strategyIndustrialcluster strategy
Industrialcluster strategy
Focus on the core
business of
"corrugatedpackagingmachinery" andexpand the businessof "Outboard power
equipment"
Focus on the core
business of
"corrugatedpackagingmachinery" andexpand the businessof "Outboard power
equipment"
Globalization
strategy
Globalization
strategy
Follow the guidance
of the Group's
strategic plans,arrange for capital
operations, andfacilitate the Group'srobust development
with industries asthe body and capital
as the wings
| Follow the guidance of the Group's strategic plans, arrange for capital operations, and facilitate the Group's robust development with industries as the body and capital as the wings | Balanced layout of global marketing, global operation, and industry formed by mainstream markets and potential markets |
Digitaloperationstrategy
| Epitaxial development strategy | Digital operation strategy |
Focus on providingstable and efficientoverall solution forintelligent plants in
the corrugatedpackaging industry
Focus on providingstable and efficientoverall solution forintelligent plants in
the corrugatedpackaging industry
Synergy strategy
| Synergy strategy | |
| Accelerate organizational capacity development for group control and realize close synergy between various entities | |
"outboard power products" as the main business.
? Epitaxial development strategy: Use such means as "Industrial M&A + Financial investment"to accumulate momentum for the Company's development; at the same time, strengthen the building ofmarket capitalization, capital operation, strategic and financial investment, etc.? Globalization strategy: Contribute to the globalization of marketing network, managementoperation and industrial distribution, including assets, business, talents and operation management.? The digital operation strategy consists of internal level and external level. Internally, itrealizes the information and digital upgrade of product, operation and management to releasemanagement benefits and support overall business operation efficiency; externally, it relies onDongfang Precision's industry accumulation and industrial Internet technology to build an industrialInternet platform solution for the intelligent factory of corrugated packaging industry and an intelligentlogistics system for the entire plant to help promote the digital and intelligent upgrade of the corrugatedpackaging industry.
? Synergy strategy: Based on building the organizing ability for group operation, strengtheningthe synergy of internal business entities and optimizing the internal supporting synergistic mechanism, athree-tier group operation structure of "Group Headquarters + Industrial Segments + Profit Units" isbuilt.
? A wealth of talents strategy: Strengthen the leadership of Middle and Senior Management,optimize the talent management system and set up talent teams at all levels.
? Cultural orientation strategy: Strengthen the Company's unified values, mission and vision,and lead the joint development of its business entities in all sectors based on the corporate culture.
(II) The Company's main business plan for 2022
1. Core business: Improve industrial synergy constantly and release growth potentialIn 2021, as the operating performances of the Company's domestic business entities grew quickly, theproblem of the contradiction between the existing production capacity and the continuous growth of sales orderswas gradually emerging.For most of 2021, the subsidiary Fosber Asia was at full production and full sales status. For many years,Fosber Asia has been renting the plant and office space of its parent company, Dongfang Precision, and theproduction capacity of existing site can no longer meet the needs of business development in the coming years. Itis imperative to expand production capacity for Fosber Asia in 2022. The Company has initiated the work toactively coordinate with the authorities for new industrial land for Fosber Asia in Guangdong Province to promotenew production capacity, which will be the cornerstone of Fosber Asia's growth for many years to come.
In 2021, the subsidiary Parsun Power, with adequate orders and fast-growing production and sales, hasencountered a capacity bottleneck to a certain extent. In 2022, Parsun Power will start to build a new productionbase with greater production scale, so as to meet the needs of future business growth, and transform and upgradeits own manufacturing status, improve and optimize production efficiency and capacity structure, furtherstrengthening its comprehensive competition.The corrugated packaging machinery, as the Company's core business, covers all the key processes in thecorrugated packaging production and processing value chain. The industrial chain is well arranged, and theproducts, technologies, sales networks and supply chains of each business entity have many similarities andcommonalities, so that they can learn and complement each other, which can promote the integration of variousbusiness entities within the Group and reach industrial synergy.
In 2022, the Company will continue to promote the interaction and exchange of products and technologiesbetween the high-end corrugator line business of Fosber Group and QCorr and the corrugator line business ofFosber Asia for China and Asia-Pacific markets, and support Fosber Asia in introducing Europe-leading solutionsand technologies for product design to create new products for China and Asia-Pacific markets; support DongfangPrecision (China) in sharing supply chain and production and processing resources with Fosber Group, FosberAsia and Dongfang Precision (Europe) to achieve complementary advantage and resource sharing, which canreduce order delivery costs, and improve production and operation efficiency, reaching "low price with brandquality" for overall competition. The Company will also support the integration of the corrugator lines of FosberGroup and QCorr, and the corrugated box printing and packaging business of Dongfang Precision (China) withindustrial digital printing technology to explore new models, technologies and products, providing new energy forthe corrugated packaging machinery business.
2. Enter the field of digital printing for corrugated packaging
(1) Plate printing technology Vs digital printing technology
The Company's corrugated box printing machinery adopt plate printing technology, the principle of which isto first make a printing plate for the text and images to be printed, and then transfer the text or images via ink fromthe printing plate to paper or other materials through professional printing machinery. The most widely used andmost mature technology in the field of corrugated packaging is plate printing. In recent years, we cannot ignorethe fact that digital printing technology, and its application in the packaging field have been developing quickly.
At the technical level, the printing plates are not adopted for digital printing, which allows graphic
information to be transferred to printing machinery via the network and imaged directly on the package.Compared with the plate printing technology, digital printing has no plate, which you can print on demand, andprint variable data/any pattern with high precision. The technology is environmental with low carbon.Currently, the application of digital printing in the packaging field, especially in the corrugated packagingindustry, is still not mature. The printing quality, production efficiency and other key indicators of digital printingtechnology are still not equal to those of traditional printing machinery. In terms of sales and market share, themachinery adopting digital printing technology is still far behind that using traditional plate printing.
However, there is a consensus in the industry that digital printing is the trend of technological developmentin the field of corrugated packaging printing. In the future, after the industrial digital printing technology is furtherdeveloped and its defects in printing quality and production efficiency are solved, its own features such as flexibleproduction, agile response time, and diverse printing graphics are expected to be fully tapped to meet the unique"small batch + multiple varieties + personalization + customization" printing needs of China's corrugatedpackaging industry.
(2) The status of digital printing technology
The application of digital printing technology is widely developed worldwide. Manufacturers in the UnitedStates, Europe and Japan started early with mature technology and a stable market, and are dominant in manyapplication areas, in which the United States HP (Hewlett-Packard), the EFI and other companies haveoverwhelming advantages in the industry of corrugated packaging digital printing machinery.
In China, the application of digital printing technology is in its initial stage. It is growing fast in the textileprinting, corrugated packaging fields with good trends, and Atexco, Hanglory Group, Shenzhen Wonder and otherwell-known enterprises have emerged.
As the digital printing technology, especially the Single Pass technology is becoming more mature, and thecost of printhead ink is reducing, the digital printing machinery have got obvious advantages gradually, narrowingthe cost difference compared with the traditional printing even in medium-sized orders. There are not more thanten companies in the world that can produce Single Pass digital printing machinery. EFI, HP, and ShenzhenWonder are the first to apply high-speed inkjet printing technology to corrugated packaging industry and havegained widespread recognition from customers.
Apart from the corrugated packaging field, the digital printing technology with great potential has a widerange of applications in such fields as printed products (advertising, labels, posters), textile printing, garment and
daily necessities printing, home decoration, ceramics, glass, electronics, automotive and even 3D printing.
(3) Dongfang Precision's development in the digital printing field in 2022
The Company has recognized the great prospect of digital printing technology in the corrugated packagingindustry earlier, and cooperated with business partners to set up a joint venture in 2017 to explore and promote theapplication and development of digital printing in the corrugated packaging industry. At the beginning of 2022,the Company worked with Shenzhen Wonder, which was the first to promote digital printing in the corrugatedpackaging printing machinery industry in China, in the form of capital increment and acquisition.Shenzhen Wonder has a complete digital printing matrix, whose machinery is exported to Europe, America,Middle East, Latin America, Southeast Asia, etc. It also occupies a market stock of more than 1,300 units in morethan 80 countries worldwide.The Company's cooperation with Shenzhen Wonder is a crucial step into the field of industrial digitalprinting. This cooperation will further improve the Company's product matrix of corrugated packaging printingmachinery, providing customers with more comprehensive "one-stop" products and services, and also helpShenzhen Wonder to develop the technology and seize the market of digital printing for corrugated packaging.The Company will give full play to its advantage of a well-developed industrial chain in the subsequentcooperation process for the sharing of resources and complementary advantages in the Group, providing importantsupport for the sustainable development of the Company and adequate guarantee for the overall performancegrowth.According to The Future of Inkjet Printing to 2023 issued by Smithers Pira, the market size of inkjet printingis expected to reach USD109 billion in 2023 in the global printing material and packaging fields, with acompound annual growth rate of nearly 10% between 2013 and 2023; in the package field, the overall growth ofinkjet printing is more rapid: the market size of inkjet printing for packaging is expected to reach USD11.13billion in 2023, with a compound annual growth rate of more than 12% between 2013 and 2023, which givesShenzhen Wonder and other companies which are researching industrial digital printing a broad room for growth;the current market size of industrial digital printing in China's packaging field is relatively small with a low base,which also indicates that higher growth will occur to the limit of its capacity. Dongfang Precision invested inShenzhen Wonder, which is expected to create a second growth curve for the Company's corrugated packagingmachinery business. In the future, its industrial digital jet printing line machinery business will become animportant driver to promote the Company's development.
3. Promote the implementation of digitalization and intellectualization strategyBased on multiple years of manufacturing experience in the field of corrugated packaging machinery, deepunderstanding of downstream customers' production processes, and mature practices of the productionmanagement system, the Company will promote the digital upgrade of corrugated packaging machinery. Throughorganic combination of the massive data related to the production techniques and production equipment to thealgorithm analysis and processing, the Company will integrate hardware and software for output, meet the needsfor capacity upgrade of downstream customers in the corrugated packaging industry, and facilitate the continualconcentration improvement of the corrugated packaging industry.Meanwhile, the Company will continue to invest resources and actively promote the development andapplication of products of "intelligent plant solution for industry".
4. Spin-off listing of subsidiary Parsun Power
The spin-off listing of subsidiary Parsun Power is conducive to strengthening the capital and enhancing therisk prevention capability, and also helps further tap its development and innovation potential to realize itsintrinsic value.After Parsun Power is listed, it will accelerate the rapid growth of its main business and operatingperformance, which will be reflected in the overall performance of Dongfang Precision at the same time, thusenhancing the profitability and robustness of the Company; besides, the value of the equity held by the Companyin Parsun Power is expected to be further increased and the liquidity will also be significantly improved.
The spin-off listing of Parsun Power will exert a positive impact on the benefits of shareholders (especiallyminority shareholders), creditors and other stakeholders of Dongfang Precision.
5. Epitaxial business: Make a difference for seeking industrial synergy and expanding new
development
In 2021, the Company proposed the "1+N" strategic model with the co-development and mutual promotionof "Endogeny+ Epitaxy" business. "1" represents the Company's main business of corrugated packagingmachinery and the cornerstone, the Company is making great efforts in developing it, and striving to obtain ahigher market share in the era of high-end, digital and intelligent trends; "N" represents the incubation andcultivation of subsidiaries and joint-stock companies.
In 2022, the subsidiary, Yineng Investment, will take advantage of industries related to the main business ofDongfang Precision, focus on high-quality companies in the industrial chain of China and the world. It will also
carry out M&A around the industrial chain according to the business needs and the actual situation of theCompany, strengthen the horizontal and vertical integration of the industrial chain, and seek for industrial synergy;conduct management output and provide resource support for the target company of industrial M&A to help itbecome bigger, stronger and more professional.During industry M&A, Yineng Investment will fully participate in the industries supported by China's "14thFive-Year Plan", focusing its equity investment on high-end equipment manufacturing, artificial intelligence,biomedicine and big consumption area and other strategic emerging industries of hard science and technology,and will aim at enterprises with extensive industrial development opportunities and favorable industrialadvantages. It will obtain good investment returns and at the same time create new industrial developmentopportunities for the Group.
(III) Possible risks and countermeasures
1. Risk of fluctuations in the prices of raw materials
The raw materials required for the Company's corrugated packaging machinery mainly include various typesof steel plates, steel parts and electrical parts. In 2021, the prices of iron ore and base metals in bulk commoditieswere once highly volatile, resulting in certain fluctuations in the costs of the Company's main business. Lookingahead to 2022, the bulk commodity market is subject to a combination of macroeconomic and industry cycles,monetary policy, international trade, even geopolitics, the Covid-19 and other factors, and price trends willrepresent a certain degree of uncertainty.Countermeasures:
The Company will pay attention to the market prices of steel and other important raw materials constantly,and conduct dynamic analysis and judgment; in terms of procurement, it will strengthen proactive managementand collaboration by adopting countermeasures such as proper adjustment of payment settlement and entering intolong-term purchase agreements for important raw materials to control the fluctuation of procurement prices; it willgive full play to the Group's internal allocation ability brought about by the globalization of business assets, andreach allocation efficiency and reduce overall costs through rational planning and management of internaltransactions and sharing of high-quality supply chain resources.
2. Integration risk due to epitaxial business
Epitaxial business includes industrial M&A, equity investment and other forms. The Company will arrangehigh-end equipment manufacturing through equity control, investment and other different forms, expecting to
gradually develop new performance growth points in the future.
In the next few years, the Company will continue to expand upstream and downstream in the industry chaininvolving its core business in the world, and arrange in the key industries supported by the national 14thFive-Year Plan, such as high-end equipment manufacturing, artificial intelligence, biomedicine and bigconsumption. Among the business entities of its subordinate companies, there are old European companies withnearly 100 years of history and profound track record, as well as international companies with multinationaldistribution of business and assets and customers around the world, and domestic private companies with roots inthe Chinese market and years of hard-working to be leaders in their niche industries.
During the integration, the new member companies are different from Dongfang Precision in culturalbackground, language differences, business practices, corporate culture, laws and regulations, fiscal and taxpolicies, internal management mechanisms, etc., which bring about certain challenges to the post-investmentmanagement and integration work.
Countermeasures:
? Promote the implementation of the "globalization" strategy and bring in talents capable ofhandling international business;? Promote the implementation of the "a wealth of talents" strategy, improve the synthetic abilityof the management team and the backbone team of key business, and build a prudent backbone teamwith a broad vision that highly identifies with the purpose and culture of the Company, and is capable ofwinning battles;
? Promote the "synergy" strategy and seek common ground with an open mind on the premiseof "mutual respect and trust";
? Carry out the post-investment management mechanism of "combination of strategic control +authorized management" to form a unique and effective integration and control mode in the run-inprocess, which reaches a better industrial synergy and the positive development of each business entity;
3. Potential risks of financial investment business
In recent years, the Company has arranged some of its idle owned funds to carry out financial investmentbusiness such as securities investment and entrusted wealth management in an appropriate manner, based on theactual and development needs.Based on its own attributes, there are certain risks of carrying out the above business due to fluctuations in
the financial market and uncertainty of income; and the risk that the Company may suffer certain investmentlosses in case of risk events in the process of wealth management activities in terms of investment strategies anduse of funds.Countermeasures:
On the premise that the funds required for the daily operation of the main business will not be affected, theCompany reasonably controls the capital scale for financial investment; it establishes and improves the internalcontrol system and mechanism standards for securities investment and entrusted financial management, andstrengthens the risk control management of securities investment business, safeguard the safety of investmentfunds and strictly control the risk exposure. In accordance with the economic situation and changes in thefinancial market, it continuously tracks and analyses the progress of securities investment and the investment offunds, the progress of project investment and the performance of the capital market, and timely takescorresponding preservation measures to control investment risks.
4. Potential risk of exchange rate fluctuations
The revenues and costs of the Company's overseas business entities are priced in Euros or U.S. dollars, andexchange rate fluctuations exert little impact on the operations of the overseas business entities, but on thepresentation of overseas assets in the consolidated financial statements. There are many factors for exchange ratechanges, and there is a certain degree of uncertainty in its fluctuation. When the depreciation of the Euro or theUS dollar occurs, it will have an adverse impact once the company cannot take effective measures to reducelosses.
Countermeasures:
The Company can closely track the global financial market and national exchange rate policies, make timelydecisions to select proper exchange rate management tools to manage exchange rate risks actively. It can alsoreduce risk exposure and increase exchange gains by increasing debts of foreign currency, and rely on Groupmanagement to strengthen the level of capital coordination in different countries and regions, balance and offsetfluctuation risks at the Group level.
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
XII Communications with the Investment Community such as Researches, Inquiries and Interviews
√ Applicable □ Not applicable
| Date | Place | Way of communication | Type of the communication party | Communication party | Main discussions and materials provided by the Company | Index to the relevant information |
| 20 April 2021 | Conference Room of the Company | By phone | Institution | Ming Ya Fund: He Ming; ICBC Credit Suisse Asset: Zhang Jisheng, Shi Zhengtong, Xu Lingling; Western Leadbank Fund: Wen Zhenyu; AEGON-INDUSTRIAL Fund: Zhao Sui; China Life AMP Asset: Sun Nan; CCB Principal Asset: Wang Siyuan; E Fund: Ji Bin; Huafu Fund: Zhu Chenghui, Yang Linyan; Morgan Stanley Huaxin Fund: Zhang Wei; CICC: Guo Weixiu, Zou Jing; Guosen Securities: Li He; Founder Securities: Zhang Xiaoguo; Huatai Securities: Huang Jinglun; Shenwan Hongyuan Securities : Liu Jianwei; Industrial Securities: Ding Zhigang; Dongguan Securities: Wang Quanyong; China Merchants Securities: Dai Deshun; Shengang Securities: Xia Shuyu; Cinda Securities: Luo Zheng; China Everwin Asset: Sang Yongliang and other investors | Introduced the Company's operation, competitive advantages, industry direction and future strategic planning, and answered investors' questions | www.cninfo.com.cn, Dongfang Precision: Record on Investor Relation Activities on 20 April 2021 |
| 18 June 2021 | Conference Room of the Company | By phone | Institution | Capital Investment Trust, Taiwan: Le Yu, Yang Shuting | Introduced the Company's operation, competitive advantages, industry direction and future strategic planning, and answered investors' questions | www.cninfo.com.cn, Dongfang Precision: Record on Investor Relation Activities on 18 June 2021 |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
| 20 August 2021 | Conference Room of the Company | By phone | Institution | E Fund: Yin Ming;China Asset Management: Li Pingzhu; Western Leadbank Fund: Wen Zhenyu; ICBC Credit Suisse Asset: Li Jianfeng; Harfor Fund: Yang Linyan; Truvalue Asset Management: Li Han; Fuanda Fund: Wu Zhanfeng; New China Fund: Zhou Xiaodong; Rongtong Fund: Sun Weidang; Manulife Teda Fund: Wang Peng; Mutual Benefits Asset: Zhang Shusheng; Changsheng Fund: Wu Da; Zhonghai Fund: Yu Zhong; Morgan Stanley Huaxin Fund: Zhang Wei; Value Partners Goldstate Fund: Xu Yong, Hou Bin; Bank of Beijing Scotiabank Asset: Liu Xiaochen; Zhong Ou Asset: Zhou Yuxiong; Citic-prudential Fund: Sun Haozhong; CICC: Huang Yuning, Wang Zilin, Zou Jing, Xiao Xueyang; China Securities: Wei Yu and other investors | Introduced the Company's operation, competitive advantages, industry direction and future strategic planning, and answered investors' questions | www.cninfo.com.cn, Dongfang Precision: Record on Investor Relation Activities on 20 August 2021 |
| 24 November 2021 | Conference Room of the Company | By phone | Institution | Zheshang Securities: Wang Huajun, Lin Ziyao; Harvest Fund: Dong Fuyan | Introduced the Company's operation, competitive advantages, industry direction and future strategic planning, and answered investors' questions | www.cninfo.com.cn, Dongfang Precision: Record on Investor Relation Activities on 24 November 2021 |
| 3 December 2021 | Conference Room of the Company | By phone | Institution | CIB Fund, Bosera Funds, Essence Securities, Everbright Pramerica Fund, Maxwealth Fund, China Securities, Shanghai Dongkai Investment, Qingli Investment (Shanghai), Yuancheng Investment, Chongyang Investment, Shanghai Tourmaline Asset, Life Insurance Asset Management, Yinfan Investment, Yingdong Private Fund, Shanghai Licheng Asset Management, Beijing Sunshine Tianhong Asset Management, China Life Asset Management, Beijing Xin'an Linshi Asset, Windsor Capital, | Introduced the Company's operation, competitive advantages, industry direction and future strategic planning, and answered investors' questions | www.cninfo.com.cn, 002611 Dongfang Precision: Record on Investor Relation Activities on 3 December 2021 |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
| Funding Capital (Beijing), Aviva-cofco and so on. 32 people in total. | ||||||
| 9 December 2021 | Conference Room of the Company | By phone | Institution | Huaxi Securities, BOC Investment Management, SWS MU Fund | Introduced the Company's operation, competitive advantages, industry direction and future strategic planning, and answered investors' questions | www.cninfo.com.cn, 002611 Dongfang Precision: Record on Investor Relation Activities on 9 December 2021 |
Part IV Corporate Governance
I General Information of Corporate GovernanceDuring the Reporting Period, the Company strictly abided by laws and regulations and rules and normative documents ofregulatory authorities, including the Company Law, the Securities Law, the Code of Corporate Governance for Listed Companies,the Rules for Stock Listing of Shenzhen Stock Exchange and the Guidelines on Standardized Operation of Listed Companies onShenzhen Stock Exchange, continued to improve the Company's corporate governance structure, refine internal management andcontrol policies, and further strengthen the Company's capability of governance.(I) Shareholders and general meetingDuring the Reporting Period, the Company convened and held general meetings in a standard manner in strict accordance withlaws and regulations. The convening and holding procedures of general meetings, the qualifications of attendants to the meetings andthe voting procedures of the meetings met the provisions of the Company Law, Rules for the Shareholders' Meetings of ListedCompanies, Articles of Associations and Rules of Procedure for General Meeting. Lawyers were engaged to witness the generalmeetings of shareholders and issued legal opinions on their legitimacy to ensure fair treatment toward and fully execution of rights ofall shareholders, especially minority shareholders.(II) The Company and controlling shareholdersDuring the Reporting Period, the Company properly handled the relationship between it and the controlling shareholders inaccordance with the Company Law, Securities Law, Articles of Association and relevant provisions of the securities regulatoryauthority. The controlling shareholders of the Company acted in a normative manner, could exercise their rights and assume theirobligations according to law, did not directly or indirectly interfere with the decision-making and business activities of the Companybeyond the general meeting of shareholders. The Company was independent of the controlling shareholders in terms of business,staffing, assets, organization and finance, and had an independent and complete business system and capability to operateindependently. The Board of Directors, Supervisory Committee and internal organs of the Company operated independently.(III) Directors and the Board of DirectorsDuring the Reporting Period, directors of the Company were elected in strict accordance with the director election procedurespecified in the Articles of Association. The Board of Directors of the Company was composed of seven directors, including threeindependent directors, and the number of members and composition of it met legal and regulatory requirements. During theReporting Period, all directors of the Company actively and strictly complied with the Company Law, Articles of Association andRules of Procedure for the Board of Directors, earnestly attended meetings of the Board of Directors and general meetings ofshareholders, and took an active part in relevant training to improve their business skill, and were diligent and responsible. Theconvening, holding and voting procedure and daily operation of the meetings of the Board of Directors of the Company compliedwith relevant regulations.(IV) Supervisors and the Supervisory CommitteeDuring the Reporting Period, supervisors of the Company were elected in strict accordance with the supervisor electionprocedure specified in the Articles of Association. The Supervisory Committee of the Company was composed of three supervisors,including one supervising employee representative, and the number of members and composition of it met legal and regulatory
requirements. The supervisors conscientiously performed their duties and, in line with the attitude of being responsible toshareholders, supervised the financial affairs of the Company as well as the legality and compliance of the performance of duties bydirectors and senior managers of the Company, and safeguarded the legitimate rights and interests of the Company and shareholders.The convening, holding and voting procedures of the meetings of the Supervisory Committee of the Company complied with theCompany Law, Articles of Association and Rules of Procedure for the Supervisory Committee.(V) Independent directors and special committees of the Board of DirectorsDuring the Reporting Period, independent directors of the Company honestly, diligently and independently performed theirduties in accordance with the Company Law and regulations, normative documents and implementation rules of other departments,actively attended relevant meetings, earnestly deliberated the proposals of the Board of Directors, gave independent advice about themajor issues of the Company, effectively protected the interests of the Company and shareholders, especially small and mediumshareholders, and well played their role to supervise as independent directors. Special committees of the Board of Directors of theCompany also performed their duties in a standard manner according to their respective implementation rules.(VI) Information disclosure and transparencyDuring the Reporting Period, the Company performed its obligation of information disclosure in strict accordance with laws andregulations and the Management Measures for Information Disclosure, and disclosed information in a true, accurate, complete andtimely manner and made no false records, misleading statements or major omissions, by which it ensured that all investors andstakeholders had equal opportunities to obtain the Company's information, increased the Company's information transparency, andeffectively played its role in protecting the right to know of small and medium investors.
Were there any significant differences between the actual situation of the corporate governance and the applicable laws andregulations, as well as rules published by China Securities Regulatory Commission on the governance of listed companies?
□ Yes √ No
There were not significant differences between the actual situation of the corporate governance and the applicable laws andregulations, as well as rules published by China Securities Regulatory Commission on the governance of listed companies.
II The Independence of the Company from Controlling Shareholders and Actual Controlleron Assets, Personnel, Finance, Structure, and Business
Since establishment, the Company has been operating in strict accordance with the Company Law, Securities Law and Articlesof Association, and has established and improved its corporate governance structure. The Company is completely independent of itscontrolling shareholders and actual controller in terms of business, staffing, assets, organization and finance, and has an independentand complete business system and capability to operate independently in the market. All production operations and major issues ofthe Company were discussed and determined by the Management, the Board of Directors and the general meetings of shareholders inaccordance with the Articles of Association and relevant policies, and none of them was controlled by any controlling shareholder orthe actual controller.
1. Asset independence
The Company was founded on the overall change of a limited liability company. All its assets and personnel before the sharerestructuring joined the joint stock company. The Company has independent and complete operating assets. After the overall change,the Company owns all the production and operational assets needed for production and operation, and there is no dispute overproperty rights. The Company owns production systems, auxiliary production systems and supporting facilities related to its
production and operation, and has independent raw material procurement and product selling systems. Assets of the Company arestrictly separated from those of shareholders and the actual controller, and no assets of the Company are being occupied byshareholders or the actual controller.
2. Personnel independence
The Company has completely independent labour, personnel and salary management systems and independent staff teams, andhas signed labour contracts with its employees in accordance with the Labour Law and the Company's policies on labourmanagement. Directors, supervisors and senior managers of the Company were elected in strict accordance with the Company Lawand Articles of Association, and senior managers, including general managers, deputy general managers, financial directors, andsecretaries to the Board of Directors are working full time in the Company and getting paid by the Company. Mr Tang Zhuolin, theactual controller of the Company, is serving as the Chairman of the Board of Directors, and has been legally exercising its functionsand powers according to the Company Law and Articles of Association in engaging in the Company's management.
3. Finance independence
The Company has an independent financial department and full-time financial personnel, and has established an independentand fine financial accounting system and standardized financial policies. It has implemented an effective financial supervision andmanagement system and an internal control system, and it is capable of making independent financial decisions, carrying outindependent accounting and assuming sole responsibility for its profits and losses according to the Articles of Association and itsown situation. The Company has an independent bank account and is not sharing any account of controlling shareholders or theactual controller and, as an independent taxpayer, declares taxes and fulfils tax payment obligations independently according to law,and has never paid taxes together with shareholders' companies.
4. Organization independence
The Company, in accordance with the Company Law and Articles of Association, has set up the General Meeting ofShareholders as the highest authority, the Board of Directors as the decision-making body, and the Supervisory Committee as thesupervisory body, and has a complete corporate governance structure. The Company has a complete internal management system andcorresponding offices and operating departments. The functional departments work according to respective duties and cooperate witheach other, making the Company an organic and independent operating entity free from the intervention of controlling shareholdersand the actual controller.
5. Business independence
The Company has its business independent of controlling shareholders, has independent and complete supply, production andsales systems, and is capable of independent decision-making on business policies and business plans, independent allocation and useof personnel, money and materials, and successful organization and implementation of production and business activities. TheCompany is completely independent in business and is not relying on the first majority shareholder and the actual controller. Thecontrolling shareholders are not conducting business of horizontal competition with that of the Company, and have undertaken not toconduct any business that may be of horizontal competition with that of the Company.III Horizontal Competition
□ Applicable √ Not applicable
IV Annual and Extraordinary General Meetings Convened during the Reporting Period
1. General Meeting Convened during the Reporting Period
| Meeting | Type | Investor participation ratioNotes | Date of the meeting | Disclosure date | Resolution |
| The First Extraordinary General Meeting of 2021 | Extraordinary General Meeting | 31.32% | 14 January 2021 | 15 January 2020 | 1. Reviewed and approved the Proposal on the Repurchase and Retirement of Some Restricted Shares; 2. Reviewed and approved the Proposal on the Change of Business Scope and Revision of <Articles of Association>; 3. Reviewed and approved the Proposal on the Provision of Guarantee for Wholly-owned Overseas Subsidiaries |
| The 2020 Annual General Meeting | Annual General Meeting | 31.87% | 19 April 2021 | 20 April 2021 | 1. Reviewed and approved the Proposal on the Report on the Work of the Board of Directors for 2020 (including the Report of the Independent Directors for 2020); 2. Reviewed and approved the Proposal on the Report on the Work of the Supervisory Committee for 2020; 3. Reviewed and approved the Proposal on the Annual Report and its Summary for 2020; 4. Reviewed and approved the Proposal on the Report on the Financial Accounts for 2020; 5. Reviewed and approved the Proposal on the Financial Budget Report for 2021; 6. Reviewed and approved the Proposal on the Profit Distribution Proposal for 2020; 7. Reviewed and approved the Proposal on the Special Report on the Deposit and Use of Raised Funds for 2020; 8. Reviewed and approved the Proposal on the Self-Evaluation Report on Internal Control for 2020; 9. Reviewed and approved the Proposal on the Appointment of the Audit Institution for 2021; 10. Reviewed and approved the Proposal on the Use of Own Funds for Securities Investment for 2021. |
| The Second Extraordinary General Meeting of 2021 | Extraordinary General Meeting | 31.60% | 22 September 2021 | 23 September 2021 | 1. Reviewed and approved, by item-by-item voting, the Proposal on the Repurchase of Some Public Shares; 2. Reviewed and approved the Proposal on the Request to the Company's General Meeting to Authorize the Board of Directors for Handling Matters Related to the Share |
2. Extraordinary General Meetings Convened at the Request of Preference Shareholders with ResumedVoting Rights
□ Applicable √ Not applicable
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
V Directors, Supervisors and Senior Management
1. General Information
| Name | Office title | Incumbent/Former | Gender | Age | Start of tenure | End of tenure | Opening shareholding (share) | Share options | Restricted shares granted (share) | Increase in the period (share) | Decrease in the period (share) | Other increase/decrease (share) | Closing shareholding (share) | Reason for share change |
| Tang Zhuolin | Chairman of the Board | Incumbent | Male | 59 | 22 July 2010 | 22 September 2023 | 270,737,568 | 270,737,568 | ||||||
| Qiu Yezhi | Director and General Manager | Incumbent | Female | 50 | 22 July 2010 | 22 September 2023 | 31,176,518 | 9,000,000 | 7,794,130 | 23,382,388 | ||||
| Xie Weiwei | Director and Deputy General Manager | Incumbent | Male | 48 | 16 June 2016 | 22 September 2023 | 1,000,000 | 1,000,000 | 1,000,000 | |||||
| Zhou Wenhui | Director, Board Secretary and Vice President | Incumbent | Male | 49 | 29 January 2019 | 22 September 2023 | 1,200,000 | 1,200,000 | 1,200,000 | |||||
| Shao Yongfeng | Chief Financial Officer and Vice President | Incumbent | Male | 47 | 29 December 2020 | 22 September 2023. | 800,000 | 800,000 |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
| Mai Zhirong | Independent Director | Incumbent | Male | 51 | 16 June 2016 | 15 June 2022 | ||||||||
| Peng Xiaowei | Independent Director | Incumbent | Male | 51 | 16 June 2016 | 15 2022 June | ||||||||
| He Weifeng | Independent Director | Incumbent | Male | 61 | 16 June 2016 | 15 June 2022 | ||||||||
| Chen Huiyi | Chairman of the Supervisory Committee | Incumbent | Female | 37 | 19 May 2017 | 22 September. 2023 | 480 | 480 | ||||||
| Zhao Xiuhe | Employee Supervisor | Incumbent | Male | 51 | 16 June 2016 | 22 September 2023 | ||||||||
| He Baohua | Supervisor | Incumbent | Male | 40 | 22 September 2020 | 22 September 2023 | 614,088 | 614,088 | ||||||
| Total | -- | -- | -- | -- | -- | -- | 304,728,654 | 0 | 12,000,000 | 0 | 7,794,130 | 297,734,524 | -- |
Indicate whether any in-service director, supervisor or senior management resigned during the Reporting Period.
□ Yes √ No
Changes of directors, supervisors and senior management:
□ Applicable √ Not applicable
2. Biographical Information
Professional backgrounds, major work experience and current posts in the Company of the incumbent directors, supervisors andsenior management:
1. Members of the Board of Directors
Tang Zhuolin, male, Chinese, born in 1963, has no right of permanent residence abroad. Member of the 12
thPeople's PoliticalConsultative Conference of Nanhai District, Foshan City, Guangdong Province, Managing Director of the 9th Council of ChinaPackaging Federation, Managing Director of Guangdong Food and Packaging Machinery Industry Association, Vice President ofFoshan Machinery Equipment Industry Association, Honorary President of Nanhai District Machinery Equipment IndustryAssociation, Vice President of Foshan High-tech Zone Chamber of Commerce, and Vice President of Foshan Nanhai District ListingAssociation. Served as the Company's General Manager and Chief Engineer since 1996, and currently the Chairman of the Board ofthe Company, Director of the subsidiary Fosber S.p.A., Director of the subsidiary Suzhou Parsun Power Machine Co., Ltd., Directorof the subsidiary Guangdong Fosber Intelligent Equipment Co., Ltd., Director & Manager of the subsidiary Dongfang YinengInternational Holding Co., Ltd., and Supervisor of Dongfang Digicom Technology Co., Ltd.Qiu Yezhi, female, Chinese, born in 1972, has no right of permanent residence abroad, MBA, National Model Worker, Member ofthe 12th People's Political Consultative Conference of Foshan City, Guangdong Province, and Deputy to the 17
thPeople’s Congressof Nanhai District, Foshan City, Guangdong Province. Served successively as the Company's Director of the General Manager'sOffice, General Manager of Operations and General Manager since 1996, and as the Company's General Manager and BoardSecretary from July 2010 to October 2013. Currently the Company's Director and General Manager, Vice Chairman of the Board ofthe subsidiary Fosber S.p.A., Director of the subsidiary Fosber America, Inc., Director of the subsidiary Suzhou Parsun PowerMachine Co., Ltd., and Chairman of the Board of the subsidiary Guangdong Fosber Intelligent Equipment Co., Ltd.Xie Weiwei, male, Chinese, born in 1974, has no right of permanent residence abroad, MBA, Member of the 14
thPeople's PoliticalConsultative Conference of Nanhai District, Foshan City, Guangdong Province, graduated from Huazhong University of Science andTechnology in 2008. Once served as the Standing Deputy General Manager of Foshan Multimodal Transport Corp., Chairman of theBoard of Foshan Donghuochang Railway Logistics Co., Ltd., Deputy Chief of the Reform and Development Division of FoshanSASAC, and Deputy Head of the Investment Department and Head of the Asset Management Department of Foshan FinancialInvestment Holdings Co., Ltd. Currently the Company's Director and Deputy General Manager, Executive Director of the subsidiaryFoshan Yinglian Digital Printing Equipment Co., Ltd., and Director of the joint-stock company Guangdong Jaten Robot &Automation Co., Ltd.Zhou Wenhui, male, Chinese, born in 1973, has no right of permanent residence abroad, master. Once served as the InvestmentDirector of Beijing Taiying Investment Management Co., Ltd., Head of the Fortune Centre of Beijing Administrative Headquartersof Guosen Securities, Investment Director of Beijing Zhongcai Venture Investment Co., Ltd., and Chief Manager of AvichinaIndustry And Technology Co., Ltd. Currently the Company's Director, Board Secretary, and Vice President.Mai Zhirong, male, Chinese, born in 1971, has no right of permanent residence abroad, Certified public accountant, certified publicassets estimator and certified tax agent. Graduated with a bachelor's degree from the Party School of Guangdong ProvincialCommittee of the Communist Party of China in 1999, and graduated from China Central Radio and Television University with abachelor's degree in accounting in 2007. Once served as an accountant in Guangdong Development Bank Nanhai Branch, auditor ofNanhai Audit Office, and currently the Vice Director of FoShan JunLang Certified Public Accountants Firm Co., Ltd., IndependentDirector of Shenzhen Magic Decoration Co., Ltd., and Independent Director of Dongfang Precision.Peng Xiaowei, male, Chinese, born in 1971, has no right of permanent residence abroad. Graduated from Shanghai University of
Electric Power with a bachelor's degree in industrial chemistry in 1995, assigned to work in the electric power authority in Foshanafter graduation, rated as a chemical engineer in 2001, and passed the 1st national judicial examination in 2002. Served as a full-timelawyer and partner in Guangzhou Kingpound Law Firm. Currently a senior partner of Beijingshi Yingke Law Firm GuangzhouOffice and Independent Director of Dongfang Precision.He Weifeng, male, Chinese, born in 1961, has no right of permanent residence abroad. Master in mechanical engineering fromGuangdong University of Technology, and currently an associate professor of Guangdong University of Technology, IndependentDirector of Guangdong Jinma Rides Co., Ltd., and Independent Director of Dongfang Precision. Engaged in teaching and research ofpackaging engineering and printing technology for 30 years. Designed and developed bag packing machine, pillow-type packingmachine, box making machine and other packaging and printing machines and devices.
2. Members of the Supervisory Committee
Chen Huiyi, female, Chinese, born in 1985, with a university degree, has no right of permanent residence abroad. Once served as theassistant of the Quality Control Department of Dongfang Plastic Products Co., Ltd. Joined Dongfang Precision in 2010, and currentlythe Chairman of the Company's Supervisory Committee and Secretary to the Company's General Manager.He Baohua, female, Chinese, born in 1982, with a university degree, has no right of permanent residence abroad. Joined GuangdongDongfang Precision Science & Technology Co., Ltd. in 2002, engaged in after-sales management and project management, currentlythe Company's supervisor and Senior Project Manager of the Project Management Department.Zhao Xiuhe, male, Chinese, born in 1971, with a technical secondary school degree, has no right of permanent residence abroad.Joined Dongfang Precision in February 2006, currently the Company's Director of the Administration Department. Served as theCompany's Employee Supervisor since June 2016.
3. Senior management
Qiu Yezhi, currently the Company's General Manager. Her resume is detailed in "1. Members of the Board of Directors".Xie Weiwei, currently the Company's Deputy General Manager. His resume is detailed in "1. Members of the Board of Directors".Shao Yongfeng, male, Chinese, born in 1975, has no right of permanent residence abroad. Graduated with a bachelor's degree fromZhongnan University of Economics and Law, a PRC certified public accountant and PRC certified public assets estimator. Served asFinancial Manager and Financial Director of TCL Multimedia Technology Holdings Limited from 2001 to 2010, joined HaierEurope in 2015 and served successively as the company's Financial Director and CFO of Europe, joined Shenzhen SmooreTechnology Limited and served as Financial Director from 2016 to 2017, served as Vice President Finance in Shenzhen CIMCTianda from 2017 to 2020, and joined Guangdong Dongfang Precision Science & Technology Co., Ltd. in April 2020 and currentlythe Company's Chief Financial Officer and Vice President.Zhou Wenhui, currently the Company's Board Secretary. His resume is detailed in "1. Members of the Board of Directors".
Offices held concurrently in shareholding entities:
□ Applicable √ Not applicable
Offices held concurrently in other entities:
√ Applicable □ Not applicable
| Name | Other entity | Office held in the entity | Start of tenure | End of tenure | Remuneration or allowance from the entity or not |
| Tang Zhuolin | Dongfang Precision (HK) | Director | 5 February 2013 | Not | |
| Tang Zhuolin | Dongfang Precision (Netherland) | Director | 29 October 2013 | Not | |
| Tang Zhuolin | Fosber Group | Director | 26 March 2014 | Yes | |
| Tang Zhuolin | Dongfang Precision (Europe) | Chairman of the Board | 15 June 2016 | Yes | |
| Tang Zhuolin | Fosber Asia | Director | 30 September 2014 | Yes | |
| Tang Zhuolin | Parsun Power | Director | 24 May 2015 | Not | |
| Tang Zhuolin | Shunyi Investment | Legal Representative, Executive Director and General Manager | 2 July 2015 | Not | |
| Tang Zhuolin | Yineng Investment | Legal Representative, Executive Director and General Manager | 10 October 2020 | Yes | |
| Tang Zhuolin | Dongfang Digicom | Supervisor | 26 October 2020 | Yes | |
| Tang Zhuolin | Dongfang Digicom (Guangdong) | Supervisor | 26 February 2021 | Not | |
| Tang Zhuolin | Dongfang Yineng International Holding Co., Ltd. | Legal Representative, Executive Director and Manager | 15 February 2022 | Not | |
| Tang Zhuolin | Shenzhen Xianglin Venture Capital Co., Ltd. | Legal Representative, Executive Director and General Manager | 26 May 2016 | Not | |
| Tang Zhuolin | Shenzhen Zhiquan Venture Capital Co., Ltd. | Supervisor | 26 May 2016 | Not | |
| Tang Zhuolin | Shenzhen Shenghui Venture Capital Co., Ltd. | Supervisor | 16 May 2016 | Not | |
| Qiu Yezhi | Fosber Group | Vice Chairman of the Board | 26 March 2014 | Yes | |
| Qiu Yezhi | Fosber America | Director | 1 September 2017 | Yes | |
| Qiu Yezhi | Tiru?a Group | Director | 30 May 2019 | Yes | |
| Qiu Yezhi | Tiru?a S.L.U. | Director | 30 May 2019 | Not | |
| Qiu Yezhi | QCorr | Director | 3 February 2020 | Yes | |
| Qiu Yezhi | Fosber Asia | Legal Representative and | 15 July 2020 | Yes |
| Name | Other entity | Office held in the entity | Start of tenure | End of tenure | Remuneration or allowance from the entity or not |
| Chairman of the Board | |||||
| Qiu Yezhi | Dongfang Precision (Europe) | Director | 15 June 2016 | Yes | |
| Qiu Yezhi | Parsun Power | Director | 24 May 2015 | Not | |
| Qiu Yezhi | Yineng Investment | Supervisor | 10 October 2020 | Not | |
| Qiu Yezhi | Dongfang Digicom | Legal Representative, Executive Director and General Manager | 26 October 2020 | Not | |
| Qiu Yezhi | Dongfang Digicom (Guangdong) | Legal Representative and Executive Director | 26 February 2021 | Not | |
| Qiu Yezhi | Shenzhen Xianglin Venture Capital Co., Ltd. | Supervisor | 26 May 2016 | Not | |
| Qiu Yezhi | Shenzhen Shenghui Venture Capital Co., Ltd. | Legal Representative, Executive Director and General Manager | 18 May 2015 | Not | |
| Qiu Yezhi | Foshan Jingmu Trading Co., Ltd. | Legal Representative, Executive Director and Manager | 16 June 2021 | Not | |
| Xie Weiwei | Parsun Power | Director | 24 May 2015 | 6 December 2021 | Not |
| Xie Weiwei | Shunyi Investment | Supervisor | 2 July 2015 | Not | |
| Xie Weiwei | Jaten Robot | Director | 23 March 2016 | Yes | |
| Xie Weiwei | Yinglian Digital | Legal Representative and Executive Director | 22 September 2020 | Not | |
| Xie Weiwei | Foshan Nanhai District Machinery Equipment Trade Association | Branch Secretary | 23 November 2020 | Yes | |
| Mai Zhirong | FoShan JunLang Certified Public Accountants Firm Co., Ltd. | Deputy Director | 1 January 2000 | Yes | |
| Mai Zhirong | Shenzhen Magic Design & Decoration Engineering Co., Ltd. | Independent Director | 20 January 2021 | Yes | |
| Mai Zhirong | Foshan Xinshengda Tax Agents Co., Ltd. | Legal Representative, Executive Director and Manager | 4 November 2002 | Not |
| Name | Other entity | Office held in the entity | Start of tenure | End of tenure | Remuneration or allowance from the entity or not |
| Mai Zhirong | Foshan Tianshun Management Consulting Co., Ltd. | Legal Representative, Executive Director and Manager | 9 January 2000 | Not | |
| Peng Xiaowei | Beijing Yingke (Guangzhou) Law Firm | Senior Partner | 1 July 2015 | Yes | |
| Peng Xiaowei | Guilin Hengtong Energy Development Co., Ltd. | Vice Chairman of the Board | 10 May 2016 | Not | |
| He Weifeng | Guangdong University of Technology | Associate Professor | 1 July 1985 | 1 December 2021 | Yes |
| He Weifeng | Guangdong Jinma Entertainment Corporation Limited | Independent Director | 19 October 2020 | 19 October 2023 | Yes |
| Zhou Wenhui | Nanjing Profeta Intelligent Technology Co., Ltd. | Director | 15 September 2021 | 15 September 2024 | Not |
| Zhou Wenhui | Yineng Investment | General Manager | 1 January 2021 | Yes | |
| Shao Yongfeng | Dongfang Digicom | Chief Financial Officer | 1 January 2021 | Yes | |
| Shao Yongfeng | Yineng Investment | Chief Financial Officer | 1 January 2021 | Yes | |
| Note | Not applicable | ||||
Punishments imposed in the recent three years by the securities regulator on the incumbent directors, supervisors and seniormanagement as well as those who left in the Reporting Period:
□ Applicable √ Not applicable
3. Remuneration of Directors, Supervisors and Senior Management
Following the approval of the Remuneration and Appraisal Committee, the remunerations for directors, supervisors and seniormanagement are submitted to the Board of Directors and the Supervisory Committee for further approval. The remunerations ofdirectors and supervisors are subject to final approval by the general meeting, and those of senior management are subject to theBoard of Directors. The decision-making procedures are in compliance with the Company Law, the Company’s Articles ofAssociation, and the Company’s Specific Implementation Rules for the Remuneration and Appraisal Committee under the Board ofDirectors. In the Reporting Period, the actual payments of remuneration for directors, supervisors and senior management wereconsistent with the resolutions of the general meeting and the Board of Directors.
Remuneration of directors, supervisors and senior management for the Reporting Period
Unit: RMB'0,000
| Name | Office title | Gender | Age | Incumbent/Former | Total before-tax remuneration from the | Remuneration from any related party or not |
| Company | ||||||
| Tang Zhuolin | Chairman of the Board | Male | 59 | Incumbent | 405.62 | Yes |
| Qiu Yezhi | Director and General Manager | Female | 50 | Incumbent | 415.31 | Yes |
| Xie Weiwei | Director and Deputy General Manager | Male | 48 | Incumbent | 95.01 | Yes |
| Zhou Wenhui | Director, Board Secretary and Vice President | Male | 49 | Incumbent | 171.58 | Not |
| Shao Yongfeng | Chief Financial Officer and Vice President | Male | 47 | Incumbent | 118.14 | Not |
| Mai Zhirong | Independent Director | Male | 51 | Incumbent | 20.00 | Not |
| Peng Xiaowei | Independent Director | Male | 51 | Incumbent | 20.00 | Not |
| He Weifeng | Independent Director | Male | 61 | Incumbent | 20.00 | Not |
| Chen Huiyi | Chairman of the Supervisory Committee | Female | 37 | Incumbent | 27.87 | Not |
| Zhao Xiuhe | Employee Supervisor | Male | 51 | Incumbent | 24.25 | Not |
| He Baohua | Supervisor | Male | 40 | Incumbent | 34.35 | Not |
| Total | -- | -- | -- | -- | 1,352.13 | -- |
VI Performance of Duty by Directors in the Reporting Period
1. Board Meetings Convened during the Reporting Period
| Meeting | Date of the meeting | Disclosure date | Resolution |
| The 5th Meeting of the 4th Board of Directors | 26 March 2021 | 29 March 2021 | 1. Reviewed and approved the Proposal on the Report on the Work of the Board of Directors for 2020 (including the Report of the Independent Directors for 2020); 2. Reviewed and approved the Proposal on the Report on the Work of the Supervisory Committee for 2020; 3. Reviewed and approved the Proposal on the Annual Report and its Summary for 2020; 4. Reviewed and approved the Proposal on the Report on the Financial Accounts for 2020; 5. |
| Reviewed and approved the Proposal on the Financial Budget Report for 2021; 6. Reviewed and approved the Proposal on the Profit Distribution Proposal for 2020; 7. Reviewed and approved the Proposal on the Self-Evaluation Report on Internal Control for 2020; 8. Reviewed and approved the Proposal on the Summary Report of the Audit Committee of the Board of Directors on the Annual Audit Work of Ernst & Young Hua Ming Accounting Firm (Special General Partnership) for 2020 and the Proposed Appointment of the Audit Institution for 2021; 9. Reviewed and approved the Proposal on the Special Report on the Deposit and Use of Raised Funds for 2020; 10. Reviewed and approved the Proposal on the Use of Own Funds for Securities Investment; 11. Reviewed and approved the Proposal on Authorizing the Management to Apply for Comprehensive Credit from Banks for 2021; 12. Reviewed and approved the Proposal on the Deliberation of the Revised Rolling Draft of the Company's Five-Year Strategic Plan; 13. Reviewed and approved the Proposal on the Convening of the 2020 Annual General Meeting. | |||
| The 6th (Extraordinary) Meeting of the 4th Board of Directors | 19 April 2021 | 20 April 2021 | 1. Reviewed and approved the Proposal on the Report for the First Quarter of 2021; 2. Reviewed and approved the Proposal on the Change of Accounting Policy. |
| The 7th (Extraordinary) Meeting of the 4th Board of Directors | 7 June 2021 | 8 June 2021 | Reviewed and approved the Proposal on Authorising the Management of the Company and its Subsidiary to Initiate Preliminary Preparation for the Spin-off and Domestic Listing of the Subsidiary. |
| The 8th (Extraordinary) Meeting of the 4th Board of Directors | 18 June 2021 | 19 June 2021 | 1. Reviewed and approved the Proposal on the Satisfaction of Unlocking Conditions in the First Unlocking Period for the First Grant of the 2020 Restricted Share Incentive Plan; 2. Reviewed and approved the Proposal on the Repurchase and Retirement of Some Restricted Shares; 3. Reviewed and approved the Proposal on the Change of Registered Capital and the Revision of <Articles of Association>. |
| The 9th Meeting of the 4th Board of Directors | 26 July 2021 | 27 July 2021 | Reviewed and approved the Proposal on the Semi-Annual Report and its Summary for 2021. |
| The 10th (Extraordinary) Meeting of the 4th Board of Directors | 31 August 2021 | 1 September 2021 | 1. Reviewed and approved, by item-by-item voting, the Proposal on the Repurchase of Some Public Shares; 2. Reviewed and approved the Proposal on the Request to the Company's General Meeting to Authorize the Board of Directors for Handling Matters Related to the Share Repurchase; 3. Reviewed and approved the Proposal on the Repurchase and Retirement of Some Restricted Shares; 4. Reviewed and approved the Proposal on the Change of |
| Registered Capital and the Revision of <Articles of Association>. 5. Reviewed and approved the Proposal on the Convening of the Second Extraordinary General Meeting for 2021. | |||
| The 11th (Extraordinary) Meeting of the 4th Board of Directors | 7 September 2021 | 8 September 2021 | Reviewed and approved the Proposal on the Deferred Convening of the Second Extraordinary General Meeting for 2021. |
| The 12th (Extraordinary) Meeting of the 4th Board of Directors | 28 October 2021 | 29 October 2021 | Reviewed and approved the Proposal on the Report for the Third Quarter of 2021. |
2. Attendance of Directors at Board Meetings and General Meetings
| Attendance of directors at board meetings and general meetings | |||||||
| Director | Total number of board meetings the director was eligible to attend | Board meetings attended on site | Board meetings attended by way of telecommunication | Board meetings attended through a proxy | Board meetings the director failed to attend | The director failed to attend two consecutive board meetings or not | General meetings attended |
| Tang Zhuolin | 8 | 3 | 5 | 0 | Not | 3 | |
| Qiu Yezhi | 8 | 3 | 5 | 0 | Not | 3 | |
| Xie Weiwei | 8 | 3 | 5 | 0 | Not | 3 | |
| Zhou Wenhui | 8 | 3 | 5 | 0 | Not | 3 | |
| Mai Zhirong | 8 | 2 | 5 | 1 | 0 | Not | 2 |
| Peng Xiaowei | 8 | 3 | 5 | 0 | Not | 3 | |
| He Weifeng | 8 | 3 | 5 | 0 | Not | 3 | |
Why any director failed to attend two consecutive board meetings:
3. Objections Raised by Directors on Matters of the Company
Indicate whether any directors raised any objections on any matter of the Company.
□ Yes √ No
No such cases in the Reporting Period.
4. Other Information about the Performance of Duty by Directors
Indicate whether any suggestions from directors were adopted by the Company.
√ Yes □ No
Suggestions from directors adopted or not adopted by the Company:
During the Reporting Period, the directors and independent directors of the Company worked in strict accordance with therequirements of the Company Law, the Securities Law, the Guidelines for the Standardized Operation of Listed Companies on theShenzhen Stock Exchange, the Articles of Association, the Rules of Procedure for the Board of Directors and other relevant laws andregulations, earnestly attended the Board meetings and the General Meetings, and were diligent and responsible. They have maderelevant suggestions on the major governance and operation decisions of the Company. The independent directors actively got toknow the operation of the Company and delivered different opinions on major matters of the Company, giving better play to theirsupervisory role and effectively maintaining the interests of the Company and its shareholders.
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
VII Performance of Duty by Special Committees under the Board in the Reporting Period
| Committee | Members | Number of meetings convened | Date of meeting | Contents | Important opinion and suggestions | Other performance of duties | Particulars about objections (if any) |
| Audit Committee of the Board of Directors | Mai Zhirong, Qiu Yezhi, He Weifeng | 1 | 30 March 2021 | Reviewed Proposal on <2020 Audit Report of Guangdong Dongfang Precision Science & Technology Co., Ltd.>; reviewed Proposal on <Special Report on the Deposit and Use of Raised Funds 2020>; reviewed Proposal on <Self-evaluation Report on Internal Control 2020>; reviewed Proposal on <Summary Report of the Audit Committee of the Board of Directors on the Annual Audit of Ernst & Young Hua Ming Certified Public Accountants (Special General Partner) 2020>; reviewed Proposal on the Proposed Appointment of an Audit Institution 2021. | |||
| Audit Committee of the Board of Directors | Mai Zhirong, Qiu Yezhi, He Weifeng | 1 | 19 April 2021 | Reviewed Proposal on <Report on the Work of the Audit Department for the First Quarter of 2021>; reviewed Proposal on the <Work Report of the Audit Committee for the First Quarter of 2021>; reviewed Proposal on the <Special Report on the Deposit and Use of Raised Funds for the First Quarter of 2021>; reviewed Proposal on the <Audit Report on the Financial Statements for the First Quarter of 2021>; reviewed Proposal on the <Work Plan of the Audit Department for the Second Quarter of 2021>. | |||
| Remuneration and Appraisal Committee of the Board of Directors | Peng Xiaowei, Qiu Yezhi, He Weifeng | 1 | 16 June 2021 | Reviewed the Proposal on the Results of 2020 Annual Performance Appraisal for Awardees of the 2020 Restricted Share Incentive Plan; reviewed the Proposal on the Satisfaction of Conditions for the First Unlocking Period for the First Grant of the 2020 Restricted Share Incentive Plan; reviewed the Proposal on the Repurchase and Retirement of Some Restricted Shares. | |||
| Audit Committee of the Board of Directors | Mai Zhirong, Qiu Yezhi, He Weifeng | 1 | 26 July 2021 | Reviewed Proposal on <Report on the Work of the Audit Department for the Second Quarter of 2021>; reviewed Proposal on the <Work Report of the Audit Committee for the Second Quarter of 2021>; reviewed Proposal on the <Audit |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
| Report on the Financial Statements for the Second Quarter of 2021>; reviewed Proposal on the <Work Plan of the Audit Department for the Third Quarter of 2021>. | |||||||
| Audit Committee of the Board of Directors | Mai Zhirong, Qiu Yezhi, He Weifeng | 1 | 28 October 2021 | Reviewed Proposal on <Report on the Work of the Audit Department for the Third Quarter of 2021>; reviewed Proposal on the <Work Report of the Audit Committee for the Third Quarter of 2021>; reviewed Proposal on the <Audit Report on the Financial Statements for the Third Quarter of 2021>; reviewed Proposal on the <Work Plan of the Audit Department for the Fourth Quarter of 2021>. |
VIII Performance of Duty by the Supervisory Committee
Indicate whether the Supervisory Committee found any risk to the Company during its supervision in the Reporting Period.
□ Yes √ No
No such cases in the Reporting Period.
IX Employees
1. Number, Functions and Educational Backgrounds of Employees
| Number of in-service employees of the Company as the parent at the period-end | 513 |
| Number of in-service employees of principal subsidiaries at the period-end | 1,339 |
| Total number of in-service employees at the period-end | 1,852 |
| Total number of paid employees in the Reporting Period | 2,140 |
| Number of retirees to whom the Company as the parent or its major subsidiaries need to pay retirement pensions | 3 |
| Functions | |
| Function | Employees |
| Production&Operation | 1,111 |
| Marketing | 211 |
| Technical | 284 |
| Financial | 67 |
| Administrative | 179 |
| Total | 1,852 |
| Educational backgrounds | |
| Educational background | Employees |
| Senior high school and below | 916 |
| Junior college | 475 |
| Bachelor’s degree | 337 |
| Master’s degree and above | 124 |
| Total | 1,852 |
2. Employee Remuneration Policy
Domestic business entities:
The remuneration policy in 2021 continued to be based on posts and performance and subject to total control.
A comprehensive remuneration system was established and further improved to retain and attract talents needed forthe Company's sustainable development.
1. Paid remuneration based on posts: The relative value of a post was determined based on its duties, and theremuneration rage of the post was determined based on the relative value and according to the Company's valueorientation.
2. Paid remuneration based on performance: The Company determined the basic remuneration based on therelative value of a post and personal competence, determined the performance bonus in an employee's remunerationbased on his/her performance, and adjusted the remuneration based on his/her personal competence and overallperformance.
3. Changed remuneration with the change in post: The remuneration was strictly fitted to the post, and if thepost changed, the remuneration changed, so that the remuneration system can support the career development ofemployees.
4. Total control: The total amount of remuneration was controlled within the scope recognized by the Company,and the growth rate of remuneration should be lower than that of sales revenue and profit. The Company'saffordability was taken into account so that the Company's business performance can support the growth of the totallabour cost.
5. The remuneration system of payment by piece is applied to first-line workers, so that they could be paidmore by being more profession and working harder, so as to reflect an internally fair remuneration policy based ondifferential skill scoring.Overseas business entities:
The remuneration system for each overseas business entity is put in place in accordance with the local laborlaw.
3. Training Plan
1. Overall status: 112 training sessions were carried out at the Group headquarters and domestic branches andsubsidiaries in 2021, totaling 710 hours of lectures. The number of training hours per capita was about 8.6 hours,totaling 2,642 training attendees.
2. In 2021, the Company set up a team of more than 60 internal trainers to instruct and contribute to the teamgrowth; meanwhile, the Company introduced external online and offline training resources to implement thetraining effectively and conveniently, empower core employees and share training resources in the Group.
3. The wisdom of Senior Management was shared to inherit the corporate culture of Dongfang Precision. TheCompany built an interactive platform between Senior Management and grassroots employees, and completed aseries of six "Voice of Boss" sharing activities.
4. The Company empowered the team of internal trainers, improved their curriculum development andteaching skills, preparing instructors and curriculum database for internal training and talent team construction.
5. Operation of Talent Development Project: a total of 40 trainees with a year of hands-on learning andmentor coaching.
4. Labor Outsourcing
√ Applicable □ Not applicable
| Total hours of labor outsourced | 145,714 |
| Total payment for labor outsourcing (RMB yuan) | 1,844,312.02 |
X Profit Distributions to Ordinary Shareholders (in the Form of Cash and/or Stock)The profit distribution policy for shareholders, especially the formulation, implementation and amendments to the cash dividendpolicy, in the Reporting Period:
√ Applicable □ Not applicable
Article 183 of the Articles of Association of Guangdong Dongfang Precision Science & Technology Co., Ltd. Has specified themethod of profit distribution and the conditions, schedule and proportion of cash dividend, as well as the procedures to decide andadjust or change profit distribution, in order to fully protect the legitimate rights and interests of investors.The profit distribution policy of the Company remained unchanged in the Reporting Period.
| Special statement about the cash dividend policy | |
| In compliance with the Company’s Articles of Association and resolution of general meeting | Yes |
| Specific and clear dividend standard and ratio | Yes |
| Complete decision-making procedure and mechanism | Yes |
| Independent directors faithfully performed their duties and played their due role | Yes |
| Non-controlling shareholders are able to fully express their opinion and desire and their legal rights and interests are fully protected | Yes |
| In case of adjusting or changing the cash dividend policy, the conditions and procedures involved are in compliance with applicable regulations and transparent | Not applicable |
Indicate whether the Company fails to put forward a cash dividend proposal for shareholders despite the facts that the Company hasmade profits in the Reporting Period and the profits of the Company as the parent distributable to shareholders are positive.
□ Applicable √ Not applicable
Final dividend plan for the Reporting Period:
□ Applicable √ Not applicable
The Company planed not to distribute cash dividends, neither give away bonus shares, nor capitalize from public reserve
XI Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures forEmployees
√ Applicable □ Not applicable
1. Equity Incentives
In order to refine its long-term incentive mechanism, boost the enthusiasm of management personnel and key employees of all
levels, effectively promote long-term development, and achieve the objective of “Promoting Team Stability and Morale, AttractTalent and Improve Operating Performance”, the Company launched the 2020 Restricted Share Incentive Plan in the first quarter of2020. The plan was approved at the First Extraordinary General Meeting of 2020 on 27 March 2020. For details, see the Summary ofthe 2020 Restricted Share Incentive Plan (Draft) disclosed by the Company on www.cninfo.com.cn dated 12 March 2020.
1. On 27 March 2020, the Proposal on the Grant of Restricted Shares to Awardees was approved at the 44
th(Extraordinary)Meeting of the 3
rd
Board of Directors. The date for the first grant of the restricted shares was 27 March 2020. In June 2020, theCompany completed the ownership transfer of the 22,600,000 restricted shares granted to 40 awardees at RMB1.00/share in the firstgrant, the listing date of which is 24 June 2020. For details, see the Announcement on the Completion of the Ownership Transfer ofthe First Grant under the 2020 Restricted Share Incentive Plan disclosed by the Company on www.cninfo.com.cn dated 29 June2020.
2. On 29 December 2020, the Proposal on the Grant of Reserved Restricted Shares to Awardees was approved at the Fourth(Extraordinary) Meeting of the Fourth Board of Directors. The date for the grant of the reserved restricted shares was 29 December2020. In February 2021, the Company completed the ownership transfer of the 4,240,000 restricted shares to 18 awardees atRMB1.00/share, the listing date of which is 25 February 2021. For details, see the Announcement on the Completion of theOwnership Transfer of the Grant of Reserved Restricted Shares under the 2020 Restricted Share Incentive Plan disclosed by theCompany on www.cninfo.com.cn dated 26 February 2021.
3. On 14 January 2021, the Proposal on the Repurchase and Retirement of Certain Restricted Shares was approved at the FirstExtraordinary General Meeting of 2021. As two awardees resigned from the Company and were disqualified for the equity incentives,the Company decided to repurchase and retire the 900,000 restricted shares that had been granted to them but were still locked up.The repurchase and retirement of these restricted shares was completed on 24 February 2021. For details, see the Announcement onthe Completion of the Repurchase and Retirement of Certain Restricted Shares disclosed by the Company on www.cninfo.com.cndated 26 February 2021.
4. On 18 June 2021, the Proposal on the Satisfaction of the Unlocking Conditions for the First Unlocking Period for the FirstGrant under the 2020 Restricted Share Incentive Plan and the Proposal on the Repurchase and Retirement of Certain RestrictedShares were approved at the 8th (Extraordinary) Meeting of the 4th Board of Directors and the 6th (Extraordinary) Meeting of the 4thSupervisory Committee. On 25 June 2021, 4,310,000 shares held by 37 awardees were unlocked for public trading in the firstunlocking period for the first grant under the 2020 Restricted Share Incentive Plan.
5. On 18 June 2021, the Proposal on the Repurchase and Retirement of Certain Restricted Shares was approved at the 8th(Extraordinary) Meeting of the 4th Board of Directors. Due to an awardee failing to meet the 2020 performance appraisal standard,the Company decided to repurchase and retire the 30,000 restricted shares that had been granted to the awardee. The repurchase and
retirement of these restricted shares was completed on 26 October 2021. For details, see the Announcement on Completion of theRepurchase and Retirement of Certain Restricted Shares disclosed by the Company on www.cninfo.com.cn dated 28 October 2021.
6. On 31 August 2021, the Proposal on the Repurchase and Retirement of Certain Restricted Shares was approved at the 10th(Extraordinary) Meeting of the 4th Board of Directors. As one awardee resigned from the Company and were disqualified for theequity incentives, the Company decided to repurchase and retire the 120,000 restricted shares that had been granted to the awardeebut were still locked up. The repurchase and retirement of these restricted shares was completed on 26 October 2021. For details, seethe Announcement on the Completion of the Repurchase and Retirement of Certain Restricted Shares disclosed by the Company onwww.cninfo.com.cn dated 28 October 2021.
Equity incentives received by directors and senior management:
√ Applicable □ Not applicable
Unit: share
| Name | Office title | Exercisable shares in the Reporting Period | Exercised shares in the Reporting Period | Exercise price for exercised shares in the Reporting Period (RMB yuan/share) | Market price at the period-end (RMB yuan/share) | Opening restricted shares | Unlocked shares in the Reporting Period | Restricted shares newly granted in the Reporting Period | Grant price (RMB yuan/share) | Closing restricted shares |
| Qiu Yezhi | Director and General Manager | 9,000,000 | 1,800,000 | 0 | 1 | 7,200,000 | ||||
| Xie Weiwei | Director and Deputy General Manager | 1,000,000 | 200,000 | 0 | 1 | 800,000 | ||||
| Zhou Wenhui | Director, Board Secretary and Vice President | 1,200,000 | 240,000 | 0 | 1 | 960,000 | ||||
| Shao Yongfeng | Chief Financial | 0 | 0 | 800,000 | 1 | 800,000 |
| Officer and Vice President | ||||||||||
| Total | -- | 0 | 0 | -- | -- | 11,200,000 | 2,240,000 | 800,000 | 9,760,000 |
Appraisal of and incentive for senior management:
The Company has established a sound performance appraisal and remuneration policy for senior managers, and determined keyperformance indicators (KPIs) matching different posts, which linked the income of the Company's managers and employees atdifferent levels to their work performance. During the Reporting Period, the Company assessed and appraised the work ability, dutyperformance and completion of responsibility goals of senior managers based on the KPIs, and closely linked their remunerationlevels with the Company's business performance.
2. Implementation of Employee Stock Ownership Plans
□ Applicable √ Not applicable
3. Other Incentive Measures for Employees
□ Applicable √ Not applicable
XII Formulation and Implementation of Internal Control System during the ReportingPeriod
1. Internal Control Formulation and Implementation
In accordance with the provisions of the Basic Code for Internal Control of Enterprises and its supporting guidelines and otherregulatory requirements for internal control, the Company has set up a relatively complete corporate governance structure andinternal control management system in line with its actual operation, which is in line with the needs of the Company's operation andmanagement. The Company has established internal control over the businesses and matters included in the scope of evaluation foreffective implementation. The objective of internal control has been basically achieved with no material weakness.
The Board of Directors of the Company is responsible for establishing sound and effective internal controls and evaluating theireffectiveness in accordance with the provisions of the standard system for enterprise internal control. The Supervisory Committeesupervised the establishment and implementation of internal controls by the Board of Directors.
The Company would ensure legal compliance in operation and management, assets safety, truthfulness and integrity of financialreports and related information through the sound and effective implementation of internal controls to improve operational efficiencyand effect, and promote the development strategy.
2. Significant Defects in Internal Control Identified during the Reporting Period
□ Yes √ No
XIII Subsidiary Management during the Reporting Period
| Subsidiary | Management plan | Progress | Problems | Solutions | Solution progress | Subsequent plan |
| N/A | N/A | N/A | N/A | N/A | N/A | N/A |
XIV Self-Assessment Report and Independent Auditor’s Report on Internal Control
1. Internal Control Self-Assessment Report
| Date of full disclosure of the internal control assessment report | 15 March 2022 | |
| Index of full disclosure of the internal control assessment report | Published on www.cninfo.com.cn | |
| Ratio of the total assets of the organizations included in the assessment to the total assets in the Company's consolidated financial report | 100.00% | |
| Ratio of the revenue of the organizations included in the assessment to the revenue in the Company's consolidated financial report | 100.00% | |
| Defect identification criteria | ||
| Category | Financial report | Non-financial report |
| Qualitative criteria | 1) Indications of significant defects in financial reports include: a. Fraudulent conduct by directors, supervisors and senior management of the Company; b. Correction of a published financial report by the Company; c. Significant misstatement in the current financial report identified by a certified public account but not identified during the Company's internal control audit; d. Invalid supervision of the Audit Committee and audit department over the Company's external financial reports and internal control of financial reports. 2) Indications of important defects in financial reports included: a. Failure to select or apply accounting policies in accordance with GAAP; b. Failure to implement | The identification of defects in non-financial reports is mainly based on the degree of impact of the defects on the effectiveness of business procedures and the possibility of their occurrence. 1) Significant defect If the possibility of the defect is high, it will seriously reduce the work efficiency or effectiveness, seriously increase the uncertainty of the effectiveness, or make the work result seriously deviate from the expected goal, the defect is a significant defect. The following usually indicates a significant defect in the internal control of non-financial reports: a. Violation of national laws and regulations; b. Outflow of managers or key technicians; c. Frequent negative news from media; d. Failure to correct the results, especially significant or important defects, in |
| anti-fraud procedures and take control measures; c. Lack of corresponding control mechanism for accounting treatment of unconventional or special transactions or lack of corresponding compensatory control; d. One or more defects in the control of the period-end financial reporting process and failure to reasonably ensure true and complete financial reports. 3) General defects refer to the control defects other than significant and important defects mentioned above. | internal control assessment; e. Lack of system control or systematic failure of system in important business. 2) Important defect If the possibility of the defect is relatively high, it will significantly reduce the work efficiency or effectiveness, significantly increase the uncertainty of the effectiveness, or make the work result significantly deviate from the expected goal, the defect is an important defect. The following usually indicates an important defect in the internal control of non-financial reports: a. Defects in important business policies or systems; b. Important mistakes in the decision-making process; c. Serious outflow of business personnel in key posts; d. Failure to timely remedy the important defects identified in internal supervision of internal control; e. Other circumstances that have a negative impact on the Company. 3) General defects referred to the control defects other than significant and important defects mentioned above. | |
| Quantitative criteria | A quantitative judgment was made based on the pretax profit of the Company. The misstatement exceeding 5% of the total pretax profit was determined as a significant misstatement, that exceeding 3% of the total pretax profit was determined as an important misstatement, and others were determined as general misstatements. | The revenue and total assets were the measuring indicators for the quantitative criteria. If the loss that may result from or results from an internal control defect is related to the profit report, it was measured by the revenue indicator. If the amount of misstatement in the financial report that may result from the defect alone or it together with other defects is less than 0.5% of the revenue, the defect was determined as a general defect. If it exceeds 0.5% and is less than 1% of the revenue, it was determined as an important defect. If it exceeds 1% of the revenue, it was determined as a significant defect. If the loss that may result from or results from an internal control defect is related to asset management, it was measured by the total asset indicator. If the amount of misstatement in the financial report that may result from the defect alone or it together with other defects is less than 0.5% of the total assets, the defect was determined as a general defect. If it exceeds 0.5% and is less than 1% of the total assets, it was determined as an important defect. If it exceeds 1% of the total assets, it was determined as a significant defect. |
| Number of significant | 0 | |
| defects in financial reports | |
| Number of significant defects in non-financial reports | 0 |
| Number of important defects in financial reports | 0 |
| Number of important defects in non-financial reports | 0 |
2. Independent Auditor’s Report on Internal Control
√ Applicable □ Not applicable
| Opinion paragraph in the independent auditor’s report on internal control | |
| In the opinion of Ernst & Young Hua Ming LLP, Guangdong Dongfang Precision Science & Technology Co., Ltd. maintained, in all material respects, effective internal control over financial reporting as at 31 December 2021, based on the Basic Rules on Enterprise Internal Control and other applicable rules. | |
| Independent auditor’s report on internal control disclosed or not | Yes |
| Disclosure date | 15 March 2022 |
| Index to such report disclosed | www.cninfo.com.cn |
| Type of the auditor’s opinion | Unmodified unqualified opinion |
| Material weaknesses in internal control not related to financial reporting | None |
Indicate whether any modified opinion is expressed in the independent auditor’s report on the Company’s internal control.
□ Yes √ No
Indicate whether the independent auditor’s report on the Company’s internal control is consistent with the internal controlself-evaluation report issued by the Company’s Board of Directors.
√ Yes □ No
XV Rectifications of Problems Identified by Self-inspection in the Special Action for ListedCompany GovernanceDuring the Reporting Period, the Company carried out special self-inspection activities on governance according tothe unified deployment of regulatory authorities, and the results of the self-inspection are as follows:
(I) Overview of corporate governanceIn strict accordance with the requirements of the Company Law, the Securities Law, the Code of CorporateGovernance for Listed Companies, the Listing Rules of Shenzhen Stock Exchange and other relevant laws and
regulations, the Company has continuously improved its corporate governance structure, established and improved itsinternal control system to standardize its operations and enhance information disclosure. It also actively developedinvestor relations management, and complied with the requirements of laws and regulations in all aspects of corporategovernance.(II) Problems in corporate governance and rectification
1. Due to other arrangements, there were circumstances where some directors or senior management did not attend(preside) the General Meeting as required.
Rectification: The Company strengthened training, educated the requirements of relevant laws and regulations tofacilitate the participation of directors, supervisors and senior management in General Meetings via video, telephoneand Internet.
2. There were circumstances where independent directors were unable to attend the board meeting in personRectification: The Company strengthened training, educated the requirements of relevant laws and regulations tofacilitate the participation of independent directors in board meeting via video, telephone and Internet.
Part V Environmental and Social Responsibilities
I Significant Environmental Issues
Whether the listed company and its subsidiaries fell into major pollutant-discharge enterprises and institutions published by nationalenvironmental protection authorities.
□ Yes √ No
The Company and its subsidiaries did not fall into major pollutant-discharge enterprises and institutions published by nationalenvironmental protection authorities, and the Company was not administratively punished for environmental issues in the ReportingPeriod. For other environmental information, please refer to “II Social Responsibilities” below.Measures taken to reduce carbon emissions in the Reporting Period and the impact:
□ Applicable √ Not applicable
Reason for the non-disclosure of other environmental information:
II Social ResponsibilitiesThe Company attached importance to fulfil social responsibility in daily operations, intending to promote the harmony andco-prosperity between it and parties related to its interests. The Company also took active measures in the protection of the rights andinterests of shareholders, creditors, employees, suppliers, customers and consumers, environmental protection, sustainabledevelopment, public relations and social public welfare undertakings, and strived to maximize comprehensive social benefitsincluding the sustainable development of itself.
(1) Corporate governance: During the Reporting Period, the Company strictly abided by the Company Law, the Securities Lawand Code of Corporate Governance for Listed Companies, continued to refine the corporate governance structure, improve theinternal control system, formed the decision-making system comprising the Shareholders' General Meeting, the Board of Directors,the Supervisory Committee and the Management, and timely fulfilled its obligation of information disclosure according to laws andregulations and effectively safeguarded the rights and interests of all shareholders.
(2) Rights and interests of employees: The Company provided employees with welfare and care by providing holiday gifts andholding employee birthday parties, annual meetings and team building activities, improved employees' professional competence byoffering regular or irregular training to employees in the headquarters and domestic and foreign branches and subsidiaries, andcontinued to improve the competitive comprehensive remuneration system to retain and attract talents needed for the Company'ssustainable development.
(3) Relationship with customers and suppliers: Long adhering to the principle of "honest business" and "mutual benefit andwin-win", the Company took the initiative to construct and develop strategic partnership with suppliers and customers and jointlybuilt a platform of trust and cooperation, and earnestly fulfilled its social responsibilities to suppliers, customers and consumers. TheCompany has been well performing contracts with suppliers and customers and ensuring that the rights and interests of all parties arehighly valued and duly protected.
(4) Production safety: The Company strictly abided by the Labour Law and the Labour Contract Law, adhered to the"people-oriented" principle, attached importance to the needs of employees, strived to improve the working and living environmentsof employees, and has set up a labour union to effectively protect the interests of employees. It also provided labour protectionsupplies according to the risk factors of different posts, organized occupational health examinations for employees (before taking thepost, on the post and before leaving the post), and bought safety liability insurance for employees on highly risky posts. In 2020,Dongfang Precision extended its Grade II Production Safety Standardization Certificate for Machinery Enterprises, and Parsun Powerand Fosber Asia were granted the Grade III Production Safety Standardization Certificate for Machinery Enterprises.
(5) Environmental protection: First, Dongfang Precision and Parsun Power were granted the National Pollutant DischargePermit and met post-licensing regulatory requirements as required. Second, Dongfang Precision and Parsun Power commissioned thequalified third party environmental protection agencies to compile the Contingency Plans for Environmental Emergencies, and filedthem. Third, the Company completed its environmental protection facilities (e.g., the waste gas treatment facility and the waste watertreatment facility), and passed the qualification re-examination on OHSAS18001:2007 Occupational Health and Safety ManagementSystems and ISO14001:2005 Environmental Management System. Fourth, the Company commissioned a third party to install andoperate 24h online wastewater flow monitoring equipment, and also commissioned a third party testing agency to test waste water,waste gas and noise every quarter. It also required environmental equipment operators to carry out regular inspections everyday. Fifth,Parsun Power commissioned a third party to implement annual environmental monitoring, and tested the activated carbon adsorptionequipment before and after maintenance (including replacement of activated carbon). It also divided pollutants and wastes intoindustrial waste water, waste gas, solid waste, hazardous waste and domestic waste, and disposed of them, and earnestly fulfilled itsresponsibility of environmental protection.
(6) Anti-fraud: The Group complied a thorough internal authorization manual that detailed provisions on internal authorizationprocess of major matters to ensure appropriate internal control and reduce the risk of fraud. In order to create a fair, just, honest andnon-corrupt internal business environment and strengthen internal monitoring, the Company also established and launched theanti-fraud reporting platform to encourage employees to report fraud findings.
(7) Social honour: Dongfang Precision won honorary titles including "Top 500 Private Manufacturing Enterprises in China","Leading Enterprises in Subdivided Industries in Foshan", and "Guangdong Provincial Industrial Design Center"; Fosber Asia wonhonorary titles including "Guangdong Demonstration Enterprise of Intellectual Property"; and Parsun Power won honorary titlesincluding "Leading Enterprise in China's Internal Combustion Engine Industry", "2021 China Shipbuilding Industry Best TechnologyInnovation Award", "2021 China Shipbuilding Industry Outstanding Contribution Award", and in July 2021 was shortlisted as anational "little giant" enterprise with the quality of specialization, refinement, characteristics and novelty.
III Efforts in Poverty Alleviation and Rural Revitalization
The Company did not conduct activities related to targeted poverty alleviation in the Reporting Year, nor did it develop anysubsequent plan for targeted poverty alleviation.
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
Part VI Significant Events
I Fulfillment of Undertakings
1. Undertakings of the Company’s Actual Controller, Shareholders, Related Parties and Acquirers, as well as the Company Itself and other Entities Fulfilledin the Reporting Period or Ongoing at the Period-end
√ Applicable □ Not applicable
| Cause of undertakings | Parties of undertakings | Types of undertakings | Contents of undertakings | Date of undertakings | Term of undertakings | Fulfilment of undertakings |
| Undertakings related to reform of shareholder structure | ||||||
| Undertakings made in acquisition report of change of equity report | ||||||
| Undertakings made in asset reorganization | Tang Zhuolin, Tang Zhuomian | Undertaking on horizontal competition, related-party transactions and capital | 1. I will conduct all related-party transactions, unavoidable or arising from a reasonable reason, between me and companies controlled by me and Dongfang Precision and its controlling subsidiaries in a fair and reasonable manner and on an equal, mutually beneficial, equivalent and compensable basis in strict accordance with market principles. For all related-party transactions between me and companies controlled by me and Dongfang Precision and its controlling subsidiaries, I will sign agreements and go through procedures according to law and fulfil the obligation of information disclosure in accordance | 25 April 2017 | Long-term effective | In normal progress of fulfilment |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
| Cause of undertakings | Parties of undertakings | Types of undertakings | Contents of undertakings | Date of undertakings | Term of undertakings | Fulfilment of undertakings |
| occupation | with relevant laws, regulations, normative documents, Articles of Association of Dongfang Precision and other corporate governance provisions, and undertakes not to damage the legitimate rights or interests of the listed company and small and medium shareholders. 2. When any related-party transaction involving me and companies controlled by me is being deliberated by the authority of Dongfang Precision, I will proactively perform the obligation of evading according to law and conduct the transaction only with the approval of the competent authority. 3. I undertake not to obtain any improper benefits or cause Dongfang Precision and its controlling subsidiaries to assume any improper obligations through related-party transactions. In case of any losses to Dongfang Precision or its controlling subsidiaries as a result of any breach of the above undertakings, I will be liable for such losses. | |||||
| Pulead; BAIC Capital; Foton; CATL; Qinghai Puren | Other undertakings | When the Company is conducting major asset reorganization by acquiring 100% of Beijing Pride's equity, former shareholders of Beijing Pride, namely Pulead, Qinghai Puren, BAIC Capital, Foton and CATL, undertake that: 1. None of them has signed any agreement on concerted action as of the date of signature of the Agreement to Purchase Assets by Issuing Shares and Paying Cash, nor will them do so in the future, although BAIC Capital and Foton are subject to a concerted action relation and so as Pulead and Qinghai Puren. 2. They will not attempt to change any member of the Board of Directors of Dongfang Precision through a general meeting of shareholders. | July 28, 2016 | Long-term effective | In normal progress of fulfilment | |
| Tang Zhuolin, Tang Zhuomian | Undertaking on horizontal competition, related-party transactions and capital occupation | 1. The undertaker and companies controlled by it are not engaging in any business the same as, similar to or competing with the business of the listed company and companies controlled by it, and they will neither, in any way, engage in or assist others in engaging in any business that competes or may compete with the business of the listed company and companies controlled by it, nor merge or substantially invest in (or jointly hold), directly or indirectly, other companies engaging in any business that competes or may compete with the business of the listed company and companies controlled by it. 2. If the listed company engages in a new business sector, the undertaker will not engage in any business that competes with such a new business of the listed company, except with the prior written consent of the listed company. 3. If any business opportunity obtained by the undertaker from any third | 25 November 2019 | Long-term effective | In normal progress of fulfilment |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
| Cause of undertakings | Parties of undertakings | Types of undertakings | Contents of undertakings | Date of undertakings | Term of undertakings | Fulfilment of undertakings |
| party completes or may compete with the business of the listed company and companies controlled by it, the undertaker will immediately inform and make every effort to deliver the business opportunity to the listed company. 4. The undertaker will not, in any way, use the information or other resources obtained from the listed company to conduct any act that harms the interests of the listed company. 5. In case of any losses to the listed company as a result of breach of these undertakings by the undertaker, the undertaker will make thorough, timely and full compensation for all such losses and take active measures to eliminate the adverse effects caused thereby. | ||||||
| Tang Zhuolin, Tang Zhuomian | Undertaking on horizontal competition, related-party transactions and capital occupation | 1. The undertaker will refrain from any illegal occupation of the funds and assets of the listed company, and will never require the listed company to provide any form of guarantee to it or companies controlled by it under any circumstances. 2. The undertaker will, to the extent possible, avoid and minimize related-party transactions with the listed company, and for all related-party transactions unavoidable or arising from a reasonable reason, it will conduct following the principle of voluntary, fair and reasonable market pricing and according to normal market trading conditions, sign agreements and go through procedures according to law, abide by relevant laws, regulations, normative documents and articles of association of the listed company, perform internal decision-making and approval procedures according to law, and timely perform the obligation of information disclosure, so as to ensure that the related-party transactions are fairly and reasonably priced and conducted under fair trading conditions and that it will not damage the legitimate rights or interests of the listed company and its shareholders through related-party transactions. 3. In case of any losses to the listed company as a result of breach of these undertakings by the undertaker, the undertaker will make thorough, timely and full compensation for all such losses and take active measures to eliminate the adverse effects caused thereby. | 25 November 2019 | Long-term effective | In normal progress of fulfilment | |
| Tang Zhuolin, Tang Zhuomian | Other undertakings | 1. I will not overstep my authority to intervene in the operation and management of Dongfang Precision, will not occupy the interests of Dongfang Precision, and will earnestly take corresponding measures to fill up the diluted spot returns of Dongfang Precision. 2. After the CSRC and Shenzhen Stock Exchange otherwise release the measures to fill up diluted spot returns and opinions and | 25 November 2019 | Long-term effective | In normal progress of fulfilment |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
| Cause of undertakings | Parties of undertakings | Types of undertakings | Contents of undertakings | Date of undertakings | Term of undertakings | Fulfilment of undertakings |
| implementation rules for its undertakings, if Dongfang Precision's corresponding policies and undertakings fail to meet such provisions, I will immediately submit a supplementary undertaking to the CSRC and Shenzhen Stock Exchange as required in order to be compliant. 3. I undertake to earnestly take the corresponding measures formulated by the listed company to fill up diluted spot returns and to earnestly fulfil my undertakings. If I violate such undertaking(s) and cause losses to the Company or investors, I am willing to bear the corresponding liability for compensation according to law. | ||||||
| Tang Zhuolin, Tang Zhuomian | Other undertakings | 1. After this transaction, the undertaker will continue to maintain the independence of the listed company in terms of staffing, asset, business, organization and finance in accordance with relevant laws, regulations and normative documents, and will not conduct any act that affects such independence or damages the interests of the listed company and other shareholders, and will effectively safeguard the independence of the listed company in terms of staffing, asset, business, organization and finance. 2. This letter of undertaking shall be effective and irrevocable as of the date when it is officially signed by the undertaker. The undertaker warrants to fulfil the undertaking(s) in good faith, and the listed company has the right to supervise its fulfilment. Where the undertaker fails to fulfil the undertaking(s) in good faith of undertaking and thus cause actual losses to the listed company, the undertaker shall compensate the listed company for all director or indirect losses caused thereby. | 25 November 2019 | Long-term effective | In normal progress of fulfilment | |
| He Weifeng, Mai Zhirong, Peng Xiaowei, Qiu Yezhi, Tang Zhuolin, Xie Weiwei, Zhou Wenhui | Other undertakings | I, as a director/senior executive of the Company, will faithfully and diligently perform my duties, safeguard the legitimate rights and interests of the Company and all shareholders, and make the following undertakings to ensure that the Company's measures to fill up returns will be effectively implemented. 1. I will not transfer benefits to other organizations or individuals for free or under unfair conditions, nor will I damage the interests of the Company in other ways. 2. I will constrain my consumption behaviour on the position. 3. I will not use the Company's assets to engage in any investment or consumption activities unrelated to my performance of duties. 4. I will link the remuneration system | 25 November 2019 | Long-term effective | In normal progress of fulfilment |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
| Cause of undertakings | Parties of undertakings | Types of undertakings | Contents of undertakings | Date of undertakings | Term of undertakings | Fulfilment of undertakings |
| formulated by the Board of Directors or the Remuneration Committee to the implementation of the Company's measures to fill up returns. 5. If the Company has an equity incentive program, I will link the exercise conditions of the equity incentive program to be announced to the implementation of the Company's measures to fill up returns. 6. After this undertaking is given, if the regulator puts forward other requirements for the measures to fill up returns and the undertaking and the undertaking fails to meet such requirements, I will give a supplementary undertaking according to the latest requirements of the regulator. 7. I will effectively implement the Company's measures to fill up returns and fully fulfil my corresponding undertakings, and I am willing to bear the corresponding liability for compensation according to law if I violate such undertaking(s) and cause losses to the Company or investors. | ||||||
| Undertakings made in IPO or refinancing | Tang Zhuolin, Tang Zhuomian | Undertaking on horizontal competition, related-party transactions and capital occupation | Before the fact that I am (or the Company is) a major shareholder of the issuer is changed, I (or the Company) will not, directly or indirectly, in any way (including but not limited to sole proprietorship, joint venture and holding stocks or interests in other companies or enterprises), engage in any business or activity that competes or may compete with the business of the issuer. I (The Company) shall compensate the issuer for any loss caused to it as a result of the failure to fulfil the undertaking to avoid horizontal competition. | 18 August 2010 | Long-term effective | In normal progress of fulfilment |
| Tang Zhuolin, Tang Zhuomian | Other undertakings | If relevant government or judicial authorities decide that Dongfang Precision or Weike Dongmeng need to make a supplementary payment for employees' public housing provision, or Dongfang Precision or Weike Dongmeng is subject to any late fee, fine or loses for failing to pay the public housing provision for some employees, I will unconditionally and in full bear such supplementary payment, late fees and fines. | 14 August 2011 | Long-term effective | In normal progress of fulfilment | |
| Undertakings related to equity incentives | ||||||
| Undertakings |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
| Cause of undertakings | Parties of undertakings | Types of undertakings | Contents of undertakings | Date of undertakings | Term of undertakings | Fulfilment of undertakings |
| made to minority shareholders of the Company | ||||||
| Whether the undertakings were timely performed | Yes | |||||
| Where the Company failed to fulfill an undertaking on time, it shall explain in detail the reasons for failing to do so and the subsequent plan | Not applicable | |||||
2. Where there had been an earnings forecast for an asset or project and the Reporting Period was stillwithin the forecast period, explain why the forecast has been reached for the Reporting Period.
□ Applicable √ Not applicable
II Occupation of the Company’s Capital by the Controlling Shareholder or Its Related Partiesfor Non-Operating Purposes
□ Applicable √ Not applicable
No such cases in the Reporting Period.
III Irregularities in Provision of Guarantees
□ Applicable √ Not applicable
No such cases in the Reporting Period.IV Explanations Given by the Board of Directors Regarding the Last “Modified Opinion” onFinancial Statements
□ Applicable √ Not applicable
V Explanations Given by the Board of Directors, the Supervisory Committee and theIndependent Directors (if any) Regarding the Independent Auditor's “Modified Opinion” onthe Financial Statements of the Reporting Period
□ Applicable √ Not applicable
VI YoY Changes to Accounting Policies and Estimates and Correction of MaterialAccounting Errors
□ Applicable √ Not applicable
On 7 December 2018, the Ministry of Finance issued the Circular on the Revision and Issue of the Accounting Standard No. 21for Business Enterprises—Leases (CK [2018] No. 35, hereinafter, the “New Lease Standard”). As required by the Ministry ofFinance, companies listed both domestically and overseas, as well as those listed overseas and adopting the International FinancialReporting Standards or China’s Accounting Standards for Business Enterprises in the preparation of their financial statements, shalladopt the New Lease Standard starting from 1 January 2019; while the other companies adopting China’s Accounting Standards forBusiness Enterprises shall adopt the New Lease Standard starting from 1 January 2021.Therefore, the Company has adopted the New Lease Standard starting from 1 January 2021. Regarding this accounting policychange, the Company shall adopt the revised Accounting Standard No. 21 for Business Enterprises—Leases issued by the Ministry ofFinance on 7 December 2018. As for other unchanged accounting policies, the Company shall be subject to the Accounting Standardsfor Business Enterprises—Basic Standard, other accounting standards, the guide for the implementation of accounting standards, the
explanatory circular regarding the accounting standards, and other applicable regulations issued previously by the Ministry ofFinance.In April 2021, the Proposal on Change of Accounting Policy was approved at the 6
th Extraordinary Meeting of the 4
th
Board ofDirectors.
Save as disclosed above, there were no other changes to the Company’s accounting policies or estimates, nor there wascorrection of any material accounting error, during the Reporting Period.
VII YoY Changes to the Scope of the Consolidated Financial Statements
√ Applicable □ Not applicable
Dongfang Digicom Technology (Guangdong) Co., Ltd. (“Digicom Guangdong”) has been incorporated by the Company inFebruary 2021 with a registered capital of RMB8 million. The Company has its 100% ownership in an indirect way.
Suzhou Parsun Power Technology Co., Ltd. (“Parsun Power Technology”) has been incorporated by the Company’s subsidiaryParsun Power with a registered capital of RMB10 million. The Company has its 69.55% ownership in an indirect way.
Tianjin Hangchuang Zhijin Investment Partnership (Limited Partnership) (“Tianjin Hangchuang Fund”) has been establishedjointly by the Company and AVIC Innovation Capital Management Co., Ltd. in March 2021. As the sole limited partner of the Fund,the Company has made a capital contribution of RMB20 million, equivalent to approximately 95% ownership. This investment is inline with the Company’s development strategy considering the Fund’s investment direction, decision-making, management, incomedistribution, loss allocation, etc. From the perspective of business nature, the Company provides the absolute majority of the capitalof the Tianjin Hangchuang Fund, so it is reasonable to include the Fund in the Company’s consolidated financial statements of theReporting Period.VIII Engagement and Disengagement of Independent Auditor
Current independent auditor:
| Name of the domestic independent auditor | Ernst & Young Hua Ming LLP |
| The Company’s payment to the domestic independent auditor | RMB3.786 million |
| How many consecutive years the domestic independent auditor has provided audit service for the Company | 2 years |
| Names of the certified public accountants from the domestic independent auditor writing signatures on the auditor’s report | Feng Xingzhi and Lin Hongyan |
| How many consecutive years the certified public accountants have provided audit service for the Company | 2 years |
Indicate whether the independent auditor was changed for the Reporting Period.
□ Yes √ No
Independent auditor, financial advisor or sponsor hired for the audit of internal control:
√ Applicable □ Not applicable
Ernst & Young Hua Ming LLP was appointed as the independent auditor of internal control for the Company for 2021.
IX Possibility of Delisting after the Disclosure of this Report
□ Applicable √ Not applicable
X Insolvency and Reorganization
□ Applicable √ Not applicable
No such cases in the Reporting Period.
XI Significant Legal Matters
□ Applicable √ Not applicable
No such cases in the Reporting Period.
XII Punishments and Rectifications
□ Applicable √ Not applicable
No such cases in the Reporting Period.XIII Credit Quality of the Company as well as Its Controlling Shareholder and ActualController
□ Applicable √ Not applicable
XIV Significant Related-Party Transactions
1. Continuing Related-Party Transactions
□ Applicable √ Not applicable
No such cases in the Reporting Period.
2. Related-Party Transactions Regarding Purchase or Sales of Assets or Equity Investments
□ Applicable √ Not applicable
No such cases in the Reporting Period.
3. Related-Party Transactions Regarding Joint Investments in Third Parties
□ Applicable √ Not applicable
No such cases in the Reporting Period.
4. Amounts Due to and from Related Parties
□ Applicable √ Not applicable
No such cases in the Reporting Period.
5. Transactions between the Company and Related Financial Companies
□ Applicable √ Not applicable
No such cases in the Reporting Period.
6. Transactions between Financial Companies Controlled by the Company and Related Parties
□ Applicable √ Not applicable
No such cases in the Reporting Period.
7. Other Significant Related-Party Transactions
□ Applicable √ Not applicable
No such cases in the Reporting Period.XV Significant Contracts and Execution thereof
1. Entrustment, Contracting and Leases
(1) Entrustment
□ Applicable √ Not applicable
No such cases in the Reporting Period.
(2) Contracting
□ Applicable √ Not applicable
No such cases in the Reporting Period.
(3) Leases
□ Applicable √ Not applicable
No such cases in the Reporting Period.
2. Significant Guarantees
√ Applicable □ Not applicable
Unit: RMB'0,000
| Guarantees provided by the Company as the parent and its subsidiaries for external parties (exclusive of those for subsidiaries) | ||||||||||
| Obligor | Disclosure date of the | Line of guarantee | Actual occurrence | Actual guarantee | Type of guarantee | Security (if any) | Counter-guarant | Term of guarantee | Having expired or | Guarantee for a |
| guarantee line announcement | date | amount | ees (if any) | not | related party or not | |||||
| Guarantees provided by the Company as the parent for its subsidiaries | ||||||||||
| Obligor | Disclosure date of the guarantee line announcement | Line of guarantee | Actual occurrence date | Actual guarantee amount | Type of guarantee | Security (if any) | Counter-guarantees (if any) | Term of guarantee | Having expired or not | Guarantee for a related party or not |
| Dongfang Precision (Netherland) | 11 January 2020 | 32,402.01 | 16 March 2020 | 32,402.01 | Joint liability | - | - | From the date when the guarantee took effect to 18 February 2021 | Yes | Not |
| Dongfang Precision (Netherland) | 30 December 2020 | 17,760.46 | 4 February 2021 | 17,760.46 | Joint liability; Pledge | Deposits | - | From the date when the guarantee took effect to 3 February 2022 | Not | Not |
| Dongfang Precision (Netherland) | 5 June 2020 | 25,268.95 | 30 June 2020 | 24,186 | Joint liability; Pledge | Deposits | - | From the date when the guarantee took effect to 29 June 2023 | Not | Not |
| Total approved line for such guarantees in the Reporting Period (B1) | 17,760.46 | Total actual amount of such guarantees in the Reporting Period (B2) | 17,760.46 | |||||||
| Total approved line for such guarantees at the end of the Reporting | 75,431.42 | Total actual balance of such guarantees at the end of the Reporting | 43,029.41 | |||||||
| Period (B3) | Period (B4) | |||||||||||
| Guarantees provided between subsidiaries | ||||||||||||
| Obligor | Disclosure date of the guarantee line announcement | Line of guarantee | Actual occurrence date | Actual guarantee amount | Type of guarantee | Security (if any) | Counter-guarantees (if any) | Term of guarantee | Having expired or not | Guarantee for a related party or not | ||
| QCorr | 15 May 2020 | 1,804.93 | 29 April 2020 | 1,804.93 | Joint liability | - | - | From the date when the guarantee took effect to 15 February 2021 | Yes | Not | ||
| QCorr | 15 May 2020 | 2,165.91 | 30 April 2020 | 2,165.91 | Joint liability | - | - | From the date when the guarantee took effect to 30 June 2024 | Not | Not | ||
| Total approved line for such guarantees in the Reporting Period (C1) | 0 | Total actual amount of such guarantees in the Reporting Period (C2) | 0 | |||||||||
| Total approved line for such guarantees at the end of the Reporting Period (C3) | 3,970.84 | Total actual balance of such guarantees at the end of the Reporting Period (C4) | 2,165.91 | |||||||||
| Total guarantee amount (total of the three kinds of guarantees above) | ||||||||||||
| Total guarantee line approved in the Reporting Period (A1+B1+C1) | 17,760.46 | Total actual guarantee amount in the Reporting Period (A2+B2+C2) | 17,760.46 | |||||||||
| Total approved guarantee line at the end of the Reporting Period (A3+B3+C3) | 79,402.26 | Total actual guarantee balance at the end of the Reporting Period (A4+B4+C4) | 45,195.32 | |||||||||
| Total actual guarantee amount (A4+B4+C4) as % of the | 12.27% | |||||||||||
| Company’s net assets | ||
| Of which: | ||
| Balance of guarantees provided for shareholders, the actual controller and their related parties (D) | 0 | |
| Balance of debt guarantees provided directly or indirectly for obligors with an over 70% debt/asset ratio (E) | 45,195.32 | |
| Amount by which the total guarantee amount exceeds 50% of the Company’s net assets (F) | 0 | |
| Total of the three amounts above (D+E+F) | 45,195.32 | |
| Joint liability possibly borne or already borne in the Reporting Period for outstanding guarantees (if any) | Not applicable | |
| Guarantees provided in breach of prescribed procedures (if any) | Not applicable | |
Particulars about complex guarantees:
3. Cash Entrusted to Other Entities for Management
(1) Cash Entrusted for Wealth Management
√ Applicable □ Not applicable
Overview of wealth management entrustments in the Reporting Period:
Unit: RMB’0,000
| Type | Funding source | Amount | Undue amount | Unrecovered overdue amount | Impairment provision for unrecovered overdue amount |
| Bank’s wealth management product | Self-funded | 41,380 | 1,000 | 0 | 0 |
| Securities firm’s wealth management product | Self-funded | 80,000 | 60,000 | 0 | 0 |
| Trust product | Self-funded | 50,000 | 662.07 | 0 | 0 |
| Total | 171,380 | 61,662.07 | 0 | 0 | |
High-risk wealth management transactions with a significant single amount or with low security and low liquidity:
□ Applicable √ Not applicable
Wealth management transactions where the principal is expectedly irrecoverable or an impairment may be incurred:
□ Applicable √ Not applicable
(2) Entrusted Loans
□ Applicable √ Not applicable
No such cases in the Reporting Period.
4. Other Significant Contracts
□ Applicable √ Not applicable
No such cases in the Reporting Period.XVI Other Significant Events
□ Applicable √ Not applicable
XVII Significant Events of Subsidiaries
□ Applicable √ Not applicable
Part VII Share Changes and Shareholder InformationI Share Changes
1. Share Changes
Unit: share
| Before | Increase/decrease in the period (+/-) | After | |||||||
| Shares | Percentage (%) | New issues | Shares as dividend converted from profit | Shares as dividend converted from capital reserves | Other | Subtotal | Shares | Percentage (%) | |
| 1. Restricted shares | 242,746,130 | 15.71% | 0 | 0 | 0 | -1,570,000 | -1,570,000 | 241,176,130 | 18.10% |
| 1.1 Shares held by the government | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 1.2 Shares held by state-owned corporations | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 1.3 Shares held by other domestic investors | 241,446,130 | 15.63% | 0 | 0 | 0 | -1,710,000 | -1,710,000 | 239,736,130 | 17.99% |
| Including: Shares held by domestic corporations | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| Shares held by domestic individuals | 241,446,130 | 15.63% | 0 | 0 | 0 | -1,710,000 | -1,710,000 | 239,736,130 | 17.99% |
| 1.4 Shares held by overseas investors | 1,300,000 | 0.08% | 0 | 0 | 0 | 140,000 | 140,000 | 1,440,000 | 0.11% |
| Including: Shares held by overseas corporations | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| Shares held by overseas individuals | 1,300,000 | 0.08% | 0 | 0 | 0 | 140,000 | 140,000 | 1,440,000 | 0.11% |
| 2. Unrestricted shares | 1,302,380,827 | 84.29% | 0 | 0 | 0 | -211,618,790 | -211,618,790 | 1,090,762,037 | 81.89% |
| 2.1 RMB-denominated ordinary shares | 1,302,380,827 | 84.29% | 0 | 0 | 0 | -211,618,790 | -211,618,790 | 1,090,762,037 | 81.89% |
| 2.2 Domestically listed foreign shares | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 2.3 Overseas listed foreign shares | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 2.4 Others | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 3. Total shares | 1,545,126,957 | 100.00% | 0 | 0 | 0 | -213,188,790 | -213,188,790 | 1,331,938,167 | 100.00% |
Reasons for share changes:
√ Applicable □ Not applicable
1. Repurchase and retirement of shares in the Reporting Period
The Company launched the 2020 Share Repurchase Plan in June 2020, with 212,138,790 shares cumulatively repurchased underthe Plan. And the said shares were retired in June 2021.
2. Repurchase and retirement of certain restricted shares
In the first grant under the 2020 Restricted Share Incentive Plan, the Company repurchased and retired a total of 1,050,000restricted shares that had been granted to four employees but were still in lockup due to the resignation of three of them and the otherfailing to meet the annual performance requirement for the first unlocking period.
3. Completion of the ownership transfer of the grant of reserved restricted shares under the 2020 Restricted Share Incentive Plan
In February 2021, the Company completed the ownership transfer of the 4,240,000 reserved restricted shares under the 2020Restricted Share Incentive Plan to 18 awardees.
4. Unlocking for public trading of shares in the first unlocking period for the first grant under the Restricted Share IncentivePlan
In June 2021, the shares were unlocked for public trading in the first unlocking period for the first grant under the 2020Restricted Share Incentive Plan, which involved 4,310,000 shares held by 37 awardees.Approval of share changes:
√ Applicable □ Not applicable
In the Reporting Period, with respect to share changes involved in the “unlocking for public trading of shares in the firstunlocking period for the first grant under the 2020 Restricted Share Incentive Plan” and the “ownership transfer of the grant ofreserved restricted shares under the 2020 Restricted Share Incentive Plan”, the Company followed the applicable laws andregulations and its Articles of Association, executed the approval procedures with the general meeting and the Board of Directors,and obtained approval from the Shenzhen Stock Exchange.Transfer of share ownership:
√ Applicable □ Not applicable
In the Reporting Period, with respect to the transfers of share ownership involved in the “repurchase and retirement of certainrestricted shares” and the “ownership transfer of the grant of reserved restricted shares under the 2020 Restricted Share IncentivePlan”, the Company completed the transfers with the Shenzhen branch of China Securities Depository and Clearing Co., Ltd. afterthey were approved by the Shenzhen Stock Exchange.Effects of share changes on the basic earnings per share, diluted earnings per share, equity per share attributable to theCompany’s ordinary shareholders and other financial indicators of the prior year and the prior accounting period,respectively:
□ Applicable √ Not applicable
Other information that the Company considers necessary or is required by the securities regulator to be disclosed:
□ Applicable √ Not applicable
2. Changes in Restricted Shares
√ Applicable □ Not applicable
Unit: share
| Shareholder | Opening restricted shares | Increase in restricted shares in the period | Unlocked in the period | Closing restricted shares | Reason for restriction | Date of unlocking |
| Qiu Yezhi | 25,632,388 | 0 | 1,800,000 | 23,382,388 | Participated in the Restricted Share Incentive Plan of the Company | 25 June 2021 |
| Xie Weiwei | 1,000,000 | 0 | 200,000 | 800,000 | Participated in the Restricted Share Incentive Plan of the Company | 25 June 2021 |
| Zhou Wenhui | 1,200,000 | 0 | 240,000 | 960,000 | Participated in the Restricted Share Incentive Plan of the Company | 25 June 2021 |
| The other 35 awardees of the first grant of the 2020 Restricted Share Incentive PlanNotes | 11,400,000 | 0 | 3,120,000 | 8,280,000 | Participated in the Restricted Share Incentive Plan of the Company | 25 June 2021 |
| Shao Yongfeng | 0 | 800,000 | 800,000 | Participated in the Restricted Share Incentive Plan of the Company | 09 March 2022 | |
| The other 17 awardees of the reserved grant of the 2020 Restricted Share Incentive Plan | 0 | 3,440,000 | 0 | 3,440,000 | Participated in the Restricted Share Incentive Plan of the Company | 09 March 2022 |
| Total | 39,232,388 | 4,240,000 | 5,360,000 | 37,662,388 | -- | -- |
Notes:
Explanation of changes in the restricted shares held by “the other awardees of the first grant of the 2020 Restricted Share IncentivePlan”:
1. There were a total of 40 awardees in the first grant of the 2020 Restricted Share Incentive Plan, including three director and seniormanagement, as well as 37 other awardees.
2. On 24 February 2021, the Company repurchased and retired the 900,000 restricted shares of two resigned awardees. Therefore, thetotal awardees in the first grant of the 2020 Restricted Share Incentive Plan changed to 38, including three director and seniormanagement, as well as 35 other awardees.
3. In June 2021, the Company unlocked the 20% shares for the first unlocking period in the first grant of the 2020 Restricted ShareIncentive Plan. Among the 35 awardees, one employee didn’t satisfy the unlocking conditions, 30,000 restricted shares of whomwere not unlocked.
II Issuance and Listing of Securities
1. Securities (Exclusive of Preference Shares) Issued in the Reporting Period
□ Applicable √ Not applicable
2. Changes to Total Shares, Shareholder Structure and Asset and Liability Structures
√ Applicable □ Not applicable
Following the repurchase and retirement of 212,138,790 public shares in the Reporting Period, the total share capital of theCompany decreased from 1,544,226,957 shares to 1,332,088,167 shares.In the first grant under the 2020 Restricted Share Incentive Plan, the Company repurchased and retired a total of 1,050,000restricted shares that had been granted to four employees but were still in lockup due to the resignation of three of them and the otherfailing to meet the annual performance requirement for the first unlocking period.Affected by the matters above, the closing net assets experienced a decreased compared to the beginning of the period.
3. Existing Staff-Held Shares
□ Applicable √ Not applicable
III Shareholders and Actual Controller
1. Shareholders and Their Shareholdings at the Period-End
Unit: share
| Number of ordinary shareholders at the period-end | 54,863 | Number of ordinary shareholders at the month-end prior to the disclosure of this Report | 52,442 | Number of preference shareholders with resumed voting rights at the period-end (if any) (see note 8) | 0 | Number of preference shareholders with resumed voting rights at the month-end prior to the disclosure of this Report (if any) (see note 8) | 0 |
| 5% or greater shareholders or top 10 shareholders | ||||||||
| Name of shareholder | Nature of shareholder | Shareholding percentage | Total shares held at the period-end | Increase/decrease in the Reporting Period | Restricted shares held | Unrestricted shares held | Shares in pledge, marked or frozen | |
| Status | Shares | |||||||
| Tang Zhuolin | Domestic individual | 20.33% | 270,737,568 | 203,053,176 | 67,684,392 | 质押 | 187,000,000 | |
| Tang Zhuomian | Domestic individual | 7.27% | 96,885,134 | -39,000,000 | 0 | 96,885,134 | ||
| Pulead Technology Industry Co., Ltd. | State-owned corporation | 3.96% | 52,749,558 | -16,704,820 | 0 | 52,749,558 | ||
| Luzhou Industrial Development Investment Group Co., Ltd. | State-owned corporation | 2.39% | 31,770,010 | 0 | 31,770,010 | |||
| Contemporary Amperex Technology Co., Ltd. | Domestic non-state-owned corporation | 2.36% | 31,438,168 | -15,052,200 | 0 | 31,438,168 | ||
| Huarong Securities－China Merchants Securities－Huarong Youzhi Collective Asset Management Plan No. 1 | Other | 2.36% | 31,372,549 | 0 | 31,372,549 | |||
| Hong Kong Securities Clearing Company Limited | Overseas corporation | 2.13% | 28,366,536 | 18,241,867 | 0 | 28,366,536 | ||
| Qinghai Puren | Domestic non-state-owne | 2.00% | 26,628,340 | 0 | 26,628,340 | |||
| Intelligent Technology R & D Center (Limited Partnership) | d corporation | |||||||
| Qiu Yezhi | Domestic individual | 1.76% | 23,382,388 | -7,794,130 | 23,382,388 | 0 | ||
| Shengji Equity Investment Fund (Shanghai) Co., Ltd. | State-owned corporation | 1.47% | 19,607,843 | 0 | 19,607,843 | 质押 | 19,607,843 | |
| Strategic investor or general corporation becoming a top-10 shareholder in a rights issue (if any) (see note 3) | None | |||||||
| Related or acting-in-concert parties among the shareholders above | Mr. Tang Zhuolin and Mr. Tang Zhuomian are brothers. On 18 August 2010, they signed the Agreement on Acting in Concert. Pulead Technology Industry Co., Ltd. and Qinghai Puren Intelligent Technology R & D Center (Limited Partnership) are acting-in-concert parties. Apart from that, the Company is not aware of any related or acting-in-concert parties among the other shareholders above. | |||||||
| Above shareholders entrusting or entrusted with voting rights, or waiving voting rights | None | |||||||
| Top 10 shareholders including the special account for repurchase (if any) (see note 10) | As of 31 December 2021, there were 64,957,798 shares in the Company’s special account for repurchase, accounting for 4.88% of its total share capital. | |||||||
| Top 10 unrestricted shareholders | ||||||||
| Name of shareholder | Unrestricted shares held at the period-end | Shares by type | ||||||
| Type | Shares | |||||||
| Tang Zhuomian | 96,885,134 | RMB-denominated ordinary stock | 96,885,134 | |||||
| Tang Zhuolin | 67,684,392 | RMB-denominated ordinary stock | 67,684,392 | |||||
| Pulead Technology Industry Co., Ltd. | 52,749,558 | RMB-denominated ordinary stock | 52,749,558 | |||||
| Luzhou Industrial Development Investment Group Co., Ltd. | 31,770,010 | RMB-denominated ordinary stock | 31,770,010 | |||||
| Contemporary Amperex Technology Co., Ltd. | 31,438,168 | RMB-denominated ordinary stock | 31,438,168 |
| Huarong Securities－China Merchants Securities－Huarong Youzhi Collective Asset Management Plan No. 1 | 31,372,549 | RMB-denominated ordinary stock | 31,372,549 |
| Hong Kong Securities Clearing Company Limited | 28,366,536 | RMB-denominated ordinary stock | 28,366,536 |
| Qinghai Puren Intelligent Technology R & D Center (Limited Partnership) | 26,628,340 | RMB-denominated ordinary stock | 26,628,340 |
| Shengji Equity Investment Fund (Shanghai) Co., Ltd. | 19,607,843 | RMB-denominated ordinary stock | 19,607,843 |
| JIC Investment Co., Ltd. | 12,984,216 | RMB-denominated ordinary stock | 12,984,216 |
| Related or acting-in-concert parties among top 10 unrestricted public shareholders, as well as between top 10 unrestricted public shareholders and top 10 shareholders | Mr. Tang Zhuolin and Mr. Tang Zhuomian are brothers. On 18 August 2010, they signed the Agreement on Acting in Concert. Pulead Technology Industry Co., Ltd. and Qinghai Puren Intelligent Technology R & D Center (Limited Partnership) are acting-in-concert parties. Apart from that, the Company is not aware of any related or acting-in-concert parties among the other shareholders above. | ||
Indicate whether any of the top 10 ordinary shareholders or the top 10 unrestricted ordinary shareholders of the Company conductedany promissory repo during the Reporting Period.
□ Yes √ No
No such cases in the Reporting Period.
2. Controlling Shareholder
Nature of the controlling shareholder: controlled by an individualType of the controlling shareholder: individual
| Name of the controlling shareholder | Nationality | Residency in other countries or regions or not |
| Tang Zhuolin | Chinese | Not |
| Main occupation and position | Chairman of the Board of Dongfang Precision | |
| Interests held in other domestically and overseas listed companies in the Reporting Period | Not applicable | |
Change of the controlling shareholder in the Reporting Period:
□ Applicable √ Not applicable
No such cases in the Reporting Period.
3. Actual Controller and Acting-in-Concert Parties
Nature of the actual controller: domestic individualType of the actual controller: individual
| Name of the actual controller | Relationship with the actual controller | Nationality | Residency in other countries or regions or not |
| Tang Zhuolin | Actual controller himself | Chinese | Not |
| Tang Zhuomian | Acting-in-concert party (contractual, kinship-based, and common control-based) | Chinese | Not |
| Main occupation and position | Mr. Tang Zhuolin serves as the Chairman of the Board of Dongfang Precision as his main occupation. | ||
| Controlling interests in other domestically and overseas listed companies in the past 10 years | Not applicable | ||
Change of the actual controller in the Reporting Period:
□ Applicable √ Not applicable
No such cases in the Reporting Period.Ownership and control relationship between the actual controller and the Company:
Indicate whether the actual controller controls the Company via trust or other ways of asset management.
□ Applicable √ Not applicable
4. Shares Cumulatively Put in Pledge by the Company’s Controlling Shareholder or Biggest Shareholderand Its Acting-in-Concert Parties Accounting for 80% of Their Shareholdings in the Company
□ Applicable √ Not applicable
5. Other 10% or Greater Corporate Shareholders
□ Applicable √ Not applicable
| Tang Zhuolin | Tang Zhuomian |
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Guangdong Dongfang Precision Science & Technology Co., Ltd.
20.33%
| 20.33% | 7.27% |
6. Limitations on Shareholding Decrease by the Company’s Controlling Shareholder, Actual Controller,Reorganizer and Other Commitment Makers
□ Applicable √ Not applicable
IV Share Repurchase in the Reporting Period
Progress on any share repurchase:
√ Applicable □ Not applicable
| Disclosure date of the repurchase plan | Number of shares to be repurchased | As % of total share capital | Amount to be used | Repurchase period | Purpose | Shares repurchased (share) | Shares repurchased as % of total shares under the equity incentive plan (if any) |
| 17 June 2020 | Not lower than RMB500 million (inclusive) and no more than RMB1 billion (inclusive) | 26 June 2020-24 June 2021 | Retirement | 212,138,790 | |||
| 1 September 2021 | Not lower than RMB500 million (inclusive) and no more than RMB1 billion (inclusive) | 23 September 2021-22 September 2022 | Shares of not lower than 80% of the repurchased number are to be retired, which will reduce the Company’s registered capital accordingly; and shares of no more than 20% of the repurchased number are to be used for equity incentives or employee stock ownership plans. | 56,797,735 |
Progress on reducing the repurchased shares by way of centralized bidding:
□ Applicable √ Not applicable
Part VIII Preference Shares
□ Applicable √ Not applicable
No preference shares in the Reporting Period.
Part IX Corporate Bonds
Does the Company have any corporate bonds publicly offered on the stock exchange, which were outstanding before the date of thisReport’s approval or were due but could not be redeemed in fullNot applicable.
Part X Corporate Financial Statement
一、Auditor’s Report
| Type of Audit Opinion | Standard Unreserved opinion |
| Signing date of the Auditor’s Report | 24 March 2022 |
| Name of the Audit Institution | Ernst & Young Hua Ming LLP |
| Document number of the Auditor’s report | Ernst & Young Hua Ming (2022) Auditor’s Report No. 61276890_G01 |
| Name of the Chinese Certified Public Accountant | Feng Xingzhi, Lin Hongyan |
Auditor’s Report
Ernst & Young Hua Ming (2022) Auditor’s Report No. 61276890_G01
Guangdong Dongfang Precision Science & Technology Co., Ltd.
To the Shareholders of Guangdong Dongfang Precision Science & Technology Co., Ltd.:
I. OpinionWe have audited the financial statements of Guangdong Dongfang Precision Science & Technology Co., Ltd. (hereinafter referred toas the “Company”), which comprise the consolidated and the Company’s balance sheets as at 31 December 2021, the consolidatedand the Company’s income statements, the consolidated and the Company’s statements of changes in equity and the consolidated andthe Company’s statements of cash flows for the year then ended, and notes to the financial statements.In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated and the Company’sfinancial position as at 31 December 2021, and the consolidated and the Company’s financial performance and cash flows for theyear then ended in accordance with Accounting Standards for Business Enterprises (“ASBEs”).
II. Basis for OpinionWe conducted our audit in accordance with China’s Standards on Auditing“CSAs”. Our responsibilities under those standards arefurther described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independentof the Company in accordance with China Code of Ethics for Certified Public Accountants(the “Code”), and we have fulfilled ourother ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.
III. Key Audit MatterKey audit matter is the matter that, in our professional judgment, was of most significance in our audit of the financial statements ofthe Current Period. This matter was addressed in the context of our audit of the financial statements as a whole, and in forming ouropinion thereon, and we do not provide a separate opinion on this matter. For the matter below, our description of how our auditaddressed the matter is provided in that context.
We have fulfilled our responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Statements section ofour report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respondto our assessment of the risks of material misstatements of the financial statements. The results of our audit procedures, includingprocedures performed to address the matter below, provide the basis for our opinion on the accompanying financial statements.
III. Key Audit Matter (Cont’d)
| Key audit matter: | How our audit addressed the key audit matter: |
| Impairment of goodwill | |
| The carrying amount of goodwill amounted to | The procedures performed to address this |
| RMB432,207,416.82 as at 31 December 2021 and the impairment allowance for goodwill was RMB125,238,269.06. The Group's management performs goodwill impairment testing at the end of each year. The assessment of goodwill impairment testing was based on the recoverable amount of the relevant asset groups to which the goodwill is allocated, and the recoverable amount of such asset groups was determined by the present value of the asset groups’ expected future cash flows. In a goodwill impairment test, the forecasting of future cash flows involved significant judgments and estimates, including sales growth rate, gross margin and discount rate. Because goodwill had a large carrying value and exerted a significant impact on the financial statements, we identified goodwill impairment as a key audit matter. The accounting policies on and disclosures of goodwill were set out in Item 16 of Note III, Item 33 of Note III, and Item 19 of Note V to the financial statements. | matter are as follows: (1) Assessing the identification of asset groups by the Group's management and the goodwill allocated to the asset groups; (2) Obtaining reports on the assessment of goodwill impairment issued by the independent third-party asset appraisal institution engaged by the management with securities and futures-related business qualification; (3) Assessing the rationality of the major assumptions and assessment methods used by the Group's management when forecasting the recoverable amount of asset groups, including the discount rate and long-term growth rate; (4) Assessing the forecast sales revenue and operating performance for future years and comparing them with historical operating performance; and (5) Checking the adequacy of the Group's disclosures in the notes to the financial statements. |
IV. Other Information
The management of the Company is responsible for the other information. The other information comprises all of the informationincluded in the annual report, other than the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusionthereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, considerwhether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit orotherwise 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 requiredto report that fact. We have nothing to report in this regard.
V. Responsibilities of Management and Those Charged with Governance for the Financial Statements
The management is responsible for the preparation and fair presentation of the financial statements in accordance with ASBEs, andfor designing, implementing and maintaining such internal control as the management determines is necessary to ensure thepreparation of financial statements to be free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the management is responsible for assessing the Company’s ability to continue as a goingconcern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting, unless themanagement either intends to liquidate or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
VI. Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from materialmisstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a highlevel of assurance, but is not a guarantee that an audit conducted in accordance with CSAs will always detect a material misstatementwhen it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they couldreasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with CSAs, we exercise professional judgment and maintain professional skepticism throughout theaudit. We also:
(1) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design andperform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resultingfrom error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internalcontrol.
(2) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in thecircumstances.
(3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and relateddisclosures made by the management.
(4) Conclude on the appropriateness of the management’s use of the going concern basis of accounting and, based on the auditevidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on theCompany’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to drawattention in our auditor’s report to the related disclosures in the financial statements or, and 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 Company to cease to continue as a going concern.
(5) Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether thefinancial statements represent the underlying transactions and events in a manner that achieves fair presentation.
VI. Auditor’s Responsibilities for the Audit of the Financial Statements (Cont’d)
As part of an audit in accordance with CSAs, we exercise professional judgment and maintain professional skepticism throughout theaudit. We also: (cont’d)
(6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within theCompany to express an audit opinion on the financial statements. We are responsible for the direction, supervision andperformance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit andsignificant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regardingindependence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on ourindependence, and where applicable, related safeguards (if applicable).
From the matters communicated with those charged with governance, we determine the matter that was of most significance in theaudit of the financial statements of the Current Period and is therefore the key audit matter. We describe this matter in our auditor’sreport unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determinethat a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expectedto outweigh the public interest benefits of such communication.
| Ernst & Young Hua Ming LLP | Chinese Certified Public Accountant: Feng Xingzhi (Engagement Partner) |
| Chinese Certified Public Accountant: Lin Hongyan | |
| Beijing, China | 14 March 2022 |
Important Notice
This auditor’s report is an English translation of the auditor’s report for the audit engagements which adopt CSAs.In case the English version does not conform to the Chinese version, the Chinese version prevails.
| Assets | Note V | 31 December 2021 | 31 December 2020 | ||||
| Current assets | |||||||
| Cash and bank balances | 1 | 1,664,336,339.35 | 885,711,053.88 | ||||
| Financial assets held for trading | 2 | 788,185,521.57 | 1,636,296,430.31 | ||||
| Notes receivable | 3 | 13,272,025.04 | 12,744,582.88 | ||||
| Accounts receivable | 4 | 741,135,648.09 | 469,635,423.58 | ||||
| Receivables financing | 5 | 30,692,449.25 | 56,737,978.04 | ||||
| Prepayments | 6 | 34,177,802.36 | 29,109,416.21 | ||||
| Other receivables | 7 | 71,363,166.84 | 79,103,472.64 | ||||
| Inventories | 8 | 867,280,013.47 | 734,120,595.26 | ||||
| Contract assets | 9 | 24,414,117.64 | 29,504,693.97 | ||||
| Current portion of non-current assets | 10 | 108,385,000.00 | 2,556,000.00 | ||||
| Other current assets | 11 | 32,124,006.99 | 22,271,217.65 | ||||
| Total current assets | 4,375,366,090.60 | 3,957,790,864.42 | |||||
| Non-current assets | |||||||
| Long-term receivables | 12 | 143,750.00 | 1,475,000.00 | ||||
| Long-term equity investments | 13 | 84,777,596.67 | 72,671,204.73 | ||||
| Other non-current financial assets | 14 | 162,523,519.41 | 5,948,588.15 | ||||
| Fixed assets | 15 | 544,180,159.09 | 571,413,480.14 | ||||
| Construction in progress | 16 | 12,298,259.58 | 9,062,038.52 | ||||
| Right-of-use assets | 17 | 80,386,832.91 | - | ||||
| Intangible assets | 18 | 293,718,987.62 | 332,387,182.69 | ||||
| Goodwill | 19 | 306,969,147.76 | 324,904,239.97 | ||||
| Long-term prepaid expenses | 20 | 11,962,127.07 | 12,096,981.78 | ||||
| Deferred tax assets | 21 | 180,245,522.94 | 98,947,059.25 | ||||
| Other non-current assets | 22 | 304,596,841.54 | 936,540,047.40 | ||||
| Total non-current assets | 1,981,802,744.59 | 2,365,445,822.63 | |||||
| Total assets | 6,357,168,835.19 | 6,323,236,687.05 | |||||
The accompanying notes to the financial statements form an integral part of the financial statements.
| Liabilities and equity | Note V | 31 December 2021 | 31 December 2020 | ||||
| Current liabilities | |||||||
| Short-term borrowings | 23 | 228,312,880.73 | 39,533,281.84 | ||||
| Financial liabilities held for trading | 24 | 110,746,939.04 | 41,408,109.80 | ||||
| Notes payable | 25 | 149,191,690.00 | 104,855,187.97 | ||||
| Accounts payable | 26 | 619,265,856.18 | 503,042,561.05 | ||||
| Contract liabilities | 27 | 405,842,932.51 | 362,792,713.35 | ||||
| Employee benefits payable | 28 | 103,809,783.58 | 92,623,562.93 | ||||
| Tax payable | 29 | 60,701,346.24 | 36,369,777.05 | ||||
| Other payables | 30 | 100,018,273.09 | 81,743,851.64 | ||||
| Current portion of non-current liabilities | 31 | 38,495,724.83 | 226,597,528.74 | ||||
| Other current liabilities | 32 | 12,836,473.00 | 20,532,046.04 | ||||
| Total current liabilities | 1,829,221,899.20 | 1,509,498,620.41 | |||||
| Non-current liabilities | |||||||
| Long-term borrowings | 33 | 325,026,188.49 | 353,412,388.29 | ||||
| Lease liabilities | 34 | 65,213,555.87 | - | ||||
| Long-term employee benefits payable | 35 | 16,083,170.32 | 18,451,652.74 | ||||
| Provisions | 36 | 117,932,721.59 | 105,450,257.63 | ||||
| Deferred income | 37 | 12,190,311.66 | 16,861,488.27 | ||||
| Deferred tax liabilities | 21 | 1,747,137.95 | 19,296,386.16 | ||||
| Other non-current liabilities | 38 | 136,178,304.44 | 68,737,415.25 | ||||
| Total non-current liabilities | 674,371,390.32 | 582,209,588.34 | |||||
| Total liabilities | 2,503,593,289.52 | 2,091,708,208.75 | |||||
The accompanying notes to the financial statements form an integral part of the financial statements.
| Liabilities and equity | Note V | 31 December 2021 | 31 December 2020 | ||||
| Equity | |||||||
| Share capital | 39 | 1,331,938,167.00 | 1,545,126,957.00 | ||||
| Capital surplus | 40 | 3,238,765,859.94 | 4,002,393,061.81 | ||||
| Less: Treasury stock | 41 | 494,335,503.94 | 579,403,185.12 | ||||
| Other comprehensive income | 42 | (33,322,662.98) | 20,026,089.70 | ||||
| Special reserve | 43 | 11,252,639.19 | 10,057,438.97 | ||||
| Surplus reserves | 44 | 51,830,974.45 | 51,830,974.45 | ||||
| Retained earnings | 45 | (424,159,175.27) | (891,492,837.06 | ) | |||
| Total equity attributable to owners of the parent | 3,681,970,298.39 | 4,158,538,499.75 | |||||
| Non-controlling interests | 171,605,247.28 | 72,989,978.55 | |||||
| Total equity | 3,853,575,545.67 | 4,231,528,478.30 | |||||
| Total liabilities and equity | 6,357,168,835.19 | 6,323,236,687.05 | |||||
The financial statements have been signed by:
Legal representative: Tang ZhuolinChief Financial Officer: Shao YongfengHead of Accounting Department: Yao Bin
The accompanying notes to the financial statements form an integral part of the financial statements.
| Note V | 2021 | 2020 | |||||
| Operating revenue | 46 | 3,524,734,783.94 | 2,916,270,143.13 | ||||
| Less: Cost of sales | 46 | 2,555,072,059.79 | 2,099,148,826.36 | ||||
| Taxes and surcharges | 47 | 11,496,506.72 | 10,253,512.61 | ||||
| Selling expenses | 48 | 185,327,678.18 | 181,549,459.69 | ||||
| Administrative expenses | 49 | 272,090,728.08 | 246,973,016.40 | ||||
| R&D expenses | 50 | 99,557,565.46 | 82,082,274.75 | ||||
| Finance costs | 51 | (5,996,474.46) | 7,919,670.28 | ||||
| Including: Interest expenses | 13,182,088.01 | 15,535,719.53 | |||||
| Interest income | 24,674,196.61 | 20,887,321.27 | |||||
| Add: Other income | 52 | 14,892,566.89 | 10,894,164.69 | ||||
| Investment income | 53 | 98,673,106.02 | 55,115,521.94 | ||||
| Including: Share of profit of joint ventures and associates | 3,880,256.70 | 2,889,349.81 | |||||
| Gain/loss on changes in fair value | 54 | (21,357,785.81) | 45,122,771.27 | ||||
| Credit impairment loss | 55 | (12,726,636.46) | (7,964,362.42 | ) | |||
| Asset impairment loss | 56 | (10,936,754.10) | (5,368,019.60 | ) | |||
| Gain/loss on disposal of assets | 57 | 424,968.29 | (17,854.18) | ||||
| Operating profit | 476,156,185.00 | 386,125,604.74 | |||||
| Add: Non-operating income | 58 | 5,750,547.04 | 35,801,786.91 | ||||
| Less: Non-operating expenses | 59 | 1,462,018.81 | 1,746,731.36 | ||||
| Gross profit | 480,444,713.23 | 420,180,660.29 | |||||
| Less: Income tax expenses | 61 | (11,946,472.42) | 23,083,339.30 | ||||
| Net profit | 492,391,185.65 | 397,097,320.99 | |||||
| Net profit classified by continuing operations | |||||||
| Net profit from continuing operations | 492,391,185.65 | 397,097,320.99 | |||||
| Net profit classified by attribution of ownership | |||||||
| Net profit attributable to owners of the parent | 467,333,661.79 | 389,180,624.08 | |||||
| Net profit attributable to non-controlling interests | 25,057,523.86 | 7,916,696.91 | |||||
The accompanying notes to the financial statements form an integral part of the financial statements.
| Note V | 2021 | 2020 | |||||
| Other comprehensive income, net of tax | (58,062,617.01) | (4,890,047.66 | ) | ||||
| Other comprehensive income attributable to owners of the parent, net of tax | (53,348,752.68) | (4,944,995.62 | ) | ||||
| Other comprehensive income that will not be reclassified to profit or loss | (368,435.04) | (471,953.04 | ) | ||||
| Changes caused by remeasurements on defined benefit schemes | 42 | (368,435.04) | (471,953.04 | ) | |||
| Other comprehensive income that will be reclassified to profit or loss | (52,980,317.64) | (4,473,042.58 | ) | ||||
| Differences arising from the translation of foreign currency-denominated financial statements | 42 | (52,980,317.64) | (4,473,042.58 | ) | |||
| Other comprehensive income attributable to non-controlling interests, net of tax | 42 | (4,713,864.33) | 54,947.96 | ||||
| Total comprehensive income | 434,328,568.64 | 392,207,273.33 | |||||
| Including: | |||||||
| Total comprehensive income attributable to owners of the parent | 413,984,909.11 | 384,235,628.46 | |||||
| Total comprehensive income attributable to non-controlling interests | 20,343,659.53 | 7,971,644.87 | |||||
| Earnings per share | 62 | ||||||
| Basic earnings per share | 0.35 | 0.26 | |||||
| Diluted earnings per share | 0.35 | 0.26 |
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
2021
| Equity attributable to owners of the parent | Non-controlling | Total equity | |||||||||||||||||||||||||||||
| Share capital | Capital surplus | Less: Treasury stock | Other comprehensive income | Special reserve | Surplus reserves | Retained earnings | Subtotal | interests | |||||||||||||||||||||||
| I. | At 31 December 2020 and 1 January 2021 | 1,545,126,957.00 | 4,002,393,061.81 | 579,403,185.12 | 20,026,089.70 | 10,057,438.97 | 51,830,974.45 | (891,492,837.06 | ) | 4,158,538,499.75 | 72,989,978.55 | 4,231,528,478.30 | |||||||||||||||||||
| II. | Changes for the year | ||||||||||||||||||||||||||||||
| （I） | Total comprehensive income | - | - | - | (53,348,752.68 | ) | - | - | 467,333,661.79 | 413,984,909.11 | 20,343,659.53 | 434,328,568.64 | |||||||||||||||||||
| （II） | Owner’s contributions and reduction in capital | ||||||||||||||||||||||||||||||
| 1. | Share-based payments included in equity | - | 15,243,506.90 | - | - | - | - | 15,243,506.90 | - | 15,243,506.90 | |||||||||||||||||||||
| 2. | Others | (213,188,790.00 | ) | (778,870,708.77) | (85,067,681.18) | - | - | - | - | (906,991,817.59) | 78,271,609.20 | (828,720,208.39) | |||||||||||||||||||
| （III） | Special reserve | ||||||||||||||||||||||||||||||
| 1. | Provision in the period | - | - | - | - | 4,513,399.49 | - | - | 4,513,399.49 | - | 4,513,399.49 | ||||||||||||||||||||
| 2. | Utilisation in the period | - | - | - | - | (3,318,199.27 | ) | - | - | (3,318,199.27 | ) | - | (3,318,199.27 | ) | |||||||||||||||||
| III. | At 31 December 2021 | 1,331,938,167.00 | 3,238,765,859.94 | 494,335,503.94 | (33,322,662.98) | 11,252,639.19 | 51,830,974.45 | (424,159,175.27) | 3,681,970,298.39 | 171,605,247.28 | 3,853,575,545.67 | ||||||||||||||||||||
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
2020
| Equity attributable to owners of the parent | Non-controlling | Total equity | |||||||||||||||||||||||||||||
| Share capital | Capital surplus | Less: Treasury stock | Other comprehensive income | Special reserve | Surplus reserves | Retained earnings | Subtotal | interests | |||||||||||||||||||||||
| I. | At 31 December 2019 and 1 January 2020 | 1,838,647,096.00 | 3,862,377,838.84 | 160,088,925.60 | 24,971,085.32 | - | 51,830,974.45 | (1,280,673,461.14 | ) | 4,337,064,607.87 | 65,018,333.68 | 4,402,082,941.55 | |||||||||||||||||||
| II. | Changes for the year | ||||||||||||||||||||||||||||||
| （I） | Total comprehensive income | - | - | - | (4,944,995.62 | ) | - | - | 389,180,624.08 | 384,235,628.46 | 7,971,644.87 | 392,207,273.33 | |||||||||||||||||||
| （II） | Owner’s contributions and reduction in capital | ||||||||||||||||||||||||||||||
| 1. | Share-based payments included in equity | - | 25,070,406.59 | - | - | - | 25,070,406.59 | - | 25,070,406.59 | ||||||||||||||||||||||
| 2. | Others | (293,520,139.00 | ) | 114,944,816.38 | 419,314,259.52 | - | - | - | (597,889,582.14 | ) | - | (597,889,582.14 | ) | ||||||||||||||||||
| （III） | Special reserve | ||||||||||||||||||||||||||||||
| 1. | Provision in the period | - | - | - | - | 11,315,076.12 | - | - | 11,315,076.12 | - | 11,315,076.12 | ||||||||||||||||||||
| 2. | Utilisation in the period | - | - | - | - | (1,257,637.15 | ) | - | - | (1,257,637.15 | ) | - | (1,257,637.15 | ) | |||||||||||||||||
| III. | At 31 December 2020 | 1,545,126,957.00 | 4,002,393,061.81 | 579,403,185.12 | 20,026,089.70 | 10,057,438.97 | 51,830,974.45 | (891,492,837.06 | ) | 4,158,538,499.75 | 72,989,978.55 | 4,231,528,478.30 | |||||||||||||||||||
The accompanying notes to the financial statements form an integral part of the financial statements.
| Note V | 2021 | 2020 | ||||||
| I. | Cash flows from operating activities | |||||||
| Proceeds from sale of goods and rendering of services | 3,421,895,227.97 | 3,103,763,332.58 | ||||||
| Receipts of taxes and surcharges refunds | 45,064,378.48 | 124,817,383.44 | ||||||
| Cash generated from other operating activities | 63 | 39,334,554.11 | 45,814,939.62 | |||||
| Subtotal of cash generated from operating activities | 3,506,294,160.56 | 3,274,395,655.64 | ||||||
| Payments for goods and services | 2,241,460,975.24 | 1,711,801,451.73 | ||||||
| Cash payments to and on behalf of employees1 | 602,036,898.56 | 556,619,112.99 | ||||||
| Payments of all types of taxes and surcharges | 135,039,721.24 | 183,936,558.09 | ||||||
| Cash used in other operating activities | 63 | 221,097,289.50 | 271,042,501.08 | |||||
| Subtotal of cash used in operating activities | 3,199,634,884.54 | 2,723,399,623.89 | ||||||
| Net cash generated from/used in operating activities | 64 | 306,659,276.02 | 550,996,031.75 | |||||
| II. | Cash flows from investing activities | |||||||
| Proceeds from disinvestment | 7,023,027,591.06 | 2,240,344,499.76 | ||||||
| Investment income | 93,945,208.58 | 79,136,616.01 | ||||||
| Net proceeds from the disposal of fixed assets, intangible assets and other long-lived assets | 928,029.29 | 2,379,184.74 | ||||||
| Cash generated from other investing activities | 63 | 2,419,748.09 | - | |||||
| Subtotal of cash generated from investing activities | 7,120,320,577.02 | 2,321,860,300.51 | ||||||
| Payments for the acquisition of fixed assets, intangible assets and other long-lived assets | 66,321,945.54 | 150,682,489.97 | ||||||
| Payments for investments | 5,718,640,747.18 | 3,341,970,650.85 | ||||||
| Net payments for the acquisition of subsidiaries and other business units | 64 | 30,000,000.00 | 11,529,999.39 | |||||
| Cash used in other investing activities | 63 | - | 1,203,750.03 | |||||
| Subtotal of cash used in investing activities | 5,814,962,692.72 | 3,505,386,890.24 | ||||||
| Net cash generated from/used in investing activities | 1,305,357,884.30 | (1,183,526,589.73 | ) |
The accompanying notes to the financial statements form an integral part of the financial statements.
| Note V | 2021 | 2020 | |||||
| III. | Cash flows from financing activities | ||||||
| Borrowings raised | 405,333,187.33 | 395,061,988.80 | |||||
| Cash generated from other financing activities | 63 | 193,525,797.34 | 162,750,024.15 | ||||
| Subtotal of cash generated from financing activities | 598,858,984.67 | 557,812,012.95 | |||||
| Repayment of borrowings | 390,598,473.42 | 470,644,665.84 | |||||
| Interest and dividends paid | 9,707,118.35 | 15,149,309.55 | |||||
| Cash used in other financing activities | 63 | 1,357,057,613.48 | 825,811,857.34 | ||||
| Subtotal of cash used in financing activities | 1,757,363,205.25 | 1,311,605,832.73 | |||||
| Net cash generated from/used in financing activities | (1,158,504,220.58 | ) | (753,793,819.78 | ) | |||
| IV. | Effect of foreign exchange rates changes on cash and cash equivalents | (54,810,400.78 | ) | 20,200,877.15 | |||
| V. | Net increase/(decrease) in cash and cash equivalents | 398,702,538.96 | (1,366,123,500.61 | ) | |||
| Add: Cash and cash equivalents, beginning of the period | 860,601,236.78 | 2,226,724,737.39 | |||||
| VI. | Cash and cash equivalents, end of the period | 64 | 1,259,303,775.74 | 860,601,236.78 |
The accompanying notes to the financial statements form an integral part of the financial statements.
| Assets | Note XV | 31 December 2021 | 31 December 2020 | ||||
| Current assets | |||||||
| Cash and bank balances | 526,602,901.98 | 134,020,813.88 | |||||
| Financial assets held for trading | 652,931,497.75 | 1,539,762,030.97 | |||||
| Accounts receivable | 1 | 154,703,065.67 | 153,517,438.90 | ||||
| Receivables financing | 14,939,923.99 | 53,245,689.47 | |||||
| Prepayments | 8,893,984.77 | 2,641,946.74 | |||||
| Other receivables | 2 | 444,140,266.79 | 68,388,543.22 | ||||
| Inventories | 145,283,359.74 | 123,156,907.36 | |||||
| Contract assets | 17,681,315.64 | 4,470,173.25 | |||||
| Current portion of non-current assets | 108,385,000.00 | 2,556,000.00 | |||||
| Other current assets | 713,296.22 | 18,942.75 | |||||
| Total current assets | 2,074,274,612.55 | 2,081,778,486.54 | |||||
| Non-current assets | |||||||
| Long-term receivables | 143,750.00 | 1,475,000.00 | |||||
| Long-term equity investments | 3 | 566,779,845.04 | 464,794,856.81 | ||||
| Other non-current financial assets | 110,672,495.38 | - | |||||
| Fixed assets | 316,780,357.65 | 329,230,669.84 | |||||
| Construction in progress | 2,040,059.06 | 351,261.61 | |||||
| Right-of-use assets | 17,226,122.41 | - | |||||
| Intangible assets | 58,297,372.40 | 58,215,631.98 | |||||
| Long-term prepaid expenses | 4,449,274.82 | 3,475,004.06 | |||||
| Deferred tax assets | 109,447,418.03 | 32,570,759.90 | |||||
| Other non-current assets | 300,150,000.00 | 935,660,189.00 | |||||
| Total non-current assets | 1,485,986,694.79 | 1,825,773,373.20 | |||||
| Total assets | 3,560,261,307.34 | 3,907,551,859.74 | |||||
The accompanying notes to the financial statements form an integral part of the financial statements.
| Liabilities and equity | 31 December 2021 | 31 December 2020 | |||||
| Current liabilities | |||||||
| Trading financial liabilities | 5,861,200.00 | - | |||||
| Notes payable | 45,445,513.50 | 55,312,772.43 | |||||
| Accounts payable | 61,109,554.88 | 53,044,344.90 | |||||
| Contract liabilities | 21,697,782.14 | 22,116,154.74 | |||||
| Employee benefits payable | 13,205,296.64 | 16,961,090.03 | |||||
| Tax payable | 2,850,207.94 | 5,181,895.95 | |||||
| Other payables | 195,636,226.94 | 50,884,934.80 | |||||
| Non-current liabilities that mature within one year | 4,875,266.03 | - | |||||
| Other current liabilities | 1,275,327.99 | 2,253,619.05 | |||||
| Total current liabilities | 351,956,376.06 | 205,754,811.90 | |||||
| Non-current liabilities | |||||||
| Lease liabilities | 13,331,936.29 | - | |||||
| Provisions | 1,635,363.75 | - | |||||
| Deferred income | 12,190,311.66 | 13,306,971.66 | |||||
| Deferred tax liabilities | - | 3,894,304.65 | |||||
| Other non-current liabilities | 12,262,010.40 | - | |||||
| Total non-current liabilities | 39,419,622.10 | 17,201,276.31 | |||||
| Total liabilities | 391,375,998.16 | 222,956,088.21 | |||||
The accompanying notes to the financial statements form an integral part of the financial statements.
| Liabilities and equity | 31 December 2021 | 31 December 2020 | |||||
| Equity | |||||||
| Share capital | 1,331,938,167.00 | 1,545,126,957.00 | |||||
| Capital surplus | 3,162,960,902.13 | 3,846,323,477.68 | |||||
| Less: Treasury stock | 494,335,503.94 | 579,403,185.12 | |||||
| Special reserve | 5,067,104.62 | 3,835,986.08 | |||||
| Surplus reserves | 51,830,974.45 | 51,830,974.45 | |||||
| Retained earnings | (888,576,335.08) | (1,183,118,438.56 | ) | ||||
| Total Equity | 3,168,885,309.18 | 3,684,595,771.53 | |||||
| Total liabilities and Equity | 3,560,261,307.34 | 3,907,551,859.74 | |||||
The accompanying notes to the financial statements form an integral part of the financial statements.
| Note XV | 2021 | 2020 | |||||
| Operating revenue | 4 | 486,757,300.91 | 357,820,756.14 | ||||
| Less: Cost of sales | 4 | 256,366,100.99 | 216,587,418.89 | ||||
| Taxes and surcharges | 5,401,743.28 | 6,495,820.00 | |||||
| Selling expenses | 19,942,732.31 | 23,483,006.93 | |||||
| Administrative expenses | 84,898,110.60 | 91,133,067.04 | |||||
| R&D expenses | 21,950,643.65 | 19,296,267.24 | |||||
| Finance costs | (11,086,061.90 | ) | (1,835,233.85 | ) | |||
| Including: Interest expenses | 2,969,649.37 | 2,455,764.90 | |||||
| Interest income | 17,285,245.87 | 13,510,226.63 | |||||
| Add: Other income | 4,618,346.17 | 5,823,069.02 | |||||
| Investment income | 5 | 58,085,312.56 | 112,497,262.90 | ||||
| Including: Share of profit or loss of joint ventures and associates | 3,880,256.70 | 2,889,349.81 | |||||
| Gain on changes in fair value | 34,139,842.44 | 53,243,450.97 | |||||
| Credit impairment loss | 613,952.31 | (2,413,082.66 | ) | ||||
| Asset impairment loss | 43,279.19 | 1,060,243.12 | |||||
| Gain/loss on disposal of assets | 275,491.34 | 22,458.25 | |||||
| Operating profit | 207,060,255.99 | 172,893,811.49 | |||||
| Add: Non-operating income | 4,248,968.31 | 3,530,930.90 | |||||
| Less: Non-operating expenses | 188,495.98 | 1,282,131.90 | |||||
| Gross profit | 211,120,728.32 | 175,142,610.49 | |||||
| Less: Income tax expenses | (83, 421,375.16 | ) | (24,252,321.59 | ) | |||
| Net profit | 294,542,103.48 | 199,394,932.08 | |||||
| Including: Net profit from continuing operations | 294,542,103.48 | 199,394,932.08 | |||||
| Total comprehensive income | 294,542,103.48 | 199,394,932.08 | |||||
The accompanying notes to the financial statements form an integral part of the financial statements.
2021
| Share capital | Capital surplus | Less: Treasury stock | Special reserve | Surplus reserves | Retained earnings | Total equity | ||||||||||
| I. | At 31 December 2020 and 1 January 2021 | 1,545,126,957.00 | 3,846,323,477.68 | 579,403,185.12 | 3,835,986.08 | 51,830,974.45 | (1,183,118,438.56 | ) | 3,684,595,771.53 | |||||||
| II. | Changes for the year | |||||||||||||||
| （I） | Total comprehensive income | - | - | - | - | - | 294,542,103.48 | 294,542,103.48 | ||||||||
| （II） | Owner’s contributions and reduction in capital | |||||||||||||||
| 1. | Share-based payments included in equity | - | 14,068,075.26 | - | - | - | - | 14,068,075.26 | ||||||||
| 2. | Others | (213,188,790.00 | ) | (697,430,650.81) | (85,067,681.18) | - | - | - | (825,551,759.63 | ) | ||||||
| （III） | Special reserve | - | - | - | - | - | - | - | ||||||||
| 1. | Provision in the period | - - | - - | - | 1,615,641.49 (384,522.95) | - - | - - | 1,615,641.49 (384,522.95 | ||||||||
| 2. | Amount utilised in the period | - | ) | |||||||||||||
| III. | At 31 December 2021 | 1,331,938,167.00 | 3,162,960,902.13 | 494,335,503.94 | 5,067,104.62 | 51,830,974.45 | (888,576,335.08) | 3,168,885,309.18 |
The accompanying notes to the financial statements form an integral part of the financial statements.
2020
| Share capital | Capital surplus | Less: Treasury stock | Special reserve | Surplus reserves | Retained earnings | Total equity | ||||||||||
| I. | At 31 December 2019 and 1 January 2020 | 1,838,647,096.00 | 3,608,591,602.42 | 160,088,925.60 | - | 51,830,974.45 | (1,382,513,370.64 | ) | 3,956,467,376.63 | |||||||
| II. | Changes for the year | |||||||||||||||
| （I） | Total comprehensive income | - | - | - | - | - | 199,394,932.08 | 199,394,932.08 | ||||||||
| （II） | Owner’s contributions and reduction in capital | |||||||||||||||
| 1. | Share-based payments included in equity | - | 24,893,737.26 | - | - | - | - | 24,893,737.26 | ||||||||
| 2. | Others | (293,520,139.00 | ) | 212,838,138.00 | 419,314,259.52 | - | - | (499,996,260.52 | ) | |||||||
| （III） | Special reserve | |||||||||||||||
| 1. | Provision in the period | - | - | - | 3,835,986.08 | - | - | 3,835,986.08 | ||||||||
| III. | At 31 December 2020 | 1,545,126,957.00 | 3,846,323,477.68 | 579,403,185.12 | 3,835,986.08 | 51,830,974.45 | (1,183,118,438.56 | ) | 3,684,595,771.53 |
The accompanying notes to the financial statements form an integral part of the financial statements.
| 2021 | 2020 | ||||||
| I. | Cash flows from operating activities | ||||||
| Proceeds from sale of goods and rendering of services | 535,230,797.30 | 378,382,646.38 | |||||
| Receipts of taxes and surcharges refunds | 13,605,552.69 | 98,380,978.71 | |||||
| Cash generated from other operating activities | 31,866,204.03 | 17,427,644.21 | |||||
| Subtotal of cash generated from operating activities | 580,702,554.02 | 494,191,269.30 | |||||
| Payments for goods and services | 293,904,947.16 | 225,072,281.14 | |||||
| Cash payments to and on behalf of employees | 84,307,393.88 | 87,707,753.20 | |||||
| Payments of all types of taxes and surcharges | 11,302,053.75 | 95,006,648.05 | |||||
| Cash used in other operating activities | 15,808,751.20 | 70,685,343.49 | |||||
| Subtotal of cash used in operating activities | 405,323,145.99 | 478,472,025.88 | |||||
| Net cash generated from/used in operating activities | (175,379,408.03) | 15,719,243.42 | |||||
| II. | Cash flows from investing activities | ||||||
| Proceeds from disinvestment | 2,866,282,671.15 | 2,227,653,619.05 | |||||
| Investment income | 63,507,216.86 | 96,889,333.09 | |||||
| Net proceeds from the disposal of fixed assets, intangible assets and other long-lived assets | 449,580.00 | 498,906.24 | |||||
| Subtotal of cash generated from investing activities | 2,930,239,468.01 | 2,325,041,858.38 | |||||
| Payments for the acquisition of fixed assets, intangible assets and other long-lived assets | 6,558,484.63 | 8,426,821.45 | |||||
| Payments for investments | 1,888,592,448.78 | 3,226,936,725.61 | |||||
| Net payments for the acquisition of subsidiaries and other business units | 120,000,001.00 | 11,529,999.39 | |||||
| Subtotal of cash used in investing activities | 2,015,150,934.41 | 3,246,893,546.45 | |||||
| Net cash generated from/used in investing activities | 915,088,533.60 | (921,851,688.07 | ) |
The accompanying notes to the financial statements form an integral part of the financial statements.
| 2021 | 2020 | |||||||
| III. | Cash flows from financing activities | |||||||
| Borrowings raised | 129,418,000.00 | - | ||||||
| Cash generated from other financing activities | 254,961,825.36 | 155,256,887.17 | ||||||
| Subtotal of cash generated from financing activities | 384,379,825.36 | 155,256,887.17 | ||||||
| Repayment of borrowings | 129,418,000.00 | 90,000,000.00 | ||||||
| Interest and dividends paid | 2,005,101.64 | 2,336,895.39 | ||||||
| Cash used in other financing activities | 1,313,154,399.85 | 800,939,572.04 | ||||||
| Subtotal of cash used in financing activities | 1,444,577,501.49 | 893,276,467.43 | ||||||
| Net cash generated from/used in financing activities | (1,060,197,676.13 | ) | (738,019,580.26 | ) | ||||
| IV. | Net increase/(decrease) in cash and cash equivalents | 30,270,265.50 | (1,644,152,024.91 | ) | ||||
| Add: Cash and cash equivalents, beginning of the period | 126,339,870.71 | 1,770,491,895.62 | ||||||
| V. | Cash and cash equivalents, end of the period | 156,610,136.21 | 126,339,870.71 | |||||
The accompanying notes to the financial statements form an integral part of the financial statements.
I. Corporate Background
Guangdong Dongfang Precision Science & Technology Co., Ltd. (the "Company"), a joint stock company withlimited liability registered in Guangdong Province of the People's Republic of China and established on 9December 1996, obtained a Business License for Enterprise Legal Person with a registration number of440682000040868.
In August 2011, upon the approval by the China Securities Regulatory Commission (CSRC) in the Reply onApproving the Initial Public Offering of Shares by Guangdong Dongfang Precision Science & Technology Co.,Ltd. (ZH.J.X.K. [2011] No. 1237), the Company issued Renminbi-denominated ordinary shares to the public, andwas listed on the Shenzhen Stock Exchange in the same month. The Company started to use the unified socialcredit code (914406002318313119) in 2016. The Company is headquartered in 2 Qiangshi Road, Shishan Town,Nanhai District, Foshan City, Guangdong Province, China.
Business scope of the Company:
General items: Network and information security software development; manufacturing of special printingequipment; computer system services; information system integration services; information consulting services(excluding licensing information consulting services); manufacturing of material handling equipment;manufacturing of special equipment for pulping and papermaking; manufacturing of industrial robots;manufacturing of special-purpose equipment (excluding manufacturing of special licensing equipment);manufacturing of industrial control computers and systems; sales of intelligent material handling equipment;software sales; intelligent control system integration; AI universal application system; domestic freightforwarding; information technology consulting services; socio-economic consulting services; environmentalprotection consulting services; technology intermediary services. (Except for items subject to approval accordingto law, business activities shall be conducted independently in accordance with the business license) Licenseditems: import and export agency; import and export of goods; import and export of technologies. (Businessactivities that require approval according to law shall be subject to the approval by relevant authorities. Specificbusiness items are indicated in the approval documents or permit documents of relevant authorities.) TheCompany belongs to the special-purpose equipment manufacturing industry.
The actual controllers of the Company are Tang Zhuolin and Tang Zhuomian.
These financial statements were authorized for issue by the Board of Directors of the Company on 14 March2022.
The consolidation scope for consolidated financial statements is determined based on the concept of control. Fordetails of changes during the period, please refer to Note VI.
II. Basis of Preparation of the Financial Statements
These financial statements have been prepared in accordance with China’s “Accounting Standards for BusinessEnterprises — Basic Standards” promulgated by the Ministry of Finance and the specific accounting standards,application guidance, interpretations and other relevant regulations issued or amended thereafter (hereaftercollectively referred to as “Accounting Standards for Business Enterprises” or “CAS”).
The financial statements are prepared on a going concern basis.
In the preparation of the financial statements, all items are recorded by using historical cost as the basis ofmeasurement except for some financial instruments. Impairment allowance is made according to relevantregulations if the assets are impaired.
III. Principal Accounting Policies and Accounting Estimates
1. Statement of compliance
The financial statements present truly and completely the financial positions of the Group and the Company as at31 December 2021, and the financial performance and the cash flows for the year then ended in accordance withAccounting Standards for Business Enterprises.
2. Accounting year
The accounting year of the Group is from 1 January to 31 December of each calendar year.
3. Functional currency
The Group’s functional currency and the currency used in preparing the financial statements were Renminbi. Theamounts in the financial statements were denominated in Renminbi yuan, unless otherwise stated.
4. Business combination
Business combinations are classified into business combinations involving entities under common control andbusiness combinations not involving entities under common control.
Business combinations involving entities under common control
A business combination involving entities under common control is a business combination in which all of thecombining entities are ultimately controlled by the same party or parties both before and after the businesscombination, and that control is not transitory. The acquirer is the entity that obtains control of the other entitiesparticipating in the combination at the combination date, and the other entities participating in the combination arethe acquirees. The combination date is the date on which the combining party effectively obtains control of theparties being combined.
Assets and liabilities obtained by combining party in the business combination involving entities under commoncontrol (including goodwill arising from the acquisition of the merged party by the ultimate controller) arerecognized on the basis of their carrying amounts at the combination date recorded on the financial statements ofthe ultimate controlling party. The difference between the carrying amount of the consideration paid for thecombination (or aggregate face values of the shares issued) and the carrying amount of the net assets obtained isadjusted to capital surplus. If the capital surplus are not sufficient to absorb the difference, any excess is adjustedto retained earnings.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
4. Business combination (cont’d)
Business combinations not involving entities under common control
A business combination not involving entities under common control is a business combination in which all of thecombining entities are not ultimately controlled by the same party or parties both before and after the businesscombination. The acquirer is the entity that obtains control of the other entities participating in the combination atthe acquisition date, and the other entities participating in the combination are the acquirees. The acquisition dateis the date on which the acquirer effectively obtains control of the acquiree.
The acquiree’s identifiable assets, liabilities and contingent liabilities are recognized at their fair values at theacquisition date.
The excess of the sum of the consideration paid (or equities issued) for business combination and equity interestsin the acquiree held prior to the date of acquisition over the share of the attributable net identifiable assets of theacquiree, measured at fair value, was recognized as goodwill, which is subsequently measured at cost lesscumulative impairment loss. In case the fair value of the sum of the consideration paid (or equities issued) andequity interests in the acquire held prior to the date of acquisition is less than the fair value of the share of theattributable net identifiable assets of the acquiree, a review of the measurement of the fair values of theidentifiable assets, liabilities and contingent liabilities, the consideration paid for the combination (or equityissued) and the equity interests in the acquiree held prior to the date of acquisition is conducted. If the reviewindicates that the fair value of the sum of the consideration paid (or equities issued) and equity interests in theacquiree held prior to the date of acquisition is indeed less than the fair value of the share of the attributable netidentifiable assets of the acquiree, the difference is recognized in profit or loss.
Where a business combination not involving entities under common control realized step by step through multipletransactions, the long-term equity investments held by the acquiree prior to the purchase date shall be remeasuredat the fair value of the long-term equity investments on the purchase date, and the difference between the fairvalue and their carrying value shall be recognized in profit or loss. For other comprehensive income of thelong-term equity investments under the equity method held by the acquiree prior to the purchase date, accountingtreatment shall be performed on the same basis as the direct disposal of relevant assets or liabilities by theinvested entity, and other changes in equity than net profit and loss, other comprehensive income and thedistribution of profits shall be converted into current profits and losses on the purchase date. The changes in thefair value of the equity instrument investments held by the acquiree prior to the purchase date and accumulated inother comprehensive income prior to the purchase date shall be transferred to retained profits and losses.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
5. Consolidated financial statements
The consolidation scope for consolidated financial statements is determined based on the concept of control,including the Company and all subsidiaries’ financial statements. Subsidiaries are those enterprises or entitieswhich the Company has control over (including enterprises, separable components of investee units and structuredentities controlled by the Company).
The financial statements of the subsidiaries are prepared for the same reporting period as the Company, usingconsistent accounting policies. Any inconsistent accounting policies have been adjusted to become consistent withthe Company’s accounting policies. All assets, liabilities, equities, revenues, costs and cash flows arising fromintercompany transactions are eliminated on consolidation.
The excess of current loss attributable to non-controlling shareholders of a subsidiary over their entitlements to theopening balance of equity shall be charged to non-controlling interests.
For subsidiaries obtained through a business combination not involving entities under common control, theoperating results and cash flows of the acquirees will be recognized in consolidated financial statements from thedate the Group effectively obtains the control until the date that control is terminated. When consolidated financialstatement is prepared, the subsidiaries’ financial statements will be adjusted based on the fair values of theidentifiable assets, liabilities and contingent liabilities at the acquisition date.
For subsidiaries acquired through combination of entities under common control, the business results and cashflows of the combined entities are included in the consolidated financial statements from the beginning of theperiod in which the combination occurred. When preparing and comparing the consolidated financial statements,the Group makes adjustments to relevant items of the financial statements of the previous period, deeming thereporting entity formed through combination as existing since initial implementation of control by the ultimatecontrolling party.
In the event of the change in one or more elements of control as a result of changes in relevant facts andconditions, the Group reassesses whether it has control over the investee.
6. Cash and cash equivalents
Cash comprises cash on hand and deposits readily available for payments. Cash equivalents represent short-termhighly liquid investments which are readily convertible to known amounts of cash, and subject to an insignificantrisk of changes in value.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
7. Foreign currency translation
For foreign currency transactions, the Group translates the foreign currency into its functional currency.
Upon initial recognition, foreign currency transactions are translated into the functional currency using the spotexchange rate of the dates on which transactions occur. At the balance sheet date, foreign currency monetary itemsare translated using the spot exchange rate at the balance sheet date. The translation differences arising from thesettlement and foreign currency monetary items are recognized in profit or loss. Also at the balance sheet date,foreign currency non-monetary items measured at historical cost continue to be translated using the spot exchangerate at the dates of the transactions and it does not change its carrying amount in functional currency. Foreigncurrency non-monetary items measured at fair value are translated using the spot exchange rate. The differencesarising from the above translations are recognized in current profit or loss or other comprehensive incomeaccording to the nature of foreign currency non-monetary items.
The Group translates the functional currencies of foreign operations into Renminbi when preparing the financialstatements. Asset and liability items in the balance sheet are translated at the spot exchange rate prevailing at thebalance sheet date. Equity items, except for retained earnings, are translated at the spot exchange rates at the datewhen such items arose. Revenue and expense items in the income statement are translated using the averageexchange rate for the periods when transactions occur. Translation differences arising from the aforesaidtranslation of financial statements denominated in foreign currency shall be recognized as other comprehensiveincome. When foreign operations are disposed, other comprehensive income relating to the foreign operation istransferred to current profit or loss. Partial disposal shall be recognized on a pro-rata basis.
Cash flows denominated in foreign currencies and foreign subsidiaries’ cash flows are translated using theaverage exchange rate for the period when cash flows occur. The impact on cash by the fluctuation of exchangerates is presented as a separate line item of reconciliation in the statement of cash flows.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
8. Financial instruments
Financial instruments refer to the contracts which give rise to a financial asset in one entity and a financialliability or equity instrument in another entity.
Recognition and derecognition of financial instruments
The Group recognizes a financial asset or a financial liability when it becomes a party to the contractualprovisions of the financial instrument.
A financial asset (or part of it, or a part of a group of similar financial asset) is derecognized when one of thefollowing criteria is met, that is, when a financial asset is written off from its account and balance sheet:
（
）The right of receiving the cash flow generated from the financial asset has expired;（
）The right of receiving cash flow generated by the financial assets is transferred, or an obligation of payingthe full amount of cash flow received to third parties in a timely manner has been undertaken under“pass-through” agreements, where (a) substantially all risks and rewards of the ownership of such type offinancial assets have been transferred, or (b) control over such type of financial assets has not beenretained even though substantially all risks and rewards of the ownership of such type of financial assetshave been neither transferred nor retained.
If the obligation of financial liability has been fulfilled, cancelled or expired, the financial liability isderecognized. If the present financial liability is substituted by the same debtee with another liability differing insubstance, or the terms of the present liability have been substantially modified, this substitution or modification istreated as derecognition of a present liability and recognition of a new liability with any arising differencesrecognized in profit or loss.
Conventional dealings in financial assets are recognized or derecognized under the trade day accounting method.Conventional dealings refer to the receipt or delivery of financial assets within periods stipulated by the law andaccording to usual practices. The trade day is the date on which the Group undertakes to buy or sell a financialasset.
Classification and measurement of financial assets
At initial recognition, the Group classifies its financial assets into: financial assets at fair value through profit orloss, financial assets at amortized cost, or financial assets at fair value through other comprehensive income,according to the Group’s business model for managing financial assets and the contract cash flow characteristicsof the financial assets. When and only when the Group changes its business model of managing financial assets,all relevant financial assets affected will be re-classified.
Financial assets are measured at fair value on initial recognition, but if the accounts receivable or notes receivablegenerated from the sales of goods or provision of services do not contain significant financing components or donot consider financing components of no longer than one year, the initial measurement will be based on thetransaction price.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
8. Financial instruments (cont’d)
Classification and measurement of financial assets (cont’d)
For financial assets at fair value through profit or loss, the relevant transaction costs are directly recognized inprofit or loss; for other financial assets, the relevant transaction costs are recognized in their initial recognitionamount.
The subsequent measurement of financial assets is dependent on its classification:
Debt instruments measured at amortized costFinancial assets fulfilling all of the following conditions are classified as financial assets at amortized cost: theobjective of the Group’s business management model in respect of such type of financial assets is to generatecontract cash flow; the contract terms of such type of financial assets provide that cash flow generated on specificdates represents interest payment in relation to principal amounts based on outstanding principal amounts only.Interest income from such type of financial assets are recognized using the effective interest rate method, and anyprofit or loss arising from derecognition, amendments or impairment shall be charged to current profit or loss.
Debt instruments at fair value through other comprehensive incomeFinancial assets fulfilling all of the following conditions are classified as financial assets at fair value throughother comprehensive income: the objective of the Group’s business management model in respect of such type offinancial assets is both to generate contract cash flow and to sell such type of financial assets; the contract terms ofsuch type of financial assets provide that cash flow generated on specific dates represents interest payment inrelation to principal amounts based on outstanding principal amounts only. Interest income from this type offinancial assets is recognized using the effective interest rate method. Other than interest income, impairment lossand exchange differences which shall be recognized as current profit or loss, other fair value changes shall beincluded in other comprehensive income. Upon derecognition of the financial assets, the cumulative gains orlosses previously included in other comprehensive income shall be transferred from other comprehensive incometo current profit or loss.
Financial assets at fair value through profit or lossOther than financial assets measured at amortized cost and financial assets at fair value through othercomprehensive income as aforementioned, all financial assets are classified as financial assets at fair valuethrough profit or loss, which are subsequently measured at fair value, any changes of which are recognized incurrent profit or loss.
Classification and measurement of financial liabilitiesThe Group classifies its financial liabilities at initial recognition: financial liabilities at fair value through profit orloss, and other financial liabilities. For financial liabilities at fair value through profit or loss, the relevanttransaction costs are directly recognized in profit or loss; for other financial liabilities, the relevant transactioncosts are recognized in their initial recognition amount.
The subsequent measurement of financial liabilities is dependent on its classification:
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
8. Financial instruments (cont’d)
Classification and measurement of financial liabilities (cont’d)
Financial liabilities at fair value through profit or lossFinancial liabilities at fair value through profit or loss include mainly financial liabilities held fortrading(comprising derivatives classified as financial liabilities). Financial liabilities held for trading (comprisingderivatives classified as financial liabilities) are subsequently measured at fair value and all changes arerecognized in current profit or loss.
Other financial liabilitiesSubsequent to initial recognition, these financial liabilities are carried at amortized cost using the effective interestmethod.
Impairment of financial instruments
The Group performs impairment treatment on financial assets at amortized cost, debt instruments at fair valuethrough other comprehensive income and contract assets based on expected credit losses (ECL) and recognizesallowances for losses.
For receivables and contract assets that do not contain significant financing components, the Group adopts asimplified measurement method to measure allowances for losses based on an amount equivalent to the lifetimeexpected credit losses.
Financial assets other than those measured with simplified valuation methods, the Group evaluates at each balancesheet date whether its credit risk has significantly increased since initial recognition. The period during whichcredit risk has not significantly increased since initial recognition is considered the first stage, at which the Groupshall measure loss allowance based on the amount of expected credit loss for the next 12 months and shallcompute interest income according to the book balance and effective interest rate; the period during which creditrisk has significantly increased since initial recognition although no credit impairment has occurred is consideredthe second stage, at which the Group shall measure loss allowance based on the amount of expected credit loss forthe entire valid period and shall compute interest income according to the book balance and effective interest rate;The period during which credit impairment has occurred after initial recognition is considered the third stage, atwhich the Group shall measure loss allowance based on the amount of the lifetime expected credit loss and shallcompute interest income according to the amortized cost and effective interest rate.
The Group estimates the expected credit loss of financial instruments individually and on a group basis. TheGroup considers the credit risk features of different customers and estimates the expected credit losses of financialinstruments based on aging portfolio.
For the Group’s criteria for judging whether credit risks have significantly increased, the definition of assetssubjected to credit impairment, and assumptions underlying the measurement of expected credit losses, pleaserefer to Note VIII.3.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
8. Financial instruments (cont’d)
Impairment of financial instruments (cont’d)
When the Group no longer reasonably expects to be able to fully or partially recover the contract cash flow offinancial assets, the Group directly writes down the book balance of such financial assets.
Derivative financial instruments
The Group uses derivative financial instruments. Derivative financial instruments are initially recognized at fairvalue on the date on which a derivative contract is entered into and are subsequently re-measured at fair value.Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.
Gains or losses arising from changes in the fair value of derivative instruments shall be directly recognized incurrent profit or loss.
Transfer of financial assets
If the Group has transferred substantially all the risks and rewards associated with the ownership of a financialasset to the transferee, the asset should be derecognized. If the Group retains substantially all the risks and rewardsof ownership of a financial asset, the asset should not be derecognized.
When the Group has neither transferred nor retained substantially all the risks and rewards of ownership of thefinancial asset, it may either derecognize the financial asset and recognize any associated assets and liabilities ifcontrol of the financial asset has not been retained; or recognizes the financial asset to the extent of its continuinginvolvement in the transferred financial asset and recognizes an associated liability if control has been retained.
Assets formed by the continuing involvement by way of the provision of financial guarantee in respect of thetransferred financial assets shall be recognized as the lower of the carrying value of the financial asset and theamount of financial guarantee. The amount of financial guarantee means the maximum amount amongconsiderations received to be required for repayment.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
9. Inventories
Inventories include raw materials, work-in-progress, finished goods, product deliveries, semi-finished goods,materials consigned for processing, etc.
Inventories are initially recorded at costs. Inventories’ costs include purchasing costs, processing costs and othercosts. Actual costs of product deliveries are recognized using the weighted average method. Turnover materialsinclude low-value consumables, packaging materials, etc., which are expensed in full.
The Group adopts the perpetual inventory system.
Inventories on the balance sheet date are stated at the lower of cost or net realisable value. Inventory valuationallowance is made and recognized in profit or loss when the net realisable value is lower than cost. If the factorsthat give rise to the allowance in prior years are not in effect in the current period, as a result that the net realisablevalue of the inventories is higher than cost, allowance should be reversed within the impaired cost, and recognizedin profit or loss.
Net realisable value is determined based on the estimated selling price in the ordinary course of business, less theestimated costs to completion and estimated costs necessary to make the sale and related taxes. Valuationallowances for raw materials are established by category, and those for finished goods by individual item. Forinventories that relate to products produced and sold in the same region, have the same or similar ultimatepurpose, and are difficult to separate in measurement, valuation allowances are established on a combined basis.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
10. Long-term equity investments
Long-term equity investments include equity investments in subsidiaries, joint ventures and associates.
Long-term equity investments were recorded at initial investment cost on acquisition. For long-term equityinvestments acquired through the business combination of entities under common control, the initial investmentcost shall be the share of carrying value of the equity of the merged party at the date of combination as stated inthe consolidated financial statements of the ultimate controlling party. Any difference between the initialinvestment cost and the carrying value of the consideration for the combination shall be dealt with by adjustingthe capital surplus(if the capital surplus are insufficient for setting off the difference, such difference shall befurther set off against retained earnings). Upon disposal of the investment, other comprehensive income prior tothe date of combination shall be dealt with on the same basis as if the relevant assets or liabilities were disposed ofdirectly by the investee. Equity recognized as a result of changes in equity other than the set-off of profit and loss,other comprehensive income and profit allocation of the investee shall be transferred to current profit and lossupon disposal of the investment. Items which remain long-term equity investments after the disposal shall beaccounted for on a pro-rata basis, while items reclassified as financial instruments following the disposal shall beaccounted for in full. For long-term equity investments acquired through the business combination of entities notunder common control, the initial investment cost shall be the cost of combination (for business combinations ofentities not under common control achieved in stages through multiple transactions, the initial investment costshall be the sum of the carrying value of the equity investment in the acquired party held at the date of acquisitionand new investment cost incurred as at the date of acquisition). The cost of combination shall be the sum of assetscontributed by the acquiring party, liabilities incurred or assumed by the acquiring party and the fair value ofequity securities issued. Upon disposal of the investment, other comprehensive income recognized under theequity method held prior to the date of acquisition shall be dealt with on the same basis as if the relevant assets orliabilities were disposed of directly by the investee. Equity recognized as a result of changes in equity other thanthe set-off of profit and loss, other comprehensive income and profit allocation of the investee shall be transferredto current profit and loss upon disposal of the investment. Items which remain long-term equity investments afterthe disposal shall be accounted for on a pro-rata basis, while items reclassified as financial instruments followingthe disposal shall be accounted for in full. The initial investment cost of long-term equity investments other thanthose acquired through business combination shall be recognized in accordance with the following: for thoseacquired by way of cash payments, the initial investment cost shall be the consideration actually paid plusexpenses, tax amounts and other necessary outgoings directly related to the acquisition of the long-term equityinvestments. For long-term equity investments acquired by way of debt restructuring, the initial investment costshall be determined in accordance with “CAS No. 12 — Debt Restructuring.”
In the financial statements of the Company, the cost method is used for long term equity investments in investeesover which the Company exercises control. Control is defined as the power exercisable over the investee, theentitlement to variable return through involvement in the activities of the investee and the ability to influence theamount of return using the power over the investee.
When the cost method is used, long-term equity investments are measured at initial cost on acquisition. Whenadditional investments are made or investments are recouped, the cost of longterm equity investments shall beadjusted. Cash dividend or profit distribution declared by the investee shall be recognized as investment incomefor the period.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
10. Long-term equity investments (cont’d)
The equity method is used to account for long-term equity investments when the Group can jointly control or hassignificant influence over the invested entity. Joint control is the contractually agreed sharing of control of anarrangement, which exists only when decisions about the relevant activities require the unanimous consent of theparties sharing control. Significant influence means having the authority to take part in the decision over thefinancial and operational policies but not the authority to control or jointly control with other parties theformulation of such policies.
Under the equity method, any excess of the initial investment cost over the Company’s share of the net fair valueof the investment’s identifiable assets and liabilities is included in the initial investment cost of the long-termequity investment. When the carrying amount of the investment is less than the Company’s share of the fair valueof the investment’s identifiable net assets, the difference is recognized in profit or loss of the current period anddebited to long-term equity investments.
Under the equity method, after the long-term equity investments are acquired, investment gains or losses and othercomprehensive income are recognized according to the entitled share of net profit or loss and other comprehensiveincome of the investee and the carrying amount of the long-term equity investment is adjusted accordingly. Whenrecognising the Group’s share of the net profit or loss of the invested entity, the Group makes adjustments basedon fair values of the investees’ identifiable assets and liabilities at the acquisition date in accordance with theGroup’s accounting policy and accounting period to investee’s net profits, eliminating pro-rata profit or loss frominternal transactions with associates and joint ventures attributed to investor (except that loss from inter-grouptransactions deemed as asset impairment loss shall be fully recognized), provided that invested or sold assetsconstituting businesses shall be excluded. When the invested enterprise declares profit distribution or cashdividends, the carrying amount of investment is adjusted down by the Group’s share of the profit distribution anddividends. The Group shall derecognize its share of the losses of the investee after the long-term equityinvestment together with any long-term interests that in substance forms part of the Group’s net investment in theinvestee are reduced to zero, except to the extent that the Group has incurred obligations to assume additionallosses. The Group also adjusts the carrying amount of long-term equity investments for other changes in owner’sequity of the investees (other than the net-off of net profits or losses, other comprehensive income and profitdistribution of the investee), and includes the corresponding adjustment in equity.
On disposal of the long-term equity investments, the difference between carrying value and market price isrecognized in profit or loss for the current period. For long-term equity investments under equity method, whenthe use of the equity method is discontinued, other comprehensive income previously accounted for under theequity method shall be dealt with on the same basis as if the relevant assets or liabilities were disposed of directlyby the investee. Equity recognized as a result of changes in equity other than the net-off of profit and loss, othercomprehensive income and profit distribution of the investee shall be transferred in full to current profit and loss.If the equity method remains in use, other comprehensive income previously accounted for under the equitymethod shall be dealt with on the same basis as if the relevant assets or liabilities were disposed of directly by theinvestee and transferred to current profit and loss on a pro-rata basis. Equity recognized as a result of changes inshareholders’ equity other than the net-off of profit and loss, other comprehensive income and profit distributionof the investee shall be transferred to current profit and loss on a pro-rata basis.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
11. Fixed assets
A fixed asset is recognized when, and only when, it is probable that future economic benefits that are associatedwith the fixed asset will flow to the Group and the cost can be measured reliably. Subsequent expenditures relatedto a fixed asset are recognized in the carrying amount of the fixed asset if the above recognition criteria are met,and the carrying value of the replaced part is derecognized; otherwise, those expenditures are recognized in profitor loss as incurred.
Fixed assets are initially recognized at cost. Cost of purchased fixed assets includes purchasing price, relevanttaxes, and any directly attributable expenditure for bringing the asset to working conditions for its intended use.
Except for those incurred by using the accrued expenses for safety production, fixed assets are depreciated on astraight-line basis, and the respective estimated useful lives, estimated residual value ratios and annualdepreciation rates are as follows:
| Useful life | Estimated residual value ratio | Annual depreciation rate | |||||||
| Buildings and constructions | 20-40 years | 5.00% | 2.38%-4.75% | ||||||
| Machinery | 5-18 years | 5.00% | 5.28%-19.00% | ||||||
| Transportation equipment | 5-10 years | 5.00% | 9.5%-19.00% | ||||||
| Electronic equipment | 3-10 years | 5.00% | 9.5%-31.67% | ||||||
| Office equipment | 3-10 years | 5.00% | 9.5%-31.67% | ||||||
| Other equipment | 5-10 years | 5.00% | 9.5%-19.00% | ||||||
The Group reviews, at least at each year end, useful lives, estimated residual values and depreciation methods offixed assets and makes adjustments if necessary.
12. Construction in progress
Construction in progress is measured at the actual construction expenditures, including necessary project workexpenses incurred during the period while construction is in progress, and other related fees.
Construction in progress is transferred into fixed assets when it is ready for its intended use.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
13. Borrowing costs
Borrowing costs are interest and other costs incurred by the Group in connection with the borrowings of funds,which include borrowing interest, amortisation of discount or premium on debt, other supplementary costs andcertain foreign exchange differences that occurred from the borrowings in foreign currencies.
14. Right-of-use assets
The right-of-use assets of the Group mainly include buildings and vehicles
At the commencement date of the lease, the Group recognizes a right-of-use asset. The cost of the right-of-useasset comprises: (1) the amount of the initial measurement of the lease liability; (2) any lease payments made at orbefore the commencement date less any lease incentives received; (3) any initial direct cost incurred; (4) anestimate of costs incurred by the lessee in dismantling and removing the underlying asset, restoring the site onwhich it is located or restoring the underlying asset to the condition required by the terms and conditions of thelease. The right-of-use assets are depreciated on a straight-line basis subsequently by the Group. If ownership ofthe leased asset transfers to the Group at the end of the lease term, depreciation is calculated using the estimateduseful life of the asset. Otherwise, the right-of-use assets are depreciated over the shorter of the lease term and theestimated useful lives of the assets.
When the Group remeasures the lease liability at the present value of the changed lease payments and adjusts thecarrying amount of the right-of-use assets accordingly, if the carrying amount of the right-of-use asset is reducedto zero, and there is a further reduction in the measurement of the lease liability, the Group recognize theremaining amount of the remeasurement in profit or loss.
15. Intangible assets
Intangible assets are recognized only when it is probable that economic benefits relating to such intangible assetswould flow into the Group and that their cost can be reliably measured. Intangible assets are initially measured atcost, provided that intangible assets which are acquired in a business combination not under common control andwhose fair value can be reliably measured shall be separately recognized as intangible assets at fair value.
Useful life of an intangible asset is determined by the period over which it is expected to bring economic benefitsto the Group. For an intangible asset with no foreseeable limit to the period over which it is expected to bringeconomic benefits to the Group, it is treated as an intangible asset with indefinite useful life.
Useful life of respective intangible assets is as follows:
| Useful life | |||||
| Land use rights | 40-50 years | ||||
| Land ownership (overseas) | Indefinite | ||||
| Trademarks | 5-10 years | ||||
| Trademarks (overseas) | Uncertain | ||||
| Patents | 5-10 years |
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
15. Intangible assets (cont’d)
Property in land acquired by the Group is normally accounted for as intangible assets. Property in land andbuildings relating to plants constructed by the Group are accounted for as intangible assets and fixed assets,respectively. The costs for acquiring land and buildings are apportioned between the property in land andbuildings, or accounted for as fixed assets if they cannot be apportioned.
The straight-line amortisation method is used during the useful life period for intangible assets with definite usefullives. The Group reviews, at least at each year end, useful lives and amortization method for intangible assets withdefinite lives and makes adjustment when necessary.
For intangible assets with indefinite useful life, impairment tests shall be conducted annually regardless ofwhether there are indications of impairment. Such intangible assets shall not be amortized and their useful lifeshall be reviewed during each accounting period. If there is evidence suggesting that their useful life is limited,accounting treatment will be performed according to the above policy on intangible assets with definite useful life.
The land ownership of Fosber S.p.A. ("Fosber Group"), a subsidiary of the Company, in Italy has a permanentterm, and the Company believes that the land ownership will be used and will bring expected inflows of economicbenefits to the Company in the foreseeable future, so its useful life is regarded as indefinite. The trademarksregistered by subsidiaries Fosber Group and Fosber America, Inc. ("Fosber America") have a useful life inaccordance with the law, but at the expiration of the protection period, Fosber Group and Fosber America canapply for an extension at low service charges, so the Company will benefit from the above trademarks in the longterm. Thus, the Company recognized the trademark use right as intangible assets with indefinite useful life. Theuseful life of intangible assets with indefinite useful life will be reviewed at the end of each year. After review, theuseful life of the above intangible assets is still uncertain.
The Group classifies the expenses for internal research and development as research costs and development costs.All research costs are charged to the current profit or loss as incurred. Expenditure incurred on projects to developnew products is capitalized and deferred only when the Group can demonstrate the technical feasibility ofcompleting the intangible asset so that it will be available for use or sale, its intention to complete and its ability touse or sell the asset, how the asset will generate future economic benefits (including demonstration that theproduct derived from the intangible asset or the intangible asset itself will be marketable or, in the case of internaluse, the usefulness of the intangible asset as such), the availability of technical and financial resources to completethe project and procure the use or sale of the intangible asset, and the ability to measure reliably the expenditureduring the development. Development costs which do not meet these criteria is recognized in profit or loss whenincurred.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
16. Impairment
The Group assesses impairment of assets other than inventories, contract assets and assets related to contractcosts, deferred tax assets and financial assets, using the methods described below:
The Group assesses at each balance sheet date whether there is an indication that a non-financial asset may beimpaired. If any such indication exists, the Group makes an estimate of the asset’s recoverable amount andperforms a test of impairment for the asset. For goodwill generated from business consolidation and intangibleassets with indefinite useful lives, tests for impairment are performed at least annually regardless of whether thereare indications of impairment. Intangible assets which are not yet ready for use are also tested annually forimpairment.
The recoverable amount is the higher of the asset’s fair value less costs to sell and its present value of estimatedfuture cash flows. The Group estimates recoverable value for individual assets. When it is difficult to estimateindividually, the recoverable value of the cash generating units which the asset belongs to will be estimated. Thedefinition of cash generating units is determined on the basis of whether the cash generating units generate cashflows which are largely independent of those from other cash generating units.
Where the carrying amount of an asset or a cash generating unit exceeds its recoverable amount, the asset or cashgenerating unit is considered impaired and is written down to its recoverable amount. The difference between thecarrying amount and recoverable amount is recognized in profit or loss and allowance for impairment is madeaccordingly.
In connection with impairment tests for goodwill, the carrying value of goodwill arising from businesscombination is allocated to relevant cash generating units (“CGU”) from the date of acquisition on a reasonablebasis. If it is difficult to allocate such goodwill to a relevant CGU, it should be allocated to a relevant CGU group.A relevant CGU or CGU group is defined as one which can benefit from the synergies of the businesscombination and is not larger than the reporting segments determined by the Group.
In connection with impairment tests for CGUs or CGU groups that comprise goodwill, where indications ofimpairment exists in a CGU or CGU group related to goodwill, impairment tests should be performed first onCGUs or CGU groups that do not comprise goodwill and recognize impairment loss after estimating therecoverable amount. Then impairment tests on CGUs or CGU groups that comprise goodwill should be performedand the carrying value and recoverable amount should be compared. Where the recoverable amount is lower thanthe carrying value, the impairment loss should first be offset against the carrying value of the goodwill allocatedto CGUs or CGU groups and then against assets in the CGUs or CGU groups other than goodwill in proportion tothe weighting of these assets.
Previously recognized impairment losses are not reversed in subsequent periods.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
17. Long-term prepaid expenses
Long-term prepaid expenses are amortized using the straight-line method, with the amortization periods asfollows:
| Amortization period | |||||
| Decoration expenditures | 3-5 years | ||||
| Amortization of moulds | 3 years | ||||
| Other expenditures | 3-5 years |
18. Employee benefits
Employee benefits include all kinds of rewards or compensation incurred by the Group in exchange for servicerendered by employees or in the termination of employment, other than share-based payment. Employee benefitsinclude short-term benefits, retirement benefits, dismission benefits and other long-term employees’ benefits.Benefits provided by the Group to the spouses, children and dependents of employees and families of deceasedemployees are also a part of employee benefits.
Short-term benefits
For accounting periods during which services are rendered by employees, short-term benefits that will incur isrecognized as liability and included in profit and loss or related capital costs.
Retirement benefits (defined contribution schemes)
Employees of the Group participated in pension insurance and unemployment insurance schemes managed by thelocal government. The contribution costs are charged as asset cost or to profit or loss when incurred.
Retirement benefits (defined benefit schemes)
The Group operates a defined benefit pension scheme, which requires payments to an independently operatedfund. No funds have been injected into the scheme. The cost of benefits provided under the defined benefitscheme is calculated using the expected benefit accrual unit approach.
Remeasurement arising from defined benefit pension schemes, including actuarial gains or losses, changes in theasset cap effect (deducting amounts included in net interest on net liabilities of the defined benefit schemes) andreturn on scheme assets (deducting amounts included in net interest on net liabilities of the defined benefitschemes) are instantly recognized in the balance sheet and charged to equity through other comprehensive incomefor the period during which it is incurred. It will not be reversed to profit and loss in subsequent periods.
Previous service costs are recognized as current expenses when: the defined benefit scheme is revised, or relevantrestructuring costs or dismission benefits are recognized by the Group, whichever earlier.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
18. Employee benefits (cont’d)
Retirement benefits (defined benefit schemes) (cont’d)recognizerecognizeNet interest is arrived at by multiplying net liabilities or net assets of defined benefits with a discount rate.Changes in net obligations of defined benefits are recognized as cost of sales, administrative expenses, R&Dexpenses, selling expenses and finance costs in the income statement. Service costs included current servicescosts, past service costs and settlement of profit or loss. Net interest included interest income from scheme assets,interest expenses for scheme obligations and interest of the asset cap effect.
19. Lease liabilities
At the commencement date, the Group measures the lease liability at the present value of the lease payments thatare not paid at that date, except for short-term leases and low-value asset leases. In calculating the present value ofthe lease payments, the Group uses the interest rate implicit in the lease as the discount rate. If that rate cannot bereadily determined, the Group uses the lessee’s incremental borrowing rate. The Group calculates the interestexpenses of the lease liability in each period during the lease term using the constant periodic rate of interest, andrecognizes such interest expenses in profit or loss, except those that in the related asset costs as required. Variablelease payments that are not included in the measurement of the lease assets are recognized in profit or loss asincurred, except those that shall be included in the related asset costs as required.
After the commencement date, in the event of any change to the substantial constant payments, the estimatedpayables of guaranteed residual value, the index or ratio used to determine lease payments, the assessment resultsor actual vesting of the purchase option, the renewal option or the termination option, the Group remeasures thelease liability at the present value of the modified lease payments.
20. Provisions
Other than contingent consideration and assumed contingent liabilities in a business combination not involvingentities under common control, the Group recognizes as provision an obligation that is related to contingentmatters when all of the following criteria are fulfilled:
（
）the obligation is a present obligation of the Group;（
）the obligation would probably result in an outflow of economic benefits from the Group;（
）the obligation could be reliably measured.
Provisions are initially measured according to the best estimate of expenses on fulfilling the current liabilities, inconnection with the risk, uncertainty and timing value of the currency. The carrying value of the provisions wouldbe reassessed on every balance sheet date. The carrying value will be adjusted to the best estimated value if thereis certain evidence that the current carrying value is not the best estimate.
The contingent liabilities obtained from a business combination not involving entities under common control shallbe measured at fair value at the time of initial recognition. After the initial recognition, according to the amountconfirmed by provisions and the balance of the initial recognition amount after deducting the accumulatedamortization determined by the revenue recognition principle, the higher of the two shall prevail for subsequentmeasurements.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
21. Share-based payments
Share-based payments can be distinguished into equity-settled share-based payments and cash-settled share-basedpayments. Equity-settled share-based payments are transactions of the Group settled through the payment ofshares or other equity instruments in consideration for receiving services.
Equity-settled share-based payments made in exchange for services rendered by employees are measured at thefair value of equity instruments granted to employees. Instruments which are vested immediately upon the grantare charged to relevant costs or expenses at the fair value on the date of grant and the capital surplus are creditedaccordingly. Instruments of which vesting is conditional upon completion of services or fulfillment ofperformance conditions are measured by recognising services rendered during the period in relevant costs orexpenses and crediting the capital surplus accordingly at the fair value on the date of grant according to the bestestimates of the number of exercisable equity instruments conducted by the Group at each balance sheet dateduring the pending period. The fair value of equity instruments is determined using the closing price of theCompany’s stock on the date of grant.
No expenses are recognized for awards that do not ultimately vest due to non-fulfillment of nonmarket conditionsand/or vesting conditions. For the market or non-vesting condition under the share-based payments agreement, itshould be treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied,provided that other performance condition and/or vesting conditions are satisfied.
22. Revenue generating from contracts with customers
The Group recognizes its revenue upon the fulfilment of contractual performance obligations under a contract,namely, when the customer obtains control over the relevant products or services. The acquisition control overrelevant products or services shall mean the ability to direct the use of the products or the provision of the servicesand receive substantially all economic benefits derived therefrom.
Contract for the sales of productsThe product sales contract between the Group and its customers typically includes different contractualperformance obligations for the transfer of products and the rendering of services. With respect to the sales ofproducts, the Group typically recognizes its revenue at the time when the customer takes control over theproducts, taking into account the following factors: the acquisition of the current right to receive payments for theproducts, the transfer of major risks and rewards of ownership, the transfer of the legal title of the products, thetransfer of the physical assets of the products, and customers’ acceptance of the products.
Contract for the rendering of installation servicesThe service contract between the Group and its customers includes contractual performance obligations forinstallation services. As the customer is able to forthwith obtain and consume the economic benefits brought bythe Group’s contractual performance when the Group performs a contract, the Group considers such contractualperformance obligations to be obligations performed over a period of time, and revenue shall be recognized oneach balance sheet date according to the progress of installation.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
22. Revenue generating from contracts with customers (cont’d)
Significant financing componentWhere a contract contains a significant financing component, the Group determines transaction prices based onamounts payable assumed to be settled in cash by customers immediately upon the acquisition of control over theproducts or services. The difference between such transaction price and contract consideration is amortized overthe contract period using the effective interest method based on a ratio that discounts the nominal contractualconsideration to the current selling price of the products or services.
The Group shall not give consideration to anysignificant financing component in a contract if the gap between the customer’s acquisition of control over theproducts or services and payment of consideration is expected to be less than 1 year.
Warranty clausesThe Group provides quality assurance for products sold in accordance with contract terms and laws andregulations. The accounting treatment of quality assurance in the form of warranty assuring customers productssold are in compliance with required standards is set out in Note III.20. Where the Group provides a servicewarranty for a standalone service in addition to the assurance of compliance of products with required standards,such warranty is treated as a standalone contractual performance obligation, and a portion of the transaction priceshall be allocated to the service warranty based on a percentage of the standalone price for the provision ofproduct and service warranty. When assessing whether a warranty is rendering a standalone service in addition toproviding guarantee to customers that all sold goods are in compliance with required standards, the Group willconsider whether or not such warranty is a statutory requirement, the term of the warranty and the nature of theGroup’s undertaking to perform its obligations.
Principal/agent
When the Group obtains control of trade goods or services from a third party and then transfers it to a customer, orhas the ability to direct the third party to provide the service to the customer on the Group’s behalf, the Group isentitled to determine the transaction price of the goods or services by itself, i.e., the Group controls the tradegoods or services before they are transferred to the customer. Thus, the Group is a principal and recognizesrevenue in the gross amount of consideration received or receivable. Otherwise, the Group is an agent andrecognizes revenue in the amount of any fee or commission to which it expects to be entitled from the customer.The amount is the net amount of the gross consideration received or receivable after paying the other party theconsideration received in exchange for the goods or services to be provided by that party.
23. Contract assets and contract liabilities
The Group presents contract assets or contract liabilities on the balance sheet according to the relationshipbetween contractual performance obligations and customer payments.
Contract assetsContract assets are the right to receive consideration following the transfer of products or services to customerswhich is dependent on factors other than the passage of time.
For details of the Group’s determination and accounting treatment of expected credit losses from contract assets,please refer to Note III.8.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
23. Contract assets and contract liabilities (Cont’d)
Contract liabilitiesContract liabilities are the obligation to pass products or services to customers in connection with customerconsideration received or receivable, for example, amounts received prior to the transfer of the promised productsor services.
24. Assets relating to contract cost
The Group’s assets relating to contract costs include the contract acquisition costs and contract performance costs.The costs are presented in inventory, other current assets or other non-current assets based on liquidity of theassets.
Where the Group expects the incremental costs for acquiring a contract to be recoverable, such contractacquisition costs are recognized as an asset (unless the amortisation period of the asset is not more than 1 year).
Costs incurred by the Group for the performance of a contract are recognized as an asset as contract performancecosts if they do not fall under the scope of the relevant standards for inventories, fixed assets or intangible assetsbut meet all the following conditions:
（
）they are directly related to a current or anticipated contract, including direct labour, direct materials,manufacturing expenses (or similar expenses), to be borne by customers as specifically stipulated, andotherwise incurred solely in connection with the contract;（
）they will increase the resources to be utilized in the Company’s future performance of its contractual
obligations;（
）they are expected to be recoverable.
25 Government grants
Government grants are recognized when there is reasonable assurance that the grant will be received and allattaching conditions will be complied with. The grant is measured as the amount received or receivable where ittakes the form of a cash asset, or at fair value where it is not a cash asset. Where the fair value cannot be reliablyobtained, it should be measured at the nominal value.
In accordance with the stipulations of the government instruments, government grants applied towards acquisitionor the formation of long-term assets in other manners are asset-related government grants; the instrumentsunspecifically refer to the exercise of judgement based on the basic conditions for receiving the asset-related grantapplied towards or the formation of long-term assets in other manners. All other grants are recognized asincome-related government grants.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
25. Government grants (cont’d)
Government grants relating to income and applied to make up for related costs or losses in future periods shall berecognized as deferred income, and shall be recognized in profit or loss of the period for which related costs orloss are recognized. Government grants specifically applied for the reimbursement of incurred related costs andexpenses shall be directly recognized in profit or loss.
Government grants relating to assets shall offset the carrying amount of related assets, or be recognized asdeferred income and credited to profit or loss over the useful life of the asset concerned by reasonable andsystematic instalments (provided that government grants measured at nominal value shall be directly recognizedin profit or loss). Where the asset concerned is disposed of, transferred, retired or damaged prior to the end of itsuseful life, the balance of the deferred income yet to be allocated shall be transferred to “asset disposal” undercurrent profit or loss.
26. Income tax
Income taxes include current and deferred tax. Income taxes are recognized in current profit or loss as income taxexpenses or income tax benefit, except for the adjustment made for goodwill in a business combination andincome tax from transactions or items that directly related to equity.
For the current period’s deferred tax assets and liabilities arising in current and prior periods, the Group measuresthem at the amount expected to be paid or recovered according to the relevant taxation regulations.
The Group recognizes deferred tax assets and liabilities based on temporary differences using the balance sheetliability method. Temporary differences are differences between the carrying amount of assets or liabilities in thebalance sheet and their tax base on the balance sheet date. Temporary differences also include the differencesbetween the carrying values and tax bases of items not recognized as assets or liabilities where the tax base can becalculated according to the relevant tax regulations.
Deferred tax liabilities are recognized for all taxable temporary differences, except:
（
）where the taxable temporary difference arises from goodwill or the initial recognition of an asset orliability in a transaction that is not a business combination and, at the time of the transaction, affectsneither the accounting profit nor taxable profit or loss;（
）in respect of taxable temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures, where the timing of the reversal of the temporary differences can be controlledand it is probable that the temporary differences will not reverse in the foreseeable future.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
.Income tax (cont’d)
Deferred tax assets are recognized for all deductible temporary differences, carryforward of unused tax credits andunused tax losses, to the extent that it is probable that taxable profit will be available against which the deductibletemporary differences, and the carryforward of unused tax credits and unused tax losses can be utilized except:
（
）where the deductible temporary difference arises from transaction that is not a business combination and,at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;（
）deductible temporary differences associated with investments in subsidiaries, associates and interests injoint ventures are recognized when all following conditions are met: it is probable that the temporarydifferences will reverse in the foreseeable future, it is probable that taxable profit against the deductibletemporary differences will be available.
As at balance sheet date, deferred tax assets and liabilities are measured in accordance with relevant tax laws atthe tax rates that are expected to apply to the period when the asset is realized or the liability is settled, and reflectsthe tax consequences that would follow the manner in which the Group expects, at the balance sheet date, torecover the assets or settle the carrying amount of its assets and liabilities.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to theextent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferredtax asset to be utilized. Unrecognized deferred tax assets are reassessed at the end of each reporting period and arerecognized to the extent that it has become probable that sufficient taxable profit will be available to allow all orpart of the deferred tax asset to be recovered.
Deferred tax assets and liabilities are offset and presented as a net amount if all of the following conditions aremet: the Group has the legal right to set off the current income tax assets and liabilities and the deferred tax assetsand liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity ordifferent taxable entities, provided that the taxable entity concerned intends either to settle current income taxliabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each futureperiod in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
27. Leases
Identification of leases
At inception of a contract, the Group assesses whether the contract is, or contains, a lease. A contract is, orcontains, a lease if the contract conveys the right to control the use of an identified asset for a period of time inexchange for consideration. To assess whether a contract conveys the right to control the use of an identified assetfor a period of time, the Group assesses whether, throughout the period of use, the customer has both of the rightto obtain substantially all of the economic benefits from use of the identified asset and the right to direct the use ofthe identified asset.
Identification of separate lease components
For a contract that contains multiple separate lease components, the Group separates the contract and accounts foreach separate lease component. The right to use an underlying asset is a separate lease component if both:
(1) The lessee can benefit from use of the underlying asset either on its own or together with other resources thatare readily available to the lessee;
(2) The underlying asset is neither highly dependent on, nor highly interrelated with, the other underlying assets inthe contract.
Assessment of lease term
The lease term is the non-cancellable period for which the Group has the right to use an underlying asset. TheGroup has an option to extend the lease, that is, the Group has the right to extend the lease, and is reasonablycertain to exercise that option, the lease term also includes periods covered by an option to extend the lease. TheGroup has an option to terminate the lease, that is, the Group has the right to terminate the lease, but is reasonablycertain not to exercise that option, the lease term includes periods covered by an option to terminate the lease. TheGroup reassesses whether it is reasonably certain to exercise an extension option, purchase option, or not toexercise a termination option, upon the occurrence of either a significant event or a significant change in thecircumstances that is within the control of the Group and affect whether the Group is reasonably certain toexercise the corresponding option.
As lessee
For general accounting practice of the Group as a lessee, please see Items 14 and 19 of Note III.
Lease modificationsA change in the scope of a lease, or the consideration for a lease, that was not part of the original terms andconditions of the lease, for example, adding or terminating the right to use one or more underlying assets, orextending or shortening the contractual lease term.
The Group accounts for a lease modification as a separate lease if both:
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
27. Leases (Cont’d)
(1) the modification increases the scope of the lease by adding the right to use one or more underlying assets;
(2) the consideration for the lease increases by an amount commensurate with the stand-alone price for theincrease in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of theparticular contract.
For a lease modification that is not accounted for as a separate lease, at the effective date of the lease modificationthe Group remeasures the lease liability by discounting the revised lease payments using a revised discount rate.The revised discount rate is determined as the interest rate implicit in the lease for the remainder of the lease term,if that rate can be readily determined, or the lessee’s incremental borrowing rate at the effective date of themodification, if the interest rate implicit in the lease cannot be readily determined.
For a lease modification that is not accounted for as a separate lease, the Group accounts for the remeasurement ofthe lease liability by:
(1) decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease forlease modifications that decrease the scope of the lease. The Group recognizes in profit or loss any gain or lossrelating to the partial or full termination of the lease.
(2) making a corresponding adjustment to the right-of-use asset for all other lease modifications.
Short-term leases and leases of low-value assetsA short-term lease is a lease that, at the commencement date, has a lease term of 12 months or less, and does notcontains any purchase option. The Group does not recognize the right-of-use assets and lease liabilities forbuildings short-term leases. The Group recognizes lease payments on short-term leases and leases of low-valueassets in the related asset costs or profit or loss on a straight-line basis over the lease term.
As a lessor
A lease that transfers substantially all the risks and rewards incidental to ownership of a leased asset on itscommencement date is a finance lease. And all the other leases are operating leases.
As a lessor of operating leases
Rental income of operating leases is recognized in current profit or loss over the respective periods during thelease term on a straight-line basis, while variable lease payment not included in lease receipts is charged to profitor loss as and when incurred.
For any modification to an operating lease, the Group treats it as a new lease from the effective date of themodification, and the received or receivable lease payments related to the lease prior to the modification aretreated as lease payments of the new lease.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
28. Share repurchase
The consideration and transaction costs paid to repurchase equity instruments are charged against owner’s equity.Except for share-based payments, the issue (including refinancing), repurchase, disposal or retirement of theCompany’s own equity instruments are accounted for as changes in equity.
29. Profit distribution
The Company’s cash dividends are recognized as liabilities upon the approval by the general meeting.
30. Expenses for safety production
The expenses for safety production set side as stipulated shall be included in the cost of relevant products orcurrent profits and losses, and included in the special reserve at the same time. When such expenses are used,accounting treatment will be performed according to whether fixed assets are formed. If identified as expenseexpenditures, the special reserve will be written down directly; if fixed assets are formed, the expenses incurredwill be collected, fixed assets will be recognized when they reach a predetermined usable state, and the equivalentamount of special reserve will be written down and the equivalent accumulated depreciation will be recognized.
31. Put option related to non-controlling interests
In the process of acquiring majority equity of subsidiaries, the Group grants to minority shareholders the option tosell the shares of subsidiaries held by them to the Group (put option). The Group recognizes the shares ofsubsidiaries held by minority shareholders as non-controlling interests in its consolidated financial statements; forthe put option, the Group undertakes the obligation to redeem the shares of the subsidiaries held by minorityshareholders in cash. The Group removes the present value of the amount payable to redeem the put option fromits equity (excluding non-controlling interests) and classifies it as financial liability, which is remeasured insubsequent periods at the present value of the the amount payable to redeem the put option and recognized inprofit or loss.
32. Fair value measurement
At each balance sheet date, the Group measures the fair value of derivative financial instruments and equityinstrument investments. Fair value means the price receivable from the disposal of an asset or required to be paidfor the transfer of a liability in an orderly transaction incurred by market participants on the measurement date.The Group measures assets or liabilities at fair value with the assumption that the orderly transaction of assetdisposal or the transfer of liabilities takes place in the major market for the relevant assets or liabilities. Wherethere is no major market, the Group assumes such transaction takes place in the most favourable market for therelevant assets or liabilities. The major market (or most favourable market) is a trading market which the Grouphas access to on the measurement date. The Group adopts assumptions used by market participants when theyprice the asset or liability with the aim of maximising its economic benefits.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
32. Fair value measurement (cont’d)
The Group adopts valuation techniques that are appropriate in the current circumstances and supported bysufficient usable data and other information. Observable input will be used first and foremost. Unobservable inputwill only be used when it is not possible or practicable to obtain observable input.
The fair value hierarchy to which an asset or liability measured or disclosed in the financial statements at fairvalue will be determined on the basis of the lowest level of input which is significant for the fair valuemeasurement as a whole. Input at the first level represents unadjusted quoted prices in an active market for theacquisition of the same asset or liability on the measurement date. Input at the second level represents directly orindirectly observable assets or liabilities apart from input at the first level. Input at the third level representsunobservable input for the asset or liability.
At each balance sheet date, the Group reassesses assets and liabilities measured at fair value on an ongoing basisrecognized in the financial statements to determine whether the level of fair value measurement should bechanged.
33. Significant accounting judgements and estimates
The preparation of financial statements requires judgement and estimation of the management. Such judgementand estimation will affect the reported amounts of revenue, expenses, assets and liabilities and the disclosure ofcontingent liabilities as at the balance sheet date. However, the consequence arising from the uncertain nature ofsuch estimation may result in significant adjustment to the carrying value of the asset or liability affected in thefuture.
Judgement
In the process of applying the Group’s accounting policies, management has made the following judgements,which have the most significant effect on the amounts recognized in the financial statements:
Determination of standalone contractual performance obligationsThe intelligent packaging equipment (printers and corrugators) business of the Group includes four kinds ofproduct or service commitments, i.e. the sale, installation, transportation and insurance services of machinery. Asthe customer can benefit from the individual use of the four kinds of products or services or their use together withother readily available resources and such product or service commitments are distinctly separable from otherproducts or service commitments, the aforesaid product or service commitments constitute standalone contractualperformance obligations respectively.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
33. Significant accounting judgements and estimates (cont’d)
Judgement (cont’d)
Business modelThe classification of financial assets at initial recognition is dependent on the Group’s business model formanaging the assets. Factors considered by the Group in judging the business model include enterprise valuation,the method of reporting the results of financial assets to key management members, risks affecting the results offinancial assets and the method for managing such risks, as well as the form of remuneration received by themanagement personnel of the businesses concerned. In assessing whether the business model is aimed at receivingcontract cash flow, the Group is required to analyse and exercise judgment in respect of the reasons, timing,frequency and values of any disposals prior to maturity.
Characteristics of contract cash flowThe classification of financial assets at initial recognition is dependent on the characteristics of the contract cashflow of such type of financial assets. Judgement is required to determine whether the contract cash flow representsinterest payment in relation to principal amounts based on outstanding principal amounts only, includingjudgement of whether it is significantly different from the benchmark cash flow when assessing modifications tothe time value of currencies, and judgement of whether the fair value of early repayment features is minimalwhere the financial assets include such early repayment features.
Estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheetdate, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilitieswithin subsequent financial years, are discussed below.
Impairment of financial instruments and contract assetsThe Group has adopted the expected credit loss model to evaluate the impairment of financial instruments andcontract assets. The application of the expected credit loss model requires significant judgement and estimates andthe consideration of all reasonable and soundly based information, including forward-looking information. Inmaking such judgement and estimates, the Group estimates the projected movements of the debtor’s credit riskaccording to past repayment records, economic policies, macro-economic indicators and industry risks. Differentestimates may affect impairment allowances, and established impairment allowances may not equal the actualimpairment loss amount in the future.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
33. Significant accounting judgements and estimates (cont’d)
Estimation uncertainty (cont’d)
Impairment of non-current assets other than financial assets (exclusive of goodwill)The Group assesses at each balance sheet date whether there is an indication that a non-current asset other thanfinancial assets may be impaired. For an intangible asset with an indefinite useful life, in addition to the annualimpairment test, it is also tested when there is an indication that it may be impaired. Non-current assets other thanfinancial assets are tested for impairment when there is an indication that the carrying amount is irrecoverable.Where the carrying amount of an asset or an asset group exceeds its recoverable amount—the higher of the assetor asset group’s fair value less costs to sell and its present value of estimated future cash flows, it is consideredimpaired. The net amount of the fair value less costs to sell is determined based on the price of a similar asset’ssales contract in a fair transaction or the observable market price less the incremental cost directly attributable tothe disposal of the asset. When estimating the present value of future cash flows, the management must choose aproper discount rate.
Impairment of goodwillGoodwill must be tested for impairment at least annually. It requires estimating the present value of future cashflows of an asset group or asset group portfolio allocated with goodwill. When estimating the present value offuture cash flows, the Group needs to estimate future cash flows generating from the asset group or asset groupportfolio, and at the same time choose a proper discount rate to determine the present value of future cash flows.For details, see Note V.19.
Fair value of unlisted equity investmentsThe unlisted equity investments have been valued based on the expected cash flows discounted at current ratesapplicable for items with similar terms and risk characteristics. This valuation requires the Group to makeestimates about expected future cash flows, credit risk, volatility and discount rates, and hence they are subject touncertainty.
Deferred tax assetsDeferred tax assets are recognized for all unused tax losses, to the extent that it is likely that taxable profit will beavailable to utilize these unused tax losses. Significant judgments are needed from management to estimate thetiming and amount of taxable profit in the future, with tax planning strategies, to determine the amount of thedeferred tax assets that should be recognized.
Lessee’s incremental borrowing rateIf the interest rate implicit in the lease cannot be readily determined, the Group measures the lease liability at thepresent value of the lease payments that are not paid at that date. The Group discounted the lease payments usingthe lessee’s incremental borrowing rate. The Group determines the incremental borrowing rate based on theeconomic environment by reference to the observable interest rate. Then the Group adjusts the reference interestrate based on its own circumstances, underlying assets, lease terms and amounts of lease liabilities to determinethe applicable incremental borrowing rate.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
33. Significant accounting judgements and estimates (cont’d)
ProvisionsThe Group estimates and makes corresponding provision for product quality guaranty according to contract terms,existing knowledge and past experience. When such contingencies have formed a present obligation and it isprobable that an outflow of economic benefits from the Group will be required to settle the obligation, the Grouprecognizes the contingencies as provisions based on the best estimate of the expenditure required to settle therelated present obligation.
The recognition and measurement of provisions largely depend on the judgment ofmanagement. In the process of making judgment, the Group is required to assess the risks, uncertainties, timevalue of money and other factors related to such contingencies.
Provisions (cont’d)The Group will undertake the provisions for post-sale quality maintenance provided to customers for the sale,maintenance and renovation of the sold goods.
The provisions have been made taking into account the Group’srecent data of maintenance experience, and taking into account the risks, uncertainties and other factors related tomaintenance matters. Any increase or decrease in this provision may affect the profit and loss in future years.
34. Changes to accounting policies and accounting estimates
Changes to accounting policies
New leases standard
In 2018, the Ministry of Finance issued the revised “CAS No. 21—Leases” (hereinafter, the “New LeasesStandard”. The New Leases Standard introduces a single model similar to current accounting treatment of financeleases, requiring the lessor to recognize right-of-use assets and lease liabilities for all the leases, except forshort-term leases and leases of low-value assets, and recognize depreciation and interest expense, respectively.The Group has adopted the New Leases Standard since 1 January 2021. For contracts signed prior to the date ofinitial application, the Group did not reassess whether they were, or contained, a lease. According to thetransitional requirements, data of the comparable periods shall not be adjusted.
（
）The Group recognized lease liabilities based on the present value of the remaining lease paymentsdiscounted at incremental borrowing rate at the date of initial application for lease previously classified asoperating leases. The right-of-use assets were recognized based on the amount equal to the leaseliabilities, adjusted for any related prepaid and accrued lease payments previously recognized;
（
）The Group performed impairment tests and corresponding accounting treatment on the right-of-use assetsin accordance with Note III 16.
For operating leases of low-value assets and operating leases for which the lease term ends within 12 months, theGroup applied a simplified approach and did not recognize the right-of-use assets and lease liabilities. For leasespreviously classified as operating leases, the Group also applied the available practical expedients wherein it:
（
）Used a single discount rate to a portfolio of leases with reasonably similar characteristics; and Excluded
the initial direct costs from the measurement of the right-of-use asset at the date of initial application;（
）The Group accounted for the changes in leases before the date of initial application based on the final
arrangement for such changes.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
34. Changes to accounting policies and accounting estimates (cont’d)
Changes to accounting policies (cont’d)
New leases standard (cont’d)For the outstanding minimum lease payments for significant operating leases disclosed in 2020 financialstatements, the Group adjusted its difference with lease liabilities included in the balance sheet as at 1 January2021 based on the present value of the minimum lease payments discounted using the incremental borrowing rateas the lessee.
| Present value of minimum lease payments for significant operating leases as at 31 December 2020 | 112,179,044.42 | ||
| Less: Simplification | 206,887.72 | ||
| Including: Short-term leases | 206,887.72 | ||
| Weighted average incremental borrowing rate | 1.91% | ||
| Present value of operating lease payments as at 1 January 2021 | 98,612,229.28 | ||
| Lease liabilities as at 1 January 2021 | 98,612,229.28 |
The effects of the adoption of the New Leases Standard on the balance sheet as of 1 January 2021 are as follows:
Consolidated balance sheet
| Carrying amount | As per the former standard | Effect | |||||||||||
| Right-of-use assets | 98,686,849.28 | - | 98,686,849.28 | ||||||||||
| Prepayments | 74,620.00 | - | 74,620.00 | ||||||||||
| Non-current liabilities that mature within one year | 15,806,339.65 | - | 15,806,339.65 | ||||||||||
| Lease liabilities | 82,805,889.63 | - | 82,805,889.63 | ||||||||||
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
34. Changes to accounting policies and accounting estimates (cont’d)
Company balance sheet
| Carrying amount | As per the former standard | Effect | |||||||
| Right-of-use assets | 22,526,467.81 | - | 22,526,467.81 | ||||||
| Prepayments | 4,319,265.50 | - | 4,319,265.50 | ||||||
| Non-current liabilities that mature within one year | 18,207,202.31 | - | 18,207,202.31 |
The effects of the adoption of the New Leases Standard on the financial statements of 2021 are as follows:
Consolidated balance sheet
| Carrying amount | As per the former standard | Effect | |||||||
| Right-of-use assets | 80,386,832.91 | - | 80,386,832.91 | ||||||
| Prepayments | 17,153,078.58 | - | 17,153,078.58 | ||||||
| Non-current liabilities that mature within one year | 65,213,555.87 | - | 65,213,555.87 |
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
34. Changes to accounting policies and accounting estimates (cont’d)
Changes to accounting policies (cont’d)
New leases standard (cont’d)
Consolidated income statement
| Carrying amount | As per the former standard | Effect | |||||||
| Cost of sales | 7,483,805.24 | 7,291,186.88 | 192,618.36 | ||||||
| Selling expenses | 202,204.69 | 190,864.07 | 11,340.62 | ||||||
| G&A | 9,356,585.13 | 9,114,584.99 | 242,000.14 | ||||||
| Financial cost | 2,127,250.02 | - | 2, 127,250.02 | ||||||
| 19,169,845.08 | 16, 596,635.94 | 2, 573,209.14 |
Company balance sheet
| Carrying amount | As per the former standard | Effect | |||||||||||
| Right-of-use assets | 17,226,122.41 | - | 17,226,122.41 | ||||||||||
| Prepayments | 4,875,266.03 | - | 4,875,266.03 | ||||||||||
| Non-current liabilities that mature within one year | 13,331,936.29 | - | 13,331,936.29 | ||||||||||
Company income statement
| Carrying amount | As per the former standard | Effect | |||||||
| G&A | 5,300,345.40 | 5,276,574.33 | 23,771.07 | ||||||
| Financial cost | 957,308.84 | - | 957,308.84 | ||||||
| 6,257,654.24 | 5,276,574.33 | 981,079.91 |
In addition, the cash paid by the Group for repayment of the principal and interest of the lease liability is includedin the statements of cash flows as cash outflows from financing activities, and the payments for short-term leasesand leases of low-value assets accounted for using the simplified approach and variable lease payments notincluded in the measurement of the lease liability are still included in cash outflows from operating activities.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
34. Changes to accounting policies and accounting estimates (cont’d)
Changes to accounting policies (cont’d)
New leases standard (cont’d)
Adjustment of scope of application for COVID-19-related rent concessionsThe Group does not have any rent concessions applicable to the Provisions on the Accounting Treatment forCOVID-19-Related Rent Concessions and any rent concessions subject to the Notice on the Adjustment of Scopeof Application for the Provisions on the Accounting Treatment for COVID-19-Related Rent Concessions issued inMay 2021.
Accounting treatment on lease modification due to benchmark interest rate reformAccording to the Accounting Standards for Business Enterprises Interpretation No.14, if the basis for determiningthe contractual cash flows of financial assets or financial liabilities accounted for using the effective interestmethod is changed only because of benchmark interest rate reform, and the basis of determination before and afterthe change is economically equivalent, the Group will recalculate the effective interest rate based on the futurecash flows after the change and make subsequent measurement on this basis. The Group’s implementation of theabove standards since 1 January 2021 had no significant effect during the reporting period.
Changes to accounting estimates
No changes occurred to the major accounting estimates of the Company in the Reporting Period.
IV. Taxation
1. Principal tax items and tax rates
Value-added tax (VAT) – The output tax of the taxable income is calculated at the rate of 13% and 6% and
VAT is levied according to the difference after deducting the input tax which isallowed to be deducted in the current period.
City maintenanceand construction tax – Levied at 7% of the turnover tax actually paid
Education surcharge – Levied at 3% of the turnover tax actually paid
Local educationSurcharge – Levied at 2% of the turnover tax actually paid
Corporate income tax – Corporate income tax of the Group’s subsidiaries located in Mainland China shall
be levied at 25% of the taxable income (except for the preferential taxation asdescribed in Note IV 2). Subsidiaries located in Hong Kong shall calculate and paythe corporate income tax at 16.5% of the taxable income, and subsidiariesregistered overseas shall apply the corporate income tax rate as required by thelocal tax law. The details are as follows:
IV. Taxation (Cont’d)
1. Principal tax items and tax rates (Cont’d)
| Name of subsidiaries | Income tax rate | |
| Dong Fang Precision (Netherland) Cooperatief U.A.（“Dongfang Precision (Netherland)”） | 20% | |
| Fosber S.p.A.（“Fosber Group”） | 24% | |
| Fosber America, Inc.（“Fosber America”） | 21% | |
| EDF Europe s.r.l.（“Italy EDF”） | 24% | |
| Tiru?a Group Industrial, S.L.（“Tiru?a Group”） | 28% | |
| Tiru?a America inc. (“Tiru?a America”) Quantum Corrugated S.r.l. (Italy QCorr) Tiru?a S.L.U. | 21% 24% 28% | |
| Tratatamientos Industriales Tiru?a S.A.U. | 28% | |
| Tiru?a France SARL | 15% | |
| SCI Candan | 15% |
Property tax – Ad valorem tax: levied at 1.2% of the remaining value after deducting 30% from the originalvalue of the property; Tax levied from rent: levied at 12% of the rental income.
2. Tax concessions
On 9 December 2020, the Company passed the high-tech enterprise review by the Department of Science andTechnology of Guangdong Province, Department of Finance of Guangdong Province, Guangdong Provincial TaxService of State Taxation Administration and Guangdong Provincial Local Taxation Bureau and obtained aHigh-tech Enterprise Certificate (certificate no.: GR202044007667) jointly issued by the above authorities, with avalidity of three years, during which the Company paid the corporate income tax at a reduced rate of 15%, so thepreferential tax rate of 15% was applicable to the Company's corporate income tax as at 31 December 2021.
Suzhou Parsun Power Machine Co., Ltd. ("Parsun Power"), a subsidiary of the Company, passed the high-techenterprise review by the Department of Science and Technology of Jiangsu Province, Department of Finance ofJiangsu Province and Jiangsu Provincial Tax Service of State Taxation Administration on 7 November 2019 andobtained a High-tech Enterprise Certificate (certificate no.: GR201932000339) jointly issued by the aboveauthorities, with a validity of three years, during which the subsidiary paid the corporate income tax at a reducedrate of 15%, so the preferential tax rate of 15% was applicable to the corporate income tax of Parsun Power as at31 December 2021.
Guangdong Fosber Intelligent Equipment Co., Ltd. ("Fosber Asia"), a subsidiary of the Company, passed thehigh-tech enterprise review by the Department of Science and Technology of Guangdong Province, Departmentof Finance of Guangdong Province and Guangdong Provincial Tax Service of State Taxation Administration on20 December 2021 and obtained a High-tech Enterprise Certificate (certificate no.: GR202144003984) jointlyissued by the above authorities, with a validity of three years, during which the subsidiary paid the corporateincome tax at a reduced rate of 15%, so the preferential tax rate of 15% was applicable to the corporate income taxof Fosber Asia as at 31 December 2021.
V. Notes to the Consolidated Financial Statements
1. Cash and bank balances
| 2021 | 2020 | |||||
| Cash on hand | 233,281.32 | 217,540.96 | ||||
| Cash at banks | 999,389,151.51 | 860,383,695.82 | ||||
| Other cash balances | 664, 713,906.52 | 25,109,817.10 | ||||
| 1,664,336,339.35 | 885,711,053.88 | |||||
| Of which: total restricted amount as collateral, pledge or frozen | 405,032,563.61 | 25,109,817.10 |
As at 31 December 2021, cash and bank balances of the Group amounting to RMB456,521,434.93(31 December 2020：
RMB514,387,073.67) were deposited outside Mainland China. The funddeposited abroad with restrictions on repatriation was equivalent to RMB16,374,076.37 (31December 2020: RMB6,556,936.03).
Current bank deposits earn interest income based on interest rates for current deposits. The periodfor short-term time deposits is usually 7 days, based on the Group’s cash requirement. Theshort-term time deposits earn interest income based on the corresponding interest rates for timedeposits.
2. Financial assets held for trading
| 2021 | 2020 | |||||
| Financial assets at fair value through profit or loss | ||||||
| Asset management plans | 628,007,924.74 | 619,890,000.00 |
| Investments in bank’s wealth management products | 140,609,523.19 | 510,808,068.35 | ||||
| Investments in trust products | 6,631,573.01 | 504,767,340.61 | ||||
| Derivative financial assets | 12,936,500.63 | 831,021.35 | ||||
| 788,185,521.57 | 1,636,296,430.31 |
V. Notes to the Consolidated Financial Statements (cont’d)
3. Notes receivable
| 2021 | 2020 | |||||
| Bank acceptance notes | 13,272,025.04 | 12,744,582.88 |
Notes receivable that were endorsed or discounted but undue at the balance sheet date are as
follows:
| 2021 | 2020 | |||||||||||
| Derecognized | Un-derecognized | Derecognized | Un-derecognized | |||||||||
| Bank acceptance notes | - | 9,391,823.29 | - | 12,744,582.88 | ||||||||
As at 31 December 2021, there’s no need to establish impairment allowances for notes receivable inthe management’s opinion.
4. Accounts receivable
Accounts receivable are interest-free. The aging of accounts receivable is analyzed as follows:
| 2021 | 2020 | |||||
| Within 1 year | 688,188,131.13 | 370,599,129.84 | ||||
| 1-2 years | 51,234,902.10 | 98,325,978.68 | ||||
| 2-3 years | 12,623,284.90 | 11,243,789.03 | ||||
| 3-4 years | 8,127,517.87 | 3,745,116.89 | ||||
| 4-5 years | 2,115,679.86 | 2,233,437.77 | ||||
| Over 5 years | 5,074,242.03 | 7,280,302.29 | ||||
| 767,363,757.89 | 493,427,754.50 | |||||
| Less: allowances for doubtful accounts receivable | 26,228,109.80 | 23,792,330.92 | ||||
| 741,135,648.09 | 469,635,423.58 | |||||
V. Notes to the Consolidated Financial Statements (cont’d)
4. Accounts receivable (cont’d)
| 2021 | ||||||||||
| Gross amount | Allowance | Carrying amount | ||||||||
| Amount | Percentage | Amount | Percentage | |||||||
| （%） | （%） | |||||||||
| Accounts receivable for which allowances are established individually | 7,038,180.40 | 0.92 | 7,038,180.40 | 100.00 | - | |||||
| Accounts receivable for which allowances are established by group with similar credit risk characteristics | 760,325,577.49 | 99.08 | 19,189,929.40 | 2.52 | 741,135,648.09 | |||||
| 767,363,757.89 | 100.00 | 26,228,109.80 | 741,135,648.09 | |||||||
| 2020 | ||||||||||
| Gross amount | Allowance | Carrying amount | ||||||||
| Amount | Percentage | Amount | Percentage | |||||||
| （%） | （%） | |||||||||
| Accounts receivable for which allowances are established individually | 6,914,949.57 | 1.40 | 6,914,949.57 | 100.00 | - | |||||
| Accounts receivable for which allowances are established by group with similar credit risk characteristics | 486,512,804.93 | 98.60 | 16,877,381.35 | 3.47 | 469,635,423.58 | |||||
| 493,427,754.50 | 100.00 | 23,792,330.92 | 469,635,423.58 | |||||||
V. Notes to the Consolidated Financial Statements (cont’d)
4. Accounts receivable (cont’d)
As at 31 December 2021, accounts receivable for which allowances are established individually areas follows:
| Gross amount | Allowance | ECL （%） | Reason for allowance | ||||||||||
| Customer 1 | 4,027,086.20 | 4,027,086.20 | 100.00 | Customer’s inability to settle the amount due | |||||||||
| Customer 2 | 939,000.00 | 939,000.00 | 100.00 | Customer’s inability to settle the amount due | |||||||||
| Customer 3 | 641,600.00 | 641,600.00 | 100.00 | Customer’s inability to settle the amount due | |||||||||
| Customer 4 | 608,800.00 | 608,800.00 | 100.00 | Customer’s inability to settle the amount due | |||||||||
| Customer 5 | 515,595.00 | 515,595.00 | 100.00 | Customer’s inability to settle the amount due | |||||||||
| Other companies | 306,099.20 | 306,099.20 | 100.00 | Customer’s inability to settle the amount due | |||||||||
| 7,038,180.40 | 7,038,180.40 | ||||||||||||
As at 31 December 2020, accounts receivable for which allowances are established individually areas follows:
| Gross amount | Allowance | ECL （%） | Reason for allowance | ||||||||||
| Customer 2 | 981,949.40 | 981,949.40 | 100.00 | Customer’s inability to settle the amount due | |||||||||
| Customer 3 | 641,600.00 | 641,600.00 | 100.00 | Customer’s inability to settle the amount due | |||||||||
| Customer 4 | 608,800.00 | 608,800.00 | 100.00 | Customer’s inability to settle the amount due | |||||||||
| Customer 5 | 515,595.00 | 515,595.00 | 100.00 | Customer’s inability to settle the amount due | |||||||||
| Customer 11 | 283,000.00 | 283,000.00 | 100.00 | Customer’s inability to settle the amount due | |||||||||
| Other companies | 3,884,005.17 | 3,884,005.17 | 100.00 | Customer’s inability to settle the amount due | |||||||||
| 6,914,949.57 | 6,914,949.57 | ||||||||||||
V. Notes to the Consolidated Financial Statements (cont’d)
4. Accounts receivable (cont’d)
Accounts receivable for which allowances are established by group with similar credit riskcharacteristics are as follows:
| 2021 | 2020 | |||||||||||||||||
| Gross amount estimated to be in default | ECL (%) | Lifetime ECL | Gross amount estimated to be in default | ECL (%) | Lifetime ECL | |||||||||||||
| Within 1 year | 688,188,131.13 | 1.02 | 7,024,121.70 | 370,599,129.84 | 1.47 | 5,441,450.45 | ||||||||||||
| 1-2 years | 51,234,902.10 | 3.93 | 2,011,112.67 | 98,325,978.68 | 2.77 | 2,728,063.22 | ||||||||||||
| 2-3 years | 8,596,198.70 | 4.90 | 421,019.36 | 8,134,737.57 | 3.76 | 305,603.55 | ||||||||||||
| 3-4 years | 8,127,517.87 | 69.96 | 5,686,380.04 | 2,247,572.49 | 70.63 | 1,587,572.49 | ||||||||||||
| 4-5 years | 661,084.86 | 80.10 | 529,552.80 | 2,233,437.77 | 82.51 | 1,842,743.05 | ||||||||||||
| Over 5 years | 3,517,742.83 | 100.00 | 3,517,742.83 | 4,971,948.58 | 100.00 | 4,971,948.59 | ||||||||||||
| 760,325,577.49 | 19,189,929.40 | 486,512,804.93 | 16,877,381.35 | |||||||||||||||
Movements in allowances for doubtful accounts receivable are as follows:
| Opening balance | Established in the period | Reversed in the period | Written off in the period | Effect of exchange rate movements | Closing balance | ||||||||||
| 2021 | 23,792,330.92 | 10,210,960.55 | (1,713,874.29 | ) | (5,062,385.81 | ) | (998,921.57) | 26,228,109.80 | |||||||
| 2020 | 17,373,408.69 | 9,075,792.17 | (239,910.02 | ) | (3,513,686.10 | ) | 1,096,726.18 | 23,792,330.92 |
In 2021, provision for bad debts of RMB10,210,960.55 (2020: RMB9,075,792.17), and write-off ofbad debts of RMB5,062,385.81 (2020: RMB3,513,686.10). The reason for the write-off was that thereceivables were recognized as uncollectible.
Top 5 of accounts receivable are as follows:
| 2021 | As a % of the closing balance of total accounts receivable | Allowance | ||||
| Customer 6 | 71,357,633.89 | 9.30 | 632,103.65 | |||
| Customer 7 | 57,526,895.71 | 7.50 | 393,080.22 | |||
| Customer 8 | 45,503,030.02 | 5.93 | 423,960.57 | |||
| Customer 9 | 18,669,670.80 | 2.43 | 295,183.15 | |||
| Customer 10 | 18,391,174.99 | 2.40 | 187,589.98 | |||
| 211,448,405.41 | 27.56 | 1, 931,917.57 |
V. Notes to the Consolidated Financial Statements (cont’d)
4. Accounts receivable (cont’d)
Top 5 of accounts receivable are as follows:
| 2020 | As a % of the closing balance of total accounts receivable | Allowance | ||||
| Customer 15 | 25,622,677.43 | 5.19 | 378,382.84 | |||
| Customer 16 | 19,590,573.00 | 3.97 | 5,877.17 | |||
| Customer 6 | 15,235,021.13 | 3.09 | 224,983.15 | |||
| Customer 8 | 13,085,372.40 | 2.65 | 193,238.21 | |||
| Customer 17 | 12,611,094.90 | 2.56 | 186,234.32 | |||
| 86,144,738.86 | 17.46 | 988,715.69 |
5. Receivables financing
| 2021 | 2020 | |||||
| Bank acceptance notes | 30,692,449.25 | 56,737,978.04 |
Notes receivable that were endorsed or discounted but undue at the balance sheet date are asfollows:
| 2021 | 2020 | |||||||||||
| Derecognized | Un-derecognized | Derecognized | Un-derecognized | |||||||||
| Bank acceptance notes | 24,598,786.91 | - | 25,235,099.85 | - | ||||||||
6. Prepayments
The aging of prepayments is analyzed as follows:
| 2021 | 2020 | |||||||||||
| Carrying amount | Percentage (%) | Carrying amount | Percentage (%) | |||||||||
| Within 1 year | 33,901,158.84 | 99.19 | 28,618,261.25 | 98.31 | ||||||||
| 1-2 years | 38,710.83 | 0.11 | 374,977.19 | 1.29 | ||||||||
| 2-3 years | 144,972.14 | 0.43 | 34,633.52 | 0.12 | ||||||||
| Over 3 years | 92,960.55 | 0.27 | 81,544.25 | 0.28 | ||||||||
| 34,177,802.36 | 100.00 | 29,109,416.21 | 100.00 | |||||||||
V. Notes to the Consolidated Financial Statements (cont’d)
6 Prepayments (cont’d)
Top 5 of prepayments are as follows:
| 2021 | As a % of total prepayments | ||||
| Supplier 1 | 6,146,589.78 | 17.98 | |||
| Supplier 2 | 5,383,577.05 | 15.75 | |||
| Supplier 3 | 5,297,682.90 | 15.50 | |||
| Supplier 4 | 3,702,992.69 | 10.83 | |||
| Supplier 5 | 1,859,780.28 | 5.44 | |||
| 22,390,622.70 | 65.50 |
| 2020 | As a % of total prepayments | ||||
| Supplier 6 | 4,128,436.87 | 14.18 | |||
| Supplier 1 | 2,385,384.54 | 8.19 | |||
| Supplier 5 | 2,076,789.75 | 7.13 | |||
| Supplier 2 | 1,927,579.27 | 6.62 | |||
| Supplier 7 | 1,129,647.15 | 3.88 | |||
| 11,647,837.58 | 40.00 |
7. Other receivables
| 2021 | 2020 | |||||
| Interest receivables | - | 587,074.81 | ||||
| Other receivable | 71,363,166.84 | 78,516,397.83 | ||||
| 71,363,166.84 | 79,103,472.64 |
Interest receivables
| 2021 | 2020 | |||||
| Other interest | - | 587,074.81 | ||||
V. Notes to the Consolidated Financial Statements (cont’d)
7. Other receivables (cont’d)
Other receivables
The aging of other receivables is analyzed as follows:
| 2021 | 2020 | |||||
| Within 1 year | 29,975,763.18 | 30,013,923.50 | ||||
| 1-2 years | 6,571,130.64 | 5,888,491.67 | ||||
| 2-3 years | 178,398.25 | 43,587,563.89 | ||||
| 3-4 years | 38,260,742.08 | 2,032,852.58 | ||||
| 4-5 years | 1,495,285.41 | 153,038.14 | ||||
| Over 5 years | 168,531.88 | 202,302.18 | ||||
| 76,649,851.44 | 81,878,171.96 | |||||
| Less: allowances for doubtful other receivables | 5,286,684.60 | 3,361,774.13 | ||||
| 71,363,166.84 | 78,516,397.83 |
Other receivables are classified by nature as follows:
| 2021 | 2020 | |||||
| Amount for transfer of equity investments | 37,903,425.00 | 42,131,250.00 | ||||
| Prepaid service charges | 10,386,867.47 | 11,152,973.97 | ||||
| Security deposits | 5,452,788.82 | 6,202,941.33 | ||||
| Export tax refunds | 912,287.93 | 3,079,666.37 | ||||
| Employee loans and petty cash | 4,537,207.00 | 2,579,209.29 | ||||
| Others | 17,457,275.22 | 16,732,131.00 | ||||
| 76,649,851.44 | 81,878,171.96 |
V. Notes to the Consolidated Financial Statements (cont’d)
7 Other receivables (cont’d)
Movements in allowances for doubtful other receivables that are established based on the 12-monthECL and the lifetime ECL are as follows:
2021
| Stage 1 | Stage 2 | Stage 3 | Total | ||||||||
| 12-month ECL | Lifetime ECL | Financial assets with credit impairment (lifetime ECL) | |||||||||
| Opening balance | 2,861,774.13 | 500,000.00 | - | 3,361,774.13 | |||||||
| Established in the period | 4,229,550.20 | - | - | 4,229,550.20 | |||||||
| Written off in the period | (1,969,247.27) | - | - | (1,969,247.27) | |||||||
| Other changes | (335,392.46) | - | - | (335,392.46) | |||||||
| Closing balance | 4,786,684.60 | 500,000.00 | - | 5,286,684.60 | |||||||
2020
| Stage 1 | Stage 2 | Stage 3 | Total | ||||||||
| 12-month ECL | Lifetime ECL | Financial assets with credit impairment (lifetime ECL) | |||||||||
| Opening balance | 2,779,738.01 | 2,460,000.00 | - | 5,239,738.01 | |||||||
| Established in the period | 137,497.51 | - | - | 137,497.51 | |||||||
| Reversed in the period | (110,541.29 | ) | (1,960,000.00 | ) | - | (2,070,541.29 | ) | ||||
| Other changes | 55,079.90 | - | - | 55,079.90 | |||||||
| Closing balance | 2,861,774.13 | 500,000.00 | - | 3,361,774.13 | |||||||
V. Notes to the Consolidated Financial Statements (cont’d)
7 Other receivables (cont’d)
Movements in allowances for doubtful other receivables are as follows:
| Opening balance | Established in the period | Reversed in the period | Decrease due to disposal of subsidiaries | Effect of exchange rate movements | Closing balance | ||||||||||
| 2021 | 3,361,774.13 | 4,229,550.20 | (1,969,247.27) | (335,392.46) | 5,286,684.60 | ||||||||||
| 2020 | 5,239,738.01 | 137,497.51 | (2,070,541.29 | ) | - | 55,079.90 | 3,361,774.13 |
In 2021, the Group accrued RMB4,229,550.20 of provision (2020: RMB137,497.51),wrote offRMB1,969,247.27 of provision (2020: RMB0) because other receivables were confirmed uncollectable.
As at 31 December 2021, top 5 of other receivables are as follows:
| 2021 | As a % of total other receivables | Nature | Age | Closing balance of allowance | |||||||||||
| Entity 1 | 37,903,425.00 | 49.45 | Amount for transfer of equity investments | 3-4 years | 1,899,115.81 | ||||||||||
| Entity 2 | 1,630,000.00 | 2.13 | Warranty deposits | 1-2 years | - | ||||||||||
| Entity 3 | 1,500,000.00 | 1.96 | Prepaidservice charges | Within 1 year | - | ||||||||||
| Entity 4 | 1,000,020.00 | 1.30 | Prepaidservice charges | Within 1 year | - | ||||||||||
| Entity 5 | 919,717.58 | 1.20 | Security deposits | Within 1 year | - | ||||||||||
| 42,953,162.58 | 56.04 | 1,899,115.81 |
V. Notes to the Consolidated Financial Statements (cont’d)
7 Other receivables (cont’d)
As at 31 December 2020, top 5 of other receivables are as follows:
| 2021 | As a % of total other receivables | Nature | Age | Closing balance of allowance | |||||||||||
| Entity 1 | 42,131,250.00 | 51.46 | Amount for transfer of equity investments | 2-3 years | 2,110,947.04 | ||||||||||
| Entity 6 | 3,233,312.63 | 3.95 | Amount in insurance | Within 1 year | - | ||||||||||
| Entity 7 | 1,934,522.55 | 2.36 | Security deposits | Within 1 year | - | ||||||||||
| Entity 2 | 1,630,000.00 | 1.99 | Warranty deposits | Within 1 year | - | ||||||||||
| Entity 8 | 1,494,884.38 | 1.83 | Compensation | Within 1 year | - | ||||||||||
| 50,423,969.56 | 61.59 | 2,110,947.04 |
V. Notes to the Consolidated Financial Statements (cont’d)
8. Inventories
| 2021 | |||||||
| Gross amount | Valuation allowance | Carrying amount | |||||
| Work-in-progress | 332,359,371.92 | 16,467,899.02 | 315,891,472.90 | ||||
| Raw materials | 365,907,967.74 | 9,445,201.52 | 356,462,766.22 | ||||
| Finished goods | 80,356,852.12 | 7,117,802.59 | 73,239,049.53 | ||||
| Product deliveries | 48,592,282.34 | - | 48,592,282.34 | ||||
| Semi-finished goods | 72,050,412.10 | 1,004,893.76 | 71,045,518.34 | ||||
| Materials consigned for processing | 2,048,924.14 | - | 2,048,924.14 | ||||
| 901,315,810.36 | 34,035,796.89 | 867,280,013.47 | |||||
| 2020 | |||||||
| Gross amount | Valuation allowance | Carrying amount | |||||
| Work-in-progress | 347,787,856.58 | 27,512,393.21 | 320,275,463.37 | ||||
| Raw materials | 313,339,147.74 | 8,477,773.27 | 304,861,374.47 | ||||
| Finished goods | 80,477,465.24 | 2,209,825.73 | 78,267,639.51 | ||||
| Product deliveries | 15,786,304.74 | - | 15,786,304.74 | ||||
| Semi-finished goods | 14,676,986.94 | 114,428.27 | 14,562,558.67 | ||||
| Materials consigned for processing | 367,254.50 | - | 367,254.50 | ||||
| 772,435,015.74 | 38,314,420.48 | 734,120,595.26 | |||||
V. Notes to the Consolidated Financial Statements (cont’d)
8 Inventories (cont’d)
Movements in inventory valuation allowances are as follows:
2021
| Opening balance | Established in the period | Decrease in the period | Closing balance | |||||||
| Reversed or written off | Others | |||||||||
| Raw materials | 8,477,773.27 | 4,613,526.07 | (3,923,240.80) | 277,142.98 | 9,445,201.52 | |||||
| Work-in-progress | 27,512,393.21 | 467,938.75 | (11,312,154.94) | (200,278.00) | 16,467,899.02 | |||||
| Finished goods | 2,209,825.73 | 5,107,721.38 | (199,744.52) | - | 7,117,802.59 | |||||
| Semi-finished goods | 114,428.27 | 1,004,893.76 | (114,428.27) | - | 1,004,893.76 | |||||
| 38,314,420.48 | 11,194,079.96 | (15,549,568.53) | 76,864.98 | 34,035,796.89 | ||||||
2020
| Opening balance | Established in the period | Decrease in the period | Closing balance | ||||||
| Reversed or written off | Others | ||||||||
| Raw materials | 13,394,596.44 | 2,492,323.28 | (7,602,705.84) | 193,559.39 | 8,477,773.27 | ||||
| Work-in-progress | 25,945,105.34 | 2,389,567.83 | (893,336.11) | 71,056.15 | 27,512,393.21 | ||||
| Finished goods | 103,897.01 | 2,105,928.72 | - | - | 2,209,825.73 | ||||
| Semi-finished goods | 244,188.37 | - | (129,760.10) | - | 114,428.27 | ||||
| 39,687,787.16 | 6,987,819.83 | (8,625,802.05) | 264,615.54 | 38,314,420.48 | |||||
| 31 December 2021 | Basis for determining the net realizable value | Basis for provision for write-down of inventories | Reasons for reversal of provision for write-down of inventories in the period | |||||
| Market prices of raw materials | Scrapped, defective and unpopular materials | |||||||
| Raw materials | Market prices of related finished goods | Market prices of related finished goods declined | Market prices of related finished goods rebounded | |||||
| Work-in-progress | Market prices of related finished goods | Market prices of related finished goods declined | Market prices of related finished goods rebounded | |||||
| Finished goods | Market price/contract price | Market price declined | Market price rebounded |
As at 31 December 2021, the Group has no inventories with restricted ownership (31 December 2020: Nil).
V. Notes to the Consolidated Financial Statements (cont’d)
9. Contract assets
| 2021 | 2020 | ||||||||||||
| Gross amount | Impairment allowance | Carrying amount | Gross amount | Impairment allowance | Carrying amount | ||||||||
| Contract assets | 25,144,462.49 | 730,344.85 | 24,414,117.64 | 30,566,218.02 | 1,061,524.05 | 29,504,693.97 | |||||||
When the Group hands over equipment to customers, the control over the equipment is consideredtransferredand the final payment for the equipment is recorded in contract assets.
Movements in impairment allowances for contract assets are as follows:
| Opening balance | Established in the period | Reversed in the period | Other decreases | Closing balance | ||||||||
| 2021 | 1,061,524.05 | - | (257,325.86) | (73,853.84)- | 730,344.85 | |||||||
| 2020 | - | 1,061,524.05 | - | - | 1,061,524.05 |
Contract assets for which impairment allowances are established by aging analysis are as follows:
| 2021 | 2020 | |||||||||||||
| Gross amount estimated to be in default | ECL (%) | Lifetime ECL | Gross amount estimated to be in default | ECL (%) | Lifetime ECL | |||||||||
| Within 1 year | 24,414,117.64 | - | - | 28,834,169.15 | 2.98 | 859,913.56 | ||||||||
| 1-2 years | 730,344.85 | 100 | 730,344.85 | 1,732,048.87 | 11.64 | 201,610.49 | ||||||||
| 25,144,462.49 | 730,344.85 | 30,566,218.02 | 1,061,524.05 | |||||||||||
V. Notes to the Consolidated Financial Statements (cont’d)
10. Current portion of non-current assets
| 2021 | 2020 | |||||
| Current portion of long-term receivables | 4,595,000.00 | 2,556,000.00 | ||||
| Current portion of large-amount deposit certificates | 103,790,000.00 | - | ||||
| 108,385,000.00 | 2,556,000.00 |
As at 31 December 2021, there’s no need to establish impairment allowances for the current portionof non-current assets in the management’s opinion.
V. Notes to the Consolidated Financial Statements (cont’d)
11. Other current assets
| 2021 | 2020 | |||||
| Overpaid value-added tax (VAT) | 18,681,339.03 | 13,120,049.59 | ||||
| Tax repayments | 8,202,256.30 | 4,547,579.26 | ||||
| Input VAT to be deducted | 3,358,040.70 | 1,041,284.86 | ||||
| Others | 1,882,370.96 | 3,562,303.94 | ||||
| 32,124,006.99 | 22,271,217.65 |
12. Long-term receivables
| 2021 | 2020 | |||||||||||
| Gross amount | Provision for bad debts | Carrying amount | Gross amount | Provision for bad debts | Carrying amount | |||||||
| Amounts receivable by installment for selling goods | 143,750.00 | - | 143,750.00 | 1,475,000.00 | - | 1,475,000.00 | ||||||
| 143,750.00 | - | 143,750.00 | 1,475,000.00 | - | 1,475,000.00 | |||||||
As at 31 December 2021, there’s no need to establish impairment allowances for long-termreceivables in the management’s opinion.
13. Long-term equity investments
2021
| Opening | Change in the period | ||||||||||
| balance | Additional investment | Return on investment under the equity method | Other equity changes | Closing balance | |||||||
| Associates | |||||||||||
| Jaten Robot | 70,900,088.92 | - | 3,880,256.70 | - | 74,780,345.62 | ||||||
| Talleres Tapre | 1,771,115.81 | - | (177,733.72) | 1,593,382.09 | |||||||
| Profeta (Note) | - | 8,403,868.96 | - | - | 8,403,868.96 | ||||||
| 72,671,204.73 | 8,403,868.96 | 3,880,256.70 | (177,733.72) | 84,777,596.67 | |||||||
Note: The Group invested in Nanjing Profeta Intelligent Technology Co., Ltd. (“Profeta”) inSeptember 2021, and the Group has appointed one of the five members in Profeta’s Board ofDirectors, and owned a substantive participation right of 20%, having a significant impact onaccounting as a joint venture.
V. Notes to the Consolidated Financial Statements (cont’d)
13. Long-term equity investments(cont’d)
2020
| Opening | Change in the period | ||||||||||
| balance | Additional investment | Return on investment under the equity method | Other equity changes | Closing balance | |||||||
| Joint venture | |||||||||||
| Yinglian Digital | 10,510,735.47 | - | (173,998.13 | (10,336,737.34 | ) | - | |||||
| Associates | |||||||||||
| Jaten Robot | 60,136,740.98 | 7,700,000.00 | 3,063,347.94 | - | 70,900,088.92 | ||||||
| Talleres Tapre | 1,724,878.58 | - | - | 46,237.23 | 1,771,115.81 | ||||||
| 72,372,355.03 | 7,700,000.00 | 2,889,349.81 | (10,290,500.11 | ) | 72,671,204.73 | ||||||
As at 31 December 2021, there’s no need to establish impairment allowances for long-term equityinvestments in the management’s opinion.
14. Other non-current financial assets
| 2021 | 2020 | |||||
| Financial assets at fair value | ||||||
| through profit or loss | 162,523,519.41 | 5,948,588.15 |
Other non-current financial assets mainly refer to the Group’s investment in equity instrumentinvestments, long-term wealth management product investments and long-term derivative financialassets.
V. Notes to the Consolidated Financial Statements (cont’d)
15. Fixed assets
Fixed assets
2021
| Buildings and constructions | Machinery | Transportation facility | Other equipment | Total | |||||||
| Gross amount | |||||||||||
| Opening balance | 589,751,776.97 | 450,190,483.35 | 29,625,946.16 | 54,535,783.13 | 1,124,103,989.61 | ||||||
| Purchases | 1,189,374.97 | 14,276,894.12 | 5,288,470.83 | 6,120,000.21 | 26,874,740.13 | ||||||
| Transfers from construction in progress | 8,331,019.81 | 8,331,019.81 | |||||||||
| Disposal or retirement | (901,617.54) | (2,788,942.24) | (3,467,463.79) | (2,680,584.25) | (9,838,607.82) | ||||||
| Effect of exchange rate movements | (15,055,595.51) | (21,959,177.72) | (611,771.38) | (103,743.20) | (37,730,287.81) | ||||||
| Closing balance | 574,983,938.89 | 448,050,277.32 | 30,835,181.82 | 57,871,455.89 | 1,111,740,853.92 | ||||||
| Accumulated depreciation | |||||||||||
| Opening balance | 170,382,986.59 | 335,115,748.64 | 19,447,337.09 | 27,744,437.15 | 552,690,509.47 | ||||||
| Provision | 17,854,660.74 | 21,711,968.56 | 2,982,429.17 | 6,792,822.21 | 49,341,880.68 | ||||||
| Disposal or retirement | (901,613.73) | (2,321,838.53) | (3,216,478.16) | (2,410,169.00) | (8,850,099.42) | ||||||
| Effect of exchange rate movements | (7,420,388.13) | (17,723,492.54) | (185,551.49) | (292, 163.74) | （25,621,595.90) | ||||||
| Closing balance | 179,915,645.47 | 336,782,386.13 | 19,027,736.61 | 31,834,926.62 | 567,560,694.83 | ||||||
| Carrying amount | |||||||||||
| Closing | 395,068,293.42 | 111,267,891.19 | 11,807,445.21 | 26,036,529.27 | 544,180,159.09 | ||||||
| Opening | 419,368,790.38 | 115,074,734.71 | 10,178,609.07 | 26,791,345.98 | 571,413,480.14 |
As at 31 December 2021, the Group has no fixed assets subject to operating leases.
As at 31 December 2021, the Group has no fixed assets without certificates of title.
V. Notes to the Consolidated Financial Statements (cont’d)
15. Fixed assets (cont’d)
2020
| Buildings and constructions | Machinery | Transportation facility | Other equipment | Total | ||||||
| Gross amount | ||||||||||
| Opening balance | 574,397,960.97 | 445,755,180.38 | 24,705,378.27 | 51,277,596.06 | 1,096,136,115.68 | |||||
| Purchases | 18,554,719.59 | 6,955,576.72 | 6,139,464.77 | 4,762,868.47 | 36,412,629.55 | |||||
| Transfers from construction in progress | 217,313.22 | 1,366,637.17 | - | - | 1,583,950.39 | |||||
| Business combinations not involving entities under common control | 533,490.07 | - | 57,954.86 | 335,446.46 | 926,891.39 | |||||
| Disposal or retirement | (2,095,875.70) | (356,538.41) | (1,067,149.73) | (1,258,232.95) | (4,777,796.79) | |||||
| Effect of exchange rate movements | (1,855,831.18) | (3,530,372.51) | (209,702.01) | (581,894.91) | (6,177,800.61) | |||||
| Closing balance | 589,751,776.97 | 450,190,483.35 | 29,625,946.16 | 54,535,783.13 | 1,124,103,989.61 | |||||
| Accumulated depreciation | ||||||||||
| Opening balance | 152,930,326.96 | 316,051,462.47 | 17,885,349.67 | 23,514,075.83 | 510,381,214.93 | |||||
| Provision | 16,573,413.49 | 20,824,324.68 | 1,464,543.61 | 4,871,188.93 | 43,733,470.71 | |||||
| Disposal or retirement | (830,361.22) | (222,091.59) | (383,473.93) | (1,163,823.40) | (2,599,750.14) | |||||
| Effect of exchange rate movements | 1,709,607.36 | (1,537,946.92) | 480,917.74 | 522,995.79 | 1,175,573.97 | |||||
| Closing balance | 170,382,986.59 | 335,115,748.64 | 19,447,337.09 | 27,744,437.15 | 552,690,509.47 | |||||
| Carrying amount | ||||||||||
| Closing | 419,368,790.38 | 115,074,734.71 | 10,178,609.07 | 26,791,345.98 | 571,413,480.14 | |||||
| Opening | 421,467,634.01 | 129,703,717.91 | 6,820,028.60 | 27,763,520.23 | 585,754,900.75 |
V. Notes to the Consolidated Financial Statements (cont’d)
16. Construction in progress
Construction in progress
| 2021 | 2020 | |||||||||||
| Gross amount | Impairment allowance | Carrying amount | Gross amount | Impairment allowance | Carrying amount | |||||||
| Plants and buildings | 11,582,347.78 | - | 11,582,347.78 | 384,832.84 | - | 384,832.84 | ||||||
| Equipment installation | 715,911.80 | - | 715,911.80 | 8,431,327.70 | - | 8,431,327.70 | ||||||
| Software installation | - | - | - | 245,877.98 | - | 245,877.98 | ||||||
| 12,298,259.58 | - | 12,298,259.58 | 9,062,038.52 | - | 9,062,038.52 | |||||||
Movements in substantial construction in progress in 2021 are as follows:
| Budget | Opening balance | Increase in the period | Transferred to fixed assets in the period | Other decrease | Closing balance | Funding source | Input as a % of budget | |||||||
| Equipment installation of Fosber Group | 12,021,450.00 | 8,426,602.70 | 8,087,962.73 | -338,639.97 | - | Self-funded | - | |||||||
| Dongfang Precision - Plant Construction Project | 7,759,142.53 | - | 2,035,342.08 | - | 2,035,342.08 | Self-funded | 26.23 | |||||||
| Yinglian - Plant Construction Project | 50,000,000.00 | - | 8,548,699.09 | - | 8,548,699.09 | Self-funded | 17.10 | |||||||
| Others | - | 635,435.82 | 1,324,587.30 | 243,057.08 | -2,747.63 | 1,714,218.41 | Self-funded | - | ||||||
| - | ||||||||||||||
| 69,780,592.53 | 9,062,038.52 | 11,908,628.47 | 8,331,019.81 | 341,387.60 | 12,298,259.58 |
Movements in substantial construction in progress in 2020 are as follows:
| Budget | Opening balance | Increase in the period | Transferred to fixed assets in the period | Closing balance | Funding source | Input as a % of budget | |||||||
| Equipment installation of Fosber Group | 12,021,450.00 | 3,481,834.40 | 4,944,768.30 | - | 8,426,602.70 | Self-funded | 97.27 | ||||||
| Electromobile parking canopy | 71,825.45 | - | 71,825.45 | 71,825.45 | - | Self-funded | 100.00 | ||||||
| Equipment installation and renovation of Dongfang Precision | 6,331,807.41 | 83,070.80 | 9,230.09 | 92,300.89 | - | Self-funded | 101.99 | ||||||
| Equipment installation and engineering of Parsun Power | 3,501,238.53 | 1,274,336.28 | - | 1,274,336.28 | - | Self-funded | 136.40 | ||||||
| Triangle stud advertising board of Dongfang Precision | 38,360.21 | - | 38,360.21 | 38,360.21 | - | Self-funded | 100.00 | ||||||
| 5 flagpoles and base | 107,127.56 | - | 107,127.56 | 107,127.56 | - | Self-funded | 100.00 | ||||||
| Others | - | - | 635,435.82 | - | 635,435.82 | Self-funded | - | ||||||
| 22,071,809.16 | 4,839,241.48 | 5,806,747.43 | 1,583,950.39 | 9,062,038.52 |
V. Notes to the Consolidated Financial Statements (cont’d)
17. Right-of-use assets
2021
| Buildings | Vehicles | Total | |||||||
| Cost | |||||||||
| Opening balance | - | - | - | ||||||
| Changes to accounting policies (Note) | 92,921,046.07 | 5,765,803.21 | 98,686,849.28 | ||||||
| Increase | - | 5,381,480.29 | 5,381,480.29 | ||||||
| Effect of exchange rate movements | (6,665,691.06 | ) | (578,592.08 | ) | (7,244,283.14 | ) | |||
| Closing balance | 86,255,355.01 | 10,568,691.42 | 96,824,046.43 | ||||||
| Accumulated depreciation | |||||||||
| Opening balance | - | - | - | ||||||
| Provision | 12,822,890.19 | 4,219,704.87 | 17,042,595.06 | ||||||
| Effect of exchange rate movements | (377,997.79 | ) | (227,383.75 | ) | (605,381.54 | ) | |||
| Closing balance | 12,444,892.40 | 3,992,321.12 | 16, 437,213.52 | ||||||
| Carrying amount | |||||||||
| Closing | 73,810,462.61 | 6,576,370.30 | 80,386,832.91 | ||||||
| Opening | - | - | - |
Note: Asdescribed in Note III. 34, the Group has initially implemented the new lease standard since January 1,2021.
V. Notes to the Consolidated Financial Statements (cont’d)
18. Intangible assets
2021
| Land use rights | Land ownership | Patented technologies | Trademarks and software | Total | |||||||||||
| Gross amount | |||||||||||||||
| Opening balance | 114,739,730.08 | 17,169,515.99 | 94,087,773.87 | 188,146,579.45 | 414,143,599.39 | ||||||||||
| Purchases | - | - | 270,088.07 | 7,126,949.32 | 7,397,037.39 | ||||||||||
| Effect of exchange rate movements | - | (1,722,942.21) | (10,544,336.46) | (16,071,668.93) | (28,338,947.60) | ||||||||||
| Closing balance | 114,739,730.08 | 15,446,573.78 | 83,813,525.48 | 179,201,859.84 | 393,201,689.18 | ||||||||||
| Accumulated depreciation | |||||||||||||||
| Opening balance | 19,772,711.70 | - | 44,892,936.80 | 17,090,768.20 | 81,756,416.70 | ||||||||||
| Provision | 2,446,243.21 | - | 12,676,060.37 | 8,714,845.76 | 23,837,149.34 | ||||||||||
| Effect of exchange rate movements | - | - | (5,155,276.21) | (955,588.27) | (6,110,864.48) | ||||||||||
| Closing balance | 22,218,954.91 | - | 52,413,720.96 | 24,850,025.69 | 99,482,701.56 | ||||||||||
| Carrying amount | |||||||||||||||
| Closing | 92,520,775.17 | 15,446,573.78 | 31,399,804.52 | 154,351,834.15 | 293,718,987.62 | ||||||||||
| Opening | 94,967,018.38 | 17,169,515.99 | 49,194,837.07 | 171,055,811.25 | 332,387,182.69 |
V. Notes to the Consolidated Financial Statements (cont’d)
18. Intangible assets (cont’d)
2020
| Land use rights | Land ownership | Patented technologies | Trademarks and software | Total | |||||||||||
| Gross amount | |||||||||||||||
| Opening balance | 98,846,238.53 | 16,721,290.00 | 64,977,998.71 | 143,285,687.75 | 323,831,214.99 | ||||||||||
| Purchases | - | - | 16,817,293.95 | 2,084,555.61 | 18,901,849.56 | ||||||||||
| Business combination not involving entities under common control | 15,893,491.55 | - | 10,049,768.04 | 42,454,332.31 | 68,397,591.90 | ||||||||||
| Disposal | - | - | - | (1,863,472.69 | ) | (1,863,472.69 | ) | ||||||||
| Effect of exchange rate movements | - | 448,225.99 | 2,242,713.17 | 2,185,476.47 | 4,876,415.63 | ||||||||||
| Closing balance | 114,739,730.08 | 17,169,515.99 | 94,087,773.87 | 188,146,579.45 | 414,143,599.39 |
| Accumulated depreciation | |||||||||||||||
| Opening balance | 17,530,690.04 | - | 38,222,325.59 | 18,195,769.83 | 73,948,785.46 | ||||||||||
| Provision | 2,242,021.66 | - | 13,354,915.20 | 7,696,803.78 | 23,293,740.64 | ||||||||||
| Disposal | - | - | - | (1,828,439.08 | ) | (1,828,439.08 | ) | ||||||||
| Effect of exchange rate movements | - | - | (6,684,303.99 | ) | (6,973,366.33 | ) | (13,657,670.32 | ) | |||||||
| Closing balance | 19,772,711.70 | - | 44,892,936.80 | 17,090,768.20 | 81,756,416.70 | ||||||||||
| Carrying amount | |||||||||||||||
| Closing | 94,967,018.38 | 17,169,515.99 | 49,194,837.07 | 171,055,811.25 | 332,387,182.69 |
| Opening | 81,315,548.49 | 16,721,290.00 | 26,755,673.12 | 25,089,917.92 | 249,882,429.53 |
As at 31 December 2021, intangible assets arising from internal R&D accounted for 5.15% of thecarrying amount of total intangible assets (31 December 2020: 8.13%).
As at 31 December 2021, the Group has no intangible assets without certificates of title.
V. Notes to the Consolidated Financial Statements (cont’d)
19. Goodwill
| 2021 | 2020 | ||||
| Gross amount of goodwill | 432,207,416.82 | 457,212,401.52 | |||
| Less: impairment allowances | 125,238,269.06 | 132,308,161.55 | |||
| 306,969,147.76 | 324,904,239.97 |
2021
| Opening balance | Increase in the period | Decrease in the period | Closing balance | |||||
| Business acquisition | Exchange rate movements | |||||||
| Fosber Group | 164,757,896.55 | - | (16,533,272.97) | 148,224,623.58 | ||||
| Parsun Power | 208,031,946.10 | - | 208,031,946.10 | |||||
| Italy EDF | 70,453,107.20 | - | (7,069,892.49) | 63,383,214.71 | ||||
| Italy QCorr | 13,969,451.67 | - | (1,401,819.24) | 12,567,632.43 | ||||
| 457,212,401.52 | - | (25,004,984.70) | 432,207,416.82 |
2020
| Opening balance | Increase in the period | Increase in the period | Closing balance | |||||
| Business acquisition | Exchange rate movements | |||||||
| Fosber Group | 160,456,740.18 | - | 4,301,156.37 | 164,757,896.55 | ||||
| Parsun Power | 208,031,946.10 | - | - | 208,031,946.10 | ||||
| Italy EDF | 68,613,864.09 | - | 1,839,243.11 | 70,453,107.20 | ||||
| Italy QCorr | - | 13,969,451.67 | - | 13,969,451.67 | ||||
| 437,102,550.37 | 13,969,451.67 | 6,140,399.48 | 457,212,401.52 |
V. Notes to the Consolidated Financial Statements (cont’d)
19. Goodwill (cont’d)
Movements in impairment allowances for goodwill are as follows:
2021
| Opening balance | Decrease in the period | Closing balance | |||||||
| Exchange rate movements | |||||||||
| Parsun Power | 61,855,054.35 | - | 61,855,054.35 | ||||||
| Italy EDF | 70,453,107.20 | (7,069,892.49) | 63,383,214.71 | ||||||
| 132,308,161.55 | (7,069,892.49) | 125,238,269.06 |
2020
| Opening balance | Increase in the period | Closing balance | |||||||
| Exchange rate movements | |||||||||
| Parsun Power | 61,855,054.35 | - | 61,855,054.35 | ||||||
| Italy EDF | 68,613,864.09 | 1,839,243.11 | 70,453,107.20 | ||||||
| 130,468,918.44 | 1,839,243.11 | 132,308,161.55 |
Goodwill acquired in business combinations is allocated to the following asset groups or asset
group portfolios for impairment testing:
? Corrugator line business asset group of Fosber Group? Power machine business asset group of Parsun Power? Corrugator line business asset group of Italy QCorr? Corrugated carton printer business asset group of Italy EDF
According to the impairment test results of goodwill, the Group did not need to establishimpairment allowances for goodwill for the period under review.
V. Notes to the Consolidated Financial Statements (cont’d)
19. Goodwill (cont’d)
Corrugator line business asset group of Fosber GroupThe corrugator line business asset group is an asset group owned by Fosber Group, consistent with the asset groupcombination determined on the purchase date and during impairment tests of the previous years. The carryingamount of the corrugator line business asset group was RMB 454.59 million. The recoverable amount isdetermined using the present value of the projected future cash flows of the asset group combination according tothe cash flow forecasting based on the financial budget over a five-year period approved by the management. Theperpetual cash flows are determined at the level of the last year of the detailed forecast period and based on theindustry development trend and other factors. The discount rate used in cash flow forecasting was 17.68%(18.14% in 2020).
Power machine business asset group of Parsun PowerThe power machine business asset group is the asset group owned by Parsun Power, consistent with the assetgroup combination determined on the purchase date and during impairment tests of the previous years. Thecarrying amount of the power machine business asset group was RMB 283.51 million. The recoverable amount isdetermined using the present value of the projected future cash flows of the asset group combination according tothe cash flow forecasting based on the financial budget over a five-year period approved by the management. Theperpetual cash flows will be determined at the level of the last year of the detailed forecast period and based on theindustry development trend and other factors. The discount rate used in cash flow forecasting was 14.35%(15.22% in 2020).
Corrugator line business asset group of Italy QCorrThe corrugator line business asset group of Italy QCorr is the only asset group owned by Italy QCorr, consistentwith the asset group combination determined on the purchase date. The carrying amount of the corrugator lineasset group was RMB 71.36 million. The recoverable amount is determined using the present value of theprojected future cash flows of the asset group combination according to the cash flow forecasting based on thefinancial budget over a five-year period approved by the management. The perpetual cash flows will bedetermined at the level of the last year of the detailed forecast period and based on the industry development trendand other factors. The discount rate used in cash flow forecasting was 17.02% (17.54% in 2020).
Corrugated carton printer business asset group of Italy EDFFor the corrugated carton printer business asset group of Italy EDF, impairment allowances for goodwill wereestablished in full amount in 2019.
The following describes the key assumptions made by the management in determining cash flow forecasting forgoodwill impairment testing:
Budget gross margin — Developed based on the average gross margin of historical operating results and
expectations for market development.Discount rate — The discount rate used is the pre-tax discount rate that reflects the specific risks of
the relevant asset group or asset group combination.The amount of the key assumptions allocated to the above asset group or asset group portfolio is consistent withthe Group's historical experience and external information.
V. Notes to the Consolidated Financial Statements (cont’d)
20. Long-term prepaid expenses
2021
| Opening balance | Increase in the period | Amortization in the period | Other decreases | Closing balance | |||||||||||
| Plant decoration expenditures | 3,502,191.47 | 1,304,963.59 | (1,190,005.86) | (546,189.53) | 3,070,959.67 | ||||||||||
| Office decoration expenditures | 2,796,808.88 | 28,712.87 | (359,199.20) | (3,173.77) | 2,463,148.78 | ||||||||||
| Amortization of moulds | 5,513,088.39 | 2,733,991.28 | (4,033,802.96) | - | 4,213,276.71 | ||||||||||
| Amortization of lease assets | 144,783.00 | 17,326.73 | (104,191.18) | - | 57,918.55 | ||||||||||
| Internet access for offices | 73,997.11 | 1,153,953.03 | (259,253.37) | - | 968,696.77 | ||||||||||
| CE certification fee | 66,112.93 | 88,453.76 | (60,557.47) | - | 94,009.22 | ||||||||||
| Expenditures on supporting engineering for plants | - | 1,291,609.07 | (197,491.70) | - | 1,094,117.37 | ||||||||||
| 12,096,981.78 | 6,619,010.33 | (6,204,501.74) | (549,363.30) | 11,962,127.07 |
2020
| Opening balance | Increase in the period | Amortization in the period | Other decreases | Closing balance | |||||||||||
| Plant decoration expenditures | 4,902,531.76 | 1,515,943.84 | (848,603.11) | (2,067,681.02) | 3,502,191.47 | ||||||||||
| Office decoration expenditures | 2,966,362.95 | 356,216.82 | (525,770.89) | - | 2,796,808.88 | ||||||||||
| Amortization of moulds | 675,195.52 | 7,655,819.08 | (2,817,926.21) | - | 5,513,088.39 | ||||||||||
| Amortization of lease assets | 86,864.45 | 66,849.37 | (8,930.82) | - | 144,783.00 | ||||||||||
| Internet access for offices | 38,384.58 | 44,160.03 | (8,547.50) | - | 73,997.11 | ||||||||||
| CE certification fee | 28,066.04 | 58,528.62 | (20,481.73) | - | 66,112.93 | ||||||||||
| Expenditures on supporting engineering for plants | 1,831.03 | - | (1,831.03) | - | - | ||||||||||
| 8,699,236.33 | 9,697,517.76 | (4,232,091.29) | (2,067,681.02) | 12,096,981.78 |
V. Notes to the Consolidated Financial Statements (cont’d)
21. Deferred tax assets/liabilities
Deferred tax assets and liabilities before offsetting:
| 2021 | 2020 | |||||||||||
| Deductible temporary differences | Deferred tax assets | Deductible temporary differences | Deferred tax assets | |||||||||
| Deferred tax assets | ||||||||||||
| Deductible loss | 487,263,663.55 | 110,651,029.11 | 186,910,770.30 | 37,446,876.20 | ||||||||
| Provisions—after-sales maintenance service charges | 110,759,543.46 | 27,917,753.88 | 78,705,949.88 | 21,163,160.85 | ||||||||
| Deferred income | 50,391,274.95 | 10,996,777.94 | 56,359,912.05 | 13,526,378.24 | ||||||||
| Accrued expenses | 25,860,319.66 | 3,911,857.71 | 36,599,312.14 | 6,231,125.47 | ||||||||
| Asset impairment allowances | 27,487,561.72 | 6,769,391.56 | 32,623,867.53 | 5,685,957.19 | ||||||||
| Equity incentive expenses | 40,413,913.40 | 5,628,337.80 | 25,006,448.74 | 3,838,878.64 | ||||||||
| Credit impairment loss | 29,574,977.76 | 7,004,793.92 | 10,520,932.53 | 1,526,582.59 | ||||||||
| Changes in fair value of financial products at fair value through profit or loss | 8,785,171.84 | 1,422,118.28 | ||||||||||
| Impact of the new lease standard | 1,957,313.78 | 438,435.98 | - | - | ||||||||
| Internal unrealized profit | 11,859,951.60 | 2,846,388.38 | 20,339,730.05 | 5,084,932.51 | ||||||||
| Others | 83,873,243.64 | 25,583,084.08 | 22,754,231.10 | 3,021,049.28 | ||||||||
| 896, 441,763.52 | 25,583,084.08 | 478,606,326.16 | 98,947,059.25 | |||||||||
| 2021 | 2020 | |||||||||||
| Deductible temporary differences | Deferred tax liabilities | Deductible temporary differences | Deferred tax liabilities | |||||||||
| Deferred tax liabilities | ||||||||||||
| Financial assets at fair value through profit or loss | 35,395,813.71 | 5,204,143.87 | 25,962,030.97 | 4,202,658.70 | ||||||||
| Increase in value in asset valuation | 31,042,086.34 | 6, 347,331.46 | 56,319,751.75 | 10,574,995.95 | ||||||||
| Depreciation difference of fixed assets | 14,439,128.26 | 3,888,612.02 | 10,059,939.38 | 2,577,333.08 | ||||||||
| Others | 46,011,729.25 | 7,809,378.02 | 8,046,763.80 | 1,941,398.43 | ||||||||
| 126,888,757.56 | 23,249,465.37 | 100,388,485.90 | 19,296,386.16 | |||||||||
V. Notes to the Consolidated Financial Statements (cont’d)
21. Deferred tax assets/liabilities (cont’d)
Deferred tax assets and liabilities are offset and presented as a net amount:
| 2021 | ||||||||||||
| Offset amount | Offset balance | |||||||||||
| Deferred tax assets | 21,502,327.42 | 180,245,522.94 | ||||||||||
| Deferred tax liabilities | 21,502,327.42 | 1,747,137.95 | ||||||||||
Deductible temporary differences and deductible losses not recognized as deferred tax assets are asfollows:
| 2021 | 2020 | |||||
| Deductible temporary differences | 8,615,142.53 | 34,063,872.36 | ||||
| Deductible losses | 869,889,774.71 | 1,233,078,267.55 | ||||
| 878,504,917.24 | 1,267,142,139.91 |
Deductible temporary differences and tax losses not recognized as deferred tax assets will expire asfollows:
| 2021 | 2020 | ||||
| 2021 | - | 34,063,872.36 | |||
| 2022 | 8,615,142.53 | - | |||
| 2024 | 834,076,473.87 | 1,233,078,267.55 | |||
| 2026 | 35,813,300.84 | - | |||
| 878,504,917.24 | 1,267,142,139.91 |
The Company has accrued deferred tax assets of RMB103,248,656.87 (2020: RMB23,178,618.80) for theaccumulated deductible losses of RMB461,185,229.48 based on the forecast of its profits in the next fiveyears.
22. Other non-current assets
| 2021 | 2020 | |||||
| Security deposits for loans | 300,150,000.00 | 295,075,000.00 | ||||
| Large-amount deposit certificates | - | 640,000,000.00 | ||||
| Others | 4,446,841.54 | 1,465,047.40 | ||||
| 304,596,841.54 | 936,540,047.40 |
V. Notes to the Consolidated Financial Statements (cont’d)
23. Short-term borrowings
| 2021 | 2020 | |||||
| Guaranteed loan | 176,738,256.00 | 16,560,239.29 | ||||
| Credit loan | 51,574,624.73 | 10,935,542.55 | ||||
| Pledge loan | - | 12,037,500.00 | ||||
| 228,312,880.73 | 39,533,281.84 |
As at 31 December 2021, the annual interest rates of the above borrowings ranged from 0.4% to
3.61% (31 December 2020: 0.5%-2.1%).
As at 31 December 2021 and 31 December 2020, the Group has no borrowings overdue.
24. Financial liabilities held for trading
| 2021 | 2020 | |||||
| Financial liabilities at fair value through profit or loss | ||||||
| Non-controlling interests put options | 110,746,939.04 | 41,408,109.80 |
Non-controlling interests put options related to the non-controlling interests of Fosber Asia andTiruna. As at 31 December 2021, the Group recognized derivative financial liabilities of RMB110,746,939.04 (31 December 2020: RMB 41,408,109.80) according to the assessment results.
25. Notes payable
| 2021 | 2020 | |||||
| Bank acceptance notes | 149,191,690.00 | 104,855,187.97 | ||||
As at 31 December 2021, outstanding notes payable upon maturity were nil (31 December 2020:
nil).
V. Notes to the Consolidated Financial Statements (cont’d)
26. Accounts payable
Accounts payable are interest-free.
| 2021 | 2020 | |||||
| Purchases of inventories | 618,943,392.87 | 489,841,770.00 | ||||
| Others | 322,463.31 | 13,200,791.05 | ||||
| 619,265,856.18 | 503,042,561.05 |
As at 31 December 2021, substantial accounts payable with aging over 1 year were nil.
27. Contract liabilities
| 2021 | 2020 | |||||
| Contract liabilities | 405,842,932.51 | 362,792,713.35 |
Information about contractual performance obligations is as follows:
Corrugator line, corrugated case printing and packaging equipment and outboard engine salesFulfill the contractual performance obligations when relevant products are delivered to the customers andthecontrol over the equipment is transferred. For all customers, the contract price usually expires within 30to 180 days after relevant products are delivered and the control over the equipment is transferred.
V. Notes to the Consolidated Financial Statements (cont’d)
28. Employee benefits payable
2021
| Opening balance | Increase in the period | Decrease in the period | Closing balance | ||||||||
| Short-term benefits | 84,647,882.17 | 547,373,917.72 | 535,634,004.98 | 96,387,794.91 | |||||||
| Retirement benefits (defined contribution schemes) | 7,975,680.76 | 65,849,201.49 | 66,402,893.58 | 7,421,988.67 | |||||||
| 92,623,562.93 | 613,223,119.21 | 602,036,898.56 | 103,809,783.58 |
2020
| Opening balance | Increase in the period | Decrease in the period | Closing balance | ||||||||
| Short-term benefits | 98,755,045.52 | 491,379,271.20 | 505,486,434.55 | 84,647,882.17 | |||||||
| Retirement benefits (defined contribution schemes) | 7,922,284.43 | 64,154,421.47 | 64,101,025.14 | 7,975,680.76 | |||||||
| 106,677,329.95 | 555,533,692.67 | 569,587,459.69 | 92,623,562.93 |
Short-term benefits are as follows:
2021
| Opening balance | Increase in the period | Decrease in the period | Closing balance | |||||||||
| Salaries, bonuses, allowances and subsidies | 79,573,190.90 | 489,454,279.60 | 478,441,950.90 | 90,585,519.60 | ||||||||
| Employee welfare | 4,218,192.78 | 24,650,214.29 | 24,268,554.32 | 4,599,852.75 | ||||||||
| Social security contributions | 112,446.62 | 29,193,688.77 | 28,718,208.43 | 587,926.96 | ||||||||
| Including: medical insurance | 120,597.45 | 19,562,582.16 | 19,106,256.48 | 576,923.13 | ||||||||
| Work injury insurance | (8,150.83) | 9,051,922.98 | 9,032,857.42 | 10,914.73 | ||||||||
| Maternity insurance | - | 579,183.63 | 579,094.53 | 89.10 | ||||||||
| Housing funds | - | 3,209,806.66 | 3,194,057.02 | 15,749.64 | ||||||||
| Labour union funds and employee education funds | 744,051.87 | 865,928.40 | 1,011,234.31 | 598,745.96 | ||||||||
| 84,647,882.17 | 547,373,917.72 | 535,634,004.98 | 96,387,794.91 |
V. Notes to the Consolidated Financial Statements (cont’d)
28. Employee benefits payable (cont’d)
2020
| Opening balance | Increase in the period | Decrease in the period | Closing balance | |||||||||
| Salaries, bonuses, allowances and subsidies | 94,103,058.39 | 437,899,372.05 | 452,429,239.54 | 79,573,190.90 | ||||||||
| Employee welfare | 3,860,673.44 | 29,398,912.60 | 29,041,393.26 | 4, 218,192.78 | ||||||||
| Social security contributions | 89,969.07 | 20,980,727.76 | 20,958,250.21 | 112,446.62 | ||||||||
| Including: medical insurance | 89,969.07 | 18,744,618.90 | 18,713,990.52 | 120,597.45 | ||||||||
| Work injury insurance | - | 1,698,741.96 | 1,706,892.79 | (8,150.83) | ||||||||
| Maternity insurance | - | 537,366.90 | 537,366.90 | - | ||||||||
| Housing funds | - | 2,386,750.21 | 2,386,750.21 | - | ||||||||
| Labour union funds and employee education funds | 701,344.62 | 713,508.58 | 670,801.33 | 744,051.87 | ||||||||
| 98,755,045.52 | 491,379,271.20 | 505,486,434.55 | 84,647,882.17 |
V. Notes to the Consolidated Financial Statements (cont’d)
28. Employee benefits payable (cont’d)
Defined contribution schemes are as follows:
2021
| Opening balance | Increase in the period | Decrease in the period | Closing balance | |||||||||
| Basic endowment insurance | 7,975,680.76 | 65,468,209.37 | 66,022,036.98 | 7,421,853.15 | ||||||||
| Unemployment insurance | - | 380,992.12 | 380,856.60 | 135.52 | ||||||||
| 7,975,680.76 | 65,849,201.49 | 66,402,893.58 | 7,421,988.67 |
2020
| Opening balance | Increase in the period | Decrease in the period | Closing balance | |||||||||
| Basic endowment insurance | 7,922,284.43 | 63,872,178.72 | 63,818,782.39 | 7,975,680.76 | ||||||||
| Unemployment insurance | - | 282,242.75 | 282,242.75 | - | ||||||||
| 7,922,284.43 | 64,154,421.47 | 64,101,025.14 | 7,975,680.76 |
V. Notes to the Consolidated Financial Statements (cont’d)
29. Tax payable
| 2021 | 2020 | |||||
| Value-added tax | 25,459,136.69 | 2,698,793.65 | ||||
| Corporate income tax | 22,054,501.83 | 18,169,790.66 | ||||
| Individual income tax | 11,666,453.95 | 14,556,028.94 | ||||
| City maintenance and construction tax | 691,680.71 | 365,856.73 | ||||
| Education surcharge | 494,057.61 | 261,326.23 | ||||
| Property tax | 239,225.19 | 211,158.56 | ||||
| Stamp duties | 55,317.40 | 51,466.90 | ||||
| Land use tax | 34,530.60 | 34,530.60 | ||||
| Others | 6,442.26 | 20,824.78 | ||||
| 60,701,346.24 | 36,369,777.05 |
30. Other payables
| 2021 | 2020 | |||||
| Other payables | 100,018,273.09 | 81,743,851.64 |
Other payables
| 2021 | 2020 | |||||
| Accrued expenses | 47,435,654.91 | 31,242,050.82 | ||||
| Repurchase obligation of restricted shares | 25,790,000.00 | 22,600,000.00 | ||||
| Payables for settled lawsuit | 3,440,221.96 | 10,224,904.52 | ||||
| Security deposits | 3,583,099.39 | 1,327,227.21 | ||||
| Others | 19,769,296.83 | 16,349,669.09 | ||||
| 100,018,273.09 | 81,743,851.64 |
As at 31 December 2021, substantial other payables with aging over 1 year were nil.
V. Notes to the Consolidated Financial Statements (cont’d)
31. Current portion of non-current liabilities
| 2021 | 2020 | |||||
| Current portion of long-term borrowings | 21,342,646.25 | 226,597,528.74 | ||||
| Of which: Pledge loan | 240,946.37 | - | ||||
| Mortgate loan | - | 14,528,676.67 | ||||
| Guaranteed loan | 10,273,279.33 | 197,026,297.17 | ||||
| Credit loan | 10,828,420.55 | 15,042,554.90 | ||||
| Current portion of lease liabilities | 17,153,078.58 | - | ||||
| 38,495,724.83 | 226,597,528.74 |
32. Other current liabilities
| 2021 | 2020 | |||||
| Endorsed notes receivable | 9,391,823.29 | 11,800,000.00 | ||||
| Output tax to be written off | 3,429,923.76 | 8,562,086.01 | ||||
| Others | 14,725.95 | 169,960.03 | ||||
| 12,836,473.00 | 20,532,046.04 |
33. Long-term borrowings
| 2021 | 2020 | |||||
| Guaranteed loan | 298,477,313.32 | 478,735,065.94 | ||||
| Credit loan | 45,450,825.31 | 33,230,968.87 | ||||
| Pledge loan | 2, 440,696.11 | 4,427,994.38 | ||||
| Mortgage loan | - | 63,615,887.84 | ||||
| 346,368,834.74 | 580,009,917.03 | |||||
| Of which: Current portion of long-term borrowings | (21,342,646.25 | ) | (226,597,528.74 | ) | ||
| 325,026,188.49 | 353,412,388.29 |
As at 31 December 2021, the annual interest rates of the above borrowings ranged from 0.0% to
2.4% (31 December 2020: 0.7%-2.4%). The mortgage loans for the period have been fully repaid inadvance.
As at 31 December 2021 and 31 December 2020, the Group has no loans overdue.
V. Notes to the Consolidated Financial Statements (cont’d)
34. Lease liabilities
| 2021 | ||||||
| Lease payments | 82,366,634.45 | |||||
| Less: Current portion of non-current liabilities | 17,153,078.58 | |||||
| 65,213,555.87 |
35. Long-term employee benefits payable
| 2021 | 2020 | |||||
| Net liabilities of defined benefit schemes | 16,083,170.32 | 18,451,652.74 |
Defined benefit schemes refer to retirement compensation (Trattamento di Fine Rapporto, for short,“TFR”) of the Group according to Italian regulations. The latest actuarial valuation of the schemeassets and the present value of the obligation associated with the defined benefit scheme weredetermined as at 31 December 2021 by Italian actuarial institution Managers & Partners – ActuarialServices S.p.A. using the expected accumulated benefit unit method.
Key actuarial assumptions used as at the balance sheet date are as follows:
| 2021 | 2020 | |||
| Separation rate | 2.50% | 2.50% | ||
| Inflation rate | 1.75% | 0.80% | ||
| Discount rate | 0.44% | 0.00% |
The quantitative sensitivity analysis of key assumptions used is as follows:
2021
| Increase % | Increase/(decrease) in obligations of defined benefit scheme | Decrease % | Increase/(decrease) in obligations of defined benefit scheme | |||||||||
| Separation rate | 1.00% | (94,653.95) | 1.00% | 106,274.92 | ||||||||
| Inflation rate | 0.25% | 118,117.68 | 0.25% | (115,757.71 | ) | |||||||
| Discount rate | 0.25% | (187,124.73) | 0.25% | 194,398.22 |
V. Notes to the Consolidated Financial Statements (cont’d)
35. Long-term employee benefits payable (cont’d)
2020
| Increase % | Increase/(decrease) in obligations of defined benefit scheme | Decrease % | Increase/(decrease) in obligations of defined benefit scheme | |||||||||
| Separation rate | 1.00% | (104,620.64) | 1.00% | 117,877.54 | ||||||||
| Inflation rate | 0.25% | 136,446.11 | 0.25% | (133,629.09 | ) | |||||||
| Discount rate | 0.25% | (215,694.58) | 0.25% | 224,325.07 |
The above sensitivity analysis is based on an inference of the impact of key assumptions on thedefined benefit scheme obligation at a reasonable change on the balance sheet date. Sensitivityanalysis is made according to the changes in major assumptions on the premise that otherassumptions remain unchanged. Since the changes in assumptions are often not isolated from oneanother, sensitivity analysis may not represent an actual change in the defined benefit obligation.
V. Notes to the Consolidated Financial Statements (cont’d)
36. Provisions
2021
| Opening balance | Increase in the period | Decrease in the period | Closing balance | ||||||||
| Product quality warranty | 104,845,110.36 | 50,180,309.14 | 43,818,254.64 | 111,207,164.86 | |||||||
| Others | 605,147.27 | 6,544,276.17 | 423,866.71 | 6,725,556.73 | |||||||
| 105,450,257.63 | 56,724,585.31 | 44,242,121.35 | 117,932,721.59 |
2020
| Opening balance | Increase in the period | Decrease in the period | Closing balance | ||||||||||
| Product quality warranty | 77,837,671.98 | 66,245,447.16 | 39,238,008.78 | 104,845,110.36 | |||||||||
| Others | 812,794.50 | 593,929.04 | 801,576.27 | 605,147.27 | |||||||||
| 78,650,466.48 | 66,839,376.20 | 40,039,585.05 | 105,450,257.63 |
37. Deferred income
2021
| Opening balance | Increase in the period | Decrease in the period | Closing balance | |||||||||
| Government grants | 16,861,488.27 | - | 4,671,176.61 | 12,190,311.66 |
2020
| Opening balance | Increase in the period | Decrease in the period | Closing balance | |||||||||
| Government grants | 18,275,808.90 | - | 1,414,320.63 | 16,861,488.27 |
V. Notes to the Consolidated Financial Statements (cont’d)
37. Deferred income (cont’d)
As at 31 December 2021, liabilities in relation to government grants are as follows:
| Opening balance | Recognized in other income of non-operating income in the period | Closing balance | Asset/income-related | |||||||||
| Compensation for demolition of old plant at Jinfeng Road | 3,554,516.61 | 3,554,516.61 | - | Asset-related | ||||||||
| Industrial revitalization and technological renovation funds (4 Mitsubishi machining centers and 3 vertical machining centers) | 13,306,971.66 | 1,116,660.00 | 12,190,311.66 | Asset-related | ||||||||
| 16,861,488.27 | 4,671,176.61 | 12,190,311.66 |
As at 31 December 2020, liabilities in relation to government grants are as follows:
| Opening balance | Recognized in other income of non-operating income in the period | Closing balance | Asset/income-related | |||||||||
| Compensation for demolition of old plant at Jinfeng Road | 3,852,177.24 | 297,660.63 | 3,554,516.61 | Asset-related | ||||||||
| Industrial revitalization and technological renovation funds (4 Mitsubishi machining centers and 3 vertical machining centers) | 14,423,631.66 | 1,116,660.00 | 13,306,971.66 | Asset-related | ||||||||
| 18,275,808.90 | 1,414,320.63 | 16,861,488.27 |
V. Notes to the Consolidated Financial Statements (cont’d)
38. Other non-current liabilities
| 2021 | 2020 | |||||
| Non-controlling interests put options | 136,178,304.44 | 68,737,415.25 |
Non-controlling interests put options related to non-controlling interests in Italy QCorr and ParsunPower. As at 31 December 2021, the Group recognized other non-current liabilities of RMB136,178,304.44 according to the assessment results (31 December 2020: RMB 68,737,415.25).
39. Share capital
2021
| Opening balance | Decrease in the period | Closing balance | |||||||
| Total share capital | 1,545,126,957.00 | 213,188,790.00 | 1,331,938,167.00 |
For the current year, the total number of shares cancelled by the Company was 213,188,790 shares,and the total number of shares of the Company changed from 1,545,126,957 shares to1,331,938,167 shares after the cancellation.
2020
| Opening balance | Decrease in the period | Closing balance | |||||||
| Total share capital | 1,838,647,096.00 | 293,520,139.00 | 1,545,126,957.00 |
V. Notes to the Consolidated Financial Statements (cont’d)
40. Capital surplus
2021
| Opening balance | Increase in the period (Note 1) | Decrease in the period (Note 2) | Closing balance | ||||||
| Share premium | 3,976,935,100.86 | 17,140,596.95 | 796,011,305.72 | 3,198,064,392.09 | |||||
| Others | 25,457,960.95 | 15,243,506.90 | - | 40,701,467.85 | |||||
| 4,002,393,061.81 | 32,384,103.85 | 796,011,305.72 | 3,238,765,859.94 |
2020
| Opening balance | Increase in the period | Decrease in the period | Closing balance | ||||||
| Share premium | 3,862,090,284.37 | 293,520,138.00 | 178,675,321.51 | 3,976,935,100.86 | |||||
| Others | 287,554.47 | 25,170,406.48 | - | 25,457,960.95 | |||||
| 3,862,377,838.84 | 318,690,544.48 | 178,675,321.51 | 4,002,393,061.81 |
Notes:
Note 1: Increases of capital surplus in the period are as follows:
(1) The Company’s share-based payments in the period were included in shareholder’s equity
and increased other capital surplus by RMB 15,243,506.90.
(2) The Company acquired 32.8% non-controlling interests of its subsidiary Fosber Asia in the
period, increasing other capital surplus by RMB 17,140,596.95.
Note 2: Decreases of capital surplus in the period are as follows:
(1) Dongfang Precision sold 25.41% shares of Parsun Power to strategic investors, reducing
other capital surplus by RMB 98,580,654.91.
(2) The Company retired a total of 213,188,790 shares in the period (as described in Item
39 of Note V), reducing other capital surplus by RMB 697,265,572.70.
(3) The Company repurchsed shares in the period, which resulted in payment of
related commissions and charges, reducing other capital surplus by RMB 165,078.11.
V. Notes to the Consolidated Financial Statements (cont’d)
41. Treasury shares
2021
| Opening balance | Increase in the period (Note) | Decrease in the period (Note) | Closing balance | |||||||
| Share repurchase | 579,403,185.12 | 825,386,681.52 | 910,454,362.70 | 494,335,503.94 |
2020
| Opening balance | Increase in the period | Decrease in the period | Closing balance | ||||
| Share repurchase | 160,088,925.60 | 499,996,259.52 | 80,682,000.00 | 579,403,185.12 |
Note: Changes in the period are as follows:
The increase in treasury shares was driven by the Company’s repurchase of shares in the period,and the decrease in treasury shares was mainly driven by the Company’s retirement of shares in theperiod (as described in Item 39 of Note V).
42. Other comprehensive income
Cumulative balance of other comprehensive income attributable to shareholders of the Company inthe consolidated balance sheet:
2021
| 1 January 2021 | Change | 31 December 2021 | |||||||
| Changes due to remeasurement of defined benefit schemes | (279,123.15 | ) | (368,435.04) | (647,558.19) | |||||
| Differences arising from the translation of foreign currency-denominated financial statements | 20,349,184.92 | (52,980,317.64) | (32,631,132.72) | ||||||
| Others | (43,972.07 | ) | - | (43,972.07) | |||||
| 20,026,089.70 | (53,348,752.68) | (33,322,662.98) |
V. Notes to the Consolidated Financial Statements (cont’d)
42. Other comprehensive income (cont’d)
Cumulative balance of other comprehensive income attributable to shareholders of the Company inthe consolidated balance sheet: (cont’d)
2020
| 1 January 2020 | Change | 31 December 2020 | |||||||
| Changes due to remeasurement of defined benefit schemes | 192,829.89 | (471,953.04 | ) | (279,123.15 | ) | ||||
| Differences arising from the translation of foreign currency-denominated financial statements | 24,822,227.50 | (4,473,042.58 | ) | 20,349,184.92 | |||||
| Others | (43,972.07 | ) | - | (43,972.07 | ) | ||||
| 24,971,085.32 | (4,944,995.62 | ) | 20,026,089.70 |
Other comprehensive income:
2021
| Before tax | Less: Income tax | Attributable to owners of the parent | Attributable to non-controlling interests | ||||||||
| Other comprehensive income that will not be reclassified to profit or loss | |||||||||||
| Changes caused by remeasurements on defined benefit schemes | (368,435.04) | - | (368,435.04) | - | |||||||
| Other comprehensive income that will be reclassified to profit or loss | |||||||||||
| Differences arising from the translation of foreign currency-denominated financial statements | (57,694,181.97) | - | (52,980,317.64) | (4,713,864.33 | ) | ||||||
| (58,062,617.01) | - | (53,348,752.68) | (4,713,864.33 | ) |
2020
| Before tax | Less: Income tax | Attributable to owners of the parent | Attributable to non-controlling interests | |||||||
| Other comprehensive income that will not be reclassified to profit or loss | ||||||||||
| Changes caused by remeasurements on defined benefit schemes | (471,953.04) | - | (471,953.04) | - | ||||||
| Other comprehensive income that will be reclassified to profit or loss | ||||||||||
| Differences arising from the translation of foreign currency-denominated financial statements | (4,418,094.62) | - | (4,473,042.58) | 54,947.96 | ||||||
| (4,890,047.66) | - | (4,944,995.62) | 54,947.96 |
V. Notes to the Consolidated Financial Statements (cont’d)
43. Special reserve
2021
| Opening balance | Provision in the period | Ultilisation in the period | Closing balance | ||||||||
| Expenses for Safety Production | 10,057,438.97 | 4,513,399.49 | (3,318,199.27 | ) | 11,252,639.19 |
2020
| Opening balance | Provision in the period | Ultilisation in the period | Closing balance | |||||||||
| Expenses for Safety Production | - | 11,315,076.12 | (1,257,637.15 | ) | 10,057,438.97 |
44. Surplus reserves
2021
| Opening and closing balance | ||||
| Statutory surplus reserves | 51,830,974.45 |
2020
| Opening and closing balance | ||||
| Statutory surplus reserves | 51,830,974.45 |
Pursuant to the Company Law, when the Company allocates after-tax profits of the year, theCompany shall set aside 10% net profit after making up losses in previous years as its statutorysurplus reserves. When the Company’s statutory reserves are not enough to make up losses inprevious years, the Company shall first make up the losses with profits in the year before itwithdraws statutory surplus reserves according to the above-mentioned regutlation. As there is stilllosses that can be made up in the Company’s account, statutory surplus reserves are not made in thecurrent year.
V. Notes to the Consolidated Financial Statements (cont’d)
45. Retained earnings
| 2021 | 2020 | |||||
| Opening retained earnings | (891,492,837.06) | (1,280,673,461.14 | ) | |||
| Net profit attributable to owners of the parent | 467,333,661.79 | 389,180,624.08 | ||||
| Closing retained earnings | (424,159,175.27) | (891,492,837.06 | ) |
V. Notes to the Consolidated Financial Statements (cont’d)
46. Operating revenue and costs
| 2021 | 2020 | ||||||||||||
| Revenue | Costs | Revenue | Costs | ||||||||||
| Principal operations | 3,471,892,485.62 | 2,522,244,108.28 | 2,894,873,363.35 | 2,080,364,453.60 | |||||||||
| Other operations | 52,842,298.32 | 32,827,951.51 | 21,396,779.78 | 18,784,372.76 | |||||||||
| 3,524,734,783.94 | 2,555,072,059.79 | 2,916,270,143.13 | 2,099,148,826.36 | ||||||||||
Operating revenue is as follows:
| 2021 | 2020 | |||||
| Revenue arising from contracts with customers | 3,523,514,431.39 | 2,916,270,143.13 | ||||
| Others | 1,220,352.55 | - | ||||
| 3,524,734,783.94 | 2,916,270,143.13 |
Breakdown of operating revenue arising from contracts with customers is as follows:
2021
| Total | |||
| Principal operating segment | |||
| Mainland China | 528,007,403.05 | ||
| Other regions | 2,995,507,028.34 | ||
| 3,523,514,431.39 | |||
| Principal product type | |||
| Goods | 3,224,038,841.57 | ||
| Services | 299,475,589.82 | ||
| 3,523,514,431.39 | |||
| By revenue recognition time | 3,523,514,431.39 | ||
| Revenue recognition at a point of time | 3,224,038,841.57 | ||
| Sale of goods | 3,224,038,841.57 | ||
| Revenue recognition for a period of time | 299,475,589.82 | ||
| Rendering of services | 299,475,589.82 | ||
V. Notes to the Consolidated Financial Statements (cont’d)
46. Operating revenue and costs (cont’d)
Breakdown of operating revenue arising from contracts with customers is as follows: (cont’d)
2020
| Total | |||
| Principal operating segment | |||
| Mainland China | 349,869,885.20 | ||
| Other regions | 2,566,400,257.93 | ||
| 2,916,270,143.13 | |||
| Principal product type | |||
| Goods | 2,729,552,600.03 | ||
| Services | 185,778,640.47 | ||
| Others | 938,902.63 | ||
| 2,916,270,143.13 | |||
| By revenue recognition time | 2,916,270,143.13 | ||
| Revenue recognition at a point of time | 2,730,491,502.66 | ||
| Sale of goods | 2,729,552,600.03 | ||
| Others | 938,902.63 | ||
| Revenue recognition for a period of time | 185,778,640.47 | ||
| Rendering of services | 185,778,640.47 | ||
Revenue recognized that was included in contract liabilities at the beginning of the year:
| 2021 | ||||||
| Sales payment in advance | 312,794,330.81 |
V. Notes to the Consolidated Financial Statements (cont’d)
46. Operating revenue and costs (cont’d)
Information about contractual performance obligations is as follows:
Sale of goodsContractual performance obligations are fulfilled when delivering manufactured goods tocustomers, and normally the payment in advance for some customers are needed.
Rendering of servicesContractual performance obligations are fulfilled during the rendering of services.
The expected time for recognizing in revenue the total transaction price allocated to outstandingcontractual performance obligations as at the period-end is as follows:
| 2021 | 2020 | |||||
| Within 1 year | 405,842,932.51 | 362,792,713.35 |
47. Taxes and surcharges
| 2021 | 2020 | |||||
| Property tax | 4,612,247.54 | 4,294,158.43 | ||||
| City maintenance and construction tax | 2,928,855.08 | 2,716,008.16 | ||||
| Education surcharge | 1,664,857.56 | 1,936,200.03 | ||||
| Stamp tax | 780,312.71 | 664,645.73 | ||||
| Local education surcharge | 734,432.96 | 17,767.13 | ||||
| Land use tax | 548,091.99 | 502,833.69 | ||||
| Vehicle and vessel tax | 19,943.53 | 18,971.12 | ||||
| Environmental protection tax | 5,852.88 | 14,309.42 | ||||
| Others | 201,912.47 | 88,618.90 | ||||
| 11,496,506.72 | 10,253,512.61 |
V. Notes to the Consolidated Financial Statements (cont’d)
48. Selling expenses
| 2021 | 2020 | |||||
| Commissions and agency fees | 59,870,536.49 | 46,237,284.80 | ||||
| Employee benefits | 48,815,734.92 | 43,931,435.42 | ||||
| Product quality warranties | 42,420,792.60 | 47,189,521.93 | ||||
| Advertising and exhibition expenses | 8,916,532.18 | 5,721,645.33 | ||||
| Travel expenses | 8,279,440.26 | 5,554,250.47 | ||||
| Transportation expenses and miscellaneous expenses associated with import and export | 2,712,663.72 | 18,155,627.53 | ||||
| Office expenses | 1,816,870.39 | 1,116,817.49 | ||||
| Depreciation and amortization expenses | 1,170,873.85 | 751,809.90 | ||||
| Other expenses | 11,324,233.77 | 12,891,066.82 | ||||
| 185,327,678.18 | 181,549,459.69 |
49. Administrative expenses
| 2021 | 2020 | |||||
| Employee benefits | 137,770,894.42 | 111,656,352.56 | ||||
| Depreciation and amortization expenses | 33,075,924.90 | 22,744,937.96 | ||||
| Intermediary expenses | 26,331,269.13 | 26,178,807.52 | ||||
| Equity incentives | 15,243,506.90 | 25,170,406.50 | ||||
| Office expenses | 14,704,181.88 | 5,745,654.54 | ||||
| Travel and reception expenses | 9,799,959.60 | 7,528,061.79 | ||||
| Conference expenses | 4,146,471.59 | 3,414,455.48 | ||||
| Property management expenses | 2,789,669.82 | 2,819,585.82 | ||||
| Maintenance expenses | 1,405,398.19 | 1,381,900.99 | ||||
| Car expenses | 1,232,050.28 | 4,085,837.67 | ||||
| Materials consumption | 722,185.83 | 333,855.16 | ||||
| Rental expenses | 544,034.30 | 10,221,040.37 | ||||
| Other expenses | 24,325,181.24 | 25,692,120.04 | ||||
| 272,090,728.08 | 246,973,016.40 |
V. Notes to the Consolidated Financial Statements (cont’d)
50. R&D expenses
| 2021 | 2020 | |||||
| Employee benefits | 51,438,135.36 | 46,765,354.71 | ||||
| Depreciation and amortization expenses | 17,208,658.35 | 16,012,422.17 | ||||
| Material expenses | 22,383,588.65 | 9,923,238.87 | ||||
| Utilities | 1,269,392.10 | 966,570.27 | ||||
| Assembly testing and debugging expenses | 87,859.47 | 250,665.58 | ||||
| Other expenses | 7,169,931.53 | 8,164,023.15 | ||||
| 99,557,565.46 | 82,082,274.75 |
51. Finance costs
| 2021 | 2020 | |||||
| Interest expenses | 13,182,088.01 | 15,535,719.53 | ||||
| Less: Interest income | 24,674,196.61 | 20,887,321.27 | ||||
| Exchange losses | 2,528,095.79 | 10,763,678.85 | ||||
| Discounted interest | 7,238.89 | 10,780.11 | ||||
| Others | 2,960,299.46 | 2,496,813.06 | ||||
| (5,996,474.46 | ) | 7,919,670.28 |
V. Notes to the Consolidated Financial Statements (cont’d)
52. Other income
| 2021 | 2020 | |||||
| Government grants related to routine activities | 14,700,007.84 | 10,699,683.55 | ||||
| Refund of handling charges for individual income tax withheld | 192,559.05 | 194,481.14 | ||||
| 14,892,566.89 | 10,894,164.69 |
Government grants related to routine activities are as follows:
| 2021 | 2020 | Asset/income-related | ||||||
| Compensation for demolition of the old plant in Jinfeng Road | 3,554,516.61 | 297,660.63 | Asset-related | |||||
| Foreign government subsidies | 2,902,405.18 | 1,503,212.44 | Income-related | |||||
| Immediate VAT refund for embedded software | 1,526,488.01 | - | Income-related | |||||
| 4 Mitsubishi gantry processing centres and 3 fixed-beam-type gantry processing centres | 1,116,660.00 | 1,116,660.00 | Asset-related | |||||
| Project subsidy funds for overseas R&D institutions in 2020 | 1,000,000.00 | - | Income-related | |||||
| Special funds for promoting foreign economic cooperation in Foshan City in 2021 | 1,000,000.00 | - | Income-related | |||||
| Municipal technology innovation award for key industries in 2017/2018 from the Scientific and Technological Innovation Bureau | 400,000.00 | - | Income-related | |||||
| Award for stabilizing employment positions and benefiting enterprises from High-tech Zone Economic and Development Commission | 300,000.00 | - | Income-related | |||||
| Manufacturing Champion in 2020 awarded by Nanhai Park Administration | 300,000.00 | - | Income-related | |||||
| Subsidy funds after R&D expenses for high-tech enterprises | 259,500.00 | - | Income-related | |||||
| Subsidies for gazelle companies | 250,000.00 | - | Income-related | |||||
| Special awards for high-tech enterprises in 2020 | 200,000.00 | - | Income-related | |||||
| Funds for quality improvement of industrial products in Foshan City in 2021 | 200,000.00 | - | Income-related | |||||
| Subsidies for National and Provincial Intellectual Property Demonstration Enterprise | 200,000.00 | - | Income-related | |||||
| Special funds for business development of Suzhou High-tech Zone Bureau of Commerce | 182,600.00 | - | Income-related | |||||
| Special funds for leading enterprises in 2020 | 150,000.00 | - | Income-related | |||||
| Subsidies for leading enterprises identification in Foshan High-tech Zone | 150,000.00 | - | Income-related | |||||
| Subsidies from Suzhou High-tech Zone Bureau of Commerce in 2019 | 111,958.59 | - | Income-related | |||||
| Subsidies for high-tech enterprises identification in Foshan City in 2020 | 100,000.00 | - | Income-related | |||||
| Subsidies for economic development from High-tech Zone Economic Development Committee | 100,000.00 | - | Income-related | |||||
| Intellectual property thematic funds of 2019 patent subsidies of Nanhai District Administration for Market Regulation | 100,000.00 | 40,894.00 | Income-related | |||||
| R&D expenses for high-tech enterprises of Foshan Science and Technology Bureau | 74,700.00 | - | Income-related | |||||
| Award for R&D of enterprises from Technology and Innovation Bureau | 55,000.00 | - | Income-related | |||||
| 2020 enterprise rewards for highly skilled leading talent | 50,000.00 | - | Income-related | |||||
| 2021 enterprise rewards for highly skilled leading talent | 50,000.00 | - | Income-related | |||||
| Patent subsidies for foreign invention of Administration for Market Regulation | 50,000.00 | - | Income-related | |||||
| Subsidies for work-based training of Suzhou Labor and Employment Management Service Center | 45,518.59 | - | Income-related |
V. Notes to the Consolidated Financial Statements (cont’d)
52. Other income (cont’d)
Government grants related to routine activities are as follows: (cont’d)
| 2021 | 2020 | Asset/income-related | |||||||
| Government subsidies for the projects with excellent technology staying in Suzhou | 39,300.00 | - | Income-related | ||||||
| Special funds for environmental protection support and reward of Nanhai Branch of Foshan Ecological Environment Bureau in 2020 | 37,633.00 | - | Income-related | ||||||
| Funds for invention patent annual fee of Foshan Administration for Market Regulation | 35,630.00 | - | Income-related | ||||||
| Special funds for intellectual property in 2020 | 31,626.00 | - | Income-related | ||||||
| Special funds for export credit insurance in Nanhai District, Foshan City in 2021 of Nanhai District Economic Promotion Bureau, Foshan City | 23,992.00 | - | Income-related | ||||||
| Funds for invention patents in China of Foshan “Fuchitong” | 21,000.00 | - | Income-related | ||||||
| Special funds for business development | 20,103.00 | - | Income-related | ||||||
| Special funds for business development of Suzhou High-tech Zone Bureau of Commerce | 20,000.00 | - | Income-related | ||||||
| Provincial promotion of high-quality economic development in 2020 of Nanhai District Economic Promotion Bureau, Foshan City Special funds for development, for the purposes of foreign economic and trade development and the development of modern service industry | 16,363.24 | 7,857.27 | Asset-related | ||||||
| Subsidies for stabilizing employment positions of Foshan Social Insurance Fund Administration in 2020 | 14,274.14 | Income-related | |||||||
| Subsidies for work-based training | 4,000.00 | 144,500.00 | Income-related | ||||||
| Funds for invention patents in China of Administration for Market Regulation | 3,000.00 | Income-related | |||||||
| Subsidies for stabilizing employment positions | 1,739.48 | 209,237.83 | Income-related | ||||||
| Award for trademark registration of “Branded Project” of Administration for Market Regulation of Nanhai District, Foshan City | 1,000.00 | - | Income-related | ||||||
| Pandemic-related subsidies | 1,000.00 | - | Income-related | ||||||
| Support incentives for four types of enterprises above designated size or qualification levels or limits | - | 300,000.00 | Income-related | ||||||
| Financial rewards for provincial-level industrial information industry transformation and upgrading in 2019 | - | 20,000.00 | Income-related | ||||||
| 2019 subsidy funds after R&D expenses for high-tech enterprises in Foshan City | - | 207,200.00 | Income-related | ||||||
| Trademark subsidies of the whole district in 2019 | - | 41,600.00 | Income-related | ||||||
| 2019 provincial special funds for business development (3rd batch), small and medium-sized development enterprises | - | 33,000.00 | Asset-related | ||||||
| 2019 enterprise rewards for highly skilled leading talent in Suzhou High-tech Zone | - | 50,000.00 | Income-related | ||||||
| 2019 domestic and foreign patent subsidies of Suzhou High-tech Zone | - | 5,300.00 | Income-related | ||||||
| Special funds for the construction of municipal-level advanced manufacturing bases in Suzhou in 2020 (a cultivation project for proprietary, elaborate, unique and innovative enterprises) | - | 400,000.00 | Income-related | ||||||
| Fiscal subsidies | - | 50,000.00 | Income-related | ||||||
| Allowances for the unemployment insurance refund project of affected enterprises, Nanhai District Human Resources and Social Security Bureau, Foshan City | - | 1,451,918.40 | Income-related | ||||||
| A project of the special funds for foreign economic and trade development in 2019 (small- and medium-sized foreign trade enterprises exploiting the international market) of Nanhai District Economic Promotion Bureau, Foshan City | - | 2,240,000.00 | Income-related | ||||||
| Electricity subsidy from Nanhai District Economic Promotion Bureau, Foshan City | - | 103,040.00 | Income-related |
V. Notes to the Consolidated Financial Statements (cont’d)
52. Other income (cont’d)
Government grants related to routine activities are as follows: (cont’d)
| 2020 special funds for municipal economic and technological development (the Industry and Information Technology Bureau part) of Nanhai District Economic Promotion Bureau, Foshan City - Energy conservation project | - | 40,000.00 | Income-related | ||||||
| Scientific research subsidies for Craftsman of the City—Nanhai of Nanhai District Human Resources and Social Security Bureau, Foshan City | - | 50,000.00 | Income-related | ||||||
| Subsidy funds for enterprise personnel increase of Nanhai District Human Resources and Social Security Bureau, Foshan City | - | 4,000.00 | Income-related | ||||||
| Support funds for Nanhai District Administration for Market Regulation, Foshan City to promote civilized patent work | - | 234,120.00 | Income-related | ||||||
| Administration for Market Regulation - Special funds for promoting invention in 2017-2018 | - | 5,000.00 | Income-related | ||||||
| Subsidies for import and export credit insurance | - | 126,310.64 | Income-related | ||||||
| Economic Promotion Bureau - 2019 subsidies for R&D expenses of high-tech enterprises | - | 23,200.00 | Income-related | ||||||
| Awards from Technology and Innovation Bureau | - | 300,000.00 | Income-related | ||||||
| Subsidies for high-tech enterprises identification from Science and Technology Bureau in 2019 | - | 300,000.00 | Income-related | ||||||
| Special funds for foreign trade and economic development in 2019 under the central finance of Nanhai District Economic Promotion Bureau | - | 69,772.00 | Asset-related |
V. Notes to the Consolidated Financial Statements (cont’d)
52. Other income (cont’d)
Government grants related to routine activities are as follows: (cont’d)
| 2021 | 2020 | Asset/income-related | |||||||
| Trademark subsidies | - | 1,600.00 | Income-related | ||||||
| Business development (4th batch) small and medium-sized development projects | - | 59,700.00 | Income-related | ||||||
| Special funds for business development (credit insurance) | - | 196,700.00 | Income-related | ||||||
| Special funds for information transformation and upgrading | - | 1,000,000.00 | Income-related | ||||||
| Pandemic-related subsidies | - | 1,000.00 | Income-related | ||||||
| Intellectual property manufacturing awards | - | 50,000.00 | Income-related | ||||||
| Provincial-level short-term insurance premiums transferred by China Export & Credit Insurance Corporation Guangdong Branch Support funds | - | 16,200.34 | Asset-related | ||||||
| 14,700,007.84 | 10,699,683.55 |
53. Investment income
| 2021 | 2020 | |||||
| Income from financial assets held for trading | 94,792,849.32 | 50,996,184.47 | ||||
| Income from long-term equity investments measured at equity method | 3,880,256.70 | 2,889,349.81 | ||||
| Income from remeasurement of former equity investments at fair value in business combination not under common control | - | 1,229,987.66 | ||||
| 98,673,106.02 | 55,115,521.94 |
V. Notes to the Consolidated Financial Statements (cont’d)
54. Gains and losses on changes in fair value
| 2021 | 2020 | |||||
| Changes in fair value of non-controlling interests call/put options | (50,864,345.69 | ) | (9,284,348.20 | ) | ||
| Financial assets at fair value through profit or loss | 29,506,559.88 | 54,407,119.47 | ||||
| (21,357,785.81 | ) | 45,122,771.27 |
55. Credit impairment loss
| 2021 | 2020 | |||||
| Loss on doubtful accounts receivable | 8,497,086.26 | 8,835,882.15 | ||||
| Allowances losses for other receivables | 4,229,550.20 | (1,933,043.78 | ) | |||
| Impairment loss on contract assets | - | 1,061,524.05 | ||||
| 12,726,636.46 | 7,964,362.42 |
56. Asset impairment loss
| 2021 | 2020 | |||||
| Inventory valuation loss | 11,194,079.96 | 5,368,019.60 | ||||
| Reversed impairment loss on contract assets | (257,325.86 | ) | - | |||
| 10,936,754.10 | 5,368,019.60 |
V. Notes to the Consolidated Financial Statements (cont’d)
57. Gains and losses on disposal of assets
| 2021 | 2020 | |||||
| Gain/(loss) on disposal of fixed assets | 424,968.29 | (17,854.18) |
58. Non-operating income
| 2021 | 2020 | Recognized in exceptional gains and losses of 2021 | |||||||
| Performance compensation | - | 29,939,067.65 | - | ||||||
| Negative goodwill arising from acquisition of Yinglian Digital | - | 866,489.40 | - | ||||||
| Others | 5,750,547.04 | 4,996,229.86 | 5,750,547.04 | ||||||
| 5,750,547.04 | 35,801,786.91 | 5,750,547.04 |
59. Non-operating expenses
| 2021 | 2020 | Recognized in exceptional gains and losses of 2021 | |||||||
| Donations | 83,988.03 | 1,570,997.47 | 83,988.03 | ||||||
| Loss on disposal of non-current assets | 501,064.13 | 36,036.61 | 501,064.13 | ||||||
| Others | 876,966.65 | 139,697.28 | 876,966.65 | ||||||
| 1,462,018.81 | 1,746,731.36 | 1,462,018.81 |
V. Notes to the Consolidated Financial Statements (cont’d)
60. Expenses by nature
Supplementary information of the Group’s cost of sales, selling expenses, administrative expenses,and R&D expenses by nature is as follows:
| 2021 | 2020 | |||||
| Raw materials consumed | 1,859,784,815.80 | 1,608,964,713.25 | ||||
| Employee benefits | 613,223,119.21 | 555,533,692.67 | ||||
| Transportation expenses and miscellaneous expenses associated with import and export | 125,384,252.47 | 92,798,948.87 | ||||
| Depreciation and amortization expenses | 96,426,126.81 | 71,259,302.64 | ||||
| Commissions and agency fees | 59,870,536.49 | 46,237,284.80 | ||||
| Product quality warranties | 42,420,792.60 | 47,189,521.93 | ||||
| Intermediary expenses | 26,331,269.13 | 26,802,166.28 | ||||
| Utilities | 18,322,758.67 | 6,107,516.69 | ||||
| Equity incentives | 15,243,506.90 | 25,170,406.50 | ||||
| Travel and business reception expenses | 85,673,533.80 | 61,319,861.28 | ||||
| Technology licensing expenses | 9,350,533.75 | 3,134,512.00 | ||||
| Advertising and exhibition expenses | 8,916,532.18 | 5,751,215.66 | ||||
| Rental expenses | 544,034.30 | 21,367,612.26 | ||||
| Office and other expenses | 150,556,219.40 | 38,116,822.37 | ||||
| 3,112,048,031.51 | 2,609,753,577.20 |
V. Notes to the Consolidated Financial Statements (cont’d)
61. Income tax expenses
| 2021 | 2020 | |||||
| Current income tax expenses | 88,328,101.49 | 71,205,843.29 | ||||
| Deferred tax expenses | (100,274,573.91 | ) | (48,122,503.99 | ) | ||
| (11,946,472.42 | ) | 23,083,339.30 |
Reconciliation between income tax expenses and gross profit is as follows:
| 2021 | 2020 | |||||
| Gross profit | 480,444,713.23 | 420,180,660.29 | ||||
| Income tax calculated at applicable tax rates (Note) | 72,066,706.98 | 63,027,099.04 | ||||
| Different tax rates for specific provinces or enacted by local authority | 38,186,704.25 | 43,500,706.27 | ||||
| Adjustment to current income tax in previous periods | (8,715,965.71 | ) | (1,018,718.96 | ) | ||
| Income not subject to tax | (13,811,012.93 | ) | (42,505,290.40 | ) | ||
| Over-deduction for R&D | (5,813,981.03 | ) | (4,685,800.11 | ) |
| Expenses not deductible for tax | 995,625.70 | 1,554,762.28 | ||||
| Utilization and recognition of deductible losses of previous periods | (100,238,844.22 | ) | (39,750,597.61 | ) | ||
| Effect of unrecognized deductible temporary differences and deductible losses | 5,384,294.54 | 2,961,178.79 | ||||
| Income tax expenses | (11,946,472.42 | ) | 23,083,339.30 |
Note: The provision for income tax of the Group was recognized based on the estimated taxableincome to be derived from mainland China and applicable tax rate. Taxable income derived fromother jurisdictions shall be taxed based on applicable tax rate in accordance with the current laws,interpretations and conventions in the country/jurisdiction where the Group operates.
V. Notes to the Consolidated Financial Statements (cont’d)
62. Earnings per share
| 2021 | 2020 | |||||
| RMB/share | RMB/share | |||||
| Basic earnings per share | ||||||
| Continuing operations | 0.35 | 0.26 | ||||
| Diluted earnings per share | ||||||
| Continuing operations | 0.35 | 0.26 |
Basic earnings per share is computed by dividing the net profit attributable to ordinary shareholdersof the Company for the period by the weighted average number of ordinary shares in issue.
In the calculation of diluted earnings per share, the numerator shall be determined based on the netprofit attributable to ordinary shareholders of the Company for the period after adjusting thefollowing factors: (1) the interest of diluted potential ordinary shares that have been recognized asexpenses in the period; (2) gains or expenses that will be incurred when the diluted potentialordinary shares are converted; and (3) the income tax impact related to the above adjustments.
In the calculation of diluted earnings per share, the denominator shall be the sum of: (1) weightedaverage number of ordinary shares of the Company in issue adopted in the calculation of basicearnings per share; and (2) weighted average number of ordinary shares created assumingconversion of potentially dilutive ordinary shares into ordinary shares.
In calculating the weighted average number of ordinary shares created upon conversion ofpotentially dilutive ordinary shares into ordinary shares, potentially dilutive ordinary shares issuedin previous periods are assumed to have been converted at the beginning of the current period,whereas potentially dilutive ordinary shares issued in the current period are assumed to have beenconverted on the date of issue.
V. Notes to the Consolidated Financial Statements (cont’d)
62. Earnings per share(cont’d)
Calculations of basic and diluted earnings per share are as follows:
| 2021 | 2020 | ||||
| Earnings | |||||
| Net profit attributable to ordinary shareholders of the Company for the period | 467,333,661.79 | 389,180,624.08 | |||
| Shares | |||||
| Weighted average number of ordinary shares in issue of the Company | 1,327,715,640.50 | 1,479,259,197.75 | |||
| Shares | |||||
| Weighted average number of ordinary shares in issue of the Company | 1,327,715,640.50 | 1,479,259,197.75 | |||
| Diluting effect——weighted average number of ordinary shares | |||||
| Restricted shares | 12,915,588.73 | 3,331,777.08 | |||
| Adjusted weighted average number of ordinary shares in issue of the Company | 1,340,631,229.23 | 1,482,590,974.83 | |||
V. Notes to the Consolidated Financial Statements (cont’d)
63. Notes to cash flow statement line items
| 2021 | 2020 | |||||
| Cash generated from other operating activities | ||||||
| Government grants | 10,221,390.28 | 9,827,504.69 | ||||
| Interest income | 24,674,196.61 | 21,022,181.82 | ||||
| Letter of guarantee received | - | 4,984,585.99 | ||||
| Current accounts and others | 4,438,967.22 | 9,980,667.12 | ||||
| 39,334,554.11 | 45,814,939.62 | |||||
| Cash used in other operating activities | ||||||
| Selling expenses in cash | 105,107,763.31 | 136,866,214.37 | ||||
| Administrative expenses in cash | 74,613,114.65 | 87,401,319.27 | ||||
| R&D expenses in cash | 17,901,111.33 | 19,304,497.87 | ||||
| Security deposits | 187,068.49 | 3,445,334.38 | ||||
| Letter of guarantee paid | 2,171,914.25 | 5,520,385.99 | ||||
| Current accounts and others | 21,116,317.47 | 18,504,749.20 | ||||
| 221,097,289.50 | 271,042,501.08 | |||||
| Cash generated from other investing activities | ||||||
| Performance compensation | 2,419,748.09 | - |
| Cash used in other investing activities | ||||||
| Acquisition of Italy QCorr’s business asset group | - | 1,203,750.03 |
V. Notes to the Consolidated Financial Statements (cont’d)
63. Notes to cash flow statement line items (cont’d)
| 2021 | 2020 | |||||
| Cash generated from other financing activities | ||||||
| Disposal of equity to non-controlling interests | 100,000,000.00 | - | ||||
| Security deposits for bank acceptance notes | 93,525,797.34 | 16,125,930.69 | ||||
| Security deposits recovered for internal guarantees for external loans | - | 124,024,093.46 | ||||
| Share subscription | - | 22,600,000.00 | ||||
| 193,525,797.34 | 162,750,024.15 | |||||
| Cash used in other financing activities | ||||||
| Share repurchase | 828,741,759.63 | 500,096,259.41 | ||||
| Security deposits paid for loans | 355,075,000.00 | 290,000,000.00 | ||||
| Security deposits for bank acceptance notes | 120,056,676.70 | 35,715,597.93 | ||||
| Purchase of non-controlling interests | 36,121,968.12 | - | ||||
| Lease and interest payments | 17,062,209.03 | - | ||||
| 1,357,057,613.48 | 825,811,857.34 |
V. Notes to the Consolidated Financial Statements (cont’d)
64. Supplemental information on statement of cash flows
(1) Supplemental information on statement of cash flows
Reconciliation of net profit to net cash generated from/used in operating activities:
| 2021 | 2020 | |||||
| Net profit | 492,391,185.65 | 397,097,320.99 | ||||
| Add: Asset impairment allowances | 10,936,754.10 | 5,368,019.60 | ||||
| Depreciation of fixed assets | 49,341,880.68 | 43,733,470.71 | ||||
| Depreciation of right-of-use assets | 17,042,595.06 | - | ||||
| Amortization of intangible assets | 23,837,149.34 | 23,293,740.64 | ||||
| Credit impairment loss | 12,726,636.46 | 7,964,362.42 | ||||
| Amortization of long-term prepaid expenses | 6,204,501.74 | 4,232,091.29 | ||||
| Loss and gain on disposal of fixed assets, intangible assets and other long-lived assets | (424,968.29) | 17,854.18 | ||||
| Loss on retirement of fixed assets | 490,962.41 | 34,888.51 | ||||
| Loss and gain on changes in fair value | 21,357,785.81 | (45,122,771.27) | ||||
| Finance costs | 13,182,088.01 | 16,797,042.44 | ||||
| Investment income | (98,673,106.02) | (55,115,521.94) | ||||
| Increase in deferred tax assets | (81,298,463.69) | (49,922,037.64) | ||||
| Decrease/(increase) in deferred tax liabilities | (17,549,248.21) | 2,380,693.25 | ||||
| Increase in inventories | (128,880,794.62) | (61,314,527.47) | ||||
| Increase/(decrease) in operating receivables | (397,793,709.49) | 62,978,697.08 | ||||
| Increase in operating payables | 374,249,103.02 | 188,515,269.99 | ||||
| Others | 9,518,924.06 | 10,057,438.97 |
| Net cash generated from/used in operating activities | 306,659,276.02 | 550,996,031.75 |
V. Notes to the Consolidated Financial Statements (cont’d)
64. Supplemental information on statement of cash flows (cont’d)
(1) Supplemental information on statement of cash flows (cont’d)
Substantial investing and financing activities not involving cash:
| 2021 | 2020 | |||||
| Transfer of endorsed bank acceptance notes received for selling goods and rendering services | 53,118,728.50 | 72,886,689.73 | ||||
| Acquisition of right-of-use assets by assuming lease liabilities | 80,386,832.91 | - | ||||
| 133,505,561.41 | 72,886,689.73 |
Net change in cash and cash equivalents:
| 2021 | 2020 | |||||
| Closing balance of cash | 1, 259,303,775.74 | 860,601,236.78 | ||||
| Less: Opening balance of cash | 860,601,236.78 | 2,226,724,737.39 | ||||
| Add: Closing balance of cash equivalents | - | - | ||||
| Less: Opening balance of cash equivalents | - | - | ||||
| Net increase/(decrease) in cash and cash equivalents | 398,702,538.96 | (1,366,123,500.61) |
(2) Information on subsidiaries and other business units acquired or disposed of
Information on subsidiaries and other business units acquired
| 2021 | 2020 | |||||
| Prices for acquiring subsidiaries and other business units | 30,000,000.00 | 11,566,725.00 | ||||
| Cash and cash equivalents paid to acquire subsidiaries and other business units | 30,000,000.00 | 11,566,725.00 | ||||
| Less: cash and cash equivalents held by subsidiaries and other business units acquired | - | 36,725.61 | ||||
| Net payments for the acquisition of subsidiaries and other business units | 30,000,000.00 | 11,529,999.39 |
(3) Cash and cash equivalents
| 2021 | 2020 | |||||
| Cash | 1,259,303,775.74 | 860,601,236.78 | ||||
| Including: cash on hand | 233,281.32 | 217,540.96 | ||||
| Bank deposits readily available | 999,389,151.51 | 860,383,695.82 | ||||
| Other cash and bank balances readily available | 259,681,342.91 | - | ||||
| Cash equivalents | - | - |
| Closing balance of cash and cash equivalents | 1,259,303,775.74 | 860,601,236.78 |
V. Notes to the Consolidated Financial Statements (cont’d)
65. Assets with restricted ownership or right of use
| 2021 | 2020 | ||||||||
| Cash and bank balances | 405,032,563.61 | 25,109,817.10 | Note 1 | ||||||
| Fixed assets | 4,533,314.25 | 211,239,552.11 | Note 2 | ||||||
| Intangible assets | - | 52,551,947.63 | Note 3 | ||||||
| Other non-current assets | 300,150,000.00 | 295,075,000.00 | Note 4 | ||||||
| 709,715,877.86 | 583,976,316.84 |
Note 1: As at 31 December 2021, cash and bank balances in the carrying amount of
RMB405,032,563.61 were used as security deposits for bank acceptance notes and letter ofguarantee and the like (31 December 2020: RMB25,109,817.10).
Note 2: As at 31 December 2021, the fixed assets in the carrying amount of RMB4,533,314.25
(31 December 2020: RMB0) was used as collateral for obtaining bank borrowings forsubsidiaries. As at 31 December 2021, the fixed assets in the carrying amount ofRMB211,239,552.11 was used as collateral for obtaining the credit line of bank borrowings,the credit line was RMB600,000,000.00, and the borrowing balance under the credit linecontract was nil. As at 31 December 2020, the fixed assets pledge was relieved.
Note 3: As at 31 December 2020, property in land of the Company in the carrying amount of
RMB52,551,947.63 was also used as collateral for the bank credit line mentioned in Note 2in Item 65 of Note V. The amortization of the property in land was RMB1,468,335.83 in2020. As at 31 December 2021, the mortgage of the property in land was released.
Note 4: As at 31 December 2021, security deposits in the carrying amount of RMB
300,150,000.00 (31 December 2020: RMB 295,075,000.00) were used for loans ofsubsidiaries, with the term expiring on 29 June 2023.
V. Notes to the Consolidated Financial Statements (cont’d)
66. Monetary items in foreign currencies
| 2021 | 2020 | ||||||||||||
| Original currency | Exchange rate | RMB equivalent | Original currency | Exchange rate | RMB equivalent | ||||||||
| Cash and bank balances | 685,152,963.98 | 640,094,525.70 | |||||||||||
| Including: USD | 56,147,869.58 | 6.3757 | 357,981,972.08 | 42,130,977.17 | 6.5251 | 274,908,839.13 | |||||||
| EUR | 45,306,958.43 | 7.2197 | 327,102,647.78 | 45,296,299.56 | 8.0250 | 363,502,803.97 | |||||||
| HKD | 83,591.14 | 0.8176 | 68,344.12 | 162,041.47 | 0.8416 | 136,374.10 | |||||||
| GBP | - | 8.6081 | - | 173,844.00 | 8.8903 | 1,545,525.31 | |||||||
| AUD | - | 4.6266 | - | 196.00 | 5.0163 | 983.19 | |||||||
| Accounts receivable | 714,281,331.38 | 466,182,574.96 | |||||||||||
| Including: USD | 8,067,507.42 | 6.3757 | 51,436,007.06 | 8,332,673.76 | 6.5251 | 54,371,529.55 | |||||||
| EUR | 91,810,646.47 | 7.2197 | 662,845,324.32 | 51,316,018.12 | 8.0250 | 411,811,045.41 | |||||||
| Contract assets | 19,971,462.55 | 29,667,325.25 | |||||||||||
| Including: USD | 2,773,235.20 | 6.3757 | 17,681,315.66 | 1,410,488.00 | 6.5251 | 9,203,575.25 | |||||||
| 317,208.04 | 7.2197 | 2,290,146.89 | 2,550,000.00 | 8.0250 | 20,463,750.00 | ||||||||
| EUR | |||||||||||||
| Other receivables | 71,937,801.62 | ||||||||||||
| Including: USD | 8,856,610.50 | 6.3757 | 210,931,472.20 | - | - | - | |||||||
| EUR | 21,394,847.52 | 7.2197 | 154,464,380.64 | 8,964,212.04 | 8.0250 | 71,937,801.62 | |||||||
| Accounts payable | 580,255,405.04 | 390,383,719.86 | |||||||||||
| Including: USD | 20,811,908.90 | 6.3757 | 132,690,487.57 | - | - | - | |||||||
| EUR | 61,992,176.61 | 7.2197 | 447,564,917.47 | 48,645,946.40 | 8.0250 | 390,383,719.86 | |||||||
| Short-term borrowings | 228,312,880.73 | 39,533,281.84 | |||||||||||
| Including: EUR | 31,623,596.65 | 7.2197 | 228,312,880.73 | 4,926,265.65 | 8.0250 | 39,533,281.84 | |||||||
| Current portion of non-current liabilities | 32,455,649.04 | 226,597,528.74 | |||||||||||
| Including: EUR | 4,495,429.04 | 7.2197 | 32,455,649.04 | 28,236,452.18 | 8.0250 | 226,597,528.74 | |||||||
| Long-term borrowings | 325,026,188.49 | 353,412,388.29 | |||||||||||
| Including: EUR | 45,019,348.24 | 7.2197 | 325,026,188.49 | 44,038,926.89 | 8.0250 | 353,412,388.29 | |||||||
| Lease liabilities | 49,459,973.23 | ||||||||||||
| Including: EUR | 6,850,696.46 | 7.2197 | 49,459,973.23 | - | - | - | |||||||
| Other payables | 18,820,269.40 | 34,280,083.33 | |||||||||||
| Including: USD | 397,040.50 | 6.3757 | 2,531,411.12 | 172,390.50 | 6.5251 | 1,124,865.25 | |||||||
| EUR | 2,256,168.30 | 7.2197 | 16, 288,858.28 | 4,131,491.35 | 8.0250 | 33,155,218.08 | |||||||
The principal places of business overseas, the functional currencies and their determination basis ofthe major overseas business entities included in the consolidated financial statements are as follows:
| Major overseas business entities | Principal place of business | Functional currency | Determination basis |
| Fosber Group | Italy | EUR | Settlement currency for local business activities |
| Fosber America | America | USD | Settlement currency for local business activities |
| Italy EDF | Italy | EUR | Settlement currency for local business activities |
| Tiru?a Group | Spain | EUR | Settlement currency for local business activities |
I. Changes to the Scope of Consolidation
1. Changes to the scope of consolidation for other reasons
Information about the newly established subsidiary:
In February 2021, the Company established Dongfang Hezhi Data Technology (Guangdong) Co., Ltd.(hereinafter referred to as “Hezhi Guangdong”) with a registered capital of RMB 8 million and ashareholding ratio of 100%.
VI.Changes to the Scope of Consolidation(cont’d)
1.Changes to the scope of consolidation for other reasons(cont’d)
Information about the newly established subsidiary: (cont’d)
In March 2021, the Company established Tianjin Hangchuang Zhijin Investment Partnership (LimitedPartnership) (hereinafter referred to as “Tianjin Hangchuang”), with a subscribed capital contribution ofRMB20 million and a shareholding ratio of 95.24%.
In September 2019, Parsun Power, a subsidiary of the Company, established Suzhou Parsun PowerTechnology Co., Ltd. (hereinafter referred to as “Parsun Power Technology”) with a registeredcapital of RMB10 million and a shareholding ratio of 100%.
VII. Interests in Other Entities
1. Interests in subsidiaries
Particulars of the subsidiaries of the Company are as follows:
| Principal place of business | Place of registration | Business nature | Registered capital | The Company’s interest（%） | |||||
| Direct | Indirect | ||||||||
| Subsidiaries acquired by way of incorporation or investment | |||||||||
| Dongfang Precision (HK) | HK | HK | Trading | USD300,000 | 100.00 | - | |||
| Dongfang Precision (Netherland) | Netherland | Netherland | Trading | EUR40,000 | 90.00 | 10.00 | |||
| Fosber Asia | Foshan, Guangdong, China | Foshan, Guangdong, China | Manufactur ing | EUR4 million | 89.20 | - | |||
| Italy QCorr | Italy | Italy | Manufacturing | EUR375,000 | - | 60.00 | |||
| Suzhou High-Tech Zone Jinquan Business Management Partnership (Limited Partnership)* | Suzhou, Jiangsu, China | Suzhou, Jiangsu, China | Investment | RMB9.65 million | - | 0.17 | |||
| Dongfang Digicom | Haikou, Hainan, China | Haikou, Hainan, China | Industrial Internet | RMB100 million | 100.00 | - | |||
| Hainan Yineng | Haikou, Hainan, China | Haikou, Hainan, China | Investment | RMB100 million | 100.00 | - | |||
| Hezhi Guangdong | Foshan, Guangdong,China | Foshan, Guangdong,China | Industrial Internet | RMB8 million | 100.00 | - | |||
| Parsun Power Technology | Suzhou, Jiangsu. China | Suzhou, Jiangsu. China | Manufacturing | RMB10 millin | - | 69.55 | |||
| Tianjin Hangchuang | Tianjin, China | Tianjin, China | Investment | RMB21 million | 95.24% | - | |||
| Subsidiaries acquired in business combinations not under common control | |||||||||
| Fosber Group | Italy | Italy | Manufactur ing | EUR1.56 million | - | 100.00 | |||
| Fosber America | America | America | Manufactur ing | USD1.10 million | - | 100.00 | |||
| Fosber Tianjin | Tianjin, China | Tianjin, China | Manufactur ing | USD500,000 | - | 100.00 | |||
| Parsun Power | Suzhou, Jiangsu, China | Suzhou, Jiangsu, China | Manufactur ing | RMB85.3 million | 7.83 | 61.72 | |||
| Shunyi Investment | Suzhou, Jiangsu, China | Suzhou, Jiangsu, China | Investment | RMB10 million | 100.00 | - | |||
| Italy EDF | Italy | Italy | Manufactur ing | EUR100,000 | - | 100.00 | |||
| Tiru?a Group | Spain | Spain | Manufactur ing | EUR10 million | - | 70.00 | |||
| Tiru?a S.L.U. | Spain | Spain | Manufactur ing | EUR1.44 million | - | 70.00 | |||
| Tratatamientos Industriales Tiru?a S.A.U. | Spain | Spain | Manufactur ing | EUR270,000 | - | 70.00 | |||
| Tiru?a France SARL | France | France | Manufactur ing | EUR100,000 | - | 70.00 | |||
| SCI Candan | France | France | Manufactur ing | EUR10,000 | - | 70.00 | |||
| Tiru?a America | America | America | Manufactur ing | USD3 million | - | 85.00 | |||
| Yinglian Digital | Foshan, Guangdong, China | Foshan, Guangdong, China | Manufactur ing | RMB50 million | 100.00 | - |
VII. Interests in Other Entities (cont’d)
1. Interests in subsidiaries (cont’d)
*According to the partnership agreement, the general partner of the partnership shall executepartnership affairs, and other partners shall not execute partnership affairs. As the sole generalpartner, the Company forms control over the partnership, which is included in the scope ofconsolidation of the Group.
VII. Interests in Other Entities (cont’d)
2. Interests in associates
| Principal place of business | Place of registration | Business nature | Registered capital | The Company’s interest (%) | Accounting method | |||||||||||||
| Direct | Indirect | |||||||||||||||||
| Associates | ||||||||||||||||||
| Guangdong Jaten Robot & Automation Co., Ltd. | Foshan | Foshan | manufacturing | RMB12.844 million | 21.00 | - | Equity method | |||||||||||
| Talleres Tapre,S.L. | Spain | Spain | manufacturing | - | - | 14.00 | Equity method | |||||||||||
| Nanjing Profeta (Note) | Nanjing | Nanjing | manufacturing | RMB3.8613 million | - | 6.66 | Equity method | |||||||||||
Note: The board of directors of Nanjing Profeta Intelligent Technology Co., Ltd. has 5 members. The Grouphas appointed one of the directors, and he accordingly enjoys 20% of the substantive participation rights,forming a significant influence.
The Group’s important associates, as the Group’s strategic partners, are engaged in the research anddevelopment of intelligent logistics robot technology and are accounted for using the equity method. Thisinvestment is strategic to the Group’s activities.
The table below presents financial information of Guangdong Jaten Robot & Automation Co., Ltd.Such information is accounting policy difference-adjusted and reconciled to the carrying amounts ofthe financial statements.
| 2021 | 2020 | |||||
| Current assets | 330,487,248.69 | 237,153,222.57 | ||||
| Including: cash and cash equivalents | 27,992,042.72 | 9,320,324.83 | ||||
| Non-current assets | 112,183,506.48 | 112,043,388.53 | ||||
| Total assets | 442,670,755.17 | 349,196,611.10 | ||||
| Current liabilities | 231,913,001.95 | 148,070,950.71 | ||||
| Non-current liabilities | 16,210,604.84 | 27,571,880.84 | ||||
| Total liabilities | 248,123,606.79 | 175,642,831.55 | ||||
| Equity attributable to owners of the parent | 194,547,148.38 | 173,553,779.55 | ||||
| Share of net assets based on the Company’s interest | 40,854,901.16 | 36,446,293.71 | ||||
| Carrying amount of the investment | 74,780,345.62 | 70,900,088.92 |
| Operating revenue | 182,826,022.76 | 102,479,717.84 | ||||
| Income tax expenses | - | 2,574,241.97 | ||||
| Net profit | 19,478,739.06 | 14,587,371.13 | ||||
| Total comprehensive income | 19,478,739.06 | 14,587,371.13 |
VII. Interests in Other Entities (cont’d)
2. Interests in associates (cont’d)
The table below presents the aggregate financial information of associates insignificant to theGroup:
| 2021 | 2020 | |||||
| Associates | ||||||
| Total carrying amount of investments | 9,997,251.05 | 1,771,115.81 | ||||
| Total amounts based on the Company’s interests: | ||||||
| Net loss | (200,249.84) | 76,960.49 | ||||
| Total comprehensive loss | (200,249.84) | 76,960.49 | ||||
VIII. Risks Associated with Financial Instruments
1. Classification of financial instruments
The carrying amounts of various financial instruments as at the balance sheet date are as follows:
2021
Financial assets
| At fair value through profit or loss | At amortized cost | At fair value through other comprehensive income | Total | ||||
| As required by standard | As required by standard | ||||||
| Cash and bank balances | - | 1,664,336,339.35 | - | 1,664,336,339.35 | |||
| Financial assets held for trading | 788,185,521.57 | - | - | 788,185,521.57 | |||
| Notes receivable | - | 13,272,025.04 | - | 13,272,025.04 | |||
| Accounts receivable | - | 741,135,648.09 | - | 741,135,648.09 | |||
| Receivables financing | - | - | 30,692,449.25 | 30,692,449.25 | |||
| Other receivables | - | 70,220,378.02 | - | 70,220,378.02 | |||
| Contract assets | - | 24,414,117.64 | - | 24,414,117.64 | |||
| Current portion of non-current assets | - | 108,385,000.00 | - | 108,385,000.00 | |||
| Long-term receivables | - | 143,750.00 | - | 143,750.00 | |||
| Other non-current financial assets | 162,523,519.41 | - | - | 162,523,519.41 | |||
| Other non-current assets | - | 300,150,000.00 | - | 300,150,000.00 | |||
| 950,709,040.98 | 2,922,057,258.14 | 30,692,449.25 | 3,903,458,748.37 |
VIII. Risks Associated with Financial Instruments (cont’d)
1. Classification of financial instruments (cont’d)
The carrying amounts of various financial instruments as at the balance sheet date are as follows:
(cont’d)
2021 (cont’d)
Financial liabilities
| At fair value through profit or loss | At amortized cost | Total | |||||||
| As required by standard | |||||||||
| Short-term borrowings | - | 228,312,880.73 | 228,312,880.73 | ||||||
| Financial liabilities held for trading | 110, 746,939.04 | - | 110, 746,939.04 | ||||||
| Notes payable | - | 149,191,690.00 | 149,191,690.00 | ||||||
| Accounts payable | - | 619,265,856.18 | 619,265,856.18 | ||||||
| Other payables | - | 100,018,273.09 | 100,018,273.09 | ||||||
| Current portion of non-current liabilities | - | 38,495,724.83 | 38,495,724.83 | ||||||
| Long-term borrowings | - | 325,026,188.49 | 325,026,188.49 | ||||||
| Lease liabilities | - | 65,213,555.87 | 65,213,555.87 | ||||||
| Other current liabilities | - | 9,391,823.29 | 9,391,823.29 | ||||||
| Other non-current liabilities | 29,074,219.95 | 107,104,084.49 | 136,178,304.44 | ||||||
| 139,821,158.99 | 1, 642,020,076.97 | 1, 781,841,235.96 |
2020
Financial assets
| At fair value through profit or loss | At amortized cost | At fair value through other comprehensive income | Total | ||||
| As required by standard | As required by standard | ||||||
| Cash and bank balances | - | 885,711,053.88 | - | 885,711,053.88 | |||
| Financial assets held for trading | 1,636,296,430.31 | - | - | 1,636,296,430.31 | |||
| Notes receivable | - | 12,744,582.88 | - | 12,744,582.88 | |||
| Accounts receivable | - | 469,635,423.58 | - | 469,635,423.58 | |||
| Current portion of non-current assets | - | 2,556,000.00 | - | 2,556,000.00 | |||
| Long-term receivables | - | 1,475,000.00 | - | 1,475,000.00 | |||
| Other non-current assets | - | 935,075,000.00 | - | 935,075,000.00 | |||
| Receivables financing | - | - | 56,737,978.04 | 56,737,978.04 | |||
| Other receivables | - | 79,103,472.64 | - | 79,103,472.64 | |||
| Contract assets | - | 29,504,693.97 | - | 29,504,693.97 | |||
| Other non-current financial assets | 5,948,588.15 | - | - | 5,948,588.15 | |||
| 1,642,245,018.46 | 2,415,805,226.95 | 56,737,978.04 | 4,114,788,223.45 |
VIII. Risks Associated with Financial Instruments (cont’d)
1. Classification of financial instruments (cont’d)
The carrying amounts of various financial instruments as at the balance sheet date are as follows:
(cont’d)
2020 (cont’d)
Financial liabilities
| At fair value through profit or loss | At amortized cost | Total | |||||||
| As required by standard | |||||||||
| Short-term borrowings | - | 39,533,281.84 | 39,533,281.84 | ||||||
| Financial liabilities held for trading | 41,408,109.80 | - | 41,408,109.80 | ||||||
| Notes payable | - | 104,855,187.97 | 104,855,187.97 | ||||||
| Accounts payable | - | 503,042,561.05 | 503,042,561.05 | ||||||
| Other payables | - | 81,743,851.64 | 81,743,851.64 | ||||||
| Current portion of non-current liabilities | - | 226,597,528.74 | 226,597,528.74 | ||||||
| Long-term borrowings | - | 353,412,388.29 | 353,412,388.29 | ||||||
| Other current liabilities | 158,452.18 | 11,811,507.85 | 11,969,960.03 | ||||||
| Other non-current liabilities | 68,737,415.25 | - | 68,737,415.25 | ||||||
| 110,303,977.23 | 1,320,996,307.38 | 1,431,300,284.61 |
2. Transfer of financial assets
Financial assets already transferred but not wholly derecognized
On 31 December 2021, the carrying value of the bank acceptance notes (BAs) endorsed by theGroup to suppliers for the settlement of accounts payable was RMB9,391,823.29 (31 December2020: RMB11,800,000.00). The Group believed that the Group retained almost all their risks andrewards, including the risk of default associated therewith, so the Group continued to confirm themand the settled accounts payable associated therewith in full amount. After the endorsement, theGroup will no longer reserve the right to use them, including the right to sell, transfer, or pledgethem to other third parties. On 31 December 2021, the carrying value of the accounts payablesettled with them totaled RMB9,391,823.29 (31 December 2020: RMB11,800,000.00).
Transferred financial assets that have been wholly derecognized but continue to be involved
On 31 December 2021, the carrying value of the BAs endorsed by the Group to suppliers for thesettlement of accounts payable was RMB23,598,786.91 (31 December 2020: RMB25,235,099.85).On 31 December 2021, their maturity date varied from one to 12 months. As stipulated in theNegotiable Instruments Law, if the accepting bank refuses to pay, their holders have the right torecourse from the Group ("continue to be involved"). The Group believed that the Group hadtransferred almost all their risks and rewards, so the Group derecognized the carrying value of themand the settled accounts payable associated therewith. The maximum loss and undiscounted cashflows from continuing involvement and repurchase were equal to their carrying value. The Groupbelieved that it was insignificant to continue to involve in fair value.
In 2021, the Group did not confirm the gains or losses on the transfer day. The Group had noincome or expenses recognized in the current year and cumulatively due to continued involvementin derecognized financial assets. Endorsements occurred roughly evenly during the year.
VIII. Risks Associated with Financial Instruments (cont’d)
3. Financial instrument risks
The Group is faced with various financial instrument risks in its routine activities, mainly including credit risk,liquidity risk and market risk (including exchange rate risk and interest rate risk). The Group mainly has thefollowing instruments: cash and bank balances, equity investment, borrowings, notes receivable, accountsreceivable, notes payable and accounts payable. The risk management strategies adopted by the Group to lowerrisks associated with these financial instruments are described below.
The Group's Board of Directors is fully responsible for the determination of risk management objectives andpolicies and assumes ultimate responsibility for such risk management objectives and policies, but the Board ofDirectors has authorized the Chief Executive's Office of the Group to design and implement procedures to ensurethe effective execution of risks management objectives and policies. The Board of Directors reviews theeffectiveness of the executed procedures and the rationality of the risk management objectives and policiesthrough the monthly reports submitted by the treasury supervisor. The internal auditors of the Group will alsoaudit the risk management policies and procedures and will report relevant findings to the Audit Committee.
The Group's overall goals for risk management are to develop risk management policies to minimize risks withoutunduly affecting the competitiveness and strain capacity of the Group.
Credit risk
The Group transacts only with recognized and reputable third parties. According to the Group's policies, creditchecks are needed for all customers that require transactions should be conducted by means of credit.Additionally, the Group performs continuous monitoring of the balance of accounts receivable to ensure that theGroup will not face major bad debt risk. For transactions not settled in the accounting standard currency of therelevant business unit, unless specifically approved by the credit control department of the Group, the Group willnot provide credit transaction conditions.
Since the counterparties of cash and bank balances and notes receivable are banks with a good reputation and highcredit rating, the credit risk of such financial instruments is low.
Other financial assets of the Group mainly include accounts receivable, other receivables and contract assets, thecredit risk of which arises from counterparty default, and the maximum risk exposure is equal to the carryingvalue of these instruments.
The Group transacts only with recognized and reputable third parties, so no collateral is required. Credit riskconcentration is managed by customer/counterparty, geographic region and industry. Because the customer baseof accounts receivable of the Group is widely dispersed in different departments and industries, there is no majorcredit risk concentration within the Group. The Group does not hold any collateral or other credit enhancement onthe balance of accounts receivable.
Criteria for judging significant increases in credit risk
The Company assesses whether or not the credit risk of the relevant financial instruments has increasedsignificantly since the initial recognition at each balance sheet date. While determining whether the credit risk hassignificantly increased since initial recognition or not, the Company takes into account the reasonable andsubstantiated information that is accessible without exerting undue extra cost or effort, including qualitative andquantitative analysis based on the historical data of the Company, external credit risk rating, and forward-lookinginformation. Based on the single financial instrument or the combination of financial instruments with similar
characteristics of credit risk, the Company compares the risk of default of financial instruments on the balancesheet date with that on the initial recognition date in order to determine changes in the risk of default during theexpected lifetime of financial instruments.
VIII. Risks Associated with Financial Instruments (cont’d)
3. Financial instrument risks (cont’d)
Credit risk (cont’d)
Definition of credit-impaired financial assetsThe standard adopted by the Group to determine whether a credit impairment occurs is consistent with the internalcredit risk management objectives of the relevant financial instrument, taking into account quantitative andqualitative criteria. When the Group assesses whether the credit impairment of debtor occurred, the principalfactors considered are as follows:
（1） Significant financial difficulty of the issuer or debtor;
（2） Debtors’ breach of contract, such as defaulting or becoming overdue on interest or principal payments;
（3） The creditor of the debtor, for economic or contractual reasons relating to the debtor’s financial difficulty,
having granted to the debtor a concession that the creditor would not otherwise consider;
（4） It is becoming probable that the debtor will enter bankruptcy or other financial restructuring;
（5） The disappearance of an active market for that financial asset because of financial difficulties of the issuer
or debtor;
（6） The purchase or origination of a financial asset at a deep discount that reflects the incurrence of credit
losses.
The credit impairment on a financial asset may be caused by the combined effect of multiple events and may notbe necessarily due to a single event.
Parameters of ECL measurementBased on whether there is a significant increase in credit risk and whether there is an impairment of assets, theGroup measures the impairment loss for different assets with ECL of 12 months or the entire lifetime respectively.The key measuring parameters of ECL include probability of default (PD), loss given default (LGD) and exposureat default (EAD). The Group takes into account the quantitative analysis of historical statistics (such as ratings ofcounterparties, manners of guarantees and types of collaterals, repayments, etc.) and forward-looking information.
The relevant definitions are as follows:
（1） PD refers to the possibility that the debtor will not be able to fulfil its obligations of repayment over
the next 12 months or throughout the entire remaining lifetime. The Group’s PD is adjusted based onthe results of the expected credit loss model, taking into account the forward-looking information toreflect the debtor’s PD under the current macroeconomic environment;
（2） LGD refers to the Group’s expectation of the extent of the loss resulting from the default exposure.
Depending on the type of counterparty, the method and priority of the recourse, and the type ofcollaterals, the LGD varies. The LGD is the percentage of loss of risk exposure at the time of default,calculated over the next 12 months or over the entire remaining lifetime;
（3） EAD is the amount that the Company should be reimbursed at the time of the default in the next 12
months or throughout the entire remaining lifetime.
The assessment of a significant increase in credit risk and the calculation of ECL both involveforward-looking information. Through the analysis of historical data, the Group identifies the key economicindicators that affect the credit risk and ECL.
VIII. Risks Associated with Financial Instruments (cont’d)
3. Financial instrument risks (cont’d)
Credit risk (cont’d)
Credit risk exposures
2021
| Carrying amount (unsecured) | Carrying amount (secured) | |||||||||
| 12-month | Lifetime | 12-month | Lifetime | |||||||
| ECL | ECL | ECL | ECL | |||||||
| Accounts receivable | - | 26,228,109.80 | - | - | ||||||
| Contract assets | - | 730,344.85 | - | - | ||||||
| Other receivables | 4,786,684.60 | 500,000.00 | - | - | ||||||
| 4,786,684.60 | 27,458,454.65 | - | - | |||||||
2020
| Carrying amount (unsecured) | Carrying amount (secured) | |||||||||
| 12-month | Lifetime | 12-month | Lifetime | |||||||
| ECL | ECL | ECL | ECL | |||||||
| Accounts receivable | - | 23,792,330.92 | - | - | ||||||
| Contract assets | - | 1,061,524.05 | - | - | ||||||
| Other receivables | 2,861,774.13 | 500,000.00 | - | - | ||||||
| 2,861,774.13 | 25,353,854.97 | - | - | |||||||
VIII. Risks Associated with Financial Instruments (cont’d)
3. Financial instrument risks (cont’d)
Liquidity risk
The Group monitors its risk to the shortage of funds using a recurring liquidity planning tool. Thistool considers the maturity profile of its financial instruments and projected cash flows fromoperations.
The maturity profile of financial liabilities based on undiscounted contractual cash flow issummarized as follows:
2021
| Within 1 month | 1-3 months | 3 months-1 year | 1-5 years | Over 5 years | Total | ||||||||
| Short-term borrowings | 190,705,475.51 | 30,521,787.76 | 7,394,911.43 | - | - | 228, 622,174.70 | |||||||
| Financial liabilities held for trading | - | - | 110,746,939.04 | - | - | 110,746,939.04 | |||||||
| Notes payable | - | - | 149,191,690.00 | - | - | 149,191,690.00 | |||||||
| Accounts payable | - | - | 619,265,856.18 | - | - | 619,265,856.18 | |||||||
| Other payables | - | - | 100,018,273.09 | - | - | 100,018,273.09 | |||||||
| Current portion of non-current liabilities | 1,430,597.18 | 2,498,486.89 | 37,889,311.44 | - | - | 41,818,395.51 | |||||||
| Long-term borrowings | - | - | - | 325,847,350.33 | 3,602,076.70 | 329,449,427.03 | |||||||
| Lease liabilities | - | - | - | 65,213,555.87 | - | 65,213,555.87 | |||||||
| Other current liabilities | - | - | 9,391,823.29 | - | - | 9,391,823.29 | |||||||
| Other non-current liabilities | - | - | - | 136,178,304.44 | - | 136,178,304.44 | |||||||
| 192,136,072.69 | 33,020,274.65 | 1,033,898,804.47 | 527,239,210.64 | 3,602,076.70 | 1,789,896,439.15 |
2020
| Within 1 month | 1-3 months | 3 months-1 year | 1-5 years | Over 5 years | Total | ||||||||
| Short-term borrowings | 4,023,064.35 | 12,877,525.22 | 22,859,189.31 | - | - | 39,759,778.88 | |||||||
| Financial liabilities held for trading | - | - | 41,408,109.80 | - | - | 41,408,109.80 | |||||||
| Notes payable | - | - | 104,855,187.97 | - | - | 104,855,187.97 | |||||||
| Accounts payable | - | - | 503,042,561.05 | - | - | 503,042,561.05 | |||||||
| Other payables | - | - | 81,743,851.64 | - | - | 81,743,851.64 | |||||||
| Current portion of non-current liabilities | 26,404,832.93 | 513,616.88 | 227,400,672.81 | - | - | 254,319,122.62 | |||||||
| Long-term borrowings | - | - | - | 9,825,103.77 | 354,814,594.04 | 364,639,697.81 | |||||||
| Other current liabilities | - | - | 11,969,960.03 | - | - | 11,969,960.03 | |||||||
| Other non-current liabilities | - | - | - | 68,737,415.25 | - | 68,737,415.25 | |||||||
| 30,427,897.28 | 13,391,142.10 | 993,279,532.61 | 78,562,519.02 | 354,814,594.04 | 1,470,475,685.05 |
VIII. Risks Associated with Financial Instruments (cont’d)
3. Financial instrument risks (cont’d)
Market risk
Interest rate risk
The Group’s exposure to risk of changes in market interest rates relates primarily to the Group’slong-term liabilities with floating interest rates.
The sensitivity analysis of interest rate risks is set out in the following table, reflecting the impact ofreasonable and probable change in interest rates on net profit or loss (through the impact on floatingrate loans) and other comprehensive income (net of tax) assuming that other variables remainconstant.
2021
| Increase/ (decrease) in basis points | Increase/ (decrease) in net profit or loss | Increase/ (decrease) in other comprehensive income net of tax | Increase/ (decrease) in total equity | |||||||||
| Loans | 0.5 | (1,361,068.13 | ) | - | (1,361,068.13) | |||||||
| Loans | (0.5 | ) | 1,361,068.13 | - | 1,361,068.13 | |||||||
2020
| Increase/ (decrease) in basis points | Increase/ (decrease) in net profit or loss | Increase/ (decrease) in other comprehensive income net of tax | Increase/ (decrease) in total equity | |||||||||
| Loans | 0.5 | (1,246,077.19 | ) | - | (1,246,077.19) | |||||||
| Loans | (0.5 | ) | 1,246,077.19 | - | 1,246,077.19 | |||||||
VIII. Risks Associated with Financial Instruments (cont’d)
3. Financial instrument risks (cont’d)
Market risk (cont’d)
Exchange rate risk
The Group is exposed to trading exchange rate risks. Such exposures arise from sales or purchasesby business units in currencies other than the units’ functional currencies. Approximately 85%(2020：76%) of the Group’s sales are priced in currencies other than the functional currencies of thebusiness units that incur the sales, and approximately 15% (2020：24%) of costs are priced in thefunctional currencies of the business units.
The sensitivity analysis of exchange rate risks is set out in the following table, reflecting the impactof reasonable and probable change in the exchange rates of EUR and USD on net profit or loss andother comprehensive income (net of tax) assuming that other variables remain constant.
2021
| Increase/ (decrease) in exchange rate (%) | Increase/ (decrease) in net profit or loss | Increase/ (decrease) in other comprehensive income net of tax | Increase/ (decrease) in total equity | |||||||||
| Stronger RMB against EUR | 2 | (1,228,442.79) | - | (1,228,442.79) | ||||||||
| Weaker RMB against EUR | (2 | ) | 1,228,442.79 | - | 1,228,442.79 | |||||||
| Stronger RMB against USD | 2 | (5,522,074.97) | - | (5,522,074.97) | ||||||||
| Weaker RMB against USD | (2 | ) | 5,522,074.97 | - | 5,522,074.97 |
2020
| Increase/ (decrease) in exchange rate (%) | Increase/ (decrease) in net profit or loss | Increase/ (decrease) in other comprehensive income net of tax | Increase/ (decrease) in total equity | ||||||||
| Stronger RMB against EUR | 2 | 847,781.70 | - | 847,781.70 | |||||||
| Weaker RMB against EUR | (2 | ) | (847,781.70 | ) | - | (847,781.70) | |||||
| Stronger RMB against USD | 2 | (291,145.12 | ) | - | (291,145.12) | ||||||
| Weaker RMB against USD | (2 | ) | 291,145.12 | - | 291,145.12 |
VIII. Risks Associated with Financial Instruments (cont’d)
4. Capital management
The primary objective of the Group’s capital management is to safeguard the Group’s ability tocontinue as a going concern and to maintain healthy capital ratios in order to support its businessand maximize shareholders’ value.
The Group manages its capital structure and makes adjustments in the light of changes in economicconditions and in the risk profiles of relevant assets. To maintain or adjust the capital structure, theGroup may adjust the dividend payment to shareholders, return capital to shareholders or issue newshares. The Group is not subject to any externally imposed capital requirements. No changes weremade in the objectives, policies or processes for managing capital during 2021 and 2020.
IX. Disclosure of Fair Values
1. Assets and liabilities measured at fair value
2021
| Input applied in the measurement of fair value | ||||||
| Quoted prices in active markets | Significant observable inputs | Significant unobservable inputs | Total | |||
| （Level 1） | （Level 2） | （Level 3） | ||||
| Continuous measurement of fair value | ||||||
| Financial assets held for trading | 775,249,020.94 | - | 12,936,500.63 | 788,185,521.57 | ||
| Receivables financing | - | 30,692,449.25 | - | 30,692,449.25 | ||
| Other non-current financial assets | 5,640,775.44 | - | 156,882,743.97 | 162,523,519.41 | ||
| 780,889,796.38 | 30,692,449.25 | 169,819,244.60 | 981, 401,490.23 | |||
| Input applied in the measurement of fair value | ||||||||
| Quoted prices in active markets | Significant observable inputs | Significant unobservable inputs | Total | |||||
| （Level 1） | （Level 2） | （Level 3） | ||||||
| Continuous measurement of fair value | ||||||||
| Financial liabilities held for trading | - | - | 110, 746,939.04 | 110, 746,939.04 | ||||
| Other non-current liabilities | - | - | 136,178,304.44 | 136,178,304.44 | ||||
| - | - | 246,925,243.48 | 246,925,243.48 | |||||
IX. Disclosure of Fair Values (cont’d)
1. Assets and liabilities measured at fair value (cont’d)
2020
| Input applied in the measurement of fair value | |||||||
| Quoted prices in active markets | Significant observable inputs | Significant unobservable inputs | Total | ||||
| （Level 1） | （Level 2） | （Level 3） | |||||
| Continuous measurement of fair value | |||||||
| Financial assets held for trading | 1,636,296,430.31 | - | - | 1,636,296,430.31 | |||
| Receivables financing | - | 56,737,978.04 | - | 56,737,978.04 | |||
| Other non-current financial assets | 5,948,588.15 | - | - | 5,948,588.15 | |||
| 1, 642,245,018.46 | 56,737,978.04 | - | 1,698,982,996.50 | ||||
| Input applied in the measurement of fair value | ||||||||
| Quoted prices in active markets | Significant observable inputs | Significant unobservable inputs | Total | |||||
| （Level 1） | （Level 2） | （Level 3） | ||||||
| Continuous measurement of fair value | ||||||||
| Financial liabilities held for trading | - | - | 41,408,109.80 | 41,408,109.80 | ||||
| Other non-current liabilities | - | - | 68,737,415.25 | 68,737,415.25 | ||||
| - | - | 110,145,525.05 | 110, 145,525.05 | |||||
IX. Disclosure of Fair Values (cont’d)
2 Assets and liabilities disclosed at fair value
2021
| Input applied in the measurement of fair value | ||||||||||
| Quoted prices in active markets | Significant observable inputs | Significant unobservable inputs | Total | |||||||
| （Level 1） | （Level 2） | （Level 3） | ||||||||
| Long-term receivables | - | - | 143,750.00 | 143,750.00 | ||||||
| Long-term borrowings | - | 325,026,188.49 | - | 325,026,188.49 | ||||||
| Current portion of non-current assets | 4,595,000.00 | 4,595,000.00 | ||||||||
| Current portion of non-current liabilities | 21,342,646.25 | - | 21,342,646.25 | |||||||
| - | 346,368,834.74 | 4,738,750.00 | 351,107,584.74 | |||||||
2020
| Input applied in the measurement of fair value | |||||||||
| Quoted prices in active markets | Significant observable inputs | Significant unobservable inputs | Total | ||||||
| （Level 1） | （Level 2） | （Level 3） | |||||||
| Long-term receivables | - | - | 1,475,000.00 | 1,475,000.00 | |||||
| Long-term borrowings | - | 353,412,388.29 | - | 353,412,388.29 | |||||
| Current portion of non-current assets | - | - | 2,556,000.00 | 2,556,000.00 | |||||
| Current portion of non-current liabilities | - | - | 226,597,528.74 | 226,597,528.74 | |||||
| - | 353,412,388.29 | 230,628,528.74 | 584,040,917.03 | ||||||
IX. Disclosure of Fair Values (cont’d)
3. Estimation of fair value
Fair value of financial instruments
The management has assessed cash and bank balances, notes receivable, accounts receivable, notespayable and accounts payable, and because the remaining maturity is not long, their fair value issimilar to their carrying value.
In a fair transaction, the fair value of financial assets and financial liabilities is determined by theamount of voluntary asset exchange or debt redemption between the parties to the transaction,rather than the amount in the case of force sale or liquidation. The following methods andassumptions are used to estimate the fair value.
The fair value of long-term receivables and long- and short-term borrowings is determined by thediscounted future cash flow method, where the market yield of other financial instruments with
similar contract terms, credit risks and remaining maturity serves as the discount rate. On 31December 2021, the result of the self-default risk assessment of long- and short-term borrowingswas not significant.
The fair value of unlisted equity instruments is estimated by the discounted valuation model, andthe assumptions used are not supported by observable market prices or interest rates. The Groupneeds to estimate the projected future cash flows (including projected future dividends and disposalincome). The Group believed that the fair value and its movements estimated by the valuationtechnique was reasonable and the most appropriate value on the balance sheet date.
4. Unobservable inputs
Below is a summary of the significant unobservable inputs to the fair value measurement of Level3:
| Closing fair value | Valuation technique | Unobservable inputs | Range | |||||||||
| Financial assets held for trading | 12,936,500.63 | Option pricing model | Volatility | 29.92%-42.52% | ||||||||
| Other non-current financial assets | 11,210,248.59 | Option pricing model | Volatility | 12.64%-36.25% | ||||||||
| Other non-current financial assets | 53,665,760.48 | Comparison approach | Liquidity discount | 10.00%-20.00% | ||||||||
| Other non-current financial assets | 92,006,734.90 | Market approach | Liquidity discount | 10.00%-20.00% | ||||||||
| Financial liabilities held for trading | 110,746,939.04 | Discounted cash flow method | Weighted average cost | 4.15%-12.60% | ||||||||
| Other non-current liabilities | 136,178,304.44 | Discounted cash flow method | Weighted average cost | 0.51%-10.80% |
IX. Disclosure of Fair Values (cont’d)
5. Reconciliation in fair value measurement
Reconciliation of continuous fair value measurements categorized within Level 3 of the fair valuehierarchy:
2021
| Opening | Total current gains and losses | Purchase | Disposal | Closing | Change in unrealized gains and losses for the period of assets | ||||||||||
| balance | Through profit or loss | Through other comprehensive income | balance | held at end of period through profit or loss | |||||||||||
| Financial assets held for trading | - | 13,181,681.67 | (245,181.04) | - | - | 12,936,500.63 | 13,181,681.67 | ||||||||
| Other non-current financial assets | - | 25,029,844.93 | (559,232.00) | 132,412,131.04 | - | 156,882,743.97 | 25,029,844.93 | ||||||||
| - | 38,211,526.60 | (804,413.04) | 132,412,131.04 | - | 169,819,244.60 | 38,211,526.60 | |||||||||
| Opening | Total current gains and losses | Purchase | Disposal | Settlement | Closing | Change in unrealized gains and losses for the period of liabilities | |||||||||
| balance | Through profit or loss | Through other comprehensive income | balance | held at end of period through profit or loss | |||||||||||
| Financial liabilities held for trading | 41,408,109.80 | 95,161,739.92 | (3,739,957.81) | - | (36,121,968.12) | 14,039,015.25 | 110, 746,939.04 | 95,161,739.92 | |||||||
| Other non-current l iabilities | 68,737,415.25 | (18,949,558.78) | (4,342,115.80) | 104,771,579.02 | - | (14,039,015.25) | 136,178,304.44 | (18,949,558.78) | |||||||
| 110,145,525.05 | 76,212,181.14 | (8,082,073.61) | 104,771,579.02 | (36,121,968.12) | - | 246,925,243.48 | 76,212,181.14 | ||||||||
IX. Disclosure of Fair Values (cont’d)
5. Reconciliation in fair value measurement (cont’d)
Reconciliation of continuous fair value measurements categorized within Level 3 of the fair valuehierarchy: (cont’d)
2020
| Opening | Total current gains and losses | Purchase | Closing | Change in unrealized gains and losses for the period of liabilities | ||||||
| balance | Through profit or loss | Through other comprehensive income | Balance | held at end of period through profit or loss | ||||||
| Financial liabilities held for traing | - | - | - | 41,408,109.80 | 41,408,109.80 | - | ||||
| Other non-current l iabilities | - | 9,284,348.20 | 2,967,855.23 | 56,485,211.82 | 68,737,415.25 | 9,284,348.20 | ||||
| - | 9,284,348.20 | 2,967,855.23 | 97,893,321.62 | 110,145,525.05 | 9,284,348.20 | |||||
IX. Disclosure of Fair Values (cont’d)
5. Reconciliation in fair value measurement (cont’d)
In the continuous fair value measurement at Level 3, gains and losses through profit or loss relatingto financial assets and non-financial assets is analyzed as follows:
| 2021 | ||||||
| Gains and losses relating to financial assets | Gains and losses relating to non-financial assets | |||||
| Total gains and losses through profit or loss | 38,211,526.60 | - | ||||
| Change in unrealized gains and losses for the period of assets held at end of period through profit or loss | 38,211,526.60 | - | ||||
In the continuous fair value measurement at Level 3, gains and losses through profit or loss relatingto financial assets and non-financial assets is analyzed as follows:
| 2021 | ||||||
| Gains and losses relating to financial liabilities | Gains and losses relating to non-financial liabilities | |||||
| Total gains and losses through profit or loss | 76,212,181.14 | |||||
| Change in unrealized gains and losses for the period of assets held at end of period through profit or loss | 76,212,181.14 | |||||
| 2020 | ||||||
| Gains and losses relating to financial liabilities | Gains and losses relating to non-financial liabilities | |||||
| Total gains and losses through profit or loss | 9,284,348.20 | |||||
| Change in unrealized gains and losses for the period | 9,284,348.20 | |||||
IX. Disclosure of Fair Values (cont’d)
6. Transfers between levels of fair value measurement
No such transfers in the Reporting Period.
X. Relationships and Transactions with Related Parties
1. Controlling Shareholder
of assets held at end of period through profit or loss
| Relationship with the Company | Interest in the Company (%) | ||||||
| Tang Zhuolin (individual) | One of the Company’s controlling shareholders and actual controllers | 20.33 | |||||
| Tang Zhuomian (individual) | One of the Company’s controlling shareholders and actual controllers | 7.27 |
The ultimate controllers of the Company are Tang Zhuolin and Tang Zhuomian.
2. Subsidiaries
See Note VII.1.
3. Associates
See Note VII.2.
4. Other related parties
| Relationship with the Company | ||
| Qiu Yezhi | Director and General Manager | |
| Zhou Wenhui | Director, Board Secretary and Vice President | |
| Xie Weiwei | Director and Deputy General Manager | |
| Mai Zhirong | Independent Director | |
| Peng Xiaowei | Independent Director | |
| He Weifeng | Independent Director | |
| Chen Huiyi | Chairman of the Supervisory Committee | |
| Zhao Xiuhe | Supervisor | |
| He Baohua | Supervisor | |
| Shao Yongfeng | Chief Financial Officer and Vice President | |
X. Relationships and Transactions with Related Parties (cont’d)
5. Major transactions between the Group and related parties
（1） Salary of key management
| 2021 | 2020 | |||||||||
| Salary of key management | 13,521,226.06 | 12,521,009.78 |
XI. Share-based Payments
1. Overview
| 2021 | 2020 | |||||
| Total equity instruments granted | 26,840,000.00 | 22,600,000.00 |
| 2021 | 2020 | |||||
| Total employee services exchanged with share-based payments | 40,413,913.40 | 25,170,406.50 |
Equity-settled share-based payments are as follows:
| 2021 | 2020 | |||||
| Cumulative amount of equity-settled share-based payments recognized in capital surplus | 40,413,913.40 | 25,170,406.50 | ||||
| Total costs of equity-settled share-based payments | 15,243,506.90 | 25,170,406.50 |
The fair value of equity instruments at the date of grant was determined at that date. The fair valueof the first grant of restricted shares in 27 March 2020 was RMB4.38/share (RMB60.07 million),and the fair value of the reserved restricted shares in 29 December 2020 was RMB4.44/share(RMB14.59 million). The number of exercisable equity instruments at each balance sheet dateduring the vesting period is determined taking into account the separation rate, the companyperformance requirements and the individual performance requirements.
XI. Share-based Payments (cont’d)
2. Share-based payment plan
On 27 March 2020, the Company convened the 44th (Extraordinary) Meeting of the Third Board ofDirectors, where the Proposal on Granting Restricted Shares to Awardees was approved, and theBoard of Directors agreed to grant 22.85 million restricted shares to 42 awardees. The grant date forthe first grant of restricted shares was 27 March 2020. On 8 June 2020, the Company approved theProposal on Adjusting Matters Related to the 2020 Restricted Share Incentive Plan, the number ofawardees was adjusted to 40, and the number of granted restricted shares was adjusted to 22.6million. The exercise price of this restricted share grant was RMB1. As at 31 December 2020, theaccumulated amount of subscription funds received by the Company for the first grant of restrictedshares under this incentive plan totaled RMB22,600,000.00.
As authorized by the first Extraordinary Meeting of the Third Board of Directors in 2020, on29 December 2020, the Company convened the 4th (Extraordinary) Meeting of the Fourth
Board of Directors, where the Proposal on Granting Reserved Restricted Shares to Awardeeswas approved, and the Board of Directors agreed to grant 4.24 million restricted shares to 18awardees. The grant date was 29 December 2020.As at 31 December 2021, the accumulatedamount of subscription funds received by the Company for the reserved restricted shares under thisincentive plan totaled RMB4,240,000.00.
The maximum number of unexercised share options currently available under the plan is equal to10% of the shares issued by the Company. According to the plan, the maximum number of shares inthe share options granted to each eligible grantee during any period spanning 12 months is 1% ofthe shares issued by the Company at any time. Any grant of share options above this limit shall besubject to the approval of the General Meeting.
The arrangements for unlocking the restricted shares under the restricted share incentive plan are asfollows:
| Unlocking arrangements | Time of unlocking | Percentage of unlocking |
| 1st unlocking period | From the first trading day 12 months after the date of listing of the first grant of/reserved restricted shares to the day of the last trading day within 24 months after the date of listing of the first grant of restricted shares | 20% |
| 2nd unlocking period | From the first trading day 24 months after the date of listing of the first grant of/reserved restricted shares to the day of the last trading day within 36 months from the date of listing of the first grant of restricted shares | 40% |
| 3rd unlocking period | From the first trading day 36 months after the date of listing of the first grant of/reserved restricted shares to the day of the last trading day within 48 months from the date of listing of the first grant of restricted shares | 40% |
XI. Share-based Payments (cont’d)
2. Share-based payment plan (cont’d)
The unlocking conditions of the restricted share incentive plan are as follows:
In addition to meeting the relevant requirements for granting, awardees must also meet thefollowing unlocking conditions on the sale of granted restricted shares:
Performance appraisal requirements at the company level:
| Unlocking period | Performance appraisal objectives | |
| 1st unlocking period | The adjusted average net profit for 2018 and 2019 is used as the base of the performance appraisal, and the growth rate of net profit in 2020 shall not be less than 20% | |
| 2nd unlocking period | The adjusted average net profit for 2018 and 2019 is used as the base of the performance appraisal, and the growth rate of net profit in 2021 shall not be less than 35% | |
| 3rd unlocking period | The adjusted average net profit for 2018 and 2019 is used as the base of the performance appraisal, and the growth rate of net profit in 2022 shall not be less than 55% |
The net profit during the appraisal period from 2020 to 2022 mentioned above refers to the auditedconsolidated statement of net profit attributable to the shareholders of the Company excluding theimpact of share-based payments under this and other equity incentive plans. The base ofperformance appraisal is the average net profit (the net profit attributable to shareholders of thelisted company in consolidated statements) of the Company for 2018 and 2019 after deducting therelevant financial impacts of Beijing Pride New Energy Battery Technology Co., Ltd.
Performance appraisal requirements at the personal level:
The performance appraisal results of the awardees are divided into Levels A, B, C and D. Thenon-resalable restricted shares of those awardees with appraisal results of Level D will berepurchased and retired by the Company, and the repurchase price is the grant price.XII. Commitments and Contingent Events
1. Significant commitments
As at the balance sheet date, the Group had no commitments which were required to be disclosed.
2. Contingent Events
As at the balance sheet date, the Group had no contingent events which were required to bedisclosed.
XIII. Events after the Balance Sheet DateAs at the balance sheet date, the Group had no events after the balance sheet date which wererequired to be disclosed.
XIV. Other Significant Matters
1. Segment reporting
Operating segment
For management purposes, the Group divides its business in to two operating segments—domesticand overseas.
2021
| Item | Domestic entities | Overseas entities | Offset | Total |
| Operating revenue | 1,432,489,346.39 | 2,404,840,482.92 | (312,595,045.37) | 3, 524,734,783.94 |
| Cost of sales | 963,221,707.93 | 1,820,431,964.95 | (228,581,613.09) | 2,555,072,059.79 |
| Total assets | 5,013,665,276.72 | 2,480,339,949.36 | (1,136,836,390.89) | 6,357,168,835.19 |
| Total liabilities | 1,385,366,306.26 | 1,778,520,920.31 | (660,293,937.05) | 2,503,593,289.52 |
2020
| Item | Domestic entities | Overseas entities | Offset | Total |
| Operating revenue | 897,355,883.51 | 2,225,366,265.77 | (206,452,006.15) | 2,916,270,143.13 |
| Cost of sales | 621,843,057.98 | 1,671,361,093.30 | (194,055,324.92) | 2,099,148,826.36 |
| Total assets | 4,554,466,542.78 | 2,226,726,088.74 | (457,955,944.47) | 6,323,236,687.05 |
| Total liabilities | 649,833,167.78 | 1,592,859,685.18 | (150,984,644.21) | 2,091,708,208.75 |
XIV. Other Significant Matters (cont’d)
2. Leases
(1) As lessee
| 2021 | ||||||
| Interest expense on lease liabilities | 2,127,205.02 | |||||
| Short term lease expense through profit or loss adopting simplified approach | 206,887.72 | |||||
| Total cash outflows related to lease | 17,062,209.03 |
Assets leased by the Group include houses and buildings, and transportation equipment used in the course ofbusiness,the lease term of houses,buildings and machinery is usually 8 years, and the lease term oftransportation equipment is usually 3 years.
Significant operating leasesAccording to the lease contracts signed with the lessors, minimum lease payments under irrevocableoperating leases falling due are as follows:
| 2020 | |||
| Within 1 year (inclusive) | 18,542,564.92 | ||
| 1-2 years (inclusive of 2 years) | 17,856,537.46 | ||
| 2-3 years (inclusive of 3 years) | 16,645,976.23 | ||
| Over 3 years | 59,133,965.81 | ||
| 112,179,044.42 |
Other information on lease
For the right-of-use assets, see Note V.17; for the simplified approach on short-term leases and leases ofassets of low value, see Note III.27; for lease liabilities, see Note V.31&34.
XV. Notes to Major Items in the Company Financial Statements
1. Accounts receivable
Accounts receivable are interest-free. The aging of accounts receivable is analyzed as follows:
| 2021 | 2020 | ||||||||||||
| Within 1 year | 114,456,911.82 | 113,429,366.77 | |||||||||||
| 1-2 years | 38,918,748.38 | 41,024,601.08 | |||||||||||
| 2-3 years | 2,987,247.70 | 438,024.56 | |||||||||||
| 3-4 years | - | 3,014,635.01 | |||||||||||
| 4-5 years | 1,454,595.00 | 170,190.80 | |||||||||||
| Over 5 years | 1,556,499.20 | 2,094,629.83 | |||||||||||
| 159,374,002.10 | 160,171,448.05 | ||||||||||||
| Less: allowances for doubtful accounts receivable | 4,670,936.43 | 6,654,009.15 | |||||||||||
| 154,703,065.67 | 153,517,438.90 | ||||||||||||
| 2021 | |||||||||||||
| Gross amount | Allowance | Carrying amount | |||||||||||
| Amount | Percentage | Amount | Percentage | ||||||||||
| （%） | （%） | ||||||||||||
| Accounts receivable for which allowances are established individually | 3,011,094.20 | 1.89 | 3,011,094.20 | 100 | - | ||||||||
| Accounts receivable for which allowances are established by group with similar credit risk characteristics | 156,362,907.90 | 98.11 | 1,659,842.23 | 1.06 | 154,703,065.67 | ||||||||
| 159,374,002.10 | 100.00 | 4,670,936.43 | 154,703,065.67 | ||||||||||
| 2020 | |||||||||||
| Gross amount | Allowance | Carrying amount | |||||||||
| Amount | Percentage | Amount | Percentage | ||||||||
| （%） | （%） | ||||||||||
| Accounts receivable for which allowances are established individually | 3,030,944.40 | 1.89 | 3,030,944.40 | 100.00 | - | ||||||
| Accounts receivable for which allowances are established by group with similar credit risk characteristics | 157,140,503.65 | 98.11 | 3,623,064.75 | 2.31 | 153,517,438.90 | ||||||
| 160,171,448.05 | 100.00 | 6,654,009.15 | 153,517,438.90 | ||||||||
XV. Notes to Major Items in the Company Financial Statements (cont’d)
1. Accounts receivable (cont’d)
As at 31 December 2021, accounts receivable for which allowances are established individually areas follows:
| Gross amount | Allowance | ECL （%） | Reason for allowance | ||||||||
| Customer 2 | 939,000.00 | 939,000.00 | 100.00 | Customer’s inability to settle the amount due | |||||||
| Customer 3 | 641,600.00 | 641,600.00 | 100.00 | Customer’s inability to settle the amount due | |||||||
| Customer 4 | 608,800.00 | 608,800.00 | 100.00 | Customer’s inability to settle the amount due | |||||||
| Customer 5 | 515,595.00 | 515,595.00 | 100.00 | Customer’s inability to settle the amount due | |||||||
| Customer 11 | 283,000.00 | 283,000.00 | 100.00 | Customer’s inability to settle the amount due | |||||||
| Other companies | 23,099.20 | 23,099.20 | 100.00 | Customer’s inability to settle the amount due | |||||||
| 3,011,094.20 | 3,011,094.20 |
As at 31 December 2020, accounts receivable for which allowances are established individually areas follows:
| Gross amount | Allowance | ECL （%） | Reason for allowance | ||||||||
| Customer 2 | 981,949.40 | 981,949.40 | 100.00 | Customer’s inability to settle the amount due | |||||||
| Customer 3 | 641,600.00 | 641,600.00 | 100.00 | Customer’s inability to settle the amount due | |||||||
| Customer 4 | 608,800.00 | 608,800.00 | 100.00 | Customer’s inability to settle the amount due | |||||||
| Customer 5 | 515,595.00 | 515,595.00 | 100.00 | Customer’s inability to settle the amount due | |||||||
| Customer 11 | 283,000.00 | 283,000.00 | 100.00 | Customer’s inability to settle the amount due | |||||||
| 3,030,944.40 | 3,030,944.40 |
Accounts receivable for provision for bad debts according to the combination of credit risk characteristics:
| 2021 | 2020 | ||||||||||||||||
| Estimated book balance of default | ECL(%) | Expected credit losses within the exsisting period | Estimated book balance of default | ECL(%) | Expected credit losses within the exsisting period | ||||||||||||
| Within 1 year | 114,456,911.82 | 0.34 | 390,298.12 | 113,429,366.77 | 1.03 | 1,170,806.97 | |||||||||||
| 1-2 years | 38,918,748.38 | 0.94 | 365,205.21 | 41,024,601.08 | 1.71 | 699,477.21 | |||||||||||
| 2-3 years | 2,987,247.70 | 30.27 | 904,338.90 | 438,024.56 | 37.50 | 164,269.33 | |||||||||||
| 3-4 years | - | - | - | 1,517,090.61 | 56.50 | 857,090.61 | |||||||||||
| 4-5 years | - | - | - | 170,190.80 | 100.00 | 170,190.80 | |||||||||||
| Over 5 years | - | - | - | 561,229.83 | 100.00 | 561,229.83 | |||||||||||
| 156,362,907.90 | 1,659,842.23 | 157,140,503.65 | 3,623,064.75 | ||||||||||||||
XV. Notes to Major Items in the Company Financial Statements (cont’d)
1. Accounts receivable (cont’d)
Movements in allowances for doubtful accounts receivable are as follows:
| Opening balance | Established in the period | Written off in the period | Reversed in the period | Closing balance | ||||
| 2021 | 6,654,009.15 | 84,975.11 | (1,369,120.41) | (698,927.42) | 4,670,936.43 | |||
| 2020 | 2,668,130.50 | 3,985,878.65 | - | - | 6,654,009.15 |
Top 5 of accounts receivable are as follows:
| 2021 | As a % of the closing balance of total accounts receivable | Allowance | ||||
| Dongfang Precision (HK) | 77,716,283.13 | 48.76 | - | |||
| Dongfang Precision (Netherland) | 33,917,508.35 | 21.28 | - | |||
| Customer 12 | 7,126,000.00 | 4.47 | 145,370.40 | |||
| Customer 13 | 4,558,625.50 | 2.86 | 92,995.96 | |||
| Customer 14 | 2,730,000.00 | 1.71 | 55,692.00 | |||
| 126,048,416.98 | 79.08 | 294,058.36 |
| 2020 | As a % of the closing balance of total accounts receivable | Allowance | ||||
| Dongfang Precision (HK) | 72,788,759.87 | 45.44 | - | |||
| Dongfang Precision (Netherland) | 45,490,692.42 | 28.40 | - | |||
| Customer 1 | 3,500,000.00 | 2.19 | 65,100.00 | |||
| Customer 18 | 3,155,678.99 | 1.97 | 58,695.63 | |||
| Customer 19 | 2,890,454.67 | 1.80 | 53,762.46 | |||
| 127,825,585.95 | 79.81 | 177,558.09 |
XV. Notes to Major Items in the Company Financial Statements (cont’d)
2. Other receivables
| 2021 | 2020 | |||||
| Other receivables | 444,140,266.79 | 28,388,543.22 | ||||
| Dividends receivable | - | 40,000,000.00 | ||||
| 444,140,266.79 | 68,388,543.22 |
The aging of other receivables is analyzed as follows:
| 2021 | 2020 | |||||
| Within 1 year | 442,798,058.31 | 26,448,285.13 | ||||
| 1-2 years | 548,952.82 | 278,657.36 | ||||
| 2-3 years | 52,186.57 | 732,604.03 | ||||
| 3-4 years | 288,333.00 | 1,871,615.53 | ||||
| 4-5 years | 1,495,285.41 | 37,693.48 | ||||
| Over 5 years | 112,475.22 | 174,712.23 | ||||
| 445,295,291.33 | 29,543,567.76 | |||||
| Less: allowances for doubtful other | 1,155,024.54 | 1,155,024.54 |
| receivables | ||||||
| 444,140,266.79 | 28,388,543.22 |
Other receivables are classified by nature as follows:
| 2021 | 2020 | |||||
| Internal transactions with related parties | 438,222,987.97 | 16,386,270.48 | ||||
| Prepaid service charges | 3,277,042.22 | 2,663,309.52 | ||||
| Security deposits | 1,427,885.96 | 1,818,495.96 | ||||
| Employee loans and petty cash | 1,722,721.94 | 806,740.89 | ||||
| Performance compensation | 500,000.00 | 500,000.00 | ||||
| Others | 144,653.24 | 7,368,750.91 | ||||
| 445,295,291.33 | 29,543,567.76 |
XV. Notes to Major Items in the Company Financial Statements (cont’d)
2. Other receivables (cont’d)
Movements in allowances for doubtful other receivables that are established based on the 12-monthECL and the lifetime ECL are as follows:
2021
| Stage 1 | Stage 2 | Stage 3 | Total | ||||||||
| 12-month ECL | Lifetime ECL | Financial assets with credit impairment (lifetme ECL) | |||||||||
| Opening and closing balance | 655,024.54 | 500,000.00 | - | 1,155,024.54 | |||||||
2020
| Stage 1 | Stage 2 | Stage 3 | Total | ||||||||
| 12-month ECL | Lifetime ECL | Financial assets with credit impairment (lifetime ECL) | |||||||||
| Opening balance | 527,286.39 | 2,460,000.00 | - | 2,987,286.39 | |||||||
| Established in the period | 133,781.06 | - | - | 133,781.06 | |||||||
| Reversed in the period | 6,042.91 | 1,960,000.00 | - | 1,966,042.91 | |||||||
| Closing balance | 655,024.54 | 500,000.00 | - | 1,155,024.54 | |||||||
XV. Notes to Major Items in the Company Financial Statements (cont’d)
2. Other receivables (cont’d)
Movements in allowances for doubtful other receivables are as follows:
| Opening balance | Established in the period | Reversed in the period | Closing balance | ||||||||
| 2021 | 1,155,024.54 | - | - | 1,155,024.54 | |||||||
| 2020 | 2,987,286.39 | 133,781.06 | 1,966,042.91 | 1,155,024.54 |
As at 31 December 2021, top 5 of other receivables are as follows:
| 2021 | As a % of total other receivables | Nature | Age | Closing balance of allowance | |||||||||||
| Hainan Yineng | 412, 234,185.81 | 92.58 | Current account | Within 1 year | - | ||||||||||
| Yinglian Digital | 15,156,527.09 | 3.40 | Current account | Within 1 year | - | ||||||||||
| Digicom Guangdong | 4,704,601.17 | 1.06 | Current account | Within 1 year | - | ||||||||||
| Dongfang Digicom | 3,065,170.33 | 0.69 | Current account | Within 1 year | - | ||||||||||
| Shunyi Investment | 1,698,000.00 | 0.38 | Current account | Within 1 year | - | ||||||||||
| 436,858,484.40 | 98.11 | - |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
As at 31 December 2020, top 5 of other receivables are as follows:
| 2020 | As a % of total other receivables | Nature | Age | Closing balance of allowance | |||||||||||
| Dongfang Precision (Netherland) | 11,970,591.46 | 40.52 | Current account | Within 1 year | - | ||||||||||
| Fosber ASIA | 2,479,766.39 | 8.39 | Current account | Within 1 year | - | ||||||||||
| Shunyi Investment | 1,698,000.00 | 5.75 | Current account | Within 1 year | - | ||||||||||
| Entity 5 | 1,494,884.38 | 5.06 | Current account | Within 1 year | - | ||||||||||
| Entity 6 | 768,814.00 | 2.60 | Deposits | 2-3 years | 38,440.70 | ||||||||||
| 18,412,056.23 | 62.32 | 38,440.70 |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
XV. Notes to Major Items in the Company Financial Statements (cont’d)
3. Long-term equity investments
2021
| Opening | Change in the period | Period-end | |||||||||||||
| balance | Opening impairment allowance | Additional investment | Reduction in investment | Change in other equity | Write-off impairment | Closing balance | Closing impairment allowance | ||||||||
| Subsidiaries | |||||||||||||||
| Dong Fang Precision (HK) Limited | 1,856,010.00 | - | - | - | - | - | 1,856,010.00 | - | |||||||
| Dongfang Precision (Netherland) | 307,666.80 | - | - | - | - | - | 307,666.80 | - | |||||||
| Guangdong Fosber Intelligent Equipment Co., Ltd. | 16,738,279.20 | - | 36,121,968.12 | - | 1,381,943.40 | - | 54,242,190.72 | - | |||||||
| Suzhou Shunyi Investment Co., Ltd. | 305,584,828.17 | - | - | - | - | - | 305,584,828.17 | - | |||||||
| Suzhou Parsun Power Machine Co., Ltd. | 106,359,575.73 | (61,855,054.35) | ) | - | 81,305,560.15 | 3,666,362.53 | 16,551,568.36 | 28,720,378.11 | (45,303,485.99 | ) | |||||
| Foshan Yinglian Digital Printing Equipment Co., Ltd. | 21,903,462.34 | - | - | - | - | - | 21,903,462.34 | - | |||||||
| Dongfang Digicom Data Technology Co., Ltd. | 3,000,000.00 | - | - | - | - | - | 3,710,751.60 | - | |||||||
| Dongfang Digicom Data Technology (Guangdong) Co., Ltd. | - | - | 1.00 | - | 710,751.60 | - | 1.00 | - | |||||||
| Hainan Yineng Investment Co., Ltd. | - | - | 100,000,000.00 | - | - | - | 100,000,000.00 | - | |||||||
| Italy EDF | - | - | - | - | 977,696.67 | - | 977,696.67 | - | |||||||
| Tianjin Hangchuang | - | - | 20,000,000.00 | - | - | - | 20,000,000.00 | - | |||||||
| 455,749,822.24 | (61,855,054.35 | ) | 156,121,969.12 | (81,305,560.15) | 6,736,754.20 | 16,551,568.36 | 537,302,985.41 | (45,303,485.99 | ) | ||||||
| Opening | Change in the period | Period-end | |||||||||||||
| balance | Opening impairment allowance | Additional investment | Reduction in investment | Investment income under equity method | Closing balance | Closing impairment allowance | |||||||||
| Associates/joint ventures | |||||||||||||||
| Guangdong Jaten Robot & Automation Co., Ltd. | 70,900,088.92 | - | - | - | 3,880,256.70 | 74,780,345.62 | - | ||||||||
XV. Notes to Major Items in the Company Financial Statements (cont’d)
3. Long-term equity investments (cont’d)
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
2020
| Opening | Change in the period | Period-end | |||||||||||||
| balance | Opening impairment allowance | Additional investment | Reduction in investment | Impairment allowance | Closing balance | Closing impairment allowance | |||||||||
| Subsidiaries | |||||||||||||||
| Dong Fang Precision (HK) Limited | 1,856,010.00 | - | - | - | - | 1,856,010.00 | - | ||||||||
| Dongfang Precision (Netherland) | 307,666.80 | - | - | - | - | 307,666.80 | - | ||||||||
| Guangdong Fosber Intelligent Equipment Co., Ltd. | 16,738,279.20 | - | - | - | - | 16,738,279.20 | - | ||||||||
| Suzhou Shunyi Investment Co., Ltd. | 305,584,828.17 | - | - | - | - | 305,584,828.17 | - | ||||||||
| Suzhou Parsun Power Machine Co., Ltd. | 106,359,575.73 | (61,855,054.35) | - | - | - | 106,359,575.73 | (61,855,054.35) | ||||||||
| Foshan Yinglian Digital Printing Equipment Co., Ltd. | - | - | 21,903,462.34 | - | - | 21,903,462.34 | - | ||||||||
| Dongfang Digicom | - | - | 3,000,000.00 | - | - | 3,000,000.00 | - | ||||||||
| 430,846,359.90 | (61,855,054.35) | 24,903,462.34 | - | - | 455,749,822.24 | (61,855,054.35) | |||||||||
| Opening | Change in the period | Period-end | ||||||||||||||||||
| balance | Opening impairment allowance | Additional investment | Reduction in investment | Investment income under equity method | Closing balance | Closing impairment allowance | ||||||||||||||
| Associates/joint ventures | ||||||||||||||||||||
| Foshan Yinglian Digital Printing Equipment Co., Ltd. | 10,510,735.47 | - | - | 10,510,735.47 | - | - | - | |||||||||||||
| Guangdong Jaten Robot & Automation Co., Ltd. | 60,136,740.98 | - | 7,700,000.00 | - | 3,063,347.94 | 70,900,088.92 | - | |||||||||||||
| 70,647,476.45 | - | 7,700,000.00 | 10,510,735.47 | 3,063,347.94 | 70,900,088.92 | - | ||||||||||||||
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
XV. Notes to Major Items in the Company Financial Statements (cont’d)
4. Operating revenue and costs
| 2021 | 2020 | |||||||||||
| Revenue | Costs | Revenue | Costs | |||||||||
| Principal operations | 384,635,560.97 | 244,033,927.30 | 347,742,217.13 | 215,188,639.98 | ||||||||
| Other operations | 102,121,739.94 | 12,332,173.69 | 10,078,539.01 | 1,398,778.91 | ||||||||
| 486,757,300.91 | 256,366,100.99 | 357,820,756.14 | 216,587,418.89 | |||||||||
Operating revenue is as follows:
| 2021 | 2020 | ||||
| Revenue arising from contracts with customers | 482,430,794.95 | 355,070,169.20 | |||
| Lease revenue | 4,326,505.96 | 2,750,586.94 | |||
| 486,757,300.91 | 357,820,756.14 |
Breakdown of operating revenue arising from contracts with customers is as follows:
2021
| Reporting segments | Total | ||
| Principal place of business | |||
| Mainland China | 214,959,492.22 | ||
| Other regions | 267,471,302.73 | ||
| 482,430,794.95 |
XV. Notes to Major Items in the Company Financial Statements (cont’d)
4. Operating revenue and costs (cont’d)
Breakdown of operating revenue arising from contracts with customers is as follows: (cont’d)
2021 (cont’d)
| Principal product type | |||
| Goods | 384,634,428.23 | ||
| Services | 59,271,971.21 | ||
| Interest income | 30,955,048.35 | ||
| Others | 7,569,347.16 | ||
| 482,430,794.95 | |||
| By revenue recognition time |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
| Revenue recognition at a point of time | 392,203,775.39 | |
| Sale of goods | 384,634,428.23 | |
| Others | 7,569,347.16 | |
| Revenue recognition for a period of time | 90,227,019.56 | |
| Rendering of services | 59,271,971.21 | |
| Interest income | 30,955,048.35 | |
XV. Notes to Major Items in the Company Financial Statements (cont’d)
4. Operating revenue and costs (cont’d)
Revenue recognized in the period included in the book value of contractual liabilities at the beginning of yearis as follows:
| 2021 | ||||||
| Advances on sales | 22,116,154.74 |
The Company’s information about contractual performance obligations is as follows:
Sale of manufactured goodsContractual performance obligations are fulfilled when delivering manufactured goods tocustomers, and normally the payment in advance for some customers are needed.
Rendering of servicesContractual performance obligations are fulfilled during the rendering of services.
The expected time for recognizing in revenue the total transaction price allocated to outstanding (orpartly outstanding) contractual performance obligations as at the period-end is as follows:
| 2021 | 2020 | |||||
| Within 1 year | 21,697,782.14 | 22,116,154.74 |
5. Investment income
| 2021 | 2020 | ||||||
| Dividends under cost method | 18,992,000.00 | 58,868,681.95 | |||||
| Income from disposal of long-term equity investments | 21,681,323.17 | - | |||||
| Income from financial assets held for trading | 13,531,732.69 | 50,739,231.14 | |||||
| Income from long-term equity investments measured at equity method | 3,880,256.70 | 2,889,349.81 | |||||
| 58,085,312.56 | 112,497,262.90 |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
XV. Notes to Major Items in the Company Financial Statements (cont’d)
6. Major transactions between the Company and related parties
?
(1) Transaction of goods and services with related parties
Purchases of goods and services from related parties
| 2021 | 2020 | |||
| Fosber Group | Purchases of goods | 4,134.82 | 5,055.07 | |
| Italy EDF | Purchases of goods | 1,423,463.44 | 1,368,331.66 | |
| 1,427,598.26 | 1,373,386.73 |
Sales of goods and services to related parties
| Nature of transaction | 2021 | 2020 | ||||
| Sales of goods | ||||||
| Dongfang Precision (HK) | Sales of goods | 104,120,103.27 | 90,284,263.88 | |||
| Dongfang Precision (Netherland) | Sales of goods | 34,585,113.86 | 48,316,946.34 | |||
| Fosber ASIA | Sales of goods | 7,016,887.07 | 3,737,965.90 | |||
| Italy EDF | Sales of goods | 8,028,881.97 | 7,827,461.53 | |||
| 153,750,986.17 | 150,166,637.65 | |||||
| Rendering of services | ||||||
| Hainan Yineng | Rendering of services | 45,999,823.31 | - | |||
| Fosber ASIA | Rendering of services | 4,297,934.53 | 2,636,301.22 | |||
| Italy EDF | Rendering of services | 631,728.39 | - | |||
| Fosber ASIA | Rendering of services | 246,169.29 | 3,088,035.44 | |||
| Yinglian Digital | Rendering of services | 105,216.14 | - | |||
| Digicom Guangdong | Rendering of services | 9,312.91 | - | |||
| 51,344,849.78 | 5,724,336.66 | |||||
XV. Notes to Major Items in the Company Financial Statements (cont’d)
6. Major transactions between the Company and related parties (cont’d)
?
(2) Interest income of related parties
| Nature of transaction | 2021 | 2020 | |||||
| Hainan Yineng | Interest income | 30,593,754.97 | - | ||||
| Yinglian Digital | Interest income | 227,996.66 | - | ||||
| Dongfang Digicom | Interest income | 56,624.19 | - | ||||
| Digicom Guangdong | Interest income | 76,672.53 | - | ||||
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
| 30,955,048.35 | - |
?
(3) Interest expenses of related parties
| Nature of transaction | 2021 | 2020 | ||||
| Dongfang Precision (Netherland) | Interest expenses | 605,927.88 | - | |||
?
(4) Lending to and borrowing from related parties
Borrowing from related parties
2021
| Borrowing amount | Start date | End date | |||||||
| Hainan Yineng | 50,000,000.00 | 2021/10/29 | 2021/12/1 | ||||||
| Hainan Yineng | 50,000,000.00 | 2021/11/24 | 2021/12/1 | ||||||
| Hainan Yineng | 50,000,000.00 | 2021/11/24 | 2022/2/10 | ||||||
| Dongfang Precision (Netherland) | 88,751,250.00 | 2021/5/7 | 2022/5/6 | ||||||
| Dongfang Precision (Netherland) | 1,548,180.00 | 2021/6/2 | 2022/6/1 | ||||||
| Dongfang Precision (Netherland) | 773,152.06 | 2021/3/3 | 2022/3/2 | ||||||
| 241,072,582.06 |
XV. Notes to Major Items in the Company Financial Statements (cont’d)
6. Major transactions between the Company and related parties (cont’d)
?
(4) Lending to and borrowing from related parties
(cont’d)
Lending to related parties
2021
| Lending amount | Start date | End date | ||||||||
| Hainan Yineng | 200,010,000.00 | 2021/1/7 | 2026/1/6 | |||||||
| Hainan Yineng | 100,000,000.00 | 2021/1/5 | 2026/1/4 |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
| Hainan Yineng | 30,000,000.00 | 2021/3/16 | 2026/3/15 | |||||||
| Hainan Yineng | 64,500,000.00 | 2021/6/21 | 2026/6/20 | |||||||
| Hainan Yineng | 35,500,000.00 | 2021/7/5 | 2026/7/4 | |||||||
| Foshan Yinglian | 5,545,083.84 | 2021/12/10 | 2022/12/9 | |||||||
| Foshan Yinglian | 3,377,458.98 | 2021/8/4 | 2022/8/3 | |||||||
| Foshan Yinglian | 911,263.10 | 2021/10/15 | 2022/10/14 | |||||||
| Foshan Yinglian | 463,213.20 | 2021/4/15 | 2022/4/14 | |||||||
| Foshan Yinglian | 239,012.32 | 2021/6/21 | 2022/6/20 | |||||||
| Foshan Yinglian | 192,577.32 | 2021/12/8 | 2022/12/7 | |||||||
| Foshan Yinglian | 114,770.60 | 2021/8/18 | 2022/8/17 | |||||||
| Foshan Yinglian | 92,227.10 | 2021/8/12 | 2022/8/11 | |||||||
| Foshan Yinglian | 58,874.20 | 2021/12/10 | 2022/12/9 | |||||||
| Dongfang Digicom | 1,000,000.00 | 2021/7/14 | 2026/7/13 | |||||||
| Dongfang Digicom | 950,000.00 | 2021/11/12 | 2026/11/11 | |||||||
| Dongfang Digicom | 1,000,000.00 | 2021/12/24 | 2026/12/23 | |||||||
| Digicom Guangdong | 600,000.00 | 2021/7/14 | 2026/7/13 | |||||||
| Digicom Guangdong | 1,000,000.00 | 2021/9/10 | 2026/9/9 | |||||||
| Digicom Guangdong | 950,000.00 | 2021/11/12 | 2026/11/11 | |||||||
| Digicom Guangdong | 950,000.00 | 2021/11/24 | 2026/11/23 | |||||||
| Digicom Guangdong | 1,000,000.00 | 2021/12/24 | 2026/12/23 | |||||||
| 448,454,480.66 |
XV. Notes to Major Items in the Company Financial Statements (cont’d)
6. Major transactions between the Company and related parties (cont’d)
(5)Guarantees for related parties
Provision of guarantees for related parties
2021
| Amount of guarantee | Start date | End date | Having expired or not | |||||||||
| Dongfang Precision (Netherland) | 241,859,950.00 | 2020/6/29 | 2023/6/29 | No | ||||||||
| Dongfang Precision (Netherland) | 177,604,620.00 | 2021/2/3 | 2022/2/3 | No |
2020
| Amount of guarantee | Start date | End date | Having expired or |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
| not | ||||||||||||
| Dongfang Precision (Netherland) | 273,542,500.00 | 2017/8/10 | 2020/8/17 | Yes | ||||||||
| Dongfang Precision (Netherland) | 360,162,000.00 | 2020/3/16 | 2021/2/18 | No | ||||||||
| Dongfang Precision (Netherland) | 268,837,500.00 | 2020/6/30 | 2023/6/29 | No |
7. Balances of amounts due from related parties
(1) Accounts receivable
| 2021 | 2020 | ||||||||
| Gross amount | Allowance | Gross amount | Allowance | ||||||
| Dongfang Precision (HK) | 77,716,283.13 | - | 72,788,759.87 | - | |||||
| Dongfang Precision (Netherland) | 33,917,508.35 | - | 45,490,692.42 | - | |||||
| Italy EDF | 2,666,531.33 | - | - | - | |||||
| Fosber ASIA | 1,934,399.54 | - | 849,666.09 | - | |||||
| Yinglian Digital | 778,894.24 | - | 660,000.00 | - | |||||
| 117,013,616.59 | - | 119,789,118.38 | - | ||||||
XV. Notes to Major Items in the Company Financial Statements (cont’d)
7. Balances of amounts due from related parties (cont’d)
(2) Other receivables
| 2021 | 2020 | ||||||||
| Gross amount | Allowance | Gross amount | Allowance | ||||||
| Hainan Yineng | 412,234,185.81 | - | - | - | |||||
| Yinglian Digital | 15,156,527.09 | - | 237,912.63 | - | |||||
| Digicom Guangdong | 4,704,601.17 | - | - | - | |||||
| Dongfang Digicom | 3,065,170.33 | - | - | - | |||||
| Shunyi Investment | 1,698,000.00 | - | 1,698,000.00 | - | |||||
| Suzhou High-Tech Zone Jinquan Business Management Partnership (Limited Partnership) | 903,000.00 | - | - | - | |||||
| Fosber ASIA | 447,649.04 | - | 2,479,766.39 | - | |||||
| Dongfang Precision (Netherland) | 13,854.53 | - | 11,970,591.46 | - | |||||
| 438,222,987.97 | - | 16,386,270.48 | - | ||||||
Except the borrowings receivable from related parties, all receivables from related parties are non-interestbearing, unsecured, and have no fixed repayment period.
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2021
XV. Notes to Major Items in the Company Financial Statements (cont’d)
8. Balances of amounts due to related parties
(1) Accounts payable
| 2021 | 2020 | |||||
| Italy EDF | 88,980.71 | - | ||||
| Dongfang Precision (Netherland) | 46,755.18 | - | ||||
| Dongfang Precision (HK) | 5,852.89 | - | ||||
| Fosber Group | - | 19,745.16 | ||||
| 141,588.78 | 19,745.16 |
(2) Other payables
| 2021 | 2020 | |||||
| Dongfang Precision (Netherland) | 91,664,646.54 | 12,129.71 | ||||
| Hainan Yineng | 50,000,000.00 | - | ||||
| Fosber ASIA | 1,138,167.89 | - | ||||
| Yinglian Digital | 11,020.46 | 28,313.20 | ||||
| Italy EDF | - | 5,956,620.45 | ||||
| Dongfang Precision (HK) | - | 3,947,502.90 | ||||
| Fosber Group | - | 363,915.30 | ||||
| 142,813,834.89 | 10,308,481.56 |
Except the borrowings receivable from related parties, all payables to related parties are non-interest bearing,unsecured, and have no fixed repayment period.
1. Schedule of exceptional gains and losses
| 2021 | |||
| Gain or loss on disposal of non-current assets (inclusive of impairment allowance write-offs) | (65,995.13) | ||
| Government grants through profit or loss | 14,700,007.84 | ||
| Gain or loss on fair-value changes on held-for-trading and derivative financial assets and liabilities & income from disposal of held-for-trading and derivative financial assets and liabilities and other debt investments | 73,435,063.51 | ||
| Non-operating income and expenses other than the above | 4,779,490.65 | ||
| Subtotal of non-recurring gain or loss | 92,848,566.87 | ||
| Income tax effects | (6,017,410.70) | ||
| Subtotal of non-recurring gain or loss, net of tax | 86,831,156.17 | ||
| Non-controlling interests effects (net of tax) | (303,722.38 | ) | |
| 86,527,428.79 |
2. Return on equity (ROE) and earnings per share (EPS)
2021
| Weighted average ROE (%) | EPS | ||||||||
| Basic | Diluted | ||||||||
| Net profit attributable to ordinary shareholders of the Company | 11.72 | 0.35 | 0.35 | ||||||
| Net profit attributable to ordinary shareholders of the Company before exceptional gains and losses | 9.55 | 0.29 | 0.28 | ||||||
2020
| Weighted average ROE (%) | EPS | ||||||||
| Basic | Diluted | ||||||||
| Net profit attributable to ordinary shareholders of the Company | 6.20 | 0.26 | 0.26 | ||||||
| Net profit attributable to ordinary shareholders of the Company before exceptional gains and losses | 4.10 | 0.18 | 0.18 | ||||||