Kangping Technology (Suzhou) Co.Ltd(300907) : self evaluation report of internal control in 2021

Suzhou Co., Ltd

Self evaluation report on internal control in 2021

The board of directors of Kangping Technology (Suzhou) Co.Ltd(300907) (Suzhou) Co., Ltd. (hereinafter referred to as the company or the company) made a self-evaluation report on the internal control related to the financial statements as of December 31, 2021 on the basis of full evaluation of the internal control of the company.

The board of directors and all directors of the company guarantee that there are no false records, misleading statements or major omissions in the contents of this report, and bear individual and joint liabilities for the authenticity, accuracy and completeness of the contents of the report. 1、 Basic information of the company

The company, formerly known as Kangcheng motor (Suzhou) Co., Ltd., was established on April 19, 2004 and received the approval certificate of Shang Wai Su Fu Zi Zi [2004] No. 51914 issued by the people’s Government of Jiangsu Province (now the unified social credit code is 91320500758990626q).

According to the resolution of the board of directors of the company on October 8, 2011 and the amended articles of association, the company is changed into a joint stock limited company by means of overall change with all shareholders as the sponsors. The total approved net asset value of the company as of July 31, 2011 is converted into the total share capital of the company, with a par value of RMB 1 per share and a registered capital of RMB 7200000000, The difference between the net assets and the total paid in share capital is included in the capital reserve of the joint stock limited company.

On October 24, 2011, the company obtained the “Su Shang Zi [2011] No. 1356” reply on the change of Kangping Technology (Suzhou) Co.Ltd(300907) (Suzhou) Co., Ltd. into a joint-stock company issued by the Department of Commerce of Jiangsu Province, and agreed to transform the company into a foreign-invested joint-stock company and change its name to Kangping Technology (Suzhou) Co.Ltd(300907) (Suzhou) Co., Ltd.

According to the reply on Approving the registration of initial public offering shares of Kangping Technology (Suzhou) Co.Ltd(300907) (Suzhou) Co., Ltd. (zjxxz [2020] No. 2258) issued by China Securities Regulatory Commission, the company is approved to publicly offer 2400000000 RMB ordinary shares (par value of 1 yuan per share). After the issuance of shares, the total number of shares of the company is changed to 96 million shares, with a par value of RMB 1.00 per share and a total share capital of RMB 96 million, of which the total share capital of the original shareholders before the issuance of shares is RMB 72 million, accounting for 75.00% of the total share capital after the change; The share capital of social public shares is 24 million yuan, accounting for 25.00% of the total share capital after change. The capital increase has been verified by ShineWing Certified Public Accountants (special general partnership), and xyzh / 2020njaa20005 capital verification report was issued on November 13, 2020.

After previous capital increases and equity changes, as of December 31, 2021, the company’s share capital and equity structure

As follows:

Name of Investor: December 31, 2021

Proportion of investment amount (%)

Jiangsu Kangping Holding Group Co., Ltd. 401400000 41.81

Hong Kong Kanghui International Group Co., Ltd. 1890000000 19.69

Suzhou Hanbo investment enterprise (limited partnership) 625000000 6.51

Suzhou Guopin Investment Management Co., Ltd. 57 Shanghai Pudong Development Bank Co.Ltd(600000) 0 6.00

RMB common shares 2495000000 25.99

Total 9 Shanghai Pudong Development Bank Co.Ltd(600000) 0000 100.00

The company is a general equipment manufacturing industry, mainly engaged in the production and sales of electric tools and parts. The main products are electric motors and complete machines. Business scope: R & D and production of motors, electric tools and molds; Sell the products produced by the company; Engage in the wholesale, import and export business of commodities similar to the products produced by the enterprise (the above commodities do not involve state-owned trade, and those involving license management and special regulations shall be handled in accordance with the relevant provisions of the state). General business items: household appliance manufacturing; Sales of household appliances; Sales of home appliance parts; Research and development of household appliances; Non residential real estate leasing (except for the projects that must be approved according to law, carry out business activities independently according to law with the business license).

2、 Objectives and principles for the company to establish internal control system

In order to strengthen and standardize the company’s internal control, improve the company’s operation and management level and risk prevention level, promote the sustainable development of the company and protect the legitimate rights and interests of shareholders, according to the requirements of relevant laws, regulations and normative documents such as the company law, the securities law and the basic norms of enterprise internal control, the company combines its own business characteristics and internal development needs, and according to the internal environment contained in the internal control system Risk assessment, control activities, information and communication, and internal oversight framework have developed a series of internal control systems. The company has improved its governance structure and rules of procedure, and established a clear organizational structure and division of responsibilities in terms of internal control: the audit committee under the board of directors is responsible for the establishment and improvement of internal audit, internal control and risk management systems and the supervision of their implementation; The general manager of the company is responsible for organizing and leading the daily operation of internal control; The company sets up an audit department to be responsible for the daily supervision of internal control under the leadership of the audit committee.

(I) objectives of the company’s internal control

The company strives to build an internal control system based on a sound corporate governance structure, guided by strengthening risk awareness and cultivating internal control culture, closely combined with business practice, centered on improving internal control systems and measures, and supervised by the self-evaluation of departments and subordinate institutions and the inspection and evaluation of the company, so as to provide reasonable guarantee for achieving the following objectives:

1. Legal operation and compliance;

2. Complete assets;

3. The financial report information is true and complete;

4. Improve operation efficiency and effect;

5. Promote the realization of the strategic objectives of development.

(II) principles followed by the company’s internal control

According to the basic norms of enterprise internal control, the company establishes and implements internal control in accordance with the following principles:

1. Principle of comprehensiveness: internal control shall cover all economic businesses and relevant posts within the company, and run through the whole process of decision-making, implementation and supervision.

2. Principle of importance: internal control should pay attention to important business matters and high-risk areas on the basis of comprehensive control.

3. Principle of checks and balances: internal control shall ensure the reasonable setting and division of responsibilities and authorities of various institutions and posts of the company, adhere to the separation of incompatible positions, and ensure clear responsibilities, mutual restriction and mutual supervision between different institutions and posts.

4. Principle of adaptability: the internal control shall adapt to the company’s business scale, business scope, competition status and risk level, and shall be adjusted in time with the changes of the situation.

5. Cost benefit principle: internal control should weigh the cost and benefit to achieve effective control at an appropriate cost.

3、 Internal control system and Implementation

(I) internal control environment of the company

1. Corporate governance structure

In strict accordance with the company law, the securities law and other laws and regulations, the company has established and improved the governance structure suitable for the development of the company. The rights and responsibilities of the general meeting of shareholders, the board of directors, the board of supervisors and the management are clear, restrict each other and operate well, forming a set of effective operation and management framework; The board of directors of the company has four professional committees: Strategy Committee, nomination committee, salary and assessment committee and Audit Committee; It has formulated the rules of procedure of the general meeting of shareholders, the rules of procedure of the board of directors, the rules of procedure of the board of supervisors, the working rules of independent directors, the working rules of the general manager, the working rules of the Secretary of the board of directors, the implementation rules of the strategy committee of the board of directors, the implementation rules of the nomination committee of the board of directors, the implementation rules of the remuneration and assessment committee of the board of directors, and the implementation rules of the audit committee of the board of directors Foreign guarantee management system, foreign investment decision-making system, related party transaction management system and other systems; Employing relevant industry experts and professionals as independent directors has played a good role in improving the standard operation level.

2. Organizational structure of the company

The company has set up 10 functional departments, including operation Department, procurement department, sales department, human resources department, technology department, logistics department, administration department, finance department, investment legal department and audit department. Each department has clear responsibilities, reasonable division of labor and mutual restriction.

As of December 31, 2021, the company has wholly-owned subsidiaries Nantong kangpingdong Electromechanical Technology Co., Ltd., Yizhu motor (Suzhou) Co., Ltd., Suzhou Maituo Electric Tool Co., Ltd., Shenzhen aishibit Motor Co., Ltd., Suzhou Yingdong Electric Tool Co., Ltd., Hong Kong CommScope Investment Co., Ltd., Hong Kong kangpinghe Technology Co., Ltd., Kangping Technology (Suzhou) Co.Ltd(300907) (Vietnam) Co., Ltd, Has a holding subsidiary, Korea es Industry Co., Ltd. All functional departments and branches of the company can operate normally under the leadership of the company’s management in accordance with the management system formulated by the company.

3. Internal audit

The audit department is subordinate to the audit committee under the board of directors and works independently under the supervision and guidance of the board of directors. The audit department is responsible for the internal audit and supervision of the company. The company has established an internal audit management system, made clear provisions on internal audit work, and improved the norms of internal audit work. Through internal audit activities, the company has effectively ensured the implementation of the company’s rules and regulations, reduced the company’s business risks and strengthened internal control.

4. Human resources

The company sets up a human resources department to be responsible for the management of the company’s human resources. In accordance with the labor contract law and relevant laws and regulations, the company has formulated human resources management system, attendance management measures, talent performance management measures, employee reward and punishment management measures, employee training management measures, etc., and effectively stipulated and implemented the company’s recruitment, training, salary, assessment, incentive and other personnel work, It ensures the stability of the staff and the sustainability of talent training.

(II) Company Risk Assessment

In order to effectively identify the main risks affecting the realization of the company’s objectives, the company has established a unified and standardized risk assessment procedure and decision-making risk assessment mechanism, set reasonable business objectives and internal control objectives on the basis of full consideration of internal and external business risks, comprehensively analyze and manage all kinds of risks, and actively take effective countermeasures to ensure the stable and healthy development of the company. The management at all levels of the company can timely identify and control risks, and transfer the identified risks to relevant decision-making levels, so as to ensure the timely investigation and removal of potential risks and the timely and proper handling of emergencies.

The main risk factors faced by the company include: market risk, operation risk, policy risk, financial risk and management risk.

1. Market risk

(1) Macroeconomic fluctuation risk

The company’s main products are motors for electric tools, which are professional supporting parts for electric tool manufacturing industry. They have the characteristics of wide application fields, numerous product varieties and complex specifications. The downstream industry is highly related to the macroeconomic environment, residents’ income level, consumer demand and other factors, and has strong economic periodicity, which makes the company’s electric tool accessories industry also show certain cyclical fluctuations. When the macro-economy develops well, the electric tool industry maintains steady growth, and the market demand for motors continues to expand. However, in recent years, under the continuous influence of factors such as the global financial crisis, China’s macro economy is facing multiple pressures of slowing growth, structural adjustment and digesting the side effects of previous policies.

If the economic boom continues to decline in the future, it will have an adverse impact on the market demand for electric tools, or the decline in orders caused by major difficulties in the operation of the company’s main customers will have an adverse impact on the company’s production and operation, and then the company will face the risk of decline in operating revenue and operating profit.

(2) Increased competition risk

With the development of economy, the electric tool industry is developing rapidly. The existing enterprises expand the production scale or new enterprises enter, which intensifies the industry competition. At the same time, there are many production enterprises in the industry, with low market concentration and fierce competition. In recent years, some advantageous enterprises with certain competitiveness have gradually emerged in China’s motor industry. With years of development, the company has occupied a certain share in the market and gradually formed a brand effect. However, if it can not continue to maintain its existing advantages in technology development, product quality and marketing channels, in the face of increasingly fierce market competition, there will be a risk of decline in market share and gross profit margin.

(3) Overseas regional risk

The company’s direct export to the United States accounts for a relatively small proportion of sales revenue. In order to cooperate with the strategic layout of major customers and reduce the possible impact of Sino US trade disputes, and with the development trend of the global industrial chain layout of the power tool manufacturing industry, in order to improve market share, give play to scale effect and reduce production costs, the company has invested and built factories in Vietnam. As an emerging economy in Southeast Asia, Vietnam has relatively low labor cost and good business environment. At the same time, it has obvious location advantages, adjacent to China and fast sea and land transportation. The company’s production base in Vietnam will make full use of the above advantages to further improve the competitiveness of the company’s products. In the current global trading environment, Vietnam business will bring new opportunities for business growth to the company. However, if Vietnam’s political, economic, social situation and trade policy change significantly, the local demand changes significantly, and the political, economic and diplomatic cooperation relationship with China changes, it will have a certain impact on the operation of the company.

2. Operational risk

(1) Risk that products and technologies cannot be continuously updated

In order to seize the good opportunity of the transfer of the world manufacturing industry to China, gradually complete the industrial upgrading in the trend of globalization and realize the development and growth of enterprises, in recent years, Chinese motor manufacturing enterprises have increased the innovation of products and technologies, and expect to quickly meet the personalized needs of customers with differentiated products and rapid R & D. Through the core technology and design ability accumulated in the process of long-term production and operation, the company has strengthened the adjustment of product structure and the development of new products. At present, the company sells a large number of product series, models and specifications, and has obtained a number of Chinese patents, overseas patents and design rights and a number of core production technologies. Nevertheless, the company may still face the risk of declining market share and product profit margin due to the slow update speed of products and technologies and failure to meet customer needs in time.

If the company fails to solve the risks in the research and development of new products in the future, it will have an adverse impact on the research and development process of new products, and even lead to the research and development of new products

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