Guangdong Dongfang Precision Science & Technology Co., Ltd.
Annual Report 2020
March 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.
All the directors of the Company attended in person the board meeting for the approvalof this Report.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 “(V) Possible Risks in theCompany’s Development” in “IX Prospects” of “Part IV Management Discussion andAnalysis” herein. And investors are kindly advised to read through the aforesaid contents.
The Company has no final dividend plan, either in the form of cash or stock.
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.
Table of Contents
Part I Important Notes, Table of Contents and Definitions ...... 2
Part II Corporate Information and Key Financial Information ...... 7
Part III Business Summary ...... 12
Part IV Management Discussion and Analysis ...... 27
Part V Significant Events ...... 83
Part VI Share Changes and Shareholder Information ...... 107
Part VII Preference Shares ...... 119
Part VIII Convertible Corporate Bonds ...... 120
Part IX Directors, Supervisors, Senior Management and Staff ...... 121
Part X Corporate Governance ...... 132
Part XI Corporate Bonds ...... 142
Part XII Corporate Financial Statements ...... 143
Part XIII Documents Available for Reference ...... 282
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/Spain Tiru?a | Tiru?a Group Industrial, S.L. |
| Tiru?a America | Tiru?a America Inc. |
| Italy QCorr | QuantumCorrugated S.r.l. |
| Dongfang Precision (Europe)/Italy 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. |
| 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. |
| Pride, or Beijing Pride | Beijing Pride New Energy Battery Technology Co., Ltd. |
| Pulead | Pulead Technology Industry Co., Ltd. |
| BAIC Capital | Beijing Automotive Group Industry Investment Co., Ltd. |
| CATL | Contemporary Amperex Technology Co., Ltd. |
| Foton | Beiqi Foton Motor Co., Ltd. |
| Qinghai Puren | Qinghai Puren Intelligent Technology R & D Center (Limited Partnership) |
| 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. |
| 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 preregulator, 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. |
| MES | MES, namely the Manufacturing Execution System, is a set of production information management system for workshop executives of manufacturing enterprises. It can manage manufacturing data, plans and schedules, production scheduling, inventory, quality, human resources, work centre and equipment, |
| tools and tooling, procurement, costs, project dashboards, production process control, and integrated underlying data analysis and integrated upper-layer data decomposition, and provides enterprises with an effective, reliable, comprehensive, feasible and collaborative manufacturing management platform. | |
| ERP | Enterprise Resource Planning |
| WMS | WMS, namely the Warehouse Management System, is a management system that comprehensively operates batch management, material corresponding, inventory checking, quality inspection management, empty warehouse management and instant inventory management through functions of incoming and outgoing management, warehouse allotting, inventory allocation and empty warehouse management. |
| SCADA | Supervisory Control And Data Acquisition |
| APS | Advanced Planning and Scheduling |
| AGV | AGV, namely Automated Guided Vehicle, refers to the vehicle that is equipped with an electromagnetic or optical auto-navigation unit, can travel along the prescribed navigation path and is functioned with safety protection and load transferring. |
| CSRC | China Securities Regulatory Commission |
| SZSE, or the “Stock Exchange” | Shenzhen Stock Exchange |
| RMB, 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 2020 to 31 December 2020 |
Part II Corporate Information and Key Financial InformationI 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 | Zhou Wenhui | 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 |
| 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
| Name of financial advisor | Office address | Representative | Period of supervision |
| China Securities Co., Ltd. | 188 Chaoyangmennei Street, Dongcheng District, Beijing, China | Zhu Lin and Gu Zhongjie | From 25 December 2019 to 31 December 2020 |
VI Key Financial Information
Indicate whether there is any retrospectively restated datum in the table below.
□ Yes √ No
| 2020 | 2019 | 2020-over-2019 change (%) | 2018 | |
| Operating revenue (RMB) | 2,916,270,143.13 | 9,973,503,602.19 | -70.76% | 6,621,349,618.40 |
| Net profit attributable to the listed company’s shareholders (RMB) | 389,180,624.08 | 1,838,018,805.50 | -78.83% | -3,875,995,219.91 |
| Net profit attributable to the listed company’s shareholders before exceptional gains and losses (RMB) | 263,426,429.87 | 438,715,870.86 | -39.96% | -3,905,407,016.45 |
| Net cash generated from/used in operating activities (RMB) | 550,996,031.75 | 281,297,787.01 | 95.88% | 721,724,801.12 |
| Basic earnings per share (RMB/share) | 0.26 | 1.01 | -74.26% | -2.11 |
| Diluted earnings per share (RMB/share) | 0.26 | 1.01 | -74.26% | -2.11 |
| Weighted average return on equity (%) | 6.20% | 36.87% | -30.67% | -67.71% |
| 31 December 2020 | 31 December 2019 | Change of 31 December 2020 over 31 December 2019 (%) | 31 December 2018 | |
| Total assets (RMB) | 6,323,236,687.05 | 6,273,516,157.31 | 0.79% | 8,986,973,675.89 |
| Equity attributable to the listed company’s shareholders (RMB) | 4,158,538,499.75 | 4,337,064,607.87 | -4.12% | 4,026,565,236.20 |
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
VII Key Financial Information on a Comparable BasisThe consolidated income statement and cash flow statement of 2019 included Pride, while the consolidated financialstatements of 2020 did not. In order to give a more accurate view of the year-on-year changes in operating results, the
2019 data in the table below do not include Pride, i.e. the 2019 and 2020 data below are on a comparable basis:
| 2020 | 2019 (adjusted on a comparable basis) | Change (%) | |
| Operating revenue (RMB) | 2,916,270,143.13 | 2,867,406,250.70 | 1.70% |
| Net profit attributable to the listed company’s shareholders (RMB) | 389,180,624.08 | 171,674,716.84 | 126.70% |
| Net profit attributable to the listed company’s shareholders before exceptional gains and losses (RMB) | 263,426,429.87 | 126,681,554.70 | 107.94% |
| Net cash generated from/used in operating activities (RMB) | 550,996,031.75 | 235,284,708.85 | 134.18% |
VIII 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.IX Key Financial Information by Quarter
Unit: RMB
| Q1 | Q2 | Q3 | Q4 | |
| Operating revenue | 618,374,944.67 | 559,116,280.46 | 774,467,679.35 | 964,311,238.65 |
| Net profit attributable to the listed company’s shareholders | 47,491,377.77 | 79,707,084.32 | 98,519,590.30 | 163,462,571.69 |
| Net profit attributable to the listed company’s shareholders before exceptional gains and losses | 25,666,651.19 | 55,352,024.67 | 80,885,127.45 | 101,522,626.56 |
| Net cash generated from/used in operating activities | -85,471,622.64 | 114,881,031.96 | 219,576,247.92 | 302,010,374.51 |
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
X Exceptional Gains and Losses
√ Applicable □ Not applicable
Unit: RMB
| Item | 2020 | 2019 | 2018 | Note |
| Gain or loss on disposal of non-current assets (inclusive of impairment allowance write-offs) | -52,742.69 | -95,745,648.97 | 1,792,860.48 | |
| 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 government’s uniform standards) | 10,749,683.55 | 22,854,061.39 | 9,052,705.37 | |
| 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) | 96,118,955.74 | 1,473,114,508.83 | 24,082,095.44 | |
| Non-operating income and expenses other than the above | 33,173,454.66 | 9,007,522.57 | 890,902.50 | |
| Other gains and losses that meet the definition of exceptional gain/loss | 1,229,987.66 | |||
| Less: Income tax effects | 15,906,631.40 | 9,881,032.32 | 6,371,800.11 | |
| Non-controlling interests effects (net of tax) | 425,002.71 | 46,476.86 | 34,967.14 | |
| Total | 125,754,194.21 | 1,399,302,934.64 | 29,411,796.54 | -- |
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.
Part III Business SummaryI Principal Activities of the Company in the Reporting PeriodGuangdong Dongfang Precision Science & Technology Co., Ltd. (hereinafter referred to as"Dongfang Precision" or the "Company") is one of the earliest companies that are engaged in theR&D, design, and production of intelligent corrugated packaging machinery in China, regarding"intelligent manufacturing" as its strategic vision and core. Since it went public in 2011, theCompany has expanded its footprint in the upstream and downstream of the industrial chain ofcorrugated packaging machinery, through the capital market and the "dual drivers of "endogenousexpansion and epitaxial M&A". Currently, Dongfang Precision has grown into a supplier ofintelligent corrugated packaging machinery with comprehensive strength leading the globe. Besides,it is endeavouring to become an overall solution provider for intelligent plants by virtue ofintelligent and digitalization transformation. In terms of core parts, Parsun Power, a subsidiary ofthe Company, is a domestic advanced supplier specializing in hydrodynamic equipment.
Schematic diagram of main businesses of Dongfang Precision
(I) Intelligent corrugated packaging machinery businessThe intelligent corrugated packaging machinery business of the Company primarily covers thecorrugator line business and the corrugated box printing and packaging machinery business. Allprocesses of the value chain, such as Design, R&D, production, sales, and services, are integrated.The Company's business entities include Dongfang Precision (China), Dongfang Precision (Europe),Fosber Group, and Fosber Asia. We can see that a global layout involving R&D, production, andsales has been developed.Dongfang Precision, as an early domestic company that is engaged in the R&D, design, andproduction of corrugated packaging machinery, has expanded its business from corrugated boxprinting and packaging machinery at the beginning of listing to the whole production process ofcorrugated board packaging, including corrugator lines, the corrugated box printing and packagingline, all kinds of individual machine units, and pre-printing and post-printing automatic equipment.
1. Main products and use
(1) Corrugator line business
The corrugator line business of the Company is mainly operated by Fosber Group, a whollyowned subsidiary of the Company (including Fosber Italy, Fosber America, Italy QCorr, and SpainTiru?a) and Fosber Asia, a partially-owned subsidiary. Specifically, Fosber Group targets theinternational market, while Fosber Asia, the domestic one.Corrugator lines are designated to produce high-end products, featuring speed, width, energyconservation, safety, and automation superior to domestic peers and leading in the world. Itsintelligent design and smooth linear processes are beneficial to effectively cut the labour costs andgreatly raise the efficiency of production, operations, and management of downstream corrugatedboard packaging manufacturer.
Schematic diagram of Fosber's corrugator lines
(2) Corrugated box printing and packaging machinery business
The corrugated box printing and packaging machinery business mainly includes the corrugatedbox printing line, individual machine units for corrugated box printing, as well as pre-printing andpost-printing intelligent and automatic equipment like pre-feeders, stripper conveyors, intelligentstackers, and folder gluers.Dongfang Precision offers two major series of lines and individual machine units, namely, topprinting and bottom printing, to meet the demand of customers at home and abroad. Representativeseries include the TOPRA series for the domestic market, the APSTAR series for the internationalmarket, and the Casemaker FD and Casemaker HGL series for the foreign market. Products withdozens of specifications and varied positioning are available. Therefore, Dongfang Precision ishailed as the equipment supplier with the most complete product lines and the richest productlibrary worldwide.
Schematic diagram of individual machine units for corrugated box printing and packaging machinery
Schematic diagram of top printing fixed type folder gluer line (left) and bottom printing open-close folder gluer line
(right) for corrugated box printing and packaging of Dongfang Precision.
Schematic diagram of automatic bottom printing line for corrugated box printing and packaging of Dongfang
Precision
Schematic diagram of bottom printing fixed type corrugated box printing and packaging line of Dongfang
Precision
The Company sells its corrugated box printing and packaging machinery to over 30 countriesand regions, including Europe, America, Asia, Africa, Latin America, and Oceania. So far, theCompany has become a world-renowned and domestic leading manufacturer of corrugated boxprinting and packaging machinery.
2. Major business models
(1) Operation models
In regard to the intelligent corrugated packaging machinery business, Dongfang Precisionadopts the one-stop business model covering "design and R&D + production + sales + service" plus
"differentiated operations" and "service-oriented manufacturing".The corrugator line business of Fosber Group and Fosber Asia as well as the corrugated boxprinting and packaging machinery business of Dongfang Precision (China) and Dongfang Precision(Europe) under Dongfang Precision boast industry-leading strengths in independent product designand R&D.The corrugator line business and the corrugated box printing and packaging machinerybusiness mainly offer mid- and high-end products, characterized by high technology,intellectualization, and reliability, to medium- and large-sized customers. Furthermore, theCompany offers factory planning, equipment selection, and production customization services. Itsprofessional technical team enables customers to enjoy superior technical support and after-salesservices around the clock concerning the stock of accessories, remote monitoring, and technicalsupport. In short, Dongfang Precision empowers manufacturing with service.
Thanks to the enormous resources devoted by the Company in the industry for years, Fosber'scorrugator lines and Dongfang Precision's corrugated box printing and packaging machinery enjoyhigh popularity and exert strong brand influences, which is favourable for the Company to gainbrand premium.
(2) Procurement and production models
The Company purchases electric elements, standard parts, and raw and auxiliary materialsfrom external suppliers, and independently produces core machining components and developscontrol procedures for equipment automation.
Approximately 80% of its products are produced in line with customer orders, while the rest20%, market prediction. The organic combination of the two production models can not only meetthe order demand of customers, but also regulate the production pace through reasonablewarehousing and prompt response to customer demand.
(3) Sales model
Direct sales are primarily adopted for the domestic market, while direct sales plus channelagency, for the foreign market.
In terms of payment and settlement methods, the Company, as a supplier of professionalequipment with a high brand reputation, applies the following payment and settlement methods to
all customers of corrugated packaging machinery at home and abroad: The customer prepays somefunds, then pays some funds upon shipment of goods, and lastly pays the rest funds off at the end ofinstallation and debugging.With respect to the type of product sales, the Company sells the whole equipment as well asaccessories, software, and services. Both types of sales have their respective advantages. The salesof the whole equipment are a lump-sum sale with a large single amount, while accessories, software,and services can be repeatedly sold during the lifecycle of the equipment. The increasing number ofthe whole equipment in the market catalyses the growth in the rigid demand for accessories,software, and services. In turn, high-quality after-sales services stimulate the sales of the wholeequipment. Both types of sales supplement each other and drive the steady progress of the business.(II) Overall solution for intelligent plantsIn 2020, Dongfang Precision incorporate a subsidiary, Dongfang Digicom, in order toformulate overall solutions of intelligent plants in the corrugated board packaging. DongfangDigicom will endeavour to become a leader of digital transformation in the corrugated boardpackaging industry. It will focus on creating a cloud platform of industrial Internet services forintelligent plants where all equipment is interconnected, based on corrugator lines, corrugated boxprinting and packaging machinery, logistics, and warehousing of the whole factory, and develop acomplete industrial ecosystem. The vision of Dongfang Digicom is to become a world-leadingsupplier of overall solutions of intelligent plants and industrial Internet services in the packagingindustry and turn the industry smarter and manufacturing simpler.
Schematic diagram of Dongfang Digicom's overall solution of intelligent plants
| General data access and protocol analysis | Marginal date processing |
Operations & ManagementOptimization
Optimization ofproduction management
Optimization ofproduction management
Optimization of intelligentmanagement of the factory
| Optimization of intelligent management of the factory | Optimization of asset management |
| Optimization of supply chain | Equipment health management | Financial service |
| Optimization of intelligent processes | Optimization of industrial chain services | ||||||||
| Optimization of energy consumption | |||||||||
| Digital simulation | Optimization of whole-procedure system | Cloud transaction platform of industrial chain | |||||||
Intelligent Platform
Data Layer
Data Layer
LayerofManufacturin
g?&OperationManagement
LayerofManufacturin
g?&OperationManagement
Equipment management
| Equipment management | Logistics management inside the factory | Quality management |
| Monitoring of operating status | Production process management | Material management |
Process/procedure
managementQuality control plan
Quality control planEquipmentLayer
Intelligentequipmen
t
Logistics equipment
Logistics equipment
RFID/Barcode
| RFID/Barcode | Three-dimensional storage |
Box and cardboard logistics
Testing equipmentIntelligent tour inspection ofmachines
| Intelligent tour inspection of machines | Measurement and detection |
Inspection of raw materials
& products
Marginal
Layer
Dataapplication
Layer
Dataapplication
Layer
Data cleansing
| Data cleansing | Data exchange | Data modelling | Data analytics |
Data LakeData visualization
Data visualization
Identifier resolution
Identifier resolutionEmployee performance
Employee performanceProduct traceability
Product traceability
Intelligentdecision-m
aking
Intelligentdecision-m
aking
Production equipment
Production equipment
SCADA/HMI/PLC
| SCADA/HMI/PLC | High-speed intelligent corrugator line |
High-speed printing line
(III) Outboard motors & general utility small gasoline motors
1. Main products and use
Parsun Power is a supplier of outboard motors and general utility small gasoline motorsintegrating R&D, manufacturing, sales, and service.Outboard motors are its primary business. Outboard motors are a kind of detachable powerunits that are mounted on the stern plate of a boat to drive the boat to sail. They can be applied toboats shorter than 24m in inland rivers, lakes, and coastal waters. Currently, the equipment has beenwidely used for civil short-distance transportation/fishing, leisure sports like yachts/motorboats, andmilitary use/maritime affairs/flood control and rescue.Parsun Power's outboard motors can be classified into two-stroke and four-stroke by enginetype. The power of two-stroke outboard motors ranges from 2-90 horsepower (HP), while that offour-stroke ones, 2.6-115HP. So far, Parsun Power embraces four major series of outboard motorsthat can be classified into 20 categories and hundreds of models, with power from 2 to 115horsepower, which has made its outboard motor production line becomes the most complete amongits domestic peers. In particular, some outboard motor models meet international advancedperformance indicators, attributable to the maturity of electronic fuel injection (EFI). Parsun Poweris second to none among domestic brands regarding comprehensive strengths in outboard motors.
Schematic diagram of some outboard motors of Parsun Power
The general utility small gasoline motors of Parsun Power can be classified into three series,namely, gasoline generating set, gasoline engine, and gasoline water pump. Specifically, thegasoline generating set can be applied to emergency communication, rush repairs, or backup powerof the machine room. The gasoline engine includes 11 models with power ranging from 4HP(British horsepower) to 16HP and can be used as the power unit of small cars. The gasoline waterpump is widely applied to agricultural irrigation and watering of stock farming. Parsun Power sellsmost general utility small gasoline motors to Africa and the Middle East which are highlyrecognized in the local market.
2. Major business models
Parsun Power employs the business model covering "design and R&D + production + sales"and two types of sales, that is, channel agency and direct sales.
Parsun Power can independently research, develop, and produce all types of outboard motorsand provide customers with highly cost-effective hydrodynamic equipment by taking full advantageof the sound industrial chain in the domestic manufacturing industry, its strong R&D and technicalstrengths and rich production experience.
II Significant Changes in Major Assets
1. Significant Changes in Major Assets
| Major assets | Main reason for significant changes |
| Equity assets | No significant change |
| Fixed assets | No significant change |
| Intangible assets | The closing balance was up 33.02% from the opening balance, primarily driven by the acquisition by Fosber Group of Agnati assets in the Reporting Period, which included intangible assets such as patented technology. |
| Construction in progress | The closing balance was up 87.26% from the opening balance, primarily driven by new manufacturing equipment of Fosber Group in the Reporting Period. |
| Cash and bank balances | The closing balance was down 62.42% from the opening balance, primarily driven by the reclassification of security deposits and large-amount deposit receipts of over one year to other non-current assets, as well as by a decrease in cash due to the purchase of wealth management products and the share repurchase, in the Reporting Period. |
| Financial assets held for trading | The closing balance was up 40.57% from the opening balance, primarily driven by new acquisitions of wealth management products in the Reporting Period. |
| Contract assets | The closing balance was up 100% from the opening balance, primarily driven by the reclassification due to the adoption of the new accounting standards governing revenue in the Reporting Period. |
| Deferred tax assets | The closing balance was up 101.83% from the opening balance, primarily driven by the recognition of deferred tax assets in the Reporting Period by the Company as the parent according to the previous losses. |
| Other non-current assets | The closing balance was up 37,081.72% from the opening balance, primarily driven by the reclassification of security deposits and large-amount deposit receipts of over one year to other non-current assets in the Reporting Period. |
2. 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 | 721,537,447.53 | Italy | Producing and marketing by itself | Operation management | Good | 17.05% | Not |
| 100% interest of EDF S.R.L | M&A | 43,186,331.69 | Italy | Producing and marketing by itself | Operation management | Good | 1.02% | Not |
III Core Competitiveness Analysis
(III) Comprehensive industrial chain layoutAs one of the leading suppliers in intelligent corrugated packaging machinery around theworld, Dongfang Precision extends its footprint in the whole industrial chain of segments and offersequipment covering all procedures of the intelligent corrugated packaging line.Dongfang Precision assigns its subsidiaries, including Fosber Group, Fosber Asia, FosberAmerica, and Italy QCorr, to undertake corrugator lines and unit equipment. Dongfang Precision(China) and Dongfang Precision (Europe) handle the corrugated box printing and packagingmachinery business. Jaten Robot, its joint-stock company, specializes in automatic logistics systems.The presence in the whole industrial chain of corrugated packaging machinery firmly supports theoverall solution of intelligent plants.
Schematic diagram of presence in the whole industrial chain
Schematic diagram of overall application for intelligent plants of corrugated box printing and packaging
(II) Leading technology, stable & reliable productsFosber Group, a business entity of corrugator lines under the intelligent corrugated packagingmachinery segment of the Company, is a major supplier of high-end corrugator lines in the globalmarket. It is one of the two largest companies in high-speed and wide corrugator lines. FosberGroup takes a leading position in Europe and North America, because of simplified design, stableperformance, low failure rate, and high intellectualization.Moreover, corrugated box printing and packaging machinery under the intelligent corrugatedpackaging machinery business of Dongfang Precision are characterized by advanced designconcepts, high functional integration, high automation, and outstanding overall performance.Especially, the Company occupies a leading position in the market regarding the overallperformance in operating stability, service life, printing quality, efficiency, width, and registeringaccuracy.The outboard motor R&D team of Parsun Power, a wholly-owned subsidiary of DongfangPrecision, has relevant product and technology R&D experience for nearly two decades. Itsproducts obtain the EU CE mark, the US EPA certification, and the CCS certification of the ChinaClassification Society (CCS). It was the first drafter of the Technical Conditions for GasolineEngine of Outboard Motors (JB/T11875-2014) for the domestic outboard motors industry. Parsun
Power has been recognized as a national high-tech enterprise for several consecutive years and wonChina Machinery Industry Science and Technology Award II twice.
(III) Industry-leading industrial Internet technology and servicesFosber Group, a subsidiary of Dongfang Precision, vigorously practices the industrial Internetmodel and has realized the self-learning and intelligent production of machines based on thecombination of the computer and the Internet, big data, and algorithms. The self-learning andintelligent production of machines include four phases, that is, visibility (intelligent identification),transparency (intelligent analysis), predictive capacity (intelligent prediction), and adaptability(artificial intelligence-based solutions). At present, Fosber has completed the functional design ofthe above four phases.
Schematic diagram of the phase of industrial Internet technology application of Fosber Group
Fosber Group has developed a PRO series intelligent information-based productionmanagement system for corrugator lines, by integrating sensor, AI, VR, 3D modelling, based on itsdata on the development, production, and technical support of corrugator lines accumulated foryears. The system can control the whole procedure of corrugated board production, collect andanalyse manufacturing data, make planning and scheduling, conduct production dispatching,monitor the inventory, and quality and cost management. The system epitomizes Fosber Group'sapplication and practices of the industrial Internet and acts as a business card of the corrugator linesof Fosber. The overall technical level is leading across the globe.
(IV) International brand and extensive industry influence
Dongfang Precision's intelligent corrugated packaging machinery features stable quality.
Dongfang Precision Printer, Fosber's Lines, Tiru?a Corrugating Rolls, and Quantum Lines arewell-known and influential.The Company's intelligent corrugated packaging machinery is known in the industry for itshigh performance, stability, and reliability. In addition, the Company offers excellent technicalsupport and after-sales services, favourable to gain brand premium.It has become an influential enterprise in the industry, as evidenced by its honours like the"Top 500 Private Manufacturers of China", the "Champion in Single Aspect", and the "Leader inIndustry Segment".(V) Excellent customer resources with long-term and stable partnershipEnd customers have raised higher and stricter requirements for product quality, deliverytimeliness, and sustainable and long-term cooperation, along with the Company's shift of thebusiness model from the manufacturing of a single type of products to the provision of integratedand overall solutions. The Company has been exerting more efforts for R&D innovation andimproving product and service quality so as to establish long-term and stable strategic partnershipswith famous brands at home and abroad.Particularly, the Company has established a good partnership in corrugated board packagingwith domestic leading enterprises, such as Nine Dragons Paper (Holdings) Limited (Nine Dragons),Shanying International Holdings Co., Ltd. (Shanying Intl), Yuen Foong Yu Group (YFY Inc.),Xiamen Hexing Packaging Printing Co., Ltd. (HXPP), MYS Group Co. Ltd. (MYS), XintonglianPacking (XTL), Zhejiang Dashengda Packaging Co., Ltd., Forest Packing Co., Ltd., UnitedCreation Packaging Solutions Group (UCPS), and Zhengye International Holdings CompanyLimited (Zhengye International), and large international conglomerate, including InternationalPaper, Smurfit Kappa, DS Smith, APP Sinar Mas , and Mpact.With the constant growth in concentration and the continuous upgrading of capacity in thedownstream industry, major customers will demand increasing overall solutions for intelligentplants as well as mid- and high-end production lines and equipment. The Company has seizedopportunities and formed a better competitive edge by virtue of its stable business partnershipduring the above industry changes.
(VI) Cornerstone for sustainability based on experienced management team andprofessional technician teamDongfang Precision has an experienced management team with a global vision and a deepinsight into product R&D and design, manufacturing and operations, marketing, industrial layout,and development planning. Thanks to its rich experience and broad horizon, the management teamallows Dongfang Precision to keep up with the general development trend of the intelligentcorrugated packaging machinery manufacturing industry. By making forward-looking and strategicplans and business layout, the management team maintains robust and sustainable development ofthe Company.In the meantime, Dongfang Precision adopts the professional manager team managementmodel and attaches great importance to authorization management. It deems "a wealth of talents"and "cultural orientation" as its basic development strategies, and strengths the building andupgrading of its organizing ability through multiple ways (including the building of a core seniormanagement team, design of the organizational structure, standardization of the management andcontrol system, implementation of mid- and long-term incentives, and building of corporate culture).Additionally, it keeps reinforcing the management and resource integration of all functionaldepartments, offers more support for subsidiaries, improves the general management and operationefficiency, and promotes the implementation of the "globalization" and "synergy" strategies.(VII) Successful practice in M&A and integration firmly supporting industrial chainlayoutDongfang Precision has adopted multiple integration measures, after acquiring Fosber Groupin 2014. For instance, it has kept sending management talents to Fosber Group, incubated andcultivated Fosber Asia, assisted Fosber Group in adjusting its business strategies, intensified themanagement and R&D capabilities of the team, and standardized the authorization managementsystem. Through the above measures, the Company has successfully injected operation vitality inFosber Group. Fosber Group has achieved rapid and steady growth in operation performance.Besides, its operating revenue is more than twice as much as that before the acquisition, while itsnet profit, approximately three times.Since the acquisition in 2015, Dongfang Precision has dispatched a management team to
Parsun Power, and facilitated the latter to streamline its strategies, adjust business strategies, andoptimize key processes, such as procurement, production, R&D, and sales. Especially, the Companyhelped Parsun Power constant and steady growth from 2017 to 2020 amid the sluggish internationalmarket of outboard motors.The successful M&A and integration cases of Fosber Group and Parsun Power have fullydemonstrated the remarkable achievements of Dongfang Precision regarding the management andcontrol of the strategies and finance of the subsidiaries, and the adoption of modern businessmanagement means, such as the management mechanism of decentralization and authorization ofauthority, the standardization of the corporate governance of the subsidiaries, and the operation andmanagement of the shareholders' meeting, the Board of Directors and the Supervisory Committee.From 2019 to 2020, the Company completed the acquisitions of the equity of Spain Tiru?a, ahigh-end manufacturer of corrugating and pressure rolls with a history of nearly one century andrelevant business assets of Agnati, an Italian manufacturer of the corrugated board line with aglorious history. Upon completion of the acquisitions, Dongfang Precision comprehensivelystreamlined the development strategies, R&D systems, product series, marketing, and team buildingof the two enterprises, and carried out management output, that facilitated them to raisemanagement effectiveness and further stimulate business vitality and the enthusiasm of teammembers. The Company is confident that the two enterprises with profound histories will markmore achievements and create greater value for shareholders based on effective integration.
Moreover, the Company will have a solid foundation and firm support for the subsequentexpansion of presence in industrial chain and resource integration worldwide, thanks to thesuccessful practice and prominent achievements in the integration of the above underlying assets, agood demonstration effect of relevant practices on the industry and favourable comments andreputation.
Part IV Management Discussion and AnalysisI OverviewThe year 2020 witnessed "drastic fluctuations which had never emerged in the past century".The COVID-19 pandemic roamed the planet, struck a serious blow at the global economy, trade,and investment, and posed severe challenges to economic and social development. The globalmanufacturing industry had been blanketed by the pandemic. However, the virus in China has beeneffectively controlled, since the late second quarter of 2020 (2020 Q2). Thus, the Chinese economyhas gone ahead of the rest countries to recover its economy, bringing a ray of hope to the globaleconomic recovery. In the second half of 2020, especially the fourth quarter, China furtheraccelerated to recover its manufacturing, given the steady recovery of industrial production,generally good prospects of supply and demand sides, and rapid growth in overseas market demandand exports. Particularly, equipment manufacturing grew rapidly by approximately 6.6%year-on-year (YoY) throughout the year.Amid the impact of the pandemic in the first half of 2020, most practitioners in the globalcorrugated board packaging industry slowed down and postponed their capital expenditure plans.Since 2020Q2, the domestic industry took the lead in recovery. In addition, since 2020Q4, supplyand demand in the industry have significantly increased. The industry prospects have graduallyimproved.Under the strong leadership of the Board of Directors and management team, DongfangPrecision enabled all its business entities at home and abroad to resume work and production in thefirst half of 2020. In the second half, it recorded an obvious increase in its sales revenue from thefirst half, by grasping opportunities brought by the economic recovery. The COVID-19 pandemichas turned domestic and foreign environments complicated and changeable and highlighted theimportance of a digital and intelligent production model for the downstream corrugated boardpackaging industry. In view of this, the management team of the Company has proactively madechanges and adhered to the strategic vision and core business strategy of "intelligentmanufacturing". It has endeavoured to turn business more digital and intelligent, whileconsolidating internal strengths and constantly improving operation efficiency.
For 2020, the Company recorded consolidated operating revenue of RMB2,916.2701 million, anet profit attributable to the listed company’s shareholders of RMB389.1806 million, and a netprofit attributable to the listed company’s shareholders before exceptional gains and losses ofRMB263.4264 million.The consolidated income statement and cash flow statement of 2019 included Pride, while theconsolidated financial statements of 2020 did not. In order to give a more accurate view of theyear-on-year changes in operating results, the 2019 data in the table below do not include Pride, the2019 and 2020 data below are on a comparable basis:
Unit: RMB’0,000
| 2020 | 2019 adjusted on a comparable basis | Change (%) | |
| Operating revenue | 291,627.01 | 286,740.63 | 1.70% |
| Net profit attributable to the listed company’s shareholders | 38,918.06 | 17,167.47 | 126.70% |
| Net profit attributable to the listed company’s shareholders before exceptional gains and losses | 26,342.64 | 12,668.16 | 107.94% |
| Net cash generated from/used in operating activities | 55,099.60 | 23,528.47 | 134.18% |
The overall operations of the Company in 2020 were summarized below:
(I) Multiple measures promoting steady progress, robust growth in main businesses
In 2020, the Company focused on the main business of "intelligent manufacturing", tookseveral measures to actively respond to changes in the macro economic and social environmentsand the market, and achieved steady growth in its principal business revenue and operationperformance.
1. Intelligent corrugated packaging machinery business
The intelligent corrugated packaging machinery business of the Company covers two majorparts, namely, the corrugator line business and the corrugated box printing and packagingmachinery business, which is the core strategic business. The overall operations in 2020 remainedrobust. The operating revenue amounted to approximately RMB2.57 billion in the Reporting Period,with a steady increase from 2019.
The corrugator line business is mainly handled by Fosber Group and Fosber Asia. The former
faces the international market, while the latter, domestic.
(1) Domestic corrugator line business
In the Reporting Period, the domestic corrugator line business of the Company seizedpost-pandemic opportunities brought by the economic recovery and progress in courier and logisticsfor online shopping to drive its corrugated board capacity. Additionally, it actively carried outdomestic marketing and exerted more efforts to develop major customers of the Group. Thus, theCompany achieved gratifying performance in 2020.In 2020, Fosber Asia had a rapid YoY increase in its order amount. Its annual order amountreached approximately RMB360 million, up by around 150% YoY from 2019. Moreover, itestablished a cooperative relationship or intention with the major customers and downstreamleaders in corrugated board packaging of the Group, such as Nine Dragons, Shanying Intl, and MYSin the year.
Fosber Asia also intensified the localization of the supply chain in the Reporting Period.Basically, over 90% of mid- and high-end products have been localized. Meanwhile, it enhancedoperation control to further cut costs and raise efficiency. Its gross profit margin was approximately33% in 2020 with an apparent YoY increase of around 9%.
Affected by the above factors, the net profit of Fosber Asia surged by over 80% in 2020.
(2) International corrugator line business
The pandemic in 2020 severely impacted the economic and social operations of major foreigneconomies. Except for China, all other countries and regions recorded a negative increase. In suchmacro-economic environment, large enterprises in the international corrugated board packagingindustry postponed their capital expenditure plans, leading to declined industry prospects and anegative influence on the sales of orders of the corrugator line business.
In consideration of the above adverse external environment, Fosber Group, the business entityof the international corrugator line business of the Company, actively responded to challenges andadopted measures to minimize the unfavourable impact of the pandemic. The internationalcorrugator line business maintained steady progress in 2020.
Fosber Group recorded operating revenue of approximately RMB1.95 billion and net profit ofaround RMB180 million, both of which rose by approximately 5%, in 2020, its consolidated
financial report showed.As early as the first half of 2020, Fosber Group had resumed normal work, production, andoperations. It vigorously took action to maintain the partnership with major customers like SmurfitKappa, International Paper, and DS Smith. Its annual order amount was generally stable. In themeantime, the management team of Fosber Group took multiple measures to reduce costs andimprove efficiency, including improving lean production management, reducing total BOM costs,and streamlining the team to cut management fees.Industrial synergy: Fosber Group acquired relevant business assets of Agnati, an Italiancorrugated board line manufacturer in 2020 Q1. The brand history of Agnati dates back to the 1930s.As a pioneer, Agnati has created significant milestones in technologies and products for the designand manufacturing of corrugator lines. With products sold all over the world, it is one of the mainsuppliers of equipment for corrugator lines. As at 2020, Agnati had sold over 3,000 pieces ofequipment to 82 countries around the world.
Through this acquisition, Fosber Group obtained the whole value chain of corrugator lines ofQuantum, relevant customer resources, brands, and intellectual properties, as well as the technicalsupport services sold and held by Agnati for corrugator lines. Thus, Fosber Group can offerhigh-speed and technology-leading corrugator lines. In 2020, the management team of FosberGroup newly established Italy QCorr (a new entity undertaking relevant business assets of Agnati),optimized the financial structure to turn finance and operations much more wholesome, launchednew Quantum series corrugator lines, and made breakthroughs in sales in 2020.
Fosber Group acquired Spain Tiru?a in 2019. Spain Tiru?a is a century-old high-endmanufacturer specialize in producing high-end corrugating and pressure rolls. Currently, it is rankedamong the top corrugating roll manufacturers in the world.
Spain Tiru?a has been a long-term strategic partner of Fosber Group for decades. Thecorrugating rolls produced by Spain Tiru?a are one of the core parts and accessories in thecorrugator line. The acquisition and business integration have tied the two enterprises with commoncustomer bases closer, strengthened the control of Fosber Group over the supply of core parts andaccessories and quality corrugating rolls, and turned the synergy effect of the industrial chain moreprominent.
(3) Corrugated box printing and packaging machinery business
The corrugated box printing and packaging machinery business consists of Dongfang Precision(China) and Dongfang Precision (Europe). In the Reporting Period, the business contributedapproximately RMB510 million in total to the operating revenue.
The global impact of the pandemic in 2020 suppressed the demand of some overseascustomers for capital expenditures and equipment procurement. Besides, blocked logisticstransportation and restricted traffic exerted a negative influence on overseas direct sales.
In 2020, Dongfang Precision (China) actively adopted measures to mitigate the negativeimpact of the pandemic. With respect to the revenue structure, it followed the "intellectualization"trend in the downstream corrugated board packaging industry and constantly intensifiedinformation-based production management software, technical support services, and spare productsand parts, though overseas sales revenue of corrugated box printing and packaging machinery fell inthe year. In the Reporting Period, sales and revenue of the above business grew steadily.
In regard to marketing, Dongfang Precision (China) continuously consolidated and furtherstrengthened the partnership with major downstream group customers in China, establishedstrategic cooperation or a deep contention intention with Shanying Intl, MYS, HXPP, and ZhengyeInternational in the year, laying a solid foundation for recovery the growth momentum. Furthermore,it vigorously expanded the coverage of overseas businesses, employed multiple methods to scale upinternational marketing, and achieved a YoY increase in sales in Russia and Turkey.
2. Outboard motors & general utility small gasoline motors
In 2020, Parsun Power, a wholly-owned subsidiary of the Company, achieved robust growth.Throughout the year, its operation performance was not significantly affected by the pandemic. Itrecorded sales revenue of approximately RMB340 million, up by around 15% from the same periodlast year.
In the Reporting Period, Parsun Power continued to exert more efforts to develop the domesticoutboard motor market and made a steady YoY increase in the sales revenue in the domestic market.In 2020, Parsun Power kept expanding the domestic military market and achieved great progress.The military business will hopefully become significant support for Parsun Power.
With respect to new product R&D, Parsun Power inputs more resources for electric outboard
motors, diesel outboard motors, and mixed-fuel outboard motors and achieved positive progress.Mass production of relevant models and large-horsepower outboard motors will hopefully begin in2021. In terms of team building, Parsun Power attracted several high-end talents in sales, R&Dtechnology, production, and finance to significantly improve the comprehensive strength and talentbuilding of the team in 2020, laying a foundation for the development of high-level talent. Besides,it implemented equity incentives for key management personnel and business elites and furtherenhanced the stability and cohesion of the team. For operations and management, Parsun Powerpushed forward the launch of the lean production management system, passed external systemreviews like ISO9001 and ISO14001, and kept turning its production management more systematicand standardized. Furthermore, it continuously cut the inventory, raise the inventory turnover ratio,and steadily improved its operations.Parsun Power recorded a rapid growth of approximately 40% YoY in the revenue from generalutility small gasoline motors in the Reporting Period, thanks to the earlier recovery of the domesticmanufacturing industry compared with international peers and higher demand for general utilitysmall gasoline motors (e.g., gasoline generating set and gasoline water pump) in overseas marketand specific markets (e.g., the agricultural market) amid the pandemic in 2020.(II) Launch of "digitalization and intellectualization" strategy and creation of"intelligent plants"Problems in the corrugated board packaging industry, such as traditional productionmanagement models, high reliance of some key positions on senior technicians, andlabour-intensive processes, turned more serious amid the pandemic in 2020 and became of the mainbarriers curbing the resumption of work and production and performance growth. In thepost-pandemic era, practitioners in the industry perceived the importance of "machines replacinghumans" and "intelligent plants" more deeply. Leading medium- and large-sized enterprises in theindustry have earnestly adopted measures to accelerate intelligent production and the building ofintelligent plants.
Regarding the development trend of the industry, production efficiency and the quality offinished products of traditional industrial production are restricted by many factors, such as staffing,skills, and proficiency. The manufacturing industry has reached a consensus on the upgrading and
transformation to automation, digitalization, and intellectualization and accelerated to do so in orderto strengthen the manufacturing precision, reliability, consistency, and production efficiency ofproducts to meet production demand that is increasingly upgraded.Intelligent plants are based on digitalization, supported by big data and the Internet, andcharacterized by intelligent design, intelligent manufacturing, intelligent management, andintelligent logistics, and integrated optimization. For the corrugated board packaging industry,intelligent plants are a systematic project centring on digitalization and intellectualization andregarding hardware and software building as its important contents. What's more, intelligent plantsrepresent a leap from traditional automatic production to data association, AI-based self-learningand decision-making, and flexible production.
Dongfang Precision has deemed "digitalization and intellectualization" as a vital part of itsfive-year strategies since the beginning of 2020, endeavoured to promote the digitalization andintellectualization transformation of corrugated box printing and packaging machinery. In 2020, thefollowing measures were adopted to implement the "digitalization and intellectualization" strategy:
1. Dongfang Precision and Yunyin Technology (Shenzhen) Co., Ltd. (Yunyin), amajority-owned subsidiary of Shanying Intl, signed a Strategic Cooperation Agreement in July2020. Yunyin is a service-oriented technological innovation enterprise in the domestic packagingindustry. The Company and Yunyin have developed a long-term strategic partnership in the digitaltransformation and upgrading of the intelligent packaging industry. They have jointly createdsamples of intelligent plants and driven the digital transformation and upgrading of the printing andpackaging industry, beneficial for the Company to further promote the implementation of businessplanning related to digital transformation and intelligent upgrading.
2. In October 2020, Dongfang Precision incorporated a new subsidiary, "Dongfang DigicomTechnology Co., Ltd.". The new subsidiary is committed to offering overall solutions for intelligentplants in the corrugated board packaging industry based on industrial Internet, by virtue of thewhole industrial chain layout and successful practices in the information-based management systemregarding intelligent corrugated packaging machinery. It aims to become a supplier of overallsolutions of intelligent plants in the corrugated board packaging industry.
The Company has shifted from its business model from being an "equipment manufacturer" to
a "supplier of overall solutions of intelligent plants", during the implementation of the"digitalization and intellectualization" strategy.It enjoys the following advantages during the above shift in the corrugated board packagingindustry:
A. Whole industrial chain layout of the corrugated packaging machinery industryDongfang Precision has vertically scaled up its footprint in the industrial chain of segments ofcorrugated box printing and packaging machinery business after listing. Its main businesses havebeen expanded from the corrugated box printing and packaging machinery business at thebeginning of listing to production equipment covering all processes in the production andprocessing chain of corrugated paper from production, printing, die cutting, gluing, to packaging,such as corrugating rolls, corrugator lines, fully automatic printing lines and individual machineunits for corrugated boxs, and pre-printing and post-printing automatic equipment.The integrity of the industrial chain layout of Dongfang Precision is reflected in the followingtwo aspects:
(1) The whole industrial chain layout covers all processes of the chain of printing, packaging,production, and processing of corrugated paper. Basically, all equipment and products in theindustrial chain of corrugated box printing and packaging machinery are reached. DongfangPrecision embraces series products, such as Tiru?a corrugating rolls-Fosber corrugatorlines-Quantum corrugator lines-Dongfang Precision (China) corrugated box printing and packagingline and individual machine units-Dongfang Precision (Europe) corrugated box printing andpackaging machinery and pre-printing and post-printing automatic equipment.Schematic diagram of whole industrial chain layout of corrugated box printing and packaging machinery business
of Dongfang Precision
(2) Dongfang Precision features a product library with the most complete and richest productspecifications and market positioning in the industry. For example, Dongfang Precision providesproducts with dozens of specifications and positioning in the corrugated box printing and packagingmachinery segment, far more than those of its rivals, thus satisfying the diversified equipmentdemands of domestic customers.B. Successful practices of information-based production management systems in thecorrugated board packaging industryThe basis and core of an intelligent plant lie in the intelligent production system consisting ofinformation-based systems like ERP, MES, WMS, SCADA, and APS. Especially, theManufacturing Execution System (MES), as an information-based system targeting manufacturingexecution, offer functions and modules, such as production process control, manufacturing datamanagement, scheduling management, production dispatching management, inventory management,quality management, cost management, and project Kanban management, and optimizes productionactivities converting orders into products.
The corrugator line business and corrugated box printing and packaging machinery business ofDongfang Precision have demonstrated mature practices regarding information-based productionsystems:
(1) The PRO series information-based intelligent production management system forcorrugator lines, developed by Fosber Group who integrated sensor, AI, VR, and 3D modelling andcombined data on the development, production, and technical support of corrugator linesaccumulated for years, has the following functions: First, it connects with ERP of the customer for
ERP production scheduling. Second, it connects with the WMS system of the customer to improveinventory management and storage and logistics management and control. Third, real-timemonitoring of production data of corrugator lines and real-time monitoring of the productionprocess and Kanban management are realized through more than 200 sensors in various typesinstalled to corrugator lines. Fourth, the performance and cost of the production line are analysedbased on data to help the customer make production decisions. Fifth, with the "self-diagnosissystem", the machine can identify abnormal production data and automatically diagnose issues,based on the production data collected in a real-time manner and the preset algorithm. It willdevelop a causal relationship and search for an optimal solution in the database. Data are stored andtransmitted safely through exclusive cloud servers and firewalls. The remote-control system enablesreal-time monitoring and remote control of equipment is monitored in a real-time manner.In 2020, the R&D team of Fosber Group kept upgrading the PRO series information-basedintelligent production management system for corrugator lines, in accordance with industrydevelopment trends and the actual demand of customers, introduced a new functional module,including the "big data analysis system" module. Sensors are utilized to collect data liketemperature, humidity, heat, and wrinkles in real time during paper board production. The logicalrelationship between data is studied with preset algorithms. Results are output to constantlyreinforce the effectiveness of production process control. The development of the "MyCorr artificialintelligence system" was promoted. Intelligent and deep analysis is carried out through "digitaltwin" and data collected and stored by the PRO series. Analysis results met requirements for thedigitalization and intellectualization of operations and management.Schematic diagram of PRO series information-based intelligent production management system of Fosber Group
(2) The information-based production management system for corrugated box printerslaunched by Dongfang Precision (China) offer multiple functions, such as ERP productionscheduling, intelligent stock management, setting of optimal parameters for automatic order storageand adjustment, collection of production data, real-time production Kanban management,production performance management, cost analysis, quality tracing, equipment failure management,and remote order management.The whole process from ordering to the completion of production was optimized to reduceinternal activities with low added value. Dongfang Precision (China) put the corrugated boxprinting line under automatic and standardized management. Production processes, enormous dataon production equipment, and algorithm analysis and processing were organically combined.Meanwhile, the operational complexity of printers was reduced to reduce the reliance on labour.Dongfang Precision (China) prolonged effective production time and reduce material consumptionto meet the demand of the customer for effective and flexible production.
Schematic diagram of functions of information-based production management system for corrugated box printers
of Dongfang Precision
C. Innovative breakthroughs in overall solutions of intelligent plants
In 2020, Dongfang Precision established a subsidiary, Dongfang Digicom, to provide thecorrugated board packaging industry with overall solutions for intelligent plants, in consideration ofindustry development trends and technology and product innovation. In the major trend of industrialupgrading, Dongfang Digicom will keep an open mind and join hands with top teams in the worldto jointly create a cooperation ecosystem, by taking advantage of Dongfang Precision's experience
related to intelligent corrugated packaging machinery in the past three decades. An enterprise- andindustry-level industrial Internet platform will be created, through new-generation informationtechnologies, such as the Internet of Things (IoT), cloud computing, big data, 5G, and artificialintelligence (AI), to lower the threshold for enterprises to apply new-generation informationtechnologies and boost the digital transformation and upgrading of the whole industry.Looking ahead, Dongfang Digicom will focus on corrugator lines and core hardwareequipment like corrugated box printing and packaging machinery and employ the IoT, 5G, and edgecomputing to realize a digital and network-based equipment layer. Furthermore, it will connectbusiness, cash, and information flows through cloud computing and information application andpromote comprehensive digitization of the production and operation layer. In addition, DongfangDigicom will facilitate enterprises to perform data-based reasonable management anddecision-making via big data and AI, promote intelligent transformation, and enhance enterprisecompetitiveness in all respects.
Resource sharing and network synergy across the industry will be available by developing anindustry-level industrial Internet platform based on intelligent transformation. Therefore, the wholeindustry will become more competitive.
(III) Progressive capital growth and increase in value returns laying a foundation forsustainable development in the future
1. Repurchase shares in the secondary market and stabilize the value expectations
In June 2020, the share repurchase plan for 2020 was approved at the extraordinary generalmeeting of the Company. The Company would repurchase its shares from the secondary marketthrough centralized bidding trading with total self-owned funds of RMB500 million (inclusive) atleast and RMB1 billion at most. The repurchase price would not exceed RMB6.42/share. Therepurchased shares would be retired in full to reduce the Company's registered capital.
As at the end of 2020, under the share repurchase of 2020 through centralized bidding trading,the Company repurchased approximately 104 million shares accumulatively, accounting for around
6.73% of its total share capital, and paid approximately RMB500 million in total. Implementationof the share repurchase plan is conducive to protecting the interests of extensive investors andbolstering their confidence. Upon share cancellation, the value of unit shares will increase, and the
value returns to shareholders will thereby increase.
2. Offer elites’ incentives to ensure sound and sustainable developmentIn 2020, the Company launched the restricted share incentive plan. With 27 million ordinaryA-shares repurchased from the secondary market as incentive shares, a price of RMB1/share wasgranted. Upon approval by the General Meeting and the Board of Directors in the year, theCompany granted incentive shares to 40 core elites and managers in the first batch in total. 22.6million shares were granted accumulatively.
Through the implementation of equity incentives, the Company will further stimulate theenthusiasm of managers and core elites at different levels, "stabilize the team, boost the morale,gather talents and improve business performance". The connection of the core elites' own intereststo the Company's future business growth and capability of shareholder return will be deepened,which is conducive to the sustainable and healthy development of the Company and its continualimprovement of the value creation capability.
3. Strengthen proactive management of idle funds, and improve the return on equity withcontrollable risk and sound income as guidelines to create higher value
In 2020, upon the approval of the General Meeting, the Company conducted securitiesinvestment with self-owned funds on the premises that legal compliance, the Company's need ofroutine operating funds and fund safety were ensured and that its development of major businesswould not be affected. The return on securities investment in 2020 totalled RMB100 millionapproximately, which made positive contribution to the growth in net profit in the Group'sconsolidated statements and the overall ROE improvement.II Core Business Analysis
1. Overview
See “I Overview” above.
2. Revenue and Cost Analysis
(1) Breakdown of Operating Revenue
Unit: RMB
| 2020 | 2019 | Change (%) | |||
| Operating revenue | As a % of total operating revenue (%) | Operating revenue | As a % of total operating revenue (%) | ||
| Total | 2,916,270,143.13 | 100% | 9,973,503,602.19 | 100% | -70.76% |
| By operating division | |||||
| Auto parts (disposed) | 0.00% | 7,106,097,351.49 | 71.25% | -100.00% | |
| Intelligent manufacturing | 2,916,270,143.13 | 100.00% | 2,867,406,250.70 | 28.75% | 1.70% |
| By product category | |||||
| Complete lines and individual machine units for intelligent corrugated packaging machinery | 1,633,066,788.32 | 56.00% | 1,620,368,040.68 | 16.25% | 0.78% |
| Parts for intelligent corrugated packaging machinery | 612,171,596.25 | 20.99% | 611,380,210.58 | 6.13% | 0.13% |
| Software and services related to intelligent corrugated packaging machinery | 326,536,590.09 | 11.20% | 336,044,115.95 | 3.37% | -2.83% |
| Outboard motors and general utility small gasoline motors | 344,495,168.47 | 11.81% | 299,613,883.49 | 3.00% | 14.98% |
| Power battery systems (disposed) | ---- | ---- | 7,106,097,351.49 | 71.25% | -100.00% |
| By operating segment | |||||
| Mainland China | 349,869,885.20 | 12.00% | 7,496,120,829.52 | 75.16% | -95.33% |
| Other countries and regions | 2,566,400,257.93 | 88.00% | 2,477,382,772.67 | 24.84% | 3.59% |
Note:
The consolidated income statement of 2019 included Pride and the revenue of 2019 from Mainland China included operatingrevenue of approximately RMB7,106 million contributed by Pride, while the consolidated financial statements of 2020 did notcomprise Pride. In order to give a more accurate view of the year-on-year changes in operating revenue by operating segment, the
2019 revenue data in the table below do not include Pride, i.e. the 2019 and 2020 data below are on a comparable basis:
Unit: RMB
| 2020 | 2019 | Change (%) | |||
| Operating revenue | As a % of total operating revenue (%) | Operating revenue | As a % of total operating revenue (%) | ||
| By operating segment (with the 2019 data exclusive of Pride) | |||||
| Mainland China | 349,869,885.21 | 12.00% | 390,023,478.03 | 13.60% | -10.30% |
| Other countries and regions | 2,566,400,257.93 | 88.00% | 2,477,382,772.67 | 86.40% | 3.59% |
(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 | ||||||
| Auto parts (disposed) | 0.00% | -100.00% | -100.00% | |||
| Intelligent manufacturing | 2,916,270,143.13 | 2,099,148,826.36 | 28.02% | 1.70% | 2.07% | -0.26% |
| By product category | ||||||
| Complete lines and individual machine units for intelligent corrugated packaging machinery | 1,633,066,788.32 | 1,278,135,262.19 | 21.73% | 0.78% | 1.99% | -0.92% |
| 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 (%) | |
| Parts for intelligent corrugated packaging machinery | 612,171,596.25 | 405,365,593.98 | 33.78% | 0.13% | -1.08% | 0.81% |
| Software and services related to intelligent corrugated packaging machinery | 326,536,590.09 | 163,729,334.95 | 49.86% | -2.83% | -2.65% | -0.09% |
| Outboard motors and general utility small gasoline motors | 344,495,168.47 | 251,918,635.24 | 26.87% | 14.98% | 11.84% | 2.05% |
| Power battery systems (disposed) | ---- | ---- | 0.00% | -100.00% | -100.00% | |
| By operating segment | ||||||
| Mainland China | 349,869,885.20 | 236,787,361.05 | 32.32% | -95.33% | -96.32% | 18.12% |
| Other countries and regions | 2,566,400,257.93 | 1,862,361,465.30 | 27.43% | 3.59% | 0.40% | 2.31% |
Note:
The consolidated income statement of 2019 included Pride and the revenue of 2019 from Mainland China included operatingrevenue of approximately RMB7,106 million contributed by Pride, while the consolidated financial statements of 2020 did notcomprise Pride. In order to give a more accurate view of the year-on-year changes in operating revenue, cost of sales and gross profitmargin by operating segment, the 2019 operating revenue, cost of sales and gross profit margin data in the table below do not includePride, i.e. the 2019 and 2020 data below are on a comparable basis:
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 segment (with the 2019 data exclusive of Pride) | ||||||
| Mainland China | 349,869,885.21 | 236,787,361.05 | 32.32% | -10.30% | -6.19% | -2.96% |
| Other countries and regions | 2,566,400,257.93 | 1,862,361,465.30 | 27.43% | 3.59% | 3.23% | 0.25% |
(3) Whether Revenue from Physical Sales Is Higher than Service Revenue
√ Yes □ No
| Operating division | Item | Unit | 2020 | 2019 | Change (%) |
| Intelligent manufacturing | Unit sales | Unit | 289,152 | 210,542 | 37.34% |
| Output | Unit | 288,738 | 212,800 | 35.69% | |
| Inventory | Unit | 7,854 | 11,451 | -31.41% |
Any over 30% YoY movements in the data above and why:
√ Applicable □ Not applicable
The intelligent equipment manufacturing business saw an increase in revenue amid stability in the Reporting Period compared to lastyear.
(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 | 2020 | 2019 | Change (%) | ||
| Cost of sales | As a % of total cost of sales (%) | Cost of sales | As a % of total cost of sales (%) | |||
| Auto parts (disposed) | Cost of sales | ---- | ---- | 6,229,954,385.16 | 75.18% | -100.00% |
| Intelligent manufacturing | Cost of sales | 2,099,148,826.36 | 100.00% | 2,056,477,689.76 | 24.82% | 2.07% |
Unit: RMB
| Product category | Item | 2020 | 2019 | 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 | 1,278,135,262.19 | 60.89% | 1,253,247,146.92 | 15.12% | 1.99% |
| Parts for intelligent corrugated packaging machinery | Cost of sales | 405,365,593.98 | 19.31% | 409,789,457.46 | 4.95% | -1.08% |
| Software and services related to intelligent corrugated packaging machinery | Cost of sales | 163,729,334.95 | 7.80% | 168,192,589.23 | 2.03% | -2.65% |
| Outboard motors and general utility small gasoline motors | Cost of sales | 251,918,635.24 | 12.00% | 225,248,496.15 | 2.72% | 11.84% |
| Power battery systems (disposed) | Cost of sales | 0.00% | 6,229,954,385.16 | 75.18% | -100.00% |
(6) Changes in the Scope of Consolidated Financial Statements for the Reporting Period
√ Yes □ No
The consolidated income statement and cash flow statement of 2019 included Pride, while the consolidatedfinancial statements of 2020 did not.
In February 2020, subsidiary Fosber Group completed the acquisition of the relevant assets of BP AgnatiS.r.l., a corrugator line manufacturer in Italy with Italy QCorr as the direct acquirer. Upon the transaction, FosberGroup has a 60% interest in Italy QCorr, and Italy QCorr was included in the consolidated financial statements ofthe Company for the Reporting Period.
In March 2020, subsidiary Tiru?a Brasil Ltda was de-registered and has been excluded from the consolidatedfinancial statements of the Company since the date of de-registration.
In September 2020, the Company acquired the other 50% interest in Yinglian Digital. Upon the acquisition,the Company owns the 100% interest of Yinglian Digital, which has been included in the consolidated financialstatements of the Company.
In October 2020, subsidiaries Hainan Yineng and Dongfang Digicom were incorporated and have beenincluded in the consolidated financial statements of the Company since the date of incorporation.
In November 2020, subsidiary Shunyi Investment, as a general partner, participated in the establishment ofSuzhou High-Tech Zone Jinquan Business Management Partnership (Limited Partnership). Pursuant to therelevant partnership agreement and China’s Accounting Standards for Business Enterprises, the Companyincluded Suzhou High-Tech Zone Jinquan Business Management Partnership (Limited Partnership) in itsconsolidated financial statements of 2020.
(7) Major Changes to the Business Scope or Product or Service Range in the Reporting Period
√ Applicable □Not applicable
The consolidated income statement and cash flow statement of 2019 included Pride, while the consolidated financial statementsof 2020 did not. Therefore, the power battery system business was excluded from the primary business scope of the Company in theReporting Period compared to 2019.
(8) Major Customers and Suppliers
Major customers:
| Total sales to top five customers (RMB) | 479,769,629.35 |
| Total sales to top five customers as a % of total sales of the Reporting Period (%) | 16.45% |
| 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 | 186,506,682.01 | 6.40% |
| 2 | Customer B | 107,222,470.55 | 3.68% |
| 3 | Customer C | 68,942,857.85 | 2.36% |
| 4 | Customer D | 65,078,583.55 | 2.23% |
| 5 | Customer E | 52,019,035.39 | 1.78% |
| Total | -- | 479,769,629.35 | 16.45% |
Other information about major customers:
□ Applicable √ Not applicable
Major suppliers:
| Total purchases from top five suppliers (RMB) | 263,932,767.20 |
| Total purchases from top five suppliers as a % of total purchases of the Reporting Period (%) | 12.12% |
| 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 | 151,135,623.42 | 6.94% |
| 2 | Supplier B | 34,031,139.58 | 1.56% |
| 3 | Supplier C | 32,525,809.09 | 1.49% |
| 4 | Supplier D | 24,349,269.60 | 1.12% |
| 5 | Supplier E | 21,890,925.50 | 1.01% |
| Total | -- | 263,932,767.20 | 12.12% |
Other information about major suppliers:
□ Applicable √ Not applicable
3. Expenses
Unit: RMB
| 2020 | 2019 | Change (%) | Reason for any significant change | |
| Selling expenses | 181,549,459.69 | 414,527,474.88 | -56.20% | The consolidated financial statements of last year included Pride for January-November 2019. Selling expenses would be up 5.62% on a comparable basis exclusive of Pride. The change was primarily driven by the reclassification of transportation expenses from selling expenses to costs, as well as by an increase in selling expenses due to Fosber Group’s acquisition of Agnati. |
| Administrative expenses | 246,973,016.40 | 365,218,611.72 | -32.38% | The consolidated financial statements of last year included Pride for January-November 2019. Administrative expenses would be down 13.09% on a comparable basis exclusive of Pride. The change was primarily driven by a decrease in administrative expenses of the Group Headquarters. |
| Finance costs | 7,919,670.28 | -16,869,846.12 | -146.95% | The consolidated financial statements of last year included Pride for January-November 2019. Finance costs would be up 1895.46% on a comparable basis exclusive of Pride. The change was primarily driven by changes in exchange gains/losses in the Reporting Period. |
| R&D expenses | 82,082,274.75 | 156,654,915.42 | -47.60% | The consolidated financial statements of last year included Pride for |
4. R&D Investments
√ Applicable □ Not applicable
Details about R&D investments:
January-November 2019. R&Dexpenses would be up 20.19% on acomparable basis exclusive of Pride.The change was primarily driven bygreater R&D investments in theReporting Period.
| 2020 | 2019 | Change (%) | |
| Number of R&D personnel | 308 | 392 | -21.43% |
| R&D personnel as a % of total employees | 18.25% | 23.99% | -5.74% |
| R&D investments (RMB) | 98,695,840.36 | 169,319,720.80 | -41.71% |
| R&D investments as a % of operating revenue | 3.38% | 1.70% | 1.68% |
| Capitalized R&D investments (RMB) | 16,613,995.40 | 12,664,805.38 | 31.18% |
| Capitalized R&D investments as a % of total R&D investments | 16.83% | 7.48% | 9.35% |
Reasons for any significant YoY change in the percentage of R&D investments in operating revenue:
√ Applicable □ Not applicable
The consolidated R&D investments of 2019 included those of Pride, while the amount of 2020 did not. Therefore, the R&Dinvestments as a percentage of operating revenue changed in 2020 compared to 2019.
Reason for any sharp variation in the percentage of capitalized R&D investments and rationale:
√ Applicable □ Not applicable
The consolidated R&D investments of 2019 included those of Pride, while the amount of 2020 did not. Therefore, thecapitalized R&D investments as a percentage of total R&D investments changed in 2020 compared to 2019.
5. Cash Flows
Unit: RMB
| Item | 2020 | 2019 | Change (%) |
| Subtotal of cash generated from operating activities | 3,274,395,655.64 | 5,971,827,830.59 | -45.17% |
| Item | 2020 | 2019 | Change (%) |
| Subtotal of cash used in operating activities | 2,723,399,623.89 | 5,690,530,043.58 | -52.14% |
| Net cash generated from/used in operating activities | 550,996,031.75 | 281,297,787.01 | 95.88% |
| Subtotal of cash generated from investing activities | 2,321,860,300.51 | 4,858,499,596.17 | -52.21% |
| Subtotal of cash used in investing activities | 3,505,386,890.24 | 4,736,987,401.92 | -26.00% |
| Net cash generated from/used in investing activities | -1,183,526,589.73 | 121,512,194.25 | -1,074.00% |
| Subtotal of cash generated from financing activities | 557,812,012.95 | 362,807,582.84 | 53.75% |
| Subtotal of cash used in financing activities | 1,311,605,832.73 | 605,506,468.14 | 116.61% |
| Net cash generated from/used in financing activities | -753,793,819.78 | -242,698,885.30 | 210.59% |
| Net increase in cash and cash equivalents | -1,366,123,500.61 | 168,727,295.04 | -909.66% |
The consolidated cash flow statement of 2019 included Pride, while the consolidated financial statements of 2020 did not. Inorder to give a more accurate view of the year-on-year changes in cash flows, the 2019 data in the table below do not include Pride,i.e. the 2019 and 2020 data below are on a comparable basis:
Unit: RMB
| Item | 2020 | 2019 (exclusive of Pride) | Change (%) |
| Net cash generated from/used in operating activities | 550,996,031.75 | 235,284,708.85 | 144.20% |
| Net cash generated from/used in investing activities | -1,183,526,589.73 | 273,125,045.18 | -530.60% |
| Net cash generated from/used in financing activities | -753,793,819.78 | -262,833,123.90 | 198.60% |
| Net increase in cash and cash equivalents | -1,366,123,500.61 | 254,192,829.21 | -637.46% |
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 RMB550.996 million, primarily because notes were adoptedmore often for the settlement of sourcing in the Reporting Period, resulting in a decrease in cash payments, in additionto a faster turnover of accounts receivable.
(2) Net cash used in investing activities was RMB1,183.5266 million, primarily because the Company conductedsecurities investments in the Reporting Period as authorized by the general meeting.
(3) Net cash used in financing activities was RMB753.7938 million, primarily driven by loan repayment, payment ofsecurity deposits and share repurchase in the Reporting Period.
(4) Net decrease in cash and cash equivalents was RMB1,366.1235 million, primarily driven by net cash used in
investing and financing activities in the Reporting Period.III 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 | 55,115,521.94 | 13.12% | Income from the wealth management products and large-amount deposit receipts purchased, as well as share of profit of associates recognized at the equity method in the Reporting Period | Yes |
| Gain/loss on changes in fair value | 45,122,771.27 | 10.74% | Gains on securities investments conducted in the Reporting Period | Yes |
| Asset impairment loss | -5,368,019.60 | -1.28% | Inventory valuation allowances | Not |
| Non-operating income | 35,801,786.91 | 8.52% | Performance compensation received | Not |
| Non-operating expenses | 1,746,731.36 | 0.42% | Donations and sponsorship expenditure | Not |
IV 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 2020 | 1 January 2020 | Change in percentage (%) | Reason for any significant change | |||
| Amount | As a % of total assets | Amount | As a % of total assets | |||
| Cash and bank balances | 885,711,053.88 | 14.01% | 2,356,703,434.60 | 37.57% | -23.56% | Reclassification of security deposits and large-amount deposit receipts of over one year to other non-current |
| assets, as well as by a decrease in cash due to securities investments and the share repurchase, in the current period | ||||||
| Accounts receivable | 469,635,423.58 | 7.43% | 597,431,210.02 | 9.52% | -2.09% | |
| Inventories | 734,120,595.26 | 11.61% | 671,432,701.11 | 10.70% | 0.91% | |
| Investment property | 0.00% | 0.00% | 0.00% | |||
| Long-term equity investments | 72,671,204.73 | 1.15% | 72,372,355.03 | 1.15% | 0.00% | |
| Fixed assets | 571,413,480.14 | 9.04% | 585,754,900.75 | 9.34% | -0.30% | |
| Construction in progress | 9,062,038.52 | 0.14% | 4,839,241.48 | 0.08% | 0.06% | |
| Short-term borrowings | 39,533,281.84 | 0.63% | 117,888,353.14 | 1.88% | -1.25% | |
| Long-term borrowings | 353,412,388.29 | 5.59% | 224,146,667.48 | 3.57% | 2.02% | |
| Financial assets held for trading | 1,636,296,430.31 | 25.88% | 1,164,039,381.59 | 18.55% | 7.33% | Securities investments conducted in the current period |
| Other non-current assets | 936,540,047.40 | 14.81% | 2,518,818.56 | 0.04% | 14.77% | Reclassification of security deposits and large-amount deposit receipts of over one year to other non-current assets in the current period |
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) | 1,163,000,000.00 | 53889921.27 | 2744242503.31 | 2298385 595.62 | 1635465408.96 | |||
| 2. Derivative | 1,039,381.59 | 517198.2 | 725,558.44 | 831021.35 | ||||
| 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 | ||||||||
| Subtotal of financial assets | 1,164,039,381.59 | 54,407,119.47 | 0.00 | 2744242503.31 | 2299111154.06 | 1,636,296,430.31 | ||
| Total of the above | 1,164,039,381.59 | 54,407,119.47 | 0.00 | 2744242503.31 | 2299111154.06 | 1,636,296,430.31 | ||
| Financial liabilities | 0.00 | 0.00 | 0.00 | 0.00 |
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 | 25,109,817.10 | Security deposits for acceptance notes |
| Fixed assets | 211,239,552.11 | As collateral for the credit line granted by the Foshan branch of the Bank of China |
| Intangible assets | 52,551,947.63 | As collateral for the credit line granted by the Foshan branch of the Bank of China |
| Other non-current assets | 295,075,000.00 | As security deposits for the loan raised by Dongfang Precision (Netherland) |
| Total | 583,976,316.84 |
V Investments Made
1. Total Investment Amount
√ Applicable □ Not applicable
| Total investment amount in 2020 (RMB) | Total investment amount in 2019 (RMB) | Change (%) |
| 1,861,603,704.43 | 123,995,066.16 | 1,401.35% |
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
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 | - | - | Fair value | 15,162,802.16 | 438,032,503.31 | 438,032,503.31 | 15,162,802.16 | Financial assets held for trading | Self-funded | ||||
| Trust products | - | - | Fair value | 4,767,340.61 | 500,000,000.00 | 19,322,135.13 | 504,767,340.61 | Financial assets held for trading | Self-funded | ||||
| Funds | - | - | Fair value | 19,890,000.00 | 600,000,000.00 | 19,890,000.00 | 619,890,000.00 | Financial assets held for trading | Self-funded | ||||
| Others | - | - | 1,164,039,381.59 | Fair value | 1,164,039,381.59 | 14,586,976.70 | 1,206,210,000 | 1,861,078,650.75 | 27,106,974.02 | 511,639,089.70 | Financial assets held for trading | Self-funded | |
| Total | 1,164,039,381.59 | -- | 1,164,039,381.59 | 54,407,119.47 | 0.00 | 2744242503.31 | 2299111154.06 | 81,481,911.31 | 1,636,296,430.31 | -- | -- | ||
| Disclosure date of the board announcement approving the | 28 March 2020 | ||||||||||||
| 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 |
| securities investments | |||||||||||||
| Disclosure date of the general meeting announcement approving the securities investments (if any) | 14 April 2020 | ||||||||||||
(2) Investments in Derivative Financial Instruments
□ Applicable √ Not applicable
No such cases in the Reporting Period.
5. Use of Raised Funds
√ Applicable □ Not applicable
(1) General Information about the Use of Raised Funds
√ Applicable □ Not applicable
Unit: RMB’0,000
| Year of raising | Way of raising | Total amount raised | Used in the period | Cumulatively used | Amount with changed use in the period | Cumulative amount with changed use | Cumulative amount with changed use as % of total amount raised | Unused amount | Purpose and whereabouts of the unused amount | Amount being idle for more than two years |
| 2017 | The matching fund raising via share offering for the restructuring | 283,616.53 | 0 | 187,902.15 | 0 | 0 | 0.00% | 0 | Not applicable | 111,655.82 |
| Total | -- | 283,616.53 | 0 | 187,902.15 | 0 | 0 | 0.00% | 0 | -- | 111,655.82 |
| Summary of the use of raised funds | ||||||||||
| As at 31 December 2020, the Company had invested a total of RMB1,879,021,500 of raised funds, as detailed as follows: (1) A total of RMB1,940,905,500 of funds were raised over previous years; (2) Beijing Pride New Energy Battery Technology Co., Ltd. (hereafter referred to as "Pride") returned RMB61,884,100 of raised funds in 2019. On 27 March 2020, the Company held the 1st extraordinary general meeting of shareholders of shareholders in 2020 and approved the Proposal on Termination of Investment Projects with Raised Funds and Permanent Replenishment of Working Capital with the Balance of Raised Funds. Given that the Company has transferred all 100% of Pride's equity by December 2019, Pride is no longer a subsidiary of Dongfang Precision, and the previous parenthood relationship between Dongfang Precision and Pride has been officially legally terminated. Dongfang Precision was no longer involved in the Company's non-public offering stock-raising matching-fund investment project, "Pride Liyang Base New Energy Car Battery R&D and Industrialization Project", planned in 2017, as the Company had transferred all 100% of Pride's equity, and the project was no longer commercially rational and feasible to be carried out. In fact, this non-public offering stock-raising matching-fund investment project planned in 2017 was automatically terminated upon completion of the closing of Pride's equity sale by the Company at the end of 2019. In order to effectively used the funds to optimize resources allocation, expand and strengthen the main business of the listed company, enhance the value creation of the listed company and create more value for shareholders, the Company, with the approval of the general meeting of shareholders, decided to use the balance of the raised funds to permanently replenish the working capital. As at 31 December 2020, the Company has transferred a total of RMB1,013,701,000 from the special account for fund raising to permanently replenish the working capital and used RMB100 million in the account to purchase large-value certificates of deposit. RMB2,857,200 of interests or income from financial products has been paid to the account in instalments, which, although still stored in the account, but no longer fall under the raised funds. | ||||||||||
(2) Promised Use of Raised Funds
√ Applicable □ Not applicable
Unit: RMB’0,000
As at 31 December 2020, the Company has received an accumulative net amount of RMB89,539,400 from interest on bank deposits deducting bank charges, and a net amount ofRMB6,040,300 from interest on the raised funds returned by Pride. During the Reporting Period, the Company approved a resolution to terminate investment projects with the raised funds andto use all the balance of the raised funds to permanently replenish the working capital, so the balance of the raised funds as at 31 December 2020 was RMB0.The use of the Company's raised funds is detailed in the 2020 Special Report on Storage and Use of Raised Funds disclosed on the same day of the 2020 Annual Report and theAuthentication Report on Storage and Use of Raised Funds by Guangdong Dongfang Precision Science & Technology Co., Ltd. for the Year ended 31 December 2020 issued by Ernst & YoungHua Ming LLP.
Promised project funded with raised funds andinvestment with over-raised funds
| Promised project funded with raised funds and investment with over-raised funds | Project changed or not (including partial change) | Total promised investment amount with raised funds | Adjusted total investment amount (1) | Investment in the period | Cumulative investment amount at the period-end (2) | Investment progress as at the period-end (3)＝(2)/(1) | Time when the project is ready for its intended use | Benefits derived in the period | Meeting the expected benefits or not | Significant change to project feasibility or not |
| Promised projects | ||||||||||
| Paying the cash consideration | Not | 180,500 | 180,500 | 180,500 | 100.00% | Not applicable | Not | |||
| Paying intermediary fees | Not | 9,500 | 9,500 | 7,402.15 | 77.92% | Not applicable | Not | |||
| Project of Pride’s Liyang base of the R&D and industrialization of New Energy Vehicle Batteries | Not | 100,000 | 0 | 0 | 0.00% | Not applicable | Not | |||
| Subtotal of promised projects | -- | 290,000 | 190,000 | 187,902.15 | -- | -- | -- | -- | ||
| Investment with over-raised funds | ||||||||||
| Nil | ||||||||||
| Total | -- | 290,000 | 190,000 | 0 | 187,902.15 | -- | -- | 0 | -- | -- |
| Reason for not meeting the scheduled progress or expected benefits (details of every project required) | In December 2019, the Company approved the package solution to the selling of Beijing Pride's equity involved in investment projects with raised funds and thus terminated investment projects with raised funds substantially. In March 2020, the Company approved the Proposal on Termination of Investment Projects with Raised Funds and Permanent Replenishment of Working Capital with the Balance of Raised Funds at the 43rd extraordinary meeting of the 3rd of Board of Directors and 1st extraordinary general meeting in 2020, with which it agreed to terminate the Company's investment projects with raised funds and use all the balance of the raised funds to permanently replenish the working capital. | |||||||||
| Significant changes to project feasibility | Ditto | |||||||||
| Amount, purpose and use progress of over-raised funds | Not applicable | |||||||||
| Change of implementation locations of projects funded with raised funds | Not applicable | |||||||||
| Adjustments to how projects funded with raised funds are implemented | Not applicable | |||||||||
| Advance investments in promised projects funded with raised funds and subsequent swaps | Applicable | |||||||||
| On 25 September 2017, the Company held the 17th meeting of the 3rd Board of Directors and deliberated and approved the Proposal on Replacing Self-raised Funds Invested in Investment Projects in advance with Raised Funds, with which it agreed to replace the self-raised funds already invested in investment projects in advance with the raised funds of RMB61,884,100, which has been completed on September 28, 2017. In December 2019, the Company approved the package solution to the selling of Beijing Pride's equity involved in investment projects with raised funds, according to which Pride should return to the listed company the principal and interest of the raised funds allocated to it. By December 25, 2019, the Company had received a total of RMB67,924,400 of | ||||||||||
| principals and interests of the raised funds paid by Pride via bank transfer. | |
| Temporary supplementation of working capital with idle raised funds | Not applicable |
| Balance amount of raised funds and why | Applicable |
| On 27 March 2020, the Company held the 1st extraordinary general meeting of shareholders in 2020 and approved the Proposal on Termination of Investment Projects with Raised Funds and Permanent Replenishment of Working Capital with the Balance of Raised Funds. Given that the Company has transferred all 100% of Pride's equity by December 2019, Pride is no longer a subsidiary of Dongfang Precision, and the previous parenthood relationship between Dongfang Precision and Pride has been officially legally terminated. Dongfang Precision was no longer involved in the Company's non-public offering stock-raising matching-fund investment project, "Pride Liyang Base New Energy Car Battery R&D and Industrialization Project", planned in 2017, as the Company had transferred all 100% of Pride's equity, and the project was no longer commercially rational and feasible to be carried out. In fact, this non-public offering stock-raising matching-fund investment project planned in 2017 was automatically terminated upon completion of the closing of Pride's equity sale by the Company at the end of 2019. In order to effectively used the funds to optimize resources allocation, expand and strengthen the main business of the listed company, enhance the value creation of the listed company and create more value for shareholders, the Company, with the approval of the general meeting of shareholders, decided to use the balance of the raised funds to permanently replenish the working capital. As at 31 December 2020, a total of RMB1,116,558,200 of the balance of the raised funds, including interests or income from deposits or wealth management products paid in instalments, has been used to permanently replenish the working capital. | |
| Purpose and whereabouts of unused raised funds | Unused raised funds were nil as at the end of the Reporting Period. |
| Problems found in the use and disclosure of raised funds, or other information | Not applicable |
(3) Changed Use of Raised Funds
□ Applicable √ Not applicable
No such cases in the Reporting Period.
VI 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
VII 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
| 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 | 1,589,543,270.33 | 721,537,447.53 | 1,946,351,010.36 | 214,933,029.25 | 176,103,145.02 |
| Parsun Power | Subsidiary | Design, manufacturing and marketing of outboard motors and general utility small gasoline motors | RMB85.30 million | 360,300,104.12 | 175,723,214.84 | 344,495,168.47 | 44,285,283.78 | 39,823,544.56 |
Subsidiaries acquired or disposed of in the Reporting Period:
□ Applicable √ Not applicable
VIII Structured Bodies Controlled by the Company
□ Applicable √ Not applicable
IX Prospects(I) Industrial landscape and the Company's market position
1. In 2020, there was no significant change in the demand and supply sides of thecorrugated packaging industry, and the industry maintained a stable competition pattern
In terms of major industry categories, industrial paper and packaging are an important part ofthe national economy, with related products widely used in industrial products, food and beverages,electronic appliances, e-commerce logistics and other areas. The main drivers for the industry'sdevelopment include the growth of the national economy, the improvement and upgrade of residentconsumption, and the enhanced awareness of environmental protection. Corrugated boards not onlysupport the sustainable development of the national economy, but also are a rigid demand productfor national consumption.
The downstream industry of the Company's intelligent corrugated packaging machineryindustry is the corrugated board packaging industry, which has basically maintained a relativestability in its overall development in 2020.
According to the data of the China Paper Association, from 2010 to 2019, the average annualgrowth of the national production of linerboard paper was 1.71%, with the consumption at anaverage annual growth of 2.37%; from 2010 to 2019, the average annual growth of the nationalproduction of corrugated base paper was 1.92%, with the consumption at an average annual growthof 2.57%. According to the above-mentioned trends in supply and demand over the past decade, thedomestic consumption of corrugated board has grown faster than the production. There was strongdemand for corrugated board packaging in the end market. However, since the domestic productionwas unable to satisfy the market demand, there was a gap between supply and demand. The averagegap per year for the past decade was around 1.35 million tons, and there is certain potential in theindustry's production growth.
In terms of the demand side, the downstream consumption structure of corrugated boards ismainly related to food and beverages, garments and shoes, daily chemical products, householdappliances, express and logistics, pharmaceuticals and other areas, with slight changes in a fewindustries. In 2019, the consumption of the above-mentioned industries accounted forapproximately 83%. The trend of changes in corrugated box consumption was positively correlated
with the development of the above-mentioned downstream industries and their developmentprospects.
The growth of domestic consumer demand was affected by the pandemic in 2020, with thetotal retail sales of consumer goods declining year-on-year. Since the domestic consumer demand isstill recovering gradually, the growth in home appliances, soft drinks and other sectors is hampered.Under the industry development law of "demand is the king", the slackness of the end consumptionindustry had a negative impact on the growth of domestic corrugated box consumption in 2020.
However, benefiting from the increase in public demand for online consumption and logisticsand delivery for online shopping, the online shopping industry and express delivery industryshowed a good growth momentum in 2020. According to the data from the National Bureau ofStatistics, the national online retail sales in 2020 amounted to RMB11,760.1 billion, an increase of
10.9% from the previous year. According to the data from the State Post Bureau, the expressenterprises above designated size recorded 83,358 million pieces of business volume in 2020, anincrease of 31.2% year-on-year. As a "standard component" for the logistics and delivery of onlineshopping goods, the purchase of corrugated boxs by the above two industries also increasedyear-on-year. The satisfactory prosperity in the online shopping and express sectors in 2020provided important support for domestic consumption of corrugated boards in 2020.
In terms of the supply side, according to the data from the National Bureau of Statistics,enterprises above designated size of the national packaging industry recorded a cumulativecorrugated box output of 31,708,400 tons from January to December 2020, down 3.31%approximately year-on-year. In the first half of the year, due to the pandemic, the corrugated boxoutput from January to February hit a low point of the year. In the second half of the year, thecorrugated box production increased with the gradual recovery of production in different areas, butthe annual year-on-year output still declined. The domestic corrugated board packaging and printingindustry still suffered an imbalance between supply and demand in 2020.
In general, the domestic consumption of corrugated boards increased while maintainingstability in 2020. However, the production of corrugated boxs declined year-on-year, with aconstant gap between supply and demand. Compared with the situations in 2019, the overallindustry landscape witnessed no significant changes.
Output and the amount of consumption of corrugated base paper from 2010 to 2019 ('0,000 tons)
Output and the amount of consumption of linerboard paper from 2010 to 2019 ('0,000 tons)
Source of data: iFinD
2. In 2020, the corrugated packaging machinery industry maintained a stable landscapeand the Company maintained a stable market position.
-10%-8%-6%-4%-2%0%2%4%6%8%10%
1,2001,6002,0002,400
2010201120122013201420152016201720182019
YieldAmount of consumptionAmount of consumption yoy
-8%-6%-4%-2%0%2%4%6%8%10%
1,2001,6002,0002,4002,800
2010201120122013201420152016201720182019
YieldAmount of consumptionAmount of consumption yoy
In the first half of 2020, affected by the pandemic, some large overseas packaging companiessuch as Smurfit Kappa and International Paper temporarily froze or postponed some of theirequipment procurement needs and new capacity launches. The domestic corrugated boardpackaging industry has gradually recovered since the second quarter of 2020, but the new capacitylaunch was somehow restricted by the pandemic. The construction progress has slowed down.There was no significant change in the demand and supply sides of the corrugated packagingmachinery. On the supply side, the market situation showed that there was no significant change inthe manufacturers engaged in the market of the corrugated packaging machinery industry, or theoverall competitive pattern of the industry market.
(1) In the segment of corrugator lines at the upstream industry chain, the wholly-ownedsubsidiary Fosber Group still maintained its position with the second largest market share across theworld.
Fosber Group is one of the two largest companies for high-speed wide corrugator lines in theworld, with a global market share of 30% approximately. Its customers include major famous globalpackaging companies such as International Paper and Smurfit Kappa. As an important globalpromoter and innovator of technologies related to high-end corrugator lines, Fosber Group is ratherfamous and influential in the global market.
Fosber Group's rivals in the industry include BHS of Germany, Marquip (a wholly ownedsubsidiary of Barry-Wehmiller of the US) and J.S. Machine. In the global market of corrugator lines,the benchmarking enterprise of Fosber Group is BHS of Germany.
(2) In the segment of corrugated box printing and packaging machinery at the midstreamindustry chain, Dongfang Precision (China), as the domestic industrial leader, has the strength tocompete with global industrial leaders.
By virtue of the advantages in global resource synergy, Dongfang Precision has maintained itsleading position in the medium and high-end corrugated board printing and packaging machineryindustry with its leading design concepts and overall R&D strength, standardized whole-procedurequality management system, leading production techniques and system integration capability, themost complete product library in the domestic industry, brand advantages as a listed A-sharecompany and first-mover market advantages, whole-procedure customer-centric technical supportand the after-sales service system, and other comprehensive competitive advantages.
The Company's rivals in the corrugated box printing and packaging machinery segmentinclude Bobst (Switzerland), Gopfert (Germany), Ward (a wholly-owned subsidiary ofBarry-Wehmiller of the US), Shanghai Dinglong and Guangzhou Keshenglong. In the globalmarket of corrugated box printing and packaging machinery, the Company's benchmarkingcompany is Bobst (Switzerland).(II) Development trends in the industry and development opportunities facing theCompany
1. The global economic recovery and the opening of a new round of productivity cycle in2021 is conducive to the growth in the equipment demand.
Under the impact of the pandemic, a large number of manufacturing enterprises across theglobe went bankrupt and excess capacity experienced a round of liquidation and elimination in 2020.In the second half of 2020, the global economy entered the stage of rebuilding and recovery.Especially in 2021 when the global pandemic is expected to be effectively controlled and the USand other overseas developed economies are expected to release sustained monetary easing policies,the overseas economic speed and manufacturing revitalization will inevitably drive the demand forequipment acquisition.
Based on the trend of inventory changes in the latter period of the pandemic, the overseasdemand has exceeded the expectations and there has been a strong recovery of the domesticeconomy after the pandemic since the second half of 2020. The global economy in 2021 is expectedto recover soon. In this context, China and the US are expected to start a new cycle of inventoryreplenishment simultaneously.
Looking ahead to 2021, in the major context of continual improvement in the demand of majorglobal economies and improved capacity utilization in the manufacturing, companies are expectedto accelerate the expansion of their production capacity based on optimistic expectations foreconomic development and the constant improvement in their own profitability. With corrugatedboard packaging being a rigid consumer product, the industry is expected to boost development.The accelerated rate of new production capacity of leading packaging companies will help boost thedemand for corrugated board packaging machinery and further benefit equipment manufacturers.
2. The "price hike" in the corrugated board packaging industry in 2021 will facilitate the
further improvement of industry concentration and help accelerate the liquidation of low-endproduction capacity.Due to the low entry barriers and limited-service scope of the packaging industry, thelinerboard paper packaging industry is scattered and has a relatively low market concentration. Theconcentration of the top four enterprises in the linerboard paper industry is around 51%, while theconcentration of the top four enterprises in the corrugated board industry is around 23%. There are anumber of scattered small- and medium-sized enterprises in the industry.In terms of the segment of the corrugated box printing and packaging industry at thedownstream of linerboard and corrugated board industries, the top five corrugated box companies inChina have a total market share of less than 10%, while the top five corrugated box companies inthe US have a domestic market share of over 70%. The comparative results of the internationalindustry concentration show that the concentration of China's corrugated box industry is low, andthere is still considerable room for the improvement of the industry market concentration.
CR5 comparison of the corrugated packaging industry in 2017
Data source: Frost &Sullivan, Wonder
Since the fourth quarter of 2020, upstream companies in the corrugated board packagingindustry have been raising prices of corrugated paper, linerboards and corrugated boards. The costpressure has been transmitted along the industry chain to the midstream and downstream enterprises.As upstream raw paper and board prices continue to rise, the secondary and tertiary plants in themidstream and downstream of the industry are under constant pressure for profitability and survival.
| China | Europe | Germany | Italy | Japan | The US |
Data source: SCI99.COM, CICC Research DepartmentIn the above context, leading enterprises can reduce the impact of higher raw material priceson their own profitability by virtue of their strong financial strength, scale production effect, higheroperational efficiency and stronger control of the supply chain, and dilute the impact of rising costsby increasing the volume of shipments.However, a large number of small- and medium-sized enterprises in the industry, after a periodof low profitability from 2018 to 2020, may face the adverse situation of raw material shortages andrising costs concurrently under the price hike. Due to extensive industry fragmentation, it is difficultto transmit the pressure of higher upstream costs to downstream customers. The space foradjustment is rather limited.In summary, the price hike of raw materials such as raw paper and boards in the upstreamindustry chain in 2021 will help accelerate the further liquidation of low-end production capacity ofsmall- and medium-sized enterprises in the corrugated board packaging industry and facilitate theimprovement of industry concentration. The improvement of industry concentration will furtherfacilitate the improvement of market shares by industrial leaders that have major medium andhigh-end equipment, overall high intelligence and the capability of mass and scaled production andflexible production. This will further stimulate the growth of the capacity of leading enterprises andfinally boost the demand for medium and high-end packaging machinery and overall smart factory
| January | April | July |
October(RMB/ton)
(RMB/ton)Average price of linerboard paper in 20182020 YTD average price of linerboardpaper
| Average price of linerboard paper in 2018 2020 YTD average price of linerboard paper | Average price of linerboard paper in 2019 |
solutions in the packaging industry.
In terms of major industry categories, the number of enterprises in the domestic paper andprinting industry has continued to shrink since 2015, and the number of unprofitable enterprises hascontinued to increase. In 2020, there were 1,245 unprofitable enterprises, an increase of 17%year-on-year; the industry loss reached 18.7%, which indirectly demonstrates the continualimprovement in the concentration of the paper and printing industry.
Change in the number of unprofitable enterprises in the paper and printing industry from 2015 to 2020
Data source: www.askci.com
3. Due to the pandemic catalyst, the downstream board packaging industry furtherrecognized the model of "smart factories" in 2020, and the development of medium andhigh-end capacity was accelerated.
As labour costs increase and corrugated box manufacturers further expand their scale, thedemand for medium and high-end corrugated packaging machinery with high efficiency, highprecision, high quality and multiple functions will rapidly grow. Low-end equipment with lowefficiency, low quality and high labour intensity will be eliminated rapidly. In the future, with thedevelopment of smart manufacturing in China, the market demand for update of corrugatedpackaging machinery will continuously increase.
Experiencing the impact of the pandemic, rising prices of labour, land and other factors foryears, tightening environmental regulations, difficulties in recruiting young workers, and thecontinuously higher for box products and services from downstream end customers, leadingenterprises in the industry continuously enhance their recognition of smart manufacturing. Besides,it has gradually become the industry's consensus to upgrade production capacity towards"intelligence, digitalization and automation".As the concentration of the corrugated board packaging industry continues to rise, leadingcompanies will continuously consolidate and increase their market share and invest more resourcesin "overall smart factory solutions" by virtue of their solid financial strength, so as to continuouslyimprove production efficiency, product quality and management efficiency, and reduce operatingcosts at the same time.According to public information, more than 20 companies of corrugated board packagingannounced the plans to build new "smart factories" or "intelligent packaging factories" in 2020,including Nine Dragons Paper, Shanying International, Longlide, MYS Group, Great Shengda andother well-known companies in the industry.As the demand structure of downstream customers changes and undergoes intelligent anddigital upgrade, more suppliers of corrugated packaging machinery are seeking to graduallytransform themselves into enterprises with collaborative production lines with high precision, highfunctional integration, high automation and high efficiency. The production and sales volume ofcorrugator lines and corrugated box printing and packaging machinery will also be further expanded.The market demand for overall smart factory solutions in the industry is likely to increase rapidly.Driven by the continual growth in production and sales of medium and high-end corrugatedpackaging machinery with high value, the global corrugated packaging machinery industry isexpected to reach an output value of approximately RMB30 billion-RMB40 billion in 2021.
4. The continual improvement in economic and social development, consumptionupgrades and the implementation of the "plastic ban" will continuously drive consumerdemand for corrugated board packaging and stimulate supply-side reform and upgrade of theindustry capacity.
(1) Improvement in economic and social development and consumption upgrades are the
medium- and long-term drivers that stimulate the growth in corrugated board packagingconsumption.The outline of the 14th Five-Year Plan mentions that during the 14th Five-Year Plan period,China will "collaborate to promote the development of a strong domestic market and trading nationbased on the large domestic circulation, rely on the domestic economic circulation system to form apowerful gravitational field for global factor resources, and promote a dual domestic andinternational circulation." China will establish effective policies for expanding domestic demandand promoting comprehensive consumption". In the post-pandemic era, a new pattern of economicdevelopment "with domestic circulation as the mainstay and domestic and international circulationsreinforcing each other" is taking shape. With the economic growth and the increase in disposableincome of the residents, the consumption upgrade will be the main direction for demand changes inthe end market.According to the data from the National Bureau of Statistics, China's per capita disposableincome rose from RMB21,966 in 2015 to RMB30,733 in 2019, a cumulative increase of 39.91%.According to the latest data, the national per capita disposable income in 2020 was RMB32,189, up
4.7% over the previous year. With the economic growth and the increase in disposable income ofthe residents, the consumption upgrade will be the main direction for demand changes. Thecontinuous improvement in people's living standards and consumption capacity will continue toboost the consumption upgrade in the food and beverage, chemicals for daily use, household andoffice, home appliance, IT and electronics, online shopping, and express and logistics, which willfurther drive growth in online retail, and express and logistics. Finally, the end demand forcorrugated board packaging of the above-mentioned industries will be boosted.
Compared with developed countries such as Japan and the US, China's per capita consumptionof corrugated packaging is still low. In 2017, China's per capita consumption of corrugatedpackaging reached 50.8 square meters per person, while that of the US reached 108.5 square metersper person and that of Japan reached 110.6 square meters per person. In 2020, China built amoderately prosperous society in all respects. According to the Outline of the 14th Five-Year Planand the Long-Range Objectives through the Year 2035 released in March 2021, China will basicallyachieve socialist modernization in 2035. During the 14th Five-Year Plan period, there will be
sufficient room for improvement in China's per capita consumption of corrugated packaging.
Comparison of per capita corrugated packaging board from 2012 to 2017 (m
/person)
Data source: The International Corrugated Case Association (ICCA), Wonder
(2) The favourable growth of the online retail industry and the express and logisticsindustry brings an important increment to the corrugated packaging industry.In recent years, the emergence of new e-commerce business formats and the continual growthin online retail sales and the business volume of express and logistics have demonstrated anincreasingly significant pull-on corrugated box packaging. Due to domestic health and safetyincidents in 2020, the development in many areas was expedited. Particularly, online retail, andexpress and logistics are representative examples.According to the data from the National Bureau of Statistics and the State Post Bureau, thebusiness volume of China's express enterprises above designated size in 2020 grew by 31.2%, ahigher growth compared to 25.3% in 2019.
| 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | |||||||||||
| China | The US | Japan | ||||||||||||||
Business volume of express enterprises above designated size in China from 2010 to 2020 (Unit: 100 million pieces, %)
Data source: State Post BureauThe State Post Bureau estimates that the annual volume of mail (express) business will reach
121.9 billion pieces in 2021, an increase of 12% year-on-year. Specifically, the express businessvolume will reach 95.5 billion pieces, an increase of 15% approximately year-on-year. According toa report released by the Employment Promotion Committee of the China Association of LabourEconomics, by 2025, China's express business volume will reach 150 billion pieces approximately.According to the forecast of the Qianzhan Industry Research Institute, the scale of China'scorrugated paper market for express will be continuously expanded from 2020 to 2025, and isexpected to reach RMB86.4 billion in 2025.
Estimated market scale of corrugated board for express products in China from 2020 to 2025 (Unit: RMB’00
million)
Data source: Qianzhan Industry Research Institute
(3) Consumption upgrades promote the development of upmarket corrugated boards andstimulate supply-side reform and upgrade of industry capacity.With the continual consumption upgrade, the demand for corrugated board packagingcontinues to increase, and the consumption upgrade is promoting the development of upmarketcorrugated boards, which have posed higher requirements on the technical products of thepackaging industry and motivated the transformation of enterprises of corrugated board packagingfrom manufacturers to packaging solution providers.A packaging solution provider should provide comprehensive services for customers,including packaging design, customization, production, distribution and after-sales services. Theservices start with providing customers with packaging appearance and style design. Then theprovider will shorten the design cycle for customers' products, customize the service to providecustomers with the best and most economical solution for their products, and provide relevantservices at any time according to customers' feedbacks. By integrating internal and externalresources, establishing production, logistics and information platforms, and integrating the entireprocess of transfer, storage and production support for customers' packaging products, in the future,quality packaging companies in the industry will be able to provide customers with comprehensive
and one-stop solutions for all packaging materials required in each procedure, which reduces theoverall packaging and logistics costs of customers, increases profit opportunities and brings forthlong-term and mutual trust with customers. International packaging giants such as InternationalPaper and WestRock have transformed themselves from manufacturers of packaging products toproviders of packaging solutions.It is expected that consumption upgrades in the end market will drive the development of theupstream corrugated board packaging industry and the corrugated packaging machinery industry,and further stimulate the supply-side reform and upgrade for the production capacity of thepackaging industry.
(4) The implementation of the "plastic ban" will improve the margin of end consumers'demand for corrugated board packaging, and further drive the capacity growth and upgradefor corrugated board packaging.In accordance with the Opinions on Further Strengthening Plastic Pollution Governance (thenew "plastic ban") implemented in 2020, non-degradable plastics for plastic express packages willbe banned in key provinces and cities by 2022, and non-degradable plastics for express services willbe fully banned nationwide by 2025.According to related estimates, the plastic ban will result in an increase of approximately 16.59billion pieces of paper packaging in 2025 from 2019 (by the proportion). The proportion ofcorrugated paper in the paper express packages is 96.18% approximately. If a single paper packagecontains 288.08 grams of corrugated paper approximately, the potential increase in the demand forcorrugated paper used in express packaging in 2025 will be 4,596,600 tons approximately.
Estimated proportions of the number of paper packages and that of plastic packages from 2019 to 2025 (Unit: %)
Data source: Qianzhan Industry Research Institute
With the continual implementation of the "plastic ban", the margin of medium- and long-termdemands for corrugated boards and boxes for packaging from end users in the society will becontinuously improved, which will further stimulate the investment in new capacity development ofcorrugated boards and boxes for packaging.
The above-mentioned inherent development directions and trends of the packagingindustry will necessarily lead to continual growth in the demand for medium and high-endcorrugated packaging machinery and the overall smart factory solutions, which will furtherbenefit the equipment manufacturers.
(III) The Company's development strategy
1. Vision
Business purposes of the Company: To become an industrial group with high influence in its areas,trust from customers and shareholders, and respect from employees; uphold the businessphilosophies of "Integrity, Innovation and Excellence", and achieve mutual benefits with customers,shareholders, employees and the society.
| 201920222025Paper packaging58.664.470.9Plastic packaging41.135.228.8Others0.40.40.4020406080Paper packagingPlastic packagingOthers | ||
| Paper packaging | ||
2. Development strategy
According to the development plan of the third five-year strategic development period(2018-2022), the Company focuses on the strategy of "intelligent manufacturing" for main businessdevelopment and deeply promotes the development strategies of "industrial cluster", "epitaxialdevelopment", "globalization", "digital operation" and "synergy" to strengthen, refine and expandits existing main business. At the same time, based in China and with a global vision, the Companydeepens its resource allocation and gradually extends its business to the whole industrial chain totransform itself from a "supplier of intelligent corrugated packaging machinery" to a "provider ofoverall smart factory solutions for the corrugated packaging industry".
The Company's strategic plan for the third five-year period (2018-2022)
(IV) Business plan for 2021
1. Business model: Comprehensive smart factory solutions
In terms of business models, the Company has developed from a provider of "products" to aplanner of "industrial chains", from a manufacturer of single equipment to a provider of one-stoppurchase services for complete sets of equipment, and further developed into a provider of overallsmart factory solutions for industrial customers. The Company will firmly promote the industrial
application and implementation of smart manufacturing and industrial Internet, and facilitate digitaland intelligent upgrade and transformation in the downstream industry.Corrugated box printing and packaging machinery of Dongfang Precision: In the future, theCompany will continue to further develop and promote new products such as intelligent lines,continuously strengthen its ability to provide customers with whole-plant equipment planning,selection and customized production to meet the overall smart factory solutions, and furtherenhance the software, technical support and spare parts.Corrugator lines of Dongfang Precision: Fosber Group will continue to consolidate andmaintain its leading position as the world's leading provider of products and technologies related tocorrugator lines, continuously make technological innovations, promote the application of industrialInternet technology in corrugator lines, and continuously bolster its competitive advantages in mid-and high-end equipment and complete lines. Fosber Asia will maintain its foothold in the Asianmarket, absorb advanced technologies from Europe, make full use of the advantages in China'slocal manufacturing industry chain, enhance technological innovation and launch products that meetthe needs of customers in the Asia Pacific market. It will make full use of China's quality supplychain, reduce costs of raw materials and delivery while maintaining the quality of European brands,and offer high-cost-performance products with "big brand quality at suitable prices" to develop itscore competitive advantages and become a powerful rival in the Asian market.Comprehensive smart factory solutions of Dongfang Digicom: As the future undertaker of theCompany's digital transformation in the corrugated board and packaging industry, DongfangDigicom, with over 30 years of industrial know-how of Dongfang Precision, will focus onproviding customers with overall smart factory solutions ranging from digital production, digitalmanagement to intelligent decision-making. It will provide industrial Internet platform services forthe whole industry to experience industry chain synergy and value chain creation and enhance itscompetitiveness in the industry.
2. Technological innovation and digital transformation
Digital transformation is a must for the actualization of intelligent manufacturing. If theindustrial Internet is abstract and driven by 5G and AI technologies, then the digital transformationof the manufacturing is endogenous and driven by corporate value creation.
Based on multiple years of manufacturing experience in the field of intelligent corrugatedpackaging machinery, deep understanding of downstream customers' production processes, andmature practices of the intelligent production management system that has been developed, theCompany will promote technological innovation, the development of digital software systems forequipment and the digital upgrade of intelligent corrugated packaging machinery. Through organiccombination of the massive data related to the production techniques and procedures to thealgorithm analysis and processing, the Company will integrate hardware and software for output,continuously improve the intelligence of its intelligent corrugated packaging machinery, meet theneeds of downstream customers in the corrugated packaging industry, and facilitate the continualconcentration improvement of the corrugated packaging industry.
3. Services empowering manufacturing
As the number of existing equipment sold increases, the Company will actively grasp the trendof increasing customer demand for spare parts, after-sales maintenance and technical supportservices, strengthen its service business and provide solid support for customers' better developmentwith professional, high-quality technical services. Fosber Group will continuously improve thetechnical level and intelligence of the smart production management information system forcorrugator lines in the PRO series, and deepen the industrial application of the industrial Internettechnology. At the same time, the Company will actively promote the implementation of "industrialsmart factory overall solutions", integrate existing technical service capabilities and resources,provide customers with smarter technical support, and stimulate revenue from the Company'ssolutions, software and technical support services.
Both Fosber Group and Dongfang Precision (China) have upgraded their customer servicecenters. In the future, the Company will adhere to the strategy of driving sales of equipment andproducts with services and creating value-added space with services, and strengthen the sales oftechnical services and spare parts.
4. Global resource allocation
The Company has a global presence in terms of the smart manufacturing equipment business.It has two production bases in Foshan and Suzhou of China, four production bases in Milan, Lucca,Bologna and Loria of Italy, one production base in Pamplona of Spain, and one production base in
Green Bay, Wisconsin of the US. The global layout of production bases provides the Company withproduction and sales capability that ensures quick response to global demands.With an international sales and service network, the Company is able to provide equipmentand technical services to industrial customers from over 100 countries and regions worldwide. TheCompany will continuously develop the mainstream markets of China, Europe and North America,and make more efforts to explore the emerging markets of the Belt and Road countries in Africa,South Asia and Southeast Asia as well as Latin America, so as to increase its global market share.Amid the irreversible pace of globalization, the Company will actively implement and improveits "globalization" strategy, and build a global system of technology, scientific research, products,supply chains and talents, which is conducive to grasping global market opportunities, findingglobal talents, integrating global technologies and reducing transaction costs. Besides, by activelyutilizing global financial resources and supply chains, the Company has enhanced its globalcompetitiveness, improved its risk resistance, gained a broader global vision and facilitated morerobust and sustainable development.
Global distribution of the Company's business assets and marketing network
5. Strategic layout and industry chain integration
The Company will enhance the strategic layout of its intelligent corrugated packagingmachinery business in China, Europe and North America as well as the global market throughstrategic mergers and acquisitions, work in a down-to-earth way, strictly control risks, and make
prudent investments. It will focus on high-quality companies in the global and China's industrychains, conduct mergers and acquisitions related to the industry chains according to businessdevelopment needs and its actualities, and strengthen the horizontal and vertical integration ofindustry chains.In 2020, the Company set up a wholly-owned subsidiary, Yineng Investment. With industriesas the body and capital as the wings, Yineng Investment is positioned as an institution to undertakethe Company's epitaxial development business. Guided by the Company's strategic plan, it focuseson industries related to the main business of Dongfang Precision and fully participates in theindustries supported by China's "14th Five-Year Plan" by virtue of the industrial advantages. Forequity investment, it focuses on high-end equipment manufacturing and big consumption areas, andaims at enterprises with extensive industrial development opportunities and favorable industrialadvantages. It will obtain good investment returns and seek industrial synergy at the same time tocreate new industrial development opportunities and facilitate the Group's sound development.
(V) Risks that may face the Company in its development
1. Risk of exchange rate fluctuations
The exchange rate of RMB against USD in 2020 decreased at first and then increased, with anoverall appreciation of 6.5%. From June 2020 when the interest rate hit the low point of the year tothe end of 2020, the exchange rate of RMB against USD appreciated by 8.5% in seven months, arare rate of appreciation in history. The volatility of the RMB exchange rate in 2020 was related tothe asymmetry of the impact of the pandemic on China and foreign countries, the continual liquidityexpansion by central banks in developed countries, the sound economic recovery of China and thedownward movement of the U.S. Dollar Index.As the "post-pandemic era" of 2021 approaches, the RMB exchange rate is expected to facelarger uncertainty. Exchange rate fluctuations are closely related to the control of the pandemicoverseas, the economic recovery of developed countries, especially the US, bilateral relationsbetween China and the US, and policies of global central banks.The Company's intelligent corrugated packaging machinery business, assets, sales and servicesare globalized. With overseas business accounting for a relatively large portion, RMB exchange ratefluctuations will have a certain impact on the Company's operating results as reflected in its
financial statements, and changes in exchange gain and loss due to exchange rate fluctuations willalso have an impact on the Company's net profit.
Countermeasures: The Company will closely track the global financial market and relevantnational exchange rate policies, conduct analysis and judgment, and select appropriate exchangerate management tools to actively manage exchange rate risks under the premise of legalcompliance and in accordance with the Company's development needs. It will capitalize on itsinternational layout of business and assets, improve the integrated management of marketingactivities carried out by business entities in different countries and regions, and balance and hedgethe risk of exchange rate fluctuations at the group level.
2. Integration risk after industrial mergers and acquisitions
In recent years, the Company has continued to extend its industrial layout in the upstream anddownstream of the industry chain of intelligent corrugated packaging machinery, expand itsbusiness scale and further promote the globalization of its business and assets through the epitaxialdevelopment model featuring industrial mergers and acquisitions. The new members among theCompany's overseas business entities include companies with a history of nearly 100 years and aprofound track record, and international companies with multinational distribution of business andassets and customers around the world. During post-acquisition integration, the differences inmanagement models, cultural backgrounds, business practices, applicable laws and languagedifferences among different business entities have posed certain challenges for the Company inpost-investment management and business integration.
Countermeasures: The Company will continuously promote the implementation of the"globalization" strategy, bring in outstanding talents with international business capabilities andbuild a global team. It will promote the implementation of the "a wealth of talents" strategy,continue to enhance the comprehensive capabilities of the management team and key businessteams, and build a team with an international vision and the ability to work excellently in a globalenvironment. It will promote the implementation of the "synergy" strategy, seek common groundwhile reserving differences with an open mind based on "mutual respect and trust", and achieveintegration in philosophy and culture. At the same time, it will deepen the post-investmentmanagement mechanism of "strategic control + hierarchical authorization management" to establish
an effective control model in integration and continuously improve the synergy among the businessentities, so as to achieve a better synergy effect of the industrial chains and the healthy andsustainable development of each business entity.
3. Risk of fluctuations in the prices of major raw materials
The major raw materials required for the production of intelligent corrugated packagingmachinery are electrical components, standard parts, machined parts, and other raw materials andauxiliary materials. During the Reporting Period, the purchase of major raw materials accounted fora significant proportion of the Company's principal operating costs. From the second half of 2020 tothe beginning of 2021, the prices of bulk commodities in international markets fluctuated at a highposition. If the prices of industrial raw materials fluctuate beyond expectations in 2021, it maycause fluctuations in the Company's production costs and further affect the Company's profitability.
Countermeasures: The Company will strengthen dynamic analysis and judgment of markettrends, enhance communication and strategic cooperation with suppliers, stabilize channels of rawmaterial purchase, sign long-term purchase agreements for important raw materials in due courseand control the fluctuation of raw material purchase prices as far as possible.
4. Potential risks of securities investment business
During the Reporting Period, the Company conducted securities investment with its own funds.Based on the business attributes, there are certain risks associated with securities investment,including the risk of market fluctuations and uncertainty of returns as macroeconomic situationshave significant impacts on the financial market, and the risk that the Company may suffer certaininvestment losses in case of risk events in the process of entrusting wealth management activities tothe trustees in terms of investment strategies and use of funds.
Countermeasures: In accordance with the Policy for Securities Investment Management, theCompany continuously strengthens the risk control management of securities investment to ensurethe safety and effective value-added of investment funds. In accordance with the economic situationand changes in the financial market, it continuously tracks and analyses the progress of securitiesinvestment and the investment of funds, the progress of project investment and the performance ofthe capital market, and timely takes corresponding preservation measures to control investmentrisks.
X Communications with the Investment Community such as Researches, Inquiries and Interviews
1. During the Reporting Period
√ 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 |
| 7 May 2020 | Conference Room of the Company | By phone | Institution | Investors include: Huang Jinglun from Huatai Securities, Bi Zinan and Xu Tianxiang from Huarong Securities, Li Pingzhu from China Asset Management, Wang Xiaojun from Sunshine Insurance, Du Junsheng from Shenzhen Xinyuanrui Asset Management, Duan Zhian from Shenzhen Jianhua Xingan Investment, Chen Ligang from Shenzhen Huacai Investment Management, Zhou Shizhao and Lei from Shenzhen Qianhai Xingjian Capital Management, Xiao Jian from Honghua Capital, and Long Huaming from Guangzhou Yunxi Private Equity Investment & Fund Management. | Introduced the Company’s operations, overall business structure, core competitiveness, operating strategies, etc. and answered questions from the investors | Investor Relations Management File Dated 5 July 2020 of Dongfang Precision (002611.SZ) on http://www.cninfo.com.cn |
| 27 November 2020 | Company Headquarters in Foshan City | By visit | Institution | Huaxi Securities: Qi Zhisheng; The Pacific Securities: Zeng Bowen | Introduced the Company’s operations, overall business structure, core competitiveness, operating strategies, etc. and answered questions from the investors | Dongfang Precision: Log Sheet of Investor Relations Activities Dated 27 November 2020 on http://www.cninfo.com.cn |
Part V Significant Events
I Profit Distributions to Ordinary Shareholders (in the Form of Cash and/or Stock)The profit distribution policy for ordinary shareholders, especially the formulation, implementation and amendments to the cashdividend policy, in the Reporting Period:
√ Applicable □ Not applicable
Article 183 of the Articles of Association of Guangdong Dongfang Precision Science & Technology Co., Ltd. and ShareholderReturn Plan of Guangdong Dongfang Precision Science & Technology Co., Ltd. for 2018 to 2020 specify the method of profitdistribution and the conditions, schedule and proportion of cash dividend, as well as the procedures to decide and adjust or changeprofit 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 |
The profit distributions to ordinary shareholders, either in the form of cash or stock, in the past three years (including theReporting Period) are summarized as follows:
1. The 2018 final dividend plan: As approved by the Board of Directors & shareholders’ meeting, the Company determined notto distribute cash dividends, neither give away bonus shares, nor capitalize from public reserve.
According to the Detailed Rules of the Shenzhen Stock Exchange for Share Repurchases by Listed Companies, where a listedcompany repurchases its shares by way of offer or centralized bidding with cash as the consideration, the amount used to repurchaseshares shall be deemed as the cash dividend amount in the year when calculating the cash dividends as a percentage.
In 2018, the Company repurchased a total of 13,113,660 shares (approximately 0.71% of the total share capital) by way ofcentralized bidding, with a total payment of approximately RMB63.5975 million (exclusive of transaction costs), which means thatthe Company implemented a cash dividend payout of RMB63.5975 million by way of share repurchase for 2018.
2. The 2019 final dividend plan: As approved by the Board of Directors & shareholders’ meeting, the Company determined notto distribute cash dividends, neither give away bonus shares, nor capitalize from public reserve.
According to the Detailed Rules of the Shenzhen Stock Exchange for Share Repurchases by Listed Companies, where a listedcompany repurchases its shares by way of offer or centralized bidding with cash as the consideration, the amount used to repurchase
shares shall be deemed as the cash dividend amount in the year when calculating the cash dividends as a percentage.
In 2019, the Company repurchased a total of 21,886,403 shares (approximately 1.19% of the total share capital) by way ofcentralized bidding, with a total payment of approximately RMB96.4915 million (exclusive of transaction costs), which means thatthe Company implemented a cash dividend payout of RMB96.4915 million by way of share repurchase for 2019.
3. The 2020 final dividend plan: As approved by the Board of Directors, the Company planed not to distribute cash dividends,neither give away bonus shares, nor capitalize from public reserve.
According to the Detailed Rules of the Shenzhen Stock Exchange for Share Repurchases by Listed Companies, where a listedcompany repurchases its shares by way of offer or centralized bidding with cash as the consideration, the amount used to repurchaseshares shall be deemed as the cash dividend amount in the year when calculating the cash dividends as a percentage.
In 2020, the Company repurchased a total of 103,968,981 shares (approximately 6.73% of the total share capital) by way ofcentralized bidding, with a total payment of approximately RMB499.9963 million (exclusive of transaction costs), which means thatthe Company implemented a cash dividend payout of RMB499.9963 million by way of share repurchase for 2020.
Cash dividends for ordinary shareholders in the past three years (including the Reporting Period):
Unit: RMB
| Year | Cash dividends (tax inclusive) (A) | Net profit attributable to ordinary shareholders of the listed company in consolidated statements for the year (B) | A as % of B (%) | Cash dividends in other forms (like share repurchase) (C) | C as % of B (%) | Total cash dividends (including those in other forms) (A+C) | A+C as % of B (%) |
| 2020 | 0.00 | 389,180,624.08 | 0.00% | 499,996,259.52 | 128.47% | 499,996,259.52 | 128.47% |
| 2019 | 0.00 | 1,838,018,805.50 | 0.00% | 96,491,469.85 | 5.25% | 96,491,469.85 | 5.25% |
| 2018 | 0.00 | -3,875,995,219.91 | 0.00% | 63,597,455.75 | -1.64% | 63,597,455.75 | -1.64% |
Indicate whether the Company fails to put forward a cash dividend proposal for the ordinary shareholders despite the facts that theCompany has made profits in the Reporting Period and the profits of the Company as the parent distributable to the ordinaryshareholders are positive.
□ Applicable √ Not applicable
II 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.
III 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 | BAIC Capital; CATL | Undertaking on restrictions on sale of shares | If the accumulated actual net profit deducting non-recurring gains and losses of Pride from 2016 to 2018 is equal to or exceeds that it undertakes, or the same fails to reach that it undertakes but Pride has fulfilled the corresponding performance compensation obligation, trading restrictions on the shares of Dongfang Precision subscribed with Pride's equity held may be released 36 months after the shares are marketable, provided that the shares used for the compensation (if any) should be deducted. | 25 April 2017 | As at 24 April 2020 | Completed |
| Qinghai Puren | Undertaking on restrictions on sale of shares | If the accumulated actual net profit deducting non-recurring gains and losses of Pride from 2016 to 2018 is equal to or exceeds that it undertakes, or the same fails to reach that it undertakes but Pride has fulfilled the corresponding performance compensation obligation, trading restrictions on 40% of the shares of Dongfang Precision subscribed with Pride's equity held may be released 36 months after the | 25 April 2017 | As at 24 April 2020 | Completed |
| Cause of undertakings | Parties of undertakings | Types of undertakings | Contents of undertakings | Date of undertakings | Term of undertakings | Fulfilment of undertakings |
| shares are marketable, provided that the shares used for the compensation (if any) should be deducted. | ||||||
| Qinghai Puren | Undertaking on restrictions on sale of shares | Trading restrictions on 80% of the shares of Dongfang Precision subscribed with Pride's equity held may be released 48 months after the shares are marketable, provided that the shares used for the compensation (if any) should be deducted. | 25 April 2017 | As at 20 May 2020 | Completed | |
| Qinghai Puren | Undertaking on restrictions on sale of shares | Trading restrictions on the remaining of the shares of Dongfang Precision subscribed with Pride's equity held may be released 60 months after the shares are marketable. | 25 April 2017 | As at 20 May 2020 | Completed | |
| Pulead; Foton | Undertaking on restrictions on sale of shares | If the accumulated actual net profit deducting non-recurring gains and losses of Pride from 2016 to 2018 is equal to or exceeds that it undertakes, or the same fails to reach that it undertakes but Pride has fulfilled the corresponding performance compensation obligation, trading restrictions on the remaining of the shares of Dongfang Precision subscribed with Pride's equity held may be released 36 months after the shares are marketable, provided that the shares used for the compensation (if any) should be deducted. | 25 April 2017 | As at 24 April 2020 | Completed | |
| Pulead; BAIC Capital; Foton; CATL; Qinghai Puren | Undertaking on horizontal competition, related-party transactions and capital occupation | 1. The Company will conduct all related-party transactions, unavoidable or arising from a reasonable reason, between the Company, companies controlled by the Company and other companies actually controlled by the controlling shareholders of the Company, 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 the Company, companies controlled by the Company and other companies actually controlled by the | 25 April 2017 | As at 8 January 2020 | Completed |
| Cause of undertakings | Parties of undertakings | Types of undertakings | Contents of undertakings | Date of undertakings | Term of undertakings | Fulfilment of undertakings |
| controlling shareholders of the Company, and Dongfang Precision and its controlling subsidiaries, the Company will sign agreements and go through procedures according to law and fulfil the obligation of information disclosure in accordance 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 through related-party transactions. 2. When any related-party transaction involving the Company, companies controlled by the Company and other companies actually controlled by the controlling shareholders of the Company is being deliberated by the authority of Dongfang Precision, the Company will proactively perform the obligation of evading according to law and conduct the transaction only with the approval of the competent authority. 3. The Company undertakes 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, the Company will be liable for such losses. Pride is independent from the Company and companies controlled by the Company in terms of assets, business, staffing, finance and organizations, and has an independent and complete asset structure and business system. After the completion of this transaction, the Company will continue the independent operation of Pride, ensure compliant conducting of transactions between the Company or its related-parties and Pride, actively implement the internal control procedure and set transaction prices in strict accordance with market |
| Cause of undertakings | Parties of undertakings | Types of undertakings | Contents of undertakings | Date of undertakings | Term of undertakings | Fulfilment of undertakings |
| prices, so as to avoid adverse impacts on the independence of the listed company. | ||||||
| Pulead; Qinghai Puren | Undertaking on horizontal competition, related-party transactions and capital occupation | 1. The Company, companies controlled by the Company and other companies actually controlled by the controlling shareholders of the Company will not engage in, directly or indirectly, any business the same as or similar to the main businesses of Dongfang Precision (China) and its affiliated companies or Pride and its affiliated companies, nor will it do so by means of investment, acquisition, joint venture, merger or entrusted operation within the territory of China. 2. If any subsequent business opportunities obtained by the Company, companies controlled by the Company or other companies actually controlled by the controlling shareholders of the Company from any third party compete or may compete with the main business of Dongfang Precision and its affiliated companies or Pride and its affiliated companies, the Company, companies controlled by the Company or other companies actually controlled by the controlling shareholders of the Company will immediately inform and make every effort to deliver such business opportunities to Dongfang Precision and its affiliated companies or Pride and its affiliated companies. 3. In case of any losses to Dongfang Precision and its related parties as a result of failure of the Company, companies controlled by the Company or other companies actually controlled by the controlling shareholders of the Company to fulfil or to fulfil properly the above undertakings, the Company will bear all such losses in cash. | 25 April 2017 | As at 8 January 2020 | Completed | |
| Pulead; BAIC Capital; Foton; CATL; | Other undertakings | 1. After the completion of this reorganization, the Company and the Company's persons acting in concert will not increase their holdings of Dongfang Precision's shares within 36 months from the date when the | 25 April 2017 | As at 24 April 2020 | Completed |
| Cause of undertakings | Parties of undertakings | Types of undertakings | Contents of undertakings | Date of undertakings | Term of undertakings | Fulfilment of undertakings |
| Qinghai Puren | new shares issued by Dongfang Precision to the Company are registered in the name of the Company. 2. After the completion of this reorganization, the Company and the Company's persons acting in concert will not, in any way, seek to gain control of Dongfang Precision within 36 months from the date when the new shares issued by Dongfang Precision to the Company are registered in the name of the Company. 3. These undertakings shall come into effect once made, and shall not be revoked. In case of any breach of the above undertakings, the Company will bear the corresponding legal liabilities. | |||||
| Tang Zhuolin, Tang Zhuomian | Other undertakings | 1. I undertake not to give up the actual control right of Dongfang Precision within 60 months from the date of completion of this transaction. 2. In order to continue to share the business results of Dongfang Precision, I have the intention to hold the shares of Dongfang Precision in the long run. Under this premise, I further undertake, while ensuring that the actual controller of Dongfang Precision will not be changed, to increase or reduce the holdings of Dongfang Precision's shares based on my own money holdings and capital demand, and to conduct relevant business in accordance with the provisions of China Securities Regulatory Commission (CSRC) and Shenzhen Stock Exchange. 3. These undertakings shall come into effect once made, and shall not be revoked. In case of any breach of the above undertakings, I will bear the corresponding legal liabilities. | 25 April 2017 | As at 20 May 2020 | Completed | |
| Tang Zhuolin, Tang Zhuomian | Undertaking on horizontal competition, related-party transactions and | 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 | 25 April 2017 | Long-term effective | In normal progress of fulfilment |
| Cause of undertakings | Parties of undertakings | Types of undertakings | Contents of undertakings | Date of undertakings | Term of undertakings | Fulfilment of undertakings |
| capital occupation | 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 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 |
| Cause of undertakings | Parties of undertakings | Types of undertakings | Contents of undertakings | Date of undertakings | Term of undertakings | Fulfilment of undertakings |
| 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 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. | 25 November 2019 | Long-term effective | In normal progress of fulfilment | |
| Tang Zhuolin, Tang Zhuomian | Undertaking on horizontal competition, related-party | 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 | 25 November 2019 | Long-term effective | In normal progress of fulfilment |
| Cause of undertakings | Parties of undertakings | Types of undertakings | Contents of undertakings | Date of undertakings | Term of undertakings | Fulfilment of undertakings |
| transactions and capital occupation | 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. | |||||
| 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 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 | 25 November 2019 | Long-term effective | In normal progress of fulfilment |
| Cause of undertakings | Parties of undertakings | Types of undertakings | Contents of undertakings | Date of undertakings | Term of undertakings | Fulfilment of undertakings |
| 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, | 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 | 25 November 2019 | Long-term effective | In normal progress of fulfilment |
| Cause of undertakings | Parties of undertakings | Types of undertakings | Contents of undertakings | Date of undertakings | Term of undertakings | Fulfilment of undertakings |
| Zhou Wenhui | 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 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 |
| Cause of undertakings | Parties of undertakings | Types of undertakings | Contents of undertakings | Date of undertakings | Term of undertakings | Fulfilment of undertakings |
| 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 made to minority shareholders of the Company | ||||||
| Whether the undertakings were timely performed | Yes | |||||
2. Where there had been an earnings forecast for an asset or project and the Reporting Period was still within the forecast period, explain why the forecasthas been reached for the Reporting Period.
□ Applicable √ Not applicable
IV Occupation of the Company’s Capital by the Controlling Shareholder or Its Related Parties for Non-Operating Purposes
□ Applicable √ Not applicable
No such cases in the Reporting Period.
V Explanations Given by the Board of Directors, the Supervisory Committee and the Independent Directors (if any) Regarding theIndependent Auditor's “Modified Opinion” on the Financial Statements of the Reporting Period
□ Applicable √ Not applicable
VI YoY Changes to Accounting Policies, Estimates and Methods
√ Applicable □ Not applicable
The Proposal on Changes to the Accounting Policies was approved at the 45
th Meeting of the 3
rd Board of Directors and the 29
th Meeting of the 3
rdSupervisory Committee respectively on 27April 2020. As required by the Ministry of Finance, the Company has adopted since 1 January 2020 the Accounting Standard No. 14 for Business Enterprises—Revenue (CK [2017] No. 22)(hereinafter, the “New Revenue Standard”), which was a revised version issued by the Ministry of Finance in 2017. As such, the Company has disclosed its financial statements according to theNew Revenue Standard starting from the First Quarterly Report 2020.
VII Retrospective Restatements due to Correction of Material Accounting Errors in theReporting Period
□ Applicable √ Not applicable
No such cases in the Reporting Period.
VIII YoY Changes to the Scope of the Consolidated Financial Statements
√ Applicable □ Not applicable
The consolidated income statement and cash flow statement of 2019 included Pride, while the consolidatedfinancial statements of 2020 did not.In February 2020, subsidiary Fosber Group completed the acquisition of the relevant assets of BP Agnati S.r.l.,a corrugator line manufacturer in Italy with Italy QCorr as the direct acquirer. Upon the transaction, Fosber Grouphas a 60% interest in Italy QCorr, and Italy QCorr was included in the consolidated financial statements of theCompany for the Reporting Period.In March 2020, subsidiary Tiru?a Brasil Ltda was de-registered and has been excluded from the consolidatedfinancial statements of the Company since the date of de-registration.
In September 2020, the Company acquired the other 50% interest in Yinglian Digital. Upon the acquisition, theCompany owns the 100% interest of Yinglian Digital, which has been included in the consolidated financialstatements of the Company.
In October 2020, subsidiaries Hainan Yineng and Dongfang Digicom were incorporated and have beenincluded in the consolidated financial statements of the Company since the date of incorporation.
In November 2020, subsidiary Shunyi Investment, as a general partner, participated in the establishment ofSuzhou High-Tech Zone Jinquan Business Management Partnership (Limited Partnership). Pursuant to the relevantpartnership agreement and China’s Accounting Standards for Business Enterprises, the Company included SuzhouHigh-Tech Zone Jinquan Business Management Partnership (Limited Partnership) in its consolidated financialstatements of 2020.
IX 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 (RMB’0,000) | 305 |
| How many consecutive years the domestic independent auditor has provided audit service for the Company | 1 year |
| 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 | 1 year |
Indicate whether the independent auditor was changed for the Reporting Period.
√ Yes □ No
Indicate whether the independent auditor was changed during the audit period.
□ Yes √ No
Indicate whether an approval procedure was implemented with regard to the change of the independent auditor.
√ Yes □ No
Particulars about the change of the independent auditor:
The Proposal on the Appointment of Independent Auditor for the 2020 Annual Audit was approved respectively at the Second(Extraordinary) Meeting of the Fourth Board of Directors on 16 October 2020 and the Fifth Extraordinary General Meeting of 2020on 2 November 2020. Due to actual and future development needs, and upon comprehensive surveying and inquiring, as well assufficient consideration and prudent decision-making, the Company decided to appoint Ernst & Young Hua Ming LLP as theindependent auditor for the 2020 annual audit of the Company, with a term of one year.Independent auditor, financial advisor or sponsor hired for the audit of internal control:
√ Applicable □ Not applicable
Shanghai Realize Investment Consulting Co., Ltd. was hired as the financial advisor for equity incentive matters in the year,with a fee of RMB200,000 paid in the year.X Possibility of Delisting after the Disclosure of this Report
□ Applicable √ Not applicable
XI Insolvency and Reorganization
□ Applicable √ Not applicable
No such cases in the Reporting Period.XII Significant Legal Matters
□ Applicable √ Not applicable
No such cases in the Reporting Period.
XIII Punishments and Rectifications
□ Applicable √ Not applicable
No such cases in the Reporting Period.XIV Credit Quality of the Company as well as Its Controlling Shareholder and ActualController
□ Applicable √ Not applicable
XV Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measuresfor Employees
√ Applicable □ Not applicable
In order to refine its long-term incentive mechanism, boost the enthusiasm of management personnel and key employees of alllevels, 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
rdBoard 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.
XVI 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. Other Significant Related-Party Transactions
□ Applicable √ Not applicable
No such cases in the Reporting Period.XVII 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
(1) Particulars about Guarantees
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 guarantee line announcement | Line of guarantee | Actual occurrence date | Actual guarantee amount | Type of guarantee | Term of guarantee | Having expired or not | Guarantee for a related party or not |
| Not applicable | ||||||||
| 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 | Term of guarantee | Having expired or not | Guarantee for a related party or not |
| Dongfang Precision (Netherland) | 11 January 2020 | 36,016.2 | 16 March 2020 | 36,016.2 | Joint liability | From the date when the guarantee took effect to 18 February 2021 | Not | Not |
| Dongfang Precision (Netherland) | 5 June 2020 | 28,087.5 | 30 June 2020 | 26,883.75 | Joint liability | 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) | 64,103.7 | Total actual amount of such guarantees in the Reporting Period (B2) | 62,899.95 | |||||
| Total approved line for such guarantees at the end of the Reporting Period (B3) | 64,103.7 | Total actual balance of such guarantees at the end of the Reporting Period (B4) | 62,899.95 | |||||
| Guarantees provided between subsidiaries | ||||||||
| Obligor | Disclosure date of the guarantee line announcement | Line of guarantee | Actual occurrence date | Actual guarantee amount | Type of guarantee | Term of guarantee | Having expired or not | Guarantee for a related party or not |
| Italy QCorr | 15 May 2020 | 2,006.25 | 29 April 2020 | 2,006.25 | Joint liability | From the date when | Not | Not |
| the guarantee took effect to 15 February 2021 | |||||||||
| Italy QCorr | 15 May 2020 | 2,407.5 | 30 April 2020 | 2,407.5 | 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) | 4,413.75 | Total actual amount of such guarantees in the Reporting Period (C2) | 4,413.75 | ||||||
| Total approved line for such guarantees at the end of the Reporting Period (C3) | 4,413.75 | Total actual balance of such guarantees at the end of the Reporting Period (C4) | 4,413.75 | ||||||
| Total guarantee amount (total of the three kinds of guarantees above) | |||||||||
| Total guarantee line approved in the Reporting Period (A1+B1+C1) | 68,517.45 | Total actual guarantee amount in the Reporting Period (A2+B2+C2) | 67,313.7 | ||||||
| Total approved guarantee line at the end of the Reporting Period (A3+B3+C3) | 68,517.45 | Total actual guarantee balance at the end of the Reporting Period (A4+B4+C4) | 67,313.7 | ||||||
| Total actual guarantee amount (A4+B4+C4) as % of the Company’s net assets | 16.19% | ||||||||
| 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) | 67,313.7 | ||||||||
| 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) | 67,313.7 | ||||||||
| 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:
Not applicable
(2) Irregularities in Provision of Guarantees
□ Applicable √ Not applicable
No such cases in the Reporting Period.
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 |
| Bank’s wealth management product | Raised funds | 65,000 | 0 | 0 |
| Bank’s wealth management product | Self-funded | 166,300 | 50,885.69 | 0 |
| Securities firm’s wealth management product | Self-funded | 60,000 | 60,000 | 0 |
| Trust product | Self-funded | 50,000 | 50,000 | 0 |
| Total | 341,300 | 160,885.69 | 0 | |
High-risk wealth management transactions with a significant single amount or with low security, low liquidity and no principalprotection:
□ 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. Significant Contracts Arising in the Ordinary Course of Business
□ Applicable √ Not applicable
5. Other Significant Contracts
□ Applicable √ Not applicable
No such cases in the Reporting Period.
XVIII Social Responsibilities
1. Performance of Social Responsibilities
The 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: Dongfang Precision took samples for testing and issued third-party testing reports each quarter,and has met the zero emission requirement put forward in the replies by environmental authorities and relocated hazardous wastes instrict accordance with the requirements of the state. During the Reporting Period, the Company completed part of its environmentalprotection facilities (e.g., the waste gas treatment facility and the waste water treatment facility), and passed the qualification
re-examination on OHSAS18001:2007 Occupational Health and Safety Management Systems and ISO14001:2005 EnvironmentalManagement System, and Dongfang Precision and Parsun Power were granted the National Pollutant Discharge Permit. Thesubsidiary Parsun Power divided pollutants and wastes into industrial waste water, waste gas, solid waste, hazardous waste anddomestic waste, and disposed of them, and earnestly fulfilled its responsibility of environmental protection. The overseas subsidiaryFosber America established the Green Team committee, which held meetings every quarter and took reform measures to promote itsgreen and low-carbon production.
(6) Epidemic control and fight: After the outbreak of COVID-19 around the Spring Festival in 2020, the Company took activepart in social epidemic controls and fights by taking the following actions:
A. The Company effectively carried out internal prevention of the epidemic. It immediately established the epidemic preventioncommittee led by the general manager to make full arrangement of epidemic prevention works, actively collected and allocatedepidemic supplies, provided employees with face masks, temperature guns and disinfectant, especially strengthened epidemic controland management over employees on business trips at home and abroad and temporary migrant workers, timely learned the healthstatus and travel schedules of such employees, and conscientiously implement epidemic prevention and management measures formigrant workers.
B. The Company actively responded to the government's call for an orderly resumption of work and production while doing agood job in epidemic prevention and control, formulated detailed plans for work and production resumption and effectivelyimplemented them, took a variety of effective epidemic prevention and control measures, and successfully realized safe workresumption after the on-site acceptance by government authorities. During this process, it formed regular epidemic prevention andcontrol in light of the development and changes of the epidemic.
C. It actively fulfilled its social responsibilities and supported others in the epidemic. The Company actively performed its socialresponsibilities as an influential listed company, donated cash and epidemic supplies to Hubei Dawu Maternity and Child HealthcareHospital, Hunan Lianyuan Red Cross Society, Foshan First People's Hospital, Nanhai District Listing Association and otherorganizations to take practical actions to support the front line against the epidemic. It also donated epidemic supplies to itssubsidiaries and agents in Italy, the US and Spain, and its overseas subsidiaries also made donations to local families and individualsaffected by the epidemic.
(7) 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.
(8) Social honour: In 2020, Dongfang Precision was once again recognized as a state-level high-tech enterprise, which wasannounced for public acknowledgment, and it won honorary titles including "Foshan Benchmark High-tech Enterprise", "ZealousPublic Welfare Team of Shishan Labour Union Volunteer Service Corps", "Outstanding Volunteer team of Shishan Labour UnionVolunteer Service Corps", and "Solo Champion in Foshan National High-tech Zone". In the same year, Fosber Asia won honorarytitles including "Guangdong Demonstration Enterprise of Intellectual Property", "Demonstrate Base for Joint Postgraduate Training",
"2020 Leading Enterprise in Foshan National High-tech Zone" and "2020 Gazelle Enterprise in Foshan National High-tech Zone",and Parsun Power won honorary titles including "Leading Enterprise in China's Internal Combustion Engine Industry", "InternationalWell-known Brand of Key Cultivation and Development in Jiangsu" and "Philanthropic Enterprise".
2. Performance of Social Responsibility of Targeted Poverty Alleviation
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.
3. Relevant Information of Environmental Protection
Whether the listed company and its subsidiaries fell into major pollutant-discharge enterprises and institutions published by nationalenvironmental protection authorities.
□ Yes √ No
No
(1) Construction and operation of pollution prevention and control facilities: The parent company Dongfang Precision hasinvested a total of RMB6,466,000 approx. in environmental protection, including the construction of new environmental protectionequipment, maintenance and operation of theses equipment and relocation and disposal of hazardous wastes, and assigned specialpersons to manage and operate the environmental protection equipment and maintain them in a regular basis to ensure their properoperation. During the production process, the Company took a variety of measures to control the waste discharge and waste gasdisposal, and met the requirements for discharge. The subsidiary Parsun Power upgraded its painting equipment according to theupgrading scheme put forward by the expert team sent by the Environmental Protection Bureau, which has been accepted forenvironmental friendliness and is in good operation condition.
(2) Administrative permit on environmental protection: Dongfang Precision and its subsidiaries have obtained the EIA approvalfrom competent departments of environmental protection for their main production projects, and have passed EIA inspection. Duringthe Reporting Period, Dongfang Precision and Parsun Power obtained the National Permit for Pollutant Discharge, and metpost-licensing regulatory requirements as required.
(3) Contingency plan for environmental emergencies: In 2019, Parsun Power filed the Contingency Plan for EnvironmentalEmergencies it compiled. In December 2020, Dongfang Precision commissioned a qualified third party environmental protectionagency to compile the Contingency Plan for Environmental Emergencies, and filed it.
(4) Environment self-monitoring plan: Dongfang Precision commissioned a third party to install and operate 24h onlinewastewater flow monitoring equipment, and also commissioned a third party testing agency to test wastewater, waste gas and noiseevery quarter. It also required environmental equipment operators to carry out regular inspections to learn about the pollutants.Besides, Parsun Power tested the activated carbon adsorption equipment before and after maintenance (including replacement ofactivated carbon).XIX Other Significant Events
√ Applicable □ Not applicable
(I) Revise the Articles of Association
On 27 March 2020, the Company held the 1st extraordinary general meeting of shareholders in 2020, and deliberated andapproved the Proposal on Revising the Articles of Association. As the governing laws, including the Company Law and the Code ofCorporate Governance for Listed Companies, were revised in 2018 and 2019, the Company revised the Articles of Association of
Guangdong Dongfang Precision Science & Technology Co., Ltd. in accordance with relevant laws and regulations and the Company'sactual situation in order to maintain the Company's long-lasting stable development, ensure the Company's focus on core business andlong-term development goals, avoid adverse impacts of potential power struggles and hostile takeover on the normal production andbusiness operation of the Company, ensure the Company's normal operation in the face of hostile takeover, and further protect theinterests of medium and small shareholders.(II) Sign a strategic cooperation agreement with InininIn July 2020, Dongfang Precision entered into the Strategic Cooperation Agreement with Ininin Technology (Shenzhen) Co., Ltd.(hereinafter referred to as "Ininin"), a majority-owned subsidiary of Shanying International Holdings Co.,Ltd., to establish a strategiccooperation relationship in promoting digital transformation and upgrading of the intelligent packaging industry, jointly set a model forsmart factories, and jointly promote the digital transformation and upgrading of the printing and packaging industry, as detailed in theAnnouncement on Entering into Strategic Cooperation Agreement with Ininin published by the Company on the cninfo website on 20July 2020.(III) Complete the general election of the Board of Directors and the Supervisory CommitteeOn 22 September 2020, the Company held the 4th extraordinary general meeting of shareholders in 2020, at which the Proposal onElection of Non-independent Directors of the Company's 4th Board of Directors, Proposal on Election of Independent Directors of theCompany's 4th Board of Directors and Proposal on Election of Supervising Shareholders of the Company's 4th Supervisory Committeewere deliberated and approved, and directors of the Company's 4th Board of Directors and supervising shareholder representatives ofthe Company's 4th Supervisory Committee were elected. The supervising shareholder representatives elected and supervisingemployee representatives elected at the congress of workers and employees held by the Company on 26 August 2020 formed theCompany's 4th Supervisory Committee. On the same day, the Company held the 1st extraordinary meeting of the 4th Board ofDirectors and the 1st extraordinary meeting of the 4th Supervisory Committee, and deliberated and approved the proposals on electionof the chairman, members of special committees of the Board of Directors and the chairman of the Supervisory Committee, as well asthe appointment of senior managers, as detailed in the Announcement on Completion of General Election of the Board of Directors andthe Supervisory Committee and the Announcement on Election of Chairman, Members of Special Committees of Board of Directorsand Chairman of Supervisory Committee and Appointment of Senior Managers published by the Company on the cninfo website on 23September 2020.
(IV) Change the business scopeOn 29 December 2020, the Company held the 4th extraordinary meeting of the 4th Board of Directors and deliberated andapproved the Proposal on Change of Business Scope and Revision of Articles of Association. The Company changed its business scopeas required by its operation and business development in accordance with the Company Law, Articles of Association and Provisions onthe Administration of Business Scope Registration for Enterprises of the State Administration for Industry and Commerce of thePeople's Republic of China. It has been deliberated and approved at the 1st extraordinary general meeting of shareholders held in 2021,as detailed in the Announcement on Change of Business Scope and Revision of Articles of Association published by the Company onthe cninfo website on 30 December 2020.XX Significant Events of Subsidiaries
□ Applicable √ Not applicable
Part VI 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 | 731,859,476 | 39.80% | 0 | 0 | 0 | -489,113,346 | -489,113,346 | 242,746,130 | 15.71% |
| 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 | 356,869,565 | 19.41% | 0 | 0 | 0 | -356,869,565 | -356,869,565 | 0 | 0.00% |
| 1.3 Shares held by other domestic investors | 374,989,911 | 20.39% | 0 | 0 | 0 | -133,543,781 | -133,543,781 | 241,446,130 | 15.63% |
| Including: Shares held by domestic corporations | 155,304,347 | 8.45% | 0 | 0 | 0 | -155,304,347 | -155,304,347 | 0 | 0.00% |
| Shares held by domestic individuals | 219,685,564 | 11.95% | 0 | 0 | 0 | 21,760,566 | 21,760,566 | 241,446,130 | 15.63% |
| 1.4 Shares held by overseas investors | 0 | 0.00% | 0 | 0 | 0 | 1,300,000 | 1,300,000 | 1,300,000 | 0.08% |
| Including: Shares held by overseas corporations | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| Shares held by overseas individuals | 0 | 0.00% | 0 | 0 | 0 | 1,300,000 | 1,300,000 | 1,300,000 | 0.08% |
| 2. Unrestricted shares | 1,106,787,620 | 60.20% | 0 | 0 | 0 | 195,593,207 | 195,593,207 | 1,302,380,827 | 84.29% |
| 2.1 RMB-denominated ordinary shares | 1,106,787,620 | 60.20% | 0 | 0 | 0 | 195,593,207 | 195,593,207 | 1,302,380,827 | 84.29% |
| 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 | 1,838,647,096 | 100.00% | 0 | 0 | 0 | -293,520,139 | -293,520,139 | 1,545,126,957 | 100.00% |
Reasons for share changes:
√ Applicable □ Not applicable
1. Repurchase and retirement of performance compensation shares in the Reporting PeriodThe Company carried out a “package solution” in late 2019 to solve the dispute over the commitment regarding Pride’sperformance. According to the said solution, the Company repurchased, at the price of RMB1, the 293,520,139 shares of the A-stockof Dongfang Precision, which were payable by the former shareholders of Pride, namely, Pulead, CATL, BAIC Capital, Foton, andQinghai Puren. And the said shares were repurchased and retired in January 2020.
2. Restricted shares unlocked in the Reporting Period
Upon the application by the Company and the approval by the Shenzhen Stock Exchange, the total of 193,871,164 restrictedshares held by shareholders Pulead, CATL, BAIC Capital, Foton, and Qinghai Puren were unlocked for public trading on 27 April2020 (Monday), and the total of 24,782,609 restricted shares held by shareholders Qinghai Puren, etc. were unlocked for publictrading on 3 June 2020 (Wednesday).
3. Completion of the ownership transfer of the first grant under the 2020 Restricted Share Incentive Plan in theReporting Period
The Company launched the restricted share incentive plan in the first half of 2020, and completed the ownership transfer of thefirst grant in June 2020. A total of 22,600,000 restricted shares were granted, including 1,300,000 shares in total to three foreignawardees.
4. Lockup of shares held by the shareholder supervisor elected in the Reporting Period
The Proposal on the Election of the Shareholder Supervisor for the Fourth Supervisory Committee was approved at the FourthExtraordinary General Meeting of 2020 on 22 September 2020. Mr. He Baohua was elected as the Shareholder Supervisor for theFourth Supervisory Committee. As required by the applicable laws and regulations, 75% of the 614,088 shares held by Mr. He in theCompany (equivalent to 460,566 shares) were locked up starting from 24 September 2020.
Approval of share changes:
√ Applicable □ Not applicable
In the Reporting Period, with respect to share changes involved in the “unlocking of shareholder Qinghai Puren’s restrictedshares for public trading” and the “ownership transfer of the first grant under the 2020 Restricted Share Incentive Plan”, theCompany followed the applicable laws and regulations and its Articles of Association, executed the approval procedures with thegeneral 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 ofperformance compensation shares” and the “ownership transfer of the first grant under the 2020 Restricted Share Incentive Plan”, theCompany completed the transfers with the Shenzhen branch of China Securities Depository and Clearing Co., Ltd. after they wereapproved by the Shenzhen Stock Exchange.
Progress on any share repurchase:
√ Applicable □ Not applicable
The 2020 share repurchase plan was approved at the 49
th (Extraordinary) Meeting of the 3
rdBoard of Directors and the ThirdExtraordinary General Meeting of 2020 on 24 June 2020 respectively. Using self-owned funds, raised funds that had been dulyapproved to supplement the working capital permanently, and borrowing from financial institution, the Company would carry out arepurchase of a certain number of shares of the RMB-denominated ordinary A-stock by way of centralized bidding (hereinafter, the“2020 Share Repurchase”). The Company intended to use a total amount of no less than RMB500 million (inclusive) and no morethan RMB1,000 million (inclusive) to repurchase shares at prices of no more than RMB6.42/share. All the repurchased shares wouldbe retired to reduce the registered capital. The implementation period was within 12 months as the share repurchase plan wasapproved by the general meeting.As of 31 December 2020, a total of 103,968,981 shares (6.73% of the Company’s total share capital) were repurchased underthe 2020 Share Repurchase Plan, with a total payment of approximately RMB500 million.As of the date of this Report, a total of 127,215,648 shares (8.23% of the Company’s total share capital) were repurchased byway of centralized bidding under the 2020 Share Repurchase Plan, with a total payment of approximately RMB600 million(exclusive of transaction costs, highest transaction price: RMB5.10/share; lowest transaction price: RMB3.88/share).
Progress on reducing the repurchased shares by way of centralized bidding:
□ Applicable √ Not applicable
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
Unit: RMB
| Earnings per share for 2019 | Earnings per share for 2019 based on the latest share capital | Earnings per share for 2020 | |
| Basic earnings per share | 1.01 | 1.24 | 0.26 |
| Diluted earnings per share | 1.01 | 1.24 | 0.26 |
| Equity per share attributable to the Company’s ordinary shareholders | 2.38 | 2.93 | 2.81 |
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 |
| Pulead | 188,347,825 | 0 | 188,347,825 | 0 | Participated in a private placement of the Company and made a share lockup commitment | On 8 January 2020, 111,537,653 shares were repurchased and retired as performance compensation. On 27 April 2020, 76,810,172 shares were unlocked. |
| BAIC Capital | 118,956,522 | 0 | 118,956,522 | 0 | Participated in a private placement of the Company and made a share lockup commitment | On 8 January 2020, 70,444,833 shares were repurchased and retired as performance compensation. On 27 April 2020, 48,511,689 shares were unlocked. |
| CATL | 114,000,000 | 0 | 114,000,000 | 0 | Participated in a private placement of the Company and made a share lockup commitment | On 8 January 2020, 67,509,632 shares were repurchased and retired as performance compensation. On 27 April 2020, 46,490,368 shares were unlocked. |
| Foton | 49,565,218 | 0 | 49,565,218 | 0 | Participated in a private placement of the Company and made a share lockup commitment | On 8 January 2020, 29,352,014 shares were repurchased and retired as performance compensation. On 27 April 2020, 20,213,204 shares were unlocked. |
| Qinghai Puren | 41,304,347 | 0 | 41,304,347 | 0 | Participated in a private placement of the Company and made a share lockup commitment | On 8 January 2020, 14,676,007 shares were repurchased and retired as performance compensation. On 27 April 2020, 1,845,731 shares were unlocked. On 3 June 2020, 24,782,609 shares were unlocked. |
| Qiu Yezhi | 16,632,388 | 9,000,000 | 0 | 25,632,388 | Participated in the 2020 Restricted Share Incentive Plan of the Company | When the unlocking conditions as stated in the 2020 Restricted Share Incentive Plan are met |
| Xie Weiwei | 0 | 1,000,000 | 0 | 1,000,000 | Participated in the 2020 Restricted Share | When the unlocking conditions as stated in the 2020 Restricted |
| Shareholder | Opening restricted shares | Increase in restricted shares in the period | Unlocked in the period | Closing restricted shares | Reason for restriction | Date of unlocking |
| Incentive Plan of the Company | Share Incentive Plan are met | |||||
| Zhou Wenhui | 0 | 1,200,000 | 0 | 1,200,000 | Participated in the 2020 Restricted Share Incentive Plan of the Company | When the unlocking conditions as stated in the 2020 Restricted Share Incentive Plan are met |
| The other 37 awardees of the first grant of the 2020 Restricted Share Incentive Plan | 0 | 11,400,000 | 0 | 11,400,000 | Participated in the 2020 Restricted Share Incentive Plan of the Company | These shares will be unlocked when the unlocking conditions as stated in the 2020 Restricted Share Incentive Plan are met. As two awardees resigned from the Company and were disqualified for the equity incentives, the Company repurchased and retired on 24 February 2021 the 900,000 restricted shares that had been granted to them but were still locked up. |
| He Baohua | 0 | 460,566 | 0 | 460,566 | As of the end of the Reporting Period, Supervisor Mr. He Baohua held 614,088 shares in the Company. According to the applicable regulations, 75% of these shares were locked up due to his senior management position. | Continuously locked up as per the statutory lockup ratio for senior management |
| Total | 528,806,300 | 23,060,566 | 512,173,912 | 39,692,954 | -- | -- |
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
The Company completed the repurchase and retirement of performance compensation shares in the Reporting Period, causing changes to its total share capital.The Company carried out a “package solution” in late 2019 to solve the dispute over the commitment regarding Pride’s performance. According to the said solution, the Companyrepurchased the 293,520,139 shares of the A-stock of Dongfang Precision held by the former shareholders of Pride, namely, Pulead, CATL, BAIC Capital, Foton, and Qinghai Puren. And thesaid shares were retired in January 2020. Upon the retirement, the total share capital of the Company decreased from 1,838,647,096 shares to 1,545,126,957 shares.
A total of 103,968,981 shares (6.73% of the Company’s total share capital) were repurchased under the 2020 Share Repurchase Plan, with a total payment of approximately RMB500million.Due to the matters above, the closing total equity decreased compared to the opening amount.
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 | 38,989 | Number of ordinary shareholders at the month-end prior to the disclosure of this Report | 39,486 | 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 or frozen | |
| Status | Shares | |||||||
| Tang Zhuolin | Domestic individual | 17.52% | 270,737,568 | 0.00 | 203,053,176 | 67,684,392 | In pledge | 187,000,000 |
| Tang Zhuomian | Domestic individual | 8.79% | 135,885,134 | 0.00 | 0 | 135,885,134 | ||
| Pulead Technology Industry Co., Ltd. | State-owned corporation | 4.50% | 69,454,378 | -118,893,447.00 | 0 | 69,454,378 | ||
| Beijing Automotive Group Industry Investment Co., Ltd. | State-owned corporation | 3.14% | 48,511,689 | -70,444,833.00 | 0 | 48,511,689 | ||
| Contemporary Amperex Technology Co., Ltd. | Domestic non-state-owned corporation | 3.01% | 46,490,368 | -67,509,632.00 | 0 | 46,490,368 | ||
| Ruan Huili | Domestic individual | 2.92% | 45,087,232 | -83,100.00 | 0 | 45,087,232 | ||
| JIC Investment Co., Ltd. | State-owned corporation | 2.54% | 39,215,685 | 0.00 | 0 | 39,215,685 | ||
| Luzhou Industrial Investment Group Co., Ltd. | State-owned corporation | 2.06% | 31,770,010 | 0.00 | 0 | 31,770,010 | ||
| Huarong Securities－China Merchants Securities－Huarong Youzhi Collective Asset Management Plan No. 1 | Other | 2.03% | 31,372,549 | 0.00 | 0 | 31,372,549 | ||
| Qiu Yezhi | Domestic individual | 2.02% | 31,176,518 | 9,000,000 | 25,632,388 | 5,544,130 | ||
| Strategic investor or general corporation becoming a top-10 ordinary 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. 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 unrestricted shareholders | |||
| Name of shareholder | Unrestricted shares held at the period-end | Shares by type | |
| Type | Shares | ||
| Tang Zhuomian | 135,885,134 | RMB-denominated ordinary stock | 135,885,134 |
| Pulead Technology Industry Co., Ltd. | 69,454,378 | RMB-denominated ordinary stock | 69,454,378 |
| Tang Zhuolin | 67,684,392 | RMB-denominated ordinary stock | 67,684,392 |
| Beijing Automotive Group Industry Investment Co., Ltd. | 48,511,689 | RMB-denominated ordinary stock | 48,511,689 |
| Contemporary Amperex Technology Co., Ltd. | 46,490,368 | RMB-denominated ordinary stock | 46,490,368 |
| Ruan Huili | 45,087,232 | RMB-denominated ordinary stock | 45,087,232 |
| JIC Investment Co., Ltd. | 39,215,685 | RMB-denominated ordinary stock | 39,215,685 |
| Luzhou Industrial Investment Group Co., Ltd. | 31,770,010 | RMB-denominated ordinary stock | 31,770,010 |
| Huarong Securities－China Merchants Securities－Huarong Youzhi Collective Asset Management Plan No. | 31,372,549 | RMB-denominated ordinary stock | 31,372,549 |
| 1 | |||
| Qinghai Puren Intelligent Technology R & D Center (Limited Partnership) | 26,628,340 | RMB-denominated ordinary stock | 26,628,340 |
| 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. | ||
| Top 10 ordinary shareholders involved in securities margin trading (if any) (see note 4) | As of 31 December 2020, among the top 10 shareholders, Pulead Technology Industry Co., Ltd. held 69,454,256 shares in the Company in its client account of collateral securities for margin trading in China Securities Co., Ltd.; and Luzhou Industrial Investment Group Co., Ltd. held 31,770,010 shares in the Company in its client account of collateral securities for margin trading in Guotai Junan Securities Co., Ltd. | ||
Indicate whether any of the top 10 ordinary shareholders or the top 10 unrestricted ordinary shareholders of the Company conducted any 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. Other 10% or Greater Corporate Shareholders
□ Applicable √ Not applicable
5. Limitations on Shareholding Decrease by the Company’s Controlling Shareholder, Actual Controller,Reorganizer and Other Commitment Makers
□ Applicable √ Not applicable
| Tang Zhuolin | Tang Zhuomian |
Part VII Preference Shares
□ Applicable √ Not applicable
No preference shares in the Reporting Period.
Part VIII Convertible Corporate Bonds
□ Applicable √ Not applicable
No convertible corporate bonds in the Reporting Period.
Part IX Directors, Supervisors, Senior Management and Staff
I Changes in the Shareholdings of Directors, Supervisors and Senior Management
| Name | Office title | Incumbent/Former | Gender | Age | Start of tenure | End of tenure | Opening shareholding (share) | Increase in the period (share) | Decrease in the period (share) | Other increase/decrease (share) | Closing shareholding (share) |
| Tang Zhuolin | Chairman of the Board | Incumbent | Male | 58 | 22 July 2010 | 22 September 2023 | 270,737,568 | 270,737,568 | |||
| Qiu Yezhi | Director and General Manager | Incumbent | Female | 49 | 22 July 2010 | 22 September 2023 | 22,176,518 | 9,000,000 | 31,176,518 | ||
| Xie Weiwei | Director and Deputy General Manager | Incumbent | Male | 47 | 16 June 2016 | 22 September 2023 | 1,000,000 | 1,000,000 | |||
| Zhou Wenhui | Director, Board Secretary and Vice President | Incumbent | Male | 48 | 29 January 2019 | 22 September 2023 | 1,200,000 | 1,200,000 | |||
| Mai Zhirong | Independent Director | Incumbent | Male | 50 | 16 June 2016 | 15 June 2022 | |||||
| Peng Xiaowei | Independent Director | Incumbent | Male | 50 | 16 June 2016 | 15 June 2022 | |||||
| He Weifeng | Independent Director | Incumbent | Male | 60 | 16 June 2016 | 15 June 2022 | |||||
| Chen Huiyi | Chairman of the Supervisory | Incumbent | Female | 36 | 19 May 2017 | 22 September 2023 | 480 | 480 |
| Committee | |||||||||||
| Zhao Xiuhe | Employee Supervisor | Incumbent | Male | 50 | 16 June 2016 | 22 September 2023 | |||||
| He Baohua | Supervisor | Incumbent | Male | 39 | 22 September 2020 | 22 September 2023 | 614,088 | 614,088 | |||
| Shao Yongfeng | Chief Financial Officer and Vice President | Incumbent | Male | 46 | 29 December 2020 | 22 September 2023 | |||||
| Cen Meiling | Supervisor | Former | Female | 42 | 10 May 2013 | 22 September 2020 | |||||
| Total | -- | -- | -- | -- | -- | -- | 293,528,654 | 11,200,000 | 0 | 0 | 304,728,654 |
II Changes of Directors, Supervisors and Senior Management
√ Applicable □ Not applicable
| Name | Office title | Type of change | Date of change | Reason for change |
| Zhou Wenhui | Director | Elected | 22 September 2020 | The Proposal on the Election of Non-Independent Director of the Fourth Board of Directors was approved at the Fourth Extraordinary General Meeting of 2020 on 22 September 2020. As such, Mr. Zhou Wenhui was elected as a Non-Independent Director of the Fourth Board of Directors. |
| Cen Meiling | Supervisor | Resignation | 22 September 2020 | Ms. Cen Meiling ceased to be a Supervisor of the Third Supervisory Committee upon the expiry of her term. |
| He Baohua | Supervisor | Elected | 22 September 2020 | The Proposal on the Election of Shareholder Supervisor of the Fourth Supervisory Committee was approved at the Fourth Extraordinary General Meeting of 2020 on 22 September 2020. As such, Mr. He Baohua was elected as the Shareholder Supervisor of the Fourth Supervisory Committee. |
| Qiu Yezhi | Chief Financial Officer | Disengaged | 29 December 2020 | In order to further improve the financial team, give full play to the financial department as a window, and provide better support for business development, the Board of Directors decided to change the Chief Financial Officer. As such, Ms. Qiu Yezhi ceased to be the Chief Financial Officer but continued as a Director and the General Manager. |
| Shao Yongfeng | Chief Financial Officer | Appointed | 29 December 2020 | The Proposal on the Change of Chief Financial Officer was approved at the Fourth (Extraordinary) Meeting of the Fourth Board of Directors on 29 December 2020. As such, Mr. Shao Yongfeng was appointed as the Chief Financial Officer. |
III Biographical InformationProfessional 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 Foshan Nanhai District People'sPolitical Consultative Conference, Managing Director of the 9th Council of China Packaging Federation, Managing Director ofGuangdong Food and Packaging Machinery Industry Association, Vice President of Foshan Machinery Equipment IndustryAssociation, Honorary President of Nanhai District Machinery Equipment Industry Association, Vice President of Foshan High-tech
Zone Chamber of Commerce, and Vice President of Foshan Nanhai District Listing Association. Served as the Company's GeneralManager and Chief Engineer since 1996, and currently the Chairman of the Board of the Company, Director of the subsidiary FosberS.p.A., Director of the subsidiary Suzhou Parsun Power Machine Co., Ltd., and Director of the subsidiary Guangdong FosberIntelligent Equipment Co., Ltd.Qiu Yezhi, female, Chinese, born in 1972, has no right of permanent residence abroad, MBA, National Model Worker, and Memberof Guangdong Foshan Municipal People's Political Consultative Conference. Served successively as the Company's Director of theGeneral Manager's Office, General Manager of Operations and General Manager since 1996, and as the Company's General Managerand Board Secretary from July 2010 to October 2013. Currently the Company's Director and General Manager, Vice Chairman of theBoard of the subsidiary Fosber S.p.A., Director of the subsidiary Fosber America, Inc., Director of the subsidiary Suzhou ParsunPower Machine 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, graduated from Huazhong Universityof Science and Technology in 2008. Once served as the Standing Deputy General Manager of Foshan Multimodal Transport Corp.,Chairman of the Board of Foshan Donghuochang Railway Logistics Co., Ltd., Deputy Chief of the Reform and DevelopmentDivision of Foshan SASAC, and Deputy Head of the Investment Department and Head of the Asset Management Department ofFoshan Financial Investment Holdings Co., Ltd. Currently the Company's Director and Deputy General Manager, Director of thesubsidiary Suzhou Parsun Power Machine Co., Ltd., Executive Director of the subsidiary Foshan Yinglian Digital PrintingEquipment 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 ofElectric 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 the
assistant 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 | 2 July 2015 | Yes |
| Name | Other entity | Office held in the entity | Start of tenure | End of tenure | Remuneration or allowance from the entity or not |
| General Manager | |||||
| Tang Zhuolin | Hainan Yineng | Legal Representative, Executive Director and General Manager | 10 October 2020 | Not | |
| Tang Zhuolin | Dongfang Digicom | Supervisor | 26 October 2020 | Not | |
| Tang Zhuolin | Dongfang Digicom (Guangdong) | Supervisor | 26 February 2021 | 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 | Yes | |
| Tang Zhuolin | Shenzhen Shenghui Venture Capital Co., Ltd. | Supervisor | 18 May 2016 | Not | |
| Qiu Yezhi | Fosber Group | Vice Chairman of the Board and Director | 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 | Italy QCorr | Director | 3 February 2020 | Yes | |
| Qiu Yezhi | Fosber Asia | Legal Representative and Chairman of the Board | 15 July 2020 | Yes | |
| Qiu Yezhi | Dongfang Precision (Europe) | Director | 15 June 2016 | Yes | |
| Qiu Yezhi | Parsun Power | Director | 24 May 2015 | Not | |
| Qiu Yezhi | Hainan Yineng | 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 |
| Name | Other entity | Office held in the entity | Start of tenure | End of tenure | Remuneration or allowance from the entity or not |
| Qiu Yezhi | Shenzhen Shenghui Venture Capital Co., Ltd. | Legal Representative, Executive Director and General Manager | 18 May 2015 | Yes | |
| Xie Weiwei | Parsun Power | Director | 24 May 2015 | 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 | |
| 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 | |
| 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 | Yes | |
| He Weifeng | Guangdong Jinma Entertainment Corporation Limited | Independent Director | 19 October 2020 | 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
IV Remuneration of Directors, Supervisors and Senior ManagementDecision-making procedure, determination basis and actual payments of remuneration for 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 Company | Remuneration from any related party or not |
| Tang Zhuolin | Chairman of the Board | Male | 57 | Incumbent | 476.17 | Yes |
| Qiu Yezhi | Director and General Manager | Female | 48 | Incumbent | 406.53 | Yes |
| Xie Weiwei | Director and Deputy General Manager | Male | 46 | Incumbent | 89.92 | Yes |
| Zhou Wenhui | Director, Board Secretary and Vice President | Male | 47 | Incumbent | 206.03 | Not |
| Mai Zhirong | Independent Director | Male | 49 | Incumbent | 8.64 | Not |
| Peng Xiaowei | Independent Director | Male | 49 | Incumbent | 8.64 | Not |
| He Weifeng | Independent Director | Male | 59 | Incumbent | 8.64 | Not |
| Chen Huiyi | Chairman of the Supervisory Committee | Female | 35 | Incumbent | 17.45 | Not |
| Zhao Xiuhe | Employee Supervisor | Male | 49 | Incumbent | 16.59 | Not |
| He Baohua | Supervisor | Male | 38 | Incumbent | 5.97 | Not |
| Cen Meiling | Supervisor | Female | 41 | Former | 7.51 | Not |
| Total | -- | -- | -- | -- | 1,252.09 | -- |
Equity incentives granted to directors and senior management in the Reporting Period:
√ 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/share) | Market price at the period-end (RMB/share) | Opening restricted shares | Unlocked shares in the Reporting Period | Restricted shares newly granted in the Reporting Period | Grant price (RMB/share) | Closing restricted shares |
| Qiu Yezhi | Director and General Manager | 0 | 0 | 0 | 4.69 | 0 | 0 | 9,000,000 | 1.00 | 9,000,000 |
| Xie Weiwei | Director and Deputy General Manager | 0 | 0 | 0 | 4.69 | 0 | 0 | 1,000,000 | 1.00 | 1,000,000 |
| Zhou Wenhui | Director, Board Secretary and Vice President | 0 | 0 | 0 | 4.69 | 0 | 0 | 1,200,000 | 1.00 | 1,200,000 |
| Total | -- | 0 | 0 | -- | -- | 0 | 0 | 11,200,000 | -- | 11,200,000 |
| Note (if any) | The restricted shares held by the directors and senior management above were granted to them in the first grant under the 2020 Restricted Share Incentive Plan on 27 March 2020, that were already listed on 24 June 2020. | |||||||||
V Employees
1. Number, Functions and Educational Backgrounds of Employees
| Number of in-service employees of the Company as the parent | 503 |
| Number of in-service employees of principal subsidiaries | 1,185 |
| Total number of in-service employees | 1,688 |
| Total number of paid employees in the Reporting Period | 1,968 |
| Number of retirees to whom the Company as the parent or its major subsidiaries need to pay retirement pensions | 15 |
| Functions | |
| Function | Employees |
| Production&Operation | 914 |
| Marketing | 245 |
| Technical | 308 |
| Financial | 59 |
| Administrative | 162 |
| Total | 1,688 |
| Educational backgrounds | |
| Educational background | Employees |
| Master’s degree and above | 117 |
| Bachelor’s degree | 290 |
| Junior college | 405 |
| Senior high school and below | 876 |
| Total | 1,688 |
2. Employee Remuneration Policy
Domestic business entities:
The remuneration policy in 2020 continued to be based on posts and performance and subject to total control. A comprehensiveremuneration system was established and further improved to retain and attract talents needed for the Company's sustainabledevelopment.
1. Paid remuneration based on posts: The relative value of a post was determined based on its duties, and the remuneration rage ofthe post was determined based on the relative value and according to the Company's value orientation.
2. Paid remuneration based on performance: The Company determined the basic remuneration based on the relative value of a postand personal competence, determined the performance bonus in an employee's remuneration based on his/her performance, andadjusted the remuneration based on his/her personal competence and overall performance.
3. Changed remuneration with the change in post: The remuneration was strictly fitted to the post, and if the post changed, theremuneration changed, so that the remuneration system can support the career development of employees.
4. Total control: The total amount of remuneration was controlled within the scope recognized by the Company, and the growthrate of remuneration should be lower than that of sales revenue and profit. The Company's affordability was taken into account so thatthe Company's business performance can support the growth of the total labour cost.
5. The Production Department changed its remuneration policy from payment by hour to payment by piece, so that first-lineworkers could be paid more by being more profession and working harder, so as to reflect an internally fair remuneration policy basedon differential skill scoring.Overseas business entities:
Fosber Group and Tiru?a Group formulated remuneration policies in accordance with local laws and regulations and the actualcondition of their companies, which fully mobilized the enthusiasm and creativity of employees and promote the sustainable, stable andhealthy development of the companies.
3. Training Plan
Domestic business entities:
In 2020, the R&D Training Camp of the Printer Division of Dongfang Precision offered a three-stage training to strengthen theprofessionalism, creativity and executive ability of core R&D posts. The Printer Division worked with Fosber Asia's Intern TrainingCamp and offered a three-day intensified training and a one-year field study and tutor-coaching training, which enhanced thereservation of technical talents and continued to support talents cultivation. Meanwhile, Parsun Power offered both outsourced trainingand internal training, and has carried out 35 courses in total in 2020.Overseas business entities:
In 2020, Fosber Group attached great importance to employee training, and has offered 12 training on team management, financeand foreign languages, with a total of 225 trainees.
4. Labor Outsourcing
√ Applicable □ Not applicable
| Total hours of labor outsourced | 69,792 |
| Total payment for labor outsourcing (RMB) | 2,600,774.99 |
Part X Corporate Governance
I General Information of Corporate Governance
During 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 Directors
During 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 Committee
During 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.(VII) Updates on policies related to the general meeting of shareholders and meetings of the Board of Directors andSupervisory Committee
During the Reporting Period, the Company revised the Articles of Association, Rules of Procedure for Shareholders' Meeting,Rules of Procedure for the Board of Directors and Rules of Procedure for the Supervisory Committee in accordance with the latestspirit and requirements of current laws and regulations and rules and normative documents of departments, which officially tookeffect after being deliberated and approved by the Board of Directors and shareholders' meeting. Such revisions improved theCompany's capability against the risk of hostile takeovers, and are conducive to ensuring the stable and standardized operation of theCompany's shareholders' meeting, Board of Directors and Supervisory Committee.
Were there any significant differences between the actual situation of the corporate governance and the regulatory documentspublished 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 regulatory documentspublished by China Securities Regulatory Commission on the governance of listed companies.II The Independence of the Company from Controlling Shareholders on Businesses,Personnel, Assets, Structure, and Finance
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 of
the 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 itsproduction 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. The
controlling 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 | Index to disclosed information |
| The First Extraordinary General Meeting of 2020 | Extraordinary General Meeting | 37.80% | 27 March 2020 | 28 March 2020 | Announcement No. 2020-022 on the Resolutions of the First Extraordinary General Meeting of 2020 disclosed on http://www.cninfo.com.cn |
| The Second Extraordinary General Meeting of 2020 | Extraordinary General Meeting | 29.28% | 13 April 2020 | 14 April 2020 | Announcement No. 2020-029 on the Resolutions of the Second Extraordinary General Meeting of 2020 disclosed on http://www.cninfo.com.cn |
| The 2019 Annual General Meeting | Annual General Meeting | 42.59% | 20 May 2020 | 21 May 2020 | Announcement No. 2020-046 on the Resolutions of the 2019 Annual General Meeting disclosed on http://www.cninfo.com.cn |
| The Third Extraordinary General Meeting of 2020 | Extraordinary General Meeting | 35.13% | 24 June 2020 | 29 June 2020 | Announcement No. 2020-059 on the Resolutions of the Third Extraordinary General Meeting of 2020 disclosed on http://www.cninfo.com.cn |
| The Fourth Extraordinary General Meeting of 2020 | Extraordinary General Meeting | 32.70% | 22 September 2020 | 23 September 2020 | Announcement No. 2020-077 on the Resolutions of the Fourth Extraordinary General Meeting of 2020 disclosed on http://www.cninfo.com.cn |
| The Fifth Extraordinary | Extraordinary General Meeting | 30.40% | 2 November 2020 | 3 November 2020 | Announcement No. 2020-088 on the Resolutions of the Fifth |
| General Meeting of 2020 | Extraordinary General Meeting of 2020 disclosed on http://www.cninfo.com.cn |
Note: As the shares in the share repurchase account of the Company did not carry voting rights at the general meeting, the investorparticipation ratio was the shareholdings of attending investors as a percentage of the Company’s total shares with voting rights net ofthe repurchased shares.
2. Extraordinary General Meetings Convened at the Request of Preference Shareholders with ResumedVoting Rights
□ Applicable √ Not applicable
V Performance of Duty by Independent Directors in the Reporting Period
1. Attendance of Independent Directors at Board Meetings and General Meetings
| Attendance of independent directors at board meetings and general meetings | |||||||
| Independent director | Total number of board meetings the independent 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 independent director failed to attend | The independent director failed to attend two consecutive board meetings or not | General meetings attended |
| Peng Xiaowei | 13 | 4 | 9 | 0 | 0 | Not | 6 |
| He Weifeng | 13 | 3 | 9 | 1 | 0 | Not | 5 |
| Mai Zhirong | 13 | 4 | 9 | 0 | 0 | Not | 6 |
Why any independent director failed to attend two consecutive board meetings:
Not applicable
2. Objections Raised by Independent Directors on Matters of the Company
Indicate whether any independent directors raised any objections on any matter of the Company.
□ Yes √ No
No such cases in the Reporting Period.
3. Other Information about the Performance of Duty by Independent Directors
Indicate whether any suggestions from independent directors were adopted by the Company.
√ Yes □ No
Suggestions from independent directors adopted or not adopted by the Company:
During the Reporting Period, the Company's independent directors earnestly fulfilled their duties according to laws and
regulations, gave independent opinions or ex-ante consent on matters that they should express opinions on, including the Company'sapplication for comprehensive credit granting, securities investment, equity incentive, foreign guarantee, profit distribution,engagement of audit firms and election of members of the Board of Directors and the Supervisory Committee., earnestly performedthe responsibilities and obligations as an independent director during the Company's annual reporting, and carried out their workdiligently and conscientiously. During the Reporting Period, independent directors gave independent opinions and suggestions basedon their professionalism, independence and the standpoint of safeguarding the legitimate rights and interests of small and mediuminvestors, which have been adopted by the Company as appropriate.VI Performance of Duty by Special Committees under the Board in the Reporting Period
There are three special committees under the Board of Directors of the Company, namely, the Audit Committee, theNominations Committee and the Remuneration and Appraisal Committee. During the Reporting Period, all special committees of theBoard of Directors actively performed their respective duties in accordance with the Articles of Association, the ImplementationRules for the Audit Committee of the Board of Directors, the Implementation Rules for the Nominations Committee of the Board ofDirectors and the Implementation Rules for the Remuneration and Appraisal Committee of the Board of Directors.During the Reporting Period, the Audit Committee held 6 meetings focusing on the Company's regular reporting and disclosureof financial information, communicated with and urged as necessary the external audit firm on matters related to the annual report,and issued a summary report on the annual audit of the external audit firm; the Nominations Committee held 3 meetings to review thecandidates of directors and senior managers of the Company during the Reporting Period; and the Remuneration and AppraisalCommittee held 4 meetings to review the Company's allowance scheme for independent directors and the annual restricted stockincentive scheme for 2020.
VII Performance of Duty by the Supervisory CommitteeIndicate 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.
VIII 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.
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2020
IX Internal Control Assessment Report
1. Significant Defects in Internal Control Identified during the Reporting Period
□ Yes √ No
2. Internal Control Self-Assessment Report
| Date of full disclosure of the internal control assessment report | 30 March 2021 | |
| 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. | 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. |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2020
| 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 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. | 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, such as unqualified product quality; 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 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 |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2020
| 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 defects in financial reports | 0 | |
| 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 | |
X Independent Auditor’s Report on Internal ControlIndependent auditor’s report on internal control:
| 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 2020, 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 | 30 March 2021 |
| Index to such report disclosed | www.cninfo.com.cn |
| Type of the auditor’s opinion | Unmodified unqualified opinion |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2020
| 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 control self-evaluation report issued by the Company’s Board of Directors.
√ Yes □ No
Part XI Corporate BondsDoes 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 full?No.
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2020
Part XII Corporate Finance Statement
一、Auditor’s Report
| Type of Audit Opinion | Standard Unreserved opinion |
| Signing date of the Auditor’s Report | 29 March 2021 |
| Name of the Audit Institution | Ernst & Young Hua Ming LLP |
| Document number of the Auditor’s report | Ernst & Young Hua Ming (2021) Auditor’s Report No. 61276890_G01 |
| Name of the Chinese Certified Public Accountant | Feng Xingzhi, Lin Hongyan |
Auditor’s Report
Ernst & Young Hua Ming (2021) 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 to as the “Company”), which comprise the consolidated and the Company’s balance sheets asat 31 December 2020, the consolidated and the Company’s income statements, the consolidated and the Company’sstatements of changes in equity and the consolidated and the Company’s statements of cash flows for the year thenended, and notes to the financial statements.In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated andthe Company’s financial position as at 31 December 2020, and the consolidated and the Company’s financialperformance and cash flows for the year then ended in accordance with Accounting Standards for BusinessEnterprises (“ASBEs”).
II. Basis for OpinionWe conducted our audit in accordance with China’s Standards on Auditing“CSAs”. Our responsibilities under thosestandards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section ofour report. We are independent of the Company in accordance with China Code of Ethics for Certified PublicAccountants(the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. Webelieve that the audit evidence we have obtained is sufficient and appropriate 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 thefinancial statements of the Current Period. This matter was addressed in the context of our audit of the financialstatements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.For the matter below, our description of how our audit addressed the matter is provided in that context.We have fulfilled our responsibilities described in the Auditor’s Responsibilities for the Audit of the FinancialStatements section of our report, including in relation to these matters. Accordingly, our audit included theperformance of procedures designed to respond to our assessment of the risks of material misstatements of thefinancial statements. The results of our audit procedures, including procedures performed to address the matterbelow, provide the basis for our opinion on the accompanying financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2020
Auditor’s Report (Cont’d)
Ernst & Young Hua Ming (2021) Auditor’s Report No. 61276890_G01
Guangdong Dongfang Precision Science & Technology Co., Ltd.
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 RMB457,212,401.52 as at 31 December 2020 and the impairment allowance for goodwill was RMB132,308,161.55. 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 15 of Note III, Item 30 of Note III, and Item 18 of Note V to the financial statements. | The procedures performed to address this 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. |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2020
Auditor’s Report (Cont’d)
Ernst & Young Hua Ming (2021) Auditor’s Report No. 61276890_G01
Guangdong Dongfang Precision Science & Technology Co., Ltd.
IV. Other Information
The management of the Company is responsible for the other information. The other information comprises all ofthe information included 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 ofassurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, indoing so, consider whether the other information is materially inconsistent with the financial statements or ourknowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this otherinformation, we are required to 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 accordancewith ASBEs, and for designing, implementing and maintaining such internal control as the managementdetermines is necessary to ensure the preparation 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 tocontinue as a going concern, disclosing, as applicable, matters related to going concern and using the goingconcern basis of accounting, unless the management either intends to liquidate or to cease operations, or has norealistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2020
Auditor’s Report (Cont’d)
Ernst & Young Hua Ming (2021) Auditor’s Report No. 61276890_G01
Guangdong Dongfang Precision Science & Technology Co., Ltd.
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 frommaterial misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordancewith CSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or errorand are considered material if, individually or in the aggregate, they could reasonably be expected to influence theeconomic 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 professionalskepticism throughout the audit. We also:
(1) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud orerror, design and perform audit procedures responsive to those risks, and obtain audit evidence that issufficient and appropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error, as fraud may involvecollusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
(2) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances.
(3) Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures 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 audit evidence obtained, whether a material uncertainty exists related to events or conditionsthat may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude thata material uncertainty exists, we are required to draw attention in our auditor’s report to the relateddisclosures in the financial statements or, and if such disclosures are inadequate, to modify our opinion. Ourconclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, futureevents 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 the financial statements represent the underlying transactions and events in a manner thatachieves fair presentation.
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2020
Auditor’s Report (Cont’d)
Ernst & Young Hua Ming (2021) Auditor’s Report No. 61276890_G01
Guangdong Dongfang Precision Science & Technology Co., Ltd.
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 professionalskepticism throughout the audit. We also: (cont’d)
(6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or businessactivities within the Company to express an audit opinion on the financial statements. We are responsiblefor the direction, supervision and performance of the group audit. We remain solely responsible for ouraudit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope andtiming of the audit and significant audit findings, including any significant deficiencies in internal control that weidentify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethicalrequirements regarding independence, and to communicate with them all relationships and other matters that mayreasonably be thought to bear on our independence, and where applicable, related safeguards (if applicable).
From the matters communicated with those charged with governance, we determine the matter that was of mostsignificance in the audit of the financial statements of the Current Period and is therefore the key audit matter. Wedescribe this matter in our auditor’s report unless law or regulation precludes public disclosure about the matter orwhen, in extremely rare circumstances, we determine that a matter should not be communicated in our reportbecause the adverse consequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2020
Auditor’s Report (Cont’d)
Ernst & Young Hua Ming (2021) Auditor’s Report No. 61276890_G01
Guangdong Dongfang Precision Science & Technology Co., Ltd.
(End of the Report)
| Ernst & Young Hua Ming LLP | Chinese Certified Public Accountant: Feng Xingzhi (Engagement Partner) |
| Chinese Certified Public Accountant: Lin Hongyan | |
| Beijing, China | 29 March 2021 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Consolidated Balance SheetAs at 31 December 2020 Expressed in RenminbiYuan
| Assets | Note V | 31 December 2020 | 31 December 2019 | ||||
| Current assets | |||||||
| Cash and bank balances | 1 | 885,711,053.88 | 2,356,703,434.60 | ||||
| Financial assets held for trading | 2 | 1,636,296,430.31 | 1,164,039,381.59 | ||||
| Notes receivable | 3 | 12,744,582.88 | - | ||||
| Accounts receivable | 4 | 469,635,423.58 | 597,431,210.02 | ||||
| Receivables financing | 5 | 56,737,978.04 | 55,447,099.32 | ||||
| Prepayments | 6 | 29,109,416.21 | 25,901,123.85 | ||||
| Other receivables | 7 | 79,103,472.64 | 79,573,114.49 | ||||
| Inventories | 8 | 734,120,595.26 | 671,432,701.11 | ||||
| Contract assets | 9 | 29,504,693.97 | - | ||||
| Current portion of non-current assets | 10 | 2,556,000.00 | 356,983.48 | ||||
| Other current assets | 11 | 22,271,217.65 | 22,346,314.29 | ||||
| Total current assets | 3,957,790,864.42 | 4,973,231,362.75 | |||||
| Non-current assets | |||||||
| Long-term receivables | 12 | 1,475,000.00 | - | ||||
| Long-term equity investments | 13 | 72,671,204.73 | 72,372,355.03 | ||||
| Other non-current financial assets | 14 | 5,948,588.15 | 20,559,159.34 | ||||
| Fixed assets | 15 | 571,413,480.14 | 585,754,900.75 | ||||
| Construction in progress | 16 | 9,062,038.52 | 4,839,241.48 | ||||
| Intangible assets | 17 | 332,387,182.69 | 249,882,429.53 | ||||
| Goodwill | 18 | 324,904,239.97 | 306,633,631.93 | ||||
| Long-term prepaid expenses | 19 | 12,096,981.78 | 8,699,236.33 | ||||
| Deferred tax assets | 20 | 98,947,059.25 | 49,025,021.61 | ||||
| Other non-current assets | 21 | 936,540,047.40 | 2,518,818.56 | ||||
| Total non-current assets | 2,365,445,822.63 | 1,300,284,794.56 | |||||
| Total assets | 6,323,236,687.05 | 6,273,516,157.31 | |||||
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Consolidated Balance Sheet (Cont’d)As at 31 December 2020 Expressed in RenminbiYuan
| Liabilities and equity | Note V | 31 December 2020 | 31 December 2019 | ||||
| Current liabilities | |||||||
| Short-term borrowings | 22 | 39,533,281.84 | 117,888,353.14 | ||||
| Financial liabilities held for trading | 23 | 41,408,109.80 | - | ||||
| Notes payable | 24 | 104,855,187.97 | 43,973,859.51 | ||||
| Accounts payable | 25 | 503,042,561.05 | 472,862,744.45 | ||||
| Receipts in advance | 26 | - | 286,511,724.62 | ||||
| Contract liabilities | 27 | 362,792,713.35 | - | ||||
| Employee benefits payable | 28 | 92,623,562.93 | 106,677,329.95 | ||||
| Tax payable | 29 | 36,369,777.05 | 48,928,229.51 | ||||
| Other payables | 30 | 81,743,851.64 | 90,950,443.16 | ||||
| Current portion of non-current liabilities | 31 | 226,597,528.74 | 353,399,238.29 | ||||
| Other current liabilities | 32 | 20,532,046.04 | - | ||||
| Total current liabilities | 1,509,498,620.41 | 1,521,191,922.63 | |||||
| Non-current liabilities | |||||||
| Long-term borrowings | 33 | 353,412,388.29 | 224,146,667.48 | ||||
| Long-term employee benefits payable | 34 | 18,451,652.74 | 12,252,657.36 | ||||
| Provisions | 35 | 105,450,257.63 | 78,650,466.48 | ||||
| Deferred income | 36 | 16,861,488.27 | 18,275,808.90 | ||||
| Deferred tax liabilities | 20 | 19,296,386.16 | 16,915,692.91 | ||||
| Other non-current liabilities | 37 | 68,737,415.25 | - | ||||
| Total non-current liabilities | 582,209,588.34 | 350,241,293.13 | |||||
| Total liabilities | 2,091,708,208.75 | 1,871,433,215.76 | |||||
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Consolidated Balance Sheet (Cont’d)As at 31 December 2020 Expressed in RenminbiYuan
| Liabilities and equity | Note V | 31 December 2020 | 31 December 2019 | ||||
| Equity | |||||||
| Share capital | 38 | 1,545,126,957.00 | 1,838,647,096.00 | ||||
| Capital surplus | 39 | 4,002,393,061.81 | 3,862,377,838.84 | ||||
| Less: Treasury stock | 40 | 579,403,185.12 | 160,088,925.60 | ||||
| Other comprehensive income | 41 | 20,026,089.70 | 24,971,085.32 | ||||
| Special reserve | 42 | 10,057,438.97 | - | ||||
| Surplus reserves | 43 | 51,830,974.45 | 51,830,974.45 | ||||
| Retained earnings | 44 | (891,492,837.06 | ) | (1,280,673,461.14 | ) | ||
| Total equity attributable to owners of the parent | 4,158,538,499.75 | 4,337,064,607.87 | |||||
| Non-controlling interests | 72,989,978.55 | 65,018,333.68 | |||||
| Total equity | 4,231,528,478.30 | 4,402,082,941.55 | |||||
| Total liabilities and equity | 6,323,236,687.05 | 6,273,516,157.31 | |||||
The financial statements have been signed by:
Legal representative: Tang Zhuolin Chief Financial Officer: Shao YongfengHead of Accounting Department: Yao Bin
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Consolidated Income Statement2020 Expressed in Renminbi Yuan
| Note V | 2020 | 2019 | |||||
| Operating revenue | 45 | 2,916,270,143.13 | 9,973,503,602.19 | ||||
| Less: Cost of sales | 45 | 2,099,148,826.36 | 8,286,432,074.92 | ||||
| Taxes and surcharges | 46 | 10,253,512.61 | 21,756,356.93 | ||||
| Selling expenses | 47 | 181,549,459.69 | 414,527,474.88 | ||||
| Administrative expenses | 48 | 246,973,016.40 | 365,218,611.72 | ||||
| R&D expenses | 49 | 82,082,274.75 | 156,654,915.42 | ||||
| Finance costs | 50 | 7,919,670.28 | (16,869,846.12 | ) | |||
| Including: Interest expenses | 15,535,719.53 | 31,945,338.53 | |||||
| Interest income | 20,887,321.27 | 55,020,801.87 | |||||
| Add: Other income | 51 | 10,894,164.69 | 22,814,061.39 | ||||
| Investment income | 52 | 55,115,521.94 | 1,384,907,790.71 | ||||
| Including: Share of profit or loss of joint ventures and associates | 2,889,349.81 | 2,541,133.81 | |||||
| Gain/loss on changes in fair value | 53 | 45,122,771.27 | (302,415.26 | ) | |||
| Credit impairment loss | 54 | (7,964,362.42 | ) | (34,097,839.70 | ) | ||
| Asset impairment loss | 55 | (5,368,019.60 | ) | (109,839,858.68 | ) | ||
| Gain/loss on disposal of assets | 56 | (17,854.18 | ) | 538,255.27 | |||
| Operating profit | 386,125,604.74 | 2,009,804,008.17 | |||||
| Add: Non-operating income | 57 | 35,801,786.91 | 12,570,847.05 | ||||
| Less: Non-operating expenses | 58 | 1,746,731.36 | 8,756,961.53 | ||||
| Gross profit | 420,180,660.29 | 2,013,617,893.69 | |||||
| Less: Income tax expenses | 60 | 23,083,339.30 | 174,271,939.88 | ||||
| Net profit | 397,097,320.99 | 1,839,345,953.81 | |||||
| Net profit classified by continuing operations | |||||||
| Net profit from continuing operations | 397,097,320.99 | 1,839,345,953.81 | |||||
| Net profit classified by attribution of ownership | |||||||
| Net profit attributable to owners of the parent | 389,180,624.08 | 1,838,018,805.50 | |||||
| Net profit attributable to non-controlling interests | 7,916,696.91 | 1,327,148.31 | |||||
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Consolidated Income Statement (Cont’d)2020 Expressed in Renminbi Yuan
| Note V | 2020 | 2019 | |||||
| Other comprehensive income/(loss), net of tax | (4,890,047.66 | ) | 4,664,988.99 | ||||
| Other comprehensive income/(loss) attributable to owners of the parent, net of tax | (4,944,995.62 | ) | 4,670,175.98 | ||||
| Other comprehensive loss that will not be reclassified to profit or loss | (471,953.04 | ) | (468,239.41 | ) | |||
| Changes caused by remeasurements on defined benefit schemes | (471,953.04 | ) | (468,239.41 | ) | |||
| Other comprehensive income/(loss) that will be reclassified to profit or loss | (4,473,042.58 | ) | 5,138,415.39 | ||||
| Differences arising from the translation of foreign currency-denominated financial statements | (4,473,042.58 | ) | 5,138,415.39 | ||||
| Other comprehensive income attributable to non-controlling interests, net of tax | 54,947.96 | (5,186.99 | ) | ||||
| Total comprehensive income | 392,207,273.33 | 1,844,010,942.80 | |||||
| Including: | |||||||
| Total comprehensive income attributable to owners of the parent | 384,235,628.46 | 1,842,688,981.48 | |||||
| Total comprehensive income attributable to non-controlling interests | 7,971,644.87 | 1,321,961.32 | |||||
| Earnings per share | 61 | ||||||
| Basic earnings per share | 0.26 | 1.01 | |||||
| Diluted earnings per share | 0.26 | 1.01 |
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Consolidated Statements of Changes in Equity2020 Expressed in Renminbi Yuan
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 | (293,520,139.00 | ) | 140,015,222.97 | 419,314,259.52 | (4,944,995.62 | ) | 10,057,438.97 | 389,180,624.08 | (178,526,108.12 | ) | 7,971,644.87 | (170,554,463.25 | ) | |||||||||||||||
| （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 | (293,520,139.00 | ) | 140,015,222.97 | 419,314,259.52 | - | - | (572,819,175.55 | ) | - | (572,819,175.55 | ) | |||||||||||||||||
| 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 | - | - | - | - | 10,057,438.97 | - | 10,057,438.97 | - | 10,057,438.97 | |||||||||||||||||||
| 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.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Consolidated Statements of Changes in Equity (Cont’d)2020 Expressed in Renminbi Yuan
2019
| Equity attributable to owners of the parent | Non-controlling | Total equity | |||||||||||||||||||||
| Share capital | Capital surplus | Less: Treasury stock | Other comprehensive income | Surplus reserves | Retained earnings | Subtotal | interests | ||||||||||||||||
| I. | At 31 December 2018 and 1 January 2019 | 1,838,647,096.00 | 5,298,075,978.80 | 63,597,455.75 | 20,300,909.34 | 51,830,974.45 | (3,118,692,266.64 | ) | 4,026,565,236.20 | 5,667,911.11 | 4,032,233,147.31 | ||||||||||||
| II. | Changes for the year | - | (1,435,698,139.96 | ) | 96,491,469.85 | 4,670,175.98 | - | 1,838,018,805.50 | 310,499,371.67 | 59,350,422.57 | 369,849,794.24 | ||||||||||||
| （I） | Total comprehensive income | - | - | - | 4,670,175.98 | - | 1,838,018,805.50 | 1,842,688,981.48 | 1,321,961.32 | 1,844,010,942.80 | |||||||||||||
| （II） | Owner’s contributions and reduction in capital | - | (1,435,698,139.96 | ) | 96,491,469.85 | - | - | - | (1,532,189,609.81 | ) | 58,344,033.37 | (1,473,845,576.44 | ) | ||||||||||
| 1. Others | - | (1,435,698,139.96 | ) | 96,491,469.85 | - | - | - | (1,532,189,609.81 | ) | 58,344,033.37 | (1,473,845,576.44 | ) | |||||||||||
| (III) | Others | - | - | - | - | - | - | - | (315,572.12 | (315,572.12 | ) | ||||||||||||
| III. | At 31 December 2019 | 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 | ||||||||||||
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Consolidated Statement of Cash Flows (Cont’d)2020 Expressed in Renminbi Yuan
| Note V | 2020 | 2019 | ||||||
| I. | Cash flows from operating activities | |||||||
| Proceeds from sale of goods and rendering of services | 3,103,763,332.58 | 5,761,214,275.00 | ||||||
| Receipts of taxes and surcharges refunds | 124,817,383.44 | 56,214,687.70 | ||||||
| Cash generated from other operating activities | 62 | 45,814,939.62 | 154,398,867.89 | |||||
| Subtotal of cash generated from operating activities | 3,274,395,655.64 | 5,971,827,830.59 | ||||||
| Payments for goods and services | 1,711,801,451.73 | 4,191,776,389.52 | ||||||
| Cash payments to and on behalf of employees1 | 556,619,112.99 | 616,716,506.72 | ||||||
| Payments of all types of taxes and surcharges | 183,936,558.09 | 538,853,364.60 | ||||||
| Cash used in other operating activities | 62 | 271,042,501.08 | 343,183,782.74 | |||||
| Subtotal of cash used in operating activities | 2,723,399,623.89 | 5,690,530,043.58 | ||||||
| Net cash generated from/used in operating activities | 63 | 550,996,031.75 | 281,297,787.01 | |||||
| II. | Cash flows from investing activities | |||||||
| Proceeds from disinvestment | 2,240,344,499.76 | - | ||||||
| Investment income | 79,136,616.01 | 86,362,638.82 | ||||||
| Net proceeds from the disposal of fixed assets, intangible assets and other long-lived assets | 2,379,184.74 | 813,403.84 | ||||||
| Net proceeds from the disposal of subsidiaries and other business units | 63 | - | 1,441,474,803.51 | |||||
| Cash generated from other investing activities | 62 | - | 3,329,848,750.00 | |||||
| Subtotal of cash generated from investing activities | 2,321,860,300.51 | 4,858,499,596.17 | ||||||
| Payments for the acquisition of fixed assets, intangible assets and other long-lived assets | 150,682,489.97 | 138,131,940.70 | ||||||
| Payments for investments | 3,341,970,650.85 | 36,900,193.48 | ||||||
| Net payments for the acquisition of subsidiaries and other business units | 63 | 11,529,999.39 | 98,967,727.73 | |||||
| Cash used in other investing activities | 62 | 1,203,750.03 | 4,462,987,540.01 | |||||
| Subtotal of cash used in investing activities | 3,505,386,890.24 | 4,736,987,401.92 | ||||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Consolidated Statement of Cash Flows (Cont’d)2020 Expressed in Renminbi Yuan
| Net cash generated from/used in investing activities | (1,183,526,589.73 | ) | 121,512,194.25 | |||||
| Note V | 2020 | 2019 | |||||
| III. | Cash flows from financing activities | ||||||
| Borrowings raised | 395,061,988.80 | 201,906,337.33 | |||||
| Cash generated from other financing activities | 62 | 162,750,024.15 | 160,901,245.51 | ||||
| Subtotal of cash generated from financing activities | 557,812,012.95 | 362,807,582.84 | |||||
| Repayment of borrowings | 470,644,665.84 | 411,199,705.69 | |||||
| Interest and dividends paid | 15,149,309.55 | 90,133,272.77 | |||||
| Cash used in other financing activities | 62 | 825,811,857.34 | 104,173,489.68 | ||||
| Subtotal of cash used in financing activities | 1,311,605,832.73 | 605,506,468.14 | |||||
| Net cash generated from/used in financing activities | (753,793,819.78 | ) | (242,698,885.30 | ) | |||
| IV. | Effect of foreign exchange rates changes on cash and cash equivalents | 20,200,877.15 | 8,616,199.08 | ||||
| V. | Net (decrease)/increase in cash and cash equivalents | (1,366,123,500.61 | ) | 168,727,295.04 | |||
| Add: Cash and cash equivalents, beginning of the period | 2,226,724,737.39 | 2,057,997,442.35 | |||||
| VI. | Cash and cash equivalents, end of the period | 63 | 860,601,236.78 | 2,226,724,737.39 |
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Company Balance SheetAs at 31 December 2020 Expressed in RenminbiYuan
| Assets | Note XV | 31 December 2020 | 31 December 2019 | ||||
| Current assets | |||||||
| Cash and bank balances | 134,020,813.88 | 1,899,380,375.38 | |||||
| Financial assets held for trading | 1,539,762,030.97 | 1,163,000,000.00 | |||||
| Accounts receivable | 1 | 153,517,438.90 | 151,096,214.10 | ||||
| Receivables financing | 53,245,689.47 | 51,139,322.12 | |||||
| Prepayments | 2,641,946.74 | 3,233,763.27 | |||||
| Other receivables | 2 | 68,388,543.22 | 36,670,496.12 | ||||
| Inventories | 123,156,907.36 | 111,225,290.10 | |||||
| Contract assets | 4,470,173.25 | - | |||||
| Current portion of non-current assets | 2,556,000.00 | 356,983.48 | |||||
| Other current assets | 18,942.75 | 4,961,417.06 | |||||
| Total current assets | 2,081,778,486.54 | 3,421,063,861.63 | |||||
| Non-current assets | |||||||
| Long-term receivables | 1,475,000.00 | - | |||||
| Long-term equity investments | 3 | 464,794,856.81 | 439,638,782.00 | ||||
| Fixed assets | 329,230,669.84 | 340,791,611.76 | |||||
| Construction in progress | 351,261.61 | 83,070.80 | |||||
| Intangible assets | 58,215,631.98 | 60,733,612.10 | |||||
| Long-term prepaid expenses | 3,475,004.06 | 3,335,014.92 | |||||
| Deferred tax assets | 32,570,759.90 | 4,923,465.18 | |||||
| Other non-current assets | 935,660,189.00 | 585,189.00 | |||||
| Total non-current assets | 1,825,773,373.20 | 850,090,745.76 | |||||
| Total assets | 3,907,551,859.74 | 4,271,154,607.39 | |||||
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Company Balance Sheet (Cont’d)As at 31 December 2020 Expressed in RenminbiYuan
| Liabilities and equity | 31 December 2020 | 31 December 2019 | |||||
| Current liabilities | |||||||
| Short-term borrowings | - | 90,000,000.00 | |||||
| Notes payable | 55,312,772.43 | 43,843,859.51 | |||||
| Accounts payable | 53,044,344.90 | 70,687,704.41 | |||||
| Receipts in advance | - | 17,451,789.10 | |||||
| Contract liabilities | 22,116,154.74 | - | |||||
| Employee benefits payable | 16,961,090.03 | 26,144,254.56 | |||||
| Tax payable | 5,181,895.95 | 1,921,575.57 | |||||
| Other payables | 50,884,934.80 | 50,214,415.95 | |||||
| Other current liabilities | 2,253,619.05 | - | |||||
| Total current liabilities | 205,754,811.90 | 300,263,599.10 | |||||
| Non-current liabilities | |||||||
| Deferred income | 13,306,971.66 | 14,423,631.66 | |||||
| Deferred tax liabilities | 3,894,304.65 | - | |||||
| Total non-current liabilities | 17,201,276.31 | 14,423,631.66 | |||||
| Total liabilities | 222,956,088.21 | 314,687,230.76 | |||||
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Company Balance Sheet (Cont’d)As at 31 December 2020 Expressed in RenminbiYuan
| Liabilities and equity | 31 December 2020 | 31 December 2019 | |||||
| Equity | - | ||||||
| Share capital | 1,545,126,957.00 | 1,838,647,096.00 | |||||
| Capital surplus | 3,846,323,477.68 | 3,608,591,602.42 | |||||
| Less: Treasury stock | 579,403,185.12 | 160,088,925.60 | |||||
| Special reserve | 3,835,986.08 | - | |||||
| Surplus reserves | 51,830,974.45 | 51,830,974.45 | |||||
| Retained earnings | (1,183,118,438.56 | ) | (1,382,513,370.64 | ) | |||
| Total Equity | 3,684,595,771.53 | 3,956,467,376.63 | |||||
| Total liabilities and Equity | 3,907,551,859.74 | 4,271,154,607.39 | |||||
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Company Income Statement2020 Expressed in Renminbi Yuan
| Note XV | 2020 | 2019 | |||||
| Operating revenue | 4 | 357,820,756.14 | 454,758,259.30 | ||||
| Less: Cost of sales | 4 | 216,587,418.89 | 262,093,105.17 | ||||
| Taxes and surcharges | 6,495,820.00 | 6,236,254.83 | |||||
| Selling expenses | 23,483,006.93 | 34,298,441.55 | |||||
| Administrative expenses | 91,133,067.04 | 138,720,475.22 | |||||
| R&D expenses | 19,296,267.24 | 32,059,854.28 | |||||
| Finance costs | (1,835,233.85 | ) | (12,467,479.41 | ) | |||
| Including: Interest expenses | 2,455,764.90 | 2,600,209.85 | |||||
| Interest income | 13,510,226.63 | 15,831,155.76 | |||||
| Add: Other income | 5,823,069.02 | 12,907,310.77 | |||||
| Investment income | 5 | 112,497,262.90 | 2,131,539,957.20 | ||||
| Including: Share of profit or loss of joint ventures and associates | 2,889,349.81 | 2,492,655.15 | |||||
| Gain/loss on changes in fair value | 53,243,450.97 | - | |||||
| Credit impairment loss | (2,413,082.66 | ) | (2,394,961.06 | ) | |||
| Asset impairment loss | 1,060,243.12 | (15,761,304.34 | ) | ||||
| Gain/loss on disposal of assets | 22,458.25 | 2,282.78 | |||||
| Operating profit | 172,893,811.49 | 2,120,110,893.01 | |||||
| Add: Non-operating income | 3,530,930.90 | 471,217.36 | |||||
| Less: Non-operating expenses | 1,282,131.90 | 1,561,582.33 | |||||
| Gross profit | 175,142,610.49 | 2,119,020,528.04 | |||||
| Less: Income tax expenses | (24,252,321.59 | ) | (1,101,074.04 | ) | |||
| Net profit | 199,394,932.08 | 2,120,121,602.08 | |||||
| Including: Net profit from continuing operations | 199,394,932.08 | 2,120,121,602.08 | |||||
| Total comprehensive income | 199,394,932.08 | 2,120,121,602.08 | |||||
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Company Statement of Changes in Equity2020 Expressed in Renminbi Yuan
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 | (293,520,139.00 | ) | 237,731,875.26 | 419,314,259.52 | 3,835,986.08 | - | 199,394,932.08 | (271,871,605.10 | ) | ||||||
| （I） | Total comprehensive income | - | - | - | - | - | 199,394,932.08 | 199,394,932.08 | ||||||||
| （II） | Owner’s contributions and reduction in capital | (293,520,139.00 | ) | 237,731,875.26 | 419,314,259.52 | - | - | - | (475,102,523.26 | ) | ||||||
| 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 | - | - | 3,835,986.08 | - | - | 3,835,986.08 | |||||||||
| 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.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Company Statement of Changes in Equity (Cont’d)2020 Expressed in Renminbi Yuan
2019
| Share capital | Capital surplus | Less: Treasury stock | Surplus reserves | Retained earnings | Total equity | |||||||||
| I. | At 31 December 2018 and 1 January 2019 | 1,838,647,096.00 | 5,055,665,185.99 | 63,597,455.75 | 51,830,974.45 | (3,502,634,972.72 | ) | 3,379,910,827.97 | ||||||
| II. | Changes for the year | - | (1,447,073,583.57 | ) | 96,491,469.85 | - | 2,120,121,602.08 | 576,556,548.66 | ||||||
| （I） | Total comprehensive income | - | - | - | - | 2,120,121,602.08 | 2,120,121,602.08 | |||||||
| （II） | Owner’s contributions and reduction in capital | - | (1,447,073,583.57 | ) | 96,491,469.85 | - | - | (1,543,565,053.42 | ) | |||||
| 1. | Others | - | (1,447,073,583.57 | ) | 96,491,469.85 | - | - | (1,543,565,053.42 | ) | |||||
| III. | At 31 December 2019 | 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 |
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Company Statement of Cash Flows2020 Expressed in Renminbi Yuan
| 2020 | 2019 | ||||||
| I. | Cash flows from operating activities | ||||||
| Proceeds from sale of goods and rendering of services | 378,382,646.38 | 444,873,626.35 | |||||
| Receipts of taxes and surcharges refunds | 98,380,978.71 | 19,746,348.95 | |||||
| Cash generated from other operating activities | 17,427,644.21 | 97,820,120.67 | |||||
| Subtotal of cash generated from operating activities | 494,191,269.30 | 562,440,095.97 | |||||
| Payments for goods and services | 225,072,281.14 | 265,624,733.00 | |||||
| Cash payments to and on behalf of employees | 87,707,753.20 | 85,050,092.27 | |||||
| Payments of all types of taxes and surcharges | 95,006,648.05 | 20,194,213.41 | |||||
| Cash used in other operating activities | 70,685,343.49 | 102,153,093.47 | |||||
| Subtotal of cash used in operating activities | 478,472,025.88 | 473,022,132.15 | |||||
| Net cash generated from/used in operating activities | 15,719,243.42 | 89,417,963.82 | |||||
| II. | Cash flows from investing activities | ||||||
| Proceeds from disinvestment | 2,227,653,619.05 | - | |||||
| Investment income | 96,889,333.09 | 85,531,992.66 | |||||
| Net proceeds from the disposal of fixed assets, intangible assets and other long-lived assets | 498,906.24 | 13,015.56 | |||||
| Net proceeds from the disposal of subsidiaries and other business units | - | 1,500,000,000.00 | |||||
| Cash generated from other investing activities | - | 3,339,848,750.00 | |||||
| Subtotal of cash generated from investing activities | 2,325,041,858.38 | 4,925,393,758.22 | |||||
| Payments for the acquisition of fixed assets, intangible assets and other long-lived assets | 8,426,821.45 | 6,938,291.51 | |||||
| Payments for investments | 3,226,936,725.61 | 36,900,193.48 | |||||
| Net payments for the acquisition of subsidiaries and other business units | 11,529,999.39 | - | |||||
| Cash used in other investing activities | - | 4,502,648,750.00 | |||||
| Subtotal of cash used in investing activities | 3,246,893,546.45 | 4,546,487,234.99 | |||||
| Net cash generated from/used in investing activities | (921,851,688.07 | ) | 378,906,523.23 |
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Company Statements of Cash Flows (Cont’d)2020 Expressed in Renminbi Yuan
| 2020 | 2019 | ||||||
| III. | Cash flows from financing activities | ||||||
| Borrowings raised | - | 90,000,000.00 | |||||
| Cash generated from other financing activities | 155,256,887.17 | 18,702,498.63 | |||||
| Subtotal of cash generated from financing activities | 155,256,887.17 | 108,702,498.63 | |||||
| Repayment of borrowings | 90,000,000.00 | 140,000,000.00 | |||||
| Interest and dividends paid | 2,336,895.39 | 2,307,471.27 | |||||
| Cash used in other financing activities | 800,939,572.04 | 96,510,768.15 | |||||
| Subtotal of cash used in financing activities | 893,276,467.43 | 238,818,239.42 | |||||
| Net cash generated from/used in financing activities | (738,019,580.26 | ) | (130,115,740.79 | ) | |||
| IV. | Net (decrease)/increase in cash and cash equivalents | (1,644,152,024.91 | ) | 338,208,746.26 | |||
| Add: Cash and cash equivalents, beginning of the period | 1,770,491,895.62 | 1,432,283,149.36 | |||||
| V. | Cash and cash equivalents, end of the period | 126,339,870.71 | 1,770,491,895.62 | ||||
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2020 Expressed in Renminbi Yuan
I. Corporate Background
Guangdong Dongfang Precision Science & Technology Co., Ltd. (the "Company"), a joint stockcompany with limited liability registered in Guangdong Province of the People's Republic ofChina and established on 9 December 1996, obtained a Business License for Enterprise LegalPerson with a registration number of 440682000040868.
In August 2011, upon the approval by the China Securities Regulatory Commission (CSRC) in theReply on Approving the Initial Public Offering of Shares by Guangdong Dongfang PrecisionScience & Technology Co., Ltd. (ZH.J.X.K. [2011] No. 1237), the Company issuedRenminbi-denominated ordinary shares to the public, and was listed on the Shenzhen StockExchange in the same month. The Company started to use the unified social credit code(914406002318313119) in 2016. The Company is headquartered in 2 Qiangshi Road, ShishanTown, Nanhai District, Foshan City, Guangdong Province, China.
Business scope of the Company:
General items: Network and information security software development; manufacturing of specialprinting equipment; 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 pulpingand papermaking; manufacturing of industrial robots; manufacturing of special-purpose equipment(excluding manufacturing of special licensing equipment); manufacturing of industrial controlcomputers 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;environmental protection consulting services; technology intermediary services. (Except for itemssubject to approval according to law, business activities shall be conducted independently inaccordance with the business license) Licensed items: import and export agency; import andexport of goods; import and export of technologies. (Business activities that require approvalaccording to law shall be subject to the approval by relevant authorities. Specific business itemsare 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 on26 March 2021.
The consolidation scope for consolidated financial statements is determined based on the conceptof control. For details of changes during the period, please refer to Note VI.
II. Basis of Preparation of the Financial StatementsThese financial statements have been prepared in accordance with China’s “Accounting Standardsfor Business Enterprises — Basic Standards” promulgated by the Ministry of Finance and thespecific accounting standards, application guidance, interpretations and other relevant regulationsissued or amended thereafter (hereafter collectively referred to as “Accounting Standards forBusiness 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 thebasis of measurement except for some financial instruments. Impairment allowance is madeaccording to relevant regulations if the assets are impaired.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
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 theCompany as at 31 December 2020, and the financial performance and the cash flows for the yearthen ended in accordance with Accounting 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 wereRenminbi. The amounts in the financial statements were denominated in Renminbi yuan, unlessotherwise stated.
The Group’s subsidiaries and associates determine their functional currencies according to themajor economic environment in which they operate the business, and translate into Renminbiwhen preparing the financial statements.
4. Business combination
Business combinations are classified into business combinations involving entities under commoncontrol and business 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 inwhich all of the combining entities are ultimately controlled by the same party or parties bothbefore and after the business combination, and that control is not transitory. The acquirer is theentity that obtains control of the other entities participating in the combination at the combinationdate, and the other entities participating in the combination are the acquirees. The combinationdate is the date on which the combining party effectively obtains control of the parties beingcombined.
Assets and liabilities obtained by combining party in the business combination involving entitiesunder common control (including goodwill arising from the acquisition of the merged party by theultimate controller) are recognised on the basis of their carrying amounts at the combination daterecorded on the financial statements of the ultimate controlling party. The difference between thecarrying amount of the consideration paid for the combination (or aggregate face values of theshares issued) and the carrying amount of the net assets obtained is adjusted to capital surplus. Ifthe capital surplus are not sufficient to absorb the difference, any excess is adjusted to retained
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
earnings.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
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 inwhich all of the combining entities are not ultimately controlled by the same party or parties bothbefore and after the business combination. The acquirer is the entity that obtains control of theother entities participating in the combination at the acquisition date, and the other entitiesparticipating in the combination are the acquirees. The acquisition date is the date on which theacquirer effectively obtains control of the acquiree.
The acquiree’s identifiable assets, liabilities and contingent liabilities are recognised at their fairvalues at the acquisition date.
The excess of the sum of the consideration paid (or equities issued) for business combination andequity interests in the acquiree held prior to the date of acquisition over the share of theattributable net identifiable assets of the acquiree, measured at fair value, was recognised asgoodwill, which is subsequently measured at cost less cumulative impairment loss. In case the fairvalue of the sum of the consideration paid (or equities issued) and equity interests in the acquireheld prior to the date of acquisition is less than the fair value of the share of the attributable netidentifiable 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 equity issued) and the equity interests in the acquiree held prior to the date of acquisition isconducted. If the review indicates that the fair value of the sum of the consideration paid (orequities issued) and equity interests in the acquiree held prior to the date of acquisition is indeedless than the fair value of the share of the attributable net identifiable assets of the acquiree, thedifference is recognised in profit or loss.
Where a business combination not involving entities under common control realized step by stepthrough multiple transactions, the long-term equity investments held by the acquiree prior to thepurchase date shall be remeasured at the fair value of the long-term equity investments on thepurchase date, and the difference between the fair value and their carrying value shall berecognized in profit or loss. For other comprehensive income of the long-term equity investmentsunder the equity method held by the acquiree prior to the purchase date, accounting treatment shallbe 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 incomeand the distribution of profits shall be converted into current profits and losses on the purchasedate. The changes in the fair value of the equity instrument investments held by the acquiree priorto the purchase date and accumulated in other comprehensive income prior to the purchase dateshall be transferred to retained profits and losses.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
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 conceptof control, including the Company and all subsidiaries’ financial statements. Subsidiaries are thoseenterprises or entities which the Company has control over (including enterprises, separablecomponents of investee units and structured entities controlled by the Company).
The financial statements of the subsidiaries are prepared for the same reporting period as theCompany, using consistent accounting policies. Any inconsistent accounting policies have beenadjusted to become consistent with the Company’s accounting policies. All assets, liabilities,equities, revenues, costs and cash flows arising from intercompany transactions are eliminated onconsolidation.
The excess of current loss attributable to non-controlling shareholders of a subsidiary over theirentitlements to the opening balance of equity shall be charged to non-controlling interests.
For subsidiaries obtained through a business combination not involving entities under commoncontrol, the operating results and cash flows of the acquirees will be recognised in consolidatedfinancial statements from the date the Group effectively obtains the control until the date thatcontrol is terminated. When consolidated financial statement is prepared, the subsidiaries’financial statements will be adjusted based on the fair values of the identifiable assets, liabilitiesand contingent liabilities at the acquisition date.
In the event of the change in one or more elements of control as a result of changes in relevantfacts and conditions, 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 equivalentsrepresent short-term highly liquid investments which are readily convertible to known amounts ofcash, and subject to an insignificant risk of changes in value.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
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 functionalcurrency.
Upon initial recognition, foreign currency transactions are translated into the functional currencyusing the average exchange rate of the period in which transactions occur. At the balance sheetdate, foreign currency monetary items are translated using the spot exchange rate at the balancesheet date. The translation differences arising from the settlement and foreign currency monetaryitems are recognised in profit or loss. Also at the balance sheet date, foreign currencynon-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 functionalcurrency. Foreign currency non-monetary items measured at fair value are translated using thespot exchange rate. The differences arising from the above translations are recognised in currentprofit or loss or other comprehensive income according to the nature of foreign currencynon-monetary items.
The Group translates the functional currencies of foreign operations into Renminbi whenpreparing the financial statements. Asset and liability items in the balance sheet are translated atthe spot exchange rate prevailing at the balance sheet date. Equity items, except for retainedearnings, are translated at the spot exchange rates at the date when such items arose. Revenue andexpense items in the income statement are translated using the average exchange rate for theperiods when transactions occur. Translation differences arising from the aforesaid translation offinancial statements denominated in foreign currency shall be recognised as other comprehensiveincome. When foreign operations are disposed, other comprehensive income relating to the foreignoperation is transferred to current profit or loss. Partial disposal shall be recognised on a pro-ratabasis.
Cash flows denominated in foreign currencies and foreign subsidiaries’ cash flows are translatedusing the average exchange rate for the period when cash flows occur. The impact on cash by thefluctuation of exchange rates is presented as a separate line item of reconciliation in the statementof cash flows.
8. Financial instruments
Financial instruments refer to the contracts which give rise to a financial asset in one entity and afinancial liability or equity instrument in another entity.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
8. Financial instruments (cont’d)
Recognition and derecognition of financial instruments
The Group recognises a financial asset or a financial liability when it becomes a party to thecontractual provisions of the financial instrument.
A financial asset (or part of it, or a part of a group of similar financial asset) is derecognised whenone of the following criteria is met, that is, when a financial asset is written off from its accountand balance sheet:
（1） The right of receiving the cash flow generated from the financial asset has expired;
（2） The right of receiving cash flow generated by the financial assets is transferred, or an
obligation of paying the full amount of cash flow received to third parties in a timelymanner has been undertaken under “pass-through” agreements, where (a) substantially allrisks and rewards of the ownership of such type of financial assets have been transferred,or (b) control over such type of financial assets has not been retained even thoughsubstantially all risks and rewards of the ownership of such type of financial assets havebeen neither transferred nor retained.
If the obligation of financial liability has been fulfilled, cancelled or expired, the financial liabilityis derecognised. If the present financial liability is substituted by the same debtee with anotherliability differing in substance, or the terms of the present liability have been substantiallymodified, this substitution or modification is treated as derecognition of a present liability andrecognition of a new liability with any arising differences recognised in profit or loss.
Conventional dealings in financial assets are recognised or derecognised under the trade dayaccounting method. Conventional dealings refer to the receipt or delivery of financial assets withinperiods stipulated by the law and according to usual practices. The trade day is the date on whichthe Group undertakes to buy or sell a financial asset.
Classification and measurement of financial assets
At initial recognition, the Group classifies its financial assets into: financial assets at fair valuethrough profit or loss, financial assets at amortised cost, or financial assets at fair value throughother comprehensive income, according to the Group’s business model for managing financialassets and the contract cash flow characteristics of the financial assets. When and only when theGroup changes its business model of managing financial assets, all relevant financial assetsaffected will be re-classified.
Financial assets are measured at fair value on initial recognition, but if the accounts receivable ornotes receivable generated from the sales of goods or provision of services do not containsignificant financing components or do not consider financing components of no longer than oneyear, the initial measurement will be based on the transaction price.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
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 directlyrecognised in profit or loss; for other financial assets, the relevant transaction costs are recognizedin their initial recognition amount.
The subsequent measurement of financial assets is dependent on its classification:
Debt instruments measured at amortised costFinancial assets fulfilling all of the following conditions are classified as financial assets atamortised cost: the objective of the Group’s business management model in respect of such typeof financial assets is to generate contract cash flow; the contract terms of such type of financialassets provide that cash flow generated on specific dates represents interest payment in relation toprincipal amounts based on outstanding principal amounts only. Interest income from such type offinancial assets are recognised using the effective interest rate method, and any profit or lossarising 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 fairvalue through other comprehensive income: the objective of the Group’s business managementmodel in respect of such type of financial assets is both to generate contract cash flow and to sellsuch type of financial assets; the contract terms of such type of financial assets provide that cashflow generated on specific dates represents interest payment in relation to principal amounts basedon outstanding principal amounts only. Interest income from this type of financial assets isrecognized using the effective interest rate method. Other than interest income, impairment lossand exchange differences which shall be recognised as current profit or loss, other fair valuechanges shall be included in other comprehensive income. Upon derecognition of the financialassets, the cumulative gains or losses previously included in other comprehensive income shall betransferred from other comprehensive income to current profit or loss.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
8. Financial instruments (cont’d)
Classification and measurement of financial assets (cont’d)
Financial assets at fair value through profit or lossOther than financial assets measured at amortised cost and financial assets at fair value throughother comprehensive income as aforementioned, all financial assets are classified as financialassets at fair value through profit or loss, which are subsequently measured at fair value, anychanges of which are recognised in current profit or loss.
Classification and measurement of financial liabilitiesThe Group classifies its financial liabilities at initial recognition: financial liabilities at fair valuethrough profit or loss, and other financial liabilities. For financial liabilities at fair value throughprofit or loss, the relevant transaction costs are directly recognised in profit or loss; for otherfinancial liabilities, the relevant transaction costs are recognised in their initial recognitionamount.
The subsequent measurement of financial liabilities is dependent on its classification:
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 fortrading (comprising derivatives classified as financial liabilities) are subsequently measured at fairvalue and all changes are recognised in current profit or loss.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
8. Financial instruments (cont’d)
Classification and measurement of financial liabilities (cont’d)
Other financial liabilitiesSubsequent to initial recognition, these financial liabilities are carried at amortised cost using theeffective interest method.
Impairment of financial instruments
The Group performs impairment treatment on financial assets at amortised cost, debt instrumentsat fair value through other comprehensive income and contract assets based on expected creditlosses (ECL) and recognises allowances for losses.
For receivables and contract assets that do not contain significant financing components, theGroup adopts a simplified measurement method to measure allowances for losses based on anamount equivalent to the lifetime expected credit losses.
For receivables and contract assets that contain a significant financing component, the Groupadopts a simplified measurement method to measure allowances for losses based on an amountequivalent to the lifetime expected credit losses.
Financial assets other than those measured with simplified valuation methods, the Group evaluatesat each balance sheet date whether its credit risk has significantly increased since initialrecognition. The period during which credit risk has not significantly increased since initialrecognition is considered the first stage, at which the Group shall measure loss allowance based onthe amount of expected credit loss for the next 12 months and shall compute interest incomeaccording to the book balance and effective interest rate; the period during which credit risk hassignificantly increased since initial recognition although no credit impairment has occurred isconsidered the second stage, at which the Group shall measure loss allowance based on theamount of expected credit loss for the entire valid period and shall compute interest incomeaccording to the book balance and effective interest rate; The period during which creditimpairment has occurred after initial recognition is considered the third stage, at which the Groupshall measure loss allowance based on the amount of the lifetime expected credit loss and shallcompute interest income according to the amortised cost and effective interest rate.
The Group estimates the expected credit loss of financial instruments individually and on a groupbasis. The Group considers the credit risk features of different customers and estimates theexpected credit losses of financial instruments based on aging portfolio.
For the Group’s criteria for judging whether credit risks have significantly increased, the definitionof assets subjected to credit impairment, and assumptions underlying the measurement of expectedcredit losses, please refer to Note VIII.3.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
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 contractcash flow of financial assets, the Group directly writes down the book balance of such financialassets.
Financial guarantee contracts
A financial guarantee contract is a contract under which the issuer shall indemnify the contractholder suffering losses with a specified amount in the event that the debtor fails to repay its debt inaccordance with the terms of the debt instrument. Financial guarantee contracts are measured atfair value at initial recognition, other than financial guarantee contracts designated as financialliabilities at fair value through profit or loss, other financial guarantee contracts shall besubsequently measured at the higher of the amount of allowance for expected credit lossdetermined as at the balance sheet date after initial recognition and the amount at initialrecognition less the cumulative amortised amount determined in accordance with revenuerecognition principles.
Derivative financial instruments
Derivative financial instruments are initially recognised at fair value on the date on which aderivative contract is entered into and are subsequently re-measured at fair value. Derivatives arecarried 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 directlyrecognised in current profit or loss.
Transfer of financial assets
If the Group has transferred substantially all the risks and rewards associated with the ownershipof a financial asset to the transferee, the asset should be derecognised. If the Group retainssubstantially all the risks and rewards of ownership of a financial asset, the asset should not bederecognised.
When the Group has neither transferred nor retained substantially all the risks and rewards ofownership of the financial asset, it may either derecognise the financial asset and recognise anyassociated assets and liabilities if control of the financial asset has not been retained; or recognisesthe financial asset to the extent of its continuing involvement in the transferred financial asset andrecognises an associated liability if control has been retained.
Assets formed by the continuing involvement by way of the provision of financial guarantee inrespect of the transferred financial assets shall be recognised as the lower of the carrying value ofthe financial asset and the amount of financial guarantee. The amount of financial guaranteemeans the maximum amount among considerations received to be required for repayment.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
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, processingcosts and other costs. Actual costs of product deliveries are recognised using the weighted averagemethod. Turnover materials include low-value consumables, packaging materials, etc., which areexpensed 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 valuation allowance is made and recognised in profit or loss when the net realisablevalue is lower than cost. If the factors that give rise to the allowance in prior years are not in effectin the current period, as a result that the net realisable value of the inventories is higher than cost,allowance should be reversed within the impaired cost, and recognised in profit or loss.
Net realisable value is determined based on the estimated selling price in the ordinary course ofbusiness, less the estimated costs to completion and estimated costs necessary to make the sale andrelated taxes. Valuation allowances for raw materials are established by category, and those forfinished goods by individual item. For inventories that relate to products produced and sold in thesame region, have the same or similar ultimate purpose, and are difficult to separate inmeasurement, valuation allowances are established on a combined basis.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
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 andassociates.
Long-term equity investments were recorded at initial investment cost on acquisition. Forlong-term equity investments acquired through the business combination of entities undercommon control, the initial investment cost shall be the share of carrying value of the equity of themerged party at the date of combination as stated in the consolidated financial statements of theultimate controlling party. Any difference between the initial investment cost and the carryingvalue of the consideration for the combination shall be dealt with by adjusting the capitalsurplus(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 comprehensiveincome prior to the date of combination shall be dealt with on the same basis as if the relevantassets or liabilities were disposed of directly by the investee. Equity recognised as a result ofchanges in equity other than the set-off of profit and loss, other comprehensive income and profitallocation of the investee shall be transferred to current profit and loss upon disposal of theinvestment. Items which remain long-term equity investments after the disposal shall be accountedfor on a pro-rata basis, while items reclassified as financial instruments following the disposalshall be accounted for in full. For long-term equity investments acquired through the businesscombination of entities not under common control, the initial investment cost shall be the cost ofcombination (for business combinations of entities not under common control achieved in stagesthrough multiple transactions, the initial investment cost shall be the sum of the carrying value ofthe equity investment in the acquired party held at the date of acquisition and new investment costincurred 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 thefair value of equity securities issued. Upon disposal of the investment, other comprehensiveincome recognised under the equity method held prior to the date of acquisition shall be dealt withon the same basis as if the relevant assets or liabilities were disposed of directly by the investee.Equity recognised as a result of changes in equity other than the set-off of profit and loss, othercomprehensive income and profit allocation of the investee shall be transferred to current profitand 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 financialinstruments following the disposal shall be accounted for in full. The initial investment cost oflong-term equity investments other than those acquired through business combination shall berecognised in accordance with the following: for those acquired by way of cash payments, theinitial investment cost shall be the consideration actually paid plus expenses, tax amounts andother necessary outgoings directly related to the acquisition of the long-term equity investments.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 equityinvestments in investees over which the Company exercises control. Control is defined as thepower exercisable over the investee, the entitlement to variable return through involvement in theactivities of the investee and the ability to influence the amount of return using the power over theinvestee.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
10. Long-term equity investments (cont’d)
When the cost method is used, long-term equity investments are measured at initial cost onacquisition. When additional investments are made or investments are recouped, the cost oflongterm equity investments shall be adjusted. Cash dividend or profit distribution declared by theinvestee shall be recognised as investment income for the period.
The equity method is used to account for long-term equity investments when the Group can jointlycontrol or has significant influence over the invested entity. Joint control is the contractuallyagreed sharing of control of an arrangement, which exists only when decisions about the relevantactivities require the unanimous consent of the parties sharing control. Significant influence meanshaving the authority to take part in the decision over the financial and operational policies but notthe authority to control or jointly control with other parties the formulation of such policies.
Under the equity method, any excess of the initial investment cost over the Company’s share ofthe net fair value of the investment’s identifiable assets and liabilities is included in the initialinvestment cost of the long-term equity investment. When the carrying amount of the investmentis less than the Company’s share of the fair value of the investment’s identifiable net assets, thedifference is recognised in profit or loss of the current period and debited to long-term equityinvestments.
Under the equity method, after the long-term equity investments are acquired, investment gains orlosses and other comprehensive income are recognised according to the entitled share of net profitor loss and other comprehensive income of the investee and the carrying amount of the long-termequity investment is adjusted accordingly. When recognising the Group’s share of the net profit orloss of the invested entity, the Group makes adjustments based on fair values of the investees’identifiable assets and liabilities at the acquisition date in accordance with the Group’s accountingpolicy 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 frominter-group transactions deemed as asset impairment loss shall be fully recognised), provided thatinvested or sold assets constituting businesses shall be excluded. When the invested enterprisedeclares profit distribution or cash dividends, the carrying amount of investment is adjusted downby the Group’s share of the profit distribution and dividends. The Group shall derecognize itsshare of the losses of the investee after the long-term equity investment together with anylong-term interests that in substance forms part of the Group’s net investment in the investee arereduced 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 otherchanges in owner’s equity of the investees (other than the net-off of net profits or losses, othercomprehensive income and profit distribution of the investee), and includes the correspondingadjustment in equity.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
10. Long-term equity investments (cont’d)
On disposal of the long-term equity investments, the difference between carrying value and marketprice is recognised in profit or loss for the current period. For long-term equity investments underequity method, when the use of the equity method is discontinued, other comprehensive incomepreviously accounted for under the equity method shall be dealt with on the same basis as if therelevant assets or liabilities were disposed of directly by the investee. Equity recognised as a result
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
of changes in equity other than the net-off of profit and loss, other comprehensive income andprofit distribution of the investee shall be transferred in full to current profit and loss. If the equitymethod 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 ofdirectly by the investee and transferred to current profit and loss on a pro-rata basis. Equityrecognised as a result of changes in shareholders’ equity other than the net-off of profit and loss,other comprehensive income and profit distribution of the investee shall be transferred to currentprofit and loss on a pro-rata basis.
11. Fixed assets
A fixed asset is recognised when, and only when, it is probable that future economic benefits thatare associated with the fixed asset will flow to the Group and the cost can be measured reliably.Subsequent expenditures related to a fixed asset are recognised in the carrying amount of the fixedasset if the above recognition criteria are met, and the carrying value of the replaced part isderecognised; otherwise, those expenditures are recognised in profit or loss as incurred.
Fixed assets are initially recognised at cost. Cost of purchased fixed assets includes purchasingprice, relevant taxes, and any directly attributable expenditure for bringing the asset to workingconditions for its intended use.
Except for those incurred by using the accrued expenses for safety production, fixed assets aredepreciated on a straight-line basis, and the respective estimated useful lives, estimated residualvalue ratios and annual depreciation 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% |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
11. Fixed assets (cont’d)
The Group reviews, at least at each year end, useful lives, estimated residual values anddepreciation methods of fixed assets and makes adjustments if necessary.
12. Construction in progress
Construction in progress is measured at the actual construction expenditures, including necessaryproject work expenses incurred during the period while construction is in progress, and otherrelated fees.Construction in progress is transferred into fixed assets when it is ready for its intended use.
13. Borrowing costs
Borrowing costs are interest and other costs incurred by the Group in connection with theborrowings of funds, which include borrowing interest, amortisation of discount or premium ondebt, other supplementary costs and certain foreign exchange differences that occurred from theborrowings in foreign currencies.
14. Intangible assets
Intangible assets are recognised only when it is probable that economic benefits relating to suchintangible assets would flow into the Group and that their cost can be reliably measured.Intangible assets are initially measured at cost, provided that intangible assets which are acquiredin a business combination not under common control and whose fair value can be reliablymeasured shall be separately recognised as intangible assets at fair value.Useful life of an intangible asset is determined by the period over which it is expected to bringeconomic benefits to the Group. For an intangible asset with no foreseeable limit to the periodover which it is expected to bring economic benefits to the Group, it is treated as an intangibleasset 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 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
14. Intangible assets (cont’d)
Property in land acquired by the Group is normally accounted for as intangible assets. Property inland and buildings relating to plants constructed by the Group are accounted for as intangibleassets and fixed assets, respectively. The costs for acquiring land and buildings are apportionedbetween the property in land and buildings, or accounted for as fixed assets if they cannot beapportioned.
The straight-line amortisation method is used during the useful life period for intangible assetswith definite useful lives. The Group reviews, at least at each year end, useful lives andamortization method for intangible assets with definite lives and makes adjustment whennecessary.
For intangible assets with indefinite useful life, impairment tests shall be conducted annuallyregardless of whether there are indications of impairment. Such intangible assets shall not beamortized and their useful life shall be reviewed during each accounting period. If there isevidence suggesting that their useful life is limited, accounting treatment will be performedaccording 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 hasa permanent term, and the Company believes that the land ownership will be used and will bringexpected inflows of economic benefits to the Company in the foreseeable future, so its useful lifeis regarded as indefinite. The trademarks registered by subsidiaries Fosber Group and FosberAmerica, Inc. ("Fosber America") have a useful life in accordance with the law, but at theexpiration of the protection period, Fosber Group and Fosber America can apply for an extensionat low service charges, so the Company will benefit from the above trademarks in the long term.Thus, the Company recognized the trademark use right as intangible assets with indefinite usefullife. The useful life of intangible assets with indefinite useful life will be reviewed at the end ofeach year. After review, the useful life of the above intangible assets is still uncertain.
The Group classifies the expenses for internal research and development as research costs anddevelopment costs. All research costs are charged to the current profit or loss as incurred.Expenditure incurred on projects to develop new products is capitalised and deferred only whenthe Group can demonstrate the technical feasibility of completing the intangible asset so that itwill be available for use or sale, its intention to complete and its ability to use or sell the asset,how the asset will generate future economic benefits (including demonstration that the productderived from the intangible asset or the intangible asset itself will be marketable or, in the case ofinternal use, the usefulness of the intangible asset as such), the availability of technical andfinancial resources to complete the project and procure the use or sale of the intangible asset, andthe ability to measure reliably the expenditure during the development. Development costs whichdo not meet these criteria is recognized in profit or loss when incurred.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
15. Impairment
The Group assesses impairment of assets other than inventories, contract assets and assets relatedto contract costs, 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-financialasset may be impaired. If any such indication exists, the Group makes an estimate of the asset’srecoverable amount and performs a test of impairment for the asset. For goodwill generated frombusiness consolidation and intangible assets with indefinite useful lives, tests for impairment areperformed at least annually regardless of whether there are indications of impairment. Intangibleassets which are not yet ready for use are also tested annually for impairment.
The recoverable amount is the higher of the asset’s fair value less costs to sell and its present valueof estimated future cash flows. The Group estimates recoverable value for individual assets. Whenit is difficult to estimate individually, the recoverable value of the cash generating units which theasset belongs to will be estimated. The definition of cash generating units is determined on thebasis of whether the cash generating units generate cash flows which are largely independent ofthose from other cash generating units.
Where the carrying amount of an asset or a cash generating unit exceeds its recoverable amount,the asset or cash generating unit is considered impaired and is written down to its recoverableamount. The difference between the carrying amount and recoverable amount is recognised inprofit or loss and allowance for impairment is made accordingly.
In connection with impairment tests for goodwill, the carrying value of goodwill arising frombusiness combination is allocated to relevant cash generating units (“CGU”) from the date ofacquisition on a reasonable basis. If it is difficult to allocate such goodwill to a relevant CGU, itshould be allocated to a relevant CGU group. A relevant CGU or CGU group is defined as onewhich can benefit from the synergies of the business combination and is not larger than thereporting segments determined by the Group.
In connection with impairment tests for CGUs or CGU groups that comprise goodwill, whereindications of impairment exists in a CGU or CGU group related to goodwill, impairment testsshould be performed first on CGUs or CGU groups that do not comprise goodwill and recognizeimpairment loss after estimating the recoverable amount. Then impairment tests on CGUs or CGUgroups that comprise goodwill should be performed and the carrying value and recoverableamount should be compared. Where the recoverable amount is lower than the carrying value, theimpairment loss should first be offset against the carrying value of the goodwill allocated to CGUsor CGU groups and then against assets in the CGUs or CGU groups other than goodwill inproportion to the weighting of these assets.
Previously recognised impairment losses are not reversed in subsequent periods.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
16. Long-term prepaid expenses
Long-term prepaid expenses are amortized using the straight-line method, with the amortizationperiods as follows:
| Amortization period | |||||
| Decoration expenditures | 3-5 years | ||||
| Amortization of moulds | 3 years | ||||
| Other expenditures | 3-5 years |
17. Employee benefits
Employee benefits include all kinds of rewards or compensation incurred by the Group inexchange for service rendered by employees or in the termination of employment. Employeebenefits include short-term benefits, retirement benefits, and other long-term employees’ benefits.Benefits provided by the Group to the spouses, children and dependents of employees and familiesof deceased employees are also a part of employee benefits.
Short-term benefits
For accounting periods during which services are rendered by employees, short-term benefits thatwill incur is recognised 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 schemesmanaged by the local government. The contribution costs are charged as asset cost or to profit orloss when incurred.
Retirement benefits (defined benefit schemes)
The Group operates a defined benefit pension scheme, which requires payments to anindependently operated fund. No funds have been injected into the scheme. The cost of benefitsprovided under the defined benefit scheme is calculated using the expected benefit accrual unitapproach.
Remeasurement arising from defined benefit pension schemes, including actuarial gains or losses,
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
changes in the asset cap effect (deducting amounts included in net interest on net liabilities of thedefined benefit schemes) and return on scheme assets (deducting amounts included in net intereston net liabilities of the defined benefit schemes) are instantly recognised in the balance sheet andcharged to equity through other comprehensive income for the period during which it is incurred.It will not be reversed to profit and loss in subsequent periods.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
17. Employee benefits (cont’d)
Retirement benefits (defined benefit schemes) (cont’d)
Previous service costs are recognised as current expenses when: the defined benefit scheme isrevised, or relevant restructuring costs are recognised by the Group, whichever earlier.
Net interest is arrived at by multiplying net liabilities or net assets of defined benefits with adiscount rate. Changes in net obligations of defined benefits are recognised as cost of sales,administrative expenses, R&D expenses, selling expenses and finance costs in the incomestatement. Service costs included current services costs, past service costs and settlement of profitor loss. Net interest included interest income from scheme assets, interest expenses for schemeobligations and interest of the asset cap effect.
18. Provisions
Other than contingent consideration and assumed contingent liabilities in a business combinationnot involving entities under common control, the Group recognises as provision an obligation thatis related to contingent matters when all of the following criteria are fulfilled:
（1） the obligation is a present obligation of the Group;
（2） the obligation would probably result in an outflow of economic benefits from the Group;
（3） the obligation could be reliably measured.
Provisions are initially measured according to the best estimate of expenses on fulfilling thecurrent liabilities, in connection with the risk, uncertainty and timing value of the currency. Thecarrying value of the provisions would be reassessed on every balance sheet date. The carryingvalue will be adjusted to the best estimated value if there is certain evidence that the currentcarrying value is not the best estimate.
The contingent liabilities obtained from a business combination not involving entities undercommon control shall be measured at fair value at the time of initial recognition. After the initialrecognition, according to the amount confirmed by provisions and the balance of the initialrecognition amount after deducting the accumulated amortization determined by the revenuerecognition principle, the higher of the two shall prevail for subsequent measurements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
19. Share-based payments
Share-based payments can be distinguished into equity-settled share-based payments andcash-settled share-based payments. Equity-settled share-based payments are transactions of theGroup settled through the payment of shares or other equity instruments in consideration forreceiving services.
Equity-settled share-based payments made in exchange for services rendered by employees aremeasured at the fair value of equity instruments granted to employees. Instruments which arevested immediately upon the grant are charged to relevant costs or expenses at the fair value onthe date of grant and the capital surplus are credited accordingly. Instruments of which vesting isconditional upon completion of services or fulfillment of performance conditions are measured byrecognising services rendered during the period in relevant costs or expenses and crediting thecapital surplus accordingly at the fair value on the date of grant according to the best estimates ofthe 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 closingprice of the Company’s stock on the date of grant.
No expenses are recognised for awards that do not ultimately vest due to non-fulfillment ofnonmarket conditions and/or vesting conditions. For the market or non-vesting condition under theshare-based payments agreement, it should be treated as vesting irrespective of whether or not themarket or non-vesting condition is satisfied, provided that other performance condition and/orvesting conditions are satisfied.
20. Revenue generating from contracts with customers
The Group recognises its revenue upon the fulfilment of contractual performance obligationsunder a contract, namely, when the customer obtains control over the relevant products or services.The acquisition control over relevant products or services shall mean the ability to direct the use ofthe products or the provision of the services and receive substantially all economic benefitsderived therefrom.
Contract for the sales of productsThe product sales contract between the Group and its customers typically includes differentcontractual performance obligations for the transfer of products and the rendering of services.With respect to the sales of products, the Group typically recognises its revenue at the time whenthe customer takes control over the products, taking into account the following factors: theacquisition of the current right to receive payments for the products, the transfer of major risks andrewards of ownership, the transfer of the legal title of the products, the transfer of the physicalassets 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 performanceobligations for installation services. As the customer is able to forthwith obtain and consume the
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
economic benefits brought by the Group’s contractual performance when the Group performs acontract, the Group considers such contractual performance obligations to be obligationsperformed over a period of time, and revenue shall be recognised on each balance sheet dateaccording to the progress of installation.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
20. Revenue generating from contracts with customers (cont’d)
Significant financing componentWhere a contract contains a significant financing component, the Group determines transactionprices based on amounts payable assumed to be settled in cash by customers immediately upon theacquisition of control over the products or services. The difference between such transaction priceand contract consideration is amortised over the contract period using the effective interest methodbased on a ratio that discounts the nominal contractual consideration to the current selling price ofthe products or services. The Group shall not give consideration to any significant financingcomponent in a contract if the gap between the customer’s acquisition of control over the productsor 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 andlaws and regulations. The accounting treatment of quality assurance in the form of warrantyassuring customers products sold are in compliance with required standards is set out in NoteIII.18. Where the Group provides a service warranty for a standalone service in addition to theassurance of compliance of products with required standards, such warranty is treated as astandalone contractual performance obligation, and a portion of the transaction price shall beallocated 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 standaloneservice in addition to providing guarantee to customers that all sold goods are in compliance withrequired standards, the Group will consider whether or not such warranty is a statutoryrequirement, the term of the warranty and the nature of the Group’s undertaking to perform itsobligations.
21. Contract assets and contract liabilities
The Group presents contract assets or contract liabilities on the balance sheet according to therelationship between contractual performance obligations and customer payments. Contract assetsand contract liabilities under the same contract are offset against each other and presented in thenet amount.
Contract assetsContract assets are the right to receive consideration following the transfer of products or servicesto customers which is dependent on factors other than the passage of time.
For details of the Group’s determination and accounting treatment of expected credit losses fromcontract assets, please refer to Note III.8.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
Contract liabilitiesContract liabilities are the obligation to pass products or services to customers in connection withcustomer consideration received or receivable, for example, amounts received prior to the transferof the promised products or services.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
22. Assets relating to contract cost
The Group’s assets relating to contract costs include the contract acquisition costs and contractperformance costs.
Where the Group expects the incremental costs for acquiring a contract to be recoverable, suchcontract acquisition costs are recognised as an asset (unless the amortisation period of the asset isnot more than 1 year).
Costs incurred by the Group for the performance of a contract are recognised as an asset ascontract performance costs if they do not fall under the scope of the relevant standards forinventories, fixed assets or intangible assets but meet all the following conditions:
（1） 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 asspecifically stipulated, and otherwise incurred solely in connection with the contract;
（2） they will increase the resources to be utilised in the Company’s future performance of its
contractual obligations;
（3） they are expected to be recoverable.
23 Government grantsGovernment grants are recognised when there is reasonable assurance that the grant will bereceived and all attaching conditions will be complied with. The grant is measured as the amountreceived or receivable where it takes the form of a cash asset, or at fair value where it is not a cashasset. Where the fair value cannot be reliably obtained, it should be measured at the nominalvalue.
In accordance with the stipulations of the government instruments, government grants appliedtowards acquisition or the formation of long-term assets in other manners are asset-relatedgovernment grants; the instruments unspecifically refer to the exercise of judgement based on thebasic conditions for receiving the asset-related grant applied towards or the formation of long-termassets in other manners. All other grants are recognised as income-related government grants.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
23. Government grants (cont’d)
Government grants relating to income and applied to make up for related costs or losses in futureperiods shall be recognised as deferred income, and shall be recognised in profit or loss of theperiod for which related costs or loss are recognised. Government grants specifically applied forthe reimbursement of incurred related costs and expenses shall be directly recognised in profit orloss.
Government grants relating to assets shall be recognised as deferred income and credited to profitor loss over the useful life of the asset concerned by reasonable and systematic instalments(provided that government grants measured at nominal value shall be directly recognised in profitor loss). Where the asset concerned is disposed of, transferred, retired or damaged prior to the endof its useful life, the balance of the deferred income yet to be allocated shall be transferred to“asset disposal” under current profit or loss.
24. Income tax
Income taxes include current and deferred tax. Income taxes are recognised in current profit orloss as income tax expenses or income tax benefit, except for the adjustment made for goodwill ina business combination and income 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, theGroup measures them at the amount expected to be paid or recovered according to the relevanttaxation regulations.
The Group recognises deferred tax assets and liabilities based on temporary differences using thebalance sheet liability method. Temporary differences are differences between the carrying amountof assets or liabilities in the balance sheet and their tax base on the balance sheet date. Temporarydifferences also include the differences between the carrying values and tax bases of items notrecognised as assets or liabilities where the tax base can be calculated according to the relevant taxregulations.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
（1） where the taxable temporary difference arises from goodwill or the initial recognition of an
asset or liability in a transaction that is not a business combination and, at the time of thetransaction, affects neither the accounting profit nor taxable profit or loss.
（2） 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 temporarydifferences can be controlled and it is probable that the temporary differences will notreverse in the foreseeable future.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
24. Income tax (cont’d)
Deferred tax assets are recognised for all deductible temporary differences, carryforward ofunused tax credits and unused tax losses, to the extent that it is probable that taxable profit will beavailable against which the deductible temporary differences, and the carryforward of unused taxcredits and unused tax losses can be utilised except:
（1） 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 nortaxable profit or loss.
（2） deductible temporary differences associated with investments in subsidiaries, associates
and interests in joint ventures are recognised when all following conditions are met: it isprobable that the temporary differences will reverse in the foreseeable future, it is probablethat taxable profit against the deductible temporary differences will be available.
As at balance sheet date, deferred tax assets and liabilities are measured in accordance withrelevant tax laws at the tax rates that are expected to apply to the period when the asset is realisedor the liability is settled, and reflects the tax consequences that would follow the manner in whichthe Group expects, at the balance sheet date, to recover the assets or settle the carrying amount ofits assets and liabilities.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period andreduced to the extent that it is no longer probable that sufficient taxable profit will be available toallow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets arereassessed at the end of each reporting period and are recognised to the extent that it has becomeprobable that sufficient taxable profit will be available to allow all or part of the deferred tax assetto be recovered.
Deferred tax assets and liabilities are offset and presented as a net amount if all of the followingconditions are met: the Group has the legal right to set off the current income tax assets andliabilities and the deferred tax assets and liabilities relate to income taxes levied by the sametaxation authority on either the same taxable entity or different taxable entities, provided that thetaxable entity concerned intends either to settle current income tax liabilities and assets on a netbasis, or to realise the assets and settle the liabilities simultaneously, in each future period in whichsignificant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
25. Leases
A lease that transfers substantially all the risks and rewards incidental to ownership of an asset is afinance lease. And all the other leases are operating leases.
As a lessee of operating leases
Rental expenses of operating leases is charged to relevant asset cost or current profit or loss overthe respective periods during the lease term on a straight-line basis, while contingent rental ischarged to profit or loss as and when incurred.
26. Share repurchase
The consideration and transaction costs paid to repurchase equity instruments are charged againstowner’s equity. Except for share-based payments, the issue (including refinancing), repurchase,disposal or retirement of the Company’s own equity instruments are accounted for as changes inequity.
27. Profit distribution
The Company’s cash dividends are recognized as liabilities upon the approval by the generalmeeting.
28. Expenses for safety production
The expenses for safety production set side as stipulated shall be included in the cost of relevantproducts or current profits and losses, and included in the special reserve at the same time. Whensuch expenses are used, accounting treatment will be performed according to whether fixed assetsare formed. If identified as expense expenditures, the special reserve will be written down directly;if fixed assets are formed, the expenses incurred will be collected, fixed assets will be recognized
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
when they reach a predetermined usable state, and the equivalent amount of special reserve will bewritten down and the equivalent accumulated depreciation will be recognized.
29. Fair value measurement
At each balance sheet date, the Group measures the fair value of derivative financial instruments.Fair value means the price receivable from the disposal of an asset or required to be paid for thetransfer of a liability in an orderly transaction incurred by market participants on the measurementdate. The Group measures assets or liabilities at fair value with the assumption that the orderlytransaction of asset disposal or the transfer of liabilities takes place in the major market for therelevant assets or liabilities. Where there is no major market, the Group assumes such transactiontakes place in the most favourable market for the relevant assets or liabilities. The major market(or most favourable market) is a trading market which the Group has access to on themeasurement date. The Group adopts assumptions used by market participants when they price theasset or liability with the aim of maximising its economic benefits.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
29. Fair value measurement (cont’d)
The Group adopts valuation techniques that are appropriate in the current circumstances andsupported by sufficient usable data and other information. Observable input will be used first andforemost. Unobservable input will only be used when it is not possible or practicable to obtainobservable input.
The fair value hierarchy to which an asset or liability measured or disclosed in the financialstatements at fair value will be determined on the basis of the lowest level of input which issignificant for the fair value measurement as a whole. Input at the first level represents unadjustedquoted prices in an active market for the acquisition of the same asset or liability on themeasurement date. Input at the second level represents directly or indirectly observable assets orliabilities apart from input at the first level. Input at the third level represents unobservable inputfor the asset or liability.
At each balance sheet date, the Group reassesses assets and liabilities measured at fair value on anongoing basis recognised in the financial statements to determine whether the level of fair valuemeasurement should be changed.
30. Significant accounting judgements and estimates
The preparation of financial statements requires judgement and estimation of the management.Such judgement and estimation will affect the reported amounts of revenue, expenses, assets andliabilities and the disclosure of contingent liabilities as at the balance sheet date. However, theconsequence arising from the uncertain nature of such estimation may result in significantadjustment to the carrying value of the asset or liability affected in the future.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
Judgement
In the process of applying the Group’s accounting policies, management has made the followingjudgements, which have the most significant effect on the amounts recognised in the financialstatements:
Determination of standalone contractual performance obligationsThe intelligent packaging equipment (printers and corrugators) business of the Group includes twokinds of service commitments, i.e. the sale and installation services of machinery. As the customercan benefit from the individual use of the two kinds of products or services or their use togetherwith other readily available resources and such product or service commitments are distinctlyseparable from other products or service commitments, the aforesaid product or servicecommitments constitute standalone contractual performance obligations respectively.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
30. 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 businessmodel for managing the assets. Factors considered by the Group in judging the business modelinclude enterprise valuation, the method of reporting the results of financial assets to keymanagement members, risks affecting the results of financial assets and the method for managingsuch risks, as well as the form of remuneration received by the management personnel of thebusinesses concerned. In assessing whether the business model is aimed at receiving contract cashflow, 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 thecontract cash flow of such type of financial assets. Judgement is required to determine whether thecontract cash flow represents interest payment in relation to principal amounts based onoutstanding principal amounts only, including judgement of whether it is significantly differentfrom the benchmark cash flow when assessing modifications to the time value of currencies, andjudgement of whether the fair value of early repayment features is minimal where the financialassets include such early repayment features.
Estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at thebalance sheet date, that have a significant risk of causing a material adjustment to the carryingamounts of assets and liabilities within 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 financialinstruments and contract assets. The application of the expected credit loss model requiressignificant judgement and estimates and the consideration of all reasonable and soundly basedinformation, including forward-looking information. In making such judgement and estimates, the
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
Group estimates the projected movements of the debtor’s credit risk according to past repaymentrecords, economic policies, macro-economic indicators and industry risks. Different estimates mayaffect 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)
30. 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-currentasset other than financial assets may be impaired. For an intangible asset with an indefinite usefullife, in addition to the annual impairment test, it is also tested when there is an indication that itmay be impaired. Non-current assets other than financial assets are tested for impairment whenthere is an indication that the carrying amount is irrecoverable. Where the carrying amount of anasset or an asset group exceeds its recoverable amount—the higher of the asset or asset group’sfair 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 asimilar asset’s sales contract in a fair transaction or the observable market price less theincremental cost directly attributable to the disposal of the asset. When estimating the presentvalue of future cash flows, the management must choose a proper discount rate.
Impairment of goodwillGoodwill must be tested for impairment at least annually. It requires estimating the present valueof future cash flows of an asset group or asset group portfolio allocated with goodwill. Whenestimating the present value of future cash flows, the Group needs to estimate future cash flowsgenerating from the asset group or asset group portfolio, and at the same time choose a properdiscount rate to determine the present value of future cash flows. For details, see Note V.18.
Deferred tax assetsDeferred tax assets are recognised for all unused tax losses, to the extent that it is likely thattaxable profit will be available to utilise these unused tax losses. Significant judgments are neededfrom management to estimate the timing and amount of taxable profit in the future, with taxplanning strategies, to determine the amount of the deferred tax assets that should be recognised.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
31. Changes to accounting policies
Changes to accounting policies
New revenue standard
In 2017, the Ministry of Finance issued the revised “CAS No. 14—Revenue” (hereinafter, the“New Revenue Standard”. The Group has adopted the New Revenue Standard since 1 January2020. According to the transitional requirements, data of the comparable periods shall not beadjusted, and the difference arising from the adoption of the new standard on the first day and theexisting standard is retrospectively adjusted to the opening retained earnings of the ReportingPeriod.
The New Revenue Standard provides a new revenue recognition model for contracts withcustomers. According to the New Revenue Standard, how revenue is recognized shall reflect theentity’s model of transferring products or rendering services to customers, and the amount ofrevenue shall reflect the amount of consideration that the entity is expected to receive fortransferring products or rendering services to customers. Meanwhile, the New Revenue Standardregulates judgments and estimates needed in every link of revenue recognition. The Group onlyadjusts cumulative effects of outstanding contracts as at 1 January 2020. For contract changesprior to that date, the Group adopts a simplified approach to identify fulfilled and outstandingcontractual performance obligations, determine the transaction price and allocate the transactionprice among the fulfilled and outstanding contractual performance obligations according to theultimate arranges of the changed contract.
The effects of the adoption of the New Revenue Standard on the financial statements of 2020 areas follows:
Consolidated balance sheet
| Carrying amount | As per the former standard | Effect | |||||||
| Accounts receivable | 469,635,423.58 | 501,922,048.78 | (32,286,625.20 | ) | |||||
| Contract assets | 29,504,693.97 | - | 29,504,693.97 | ||||||
| Receipts in advance | - | 370,415,490.95 | (370,415,490.95 | ) | |||||
| Contract liabilities | 362,792,713.35 | - | 362,792,713.35 | ||||||
| Other payables | 61,940,155.84 | 84,442,324.93 | (2,698,473.29 | ) | |||||
| Other current liabilities | 61,781,703.66 | 54,317,378.24 | 7,622,777.60 | ||||||
| Retained earnings | (891,492,837.06 | ) | (891,409,379.12 | ) | (83,457.94 | ) |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
31. Changes to accounting policies (cont’d)
New revenue standard (cont’d)Consolidated income statement
| Carrying amount | As per the former standard | Effect | |||||||
| Revenue from principal operations | 2,916,270,143.13 | 2,919,052,074.36 | (2,781,931.23 | ) | |||||
| Costs of principal operations | 2,099,148,826.36 | 2,031,759,870.75 | 67,388,955.61 | ||||||
| Selling expenses | 181,549,459.69 | 251,636,888.59 | (70,087,428.90 | ) | |||||
| Net profit | 397,097,320.99 | 397,180,778.93 | (83,457.94 | ) |
Company balance sheet
| Carrying amount | As per the former standard | Effect | |||||||
| Accounts receivable | 153,517,438.90 | 157,987,612.15 | (4,470,173.25 | ) | |||||
| Contract assets | 4,470,173.25 | - | 4,470,173.25 | ||||||
| Receipts in advance | - | 23,484,423.45 | (23,484,423.45 | ) | |||||
| Contract liabilities | 22,116,154.74 | - | 22,116,154.74 | ||||||
| Other current liabilities | 2,253,619.05 | 885,350.34 | 1,368,268.71 |
Company income statement
| Carrying amount | As per the former standard | Effect | |||||||
| Costs of principal operations | 216,587,418.89 | 214,705,961.41 | 1,881,457.48 | ||||||
| Selling expenses | 23,483,006.93 | 25,364,464.41 | (1,881,457.48 | ) |
The Group sees its intelligent packaging equipment business as a whole as a commitment ofselling products. On 1 January 2020, according to the Group’s analysis, this business includesproduct and service commitments of selling products and rendering installation services. As thecustomer can benefit from the individual use of the product and service commitments or their usetogether with other readily available resources and such product and service commitments aredistinctly separable from other products or service commitments, the aforesaid product or servicecommitments constitute standalone contractual performance obligations respectively. The saidchanges result in a decrease of RMB2,781,931.23 in operating revenue, an increase ofRMB67,388,955.61 in cost of sales, and a decrease of RMB70,087,428.90 in selling expenses.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
31. Changes to accounting policies (cont’d)
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 afterdeducting the input tax which is allowed to be deducted in thecurrent period.
City maintenanceand construction tax – Levied at 7% of the turnover tax actually paid
Property tax – Ad valorem tax: levied at 1.2% of the remaining value after
deducting 30% from the original value of the property; Tax leviedfrom rent: levied at 12% of the rental income.
Land use tax – RMB3/square meter
Corporate income tax – Corporate income tax shall be levied at 25% of the taxable income.
Except for the Company and subsidiaries enjoying tax concessions,other domestic subsidiaries shall calculate and pay the businessincome taxes at 25% of the taxable income; subsidiaries registeredabroad shall apply the corporate income tax rate as required by thelocal tax law.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
IV. Taxation (cont’d)
1. Principal tax items and tax rates (cont’d)
2.Taxpayers with different corporate income tax rates within the Group are as follows:
| Serial No. | Company name | Income tax rate |
| 1 | Dongfang Precision | 15% |
| 2 | Dong Fang Precision (HK) Limited（“Dongfang Precision (HK)”） | 16.5% |
| 3 | Dong Fang Precision (Netherland) Cooperatief U.A.（ “Dongfang Precision (Netherland)”） | 20% |
| 4 | Fosber S.p.A.（“Fosber”） | 24% |
| 5 | Fosber America, Inc.（ “Fosber America”） | 21% |
| 6 | Fosber Machinery (Tianjin) Co., Ltd.（ “Fosber Tianjin”） | 25% |
| 7 | Suzhou Shunyi Investment Co., Ltd.（ “Shunyi Investment”） | 25% |
| 8 | EDF Europe s.r.l.（ “EDF”） | 24% |
| 9 | Tiru?a Group Industrial, S.L.（ “Tiru?a”） | 28% |
| 10 | Tiru?a S.L.U. | 28% |
| 11 | Tratatamientos Industriales Tiru?a S.A.U. | 28% |
| 12 | Tiru?a France SARL | 15% |
| 13 | Tiru?a UK Ltd | 19% |
| 14 | Tiru?a America inc. | 21% |
2. Tax concessions
In November 2017, the Company passed the high-tech enterprise review by the Department ofScience and Technology of Guangdong Province, Department of Finance of Guangdong Province,Guangdong Provincial Tax Service of State Taxation Administration and Guangdong ProvincialLocal Taxation Bureau and obtained a High-tech Enterprise Certificate (certificate no.:
GR201744002995) jointly issued by the above authorities, with a validity of three years.Corporate income tax was levied at a reduced rate of 15% during the validity period. In 2020, theCompany went through the procedures for high-tech enterprise re-identification and passed theno-objection identification (certificate no.: GR202044007667) on 9 December 2020, so thepreferential tax rate of 15% was applicable to the Company's business income tax in 2020.
Suzhou Parsun Power Machine Co., Ltd. ("Parsun Power"), a subsidiary of the Company, passedthe high-tech enterprise review by the Department of Science and Technology of Jiangsu Province,Department of Finance of Jiangsu Province and Jiangsu Provincial Tax Service of State TaxationAdministration on 7 November 2019 and obtained a High-tech Enterprise Certificate (certificateno.: GR201932000339) jointly issued by the above authorities, with a validity of three years,during which the subsidiary paid the corporate income tax at a reduced rate of 15%.
Guangdong Fosber Intelligent Equipment Co., Ltd. ("Fosber Asia"), a subsidiary of the Company,passed the high-tech enterprise review by the Department of Science and Technology ofGuangdong Province, Department of Finance of Guangdong Province and Guangdong ProvincialTax Service of State Taxation Administration on 28 November 2018 and obtained a High-techEnterprise Certificate (certificate no.: GR201844003599) jointly issued by the above authorities,with a validity of three years, during which the subsidiary paid the corporate income tax at a
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
reduced rate of 15%.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
1. Cash and bank balances
| 2020 | 2019 | |||||
| Cash on hand | 217,540.96 | 249,951.68 | ||||
| Cash at banks | 860,383,695.82 | 2,224,849,135.20 | ||||
| Other cash balances | 25,109,817.10 | 131,604,347.72 | ||||
| 885,711,053.88 | 2,356,703,434.60 |
| Of which: total restricted amount as collateral, pledge or frozen | 25,109,817.10 | 129,978,697.21 |
As at 31 December 2020, cash and bank balances of the Group amounting toRMB514,387,073.67 (31 December 2019：RMB340,057,779.28) were depositedoutside Mainland China.
Current bank deposits earn interest income based on interest rates for current deposits.The period for short-term time deposits is usually 7 days. The short-term timedeposits earn interest income based on the corresponding interest rates for timedeposits.
2. Financial assets held for trading
| 2020 | 2019 | |||||
| Financial assets at fair value through profit or loss | ||||||
| Asset management plans | 619,890,000.00 | - | ||||
| Investments in bank’s wealth management products | 510,808,068.35 | 1,163,000,000.00 | ||||
| Investments in trust products | 504,767,340.61 | - | ||||
| Derivative financial assets | 831,021.35 | 1,039,381.59 | ||||
| 1,636,296,430.31 | 1,164,039,381.59 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
3. Notes receivable
| 2020 | 2019 | |||||
| Bank acceptance notes | 12,744,582.88 | - |
Notes receivable that were endorsed or discounted but undue at the balance sheet dateare as follows:
| 2020 2019 | |||||||
| Un-derecognized | Un-derecognized | ||||||
| Bank acceptance notes | 12,744,582.88 | - | |||||
As at 31 December 2020, there’s no need to establish impairment allowances fornotes receivable in the management’s opinion.
4. Accounts receivable
Accounts receivable are interest-free. The aging of accounts receivable is analyzed asfollows:
| 2020 | 2019 | |||||
| Within 1 year | 370,599,129.84 | 538,200,317.40 | ||||
| 1-2 years | 98,325,978.68 | 57,597,031.52 | ||||
| 2-3 years | 11,243,789.03 | 8,856,560.79 | ||||
| 3-4 years | 3,745,116.89 | 2,943,649.11 | ||||
| 4-5 years | 2,233,437.77 | 2,150,918.82 | ||||
| Over 5 years | 7,280,302.29 | 5,056,141.07 | ||||
| 493,427,754.50 | 614,804,618.71 | |||||
| Less: allowances for doubtful accounts receivable | 23,792,330.92 | 17,373,408.69 | ||||
| 469,635,423.58 | 597,431,210.02 | |||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
4. Accounts receivable (cont’d)
| 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 | |||||||
| 2019 | |||||||||||
| Gross amount | Allowance | Carrying amount | |||||||||
| Amount | Percentage | Amount | Percentage | ||||||||
| （%） | （%） | ||||||||||
| Accounts receivable for which allowances are established individually | 1,088,998.63 | 0.18 | 1,088,998.63 | 100.00 | - | ||||||
| Accounts receivable for which allowances are established by group with similar credit risk characteristics | 613,715,620.08 | 99.82 | 16,284,410.06 | 2.65 | 597,431,210.02 | ||||||
| 614,804,618.71 | 100.00 | 17,373,408.69 | 597,431,210.02 | ||||||||
As at 31 December 2020, accounts receivable for which allowances are establishedindividually are as follows:
| Gross amount | Allowance | ECL （%） | Reason for allowance | ||||||||
| Customer 1 | 981,949.40 | 981,949.40 | 100.00 | Customer’s inability to settle the amount due | |||||||
| Customer 2 | 641,600.00 | 641,600.00 | 100.00 | Customer’s inability to settle the amount due | |||||||
| Customer 3 | 608,800.00 | 608,800.00 | 100.00 | Customer’s inability to settle the amount due | |||||||
| Customer 4 | 515,595.00 | 515,595.00 | 100.00 | Customer’s inability to settle the amount due | |||||||
| Customer 5 | 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 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
4. Accounts receivable (cont’d)
As at 31 December 2019, accounts receivable for which allowances are establishedindividually are as follows:
| Gross amount | Allowance | ECL (%) | Reason for allowance | |||||||
| Customer 6 | 1,088,998.63 | 1,088,998.63 | 100.00 | Customer’s inability to settle the amount due due to insolvency |
Accounts receivable for which allowances are established by group with similar creditrisk characteristics are as follows:
| 2020 | 2019 | |||||||||||||||||
| Gross amount estimated to be in default | ECL (%) | Lifetime ECL | Gross amount estimated to be in default | ECL (%) | Lifetime ECL | |||||||||||||
| Within 1 year | 370,599,129.84 | 1.47 | 5,441,450.45 | 569,470,250.59 | 2.48 | 14,107,722.48 | ||||||||||||
| 1-2 years | 98,325,978.68 | 2.77 | 2,728,063.22 | 28,435,925.54 | 0.55 | 155,721.54 | ||||||||||||
| 2-3 years | 8,134,737.57 | 3.76 | 305,603.55 | 5,658,734.95 | 4.14 | 234,054.25 | ||||||||||||
| 3-4 years | 2,247,572.49 | 70.63 | 1,587,572.49 | 2,943,649.11 | 2.02 | 59,415.90 | ||||||||||||
| 4-5 years | 2,233,437.77 | 82.51 | 1,842,743.05 | 2,150,918.82 | 15.59 | 335,339.38 | ||||||||||||
| Over 5 years | 4,971,948.58 | 100.00 | 4,971,948.59 | 5,056,141.07 | 27.53 | 1,392,156.51 | ||||||||||||
| 486,512,804.93 | 16,877,381.35 | 613,715,620.08 | 16,284,410.06 | |||||||||||||||
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 | Increase due to combination | Effect of disposal of subsidiaries | Effect of exchange rate movements | Closing balance | ||||||||||||
| 2020 | 17,373,408.69 | 9,075,792.17 | (239,910.02 | ) | (3,513,686.10 | ) | - | - | 1,096,726.18 | 23,792,330.92 | |||||||||
| 2019 | 57,941,119.23 | 28,381,073.14 | - | (26,065.47 | ) | 2,816,822.80 | (71,739,541.01 | ) | - | 17,373,408.69 |
Top 5 of accounts receivable are as follows:
| 2020 | As a % of the closing balance of total accounts receivable | Allowance | ||||
| Customer 7 | 25,622,677.43 | 5.19 | 378,382.84 | |||
| Customer 8 | 19,590,573.00 | 3.97 | 5,877.17 | |||
| Customer 9 | 15,235,021.13 | 3.09 | 224,983.15 | |||
| Customer 10 | 13,085,372.40 | 2.65 | 193,238.21 | |||
| Customer 11 | 12,611,094.90 | 2.56 | 186,234.32 | |||
| 86,144,738.86 | 17.46 | 988,715.69 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
5. Receivables financing
| 2020 | 2019 | |||||
| Bank acceptance notes | 56,737,978.04 | 55,447,099.32 |
Notes receivable that were endorsed or discounted but undue at the balance sheet dateare as follows:
| 2020 | 2019 | ||||||||||
| Derecognized | Un-derecognized | Derecognized | Un-derecognized | ||||||||
| Bank acceptance notes | 25,235,099.85 | - | - | - | |||||||
6. Prepayments
The aging of prepayments is analyzed as follows:
| 2020 | 2019 | |||||||||||
| Carrying amount | Percentage (%) | Carrying amount | Percentage (%) | |||||||||
| Within 1 year | 28,618,261.25 | 98.31 | 24,221,885.95 | 93.52 | ||||||||
| 1-2 years | 374,977.19 | 1.29 | 1,367,636.64 | 5.28 | ||||||||
| 2-3 years | 34,633.52 | 0.12 | 56,688.15 | 0.22 | ||||||||
| Over 3 years | 81,544.25 | 0.28 | 254,913.11 | 0.98 | ||||||||
| 29,109,416.21 | 100.00 | 25,901,123.85 | 100.00 | |||||||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
6 Prepayments (cont’d)
Top 5 of prepayments are as follows:
2020
| 2020 | As a % of total prepayments | ||||
| Supplier 1 | 4,128,436.87 | 14.18 | |||
| Supplier 2 | 2,385,384.54 | 8.19 | |||
| Supplier 3 | 2,076,789.75 | 7.13 | |||
| Supplier 4 | 1,927,579.27 | 6.62 | |||
| Supplier 5 | 1,129,647.15 | 3.88 | |||
| 11,647,837.58 | 40.00 |
7. Other receivables
| 2020 | 2019 | |||||
| Other receivables | 78,516,397.83 | 78,851,179.13 | ||||
| Interest receivable | 587,074.81 | 721,935.36 | ||||
| 79,103,472.64 | 79,573,114.49 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
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:
| 2020 | 2019 | |||||
| Within 1 year | 30,013,923.50 | 29,859,345.91 | ||||
| 1-2 years | 5,888,491.67 | 43,855,797.79 | ||||
| 2-3 years | 43,587,563.89 | 9,043,027.93 | ||||
| 3-4 years | 2,032,852.58 | 685,639.96 | ||||
| 4-5 years | 153,038.14 | 369,509.02 | ||||
| Over 5 years | 202,302.18 | 277,596.53 | ||||
| 81,878,171.96 | 84,090,917.14 | |||||
| Less: allowances for doubtful other receivables | 3,361,774.13 | 5,239,738.01 | ||||
| 78,516,397.83 | 78,851,179.13 |
Other receivables are classified by nature as follows:
| 2020 | 2019 | |||||
| Amount for transfer of equity investments | 42,131,250.00 | 41,031,375.00 | ||||
| Prepaid service charges | 11,152,973.97 | 6,902,391.34 | ||||
| Security deposits | 6,202,941.33 | 10,743,022.49 | ||||
| Performance compensation | 3,864,914.60 | 8,200,000.00 | ||||
| Export tax refunds | 3,079,666.37 | 2,110,960.29 | ||||
| Employee loans and petty cash | 2,579,209.29 | 986,143.77 | ||||
| Others | 12,867,216.40 | 14,117,024.25 | ||||
| 81,878,171.96 | 84,090,917.14 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
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 onthe 12-month ECL and the lifetime ECL are as follows:
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 | |||||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
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 | |||||||||||
| 2020 | 5,239,738.01 | 137,497.51 | (2,070,541.29 | ) | - | 55,079.90 | 3,361,774.13 | |||||||||
| 2019 | 2,509,389.25 | 5,705,756.87 | - | (2,975,408.11 | ) | - | 5,239,738.01 |
As at 31 December 2020, top 5 of other receivables are as follows:
| Closing balance | 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 2 | 3,233,312.63 | 3.95 | Amount in insurance | Within 1 year | - | ||||||||||
| Entity 3 | 1,934,522.55 | 2.36 | Security deposits | Within 1 year | - | ||||||||||
| Entity 4 | 1,630,000.00 | 1.99 | Warranty deposits | Within 1 year | - | ||||||||||
| Entity 5 | 1,494,884.38 | 1.83 | Compensation | Within 1 year | - | ||||||||||
| 50,423,969.56 | 61.59 | 2,110,947.04 |
Interest receivable
| 2020 | 2019 | |||||
| Other interest | 587,074.81 | 721,935.36 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
8. Inventories
| 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 | |||||
| 2019 | |||||||
| Gross amount | Valuation allowance | Carrying amount | |||||
| Work-in-progress | 379,351,397.96 | 25,945,105.34 | 353,406,292.62 | ||||
| Raw materials | 248,492,417.64 | 13,394,596.44 | 235,097,821.20 | ||||
| Finished goods | 25,948,936.98 | 103,897.01 | 25,845,039.97 | ||||
| Product deliveries | 43,439,406.00 | - | 43,439,406.00 | ||||
| Semi-finished goods | 12,014,421.40 | 244,188.37 | 11,770,233.03 | ||||
| Materials consigned for processing | 1,873,908.29 | - | 1,873,908.29 | ||||
| 711,120,488.27 | 39,687,787.16 | 671,432,701.11 | |||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
8 Inventories (cont’d)
Movements in inventory valuation allowances are as follows:
2020
| Opening balance | Established in the period | Decrease in the period | Effect of exchange rate movements | Closing balance | ||||||||||
| Reversed or written off | ||||||||||||||
| 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 |
9. Contract assets
| 2020 | ||||||||||||
| Gross amount | Impairment allowance | Carrying amount | ||||||||||
| Contract assets | 30,566,218.02 | 1,061,524.05 | 29,504,693.97 | |||||||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
9. Contract assets (cont’d)
Significant changes in the carrying amount of contract assets in the period and why:
| Change | Reason | |||||
| Contract assets | 29,504,693.97 | Change to accounting policies |
The Group sells equipment to and provides the related installation services forcustomers, which constitute standalone contractual performance obligationsrespectively. When the Group hands over equipment to customers and customersaccept them upon inspection, the control over the equipment is considered transferred.That’s when equipment sales revenue is recognized, forming contract assets. Upon theinstallation of the equipment, the contract assets become unconditional rights ofcollection and are transferred to receivables.
Movements in impairment allowances for contract assets are as follows:
| Opening balance | Established in the period | Reversed in the period | Written off in the period | Charged off in the period | Closing balance | |||||||||
| 2020 | - | 1,061,524.05 | - | - | - | 1,061,524.05 |
10. Current portion of non-current assets
| 2020 | 2019 | |||||
| Current portion of long-term receivables | 2,556,000.00 | 356,983.48 |
As at 31 December 2020, there’s no need to establish impairment allowances for thecurrent portion of non-current assets in the management’s opinion.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
11. Other current assets
| 2020 | 2019 | |||||
| Overpaid value-added tax (VAT) | 13,120,049.59 | 2,209,523.18 | ||||
| Tax repayments | 4,547,579.26 | 14,404,806.23 | ||||
| Input VAT to be deducted | 1,041,284.86 | - | ||||
| Prepaid expenses | 23,570.22 | 207,209.64 | ||||
| Prepayment of interest expenses | - | 129,649.62 | ||||
| Others | 3,538,733.72 | 5,395,125.62 | ||||
| 22,271,217.65 | 22,346,314.29 |
12. Long-term receivables
| 2020 | 2019 | ||||||||||||
| Gross amount | Impairment allowance | Carrying amount | Gross amount | Impairment allowance | Carrying amount | ||||||||
| Amounts receivable by installment for selling goods | 1,475,000.00 | - | 1,475,000.00 | - | - | - | |||||||
13. Long-term equity investments
2020
| Opening | Change in the period | Closing | |||||||||
| balance | Additional investment | Return on investment under the equity method | Other comprehensive income | Other equity changes | Carrying amount | ||||||
| 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 | |||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
13. Long-term equity investments (cont’d)
As at 31 December 2020, there’s no need to establish impairment allowances forlong-term equity investments in the management’s opinion.
14. Other non-current financial assets
| 2020 | 2019 | |||||
| Financial assets at fair value | ||||||
| through profit or loss | 5,948,588.15 | 20,559,159.34 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
15. Fixed assets
Fixed assets
2020
| Buildings and constructions | Machinery | Transportation equipment | Electronic equipment/ office equipment/ 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 | ||||||||
| Increase in business combination | 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 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
16. Construction in progress
Construction in progress
| 2020 | 2019 | |||||||||||||
| Gross amount | Impairment allowance | Carrying amount | Gross amount | Impairment allowance | Carrying amount | |||||||||
| Plants and buildings | 384,832.84 | - | 384,832.84 | - | - | - | ||||||||
| Equipment installation | 8,431,327.70 | - | 8,431,327.70 | 4,756,170.68 | - | 4,756,170.68 | ||||||||
| Software installation | 245,877.98 | - | 245,877.98 | 83,070.80 | - | 83,070.80 | ||||||||
| 9,062,038.52 | - | 9,062,038.52 | 4,839,241.48 | - | 4,839,241.48 | |||||||||
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 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
17. Intangible assets
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 | ||||||||||
| Increase in business combination | 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 | 125,089,917.92 | 249,882,429.53 |
As at 31 December 2020, intangible assets arising from internal R&D accounted for
8.13% of the carrying amount of total intangible assets (31 December 2019：8.18%).
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
18. Goodwill
| 2020 | 2019 | ||||
| Gross amount of goodwill | 457,212,401.52 | 437,102,550.37 | |||
| Less: impairment allowances | 132,308,161.55 | 130,468,918.44 | |||
| 324,904,239.97 | 306,633,631.93 |
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 | ||||
| Business acquisition | - | 13,969,451.67 | - | 13,969,451.67 | ||||
| 437,102,550.37 | 13,969,451.67 | 6,140,399.48 | 457,212,401.52 |
In February 2020, Fosber Group established new majority-owned subsidiary QuantumCorrugated S.r.l. (hereinafter, “Italy QCorr”), and acquired the business assets of BPAgnati S.r.l., an Italian corrugator line manufacturer, through Italy QCorr as the directacquirer. Therefore, the Group recognized goodwill of RMB13,969,451.67 based onthe 60% interest held by Fosber Group in Italy QCorr.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
18. Goodwill (cont’d)
Movements in impairment allowances for goodwill are as follows:
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 BP Agnati S.r.l.? Corrugated carton printer business asset group of Italy EDF
According to the impairment test results of goodwill, the Group did not need toestablish impairment allowances for goodwill for the period under review.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
18. 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 withthe asset group combination determined on the purchase date and during impairment tests of theprevious years. The carrying amount of the corrugator line business asset group was RMB503.6million. The recoverable amount is determined using the present value of the projected future cashflows of the asset group combination according to the cash flow forecasting based on the financialbudget over a five-year period approved by the management. The growth rate of the operatingrevenue during this period is -6.4%, 0.5%, 7.9%, 5% and 5%, respectively, the growth rate of therevenue during the perpetual period after five years is 0%, and the perpetual cash flows aredetermined at the level of the last year of the detailed forecast period and based on the industrydevelopment trend and other factors. The discount rate used in cash flow forecasting was 18.14%(18.00% in 2019).
Power machine business asset group of Parsun PowerThe power machine business asset group is the only asset group owned by Parsun Power,consistent with the asset group combination determined on the purchase date and duringimpairment tests of the previous years. The carrying amount of the power machine business assetgroup was RMB280.98 million. The recoverable amount is determined using the present value ofthe projected future cash flows of the asset group combination according to the cash flowforecasting based on the financial budget over a five-year period approved by the management.The annualized growth rate of the operating revenue in the next five years is all 10%, the growthrate of the revenue during the perpetual period after five years is 0%, and the perpetual cash flowswill 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
15.22% (14.81% in 2019).
Corrugator line business asset group of BP Agnati S.r.l.The corrugator line business asset group of BP Agnati S.r.l. is the only asset group owned by ItalyQCorr, consistent with the asset group combination determined on the purchase date. The carryingamount of the corrugator line asset group was RMB86.23 million. The recoverable amount isdetermined using the present value of the projected future cash flows of the asset groupcombination according to the cash flow forecasting based on the financial budget over a five-yearperiod approved by the management. The annualized growth rate of the operating revenue in thenext five years is 28.1%, 19.8%, 7.8, 13.6% and 0%, respectively, the growth rate of the revenueduring the perpetual period after five years is 0%, and the perpetual cash flows will be determinedat the level of the last year of the detailed forecast period and based on the industry developmenttrend and other factors. The discount rate used in cash flow forecasting was 17.54% (17.54% onthe purchase date).
Corrugated carton printer business asset group of Italy EDFFor the corrugated carton printer business asset group of Italy EDF, impairment allowances forgoodwill were established in full amount in 2019.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
18. Goodwill (cont’d)
The following describes the key assumptions made by the management in determining cash flowforecasting for goodwill 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 isconsistent with the Group's historical experience and external information.
19. Long-term prepaid expenses
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 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
20. Deferred tax assets/liabilities
Deferred tax assets and liabilities before offsetting:
| 2020 | 2019 | |||||||||||
| Deductible temporary differences | Deferred tax assets | Deductible temporary differences | Deferred tax assets | |||||||||
| Deferred tax assets | ||||||||||||
| Deductible loss | 186,910,770.30 | 37,446,876.20 | 32,046,890.02 | 8,501,046.65 | ||||||||
| Provisions—after-sales maintenance service charges | 78,705,949.88 | 21,163,160.85 | 65,787,362.65 | 16,007,718.04 | ||||||||
| Deferred income | 56,359,912.05 | 13,526,378.24 | 26,277,954.05 | 6,306,709.91 | ||||||||
| Accrued expenses | 36,599,312.14 | 6,231,125.47 | 7,338,871.73 | 1,834,719.89 | ||||||||
| Asset impairment allowances | 32,623,867.53 | 5,685,957.19 | 40,047,445.90 | 7,625,373.36 | ||||||||
| Equity incentive expenses | 25,006,448.74 | 3,838,878.64 | - | - | ||||||||
| Credit impairment loss | 10,520,932.53 | 1,526,582.59 | 8,003,088.75 | 501,069.70 | ||||||||
| Changes in fair value of financial products at fair value through profit or loss | 8,785,171.84 | 1,422,118.28 | - | - | ||||||||
| Internal unrealized profit | 20,339,730.05 | 5,084,932.51 | 35,104,949.11 | 7,347,281.21 | ||||||||
| Others | 22,754,231.10 | 3,021,049.28 | 3,081,562.71 | 901,102.85 | ||||||||
| 478,606,326.16 | 98,947,059.25 | 217,688,124.92 | 49,025,021.61 | |||||||||
| 2020 | 2019 | |||||||||||
| Deductible temporary differences | Deferred tax liabilities | Deductible temporary differences | Deferred tax liabilities | |||||||||
| Deferred tax liabilities | ||||||||||||
| Increase in value in asset valuation | 56,319,751.75 | 10,574,995.95 | 55,686,591.83 | 10,912,760.98 | ||||||||
| Depreciation difference of fixed assets | 10,059,939.38 | 2,577,333.08 | 10,397,629.99 | 2,636,973.15 | ||||||||
| Financial assets at fair value through profit or loss | 25,962,030.97 | 4,202,658.70 | 2,378,966.50 | 580,080.66 | ||||||||
| Others | 8,046,763.80 | 1,941,398.43 | 9,878,448.83 | 2,785,878.12 | ||||||||
| 100,388,485.90 | 19,296,386.16 | 78,341,637.15 | 16,915,692.91 | |||||||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
20. Deferred tax assets/liabilities (cont’d)
Deductible temporary differences and deductible losses not recognized as deferred taxassets are as follows:
| 2020 | 2019 | |||||
| Deductible temporary differences | 34,063,872.36 | 14,250,399.21 | ||||
| Deductible losses | 1,233,078,267.55 | 1,498,082,251.60 | ||||
| 1,267,142,139.91 | 1,512,332,650.81 |
Deductible losses not recognized as deferred tax assets will expire as follows:
| 2020 | 2019 | ||||
| 2024 | 1,233,078,267.55 | 1,498,082,251.60 |
21. Other non-current assets
| 2020 | 2019 | |||||
| Large-amount deposit certificates | 640,000,000.00 | - | ||||
| Security deposits for loans | 295,075,000.00 | - | ||||
| Prepayments for long-lived assets | 623,889.00 | 38,700.00 | ||||
| Prepayments for service charges related to long-term borrowings | 363,799.89 | 2,480,118.56 | ||||
| Others | 477,358.51 | - | ||||
| 936,540,047.40 | 2,518,818.56 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
22. Short-term borrowings
| 2020 | 2019 | |||||
| Pledge loan | 12,037,500.00 | - | ||||
| Guaranteed loan | 16,560,239.29 | - | ||||
| Credit loan | 10,935,542.55 | 117,888,353.14 | ||||
| 39,533,281.84 | 117,888,353.14 |
As at 31 December 2020, the annual interest rates of the above borrowings rangedfrom 0.5% to 2.1% (31 December 2019：0.6%-1.75%).
23. Financial liabilities held for trading
| 2020 | 2019 | |||||
| Non-controlling interests put options | 41,408,109.80 | - |
Non-controlling interests put options related to the non-controlling interests of FosberAsia. As at 31 December 2020, Dongfang Precision recognized derivative financialliabilities of RMB41,408,109.80 according to the assessment results.
24. Notes payable
| 2020 | 2019 | |||||
| Bank acceptance notes | 104,855,187.97 | 43,973,859.51 | ||||
As at 31 December 2020, outstanding notes payable upon maturity were nil (31December 2019: nil).
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
25. Accounts payable
Accounts payable are interest-free.
| 2020 | 2019 | |||||
| Purchases of inventories | 489,841,770.00 | 470,629,176.02 | ||||
| Others | 13,200,791.05 | 2,233,568.43 | ||||
| 503,042,561.05 | 472,862,744.45 |
As at 31 December 2020, substantial accounts payable with aging over 1 year werenil.
26. Receipts in advance
| 2020 | 2019 | |||||
| Within 1 year (inclusive) | - | 254,027,005.07 | ||||
| 1-2 years (inclusive of 2 years) | - | 29,263,151.54 | ||||
| 2-3 years (inclusive of 3 years) | - | 830,688.85 | ||||
| Over 3 years | - | 2,390,879.16 | ||||
| - | 286,511,724.62 |
27. Contract liabilities
| 2020 | 2019 | |||||
| Contract liabilities | 362,792,713.35 | - |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
28. Employee benefits payable
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:
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 |
Defined contribution schemes are as follows:
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 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
29. Tax payable
| 2020 | 2019 | |||||
| Corporate income tax | 18,169,790.66 | 27,833,282.53 | ||||
| Individual income tax | 14,556,028.94 | 7,786,676.05 | ||||
| Value-added tax | 2,698,793.65 | 7,909,778.04 | ||||
| City maintenance and construction tax | 365,856.73 | 667,743.61 | ||||
| Education surcharge | 261,326.23 | 476,959.72 | ||||
| Property tax | 211,158.56 | 211,158.54 | ||||
| Stamp duties | 51,466.90 | 810,738.35 | ||||
| Land use tax | 34,530.60 | 34,530.60 | ||||
| Others | 20,824.78 | 3,197,362.07 | ||||
| 36,369,777.05 | 48,928,229.51 |
30. Other payables
| 2020 | 2019 | |||||
| Other payables | 81,743,851.64 | 90,950,443.16 |
| 2020 | 2019 | |||||
| Accrued expenses | 31,242,050.82 | 56,996,497.19 | ||||
| Repurchase obligation of restricted shares | 22,600,000.00 | - | ||||
| Payables for settled lawsuit | 10,224,904.52 | - | ||||
| Security deposits | 1,327,227.21 | 205,000.00 | ||||
| Acquisition of equity investments | - | 25,869,305.00 | ||||
| Others | 16,349,669.09 | 7,879,640.97 | ||||
| 81,743,851.64 | 90,950,443.16 |
As at 31 December 2020, substantial other payables with aging over 1 year were nil.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
31. Current portion of non-current liabilities
| 2020 | 2019 | |||||
| Current portion of long-term borrowings | 226,597,528.74 | 353,399,238.29 |
32. Other current liabilities
| 2020 | 2019 | |||||
| Endorsed notes receivable | 11,800,000.00 | - | ||||
| Output tax to be written off | 8,562,086.01 | - | ||||
| Others | 169,960.03 | - | ||||
| 20,532,046.04 | - |
33. Long-term borrowings
| 2020 | 2019 | |||||
| Guaranteed loan | 281,708,768.77 | 191,323,440.00 | ||||
| Mortgage loan | 49,087,211.17 | 9,645,245.56 | ||||
| Credit loan | 18,188,413.97 | 23,177,981.92 | ||||
| Pledge loan | 4,427,994.38 | - | ||||
| 353,412,388.29 | 224,146,667.48 |
As at 31 December 2020, the annual interest rates of the above borrowings rangedfrom 0.7% to 2.4% (31 December 2019：0.4%-2.4%).
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
34. Long-term employee benefits payable
| 2020 | 2019 | |||||
| Net liabilities of defined benefit schemes | 18,451,652.74 | 12,252,657.36 |
35. Provisions
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 |
36. Deferred income
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 |
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 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
37. Other non-current liabilities
| 2020 | 2019 | |||||
| Non-controlling interests put options | 68,737,415.25 | - |
Non-controlling interests put options related to non-controlling interests in Tiru?a andItaly QCorr. As at 31 December 2020, Fosber Group recognized other non-currentliabilities of RMB14,039,015.25 and RMB54,698,400.00 respectively according tothe assessment results.
38. Share capital
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 |
In January 2020, the Company repurchased and retired a total of 293,520,139 sharesas performance compensations from Pride’s former shareholders. As such, the totalshare capital of the Company decreased from 1,838,647,096 shares to 1,545,126,957shares.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
39. Capital surplus
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:
Increases in the period are as follows:
（1） In January 2020, the Company repurchased 293,520,139.00 shares at the
price of RMB1 as performance compensations, increasing share premium byRMB293,520,138.00.
（2） The share-based payments by Dongfang Precision in the period increased
other capital surplus by RMB24,993,737.15.
（3） The share-based payments by Parsun Power in the period increased other
capital surplus by RMB176,669.33.
Decreases in the period are as follows:
（1） According to equity incentive schemes, treasury shares were transferred to
awardees in the period, reducing share premium by RMB80,682,000.00 andat the same time reducing treasury shares by RMB80,682,000.00.
（2） The recognition of the present value of the exercise price of non-controlling
interests put options in the period reduced share premium byRMB97,893,321.62.
（3） The share repurchase-related service charges in the period reduced share
premium by RMB99,999.89.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
40. Treasury shares
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: The increase in treasury shares was driven by the consideration ofRMB499,996,259.52 paid by the Company in the current period for share repurchases.The decrease in the current period was driven by the transfer of treasury shares asshare-based payments to employees.
41. Other comprehensive income
Cumulative balance of other comprehensive income attributable to shareholders of theCompany in the consolidated balance sheet:
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 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
42. Special reserve
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 |
43. Surplus reserves
2020
| Opening and closing balance | ||||
| Statutory surplus reserves | 51,830,974.45 |
2019
| Opening and closing balance | ||||
| Statutory surplus reserves | 51,830,974.45 |
Pursuant to the Company Law and the Company’s Articles of Association, theCompany set aside 10% net profit as statutory surplus reserves. Where the cumulativestatutory surplus reserves are over 50% of the registered capital, the Company maycease to do so.
44. Retained earnings
| 2020 | 2019 | |||||
| Opening retained earnings | (1,280,673,461.14 | ) | (3,118,692,266.64 | ) | ||
| Net profit attributable to owners of the parent | 389,180,624.08 | 1,838,018,805.50 | ||||
| Closing retained earnings | (891,492,837.06 | ) | (1,280,673,461.14 | ) |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
45. Operating revenue and costs
| 2020 | 2019 | |||||||||
| Revenue | Costs | Revenue | Costs | |||||||
| Principal operations | 2,894,873,363.35 | 2,080,364,453.60 | 9,847,745,645.54 | 8,228,523,820.13 | ||||||
| Other operations | 21,396,779.78 | 18,784,372.76 | 125,757,956.65 | 57,908,254.79 | ||||||
| 2,916,270,143.13 | 2,099,148,826.36 | 9,973,503,602.19 | 8,286,432,074.92 | |||||||
46. Taxes and surcharges
| 2020 | 2019 | |||||
| Property tax | 4,294,158.43 | 4,382,315.92 | ||||
| City maintenance and construction tax | 2,716,008.16 | 5,305,701.26 | ||||
| Education surcharge | 1,936,200.03 | 4,575,005.13 | ||||
| Stamp tax | 664,645.73 | 6,215,513.43 | ||||
| Land use tax | 502,833.69 | 479,368.81 | ||||
| Vehicle and vessel tax | 18,971.12 | 635,862.27 | ||||
| Environmental protection tax | 14,309.42 | 77,509.78 | ||||
| Others | 106,386.03 | 85,080.33 | ||||
| 10,253,512.61 | 21,756,356.93 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
47. Selling expenses
| 2020 | 2019 | |||||
| Product quality warranties | 47,189,521.93 | 190,832,558.76 | ||||
| Commissions and agency fees | 46,237,284.80 | 48,998,758.52 | ||||
| Employee benefits | 43,931,435.42 | 56,567,481.19 | ||||
| Advertising and exhibition expenses | 5,721,645.33 | 13,124,552.50 | ||||
| Travel expenses | 5,554,250.47 | 14,192,497.81 | ||||
| Transportation expenses and miscellaneous expenses associated with import and export | 18,155,627.53 | 69,482,175.84 | ||||
| Office expenses | 1,116,817.49 | 650,335.33 | ||||
| Depreciation and amortization expenses | 751,809.90 | 4,681,809.15 | ||||
| Other expenses | 12,891,066.82 | 15,997,305.78 | ||||
| 181,549,459.69 | 414,527,474.88 |
48. Administrative expenses
| 2020 | 2019 | |||||
| Employee benefits | 111,656,352.56 | 174,333,946.78 | ||||
| Equity incentives | 25,170,406.50 | - | ||||
| Intermediary expenses | 26,178,807.52 | 86,145,399.31 | ||||
| Depreciation and amortization expenses | 22,744,937.96 | 41,902,217.00 | ||||
| Rental expenses | 10,221,040.37 | 7,556,679.05 | ||||
| Travel and reception expenses | 7,528,061.79 | 12,750,784.75 | ||||
| Office expenses | 5,745,654.54 | 4,168,306.88 | ||||
| Insurance expenses | 4,686,339.64 | 2,431,093.04 | ||||
| Car expenses | 4,085,837.67 | 1,373,682.92 | ||||
| Property management expenses | 2,819,585.82 | 998,199.83 | ||||
| Maintenance insurance expenses | 1,381,900.99 | 4,152,782.33 | ||||
| Materials consumption | 333,855.16 | 7,712,525.44 | ||||
| Other expenses | 24,420,235.88 | 21,692,994.39 | ||||
| 246,973,016.40 | 365,218,611.72 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
49. R&D expenses
| 2020 | 2019 | |||||
| Employee benefits | 46,765,354.71 | 67,481,755.14 | ||||
| Depreciation and amortization expenses | 16,012,422.17 | 14,869,894.79 | ||||
| Material expenses | 9,923,238.87 | 31,357,724.77 | ||||
| Utilities | 966,570.27 | 2,194,303.18 | ||||
| Assembly testing and debugging expenses | 250,665.58 | 8,287,240.29 | ||||
| Technology licensing expenses | - | 23,253,278.02 | ||||
| Other expenses | 8,164,023.15 | 9,210,719.23 | ||||
| 82,082,274.75 | 156,654,915.42 |
50. Finance costs
| 2020 | 2019 | |||||
| Interest expenses | 15,535,719.53 | 20,712,697.63 | ||||
| Less: Interest income | 20,887,321.27 | 55,020,801.87 | ||||
| Exchange gains and losses | 10,763,678.85 | 1,288,171.81 | ||||
| Discounted interest | 10,780.11 | 11,232,640.90 | ||||
| Others | 2,496,813.06 | 4,917,445.41 | ||||
| 7,919,670.28 | (16,869,846.12 | ) |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
51. Other income
| 2020 | 2019 | |||||
| Government grants related to routine activities | 10,699,683.55 | 22,814,061.39 | ||||
| Refund of handling charges for individual income tax withheld | 194,481.14 | - | ||||
| 10,894,164.69 | 22,814,061.39 |
Government grants related to routine activities are as follows:
| 2020 | 2019 | Asset/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 | |||||
| Foreign government subsidies | 1,503,212.44 | 5,704,532.73 | 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 | |||||
| 4 Mitsubishi gantry processing centres and 3 fixed-beam-type gantry processing centres | 1,116,660.00 | 1,116,660.00 | Asset-related | |||||
| Special funds for information transformation and upgrading | 1,000,000.00 | - | 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 | |||||
| Awards from the Scientific and Technological Innovation Bureau | 300,000.00 | - | Income-related | |||||
| Subsidy funds for high-tech enterprise identification in 2019 from the Science and Technology Bureau | 300,000.00 | - | Income-related | |||||
| Support incentives for four types of enterprises above designated size or qualification levels or limits | 300,000.00 | - | Income-related | |||||
| Compensation for demolition of the old plant in Jinfeng Road | 297,660.63 | 297,660.63 | Asset-related | |||||
| Support funds for Nanhai District Administration for Market Regulation, Foshan City to promote civilized patent work | 234,120.00 | - | Income-related | |||||
| 2019 subsidy funds after R&D expenses for high-tech enterprises in Foshan City | 207,200.00 | - | Income-related | |||||
| Special funds for business development (credit insurance) | 196,700.00 | - | Income-related | |||||
| Subsidies for stabilizing employment positions in enterprises | 209,237.83 | 234,166.52 | Income-related | |||||
| Subsidies for import and export credit insurance | 126,310.64 | - | Income-related | |||||
| Electricity subsidy from Nanhai District Economic Promotion Bureau, Foshan City | 103,040.00 | - | 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 | |||||
| Business development (4th batch) small and medium-sized development projects | 59,700.00 | - | Income-related | |||||
| 2019 enterprise rewards for highly skilled leading talent in Suzhou New District | 50,000.00 | - | Income-related | |||||
| Intellectual property manufacturing awards | 50,000.00 | - | 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 | |||||
| Trademark subsidies of the whole district in 2019 | 41,600.00 | - | Income-related | |||||
| Intellectual property thematic funds of 2019 patent subsidies of Nanhai District Administration for Market Regulation | 40,894.00 | - | Income-related | |||||
| 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 | |||||
| 2019 provincial special funds for business development (3rd batch), small and medium-sized development enterprises | 33,000.00 | - | Asset-related | |||||
| Economic Promotion Bureau - 2019 subsidies for R&D expenses of high-tech enterprises | 23,200.00 | - | Income-related |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
51. Other income (cont’d)
Government grants related to routine activities are as follows: (cont’d)
| 2020 | 2019 | Asset/income-related | ||||||
| Financial rewards for provincial-level industrial information industry transformation and upgrading in 2019 | 20,000.00 | - | Income-related | |||||
| Provincial-level short-term insurance premiums transferred by China Export & Credit Insurance Corporation Guangdong Branch Support funds | 16,200.34 | - | Asset-related | |||||
| 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 | 7,857.27 | - | Asset-related | |||||
| 2019 domestic and foreign patent subsidies of Suzhou New District | 5,300.00 | - | Income-related | |||||
| Administration for Market Regulation - Special funds for promoting invention in 2017-2018 | 5,000.00 | - | Income-related | |||||
| Subsidy funds for enterprise personnel increase of Nanhai District Human Resources and Social Security Bureau, Foshan City | 4,000.00 | - | Income-related | |||||
| Trademark subsidies | 1,600.00 | - | Income-related | |||||
| Refund of income tax fee | - | 120,839.33 | Income-related | |||||
| Support incentives for "Big Dipper" enterprises of Shishan Town Treasury Payment Centre, Nanhai District, Foshan City (Township-level part) | - | 4,800,000.00 | Income-related | |||||
| Intellectual property subsidies | - | 12,000.00 | Income-related | |||||
| 2018 technological innovation platform of Nanhai District Economic and Technological Promotion Bureau, Foshan City Support incentive funds | - | 500,000.00 | Income-related | |||||
| 2018 foreign trade cooperation of Nanhai District Economic and Technological Promotion Bureau, Foshan City Special funds | - | 200,000.00 | Income-related | |||||
| Tax incentive funds of Caiyu Town government | - | 200,000.00 | Income-related | |||||
| Industrial innovation cluster allocation project of Beijing high-grade, precision and advanced industrial development funds | - | 366,869.29 | Asset-related | |||||
| Support incentives for "Big Dipper" enterprises of Shishan Town Economic Promotion Bureau (district-level) | - | 3,200,000.00 | Income-related | |||||
| Special funds for Class B air pollution prevention and control project in 2018 | - | 390,000.00 | Income-related | |||||
| Subsidy funds for high-tech enterprise identification in 2018 of the Science and Technology Bureau | - | 100,000.00 | Income-related | |||||
| Integration of informationization and industrialization | - | 300,000.00 | Asset-related | |||||
| 2018 incentives for advanced enterprises of Suzhou Hushuguan Economic Development Zone | - | 30,000.00 | Income-related | |||||
| Financial support funds of Nanhai District Economic Promotion Bureau, Foshan City (municipal-level engineering technology research centre) | - | 200,000.00 | Income-related | |||||
| Equipment subsidies for Liyang Project Investment of the Administrative Committee of Jiangsu Zhongguancun Science and Technology Industrial Park | - | 1,507,691.87 | Asset-related | |||||
| Support funds for small and medium-sized development projects of the Ministry of Commerce | - | 58,500.00 | Income-related | |||||
| Provincial-level special funds for intellectual property in 2019 | - | 3,000.00 | Income-related | |||||
| Special funds for the demonstration enterprise project of "Smart Manufacturing and Intrinsic Safety" of Foshan Municipal Administration of Work Safety | - | 480,000.00 | Income-related | |||||
| 2018 domestic and foreign patent subsidies of Suzhou New District | - | 35,200.00 | Income-related | |||||
| 2018 subsidy funds for top 50 benchmark high-tech enterprises of Nanhai District Economic and Technological Promotion Bureau, Foshan City | - | 1,000,000.00 | Income-related | |||||
| 2018 subsidy funds for key sci-tech projects of top 50 (benchmark high-tech) enterprises of Nanhai District Economic and Technological Promotion Bureau, Foshan City | - | 1,000,000.00 | Income-related |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
51. Other income (cont’d)
Government grants related to routine activities are as follows: (cont’d)
| 2020 | 2019 | Asset/income-related | |||||||
| 2017 patent subsidy funds of Economic and Technological Promotion Bureau | - | 15,000.00 | Income-related | ||||||
| Subsidy funds and government subsidies of Liyang's First Batch of Science and Technology Award in 2019 | - | 100,000.00 | Income-related | ||||||
| Special funds for economic development in 2019 of Nanhai District Economic Promotion Bureau, Foshan City (Promoting export credit insurance) | - | 9,491.02 | Income-related | ||||||
| Patent subsidies | - | 5,950.00 | Income-related | ||||||
| Funds declared by high-tech enterprises in 2019 | - | 30,000.00 | Income-related | ||||||
| Incentives to promote scientific and technological innovation in 2018 | - | 180,500.00 | Income-related | ||||||
| Special funds for business development in 2019 (credit insurance subsidies) | - | 216,700.00 | Income-related | ||||||
| Special subsidy funds after R&D expenses for high-tech enterprises in 2016 and 2017 of Nanhai District Economic and Technological Promotion Bureau, Foshan City | - | 246,300.00 | Income-related | ||||||
| Special support incentives for the development of high-tech enterprises in 2017 of Nanhai District Economic and Technological Promotion Bureau, Foshan City | - | 153,000.00 | Income-related | ||||||
| Fiscal subsidies | 50,000.00 | - | Income-related | ||||||
| Subsidies for work-based training | 144,500.00 | - | Income-related | ||||||
| Pandemic-related subsidies | 1,000.00 | - | Income-related | ||||||
| 10,699,683.55 | 22,814,061.39 |
52. Investment income
| 2020 | 2019 | ||||
| Income from financial assets held for trading | 50,996,184.47 | 26,362,638.82 | |||
| Income from long-term equity investments measured at equity method | 2,889,349.81 | 2,541,133.81 | |||
| Income from remeasurement of former equity investments at fair value in business combination not under common control | 1,229,987.66 | - | |||
| Loss on disposal of long-term equity investments | - | (91,050,267.19 | ) | ||
| Performance compensation | - | 1,447,054,285.27 | |||
| 55,115,521.94 | 1,384,907,790.71 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
53. Gains and losses on changes in fair value
| 2020 | 2019 | |||||
| Financial assets at fair value through profit or loss | 54,407,119.47 | (302,415.26 | ) | |||
| Changes in fair value of non-controlling interests put options | (9,284,348.20 | ) | - | |||
| 45,122,771.27 | (302,415.26 | ) |
54. Credit impairment loss
| 2020 | 2019 | |||||
| Loss on doubtful accounts receivable | (8,835,882.15 | ) | (28,381,073.14 | ) | ||
| Reversed allowances for other receivables | 1,933,043.78 | (5,710,766.56 | ) | |||
| Impairment loss of contract assets | (1,061,524.05 | ) | (6,000.00 | ) | ||
| (7,964,362.42 | ) | (34,097,839.70 | ) |
55. Asset impairment loss
| 2020 | 2019 | |||||
| Inventory valuation loss | (5,368,019.60 | ) | (41,086,405.25 | ) | ||
| Goodwill impairment loss | - | (68,753,453.43 | ) | |||
| (5,368,019.60 | ) | (109,839,858.68 | ) |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
56. Gains and losses on disposal of assets
| 2020 | 2019 | |||||
| Loss on disposal of fixed assets | (17,854.18 | ) | - | |||
| Gain on disposal of other non-current assets | - | 538,255.27 | ||||
| (17,854.18 | ) | 538,255.27 |
57. Non-operating income
| 2020 | 2019 | Recognized in exceptional gains and losses of 2020 | ||||||
| Performance compensation | 29,939,067.65 | - | 29,939,067.65 | |||||
| Negative goodwill arising from acquisition of Yinglian Digital | 866,489.40 | - | 866,489.40 | |||||
| Government grants not related to routine operations | 50,000.00 | 40,000.00 | 50,000.00 | |||||
| Others | 4,946,229.86 | 12,530,847.05 | 4,946,229.86 | |||||
| 35,801,786.91 | 12,570,847.05 | 35,801,786.91 |
58. Non-operating expenses
| 2020 | 2019 | Recognized in exceptional gains and losses of 2020 | |||||||
| Donations | 1,570,997.47 | 105,090.50 | 1,570,997.47 | ||||||
| Loss on disposal of fixed assets | 36,036.61 | 5,233,637.05 | 36,036.61 | ||||||
| Others | 139,697.28 | 3,418,233.98 | 139,697.28 | ||||||
| 1,746,731.36 | 8,756,961.53 | 1,746,731.36 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
V. Notes to the Consolidated Financial Statements (cont’d)
59. Income tax expenses
| 2020 | 2019 | |||||
| Current income tax expenses | 71,205,843.29 | 215,161,306.67 | ||||
| Deferred tax expenses | (48,122,503.99 | ) | (40,889,366.79 | ) | ||
| 23,083,339.30 | 174,271,939.88 |
Reconciliation between income tax expenses and gross profit is as follows:
| 2020 | |||
| Gross profit | 420,180,660.29 | ||
| Income tax calculated at applicable tax rates | 63,027,099.04 | ||
| Different tax rates for specific provinces or enacted by local authority | 43,500,706.27 | ||
| Adjustment to current income tax in previous periods | (1,018,718.96 | ) | |
| Utilization of deductible losses of previous periods | (39,750,597.61 | ) | |
| Effect of unrecognized deductible temporary differences and deductible losses | 2,961,178.79 | ||
| Income not subject to tax | (42,505,290.40 | ) | |
| Over-deduction for R&D | (4,685,800.11 | ) | |
| Expenses not deductible for tax | 1,554,762.28 | ||
| Income tax expenses | 23,083,339.30 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
60. Earnings per share
| 2020 | 2019 | |||||
| RMB/share | RMB/share | |||||
| Basic earnings per share | ||||||
| Continuing operations | 0.26 | 1.01 | ||||
| Diluted earnings per share | ||||||
| Continuing operations | 0.26 | 1.01 |
Basic earnings per share is computed by dividing the net profit attributable to ordinaryshareholders of the Company for the period by the weighted average number ofordinary shares in issue.
In the calculation of diluted earnings per share, the denominator shall be the sum of:
(1) weighted average number of ordinary shares of the Company in issue adopted inthe calculation of basic earnings per share; and (2) weighted average number ofordinary shares created assuming conversion of potentially dilutive ordinary sharesinto ordinary shares.
In calculating the weighted average number of ordinary shares created uponconversion of potentially dilutive ordinary shares into ordinary shares, potentiallydilutive ordinary shares issued in previous periods are assumed to have beenconverted at the beginning of the current period, whereas potentially dilutive ordinaryshares issued in the current period are assumed to have been converted on the date ofissue.
Calculations of basic and diluted earnings per share are as follows:
| 2020 | 2019 | ||||
| Earnings | |||||
| Net profit attributable to ordinary shareholders of the Company for the period | 389,180,624.08 | 1,838,018,805.50 | |||
| Shares | |||||
| Weighted average number of ordinary shares in issue of the Company | 1,479,259,197.75 | 1,821,084,559.92 | |||
| Shares | |||||
| Weighted average number of ordinary shares in issue of the Company | 1,479,259,197.75 | 1,821,084,559.92 | |||
| Diluting effect——weighted average number of ordinary shares | |||||
| Restricted shares | 3,331,777.08 | - | |||
| Adjusted weighted average number of ordinary shares in issue of the Company | 1,482,590,974.83 | 1,821,084,559.92 | |||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
61. Notes to cash flow statement line items
| 2020 | 2019 | |||||
| Cash generated from other operating activities | ||||||
| Interest income | 21,022,181.82 | 51,713,851.09 | ||||
| Government grants | 9,827,504.69 | 27,918,029.60 | ||||
| Letter of guarantee received | 4,984,585.99 | 590,491.85 | ||||
| Current accounts and others | 9,980,667.12 | 74,176,495.35 | ||||
| 45,814,939.62 | 154,398,867.89 | |||||
| Cash used in other operating activities | ||||||
| Selling expenses in cash | 136,866,214.37 | 145,334,515.96 | ||||
| Administrative expenses in cash | 87,401,319.27 | 132,074,384.83 | ||||
| R&D expenses in cash | 19,304,497.87 | 20,547,103.04 | ||||
| Letter of guarantee paid | 5,520,385.99 | 526,000.00 | ||||
| Security deposits | 3,445,334.38 | 8,317,055.21 | ||||
| Current accounts and others | 18,504,749.20 | 36,384,723.70 | ||||
| 271,042,501.08 | 343,183,782.74 | |||||
| Cash generated from other investing activities | ||||||
| Performance compensation | - | 200,000.00 | ||||
| Redemption of investments in wealth management products | - | 3,329,648,750.00 | ||||
| - | 3,329,848,750.00 |
| Cash used in other investing activities | ||||||
| Acquisition of BP Agnati S.r.l.’s business asset group | 1,203,750.03 | - | ||||
| Purchases of wealth management products | - | 4,462,987,540.01 | ||||
| 1,203,750.03 | 4,462,987,540.01 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
61. Notes to cash flow statement line items (cont’d)
| 2020 | 2019 | |||||
| Cash generated from other financing activities | ||||||
| Refund of security deposits for internal guarantees for external loans | 124,024,093.46 | 16,502,736.75 | ||||
| Share subscription | 22,600,000.00 | - | ||||
| Security deposits for bank acceptance notes | 16,125,930.69 | 144,398,508.76 | ||||
| 162,750,024.15 | 160,901,245.51 | |||||
| Cash used in other financing activities | ||||||
| Share repurchase | 500,096,259.41 | 96,510,768.15 | ||||
| Security deposits paid for internal guarantees for external loans | 290,000,000.00 | - | ||||
| Security deposits for bank acceptance notes | 35,715,597.93 | 7,662,721.53 | ||||
| 825,811,857.34 | 104,173,489.68 |
62. 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:
| 2020 | 2019 | |||||
| Net profit | 397,097,320.99 | 1,839,345,953.81 | ||||
| Add: Asset impairment allowances | 5,368,019.60 | 109,839,858.68 | ||||
| Depreciation of fixed assets | 43,733,470.71 | 68,039,843.73 | ||||
| Amortization of intangible assets | 23,293,740.64 | 26,098,369.17 | ||||
| Credit impairment loss | 7,964,362.42 | 34,097,839.70 | ||||
| Amortization of long-term prepaid expenses | 4,232,091.29 | 15,501,412.42 | ||||
| Loss/(gain) on disposal of fixed assets, intangible assets and other long-lived assets | 17,854.18 | (538,255.27 | ) | |||
| Loss on retirement of fixed assets | 34,888.51 | 5,233,637.05 | ||||
| (Gain)/loss on changes in fair value | (45,122,771.27 | ) | 302,415.26 | |||
| Finance costs | 16,797,042.44 | 31,945,338.53 | ||||
| Investment income | (55,115,521.94 | ) | (1,384,907,790.71 | ) | ||
| Increase in deferred tax assets | (49,922,037.64 | ) | (50,201,552.00 | ) | ||
| Increase in deferred tax liabilities | 2,380,693.25 | 571,989.59 | ||||
| Increase in inventories | (61,314,527.47 | ) | (546,145,845.44 | ) | ||
| Decrease/(increase) in operating receivables | 62,978,697.08 | (221,590,998.95 | ) | |||
| Increase in operating payables | 188,515,269.99 | 356,387,828.69 | ||||
| Others | 10,057,438.97 | (2,682,257.25 | ) | |||
| Net cash generated from/used in operating activities | 550,996,031.75 | 281,297,787.01 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
62. 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:
| 2020 | 2019 | |||||
| Transfer of endorsed bank acceptance notes received for selling goods and rendering services | 72,886,689.73 | 140,567,947.10 |
Net change in cash and cash equivalents:
| 2020 | 2019 | |||||
| Closing balance of cash | 860,601,236.78 | 2,226,724,737.39 | ||||
| Less: Opening balance of cash | 2,226,724,737.39 | 2,057,997,442.35 | ||||
| Add: Closing balance of cash equivalents | - | - | ||||
| Less: Opening balance of cash equivalents | - | - | ||||
| Net (decrease)/increase in cash and cash equivalents | (1,366,123,500.61 | ) | 168,727,295.04 |
（2） Information on subsidiaries and other business units acquired or
disposed of
Information on subsidiaries and other business units acquired
| 2020 | 2019 | |||||
| Prices for acquiring subsidiaries and other business units | 11,566,725.00 | - | ||||
| Cash and cash equivalents paid to acquire subsidiaries and other business units | 11,566,725.00 | 123,995,066.16 | ||||
| Less: cash and cash equivalents held by subsidiaries and other business units acquired | 36,725.61 | 26,748,538.29 | ||||
| Net payments for the acquisition of subsidiaries and other business units | 11,529,999.39 | 97,246,527.87 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
62. Supplemental information on statement of cash flows (cont’d)
（2） Information on subsidiaries and other business units acquired or disposed
of (cont’d)
Information on subsidiaries and other business units disposed of
| 2020 | 2019 | |||||
| Prices for disposing of subsidiaries and other business units | - | - | ||||
| Cash and cash equivalents received from disposal of subsidiaries and other business units | - | 1,500,000,000.00 | ||||
| Less: cash and cash equivalents held by subsidiaries and other business units disposed of | - | 58,525,196.49 | ||||
| Net proceeds from the disposal of subsidiaries and other business units | - | 1,441,474,803.51 |
（3） Cash and cash equivalents
| 2020 | 2019 | |||||
| Cash | 860,601,236.78 | 2,226,724,737.39 | ||||
| Including: cash on hand | 217,540.96 | 249,951.68 | ||||
| Bank deposits readily available | 857,460,233.91 | 2,224,849,135.20 | ||||
| Other cash and bank balances readily available | 2,923,461.91 | 1,625,650.51 | ||||
| Cash equivalents | ||||||
| Closing balance of cash and cash equivalents | 860,601,236.78 | 2,226,724,737.39 |
The difference between net payments for the acquisition of subsidiaries and otherbusiness units of the current period and last year was primarily attributable tocurrency translation differences.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
63. Assets with restricted ownership or right of use
| 2020 | 2019 | ||||||||
| Cash and bank balances | 25,109,817.10 | 129,978,697.21 | Note 1 | ||||||
| Fixed assets | 211,239,552.11 | 11,981,751.80 | Note 2 | ||||||
| Intangible assets | 52,551,947.63 | - | Note 3 | ||||||
| Other non-current assets | 295,075,000.00 | - | Note 4 | ||||||
| 583,976,316.84 | 141,960,449.01 |
Note 1： As at 31 December 2020, cash and bank balances in the carrying amount
of RMB25,109,817.10 were used as security deposits for bank acceptancenotes and the like; as at 31 December 2019, cash and bank balances in thecarrying amount of RMB129,978,697.21 were used as pledge for bankborrowings.
Note 2： As at 31 December 2020, fixed assets of Guangdong Dongfang Precision
Science & Technology Co., Ltd. in the carrying amount ofRMB211,239,552.11 (31 December 2019：RMB11,981,751.80) were used ascollateral for a bank credit line of RMB600,000,000.00. As at 31 December2020, the borrowing balance under the credit line contract was nil.
Note 3： As at 31 December 2020, property in land of Guangdong Dongfang
Precision Science & Technology Co., Ltd. in the carrying amount ofRMB52,551,947.63 was also used as collateral for the bank credit linementioned in Note 2. The amortization of the property in land wasRMB1,468,335.83 in 2020.
Note 4： As at 31 December 2020, security deposits in the carrying amount of
RMB295,075,000.00 (31 December 2019：nil) were used for loans ofsubsidiaries, with the term expiring on 29 June 2023.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
64. Monetary items in foreign currencies
| 2020 | |||||
| Original currency | Exchange rate | RMB equivalent | |||
| Cash and bank balances | 640,094,525.70 | ||||
| Including: USD | 42,130,977.17 | 6.5251 | 274,908,839.13 | ||
| EUR | 45,296,299.56 | 8.0250 | 363,502,803.97 | ||
| HKD | 162,041.47 | 0.8416 | 136,374.10 | ||
| GBP | 173,844.00 | 8.8903 | 1,545,525.31 | ||
| AUD | 196.00 | 5.0163 | 983.19 | ||
| Notes receivable | - | ||||
| Including: EUR | - | - | - | ||
| Accounts receivable | 466,182,574.97 | ||||
| Including: USD | 8,332,673.76 | 6.5251 | 54,371,529.56 | ||
| EUR | 51,316,018.12 | 8.0250 | 411,811,045.41 | ||
| Contract assets | 29,667,325.25 | ||||
| Including: USD | 1,410,488.00 | 6.5251 | 9,203,575.25 | ||
| EUR | 2,550,000.00 | 8.0250 | 20,463,750.00 | ||
| Other receivables | 71,937,801.62 | ||||
| Including: EUR | 8,964,212.04 | 8.0250 | 71,937,801.62 | ||
| Accounts payable | 390,383,719.86 | ||||
| Including: USD | - | - | - | ||
| EUR | 48,645,946.40 | 8.0250 | 390,383,719.86 | ||
| GBP | - | - | - | ||
| Short-term borrowings | 39,533,281.84 | ||||
| Including: EUR | 4,926,265.65 | 8.0250 | 39,533,281.84 | ||
| Current portion of non-current liabilities | 226,597,528.74 | ||||
| Including: EUR | 28,236,452.18 | 8.0250 | 226,597,528.74 | ||
| Long-term borrowings | 353,412,388.29 | ||||
| Including: EUR | 44,038,926.89 | 8.0250 | 353,412,388.29 | ||
| Other payables | 34,280,083.33 | ||||
| Including: USD | 172,390.50 | 6.5251 | 1,124,865.25 | ||
| EUR | 4,131,491.35 | 8.0250 | 33,155,218.08 | ||
| Interest payable | - | ||||
| Including: EUR | - | - | - | ||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
64. Monetary items in foreign currencies (cont’d)
The principal places of business overseas, the functional currencies and theirdetermination basis of the major overseas business entities included in theconsolidated financial statements are as follows:
| Major overseas business entities | Principal place of business | Functional currency | Determination basis |
| Dongfang Precision (HK) | Hong Kong | USD | Settlement currency for local business activities |
| Dongfang Precision (Netherland) | Netherland | EUR | Settlement currency for local business activities |
| Fosber Group | Italy | EUR | Settlement currency for local business activities |
| Fosber America | America | USD | Settlement currency for local business activities |
| EDF | Italy | EUR | Settlement currency for local business activities |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
VI. Changes to the Scope of Consolidation
1. Business combination not involving entities under common control
On 19 August 2016, Dongfang Precision and Xiwang Ceramic Machinery EquipmentCo., Ltd. Nanhai District, Foshan City set up a joint venture - Foshan Yinglian DigitalPrinting Equipment Co., Ltd. Dongfang Precision made a paid-in capital contributionof RMB13,060,193.48 and holds a 50% stake in Foshan Yinglian Digital PrintingEquipment Co., Ltd. Within the current period, the Company acquired a 50% stake inFoshan Yinglian Digital Printing Equipment Co., Ltd. at RMB11,566,725.00 in cash,and holds 100% of its equity after the completion of this transaction. The date ofacquisition is determined as 30 September 2020 based on the actual delivery date. Thecarrying value of the 50% equity previously held prior to the purchase date wasRMB10,336,737.34 on the acquisition date, its fair value was RMB11,566,725.00,and the gain arising from a remeasurement at fair value was RMB1,229,987.66.
The fair value and carrying amounts of the identifiable assets and liabilities of FoshanYinglian Digital Printing Equipment Co., Ltd. as at the date of acquisition are asfollows:
| 30 September 2020 | 30 September 2020 | |||||
| Fair value | Carrying amount | |||||
| Cash and bank balances | 36,772.75 | 36,772.75 | ||||
| Accounts receivable | 4,751,863.00 | 4,751,863.00 | ||||
| Other receivables | 35,980.00 | 35,980.00 | ||||
| Prepayments | 440,000.00 | 440,000.00 | ||||
| Inventories | 4,146,532.08 | 4,146,532.08 | ||||
| Other current assets | 572,847.35 | 572,847.35 | ||||
| Fixed assets | 47,196.94 | 51,548.69 | ||||
| Intangible assets | 15,893,491.65 | 13,564,501.47 | ||||
| Total assets | 25,924,683.77 | 23,600,045.34 | ||||
| Accounts payable | 1,100,000.00 | 1,100,000.00 | ||||
| Employee benefits payable | 1,222.48 | 1,222.48 | ||||
| Tax payable | 45,258.30 | 45,258.30 | ||||
| Other payables | 197,103.98 | 197,103.98 | ||||
| Deferred tax liabilities | 581,159.61 | - | ||||
| Total liabilities | 1,924,744.37 | 1,343,584.76 | ||||
| Net assets | 23,999,939.40 | 22,256,460.58 | ||||
| Amount that exceeds combination cost and is recognized in profit or loss | 866,489.40 | |||||
| Combination consideration | 23,133,450.00 | Note | ||||
Note: The amount included the cash of RMB11,566,725.00 paid by the Company inthe business combination and the fair value of RMB11,566,725.00 of the 50% interestheld by the Company in Foshan Yinglian Digital Printing Equipment Co., Ltd. beforethe date of acquisition.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
VI. Changes to the Scope of Consolidation (cont’d)
1. Business combination not involving entities under common control
(cont’d)
The operating results and cash flows of Foshan Yinglian Digital Printing EquipmentCo., Ltd. for the period from the date of acquisition to the period-end are as follows:
| 30 Sept.-31 Dec. 2020 | |||||
| Operating revenue | (8,782,051.36 | ) | |||
| Net loss | (3,800,729.62 | ) | |||
| Net cash flow | (47.14 | ) |
2. Changes to the scope of consolidation for other reasons
In March 2020, subsidiary Tiru?a Brasil LTDA was de-registered, and it has beenexcluded from the scope of consolidation since the date of de-registration.
In October 2020, subsidiaries Hainan Yineng and Dongfang Digicom wereincorporated, and they have been included in the scope of consolidation since thedates of their respective incorporation.
In November 2020, the Company's subsidiary Suzhou Shunyi Investment Co., Ltd.(hereinafter referred to as "Shunyi Investment") established a partnership firm -Suzhou High-Tech Zone Jinquan Business Management Partnership (LimitedPartnership), which is an employee stock ownership platform of Suzhou ParsunPower Machine Co., Ltd. (hereinafter referred to as "Parsun Power"). ShunyiInvestment is a general partner of Suzhou High-Tech Zone Jinquan BusinessManagement Partnership (Limited Partnership), holds 17.60% of property shares, andperforms partnership affairs on behalf of Suzhou High-Tech Zone Jinquan BusinessManagement Partnership (Limited Partnership). Besides, according to the relevantregulations in the Equity Incentive Plan of Suzhou Parsun Power Machine Co., Ltd., ifthe individual performance appraisal of an incentive awardee fails to meet thestandards, the property shares held by this awardee in Suzhou High-Tech ZoneJinquan Business Management Partnership (Limited Partnership) will be compulsorilyacquired by Shunyi Investment or a third party designated by Shunyi Investment.Therefore, the Group believes that the Group controls Suzhou High-Tech ZoneJinquan Business Management Partnership (Limited Partnership) and includes thelatter in its consolidation scope.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
VI. Changes to the Scope of Consolidation (cont’d)
2. Changes to the scope of consolidation for other reasons (cont’d)
On 3 February 2020, subsidiary Fosber Group incorporated a new majority-ownedsubsidiary Italy QCorr, and completed the acquisition of the relevant business assetsof BP Agnati S.r.l., a corrugator line manufacturer in Italy with Italy QCorr as thedirect acquirer. Upon the transaction, Fosber Group has a 60% interest in Italy QCorr,and Italy QCorr was included in the consolidated financial statements of the Companyfor the Reporting Period.
The fair value and carrying amounts of the identifiable assets and liabilities of therelevant business assets of BP Agnati S.r.l. as at the date of acquisition are as follows:
| 3 February 2020 | 3 February 2020 | |||||
| Fair value | Carrying amount | |||||
| Cash and bank balances | 1,900,568.78 | 1,900,568.78 | ||||
| Accounts receivable | 87,143,426.85 | 87,143,426.85 | ||||
| Other receivables | 23,189,625.83 | 23,189,625.83 | ||||
| Prepayments | 2,313,888.38 | 2,313,888.38 | ||||
| Inventories | 51,729,462.98 | 51,729,462.98 | ||||
| Other current assets | 7,482,389.63 | 7,482,389.63 | ||||
| Fixed assets | 921,101.48 | 921,101.48 | ||||
| Intangible assets | 66,816,479.03 | 66,816,479.03 | ||||
| Total assets | 241,496,942.96 | 241,496,942.96 | ||||
| Accounts payable | 82,860,684.98 | 82,860,684.98 | ||||
| Receipts in advance | 84,095,034.30 | 84,095,034.30 | ||||
| Employee benefits payable | 7,133,623.13 | 7,133,623.13 | ||||
| Other payables | 502,365.00 | 502,365.00 | ||||
| Other current liabilities | 66,692,966.25 | 66,692,966.25 | ||||
| Long-term employee benefits payable | 6,072,421.20 | 6,072,421.20 | ||||
| Provisions | 16,218,525.00 | 16,218,525.00 | ||||
| Total liabilities | 263,575,619.86 | 263,575,619.86 | ||||
| Net assets | (22,078,676.90 | ) | (22,078,676.90 | ) | ||
| Goodwill arising from the acquisition | 23,282,426.93 | |||||
| Acquisition consideration | 1,203,750.03 | |||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
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 | 56.40 | - | ||||
| Italy QCorr | Italy | Italy | Investment | EUR375,000 | - | 60.00 | ||||
| Suzhou High-Tech Zone Jinquan Business Management Partnership (Limited Partnership) | Suzhou, Jiangsu, China | Suzhou, Jiangsu, China | Investment | RMB9.65 million | - | 17.60 | ||||
| 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 | - | ||||
| 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 | 35.00 | 65.00 | ||||
| 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 UK Ltd | UK | UK | Manufactur ing | GBP233,000 | - | 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 | - | ||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
VII. Interests in Other Entities (cont’d)
1. Interests in subsidiaries (cont’d)
Subsidiaries with substantial non-controlling interests are as follows:
2020
| Non-controlling | Net profit/(loss) attributable to | Dividends for | Closing cumulative amount of | ||||||||
| interests (%) | non-controlling interests | non-controlling interest | non-controlling interests | ||||||||
| Fosber Asia | 43.60% | 9,400,368.74 | - | 20,365,964.98 | |||||||
| Tiru?a Group | 30.00% | 2,784,169.23 | - | 56,891,854.63 | |||||||
| Italy QCorr | 40.00% | (4,266,423.66 | ) | - | 4,266,423.66 |
The table below presents key financial information of the aforesaid subsidiaries. Andthe information is before intraGroup offsetting.
| Fosber Asia | Tiru?a Group | Italy QCorr | |||||||
| 2020 | |||||||||
| Current assets | 234,958,647.84 | 163,298,154.40 | 85,678,911.94 | ||||||
| Non-current assets | 7,397,590.50 | 102,212,623.71 | 89,107,086.16 | ||||||
| Total assets | 242,356,238.34 | 265,510,778.11 | 174,785,998.10 | ||||||
| Current liabilities | 180,646,968.18 | 45,073,392.11 | 96,103,930.63 | ||||||
| Non-current liabilities | 11,984,150.68 | 10,962,079.01 | 78,913,562.80 | ||||||
| Total liabilities | 192,631,118.86 | 56,035,471.12 | 175,017,493.43 | ||||||
| Operating revenue | 203,822,010.26 | 201,033,491.76 | 227,098,165.68 | ||||||
| Net profit | 21,560,478.75 | 10,540,714.99 | (11,055,920.82 | ) | |||||
| Total comprehensive income | 21,560,478.75 | 8,102,058.54 | (11,055,920.82 | ) | |||||
| Net cash generated from/used in operating activities | 54,994,242.05 | 51,870,539.53 | (7,763,897.55 | ) |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
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, Guangdong, China | manufacturing | RMB12.844 million | 21.00 | - | Equity method | |||||||||||
| Talleres Tapre,S.L. | Spain | Spain | manufacturing | - | - | 14.00 | Equity method | |||||||||||
The table below presents financial information of Guangdong Jaten Robot &Automation Co., Ltd. Such information is accounting policy difference-adjusted andreconciled to the carrying amounts of the financial statements.
| 2020 | 2019 | |||||
| Current assets | 237,153,222.57 | 219,472,243.57 | ||||
| Including: cash and cash equivalents | 9,320,324.83 | 10,188,543.73 | ||||
| Non-current assets | 112,043,388.53 | 113,320,858.41 | ||||
| Total assets | 349,196,611.10 | 332,793,101.98 | ||||
| Current liabilities | 148,070,950.71 | 136,413,860.90 | ||||
| Non-current liabilities | 27,571,880.84 | 28,053,156.84 | ||||
| Total liabilities | 175,642,831.55 | 164,467,017.74 | ||||
| Equity attributable to owners of the parent | 173,553,779.55 | 168,326,084.24 | ||||
| Share of net assets based on the Company’s interest | 36,446,293.71 | 33,665,216.85 | ||||
| Carrying amount of the investment | 70,900,088.92 | 60,136,740.98 |
| 2020 | 2019 | |||||
| Operating revenue | 102,479,717.84 | 153,097,991.65 | ||||
| Income tax expenses | 2,574,241.97 | - | ||||
| Net profit | 14,587,371.13 | 14,017,719.34 | ||||
| Total comprehensive income | 14,587,371.13 | 14,017,719.34 |
The table below presents the aggregate financial information of associatesinsignificant to the Group:
| 2020 | 2019 | |||||
| Associates (Talleres Tapre, S.L.) | ||||||
| Total carrying amount of investments | 1,771,115.81 | 1,724,878.58 | ||||
| Total amounts based on the Company’s interests: | ||||||
| Net profit | 76,960.49 | 189,406.64 | ||||
| Other comprehensive income/(loss) | - | (384.56 | ) | |||
| Total comprehensive income | 76,960.49 | 189,022.08 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
VIII. Risks Associated with Financial Instruments
1. Classification of financial instruments
The carrying amounts of various financial instruments as at the balance sheet date areas follows:
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 |
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 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
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 areas follows: (cont’d)
2019
Financial assets
| At fair value through profit or loss | At amortized cost | At fair value through other comprehensive income | Total | ||||||||
| As required by standard | Designated | As required by standard | |||||||||
| Cash and bank balances | - | - | 2,356,703,434.60 | - | 2,356,703,434.60 | ||||||
| Financial assets held for trading | 1,039,381.59 | 1,163,000,000.00 | - | - | 1,164,039,381.59 | ||||||
| Notes receivable | - | - | - | - | - | ||||||
| Accounts receivable | - | - | 597,431,210.02 | - | 597,431,210.02 | ||||||
| Receivables financing | - | - | - | 55,447,099.32 | 55,447,099.32 | ||||||
| Other receivables | - | - | 79,573,114.49 | - | 79,573,114.49 | ||||||
| Current portion of non-current assets | - | - | 356,983.48 | - | 356,983.48 | ||||||
| Other non-current financial assets | 20,559,159.34 | - | - | - | 20,559,159.34 | ||||||
| 21,598,540.93 | 1,163,000,000.00 | 3,034,064,742.59 | 55,447,099.32 | 4,274,110,382.84 | |||||||
Financial liabilities
| Financial liabilities at amortized cost | |||
| Short-term borrowings | 117,888,353.14 | ||
| Notes payable | 43,973,859.51 | ||
| Accounts payable | 472,862,744.45 | ||
| Other payables | 90,950,443.16 | ||
| Current portion of non-current liabilities | 353,399,238.29 | ||
| Long-term borrowings | 224,146,667.48 | ||
| 1,303,221,306.03 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
VIII. Risks Associated with Financial Instruments (cont’d)
. Transfer of financial assets
Financial assets already transferred but not wholly derecognized
On 31 December 2020, the carrying value of the bank acceptance notes (BAs)endorsed by the Group to suppliers for the settlement of accounts payable wasRMB11,800,000.00 (31 December 2019: nil). The Group believed that the Groupretained almost all their risks and rewards, including the risk of default associatedtherewith, so the Group continued to confirm them and the settled accounts payableassociated therewith in full amount. After the endorsement, the Group will no longerreserve the right to use them, including the right to sell, transfer, or pledge them toother third parties. On 31 December 2020, the carrying value of the accounts payablesettled with them totaled RMB11,800,000.00 (31 December 2019: nil).
Transferred financial assets that have been wholly derecognized but continue to beinvolved
On 31 December 2020, the carrying value of the BAs endorsed by the Group tosuppliers for the settlement of accounts payable was RMB56,737,978.04 (31December 2019: RMB55,447,099.32). On 31 December 2020, their maturity datevaried from one to 12 months. As stipulated in the Negotiable Instruments Law, if theaccepting bank refuses to pay, their holders have the right to recourse from the Group("continue to be involved"). The Group believed that the Group had transferred almostall their risks and rewards, so the Group derecognized the carrying value of them andthe settled accounts payable associated therewith. The maximum loss andundiscounted cash flows from continuing involvement and repurchase were equal totheir carrying value. The Group believed that it was insignificant to continue toinvolve in fair value.
In 2020, the Group did not confirm the gains or losses on the transfer day. The Grouphad no income or expenses recognized in the current year and cumulatively due tocontinued involvement in derecognized financial assets. Endorsements occurredroughly evenly during the year.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
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, mainlyincluding credit risk, liquidity risk and market risk (including exchange rate risk and interest raterisk). The Group mainly has the following instruments: cash and bank balances, equityinvestment, borrowings, notes receivable, accounts receivable, notes payable and accountspayable. The risk management strategies adopted by the Group to lower risks associated withthese financial instruments are described below.
The Group's Board of Directors is fully responsible for the determination of risk managementobjectives and policies and assumes ultimate responsibility for such risk management objectivesand policies, but the Board of Directors has authorized the Chief Executive's Office of the Groupto design and implement procedures to ensure the effective execution of risks managementobjectives and policies. The Board of Directors reviews the effectiveness of the executedprocedures and the rationality of the risk management objectives and policies through the monthlyreports submitted by the treasury supervisor. The internal auditors of the Group will also audit therisk management policies and procedures and will report relevant findings to the AuditCommittee.
The Group's overall goals for risk management are to develop risk management policies tominimize risks without unduly 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'spolicies, credit checks are needed for all customers that require transactions should be conductedby means of credit. Additionally, the Group performs continuous monitoring of the balance ofaccounts receivable to ensure that the Group will not face major bad debt risk. For transactions notsettled in the accounting standard currency of the relevant business unit, unless specificallyapproved by the credit control department of the Group, the Group will not provide credittransaction conditions.
Since the counterparties of cash and bank balances and notes receivable are banks with a goodreputation and high credit rating, the credit risk of such financial instruments is low.
Other financial assets of the Group mainly include accounts receivable, other receivables andcontract assets, the credit risk of which arises from counterparty default, and the maximum riskexposure is equal to the carrying value of these instruments.
The Group transacts only with recognized and reputable third parties, so no collateral is required.Credit risk concentration is managed by customer/counterparty, geographic region and industry.Because the customer base of accounts receivable of the Group is widely dispersed in differentdepartments and industries, there is no major credit risk concentration within the Group. TheGroup does not hold any collateral or other credit enhancement on the balance of accountsreceivable.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
VIII. Risks Associated with Financial Instruments (cont’d)
3. Financial instrument risks (cont’d)
Credit risk (cont’d)
Criteria for judging significant increases in credit risk
The Company assesses whether or not the credit risk of the relevant financial instruments hasincreased significantly since the initial recognition at each balance sheet date. While determiningwhether the credit risk has significantly increased since initial recognition or not, the Companytakes into account the reasonable and substantiated information that is accessible without exertingundue extra cost or effort, including qualitative and quantitative analysis based on the historicaldata of the Company, external credit risk rating, and forward-looking information. Based on thesingle financial instrument or the combination of financial instruments with similar characteristicsof 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 ofdefault during the expected lifetime of financial instruments.
Definition of credit-impaired financial assetsThe standard adopted by the Group to determine whether a credit impairment occurs is consistentwith the internal credit risk management objectives of the relevant financial instrument, takinginto account quantitative and qualitative criteria. When the Group assesses whether the creditimpairment of debtor occurred, the principal factors 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 nototherwise 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 multipleevents and may not be 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 impairmentof assets, the Group measures the impairment loss for different assets with ECL of 12 months orthe entire lifetime respectively. The key measuring parameters of ECL include probability ofdefault (PD), loss given default (LGD) and exposure at default (EAD). The Group takes intoaccount the quantitative analysis of historical statistics (such as ratings of counterparties, mannersof guarantees and types of collaterals, repayments, etc.) and forward-looking information.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
VIII. Risks Associated with Financial Instruments (cont’d)
3. Financial instrument risks (cont’d)
Credit risk (cont’d)
Parameters of ECL measurement (cont’d)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 entireremaining lifetime. The Group’s PD is adjusted based on the results of theexpected credit loss model, taking into account the forward-lookinginformation to reflect the debtor’s PD under the current macroeconomicenvironment;
（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 andpriority of the recourse, and the type of collaterals, the LGD varies. The LGDis the percentage of loss of risk exposure at the time of default, calculated overthe 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 bothinvolve forward-looking information. Through the analysis of historical data, theGroup identifies the key economic indicators that affect the credit risk and ECL.
As at 31 December 2020, there were no significant increases in the credit risk of theGroup.
Credit risk exposures
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 | - | - | ||||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
VIII. Risks Associated with Financial Instruments (cont’d)
3. Financial instrument risks (cont’d)
Credit risk (cont’d)
Credit risk exposures (cont’d)
2019
| Carrying amount (unsecured) | Carrying amount (secured) | |||||||||
| 12-month | Lifetime | 12-month | Lifetime | |||||||
| ECL | ECL | ECL | ECL | |||||||
| Accounts receivable | - | 17,373,408.69 | - | - | ||||||
| Other receivables | 2,779,738.01 | 2,460,000.00 | - | - | ||||||
Liquidity risk
The Group monitors its risk to the shortage of funds using a recurring liquidityplanning tool. This tool considers the maturity profile of its financial instruments andprojected cash flows from operations.
The maturity profile of financial liabilities based on undiscounted contractual cashflow is summarised as follows:
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 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
VIII. Risks Associated with Financial Instruments (cont’d)
3. Financial instrument risks (cont’d)
Liquidity risk (cont’d)
The maturity profile of financial liabilities based on undiscounted contractual cashflow is summarised as follows: (cont’d)
2019
| Within 1 month | 1-3 months | 3 months-1 year | 1-5 years | Over 5 years | Total | |||||||||
| Short-term borrowings | - | - | 117,888,353.14 | - | - | 117,888,353.14 | ||||||||
| Notes payable | - | - | 43,973,859.51 | - | - | 43,973,859.51 | ||||||||
| Accounts payable | - | - | 472,862,744.45 | - | - | 472,862,744.45 | ||||||||
| Other payables | - | - | 90,950,443.16 | - | - | 90,950,443.16 | ||||||||
| Current portion of non-current liabilities | - | - | 353,399,238.29 | - | - | 353,399,238.29 | ||||||||
| Long-term borrowings | - | - | - | 203,034,208.34 | 21,112,459.14 | 224,146,667.48 | ||||||||
| - | - | 1,079,074,638.55 | 203,034,208.34 | 21,112,459.14 | 1,303,221,306.03 |
Market risk
Interest rate risk
The Group’s exposure to risk of changes in market interest rates relates primarily tothe Group’s loans with floating interest rates.
The sensitivity analysis of interest rate risks is set out in the following table, reflectingthe impact of reasonable and probable change in interest rates on net profit or loss(through the impact on floating rate loans) and other comprehensive income (net oftax) assuming that other variables remain constant.
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 | |||||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
VIII. Risks Associated with Financial Instruments (cont’d)
3. Financial instrument risks (cont’d)
Market risk (cont’d)
Interest rate risk (cont’d)
2019
| 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 | (22,906.37 | ) | - | (22,906.37 | ) | ||||||
| Loans | (0.5 | ) | 22,906.37 | - | 22,906.37 | |||||||
Exchange rate risk
The Group is exposed to trading exchange rate risks. Such exposures arise from salesor purchases by business units in currencies other than the units’ functionalcurrencies. Approximately 76% (2019：77%) of the Group’s sales are priced incurrencies other than the functional currencies of the business units that incur thesales, and approximately 24% (2019：23%) of costs are priced in the functionalcurrencies of the business units.
The sensitivity analysis of exchange rate risks is set out in the following table,reflecting the impact of reasonable and probable change in the exchange rates of EURand USD on net profit or loss and other comprehensive income (net of tax)assuming that other variables remain constant.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
VIII. Risks Associated with Financial Instruments (cont’d)
3. Financial instrument risks (cont’d)
Market risk (cont’d)
Exchange rate risk (cont’d)
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 |
2019
| 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 | 3,595,794.73 | - | 3,595,794.73 | |||||||
| Weaker RMB against EUR | (2 | ) | (3,595,794.73 | ) | - | (3,595,794.73 | ) |
4. Capital management
The primary objective of the Group’s capital management is to safeguard the Group’sability to continue as a going concern and to maintain healthy capital ratios in order tosupport its business and maximise shareholders’ value.
The Group manages its capital structure and makes adjustments in the light of changesin economic conditions and in the risk profiles of relevant assets. To maintain oradjust the capital structure, the Group may adjust the dividend payment toshareholders, return capital to shareholders or issue new shares. The Group is notsubject to any externally imposed capital requirements. No changes were made in theobjectives, policies or processes for managing capital during 2020 and 2019.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
IX. Disclosure of Fair Values
1. Assets and liabilities measured at fair value
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 |
| Financial assets at fair value through profit or loss | 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 |
| 1,636,296,430.31 | 62,686,566.19 | - | 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 current liabilities | - | 158,452.18 | - | 158,452.18 | |||
| Other non-current liabilities | - | - | 68,737,415.25 | 68,737,415.25 | |||
| - | 158,452.18 | 110,145,525.05 | 110,303,977.23 | ||||
2. Unobservable inputs
Below is a summary of the significant unobservable inputs to the fair valuemeasurement of Level 3:
| Closing fair value | Valuation technique | Unobservable inputs | Range | |||||||||
| Financial liabilities held for trading | 41,408,109.80 | Discounted cash flow method | Weighted average cost | 2.53%-3.61% | ||||||||
| Other non-current liabilities | 68,737,415.25 | Discounted cash flow method | Weighted average cost | 2.00%-5.80% |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2020 Expressed in Renminbi Yuan
IX. Disclosure of Fair Values (cont’d)
3. Reconciliation in fair value measurement
Reconciliation of continuous fair value measurements categorised within Level 3 ofthe fair value hierarchy:
2020
| Opening | Transfer into | Transfer out of | Total current gains and losses | Purchase | Closing | Change in unrealized gains and losses for the period of liabilities | |||||||
| balance | Level 3 | Level 3 | 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 | ||||||
In the continuous fair value measurement at Level 3, gains and losses through profitor loss relating to financial assets and non-financial assets is analyzed as follows:
| 2020 | ||||||
| Gains and losses relating to financial assets | Gains and losses relating to non-financial assets | |||||
| Total gains and losses through profit or loss | 2,255,137.35 | - | ||||
| Change in unrealized gains and losses for the period of assets held at end of period through profit or loss | 2,255,137.35 | - | ||||
| 2019 | ||||||
| Gains and losses relating to financial assets | Gains and losses relating to non-financial assets | |||||
| Total gains and losses through profit or loss | - | - | ||||
| Change in unrealized gains and losses for the period of assets held at end of period through profit or loss | - | - | ||||
4. Transfers between levels of fair value measurement
No such transfers in the Reporting Period.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
X. Relationships and Transactions with Related Parties
1. Parent Company
| Relationship with the Company | Interest in the Company (%) | ||||||
| Tang Zhuolin (individual) | One of the Company’s controlling shareholders and actual controllers | 17.52 | |||||
| Tang Zhuomian (individual) | One of the Company’s controlling shareholders and actual controllers | 8.79 |
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 | |
| Cen Meiling | Supervisor during the Reporting Period | |
| Zhao Xiuhe | Supervisor | |
| He Baohua | Supervisor | |
| Shao Yongfeng | Chief Financial Officer and Vice President | |
| Smart Shot Inc Limited（hereinafter, “Smart Shot”） | Non-controlling shareholder of the Company’s majority-owned subsidiary |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
X. Relationships and Transactions with Related Parties (cont’d)
5. Major transactions between the Group and related parties
（1） Transaction of goods and services with related parties
Purchases of goods and services from related parties
| Note | 2020 | 2019 | |||||
| CATL | 1) | - | 5,382,482,492.26 |
Sales of goods and services to related parties
| Note | 2020 | 2019 | |||||
| BAIC BJEV | 1) | - | 7,017,964,740.18 | ||||
| Foton | 1) | - | 183,966,713.54 | ||||
| Beijing Borgward | 1) | - | 13,557,432.64 | ||||
| - | 7,215,488,886.36 |
1) These companies were related parties of the Group in 2019. Upon the disposal ofPride by the Group in 2019, they ceased to be related parties of the Group. Andthe Group had no transactions with them in the current period.
（2） Remuneration of key management
| 2020 | 2019 | |||||||||
| Remuneration of key management | 12,521,009.78 | 13,526,996.13 |
6. Balances of amounts due from related parties
（1） Accounts receivable
| 2020 | 2019 | ||||||||
| Gross amount | Allowance | Gross amount | Allowance | ||||||
| Yinglian Digital | - | - | 660,000.00 | 66,000.00 | |||||
（2） Other receivables
| 2020 | 2019 | ||||||||
| Gross amount | Allowance | Gross amount | Allowance | ||||||
| Smart Shot | - | - | 58,227.04 | 5,822.70 | |||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
X. Relationships and Transactions with Related Parties (cont’d)
7. Balances of amounts due to related parties
（1） Other payables
| 2020 | 2019 | |||||
| Yinglian Digital | - | 200,876.88 |
XI. Share-based Payments
1. Overview
| 2020 | 2019 | |||||
| Total equity instruments granted | 22,600,000.00 | - |
| 2020 | 2019 | |||||
| Total employee services exchanged with share-based payments | 25,170,406.50 | - |
Equity-settled share-based payments are as follows:
| 2020 | 2019 | |||||
| Cumulative amount of equity-settled share-based payments recognized in capital surplus | 25,170,406.50 | - | ||||
| Total costs of equity-settled share-based payments | 25,170,406.50 | - |
The fair value of equity instruments at the date of grant was determined based on thestock price of RMB4.38/share at that date. The fair value of restricted shares grantedin 2020 was RMB60.07 million (RMB4.38/share). The number of exercisable equityinstruments at each balance sheet date during the vesting period is determined takinginto account the separation rate, the company performance requirements and theindividual performance requirements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
XI. Share-based Payments (cont’d)
2. Share-based payment plan
On 27 March 2020, the Company convened the 44th (Extraordinary) Meeting of theThird Board of Directors, where the Proposal on Granting Restricted Shares toAwardees was approved, and the Board of Directors agreed to grant 22.85 millionrestricted shares to 42 awardees. The grant date for the first grant of restricted shareswas 27 March 2020. On 8 June 2020, the Company approved the Proposal onAdjusting Matters Related to the 2020 Restricted Share Incentive Plan, the number ofawardees was adjusted to 40, and the number of granted restricted shares was adjustedto 22.6 million. The exercise price of this restricted share grant was RMB1. As at 31December 2020, the accumulated amount of subscription funds received by theCompany for the first grant of restricted shares under this incentive plan totaledRMB22,600,000.00.
The arrangements for unlocking the restricted shares under the restricted shareincentive plan are as follows:
| 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 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 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 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% |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
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 alsomeet the following 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 refersto the audited consolidated statement of net profit attributable to the shareholders ofthe Company excluding the impact of share-based payments under this and otherequity incentive plans. The base of performance appraisal is the average net profit (thenet profit attributable to shareholders of the listed company in consolidatedstatements) of the Company for 2018 and 2019 after deducting the relevant financialimpacts 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 andD. The non-resalable restricted shares of those awardees with appraisal results ofLevel D will be repurchased and retired by the Company, and the repurchase price isthe grant price.
XII. Commitments and Contingent Events
1. Significant commitments
As at the balance sheet date, the Group had no significant commitments which wererequired to be disclosed.
2. Contingent Events
As at the balance sheet date, the Group had no contingent events which were requiredto be disclosed.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
XIII. Events after the Balance Sheet DateAs at the balance sheet date, the Group had no events after the balance sheet datewhich were required to be disclosed.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
XIV. Other Significant Matters
1. Segment reporting
Operating segment
For management purposes, the Group divides its business in to two operatingsegments—domestic and overseas.
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 |
2. Leases
As lessee
Significant operating leases: According to the lease contracts signed with the lessors,minimum lease payments under irrevocable operating leases falling due are asfollows:
| 2020 | 2019 | |||||
| Within 1 year (inclusive) | 5,712,078.60 | 5,276,493.00 | ||||
| 1-2 years (inclusive of 2 years) | 6,073,200.60 | 5,540,403.00 | ||||
| 2-3 years (inclusive of 3 years) | 6,314,631.00 | 5,901,525.00 | ||||
| Over 3 years | 8,473,995.00 | 14,788,626.00 | ||||
| 26,573,905.20 | 31,507,047.00 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
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 asfollows:
| 2020 | 2019 | |||||
| Within 1 year | 113,429,366.77 | 114,803,763.84 | ||||
| 1-2 years | 41,024,601.08 | 32,275,536.72 | ||||
| 2-3 years | 438,024.56 | 4,448,266.21 | ||||
| 3-4 years | 3,014,635.01 | 173,942.57 | ||||
| 4-5 years | 170,190.80 | 670,678.75 | ||||
| Over 5 years | 2,094,629.83 | 1,392,156.51 | ||||
| 160,171,448.05 | 153,764,344.60 | |||||
| Less: allowances for doubtful accounts receivable | 6,654,009.15 | 2,668,130.50 | ||||
| 153,517,438.90 | 151,096,214.10 | |||||
| 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 | ||||||||
| 2019 | |||||||||
| Gross amount | Allowance | Carrying amount | |||||||
| Amount | Percentage | Amount | Percentage | ||||||
| （%） | （%） | ||||||||
| Accounts receivable for which allowances are established individually | - | - | - | - | - | ||||
| Accounts receivable for which allowances are established by group with similar credit risk characteristics | 153,764,344.60 | 100.00 | 2,668,130.50 | 100.00 | 151,096,214.10 | ||||
| 153,764,344.60 | 100.00 | 2,668,130.50 | 151,096,214.10 | ||||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
XV. Notes to Major Items in the Company Financial Statements (cont’d)
1. Accounts receivable (cont’d)
As at 31 December 2020, accounts receivable for which allowances are establishedindividually are as follows:
| Gross amount | Allowance | ECL （%） | Reason for allowance | |||||||
| Customer 1 | 981,949.40 | 981,949.40 | 100.00 | Customer’s inability to settle the amount due | ||||||
| Customer 2 | 641,600.00 | 641,600.00 | 100.00 | Customer’s inability to settle the amount due | ||||||
| Customer 3 | 608,800.00 | 608,800.00 | 100.00 | Customer’s inability to settle the amount due | ||||||
| Customer 4 | 515,595.00 | 515,595.00 | 100.00 | Customer’s inability to settle the amount due | ||||||
| Customer 5 | 283,000.00 | 283,000.00 | 100.00 | Customer’s inability to settle the amount due | ||||||
| 3,030,944.40 | 3,030,944.40 |
As at 31 December 2019, the Company had no accounts receivable for whichallowances are established individually.
Accounts receivable for which allowances are established by group with similar creditrisk characteristics are as follows:
| 2020 | 2019 | |||||||||||||||||
| Gross amount estimated to be in default | ECL (%) | Lifetime ECL | Gross amount estimated to be in default | ECL (%) | Lifetime ECL | |||||||||||||
| Within 1 year | 113,429,366.77 | 1.03 | 1,170,806.97 | 146,073,697.03 | 0.34 | 498,786.40 | ||||||||||||
| 1-2 years | 41,024,601.08 | 1.71 | 699,477.21 | 3,114,430.74 | 5.00 | 155,721.54 | ||||||||||||
| 2-3 years | 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 | 2,339,439.00 | 10.00 | 233,943.90 | ||||||||||||
| Over 5 years | 561,229.83 | 100.00 | 561,229.83 | 2,236,777.83 | 79.56 | 1,779,678.66 | ||||||||||||
| 157,140,503.65 | 3,623,064.75 | 153,764,344.60 | 2,668,130.50 | |||||||||||||||
Movements in allowances for doubtful accounts receivable are as follows:
| Opening balance | Established in the period | Closing balance | |||||||||
| 2020 | 2,668,130.50 | 3,985,878.65 | 6,654,009.15 | ||||||||
| 2019 | 1,988,510.18 | 679,620.32 | 2,668,130.50 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
XV. Notes to Major Items in the Company Financial Statements (cont’d)
1. Accounts receivable (cont’d)
Top 5 of accounts receivable are as follows:
| 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 12 | 3,500,000.00 | 2.19 | 65,100.00 | |||
| Customer 13 | 3,155,678.99 | 1.97 | 58,695.63 | |||
| Customer 14 | 2,890,454.67 | 1.80 | 53,762.46 | |||
| 127,825,585.95 | 79.80 | 177,558.09 |
2. Other receivables
| 2020 | 2019 | |||||
| Other receivables | 28,388,543.22 | 36,670,496.12 | ||||
| Dividends receivable | 40,000,000.00 | - | ||||
| 68,388,543.22 | 36,670,496.12 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
XV. Notes to Major Items in the Company Financial Statements (cont’d)
2. Other receivables (cont’d)
Other receivables
The aging of other receivables is analyzed as follows:
| 2020 | 2019 | |||||
| Within 1 year | 26,448,285.13 | 28,833,971.68 | ||||
| 1-2 years | 278,657.36 | 1,518,890.62 | ||||
| 2-3 years | 732,604.03 | 8,640,379.72 | ||||
| 3-4 years | 1,871,615.53 | 414,540.49 | ||||
| 4-5 years | 37,693.48 | - | ||||
| Over 5 years | 174,712.23 | 250,000.00 | ||||
| 29,543,567.76 | 39,657,782.51 | |||||
| Less: allowances for doubtful other receivables | 1,155,024.54 | 2,987,286.39 | ||||
| 28,388,543.22 | 36,670,496.12 |
Other receivables are classified by nature as follows:
| 2020 | 2019 | |||||
| Internal transactions with related parties | 16,386,270.48 | 24,488,538.25 | ||||
| Prepaid service charges | 2,663,309.52 | 1,724,133.15 | ||||
| Security deposits | 1,818,495.96 | 1,522,182.68 | ||||
| Employee loans and petty cash | 806,740.89 | 843,783.19 | ||||
| Performance compensation | 500,000.00 | 8,200,000.00 | ||||
| Export tax refunds | - | 1,051,258.91 | ||||
| Others | 7,368,750.91 | 1,827,886.33 | ||||
| 29,543,567.76 | 39,657,782.51 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
XV. Notes to Major Items in the Company Financial Statements (cont’d)
2. Other receivables (cont’d)
Other receivables (cont’d)
Movements in allowances for doubtful other receivables that are established based onthe 12-month ECL and the lifetime ECL are as follows:
2020
| Stage 1 | Stage 2 | Stage 3 | Total | ||||||||
| 12-month ECL | Lifetime ECL | Financial assets with credit impairment (lifetme 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 | |||||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements (Cont’d)2020 Expressed in Renminbi Yuan
XV. Notes to Major Items in the Company Financial Statements (cont’d)
2. Other receivables (cont’d)
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 | |||||||||
| 2020 | 2,987,286.39 | 133,781.06 | 1,966,042.91 | 1,155,024.54 | ||||||||
| 2019 | 1,271,945.65 | 1,715,340.74 | - | 2,987,286.39 |
As at 31 December 2020, top 5 of other receivables are as follows:
| Closing balance | 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 | - | ||||||||||
| Guangdong Fosber Intelligent Equipment Co., Ltd. | 2,479,766.39 | 8.39 | Current account | Within 1 year | - | ||||||||||
| Suzhou Shunyi Investment Co., Ltd. | 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 | Security deposits | 2-3 years | 38,440.70 | ||||||||||
| 18,412,056.23 | 62.32 | 38,440.70 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2020 Expressed in Renminbi Yuan
XV. Notes to Major Items in the Company Financial Statements (cont’d)
3. Long-term equity investments
2020
| Opening | Change in the period | Period-end | |||||||||||||
| balance | Opening impairment allowance | Additional investment | Reduction in investment | Impairment allowance | Closing carrying amount | 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 | |||||||||
| Hainan Yineng Data Technology Co., Ltd. | - | - | 3,000,000.00 | - | - | 3,000,000.00 | |||||||||
| Hainan Yineng Investment Co., Ltd. | - | - | - | - | - | - | - | ||||||||
| 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 carrying amount | 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.Notes to the Financial Statements2020 Expressed in Renminbi Yuan
XV. Notes to Major Items in the Company Financial Statements (cont’d)
4. Operating revenue and costs
| 2020 | 2019 | ||||||||||||
| Revenue | Costs | Revenue | Costs | ||||||||||
| Principal operations | 347,742,217.13 | 215,188,639.98 | 439,412,077.02 | 262,077,447.56 | |||||||||
| Other operations | 10,078,539.01 | 1,398,778.91 | 15,346,182.28 | 15,657.61 | |||||||||
| 357,820,756.14 | 216,587,418.89 | 454,758,259.30 | 262,093,105.17 | ||||||||||
Information about contractual performance obligations is as follows:
Sale of manufactured goodsContractual performance obligations are fulfilled when delivering manufacturedgoods to customers, which usually requires a prepayment of the contractual price.
Installation servicesContractual performance obligations are fulfilled during the rendering of services.
The expected time for recognizing in revenue the total transaction price allocated tooutstanding (or partly outstanding) contractual performance obligations as at theperiod-end is as follows:
| 2020 | ||||||
| Within 1 year | 22,116,155 |
5. Investment income
| 2020 | 2019 | |||||
| Dividends under cost method | 58,868,681.95 | 60,000,000.00 | ||||
| Income from financial assets held for trading | 50,739,231.14 | 25,531,992.66 | ||||
| Income from long-term equity investments measured at equity method | 2,889,349.81 | 2,492,655.15 | ||||
| Disposal of equity investments | - | 596,461,024.12 | ||||
| Performance compensation | - | 1,447,054,285.27 | ||||
| 112,497,262.90 | 2,131,539,957.20 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Supplementary Information2020 Expressed in Renminbi Yuan
1. Schedule of exceptional gains and losses
| 2020 | |||
| Gain or loss on disposal of non-current assets (inclusive of impairment allowance write-offs) | (52,742.69 | ) | |
| 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 government’s uniform standards) | 10,749,683.55 | ||
| 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) | 96,118,955.74 | ||
| Non-operating income and expenses other than the above | 33,173,454.66 | ||
| Other gains and losses that meet the definition of exceptional gain/loss | 1,229,987.66 | ||
| 142,085,828.32 | |||
| Income tax effects | (15,906,631.40 | ) | |
| 126,179,196.92 | |||
| Non-controlling interests effects (net of tax) | (425,002.71 | ) | |
| 125,754,194.21 |
2. Return on equity (ROE) and earnings per share (EPS)
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 | ||||||
Part XIII Documents Available for Reference
1. The financial statements signed and sealed by the Company’s legal representative, Chief Financial Officerand the person-in-charge of the financial organ.
2. The original copy of the Independent Auditor’s Report signed and sealed by the certified publicaccountants and sealed by the CPA firm.
3. All the originals of the Company’s announcements and documents that were disclosed to the public duringthe Reporting Period on the media designated by the CSRC for information disclosure.
4. The 2020 Annual Report carrying the signature of the legal representative.
5. The documents above are lodged in the Securities Department of the Company on 25/F, Hisense SouthernBuilding, 1777 Chuangye Road, Nanshan District, Shenzhen City, Guangdong Province, China.