Stock Code：002607 Stock Abbr.：OFFCN EDU Announcement No.:2020-008
Offcn Education Technology Co., Ltd.2019 Annual Report Summary
I. Important Notes
This summary is extracted from the full annual report. In order to fully understand the Company's operating results, financial statusand future development plan, investors should read the full annual report carefully disclosed on the media designated by the ChinaSecurities Regulatory Commission (CSRC). The Company’s 2019 Annual Report is prepared and published in Chinese version, andthe English version is for reference only. Should there be any inconsistency between the Chinese version and English version, theChinese version shall prevail.The board of directors, the supervisor committee, the directors, supervisors, and senior management of the company shall herebyguarantee the authenticity, accuracy and completeness of the annual report also without misrepresentations, misleading statements, ormaterial omissions, and bear individual and joint legal liabilities.All directors of the Company personally attended the board meeting to review this annual report.Notes of non-standard audit opinion
□ Applicable √ N/A
The plan for the common stock profit distribution or the plan for converting reserved funds into share capital during the reportingperiod was reviewed by the board meeting
√ Applicable □ N/A
Whether to convert reserved funds into share capital
□ Yes √ No
According to the profit distribution proposal reviewed and approved by the Company’s Board of Directors on March 9, 2020, basedon the total share capital of 6,167,399,389 shares as of December 31, 2019, a cash dividend of RMB 2.40 (including tax) will bedistributed for every 10 shares to all shareholders in a total of RMB 1,480,175,853.36. No equity dividends will be distributed and theequity reserves will not be converted to share capital.The plan for the distribution of preferred stock profits during the reporting period is adopted by the board of directors through resolution.
□ Applicable √ N/A
II. Basic Situation of the Company
1. Company Profile
| Stock Abbreviation | OFFCN EDU (Yaxia Auto has been renamed as OFFCN EDU on February 21, 2019) | Stock Code | 002607 |
| Stock Exchange for Stock Listing | Shenzhen Stock Exchange | ||
Stock Abbreviation beforechange
| Stock Abbreviation before change | Yaxia Auto | |
| Contact Person and Contact Information | Secretary of the Board | Representative of Securities Affairs |
| Name | Gui Hongzhi | Gu Pan |
| Address | Block B, Hanhua Century Mansion, No.23 Xueqing Road, Haidian District, Beijing, China | Block B, Hanhua Century Mansion, No.23 Xueqing Road, Haidian District, Beijing, China |
| Tel | 010-83433677 | 010-83433677 |
| ir@offcn.com | ir@offcn.com | |
（2） Overview of the industry and business environment in 2019
① The acceleration of economic transformation and public service investment is creating robust momentum both for thepublic recruitment test training and for the overall vocational education.Shortage of public services is a fundamental reality in our country. It forces families to spend more on public consumption by reducingpersonal consumption, which significantly limits the economies of scale in consumption, and brings a negative effect on economicgrowth. Therefore, it is a popular sentiment to expand public services such as education, medical care, social service and other publicservices, so as to benefit both the country and the people.In the past several years, the demands for recruitment of teachers, civil servants and other public service divisions continuouslyremained at a high level. The long term trend of driving economic growth model transformation by expanding public consumption isformed gradually. Such trend has been confirmed in the second half of 2019, when the state council and relevant department deliveredpolicies to promote the employment. The outbreak of novel corona virus accelerates the involvement of the trend. Expanding both inrecruitment of public services and enrollment of graduate schools has become a clear orientation of government policy.
② The industry of vocational education bids farewell to the state of dispersal and has entered into a new stage of the demandrelease led by the top players of large scale.From the beginning, the lack of cost-effective products and services with high quality has been the principal contradiction for theindustry. The scale of demand is depressed by the capability of supplying . Except the sector of public service recruitment training,many sub-tracks of the two larger sectors of academic qualification improvement and vocational training have been in the small-sizedand scattered state for a long time.There are two main aspects accounting for such situation. Firstly, these two sectors serve the existing labor force mainly as a part-timelearner. The working population is not as concentrated in colleges or universities as those fresh graduates who have the graduationemployment season and demand of employment is highly dispersed. And it is not a direct employment service of colleges or universities,but only indirectly enhances their employment competitiveness, so the demand is rigid but cannot be compared with the recruitmentfield. The external and institutional environment appears more mild and has not produced significant revolutionary forces.
By contrast, the booming of the recruitment sector over the past two decades has been driven by the superposition of the forces ofeconomic and social change in urbanization and the expansion of universities. More importantly, It provides high-value-added servicesrelated to direct employment for the incremental labor force centered on fresh graduates of universities. There are profound marketenvironment reasons behind the recruitment section that can produce enterprises with billions of revenues. such as Offcn Education. .Therefore, without the accumulation and transferring of enterprise power formed by the employment market of the incremental laborpopulation, it is difficult for the pioneers of the existing labor employment market to break the scale ceiling of 1 billion revenues, andit seems hard for a single track to break the 5 billion scale boundary. .The emergence of large scale enterprises will have a profound impact on the structure of the existing labor force. From the operationof the training market related to incremental labor employment to the creation of a training market related to the employment of existinglabor, it will be a great leap forward, and the overall vocational education industry will gain a geometric progression.The formation of large scale enterprises is an essential prerequisite for the leap. Only large companies can break through the difficultobstacles brought by the extreme fragmentation of the market. Through full investment in the core areas of management such as R&D,channels, and management, we can create cost-effective products and detonate the huge demand in order to rotate the high-growthflywheel to create a tens of billions of vocational education tracks.
③ Main industry characteristics and cyclical characteristics
The industry of vocational education distributes vastly all over the county and demonstrates a significant long-taileffect. Different from both the K12 tutoring industry and English language training industry which are concentratedin big cities, the demand of vocational education distributes vastly in every province and every city, especially inthe prefecture-level cities and the counties. Almost every county has a vocational high school, every prefecture-level city has vocational colleges. The recruitment demand of public employers from prefecture-level cities andcounties also occupies a large proportion, which stimulates lots of local small training institutions to get into themarket and provides a wide space for the large scale players to expand their network of channels. Meanwhile, thenation-wide operation adds more difficulties to management on one hand, and lifts the barriers to competition onthe other hand.The training of public services recruitment test is seasonal. Students always take training classes within 1-2years before or after their graduations.The national civil servant test takes place once a year, and the provincial examinations for each province arebasically once a year and provinces form a common sense that in the first half of the year, there is a relativelyconcentrated large-scale entrance and a small-scale entrance examination in the second half of the year. Institutesand teachers are recruited according to the needs of the provinces and cities, which are evenly distributed throughoutthe year. It is obvious that the number of exams amounts to tens of thousands.This seasonal fluctuation has caused major growth bottlenecks for small and medium-sized training institutes andhas also provided large institutes with continuous motivation to constantly challenge the scale boundary. With therapid increase in examination categories, large institutes will increasingly enjoy the results of scale effects andobtain a more sound resource allocation structure. In recent years, the momentum of recruitment examinations hasbeen switched to new areas such as public institutes, teachers and comprehensive recruitment, which has led to the
rapid concentration of market share in leading enterprises.
3. Key Accounting Information and Financial Indicators
（1）Major accounting data and financial indicators in the past three years
Does the Company need to adjust its financial information retrospectively or restate its previous year accounting information?
□ Yes √ No
| 2019 | 2018 | Increase/Decrease Over Previous Year End | 2017 | |
| Revenue (RMB) | 9,176,129,995.89 | 6,236,987,812.57 | 47.12% | 4,031,257,331.70 |
| Net profit attributable to shareholders of the parent company (RMB) | 1,804,548,688.01 | 1,152,887,416.22 | 56.52% | 524,837,228.26 |
| Net profit after deducting non-recurring profit or loss attributable to shareholders of the parent company (RMB) | 1,700,369,663.16 | 1,112,879,085.16 | 52.79% | 495,080,555.61 |
| Net cash flow from operating activities (RMB) | 2,473,986,085.19 | 1,407,946,376.93 | 75.72% | 999,410,591.54 |
| Basic earnings per share (RMB/share) | 0.29 | 0.22 | 31.82% | 0.10 |
| Diluted earnings per share (RMB/share) | 0.29 | 0.22 | 31.82% | 0.10 |
| Weighted average return on net assets | 60.71% | 71.89% | -11.18% | 66.93% |
| Year End 2019 | Year End 2018 | Increase/Decrease Over Previous Year End | Year End 2017 | |
| Total assets (RMB) | 9,960,705,427.94 | 7,202,071,521.23 | 38.30% | 3,234,754,509.88 |
| Total equity attributable to shareholders of the parent company (RMB) | 3,431,545,903.82 | 2,953,951,905.00 | 16.17% | 1,000,314,049.84 |
| The First Quarter | The Second Quarter | The Third Quarter | The Fourth Quarter | |
| Revenue | 1,311,632,662.04 | 2,325,786,853.44 | 2,521,688,418.01 | 3,017,022,062.40 |
| Net profit attributable to shareholders of the parent company | 106,193,482.28 | 386,831,982.87 | 465,837,656.14 | 845,685,566.72 |
Net profit after deducting non-recurring profit or lossattributable to shareholders ofthe parent company
| Net profit after deducting non-recurring profit or loss attributable to shareholders of the parent company | 107,644,815.54 | 364,790,101.80 | 416,140,588.66 | 811,794,157.16 |
| Net cash flow from operating activities | 2,422,743,973.91 | 1,932,022,824.62 | -1,312,107,088.75 | -568,673,624.59 |
| Total number of common shareholders at the end of reporting period | 31,629 | Total number of common shareholders at the end of last month before the disclosure date of the annual report | 26,733 | Total number of preferred shareholders with voting rights restored at the end of reporting period | 0 | Total number of preferred shareholders with voting rights restored at the end of last month before the disclosure date of the annual report | 0 | ||||||||
| Particulars about shares held by shareholders with a shareholding percentage over 5% or the Top 10 of them | |||||||||||||||
| Name of shareholder | Nature of shareholder | Shareholding Percentage (%) | Total shares held at the end of the reporting period | Increase/decrease of shares during the reporting period | Number of shares held with sales restrictions | Number of shares held without sales restrictions | Pledged or frozen | ||||||||
| Status of shares | Amount | ||||||||||||||
| Lu Zhongfang | Domestic natural person | 41.36% | 2,550,549,260 | 2,550,549,260 | 2,550,549,260 | 0 | Pledged | 400,000,000 | |||||||
| Li Yongxin | Domestic natural person | 18.35% | 1,131,415,121 | 1,131,415,121 | 1,058,718,560 | 72,696,561 | Pledged | 782,850,000 | |||||||
| Wang Zhendong | Domestic natural person | 15.61% | 962,471,418 | 962,471,418 | 962,471,418 | 0 | Pledged | 78,600,000 | |||||||
| Beijing Aerospace Industry | Domestic non-state-owned legal | 4.33% | 267,353,171 | 267,353,171 | 267,353,171 | 0 | |||||||||
InvestmentFund (LimitedPartnership)
| Investment Fund (Limited Partnership) | person | |||||||
| Beijing Guangyin Venture Capital Center (Limited Partnership) | 境内非国有法人 Domestic non-state-owned legal person | 2.89% | 178,235,447 | 178,235,447 | 178,235,447 | 0 | Pledged | 30,000,000 |
| Beijing Kerui Technology Innovation Investment Center (Limited Partnership) | Domestic non-state-owned legal person | 1.44% | 89,117,723 | 89,117,723 | 89,117,723 | 0 | ||
| Beijing Offcn Future Information Consulting Center (Limited Partnership) | Domestic non-state-owned legal person | 1.30% | 80,000,000 | 80,000,000 | 0 | 80,000,000 | ||
| Zhou Xiayun | Domestic natural person | 1.28% | 78,848,640 | 0 | 0 | 78,848,640 | Pledged | 62,148,845 |
| Zhou Hui | Domestic natural person | 1.17% | 72,277,920 | 0 | 0 | 72,277,920 | Pledged | 18,249,020 |
| Zhou Li | Domestic natural person | 0.78% | 48,185,280 | 0 | 0 | 48,185,280 | ||
| Particulars about the strategic investor or general legal person who becomes the top 10 shareholders due to the placement of new shares | N/A | |||||||
disclosed in block diagram
5. Corporate Bond
Whether the Company has bonds publicly issued and listed on the stock exchange that have not expired or expiredbut not paid in full on the date of approval of the annual reportNo
III. Discussion about and Analysis of Business Operation
1. Overview of Business Operation during the Reporting Period
The year of 2019 was the closing year for the reform of national governmental institutions. During the last year, theoverall demand of civil servant recruitment was not meeting our forecast. However, with all your attention andsupports, and thanks to all the great efforts, courage, perseverance and excellent performance of the team, ourcompany’s performance realized a substantial growth. The amount of performance profits significantly exceededthe commitment we made for the last year at the time of the company’s major assets restructuring, as well as thehigh expectations in the capital market. We are even happier to see that after working wholeheartedly together inthe last year, the will of our team has become stronger, and the fast-response ability of the company’s rapid-growingplatform was again systematically improved. With our performance surpassing the line of 10 billion RMB, it markeda new fast-growing era of the company under the scale economies effect.
(1) Outstanding execution triggered the superposition of high-growth culture, and the performance of thecurrent period has been drastically improved.Under an overall bleak public services recruitment trend throughout the year, the company still achieved rapidgrowth against the trend , and laid a solid foundation for the business growth brought about by the 2020 nationalemployment stabilization policy. During the reporting period, the Company achieved a gross revenue of RMB9,176,129,995.89, representing an increase of 47.12% as compared with the same period of last year. Accordingly,the net profits attributable to shareholders of the parent company amounted to RMB 1,804,548,688.01, increasedby 56.52% as compared with the same period of last year; and net profits attributable to shareholders of the parentcompany after deducing non-recurring profits and losses amounted to RMB 1,700,369,663.16, increased by 52.79%
as compared with the same period of last year.To achieve such a significant growth in a short period of time with adversity, excellent execution of the team wouldbe the most important factor, which is embedded in the high-growth culture accumulated and shaped in the long-term exploration. the company could grow fast naturally when the business climate is good, while under unsoundcircumstances, the high-growth culture itself would trigger the superposition of high-growth culture itself andrefresh the team’s understanding of refined operations and actions and thus greatly increase the current businessperformance . Then the company can reverse the potential energy of falling and ultimately achieve high growth inperformance. Furthermore, it can solidify this high level of current business performance.The key Operating Resources and Performance Indicators Shown in the Table Below：
| Item | Indicators | At the End of the Reporting Period | At the End of Last Year | Year-on-year Change (%) |
| Operating Resources | Directly Operated Branches | 1,104 | 701 | 57.49% |
| Employees | 35,209 | 25,718 | 36.90% | |
| R&D personnel | 2,051 | 1,350 | 51.93% | |
| Teachers | 13,475 | 9,424 | 42.99% | |
| Business | Face-to-face Training Students | 1,508,160 | 1,192,103 | 26.51% |
| Online Training Students | 1,779,196 | 1,115,779 | 59.46% | |
| Face-to-face Training Income (RMB) | 8,083,730,102.79 | 5,770,250,029.33 | 40.09% | |
| Online Training Students (RMB) | 1,035,595,638.64 | 443,502,944.37 | 133.50% | |
| Revenues & Profits | Revenue (RMB) | 9,176,129,995.89 | 6,236,987,812.57 | 47.12% |
| Net profits Attributable to Shareholders of the Company(RMB) | 1,804,548,688.01 | 1,152,887,416.22 | 56.52% |
During the reporting period, the company proactively embrace innovation, promote the in-depth matching betweendigital operations and the vertically integrated rapid response system, and use the power of digital operation to seeka more effective level of rapid response, further enhancing the company’s core competitiveness based on the speedeconomy.Specifically, the company actively deploy and build a smart teaching platform based on AI and big data technology.An interactive live broadcast teaching platform of version 3.0, a private cloud platform for education, a newgeneration of intelligent learning analysis engine and a strong capability of online R&D and comprehensive servicehave enabled the company’s online education business to grow steadily, further consolidating the company’sindustry-leading position of online education and online and offline integrated education.During the reporting period, the online training business exceeded RMB 1 billion and achieved revenue of RMB1,035,595,638.64, representing an increase of 133.50%, as compared with the same period of last year.
（3）The scale economy effect of recruitment sector revenue broke the resistance line of RMB 10 billionsDuring the reporting period, despite the overall severe public services recruitment climate, the performance of thesector still grew rapidly against the headwind, which made decisive contribution to go beyond the annualperformance target. Among the four major categories of the sector, except the category of training for civil servanttest, all of the rest three categories held growth rate of more 50%.Such an achievement was not only a progress both in the total amount and in the incremental amount, but also acritical breakthrough in the magnitude of the scale economy effect of the sector revenue, which demonstrated thesector’s annual revenue would step into a new level of 10 billions from the previous level of billions. With a strongerstable employment policy, the sector has got into a new high-growth circle.Behind the breakthrough of growth level, there came significantly structural change in the momentum of growthwithin the sector. The other three categories had achieved a total annual revenue with the same size of civil servantcategory. Every category had an annual revenue of more than RMB 1billion on average, which showed a new well-balanced fast growth mode driven by multicategories.During the reporting period, the category of training for civil servant test achieved revenue of RMB4,171,091,369.87, an increase by 30.15%, from revenue of RMB 3,204,932,785.69 last year. Training for publicinstitution test achieved revenue of RMB 1,401,287,171.43, representing an increase of 58.44%, from revenue ofRMB 884,449,895.82 of the corresponding period of last year. The category of training for teachers’ recruitmenttest achieved revenue of RMB 1,932,698,035.79, representing an increase of 60.85%, from revenue of RMB1,201,551,528.55 of the corresponding period of last year. Besides, although the category of training for other publicservice test hasn’t been separated from the item of new businesses statistically, it achieved nearly the same highgrowth rate with the category of training for public institution test and the category of training for teachers’recruitment test.Training for civil servant test seemed growing steadily in comparison with other categories, but if considered inthe latter period of the institutional reform, both the recruitment of national civil servant and recruitment of theprovincial civil servant declined sharply more than 30% on average, such growth might nominate different
meaning. On the one hand, this was the combined achievement of business innovation and excellent execution.On the other hand, this also revealed significant progress both in training attendance rate and in the concentrationdegree of market share. The students orders of the category increased 27.09%, as compared to the correspondingperiod of last year. In the meanwhile, the sharp drop in the recruitment put much pressure on the operation ofcontractual class, under such circumstance, the unit price of the category still got a positive growth rate, whichproved the leading edge effect of the company in this category again. All of the above also confirmed the earlyjudgement that there is still strong potential for the growth of the category.Training for public institution test achieved such a high growth rate out of our expectation. The student orders ofthe category increased 43.63%, and the unit price of the category increased by 10.31%, as compared to thecorresponding period of last year. At the beginning of last year, the company reinforced the management team ofthe category. So when the recruitment soared in Q3, the team had been well prepared and grasped this valuableopportunity. More importantly, the warm-up of the recruitment climate demonstrated that after the institutionalreform, public institutions revealed a much more nominating position to offer public services. Accordingly, thesize of recruitment would get into the new orbit of steady rebound. In such a highly fragmented market distributingmostly in the low-tie cities, the company’s competitiveness of owned channels, capability of teaching and overalllean operational services could be optimized both in the penetration to the low-tier regional market and in theexpansion in market shares.Training for teachers’ recruitment test grew robustly. Because some provincial governments postponed their routinerecruitment plan, it finally did not double the revenue. Even though, we still regarded this as short-term change fromoutside, the fast-growth trend driven by expansion of recruitment and penetration of operation has never beenchanged. Given the upcoming peak of retirement and promotion in the investment of education, the long-termshortage for K12 teachers would be more than 10 millions people. Expansion of teachers’ recruitment was a keysparkle in the recent employment stabilizing policy. Actually, it’s not a new situation coming up suddenly, the high-growth trend has been forged long time ago. The outbreak of novel coronavirus only accelerates the evolvement ofthe trend from outside. The category also reveal a trend of increase both in volume and in price. During the reportingperiod, the student orders of the category increased 52.89%, and the unit price of the category increased 5.21%, ascompared to the corresponding period of last year respectively. In the first half of the year, the company adjustedthe management team forcefully, and invested in the business decisively. Such experience of expansion verify thetruth that keeping a positive operation standing point would always be paid off by the market.Training for other public service test kept fast growth with plenty of niche categories, and responded to the tendencyof current policy. During the reporting period, military reform, the policies such as poverty reduction and medicalcare promotion create strong opportunity for growth. The team of the category monetized the opportunity quickly,not only realize the increase both in volume and in price, but also extend the scale of relevant niche categories,leading the category of small size and fragmented originally head to the milestone of 1 billions in annual revenue.From the long-term perspective, this category would evolve into another category of training for public institutiontest in the region of grass root, since it share the attributes of public services and the diversities of the recruiter. Onthe other hand, the incremental amount of recruitment might have more potential to surpass those of the categoryof training for public institution test.
（4）The leading-geese of the two emerging sectors have been confirmed again. The flock-of-geese of allcategories grew fast and will redefine the border of the industry for next ten years.After successfully replicating the model of the sector of training for public services recruitment test, training forgraduate school entrance examination and IT skills training enter a new fast-growth business. During the reportingperiod, training for graduate school entrance exam achieved a growth rate beyond 100%, and IT skills training evenachieved a high growth rate of more than 300%. More importantly, there comes up a cluster of active categorieswith the revenue size of more than RMB 10 million, and more and more categories show their potential to growinto large scale players.For a long time, there seldom came up with large scale leading company that could generate a revenue of more thanRMB 1 billion per year in these two sectors. This might be the results of the capability of the operators, but moreimportantly, the result lies in the inner developmental logic of the vocational education market. Amid the threemajor sectors of vocational education oriented to the college students and graduates, only the training for publicservices recruitment test has the chance to cultivate large scale companies, while the other two sectors are not ableto gestate large nationwide companies with annual revenue of RMB billions through its own self development. Thiscan be explained by the current situation in this industry and its slow development process in such a long time.This is decided by both the fragmented distribution of working personnel and the characteristic of low-pace fromthe demand end. To activate the potential demand within the two sectors, there must the participation of large scalecompanies from other industries, which have strong teaching and research capabilities as well as verticallyintegrated operation ability. With heavy investment in the long run, exploration the categories one by one, creatingcost-effective products and aggressively cultivate both on the demand side and the supply side, these companies caneventually trigger out the eruption of the growth potential hidden deeply under separate categories in the market.It takes this industry 5 years to layout its business resources and explore the developmental opportunities in morethan a hundred programs in these two sectors. Since more and more sectors have generated a revenue above 10millions and even 100 millions, the scale growth in the next 5-10 years can be expected. Given the large-scalegrowth brought by both single category and multi-categories development, the two new sectors will reshape thefuture of the company in the next ten years.
2. Is there any major change in the main business during the reporting period?
□ Yes √ No
3. Overview of products which account for more than 10% of the revenue or profit of the company’s mainbusiness
□Applicable √ N/A
4. Is there any seasonal or periodical characteristics in the operation which needs special attention?
□ Yes √ No
5. Presentation of major changes in revenue, cost of revenue, total amount or composition of net profitsattributable to shareholders of common stock of public company during the reporting period when comparedto the previous reporting period
□Applicable √ N/A
In 2019, the Company achieved operating revenue of RMB 9,176,129,995.89, representing an increase of 47.12%as compared to the corresponding period of last year. Accordingly, operating profit amounted to RMB2,090,668,843.03, representing an increase of 56.02%, and total profit amounted to RMB 2,089,327,430.78,increased by 55.97%, and net profits attributable to shareholders of the Company amounted to RMB1,804,548,688.01, increased by 56.52% as compared to the corresponding period of last year respectively.The rapid growth attributes to the enhancement of the company's leading position in the market and the advantagein the economies of scale. We have been promoting our management effectiveness and capability of research.Besides, we have been taking advantage of super execution power of the team. As more and more technology isimplemented in our product and services, our overall competitiveness both in brand and platform becomes muchnominating, accelerating the market shares to concentrate towards the leading player.
6. Conditions of suspension and termination of listing
□Applicable √ N/A
7. Matters related to financial statements
(1) Changes in accounting policy, estimation, and methods when compared to the previous financial year
√Applicable □ N/A
1.Since 1 January 2019, the company has adopted the relevant provisions of "Notice on Revising and Issuing theFormat of General Enterprise Financial Statements for 2019" [Cai Kuai (2019) No. 6] and “Notice on Revision ofthe Consolidated Financial Statement format (2019 edition)”([Cai Kuai (2019) No.16] , hereinafter referred to as"Amendment Notice").Accounting policy changes and the resulting effects are as follows：
Table 1
| Projects | Adjustment Item |
| Balance Sheet | (1) The item "Notes and accounts receivable" is divided into the item "Notes Receivable" and the item "Accounts Receivable"; (2) The item "Notes and accounts payable" is divided into the item "Notes Payable" and the item "Accounts Payable"； (3) A new "Financing receivables” item reflects notes and accounts receivable that are measured at fair value and their changes are included in other comprehensive income; (4) The new item of "Special reserve" reflects the book value at the end of the period of the safety production expenses drawn by enterprises in high-risk industries according to state |
regulations.
(5) New "Right-of-use assets" and "Lease liabilities" items.
| regulations. (5) New "Right-of-use assets" and "Lease liabilities" items. | |
| The Income Statement | (1) A new item entitled "Income generated from the derecognition of financial assets measured at amortized cost" shall be added to reflect the gains or losses incurred by an enterprise as a result of the termination of recognition of financial assets at amortized cost due to transfer or other circumstances; (2) The items of "Impairment losses of assets" and "Impairment losses of creditability " are moved to the position after "Gains from changes in fair value" ; (3) The Income Statement "MINUS: Impairment losses of assets" is adjusted to "PLUS: Impairment losses of assets(Losses are indicated by "-")" ; (4) Adjusting the "MINUS: Impairment losses of creditability" in the Income Statement to "PLUS: Impairment losses of creditability (Losses are indicated by "-") " ; (5) In the Income Statement, under the item "Investment income" , add the item " Income generated from the derecognition of financial assets measured at amortized cost (losses are represented by '-')" ; (6) The "Net increase in financial assets held for trading purposes" and "Cash received on issuance of bonds" were deleted from the Income Statement. |
| Statement of Cash Flow | The Statement of Cash Flows specifies the scope of the government subsidy, and the actual government subsidy received by the enterprise, whether related to assets or income, is listed under the item " Cash received relating to other operating activities " . |
| Statement of Changes in Owners' Equity | (1) Specifying the scope of the item "Other equity instrument owner's invested capital" and the item "Other equity instrument owner's invested capital" , the amount of capital invested by the holders of financial instruments classified as equity instruments other than common shares issued by the Enterprise; (2) Adding "Extraction and use of special reserve" items to the statement of changes in owners' equity. |
| The contents and reasons for the changes of accounting policies | Affected financial statements line items |
| Divide the “Notes receivable and Accounts receivable” into “Notes receivables” and “Accounts receivables” | As of 31 December 2019, the amount of notes receivables and accounts receivables presented in the statement of the consolidated financial position were RMB 0.00 and RMB 2,721,638,09;As of 31 December 2018, the amount of notes receivables and accounts receivables were RMB 0.00and RMB 6,804,330.67. As of 31 December 2019,both of the notes receivables and accounts receivables are presented as RMB 0.00. As of 31 December 2018, both of the notes receivables and |
The contents and reasons for thechanges of accounting policies
| The contents and reasons for the changes of accounting policies | Affected financial statements line items |
| accounts receivables are also presented as RMB 0.00. | |
| Divide the “Notes payable and Accounts payable” into “Notes payable” and “Accounts payable” | As of 31 December 2019, the amount of notes payable and accounts payable presented in the statement of the consolidated financial position were RMB 0.00 and RMB 236,481,990,86;As of 31 December 2018, the amount of notes payables and accounts receivables were RMB 0.00and RMB 144,564,705.50. As of 31 December 2019, the amount of notes payable and accounts payable presented in the statement of the parent financial position were RMB 0.00 and RMB 561,752,26 ;As of 31 December 2018, the amount of notes payables and accounts receivables were RMB 0.00 and RMB 19,854,802.89. |
(2) Explanation of ratification of major accounting error in the reporting period which needs to be trackedand restated
□Applicable √ N/A
No ratification of major accounting error in the reporting period which needs to be tracked and restated.
(3) Explanation of changes in the scope of combined financial statements when compared with financialstatements of the previous year
√Applicable □ N/A
| The name of the subsidiary | Proportion of shareholding (%) | Reason for changes |
| Tonghua Offcn Co., Ltd. | 100.00 | New establishment |
| Hunan Lightsalt Offcn Co., Ltd. | 90.00 | New establishment |
| Tianjin Hexi Offcn Co., Ltd. | 100.00 | New establishment |
| Chengdu Offcn Co., Ltd. | 100.00 | New establishment |
| Shandong Zuoda Business Management Co., Ltd. | 100.00 | New establishment |
| Liaoning Zhongcheng Real Eestate Development Co., Ltd. | 100.00 | Acquisition |