Wison Engineering Services : 2020 Annual Report

April 25, 2021 at 06:08 am

Wison Engineering

Builds a Better World

ANNUAL REPORT

Wison Engineering Services Co. Ltd.

(Incorporated in the Cayman Islands with limited liability Stock Code: 2236)

CHINA'S LEADING PROVIDER OF ENERGY & CHEMICAL EPC SERVICES

AND TECHNOLOGY INTEGRATED SOLUTIONS

Wison Engineering Services Co. Ltd. Annual Report 2020

CONTENTS

3 Corporate Information

6 Financial Summary

9 Business Overview

29 Management Discussion and Analysis

41 Biographies of the Directors and Senior Management

49 Report of the Directors

68 Corporate Governance Report

80 Independent Auditor's Report

Consolidated Statement of Profit or Loss
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows

93 Notes to Financial Statements

Corporate Information

Wison Engineering Services Co. Ltd. Annual Report 2020

Corporate Information

BOARD OF DIRECTORS

Executive Directors

Mr. Yan Shaochun* (Chief Executive Officer)

Mr. Zhou Hongliang

Mr. Dong Hua

Mr. Zheng Shifeng

Non-executive Director

Mr. Liu Hongjun* (Chairman)

Independent Non-executive Directors

Mr. Lawrence Lee

Mr. Tang Shisheng

Mr. Feng Guohua

AUDIT COMMITTEE

Mr. Lawrence Lee (Chairman)

Mr. Feng Guohua

Mr. Tang Shisheng

Mr. Yan Shaochun had been appointed as Executive Director and Chief Executive Officer on 5 February 2021.
Mr. Liu Hongjun had been appointed as Chairman on 5 February 2021.

NOMINATION COMMITTEE

Mr. Tang Shisheng (Chairman)

Mr. Feng Guohua

Mr. Lawrence Lee

REMUNERATION COMMITTEE

Mr. Feng Guohua (Chairman)

Mr. Lawrence Lee

Mr. Tang Shisheng

GLOBAL HEADQUARTERS, PRINCIPAL PLACE OF BUSINESS AND HEAD OFFICE IN THE PRC

633 Zhongke Road

Zhangjiang Hi-Tech Park

Pudong New Area

Shanghai 201210

PRC

PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE

Conyers Trust Company (Cayman) Limited

Cricket Square

Hutchins Drive

P.O. Box 2681

Grand Cayman, KY1-1111 Cayman Islands

Wison Engineering Services Co. Ltd. Annual Report 2020

Corporate Information

HONG KONG SHARE REGISTRAR

Computershare Hong Kong Investor Services Limited

Shops 1712-1716, 17/F, Hopewell Centre

183 Queen's Road East

Wan Chai

Hong Kong

COMPANY SECRETARY

Ms. Tsang Chi Ka*

AUTHORISED REPRESENTATIVES*

Mr. Yan Shaochun*

Ms. Tsang Chi Ka*

AUDITORS

Ernst & Young

PRINCIPAL BANKS

China CITIC Bank Corporation Limited Shanghai Pudong Development Bank Co., Ltd. Bank of China Limited

China Merchants Bank Co., Ltd.

Industrial and Commercial Bank of China Limited East West Bancorp, Inc

REGISTERED OFFICE

Cricket Square

Hutchins Drive

P.O. Box 2681

Grand Cayman, KY1-1111

Cayman Islands

PRINCIPAL PLACE OF BUSINESS IN HONG KONG

Room 5408

54th Floor

Central Plaza

18 Harbour Road

Wan Chai

Hong Kong

COMPANY'S WEBSITE

www.wison-engineering.com

STOCK CODE

2236

Mr. Yan Shaochun had been appointed as authorised representative on 5 February 2021.
Ms. Tsang Chi Ka had been appointed as Company Secretary and authorised representative on 18 February 2021.

Financial Summary

Wison Engineering Services Co. Ltd. Annual Report 2020

Financial Summary

		For the year ended 31 December
	2020	2019	2018	2017	2016
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
					(Restated)
Results
Revenue	5,296,064	4,367,271	3,256,478	4,124,790	3,041,877
Gross profit	301,202	408,227	498,872	861,158	931,233
(Loss)/profit before tax	(283,820)	89,775	72,739	229,124	121,217
Income tax credit/
(expenses)	12,309	(39,217)	(12,786)	(63,405)	(98,822)
(Loss)/profit for the year	(271,511)	50,558	59,953	165,719	22,395
Attributable to:
Owners of the parent	(271,238)	50,609	56,301	138,306	15,179
Non-controlling interests	(273)	(51)	3,652	27,413	7,216
Earnings per share
- Basic and diluted	RMB(0.07)	RMB0.01	RMB0.01	RMB0.03	RMB0.00

Wison Engineering Services Co. Ltd. Annual Report 2020

Financial Summary

		As at 31 December
	2020	2019	2018	2017	2016
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
					(Restated)
Assets and liabilities
Non-current assets	4,192,588	1,432,965	1,131,114	1,116,712	1,195,846
Current assets	4,665,778	4,287,999	4,618,231	6,496,159	6,524,839
Current liabilities	4,639,282	3,456,486	3,988,387	5,229,976	5,532,446
Net current assets	26,496	831,513	629,844	1,266,183	992,393
Total assets less current
liabilities	4,219,084	2,264,478	1,760,958	2,382,895	2,188,239
Non-current liabilities	427,340	460,851	11,139	23,513	30,777
Net assets	3,791,744	1,803,627	1,749,819	2,359,382	2,157,462
Share capital	330,578	330,578	330,299	329,968	329,809
Reserves	3,461,490	1,473,100	1,419,520	1,853,056	1,632,560
Non-controlling interests	(324)	(51)	-	176,358	195,093
Total equity	3,791,744	1,803,627	1,749,819	2,359,382	2,157,462

Business Overview

Wison Engineering Services Co. Ltd. Annual Report 2020

Business Overview

REVIEW OF 2020 ANNUAL RESULTS AND OUTLOOK

(I) BUSINESS OVERVIEW

In 2020, the Group continued to uphold the strategy of "improving people's livelihood with innovative technology". Taking full advantage of the rapid and flexible operating mechanism of a private enterprise, the Group proactively responded to the challenges and changes in the market and the industry. Meanwhile, the Group continued to optimize the organization structure, refined project management, increased the value creation of digitalization and modularization, and boosted the strategic investment in technology R&D and industry chain extension. The Group forged ahead overcoming difficulties, actively explored new opportunities, and e arnestl y i m p lemented the ph il o soph y o f "technology-oriented development", striving to become a leading and renowned energy and chemical technology engineering solutions provider in the domestic and international markets.

For the twelve months ended 31 December 2020 (the "Period under Review"), the global economy was affected by the outbreak of the novel coronavirus ("COVID-19") pandemic and the tense global trade relations, resulting in weak demand for crude oil and chemical market at home and abroad. During the Period under Review, total new contract secured by the Group amounted to approximately RMB10,657.2 million (net of estimated value added tax), representing a year-on-year decrease of 16.6%. As at 31 December 2020, the Group's total backlog value was approximately RMB27,172.9 million (net of estimated value added tax), representing an increase of 24.3% compared to that as at 31 December 2019. During the period, the main reason for the decrease in total new contract value was the global rampage of COVID-19, which caused uncertainties for macroeconomy and the industry and therefore delayed the planning and contract progress for some potential projects. In addition, the planning and progress of certain projects have been affected due to the adjustments to the environmental policy in places where the projects were located.

Wison Engineering Services Co. Ltd. Annual Report 2020

Business Overview

Market Environment

Global crude oil prices fluctuated in 2020. The crude oil market saw a historic plunge and a sluggish recovery in the first half of the year and gradually regained its confidence in the second half of the year. At the end of February, crude oil demand showed a steep decline due to the travel restrictions imposed by governments following the global outbreak of COVID-19. On the other hand, the Organization of the Petroleum Exporting Countries and its allies ("OPEC+") failed to agree on the terms of output cut of crude oil in March and led to a freefall in oil price. The price of WTI crude oil futures contract for May delivery, traded on New York Mercantile Exchange, hit historic low at US$-37.63 per barrel since its listing. During the period, major economies in Europe and America were still greatly affected by the epidemic and economic activities were significantly disrupted. Facing unprecedented pressure on the operations, most energy and chemical enterprises around the world significantly announced to scale-down their investment and budget, and cancelled or postponed a number of projects. However, with the conclusion of a record deal by OPEC+ to cut production by 9.7 million barrels per day in early May, oil prices were well supported and the international crude oil market rebounded.

On another front, China's economy has recovered rapidly since April and registered a year-on-year GDP growth of 6.5% in the fourth quarter, due to the containment of COVID-19 within its borders following rigorous pandemic control measures in the

second quarter, coupled with economic stimulus policies issued by the central and local governments, boosting the domestic energy and chemical markets and thus enabling the Asia Pacific region to be the main driving force for the recovery of the global oil market. Following the stepping up efforts of various countries in launching fiscal relief measures in the second half of the year in tandem with the anticipation of availability of effective vaccines, the market has gradually regain confidence in recovery. Brent crude oil prices climbed slowly and returned to the level of over US$50 per barrel at the end of the year.

During the Period under Review, benefitting from low oil price, as well as low cost and their competitive advantage arising from economies of scale and refinery-petrochemical integration, refinery-petrochemical enterprises in China achieved speedy turnaround in profit in the second quarter amid fluctuations in the crude oil market. Driven by the demand for medical protective supplies and packaging, the olefin industry recorded highest profit for these two years amid the downward cycle. In the coming years, propped up by the macroeconomy of the development of Midwestern China and the promotion of "Domestic and International Dual Circulation strategy", the demand for energy and chemical materials in China will continue to grow, thus promoting more investment. In the short term, foreign investment will decline due to the impact of the pandemic and low oil prices. It is expected that the chemical industry will start an upward cycle after 2022 along with the recovery of the economy and oil prices, ramping up investment in the industry.

Constantly enhancing the ecosystem and promoting diversified business development

During the Period under Review, the Group established headquarters-level and project-level disease emergency response task forces at home and abroad in line with the anti - pandemic government policies issued to implement stringent i n f e c t i o n c o n t r o l m e a s u r e s i n c l u d i n g t h e procurement, customs clearance and transportation of disease prevention materials worldwide. To reduce the impact of the pandemic on projects, the Group developed a COVID-19 emergency response plan to ensure the safety and health of employees and construction workers before an orderly reopening.

The Group implemented stringent pandemic prevention and control measures to ensure "zero infection" of employees and construction workers

Wison Engineering Services Co. Ltd. Annual Report 2020

Business Overview

To address the changing market, Wison Engineering was committed to enhancing its institutional structure, cutting costs and boosting efficiency in addition to strengthening technological research, d e v e l o p m e n t a n d i n n o v a t i o n a n d r e f i n e d management. The Group continued to optimize its supply chain and extend its industrial chain, while looking for premium investment opportunities to explore new markets and business opportunities. On 19 May, Wison Engineering entered into a strategic

cooperation agreement with Shenyang Blower Works Group Corporation (瀋陽鼓風機集團股份有限公司), pursuant to which both parties agreed to carry out all-round cooperation in market expansion,

product research and development and service provision in relation to refinery, petrochemical, coal- to-chemicals. On 22 June, the Group entered into a limited partnership agreement with Silver Saddle

Equity Investment Management (Shanghai) Company Limited (上海銀鞍股權投資管理有限公司) and other limited partners including Sinochem International to

establish a limited partnership for carrying out investments in new materials, fine chemicals and other projects related to national strategic emerging industries, with a target total capital contribution size of RMB950 million.

Wison Engineering Services Co. Ltd. Annual Report 2020

Business Overview

Meanwhile, Wison Engineering not only focused on petrochemical engineering and other core business activities, but also strived to explore new business and markets to achieve diversified development. During the Period under Review, the Group successfully established its presence in the municipal engineering market through the public-private partnership ("PPP") model, undertaking a total of three ongoing and newly contracted PPP projects. As the Group's first important municipal engineering livelihood project, the Yangtze River diversion project in Xinghua City, Jiangsu, with a total planned capacity of 430,000 tonnes per day, will ensure the water supply to approximately 1.58 million residents upon its completion scheduled for 2021. Wison Engineering will stick to high standards, high quality and refined management in its PPP business, aiming to create a new area of profit growth for the Group.

The Group established presence in the municipal engineering market through the PPP model

(II) BUSINESS AND OPERATIONS REVIEW

(1) International Markets

During the Period under Review, the global economy and the energy and chemical markets were seriously affected by the COVID-19 pandemic. The overall chemical market declined both at home and abroad and investment projects suffered different levels of delay worldwide. During the period, the Group remained committed to the internationalization strategy and constantly improved its international marketing, project execution and management team. Moreover, based on the demand in the overseas market, it further strengthened its modular prefabrication capability and enhanced its market competitiveness . During the period, Wison Engineering successfully secured new customers and explored new markets overseas and further established its presence in regions such as Russia, Central Asia and Southeast Asia, and is expected to make breakthrough in securing projects in emerging markets.

The Middle East:

The Middle East is a global energy hub. Meanwhile, the petrochemical industry has taken steps for a downstream transformation, becoming more active in gas field development, LNG and investment in major petrochemical projects in addition to crude oil mining, and has therefore generated new opportunities for engineering companies. With nearly ten years of presence in the Middle East, Wison Engineering continued to enhance its competitiveness in the region by establishing the

operating centre in the Middle East to quickly respond to the needs of local owners. Thanks to its outstanding capabilities in project execution, engineering quality, safety management and resource integration, the Group has delivered a number of quality projects for clients including Saudi Aramco, Abu Dhabi National Oil Company ("ADNOC") and Saudi Basic Industries Corporation ("SABIC"), and has therefore established a premium brand image and reputation.

The Group secured the first EPC project from Saudi Aramco in the Middle East

During the Period under Review, Wison Engineering entered into an EPC contract with Saudi Aramco for the dew point control device in Shaybah, Saudi Arabia. This project is the first oil and gas upstream EPC project in relation to natural gas processing secured by Wison Engineering in the Middle East market, marking Wison Engineering's first breakthrough achieved in Saudi Arabia in terms of modular solutions. Wison Engineering will construct a new dew point control device in the desulfurization

Wison Engineering Services Co. Ltd. Annual Report 2020

Business Overview

unit of the natural gas processing plant in the upstream on behalf of Saudi Aramco, at the same time increasing the natural gas processing capacity of the relevant devices downstream. The project is the first EPC project secured by Wison Engineering from Saudi Aramco independently, giving full play to Wison Engineering's excellent project execution and management capability in the Middle East and the recognition of its modular solutions by international top-class owners.

During the Period under Review, the STC-J UPP project of SABIC, undertook by the Group under EPC, was in progress as scheduled. The project is an interim test plant project for polyolefin of SABIC's research and development ("R&D") centre, and is the largest R&D investment project for SABIC so far. It will be the largest global R&D centre for SABIC after its completion, providing technical assurance for SABIC in developing and applying new products of polyolefin for commercial use. The project has now entered into the peak construction stage as scheduled.

The EPC Project for Saudi Aramco Total Refining and Petrochemical Company ("SATORP")'s Refinery Debottlenecking Project jointly obtained by the Group and Kellogg Brown & Root ("KBR") during the Period under Review, was in progress as scheduled. The project has achieved mechanical completion with high standards in mid-October 2020.

Wison Engineering Services Co. Ltd. Annual Report 2020

Business Overview

North America:

North America is another major market for the Group's global strategy. In view of issues such as high labour cost and delay in engineering progress in the North American market, the Group developed modularized EPC delivery services. The Group, t h r o u g h m e a n s o f m o d u l a r i z e d f a c t o r y prefabrication, assembly and integrated delivery, has reduced the cost of construction for projects in North America and significantly shortened the construction cycle, thus enhancing the economic efficiency of the projects. The modularized EPC service products enabled the Group to increase the competitiveness in the U.S market and have set a new benchmark for Chinese engineering enterprises.

The Group explored the North American market through modularized EPC delivery services

During the Period under Review, the Group was awarded an engineering, procurement and modular service contract by Air Products & Chemicals, Inc ("AP") for a petrochemical project in the Gulf of Mexico in the United States. The construction is expected to commence in 2021 and the start-up in the first half 2023. AP is one of Wison Engineering's major clients in the expansion of its global EPC

business. This project, representing the first collaboration between Wison Engineering and AP in the North America market, is a major milestone in Wison Engineering's business development in the United States, marking the entry into the growth phase by the Group's business in North America.

During the Period under Review, the Group strengthened its whole-process management of the petrochemical EPC project located in Texas of the United States amid the outbreak of COVID-19 pandemic to minimize the impact of the pandemic on construction. As the largest general contractor contract solely undertaken in the United States by a EPC engineering company in the petrochemical industry in China, the successful execution of the project again proves the Group's capability in managing engineering, procurement, construction and transportation for the modular EPC delivery project throughout the whole process, hence building up the Group's brand image as being outstanding in EPC project execution capability in the global market.

Other regions:

In addition to the key regions such as the Middle East and North America, the Group is determined to implement its international strategy and will continue to strengthen strategic investment in its global marketing layout by establishing branches in the countries in Central Asia, Southeast Asia as well as those along the "Belt and Road" initiative. During the period under review, the Group's MTO Front End Engineering Design (Pre-FEED) Project in Russia was successfully delivered as planned, laying the foundation for further expansion in Russian natural gas chemical EPC projects.

(2) Domestic markets

During the Period under Review, the Group actively consolidated its leading position in traditional fields such as ethylene and coal-to-chemicals in the core domestic market, and proactively explored emerging fields, which led to breakthroughs in aspects such as PDH, PTA and new chemical materials. During the Period under Review, with upgrading consumption and increasing environmental protection regulatory requirements in Mainland China, coupled with successive commencement of operation of large- scale integrated joint devices, and in particular, s t r o n g i n v e s t m e n t b y l a r g e - s c a l e p r i v a t e petrochemical enterprises in the bulk basic chemicals and fine chemicals market, the industry was injected with new impetus. In 2020, Wison Engineering had made significant progress on multiple key domestic projects in the PRC and gained high recognition.

Wison Engineering has allocated more resources for construction staff, machinery and equipment in key projects since March

SP Chemicals project group set a new benchmark for Taixing Chemical Industrial Park: On 12 October

2020, Wison Engineering officially entered into a PC contract with SP Chemicals for devices with annual

Wison Engineering Services Co. Ltd. Annual Report 2020

Business Overview

p r o d u c t i o n c a p a c i t y o f 4 0 0 , 0 0 0 t o n s o f chloroethylene, 500,000 tons of polyvinyl chloride and 310,000 tons of high impact polystyrene with a total contract value of approximately RMB2 billion. This contract involves multiple projects. Leveraging its experience in overall coordination and management of EPC projects accumulated over the years, the Group will tackle challenges such as short construction period, concentrated management difficulties, coordination of multiple production lines, excessive cross-operation and long term equipment, striving to achieve the goal of completing the construction and delivery of the project by mid- 2022. This is the first cooperation between Wison Engineering and SP Chemicals, laying a foundation for a more extensive and in-depth cooperation between both parties in fields such as new materials in the future.

PDH facilities for Shandong Binhua accelerated the

build-up of advantages in the PDH field: In June 2020, Wison Engineering successfully entered into a general contractor contract with Shandong Binhua New Material Co., Ltd. ("Shandong Binhua") for the PDH facilities for a C3C4 comprehensive use project with a capacity of 600kta. As a core project in Shandong Province, the construction of this project was jointly invested by Binhua Group and Beijing Tsinghua Industrial Development Research Institute with more than RMB10 billion. Upon completion of this project, various indicators such as device technology, energy consumption and resource consumption will serve as the best standards in the industry, which is of major strategic significance in terms of accelerating the development and construction of Binzhou Lingang High - end

Wison Engineering Services Co. Ltd. Annual Report 2020

Business Overview

Petrochemical Industrial Park and building a large- scale refining and chemical integrated base. This project helps Wison Engineering to continuously strengthen its design and enhancement standards in the PDH field, and raises the capacity for the construction of PDH facilities to create a higher economic value for its customers.

The Group entered into a general contractor contract with Shandong Binhua for the PDH facilities project

PTA project for Dongying Weilian was built as a

benchmark project for the PTA field: In June 2020, Wison Engineering entered into a contract with Dongying Weilian Chemical Co., Ltd. ("Dongying Weilian") for a purified terephthalic acid ("PTA") project with a capacity of 2,500kta. The contract covered the project design and procurement services of PTA process facilities as well as supporting public and auxiliary projects. As one of the key construction projects in Shandong Province in 2020, Dongying Weilian's PTA project of 2,500kta will, upon completion, further improve the company's crude oil-aromatic hydrocarbon-polyesterindustrial chain, which is of great significance in terms of the transformation and upgrade of local refining enterprises as well as the extension of the regional petrochemical industrial structure to a pattern with high-endand refined development. Following the Xinfengming project, this project is the second

collaborated PTA project between Wison Engineering and British Petroleum ("BP"), which will further establish the Group's position as a leading player in the PTA field.

Ethylene plant project for Zhejiang Petrochemical highlighted the Group's capabilities in project

execution and global procurement: As the general contractor of Zhejiang Petroleum & Chemical Co., Ltd. ("Zhejiang Petrochemical") for 2# 1,400kta ethylene plant, the Group fully leveraged its modular design, manufacturing experience and global procurement capabilities as well as project management experience. The construction progress beat expectations after a large number of construction staff as well as machinery and equipment were added since March, achieving an accumulated completion rate of 98%. Since the ethylene plant project is one of the principal part of Zhejiang Petrochemical's integrated refining and chemical project with a capacity of 40,000kta, the Group placed great emphasis on project safety, construction and management in a disciplined manner. The Company received a number of awards for this project, such as "HSE Model Project", "First Place in Quality Management" and "First Place in Disciplined Construction", signifying the wide recognition from project owners and the industry.

The ethylene project for Zhejiang Petrochemical won a number of awards for quality and construction management

Fujian ShenYuan's Coal-to-Hydrogen and Synthetic Ammonia Project set a new benchmark for safe

environmental protection: The EPC project of 75,000Nm3/h Coal-to-HydrogenPlant and 300kta

Synthetic Ammonia Plant of Fujian ShenYuan New Materials Co., Ltd. (福建申遠新材料有限公司) ("Fujian ShenYuan"), undertaken by the Group under

a general contractor contract, was in progress in a steady manner during the Period under Review. Its scope includes engineering management, basic design and detailed design of the project, supply of equipment and materials, construction and construction management as well as instructing the commissioning and start-up. Once completed, the Coal-to-Hydrogen and Synthetic Ammonia Project, which is a key part of the second phase of the 400kta integrated polyamide project of Fujian ShenYuan, will achieve upstream and downstream integration as well as production capacity expansion of the world's largest production base for caprolactam, and become a new industrial benchmark that is safe, reliable, energy-saving and environment-friendly. It also marks another breakthrough of the Group in the new material application area as well as a significant strategic presence for the Group to deepen its expansion in the South China market.

Wison Taizhou New Materials Project has achieved preliminary breakthroughs: The High-performance

Polyamide EPC Project of Wison (Taizhou) New Material Technology Co., Ltd. (惠生(泰州)新材料科技有限公司) ("Wison Taizhou"), undertaken by the Group under a general contractor contract, achieved

s i g n i f i c a n t b r e a k t h r o u g h s . C u r r e n t l y , t h e construction and intermediate handover of PA10T device and public and auxiliary projects as well as

Wison Engineering Services Co. Ltd. Annual Report 2020

Business Overview

PA12T device of the project have been completed. This project fully demonstrated the Group's capabilities in technological engineering conversion and will become a benchmark of Wison Engineering in the new material sector.

Technological Research and Development and Social Recognition

In 2020, keeping abreast of the global technological development trend of the industry and in congruence with the Chinese government's strategic framework on sustainable development, the Group closely monitored and maintained strategic investment in, amongst others, green chemistry, energy conservation process, high-end new material intermediates and breakthrough technology of basic chemicals, putting in continuous effort to implement its strategic objective of "improving people's livelihood with innovative technology". During the Period under Review, the Group successfully passed the re-evaluation of its High and New Technology Enterprise status, while the Shanghai Green Chemical and Energy Conservation Engineering Research Center also passed the evaluation and was approved for establishment. In addition, The Group continued to enrich its intellectual property portfolio by securing 20 new licensed patents and 7 new patent applications during the year, up to a total of 118 licensed patents and 177 patent applications.

Wison Engineering Services Co. Ltd. Annual Report 2020

Business Overview

In 2020, China undertook that it would achieve the goals of carbon peak in 2030 and carbon neutral in 2060. Under this context, the Group continued to deepen its green and low-carbon development s t r a t e g i e s a n d p r o a c t i v e l y p r o m o t e d t h e implementation of the national key research and development project titled as "new technology for efficient CO2 synthesis of chemicals". During the Period under Review, given that the construction of the testing platform for ethylene carbonate and hydrogen was basically completed, the Group started the preparation for various productions, at the same time pushing ahead the relevant IP application and subsequent design of technology packages for 100kta projects.

During the Period under Review, the Group entered into an agreement with Qingdao Sanli Group on the "development, design and technological services in relation to the technology packages of methyl methacrylate ("MMA")". This was the first project in China to develop ethylene - MMA industrial production equipment, which adopted leading technologies of olefin hydrogen formylation and o n e - s t e p o x i d a t i o n a n d e s t e r i f i c a t i o n o f methacrylaldehyde. These technologies have successfully passed the assessment by the China Petroleum and Chemical Industry Federation, and was identified as the first scientific achievement in China and certified to reach international advanced standards. The implementation of the project will effectively change the current predicament of the production of MMA in China using primarily the acetone cyanohydrin process, which involves heavy contamination and high energy consumption, offering advanced technical solutions for achieving green and sustainable development in this field. By continuously leveraging its extensive engineering

capability and practical experience regarding this new technology, the Group will work together with its domestic and foreign partners to push forward the industrial application of this new technology so as to boost the quality and sustainable development of the industry.

During the Period under Review, the Group completed the development of DME-based ethanol technology package for 100kta projects, and will actively expand industrial applications in dimethyl ether, methanol, acetic acid, polyvinyl alcohol, pharmaceutical intermediaries and other industries, as well as in the comprehensive use of tail gas resources mainly in coking and calcium carbide, so as to help the above industries achieve industrial upgrading through extension of the value chain and develop toward a differentiated and efficiency direction. Besides, the Group completed the design and delivery of the technology packages for the acid gas removal unit of the technical transformation project of the 45,000Nm3/h syngas plant for Huayuan New Material Co., Ltd.. The technology, self-developed by the Group, is used to provide qualified clean gas for downstream butanol plants by removing the acid gas in upstream syngas. This licensed technology has once again highlighted the Group's leading edges in the efficient and environment-friendly use of new coal-to-chemicals in the industry.

Wison Engineering endeavored to enhance digital capability and gradually developed "Intelligent Factory" through conducting "Smart Project"

(4) Digitalization

Adopting a digital and smart operational approach is the development trend for the energy and chemical engineering industry. During the Period under Review, the Group proactively promoted digital transformation, and implemented the mission of "enhancing the digital capability of Wison and supporting the One-Core and Two- Wing strategy". By enhancing its digital capability involved in "client- oriented" EPC, project management and other processes, the Group gradually developed "Intelligent Factory" through conducting "Smart Project". Simultaneously, the Group enhanced its operating efficiency and effectiveness by constantly improving its digital system with a focus on building up "Wison's digital strength", and continuously carrying out the reform of its institutions and operational models, procedures and methods, as well as systems and platforms. Wison Engineering's industry leading digital capability and system will continue to create values for customers.

In terms of Smart Project, Wison Engineering commenced the development of a digitalized engineering platform during the Period under Review. Propped up by the trend of digitalized

Wison Engineering Services Co. Ltd. Annual Report 2020

Business Overview

engineering in various disciplines, such as process, piping, instruments and electricity, this project, pursuing the philosophy of Digital Thread, researched and identified the demands for the cross- disciplinary data transmission among various design models and relevant information, thereby effectively strengthening cross-disciplinary information sharing and operation synergy, as well as improving design efficiency and quality. Furthermore, by virtue of the latest information technology, including big data, mobile internet and application of QR code, the Groups has self-developed a QR code-based management system ("WQRS") for engineering materials, ensuring information tracing, dynamic monitoring, process examination and status enquiry of the materials from ordering to on-site installation in order to improve efficiency and cut costs.

During the Period under Review, Wison Engineering has adopted digitalized engineering in various new projects in China and abroad, with a view to enhancing design capability and work efficiency. In particular, the domestic Wanhua ethylene project of 100 kta has completed the delivery of digitalized engineering; the SRU project and STC project in the Middle East were in the process of digital delivery, near the final phase of the design stage. The SRU project represents the world's highest standards of digital delivery in the design phase, the completion of which will facilitate the Group to formulate a complete set of digital delivery standards in the design phase and the corresponding documentation system. In addition, Wison Engineering continued to deepen the cooperation with Honeywell, the leading enterprise implementing intelligent factory, by jointly forming a task group to focus on petrochemical ethylene business and collaborate on data integration and smart application in the process of digital delivery and intelligent factory construction in potential ethylene projects.

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Business Overview

(5) Going Modular

Modular prefabrication, assembly and integrated delivery can effectively diminish constraints of the construction environment, significantly shorten construction period and improve work efficiency. Especially for regions with high construction costs, resource shortage and higher construction risks, modular construction of large-scale petrochemical plants is a highly effective solution. The Group has set up a modular master planning working office and established a dedicated professional modular design and execution team. During the Period under Review, with sustainable improvement in capabilities of planning and design of process modules and refined construction, Wison Engineering collated and compiled the FEED execution plan and work procedures for modular projects, promoted the use of three-dimensional models to complete modular research and layout design, and facilitated the seamless connection between modular and digital operations, thereby solidifying the foundation for the Company's modular business.

Meanwhile, the Group is equipped with the capabilities of module feasibility studies, basic design, detailed design and construction for medium and large-scale land facility. Combining with its sea and land transport and lifting design, the Group has integrated capabilities in modular "design, construction and delivery", thereby establishing its leading competitiveness in both the domestic and international energy and chemical engineering markets. During the Period under Review, the Group successfully adopted advanced modular technology in various domestic and overseas projects, which was indispensable for reducing construction cost and enhancing work efficiency.

The Group has integrated capabilities in modular design, construction and delivery

The Group continued to employ high-end talents and optimize organizational structure

Talent Scheme and Organizational Structure

The Group adhered to the philosophy of being "market-oriented and customer focused" amid market changes, continued to introduce high-end talents based on its business needs to improve its i n t e r n a l m a n a g e m e n t , a n d e n h a n c e i t s organizational structure, so as to achieve a quick response to customers' needs and satisfy the

demand of human resources for new project orders. During the period, the Group introduced outstanding postdoctoral researchers through its corporate postdoctoral workstations, enhancing the capability and creativity of its research team.

Adhering to the philosophy of being "business- oriented and project-focused", the Group continued to optimize the organizational structure of the Company based on the transformation in the petrochemical engineering industry and the development needs of the Company. The new structure achieved enhancements in the allocation of talents and resources without compromising either the focus or flexibility, and attained a flexible and responsive approval procedure with an efficient, simple and convenient flattened matrix structure.

While enhancing its new organizational structure, the Group established an incentive scheme with order acquisition and project execution as its core elements to lay emphasis on value contribution, increase awareness of competition and develop a champion mindset. The Group strengthened its performance management system in line with the implementation of the incentive scheme, and improved its performance management process. By promoting project delivery responsibilities featuring low cost and high quality, the Group encouraged its employees to achieve better performance, thus improving the performance of both the individual entities and the Company. In addition, Wison Engineering attached great importance to talent cultivation and kept improving leadership and management capabilities of the middle management and the core roles. During the pandemic, the Group continued to provide quality training via online platforms and enhance employees' management and problem-solving skills through case studies with individual guidance and support.

Wison Engineering Services Co. Ltd. Annual Report 2020

Business Overview

(III) OUTLOOK

The year 2021 marks the beginning of China's "14th Five-Year Plan" and the petrochemical energy industry will encounter new challenges and opportunities. The COVID-19 pandemic, how far the crude oil production cut agreement can be performed and geopolitics will continue to affect the trend of global economy and oil price. On the other hand, as various countries put more efforts in implementing financial relief measures and vaccines are gradually becoming available, market confidence will continue to be boosted, which will be beneficial to the global economic recovery and increase the market demand for energy and chemical products. With the launch of environmental policies such as carbon peak and carbon neutral by the Chinese government, new processes for energy saving and emission reduction, new energy and new technology of environmental protection will become the key development direction of the industry, at the same time clean energy represented by LNG will also be widely employed.

The petrochemical industry will continue to explore new development direction in the new market environment . In the long run, new project investment will focus more on individual areas and reasonable extension of its regional competitive edges, which in turn highlights integration advantages, and hence resisting the impact of industrial volatility and maximizing the benefit. Geographically, the China-ledAsia-Pacific region is still a region with the largest trading volume and fastest growth rate in the global petrochemical market, and in particular has a strong demand for fine chemical industry. The trend of future

Wison Engineering Services Co. Ltd. Annual Report 2020

Business Overview

development in the EPC engineering market will concentrate on the richly assorted fine chemical products and by-products, while the production of which requires a high level of engineering technology and design capability.

Faced with new challenges and opportunities, Wison Engineering upholds its operation tenet of "integrity- oriented, customer-oriented,innovation-oriented,

achieving mutual success in harmony" (誠信為本、客户為尊、創新為要、和諧共贏), promptly responds to market demand by leveraging its advantages of

high efficiency and flexibility as a private enterprise, pushes forward innovation in technology and management, and enhances its new technology engineering and design capabilities through continuous consolidation of research and development of its core technology and expansion of technological collaboration, with a view to developing the leading edges of its core products and enabling them to become the major growing business segment of the Company.

The Group enhanced its comprehensive competitiveness through R&D of proprietary technology and technology licensing cooperation

Benchmarking international leading enterprises, Wison Engineering strives to increase the application of digitalization and provides support to owners to achieve full-life cycle intelligent management in their factories through digitalization in the entire process of delivery with high standards. It focuses on enhancing control of the refined process based on data as well as the flexible and efficient on-site intelligent management system to enhance its management and delivery capabilities, thereby increasing the core competitiveness of the Company. On the other hand, the Group continues to enhance its overall advantages of modularized planning, design, manufacturing and on-site construction, demonstrating its operation edges in short construction period with high quality at low cost, which has achieved significant effectiveness and secured new orders in markets such as North America and Middle East. In addition, the Group continues to optimize its talent team and institution restructuring, develops the potential of its employees at all levels, strengthens collaboration between departments and systems, and highlights Wison Engineering's advantages in refined management, responsive and flexible mechanisms as well as efficient innovation.

Building on local market and grasping new opportunities in domestic market, while being committed to the internationalization strategy

Faced with new challenges and fully leveraging the advantages of private enterprises in responsiveness and flexibility, Wison Engineering promptly responds to changes in the market and the industry. Meanwhile, the Group upholds the development strategy of building on local market and expanding into the international market. Domestic market will remain the world's biggest growth driver as well as the core market of Wison Engineering. Following a series of reform policies, domestic oil and gas, petrochemical and coal-to-chemical markets will gradually open to private and foreign enterprises, so as to attract more capital into domestic market and propel its rapid growth. With years of presence in the industry, Wison Engineering has established good cooperative relationship with a number of domestic outstanding petrochemical enterprise customers. Facing the intensifying competition in the industry, the Company has reinforced its focus on the high- quality execution, delivery and services of the existing contracted projects, hence gaining the trust from the customers and securing new collaborative o p p o r t u n i t i e s i n t h e c o u r s e o f u p g r a d e , transformation and expansion of production in industries where its existing customers operate; at the same time, Wison Engineering will continue to optimize the procurement and execution of its projects and unleash value by means of shortening the construction period and reducing procurement

Wison Engineering Services Co. Ltd. Annual Report 2020

Business Overview

and construction cost in a reasonable manner, aiming to secure new customers and new orders. In terms of domestic foreign-funded market, in virtue of its experience and edges in the international market, Wison Engineering will actively expand its customer coverage and further enhance its cooperation with renowned foreign enterprises such as Shell, BASF, SABIC, Air Liquide and Evonik Wynca in new domestic projects with a focus on clients' intellectual property protection.

Expanding into the overseas market is an inevitable step for the Group to become an international engineering company. With development of over a decade, Wison Engineering has developed well- established reputation and brand advantages. Wison Engineering has formulated prioritized development strategies catering to the characteristics of different markets in order to invest with corporate resources in a more effective manner. Given its abundant energy resources, the Middle East region actively developed refining and chemical industry, bringing new opportunities to the petrochemical industry. As the oil price recovered to a reasonable level, it is expected that the economic vitality of the region will increase significantly in the second half of 2021, which will further promote the regional development of the petrochemical industry. Wison Engineering has a high-quality customer base and sound reputation in the Middle East. The Company will devote greater efforts and focus on the expansion of the Middle East market to seize new opportunities. The Company's operation center in the Middle East

Wison Engineering Services Co. Ltd. Annual Report 2020

Business Overview

which has been operating for years has achieved outstanding performance. With quality services, cost and working period control, the operation center has made breakthroughs in orders obtained from different sectors. In particular, the Group obtained the EPC contract from Saudi Aramco for the first time during the Period under Review, which was the first EPC project for upstream oil and gas relating to natural gas treatment of Wison Engineering in the Middle East, marking the Group's breakthrough in modularized solutions in Saudi Arabia. In addition to the Middle East, emerging markets such as Russia, Central Asia and Southeast Asia are growing rapidly with huge market potential, which are also the key regions developed by Wison Engineering. Currently, the Group has obtained the front-end engineering design projects in Russia and other regions and is expected to further expand the market in the region. Furthermore, despite the fierce competition in the well-developed energy and chemical market in North America, the market in North America region has still provided sufficient market potential for Chinese enterprises with high execution efficiency and cost advantages. By leveraging its advantages in modularized construction and refined management, Wison Engineering will resolve the weaknesses of high labour costs and long working period for owners located in North America, thereby creating more value for customers and building a leading international brand image for the Company.

Consolidating the advantages in core energy and chemical markets and accelerating the expansion of new energy and fine chemicals

In terms of industrial expansion, Wison Engineering will consolidate its core advantages in traditional energy and chemicals and step up efforts to explore new energy markets. The Group has significant a d v a n t a g e s i n t e c h n o l o g i e s a n d p r o j e c t implementation in respect of core products, including ethylene and its downstream products, PDH, PTA, MTO, coal gasification and cracking furnace, and it is one of the industrial leaders with engineering design and EPC capabilities in olefins process technologies and PTA facilities in China. The Company will optimize its advantages in core technologies to continuously expand market shares and strive to increase profitability.

On the other hand, China has put forward the development goal to reach a peak in carbon dioxide emission by 2030 and achieve carbon neutral by 2060. Hence, China is vigorously planning and developing new energy industry and successively promulgated a series of supporting policies, enabling the new energy and clean energy industry to embrace opportunities for prosperity. This field, from technological research and development to effective fulfilling the production capacity, is at a stage when new technologies are booming, therefore, there will be huge demand for high - end and refined engineering, which has provided a valuable market opportunity for quality engineering companies

excelling in utilizing new technologies. Wison Engineering has established a designated "New Energy Business Department" which is committed to developing a product line for comprehensive use of clean energy, including technologies such as comprehensive use of solar energy, wind power, downstream natural gas and hydrogen power as well as carbon capture and treatment. Meanwhile, the Group will also put more efforts in exploring new market segments such as biodegradable plastics and fine chemical.

Accelerating the implementation of digitalization and modularization to build a technology-based engineering service enterprise

Wison Engineering believes that "technology-driven development", digital transformation and smart technology and modular operations will become the future core competitiveness of engineering companies. Digital transformation will be the overall trend of the industry and smart technology will be more widely applied in energy and chemical engineering. New technology empowers traditional industry while the significance of application of Digital Twin, Industrial Internet of Things (IoT), Cloud computing, artificial intelligence and other high and new technologies in the EPC engineering industry is g r o w i n g . T h r o u g h s e l f - d e v e l o p m e n t a n d collaborations with global leading enterprises, the Group will continue to strengthen R&D in digital transformation and smart technology with a view to setting a new benchmark in the industry.

Wison Engineering Services Co. Ltd. Annual Report 2020

Business Overview

Digitization and smart technology will change the operation and work model of the engineering construction industry. The Group is committed to the in-depth application of digitization and smart technology by developing a digital design platform w i t h d a t a f l o w , s t r e a m o f t e c h n o l o g y a n d management as the core to realize digital transmission. By accumulating experience with professional experts specializing in software integration, the Group is aimed to improve quality and efficiency. The Group will also promote workflow optimization to increase effectiveness and build competitiveness through technologies such as big data analysis and Cloud computing. The Group will vigorously promote application of smart technology in its engineering projects and develop smart applications in, among others, procurement source tracing, logistics tracking, material management, progress deviation rectification, construction guidance, QHSE and emergency training, which will significantly improve construction quality and working efficiency, mitigate safety risks and reduce construction costs. Wison Engineering will adopt digital delivery throughout the whole process of design and project construction to help owners carry out lean and effective practice control, supply chain optimization, production process optimization and full-life cycle asset management so as to reduce maintenance costs and increase efficiency of facilities.

Wison Engineering Services Co. Ltd. Annual Report 2020

Business Overview

The Group endeavored to enhance the R&D and application of modular operations technologies

Modulization is another significant development trend . Through continuous optimization of modularized solutions for process facilities as well as accumulation of experience, more on - site installation work of steel structures, equipment, pipes and electrical instruments can be transferred to module processing plants so as to further increase working efficiency, shorten construction cycle at a lower cost and reduce the impact on the environment, which will also minimize project risks, improve quality and efficiency and foster mutual benefits with owners. Wison Engineering expects that as modulization will be applied in more scenarios and the value will improve continuously, it will be applied in projects with more technological complexity, larger in scale and longer in distance. As a benchmark enterprise in China in respect of modularized design and manufacturing, Wison Engineering will continuously enhance its standard and capability in modulization planning, design and implementation to further increase the Group's competitive edge in large-scale domestic and overseas petrochemical EPC projects, thereby exploring domestic market and potential markets in, among other regions, the United States, the Middle East, Central Asia, Southeast Asia and Russia.

Putting greater efforts in technological R&D and technological cooperation to realize new growth points and facilitate diversified development

By firmly adhering to the strategic measure of "Promoting development and strengthening business with technologies", the Group closely tracks the popular research projects and development trends in the global energy and chemical industry, deeply explores the technological gap in the industrial market, actively matches the engineering and industrial requirements between research institutions of upstream base and end users for production in terms of energy conservation and consumption reduction as well as quality and efficiency enhancement, continuously focuses on breakthrough technologies of basic chemicals and chemical intermediates, green and clean production process and catalyzing technology, identifies the segmented markets in the comprehensive use of waste resources, high-value CO2 chemical use and circular economy, and develops technological reserve. Having established its "new technological institute" to be more devoted to technological R&D and cooperation, Wison Engineering will develop an extensive global technical cooperation ecochain, enabling it to become the powerful support for the Group's development. The Group will create advantages in differentiated and diversified core technologies and march toward the goal of becoming "an engineering service enterprise with the most advanced technologies" with best endeavors.

Wison Engineering established "new technological institute" to be devoted to technological R&D and Cooperation

Since the establishment of the new technological institute, the Group has carried out in-depth research on various bottleneck technologies in chemical industry as well as energy conservation and environment protection processes and continuously made breakthroughs . Wison Engineering has made substantial progress in R&D of the catalyst sector and has entered its promotion stage. The Group has also made good progress in the technological development and product research of polyglycolic acid (PGA) in biodegradable plastics and is currently carrying out the construction of demonstration facilities with business partners. The successful development and potential application of the technology will be a favourable start for Wison Engineering to rapidly tap into the sector of new environmentally-friendly materials. In addition, the demonstration facility for ethylene-based MMA engineering technology with a capacity of 50kta co-

Wison Engineering Services Co. Ltd. Annual Report 2020

Business Overview

developed by Wison Engineering, Benzo and Dalian Institute of Chemical Physics, Chinese Academy of Sciences has entered the implementation stage. The energy-saving and environmentally-friendly technology will significantly reduce the production costs of widely-used PMMA materials. In the future, Wison Engineering will further explore the technological collaboration in the sectors of h y d r o g e n p o w e r , r e n e w a b l e e n e r g y a n d environmental protection technology and actively carry out investment and operation of industries which can be an effective extension of its principal business, with a view to promoting long-term sustainable development of the Group.

Management

Discussion

and Analysis

Wison Engineering Services Co. Ltd. Annual Report 2020

Management Discussion

and Analysis

FINANCIAL REVIEW OF 2020

During the Year, revenue of the Group amounted to approximately RMB5,296.1 million (for the year ended 31 December 2019: approximately RMB4,367.3 million), representing a year-on-year increase of 21.3%. Despite the impact of the COVID-19 pandemic worldwide, the Group has accelerated the progress of those delayed projects after the pandemic came under control, coupled with the year-on-year increase in the number of the Group's project entering principal construction phase, giving rise to the increase in recognized revenue for the Year. Gross profit of the Group amounted to approximately RMB301.2 million (for the year ended 31 December 2019: approximately RMB408.2 million), representing a year-on-year decrease of 26.2%. Loss attributable to owners of the parent amounted to approximately RMB271.2 million (for the year ended 31 December 2019: profit attributable to owners of the parent of approximately RMB50.6 million), representing a year-on-year decrease of 636.0%, which was mainly attributable to the decline in gross profit margin of EPC projects due to intensified market competition and increase in construction costs during the Year under the impact of the pandemic. In addition, the Group's depreciation and amortization expenses also increased due to the change of the accounting policy during the Year. Meanwhile, the Group also

recognised provision for impairment losses on financial and contract assets for certain projects as well as the fair value losses on financial assets at fair value through profit or loss.

During the Year, the Group's total new contract value (net of estimated valued added tax) amounted to approximately RMB10,657.2 million (for the year ended 31 December 2019: RMB12,776.6 million), representing a year-on-year decrease of 16.6%, of which EPC accounted for 97.2%. As at 31 December 2020, the total backlog value (net of estimated value added tax) was approximately RMB27,172.9 million, representing an increase of 24.3% compared to the total backlog value as at 31 December 2019.

Revenue and Gross Profit

The comprehensive revenue of the Group increased by 21.3% from RMB4,367.3 million for the year ended 31 December 2019 to RMB5,296.1 million for the Year.

The gross profit of the Group decreased by 26.2% from RMB408.2 million for the year ended 31 December 2019 to RMB301.2 million for the Year.

The gross profit margins of the Group for the year ended 31 December 2019 and 2020 were 9.3% and 5.7%, respectively.

Wison Engineering Services Co. Ltd. Annual Report 2020

Management Discussion and Analysis

Details of comprehensive revenue and gross profit breakdown by business segments are set out below:

								Segment gross profit
	Segment revenue		Segment gross profit		margin
	2020	2019	2020	2019	2020	2019
	(RMB'million)	(RMB'million)	(RMB'million)	(RMB'million)	(%)	(%)
EPC	5,116.0	4,201.7	245.2	373.8	4.8%	8.9%
Engineering, consulting
and technical services	180.1	165.6	56.0	34.4	31.1%	20.8%

	5,296.1	4,367.3	301.2	408.2	5.7%	9.3%


2020						2019
3%							4%
		EPC							EPC
		Engineering,					Engineering,
		consulting and					consulting and
		technical services					technical services
97%							96%

The revenue of EPC of the Group increased by 21.8% from RMB4,201.7 million for the year ended 31 December 2019 to RMB5,116.0 million for the Year. The increase of the revenue of EPC was mainly attributable to the smooth progress of the Group's petrochemical and coal-to-chemicals projects located in China and Middle East, which increased the revenue contribution during the Year. The gross profit margins of EPC of the Group decreased from 8.9% for the year ended 31 December 2019 to 4.8% for the Year. This was mainly because of the intensified competition in EPC market, increasing raw materials costs and costs incurred in project delay arising from outbreak of the COVID-19 pandemic during the Year.

The revenue of engineering, consulting and technical services of the Group increased by 8.8% from RMB165.6 million for the year ended 31 December 2019 to RMB180.1 million for the Year. The gross profit margins of engineering, consulting and technical services of the Group increased from 20.8% for the year ended 31 December 2019 to 31.1% for the Year. This was mainly due to the cost optimization of the Group's certain engineering and consultancy projects, which increased their gross profit margin for the Year.

Wison Engineering Services Co. Ltd. Annual Report 2020

Management Discussion and Analysis

Details of comprehensive revenue breakdown by industries in which our clients operate are set out below:

	2020		2019	Change	Change
	(RMB'million)	(RMB'million)			(%)
Petrochemicals	3,498.4		3,711.3	-212.9	-5.7%
Coal-to-chemicals	572.8		321.7	251.1	78.1%
Oil refineries	270.7		151.6	119.1	78.6%
Public infrastructure	461.7		113.6	348.1	306.4%
Other products and services	492.5		69.1	423.4	612.7%

	5,296.1		4,367.3	928.8	21.3%


2020			2019
9%						3%
Petrochemicals		3% 2%			Petrochemicals
	7%
9%

5%	Coal-to-chemicals						Coal-to-chemicals
Oil reﬁneries					Oil reﬁneries
11%

66%	Public infrastructure				85%		Public infrastructure

	Other products					Other products
	and services						and services

The revenue of petrochemical business segment decreased by 5.7%, essentially remaining the same. As the Group's petrochemical project in the United States approached to the completion stage during the Year, a year-on-year decrease in revenue was recorded. However, the Group's petrochemical projects in China and Middle East were well in progress, which offset the decrease in revenue from the US petrochemical project.

The revenue of coal-to-chemicals business segment increased by 78.1%. The coal-to-chemicals projects located in Fujian newly contracted by the Group in the previous year approached to the principal construction stage during the Year, driving the increase in revenue of the coal-to-chemical business segment.

The revenue of oil refineries business segment increased by 78.6%. This was mainly due to the Group's oil refinery projects located in Abu Dhabi entered the principal construction stage, which contributed to the increase in revenue in oil refinery segment.

Wison Engineering Services Co. Ltd. Annual Report 2020

Management Discussion and Analysis

The revenue of public infrastructure business segment increased by 306.4%, which is mainly due to the fact that the Group's domestic water conservancy and sewage infrastructure projects have entered the principal construction stage and were well in progress.

The revenue of other products and services business segment increased by 612.7%. This was mainly due to the increase in revenue driven by the smooth progress of the Group's new materials project in Jiangsu.

Details of comprehensive revenue breakdown by geographic locations of our projects are set out below:

				Year ended 31 December
	2020	2019
				Percentage of	Percentage of
	Revenue	total revenue	Revenue	total revenue
	(RMB'million)	(%)	(RMB'million)	(%)
Mainland China	3,797.6	71.7%	1,938.0	44.3%
America	661.0	12.5%	1,929.0	44.2%
Middle East	824.0	15.5%	482.8	11.1%
Others	13.5	0.3%	17.5	0.4%
	5,296.1	100.0%	4,367.3	100.0%


2020 % of total revenue by geographic locations				2019 % of total revenue by geographic locations

28%

	China	56%	China
	Overseas
72%	Overseas
44%

Wison Engineering Services Co. Ltd. Annual Report 2020

Management Discussion and Analysis

The revenue from overseas projects of the Group accounted for approximately 55.7% of the total revenue for the year ended 31 December 2019, whereas for the Year, revenue from overseas projects accounted for approximately 28.3% of the total revenue. The decrease in percentage weighting of revenue from overseas projects for the Year was mainly because the new orders entered by the Group during last year were primarily domestic projects. In addition, in view of the COVID-19 pandemic outbreak in overseas regions during the Year, the resumption of work and construction progress of the Group's overseas projects were delayed, as compared with domestic projects.

Other Income and gains

Other income and gains decreased by 38.0% from RMB293.9 million for the year ended 31 December 2019 to RMB182.1 million for the Year, in which government grants decreased by RMB95.3 million, net fair value gains decreased by RMB23.2 million, dividend income from equity investments at fair value through other comprehensive income

increased by RMB8.0 million. The decrease in net fair value gains was mainly due to the significant decline in the fair value of the Group's financial asset at fair value through profit or loss.

Selling and Marketing Expenses

Selling and marketing expenses decreased by 21.3% from RMB132.9 million for the year ended 31 December 2019 to RMB104.6 million for the Year, which was mainly because the marketing activities diminished across the world due to the outbreak of the COVID-19 pandemic during the Year.

Administrative Expenses

Administrative expenses decreased by 14.9% from RMB288.8 million for the year ended 31 December 2019 to RMB245.8 million for the Year. Although the Group's depreciation and amortization increased as a result of the change of accounting policy, the Group significantly decreased the deployment of personnel of administrative and back office functions. In addition, the Group's expenses in relation to equity-settled share option and legal expenditure also decreased during the Year.

Wison Engineering Services Co. Ltd. Annual Report 2020

Management Discussion and Analysis

Other Expenses

Details of other expenses breakdown are set out below:

	2020	2019
	RMB million	RMB million
Research and development costs	144.9	131.7
Expenses in relation to operating lease income	19.7	19.1
Bad debt (reversal)/provision	-2.4	3.3
Loss on derecognition of financial asset at fair value through
profit or loss	16.5	-
(Reversal)/Provision of accrued liabilities	-9.8	18.7
Others	3.6	3.2
	172.5	176.0

Other expenses decreased by 2.0% from RMB176.0 million for the year ended 31 December 2019 to RMB172.5 million for the Year.

Finance Costs

Finance costs increased by 188.1% from RMB22.7 million for the year ended 31 December 2019 to RMB65.4 million for the Year, in which interest on bank loans increased by RMB40.1 million. The increase in interest on bank loans was mainly due to the fact that most of the bank loans and related interest on bank loans were incurred from the third quarter of previous year. Also, during the previous year, the average bank loans balance was less than that during the Year and so was the amount of interest expenses incurred. Please see the section headed "Financial Resources, Liquidity and Capital Structure" below for further details.

Income Tax Credit/Expense

Income tax decreased by 131.4% from income tax expense of RMB39.2 million for the year ended 31 December 2019 to income tax credit of RMB12.3 million for the Year, this was mainly because of the recognition of deferred tax assets arising from the provision of impairment losses on financial and contract assets during the Year.

Loss/profit for the year

Loss/profit for the year decreased by 636.6% from a profit of RMB50.6 million for the year ended 31 December 2019 to a loss of RMB271.5 million for the Year. Our net profit margin was 1.2% for the year ended 31 December 2019 and decreased to -5.1% for the Year. The decline was mainly because of the lower gross profit margins of the Group's major projects under construction during the Year. In addition, the Group's depreciation and amortisation expenses have increased during the Year due to the change of accounting policy. Meanwhile, the provision of impairment losses of financial and contract assets and the fair value losses on financial asset at fair value through profit or loss were also recognised during the Year.

Wison Engineering Services Co. Ltd. Annual Report 2020

Management Discussion and Analysis

Trade and Bills receivables

The Group's trading terms with its customers are mainly on credit where payment in advance is normally required. Trade receivables are non-interest-bearing and on credit terms of a period of 30 days or the respective contracts' retention period. The Group's total trade and bills receivables decreased by approximately 22.8% from RMB1,218.2 million as at 31 December 2019 to RMB941.0 million as at 31 December 2020.

Financial Resources, Liquidity and Capital Structure

As at 31 December 2020, the Group's cash and bank balances amounted to RMB471.0 million, representing approximately 10.1% of the Group's current assets (as at 31 December 2019: RMB814.3 million, representing approximately 19.0% of the Group's current assets).

The major items of Consolidated Statement of Cash Flows of the Group are set out below:

	For the year ended 31 December
	2020	2019
	RMB million	RMB million
Net cash flows from operating activities	(335.1)	(271.1)
Net cash flows from investing activities	(142.8)	(338.0)
Net cash flows from financing activities	156.6	483.5

As at 31 December 2020, the Group's pledged and unpledged cash and bank balances included the following amounts:

	As at 31 December
	2020	2019
	RMB million	RMB million
Hong Kong Dollar	9.5	7.6
US Dollar	293.6	714.8
Renminbi	926.3	786.4
Saudi Riyal	58.6	80.3
Euro	1.0	14.6
South African Rand	2.7	8.3
UAE Dirham	2.7	1.3

Wison Engineering Services Co. Ltd. Annual Report 2020

Management Discussion and Analysis

The Asset-Liability Ratio of the Group, which was derived by dividing average total liabilities by average total assets, is set out below. The Asset-Liability Ratio of the Group has exhibited a downward trend. The decrease in Asset-Liability Ratio for the Year was mainly attributable to the increase in the proportion of the Group's total assets.

Asset-Liability Ratio

78.5%

74.8%

70.5%

69.2%69.0%

61.6%

2015

2016

2017

2018

2019

2020

Interest-bearing bank and other borrowings of the Group as at 31 December 2020 and 2019 were set out in the table follow. The short-term bank borrowings of the Group accounted for 100.0% of the total bank borrowings (31 December 2019: 40.5%).

	As at 31 December
	2020	2019
	RMB million	RMB million
Current
Bank loans repayable within one year
- secured	134.3	252.0
Current portion of long-term bank loans
- secured	805.0	52.8
	939.3	304.8

Non-Current
Bank loans repayable after one year
- secured	-	447.2

Bank borrowings were denominated in RMB and USD at 31 December 2020 and 2019. As at 31 December 2020, bank borrowings amounting to RMB939,327,000 (31 December 2019: RMB62,000,000) bore interest at fixed rates.

Wison Engineering Services Co. Ltd. Annual Report 2020

Management Discussion and Analysis

The effective interest rates of the Group's bank and other borrowings ranged as follows:

Year ended 31 December 2019	4.79% to 5.88%
Year ended 31 December 2020	2.60% to 5.88%

The maturity profile of interest-bearing bank and other borrowings as at 31 December 2020 and 2019, based on contractual undiscounted payments, is as follows:

		Less than	3 to 12	Over 1
	On demand	3 months	months	year	Total
			RMB million
31 December 2020
Interest-bearing bank and
other borrowings	-	927.9	59.5	287.3	1,274.7

31 December 2019
Interest-bearing bank and
other borrowings	-	213.7	122.1	632.8	968.6

The Group meets its working capital and other capital requirements principally with cash generated from its operations and borrowings.

Material Acquisitions and Disposals

Reference is made to the discloseable transaction announcements dated 22 June 2020 and 4 December 2020 of the Company. The Company declared in the announcement that on 22 June 2020,

wholly-ownedsubsidiary of the Company, Shanghai Huicheng Enterprise Management Limited ("Shanghai Huicheng") entered into the Limited Partnership Agreement (the "Previous Limited Partnership Agreement") with Silver Saddle Equity Investment Management (Shanghai) Co., Ltd. ("Silver Saddle") and the Other Limited Partners, pursuant to which, Shanghai Huicheng (as limited partner), the Other Limited Partners and Silver Saddle (as general partner) agreed to establish the Limited Partnership for carrying out equity and equity - related investments in new materials, fine chemicals and other fields and projects related to national strategic emerging industries . The Previous Limited

Partnership Agreement has a target total capital contribution size of RMB950,000,000 and the capital c o n t r i b u t i o n b y S h a n g h a i H u i c h e n g i s RMB160,000,000, representing approximately 30.2% of the Initial Capital Contribution.

On 4 December 2020, Shanghai Huicheng, Other Limited Partners and general partner entered into a new limited partnership agreement (the "New Limited Partnership Agreement") to amend the terms of the Previous Limited Partnership Agreement. Pursuant to the New Limited Partnership Agreement, a new limited partner had been added to the Limited Partnership and the New Limited Partnership Agreement shall replace and supersede the Previous Limited Partnership Agreement. Pursuant to the new Limited Partnership Agreement, the target total capital contribution size of the Limited Partnership has been reduced from

Wison Engineering Services Co. Ltd. Annual Report 2020

Management Discussion and Analysis

RMB950,000,000 to RMB910,000,000. There is no change to the contribution amount of Shanghai Huicheng in the Limited Partnership (being RMB160,000,000), representing approximately 21.11% of the Initial Capital Contribution. Shanghai Huicheng has completed the related agreed capital contribution pursuant to the New Limited Partnership Agreement.

Capital Expenditure

The capital expenditure of the Group amounted to RMB11.7 million for the Year (2019: RMB32.8 million).

Foreign Exchange Risk Control

The business transactions of the Group are mainly settled in Renminbi and US dollars. The Group is exposed to currency risks in relation to the bank balances denominated in currency other than the functional currencies of the relevant entities. The Group has formulated and strictly adheres to a currency hedging policy against the foreign currency risk.

Contingent Liabilities

During 2018, a sub-contractor of Wison Engineering filed a claim to the Sichuan Province's Higher People's Court in Mainland China against Wison Engineering for additional payment of construction costs and the interest arising from the overdue payment of

c o n s t r u c t i o n c o s t s o f a p p r o x i m a t e l y RMB211,316,000.

During 2018, another sub-contractor of Wison Engineering filed a claim to the Sichuan Province's Higher People's Court in Mainland China against Wison Engineering for additional payment of construction costs and the interest arising from the overdue payment of

c o n s t r u c t i o n c o s t s o f a p p r o x i m a t e l y RMB132,322,000.

During 2019, a sub-contractor of Wison Engineering was accused by its own sub- contractor to Chengdu Intermediate People's Court and Wison Engineering has also been named as a defendant to undertake the joint liability for the payment of construction costs of approximately RMB45,360,000.
During 2020, a sub-contractor of Wison Engineering applied for arbitration in Shanghai Arbitration Committee for additional payment of construction costs, guarantee deposits, loss expenses and the interest arising from the overdue payment of above mentioned expenses mentioned of approximately RMB48,966,000.
During 2020, a sub-contractor of Jiangsu Wison filed a claim to the Jintan District People's Court in Mainland China against Jiangsu Wison for an overdue payment of construction cost of approximately RMB9,668,000 . As at 31 December 2020, certain bank account of Jiangsu Wison of RMB9,700,000 were frozen by Jintan District People's Court for property preservation.
During 2020, a sub-contractor of Jiangsu Wison filed a claim to the Jiangsu Province's People's Court in Mainland China against Jiangsu Wison for additional payment of construction costs and the interest arising from the overdue payment of construction costs of approximately RMB17,655,000. As at 31 December 2020, certain bank account of Jiangsu Wison of RMB20,000,000 were frozen by Jiangsu Province's People's Court for property preservation.

Wison Engineering Services Co. Ltd. Annual Report 2020

Management Discussion and Analysis

During 2020, a sub-contractor of Jiangsu Wison filed a claim to the Taixing People's Court in Mainland China against Jiangsu Wison and Wison Engineering as a defendant to undertake the joint liability for an additional payment of construction costs and the interest arising from the overdue payment of construction costs of approximately RMB11,657,000. As at 31 December 2020, certain bank account of Jiangsu Wison of RMB10,500,000 were frozen by Taixing People's Court for property preservation.

As of the date of approval of the financial statements, for case (1) and case (2) Wison Engineering and the subcontractors have completed judicial cost audit by an independent third party arranged by the court and trials are yet to be scheduled. For case (3) Wison Engineering and the sub-contractors have completed the first pre-trial evidence exchange in court and cross-examination, and trials are yet to be scheduled. The trial of case (4), case (5), case (6) and case (7) are yet to be scheduled.

The directors of the Company are of the opinion that, besides case (1) and case (2), the other five cases are without merits and the possibility for the Group to be subject to additional payment claims were remote on the basis of the available evidence and having legal advice taken. Thus, it is not required for the Group to make provision for these five cases.

The directors of the Company have made additional related provision of RMB73,210,000 in its financial statements for the year ended 31 December 2020 for case (1) and case (2) due to the possibility of the Group to take responsibility for the additional settlement on the basis of the available evidence and legal advice taken.

Pledge of Assets

As at 31 December 2020, certain buildings of RMB3,603.5 million, as well as future years right of receiving rental income from certain properties, were pledged as security for bank facilities of the Group.

Human Resources

As at 31 December 2020, the Group had 1,538 employees (31 December 2019: 1,694 employees). The Group reviews the salaries and benefits of the employees according to market practice and the performance of the employees on a regular basis. Also, the Group contributes to various social insurance schemes in the PRC and the Mandatory Provident Fund Scheme in Hong Kong for qualified employees and provides medical insurance, work injury insurance, maternity insurance and unemployment insurance pursuant to applicable laws and regulations in the PRC and Hong Kong, as well as additional business accident and medical insurance. During the Year, the total staff cost of the Group (including salaries, bonuses, insurance and share option schemes) amounted to RMB665.5 million (during the year ended 31 December 2019: RMB619.3 million). The Group adopted the Pre-IPO Share Option Scheme and the Share Option Scheme on 30 November 2012 as encouragement and reward for the contributions of employees to the Company.

Biographies of the

Directors and

Senior Management

Wison Engineering Services Co. Ltd. Annual Report 2020

Biographies of the Directors and Senior Management

EXECUTIVE DIRECTORS

Mr. Yan Shaochun (閆少春), aged 56, was appointed as an executive Director of our Company and the Chief Executive Officer of our Group on 5 February 2021. He has approximately 35 years of experience in oil refining, petrochemical, coal-to-chemicals and other energy chemical industries. Prior to joining our Group, Mr. Yan served as the general manager of Wood Zone Co., Ltd. from 2019 to 2021, the deputy director of the engineering department at Sinopec Group from 2017 to 2018, an executive director and the general manager of Sinopec Engineering (Group) Co., Ltd. from 2012 to 2017, the general manager of Luoyang Petrochemical Engineering Corporation Ltd. from 2004 to 2012, the deputy general manager of Sinopec Engineering Incorporation from 1998 to 2004 and various other positions within the Sinopec Group from 1986 to 1998.

Mr. Yan obtained a bachelor degree in engineering and majored in petroleum refining from Fushun Petroleum Institute in 1986 and completed the Advanced Management Program of Harvard Business School in 2005. Mr. Yan is a professor-level senior engineer in oil refining and petrochemical specialty and is a registered senior project manager and a registered chemical engineer in the PRC.

Mr. Zhou Hongliang (周宏亮), age 51, is a senior vice president of our Group and was appointed as an executive Director of our Company on 10 September 2013. He is mainly responsible for the Company's brand operation and system establishment in terms

of quality and safety. He graduated from Liaoning Shihua University (遼寧石油化工大學), formerly known as the Fushun Petroleum Institute (撫順石油學院) in 1991. He received his master's degree in business administration from China Europe International Business School (中歐國際工商學院) in 2014. He obtained the qualification of constructor

from the Ministry of Construction of the People's Republic of China (中華人民共和國建設部) in 2006. He was responsible for project management in

Sinopec Ningbo Engineering Co., Ltd. from 1991 to 2002. From 2002 to 2004, Mr. Zhou worked as a deputy manager in the Ethylene Project Team in

Shanghai SECCO Petrochemical Company Limited (上海賽科石油化工有限責任公司). Mr. Zhou joined our Group in January 2005 as a manager of the

construction management department of Wison Engineering and was appointed as the deputy general manager of Wison Engineering in January 2 0 0 8 . H e h a s 2 7 y e a r s ' e x p e r i e n c e i n t h e petrochemicals industry.

Wison Engineering Services Co. Ltd. Annual Report 2020

Biographies of the Directors and Senior Management

Mr. Dong Hua (董華), age 53, was appointed as an executive Director of our Company on 13 January 2017. Mr. Dong joined the Group in July 2006 and served as the assistant to general manager and the manager of Beijing Design Centre. In the second half of 2008, he served concurrently as the general manager of the International Business Division, responsible for the business expansion in international markets and foreign-funded projects in the domestic market. Mr. Dong is also a senior vice president of the Group and the manager of Wison Petrochemicals (NA), LLC, an indirect wholly-owned subsidiary of the Company. Mr. Dong is mainly responsible for supervising overseas marketing and overseeing the international business, and is also responsible for supervising the overseas regional sales and overseas branches. Mr. Dong graduated from Lanzhou Petroleum College (蘭州石油學校), the PRC, with a major in chemical equipment in 1988 and subsequently graduated from China Three Gorges University (三峽大學), the PRC, with a major in law in 2006. Mr. Dong obtained an EMBA from The Hong Kong University of Science and Technology, Hong Kong in 2015. Mr. Dong joined Sinopec Engineering Incorporation (SEI) in 1988, where he engaged in project management and served as the design or EPC general contracting project manager and construction manager for a number of petrochemical projects. From 2001 to 2005, he participated in the project construction of the 800-kt ethylene integration plant of CNOOC and Shell Petrochemicals Company Limited (CSPC) Nanhai Petrochemicals, which features the highest standards to date, and served successively as the deputy general project manager, deputy general whole-plant construction manager, and government relations and approval manager for the project management company (PCM) BSF China Company Limited, a PCM comprising three internationally renowned engineering companies: BECHTEL (USA), FOSTER WHEELER (UK), and SEI (China). Mr. Dong has over 31 years' experience in the petrochemicals industry.

Mr. Zheng Shifeng (鄭世鋒), age 53, is a senior vice president of our Group and was appointed as an executive Director of our Company on 1 September 2020. He is responsible for the execution of domestic

and overseas projects. Mr. Zheng graduated from Hefei University of Technology (合肥工業大學) with a major in welding technology and equipment in

1990 and obtained a bachelor's degree in engineering. He has been engaging in the project management in the petrochemicals and coal-to- chemicals industries and gained extensive experience. He holds the title of senior engineer and the qualification of registered qualification certificate

professional constructor of electrical and mechanical engineering in the PRC (國家註冊機電工程專業一級建造師). He also holds an EMBA degree from China Europe International Business School (中歐國際工商學院). From 1996 to 2004, he worked as a project manager in the engineering department of Sinopec Qilu Petrochemical Corporation. Mr. Zheng joined our Group in 2004 and has successively served as the deputy manager and the general manager of the Project Management Department as well as the vice president of our Group and was once in charge of the execution of Group's domestic and overseas projects and international business in the Middle East and partial region of Africa. Mr. Zheng is a member of council of Shanghai Association of International Services Trade. Mr. Zheng has 30 years' experience in the petrochemicals industry.

Wison Engineering Services Co. Ltd. Annual Report 2020

Biographies of the Directors and Senior Management

NON-EXECUTIVE DIRECTOR

Mr. Liu Hongjun (劉洪鈞), aged 48, joined our Company as a non-executive Director on 19 February 2020 and appointed as Chairman on 5 February 2021. He obtained a bachelor degree in chemical engineering and processes and a master degree in chemical engineering from Tsinghua University in the PRC in 1996 and 1999, respectively, and an Executive Master of Business Administration (EMBA) degree from China Europe International Business School in the PRC in 2010.

Mr. Liu has over 20 years of work experience in chemical engineering industry. From July 1999 to

January 2005, he worked at Shanghai Wison Chemical Engineering Co., Ltd. (上海惠生化工工程有限公司) (currently known as Wison Engineering Ltd. ( 惠生工程( 中國) 有限公司)) and held various positions, including engineer, deputy manager,

manager of project department (division 1) and manager of Nanjing project department. During the period between February 2005 and October 2015,

Mr. Liu served at Wison (Nanjing) Chemical Co., Ltd. (惠生(南京)化工有限公司) (currently known as Nanjing Chengzhi Clean Energy Co., Ltd (南京誠志清潔能源有限公司)) and held a number of positions, s u c h a s m a n a g e r o f p r o j e c t m a n a g e m e n t

department, deputy general manager, general manager, president and chairman of the board of directors. From November 2015 to November 2019, Mr. Liu served as a vice president of Wison Group Holding Limited. Since November 2015, he has been a director and president of Wison (China) Holding Company. Since November 2017, Mr. Liu has been a director of Wison Group Holding Limited. Since December 2019, he has been the president of Wison Group Holding Limited. Since January 2020, Mr. Liu has been the chairman of the board of directors of Wison (China) Holding Company. Wison Group Holding Limited is the controlling shareholder of the Company and Wison (China) Holding Company is one of its key operating subsidiaries. Currently, Mr. Liu also serves as a director at certain other subsidiaries of Wison Group Holding Limited.

INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr. Lawrence Lee (李磊), age 56, joined our Company as an independent non-executive Director on 30 March 2015. Mr. Lee has been an independent director of Guangdong New Jingang Technology Limited (a China GEM Board Company) since August 2017 to January 2019. During his career of over 25 years, Mr. Lee also held several senior finance positions, serving as the Chief Financial Officer at Synutra International, Inc. (a company listed on NASDAQ) from October 2007 to October 2009; as a vice president and the Chief Financial Officer of Kasen International Holdings Limited (卡森國際控股有限公司) (a company listed on the Stock Exchange) from August 2004 to September 2007; as the Chief Financial Officer of Eagle Brand Holdings Limited (a company listed on the Singapore Stock Exchange), from July 2001 to April 2004; and as a financial controller at the Korean division of Exel Plc of the United Kingdom from January 1999 to July 2001. Mr. Lee received a bachelor's degree in management and engineering from the Beijing Institute of Technology in 1984. Mr. Lee also obtained a master's degree in economics from the Renmin University of China in 1987 and a master's degree in accounting and finance from the London School of Economics and Political Science in 1992. He is also a fellow member of the Association of Chartered Certified Accountants.

Wison Engineering Services Co. Ltd. Annual Report 2020

Biographies of the Directors and Senior Management

Mr. Tang Shisheng (湯世生), age 64, joined our Company as an independent non-executive Director on 7 December 2015. Mr. Tang, PhD in economics, is a senior economist. Mr. Tang was admitted to Hunan College of Finance and Economics in September 1978 and became a teacher in the college after graduation in August 1981. From August 1988 to July 1994, Mr. Tang served successively as deputy general manager of the international business department of Hainan branch and branch president of Yangpu branch of the Hainan Province of China Construction Bank. From July 1994 to February 1997, Mr. Tang served successively as person in charge of preparation team

and vice president of China International Capital Corporation Limited (中國國際金融有限公司) (now known as China International Capital Corporation L i m i t e d ( 中國國際金融股份有限公司) ) . F r o m February 1997 to September 2009, Mr. Tang served

successively as vice president of China Cinda Trust Investment Company (中國信達信託投資公司), vice president of China Galaxy Securities Limited Liability Company (中國銀河證券有限責任公司) (now known as China Galaxy Securities Co., Ltd. (中國銀河證券股份有限公司)), chairman of Hong Yuan Securities Co., Ltd. (a company listed on Shenzhen Stock Exchange,

Stock Code: 000562). Mr. Tang acted as senior vice president of Peking University Founder Group Co., Ltd. from September 2009 to June 2012; and as

chairman of Founder Capital Holdings Limited from October 2010 to June 2012. Mr. Tang served as

supervisor, chairman and director of Hodojou Technology Co., Ltd. (華多九州科技股份有限公司), formerly known as Beijing HODOJOU Technology Co., Ltd (北京華多九州科技有限公司) (a company listed on National Equities Exchange and Quotations,

Stock Code: 834567) from March 2012 to October

2018. Mr. Tang was an independent director of Geo- Jade Petroleum Corporation (洲際油氣股份有限公司) (formerly known as Hainan Zhenghe Industrial Group Co . , Ltd . ( 海南正和實業集團股份有限公司), a company listed on Shanghai Stock Exchange, Stock

Code: 600759) from December 2013 to July 2019. Mr.

Tang has been an independent director of China CITIC Bank International Limited (中信銀行（國際）有限公司) since November 2013.

Mr. Tang graduated from Hunan College of Finance and Economics, majoring in finance in August 1981. Mr. Tang graduated in June 1987 from the Institute of Financial Research, Head Office, People's Bank of China with a master's degree in economics; and graduated from the Graduate School of the Chinese Academy of Social Sciences in July 2004 with a doctoral degree in economics.

Wison Engineering Services Co. Ltd. Annual Report 2020

Biographies of the Directors and Senior Management

Mr. Feng Guohua (馮國華), age 52, joined our Company as an independent non-executive Director on 28 December 2015. Mr. Feng has over 25 years of experience in information technology and management of consultancy services. Mr. Feng has extensive international exposure and experience in providing consulting services to multinational companies, state-owned enterprises and private enterprises.

Mr. Feng is currently served as an executive director and the Chief Executive Officer of Man Wah Holdings Limited (Stock code: 01999.HK) and he is also an independent director of Shanghai Jahwa United Co., Ltd. (Stock code: 600315.SH), (which is listed on Shanghai Stock Exchange).

Prior to that, Mr. Feng had served as general Manager of The Greater China Corporate Services Department of Microsoft (China) ("Microsoft") from April 2016 to September 2020. Before he joined Microsoft, he had also been a Vice President and the managing partner at IBM Global Business Consulting Services Department.

Mr. Feng graduated from the University of Science and Technology of China in 1990 with a Bachelor's degree which majors in economic management and minors in computer application software. Mr. Feng also completed the Advanced Management program of Harvard Business School in 2009.

SENIOR MANAGEMENT

Ms. Chen Huimei (陳惠梅), age 53, is a senior vice president of our Group. She is responsible for the professional talent resource efficiency, professional technical capabilities and enhancement of corporate productization capabilities of Wison Engineering, and at the same time, is a senior supporter of various

domestic and overseas projects. Ms. Chen graduated from Xi'an Jiaotong University (西安交通大學) with a bachelor's degree in chemistry and chemical

engineering in 1989, and had the qualification of senior engineer. From 1998 to 2007, Ms. Chen

successively worked at Petrochina Lanzhou Petrochemical Company (中石油蘭州石化工程公司) as project manager, project director and the

manager of technology management department. Ms. Chen joined our Group in 2007 and successively worked at Wison Engineering as deputy manager of the quality and safety department, manager of the technical management department, manager of the research and development center and vice president of the Group, and was once in charge of technology research, engineering design, information technology as well as quality and safety. Ms. Chen has 29 years' experience in the petrochemicals industry. She obtained an EMBA degree from the Chinese University of Hong Kong in 2015.

Wison Engineering Services Co. Ltd. Annual Report 2020

Biographies of the Directors and Senior Management

Mr. Li Yansheng (李延生), age 56, is the chief engineer and the chief scientist of our Group. He is mainly responsible for guiding and leading the technology development of Wison Engineering and supporting and participating in internal technology research and development of Wison Engineering. Mr. Li graduated from Qingdao Institute of Chemical Technology (青島化工學院) with a bachelor's degree in organic chemical engineering. Mr. Li also obtained a certificate in business administration (MBA core course) from Antai College of Economics and

Management of Shanghai Jiao Tong University (上海交通大學安泰經濟與管理學院) in 2006. Mr. Li then obtained an executive education program certificate

from Cheung Kong Graduate School of Business (長江商學院) in 2010. Prior to joining our Group, Mr. Li worked at Shandong Qilu Petrochemical Engineering

Co. Ltd as vice chief engineer from 1987 to 2004. Mr. Li joined our Group in 2004 and worked at the technical department of Wison Engineering. He then worked in the design management department and technical management department of Wison Engineering as a manager and vice chief engineer in 2005 and 2006, respectively. Mr. Li was working at Wison Engineering as an assistant to general manager and technical director in 2008. Since 2017, Mr. Li has been working at Wison Engineering as chief engineer and chief scientist. Mr. Li also received

various awards such as First-class Technical Progress Award (科技進步一等獎) from All-China Federation of Industry & Commerce (中華全國工商業聯合會) and the nationwide outstanding chemical engineering worker (全國化工優秀科技工作者) from China Petroleum and Chemical Industry Federation (中國石油和化學工業聯合會) in 2010. He earned the title as a master of exploration design in the

petroleum industry of the PRC in 2013. In 2018, he was awarded the "Nomination Award for Meritorious Figure" from Shanghai Exploration & Design Trade Association for echoing 40th anniversary of Reform and Opening up.

Mr. Pang Xiongying (龐雄鷹), age 55, is the chief technology officer of Wison Engineering, mainly responsible for global technology cooperation, global market strategic research and marketing, and in charge of the product technology centre, the technology development centre and the marketing department. Mr. Pang has 30 years of professional experience in energy and chemical industry management, market analysis, business planning, operation, engineering and technology, specializing in corporate strategy and market analysis. Mr. Pang started his career as a R&D researcher with SINOPEC in Research Institute of Petroleum Processing. He also worked as an engineer and business planner for ExxonMobil from December 1995 to March 2003. He joined CMAI Consulting in 2003; became a partner and then established CMAI's China business, which he served as the president from January 2006 to May 2011. After IHS acquired CMAI in May 2011, he served as a vice president, leading Greater China and then later Asia Pacific chemical business. Mr. Pang graduated from South China University of Technology with a bachelor's degree in chemical engineering in 1988. He also obtained a master's degree in chemical engineering from National University of Singapore in 1995 and a master's degree in economics from University of Houston, the United States in 2001. Mr. Pang joined the Group in February 2019.

Wison Engineering Services Co. Ltd. Annual Report 2020

Biographies of the Directors and Senior Management

Mr. Cui Hongxing (崔洪星), age 55, is the senior vice president and chief scientist of Wison Engineering, responsible for assisting in the global development of the Group's international business, and fully in charge of the expansion and growth of international business in emerging markets and regions, such as Africa. Mr. Cui has approximately 32 years of experience in the petrochemical industry. He is familiar with the development trends of domestic and international refining industry, product development directions and technical developments, and has won various technical progress awards. Mr. Cui worked as a deputy chief engineer, general manager of the overseas department and director of the consulting office in Beijing for SINOPEC Luoyang Petrochemical Engineering Co., Ltd. from July 1988 to October 2006 and received training at JGC Corporation at an earlier time. He worked as a senior process specialist for Jacobs Canada Limited from November 2006 to July 2011 and served as a senior technology responsible officer of the chief representative office in Beijing and senior project development manager for Qatar Petroleum International from August 2011 to July 2015. Mr. Cui is a senior expert in refining technology, design management and project development, with achievements covering consulting, planning, technical demonstrations and patent technology selections, engineering designs, project investment demonstrations and opportunity researches for large-scale refining projects, biddings and quotations for domestic and overseas projects, and overseas project development and cultivation. Mr. Cui joined the Group in August 2015 and was appointed as a technical director of the design centre, corporate refining technology director, and deputy general manager of the product technology centre. Mr. Cui graduated from Dalian University of Technology with a master's degree in 1988.

Report of the Directors

Wison Engineering Services Co. Ltd. Annual Report 2020

Report of the Directors

The board of directors of the Company (the "Board") is pleased to present this annual report together with the audited financial statements of the Company and its subsidiaries (the "Group"), for the year ended 31 December 2020.

likely future development in the Group's business is set out in the Business Overview section of this report. Particulars of important events affecting the Group that have occurred since the end of the financial year are set out in the Business Overview section and the Notes to the financial statements.

PRINCIPAL ACTIVITIES

The Company is an investment holding company. The principal activity of the Group is the provision of chemical engineering, procurement and construction management, or EPC services. The Group provides a broad range of integrated services spanning the project lifecycle from feasibility studies, consulting services, provision of proprietary technologies, design, engineering, raw materials and equipment procurement and construction management to maintenance and after- sale technical support.

BUSINESS REVIEW

Overview and Performance of the Year

A fair review of the business of the Group, a discussion and analysis using financial key performance indicators and an account of the Group's relationships with its key stakeholders that have a significant impact on the Group are set out in the Business Overview and Management Discussion and Analysis sections of this report. An indication of

The Group's business, financial condition or results of operation may be affected by a number of risks and uncertainties. Description of the principal risks and uncertainties facing the Group can be found in the Business Overview section and Note 38 to the financial statements.

Environmental Policies and Performance

The Group has established and implemented environmental management systems in accordance with the GB/T 24001-2004/ISO14001:2004 standards, and obtained the Environmental Management System Certificate after qualifying under the review by a third- party certification body. The Group strictly adheres to laws and regulations related to environmental protection, actively pursues the development strategies of "Green Engineering", and through implementing controls at different stages of the engineering design and construction process, achieves the goals of energy saving, emission reduction and environmental protection. In the feasibility studies, basic (preliminary) design and

Wison Engineering Services Co. Ltd. Annual Report 2020

Report of the Directors

overall design phases of engineering construction projects, the Group has compiled specifications on environmental protection and energy saving in accordance with relevant environmental protection and energy saving design specifications and requirements, and determined the investments required for the prevention of and remedy for pollution, and energy saving measures. In the construction phase of engineering projects, the Group effects soil protection through the adoption of anti-leakage measures; the Group enables full utilization of reusable resources through the sorting, collection and treatment of waste; and the Group reduces wastage of materials through the use of advanced material management systems to optimize construction plans and enable precise calculations.

C o m p l i a n c e w i t h R e l e v a n t L a w s a n d Regulations

With respect to the compliance with laws and regulations, the Group proactively keeps itself abreast of regulatory updates. Apart from the above, details of the Group's compliance with relevant laws and regulations which have a significant impact on the Group are also provided in the Business Overview, Management Discussion and Analysis and Corporate Governance Report sections of this report. These review and discussion form part of this Report of the Directors.

Further details of the Group's environmental, social and governance ("ESG") matters will be set out in the ESG Report to be published by the Company separately in due course and will be made available on the website of the Company and that of the Stock Exchange.

SUBSEQUENT EVENTS

As a result of net loss recorded by the Group, the Group is in breach of financial covenant with a certain bank (the "Bank") which is entitled to demand for immediate repayment of the principal amount of RMB805,000,000 and accrued interest as at 31 December 2020 as stipulated in the provisions in the loan agreement.

In order to improve the Group's operating and financial position, the directors of the Company have taken certain measures. For details, please refer to note 2.1 of the consolidated financial statements on page 94 of this report.

The Directors have reviewed the Group's cash flow forecast covering a period of twelve months from the end of the reporting period. They are of the opinion that, taking into account the above- mentioned plans and measures, the Group will have sufficient working capital to finance its operations and meet its financial obligations as and when they fall due in the foreseeable future.

As at the date of this report, the Bank has not raised any demand for immediate repayment.

MAJOR CUSTOMERS AND SUPPLIERS

For the year ended 31 December 2020, the aggregate purchases of raw materials attributable to the Group's five largest suppliers accounted for approximately 22.6% of the Group' s total purchases. Our purchases attributable to the single largest supplier accounted for approximately 8.4% of the Group's total purchases for the same period.

For the year ended 31 December 2020, our five largest clients, in aggregate, accounted for approximately 69.6% of our total revenue. Our revenue derived from the single largest client for the same period amounted to approximately 31.6% of our total revenue.

None of our Directors, any of their close associates or any shareholders that, to the knowledge of our Directors, own more than 5% of the issued share capital of our Company had any interest in any of our five largest suppliers or clients during the year ended 31 December 2020.

SUBSIDIARIES AND ASSOCIATE

Particulars of the Company's subsidiaries and the Group's associate as at 31 December 2020 are set out in Notes 1 and 18 to the financial statements respectively.

FINANCIAL STATEMENTS

The results of the Group for the year ended 31 December 2020 are set out in the consolidated statement of profit or loss and other comprehensive income on page 86 of this annual report.

Wison Engineering Services Co. Ltd. Annual Report 2020

Report of the Directors

FINAL DIVIDEND

The Board has resolved not to declare a dividend for the year ended 31 December 2020 (2019: HK$0.0040 per ordinary share).

DONATIONS

No donations were made by the Group during the year ended 31 December 2020 (2019: NIL).

PROPERTY, PLANT AND EQUIPMENT

Changes to the property, plant and equipment of the Group during the year are set out in Note 13 to the financial statements.

SHARE CAPITAL AND SHARE OPTION SCHEMES

Details of the Company's share capital and share option schemes are set out in Notes 31 and 32 to the financial statements and the paragraph "Share Option Schemes" below, respectively.

RESERVES

Changes to the reserves of the Group during the year ended 31 December 2020 are set out in the consolidated statement of changes in equity. Changes to the reserves of the Company during the year ended 31 December 2020 are set out in Note 39 to the financial statements.

DISTRIBUTABLE RESERVES

As at 31 December 2020, the Company's distributable reserves calculated under the Companies Law of the Cayman Islands comprise the share premium and retained earnings totaling approximately RMB872,486,000.

Wison Engineering Services Co. Ltd. Annual Report 2020

Report of the Directors

DIRECTORS

The directors during the year and as of the date of this annual report are:

Executive Directors

Ms. Rong Wei (Chief Executive Officer)(1)

Mr. Yan Shaochun (Chief Executive Officer)(2)

Mr. Zhou Hongliang

Mr. Li Zhiyong (Chief Financial Officer)(3)

Mr. Dong Hua

Mr. Zheng Shifeng(4)

Non-executive Director

Mr. Liu Hongjun (Chairman)(5)

Independent Non-executive Directors

Mr. Lawrence Lee

Mr. Tang Shisheng

Mr. Feng Guohua

Ms. Rong has resigned with effect from 5 February 2021.
Mr. Yan was appointed with effect from 5 February 2021.
Mr. Li has resigned with effect from 7 August 2020.
Mr. Zheng was appointed with effect from 1 September 2020.
Mr. Liu was appointed as the Chairman with effect from 5 February 2021.

BIOGRAPHIES OF THE DIRECTORS AND SENIOR MANAGEMENT

The biographical details of the Directors and the senior management of the Company are set out in t h e s e c t i o n h e a d e d " D i r e c t o r s a n d S e n i o r Management" on pages 41 to 47 of this annual report.

SERVICE CONTRACTS OF THE DIRECTORS

Each of the executive Directors has entered into a three-year service contract with the Company and effective from their respective appointment dates, is subject to termination before expiry by either party giving not less than six months' notice in writing to the other. Each of the independent non-executive Directors has entered into a letter of appointment with the Company which commenced from their respective appointment dates for an initial term of three years and shall be terminable by either party giving not less than three months' notice in writing to the other.

All Directors are subject to retirement by rotation and re-election at annual general meeting at least once every three years, and will continue thereafter until terminated in accordance with the terms of the service contract/letter of appointment.

In accordance with Article 108 of the Company's Articles of Association, Mr. Liu Hongjun, Mr. Dong Hua and Mr. Feng Guohua will retire by rotation at the forthcoming annual general meeting of the Company and, being eligible, offer themselves for re-election.

In accordance with Article 112 of the Company's Articles of Association, Mr. Yan Shaochun and Mr. Zheng Shifeng will retire at the forthcoming annual general meeting of the Company and, being eligible, offer themselves for re-election.

None of Mr. Liu Hongjun, Mr. Dong Hua, Mr. Feng Guohua, Mr. Yan Shaochun and Mr. Zheng Shifeng has an unexpired service contract which is not determinable by the Company or any of its subsidiaries within one year without payment of compensation, other than under normal statutory obligations.

REMUNERATION OF THE DIRECTORS AND FIVE HIGHEST PAID INDIVIDUALS

Details of the Directors' remuneration and the five highest paid individuals in the Group are set out in note 9 to the consolidated financial statements in this annual report.

EMPLOYEES AND REMUNERATION POLICIES

A review of the employees and remuneration policies of the Group during the Year are set out in the section headed "Management Discussion and Analysis" on page 39 of this annual report.

INDEPENDENCE OF INDEPENDENT NON- EXECUTIVE DIRECTORS

The Company has received from each of the independent non-executive Directors an annual confirmation of his independence pursuant to Rule

3.13 of the Listing Rule. The Company considers that all of the independent non-executive Directors are independent in accordance with the guidelines set out in the Listing Rules.

RIGHTS TO ACQUIRE THE COMPANY'S SECURITIES

Save as disclosed under the section "Share Option Schemes" below, at no time during the year or at the end of the year was the Company, or any of its holding companies or subsidiaries, or any of its fellow subsidiaries, a party to any arrangement to enable the Directors or chief executive of the Company or their respective associates (as defined under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules")) to have any right to subscribe for

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Report of the Directors

securities of the Company or any of its associated corporations as defined in the Securities and Futures Ordinance (the "SFO") or to acquire benefits by means of acquisition of shares in, or debentures of, the Company or any other body corporate.

DIRECTORS' INTERESTS IN TRANSACTIONS, ARRANGEMENTS AND CONTRACTS

Save as disclosed under the section "Connected Transactions" below, no transaction, arrangement or contract of significance in relation to the Group's business to which the Company or any of its subsidiaries, holding companies or fellow subsidiaries was a party and in which a director of the Company and/or any of his connected entity had a material interest, whether directly or indirectly, and no contract of significance between the Company or any of its subsidiaries and the Company's controlling shareholder or any of its subsidiaries, subsisted at the end of the year or at anytime during the year.

DIRECTORS' INTERESTS IN COMPETING BUSINESS

As at the date of this report, none of the directors of the Company and directors of the Company's subsidiaries, or their respective associates had interests in businesses, which compete or are likely to compete either directly or indirectly, with the businesses of the Company and its subsidiaries as required to be disclosed pursuant to the Listing Rules.

MANAGEMENT CONTRACTS

No contracts concerning the management and administration of the whole or any substantial part of the business of the Company were entered into or existed during the year.

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DIRECTORS' AND CHIEF EXECUTIVE'S INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES

As at 31 December 2020, the interests and short positions of the Directors or the chief executive of the Company in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept by the Company pursuant to section 352 of the SFO or as notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers ("Model Code") were as follows:

(a) Long position in the ordinary share of the Company (the "Share")

				Approximate
	Company/Name of	Capacity/		percentage of
Name of Director	Group Company	Nature of interest	Number of Shares(1)	shareholding
Zhou Hongliang	Company	Beneficial owner	3,250,000(L)	0.08%
Dong Hua	Company	Beneficial owner	2,440,000(L)	0.06%
Zheng Shifeng	Company	Beneficial owner	2,250,000(L)	0.06%
Liu Hongjun	Company	Beneficial owner	1,000,000(L)	0.02%

Notes:

1. The letter "L" denotes the person's long position in such Shares.
Long position in underlying Shares - share options
The following directors of the Company have personal interests in options to subscribe for the Shares:

				Number of share options
			Balance as at	Granted	Exercised	Balance as at	Exercise
			1 January	during	during	31 December	price
Name	Date of grant	Exercisable period	2020	the Year	the Year	2020	per share
							(HK$)
Lawrence Lee	14 November 2017	15 November 2018 to	1,000,000	-	-	1,000,000	1.744
		14 November 2022
Tang Shisheng	14 November 2017	15 November 2018 to	1,000,000	-	-	1,000,000	1.744
		14 November 2022
Feng Guohua	14 November 2017	15 November 2018 to	1,000,000	-	-	1,000,000	1.744
		14 November 2022

Save as disclosed above, as at 31 December 2020, none of the Directors nor the chief executive of the Company had any interests or short positions in any of the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept by the Company pursuant to section 352 of the SFO or as notified to the Company and the Stock Exchange pursuant to the Model Code.

SHARE OPTION SCHEMES

Share Option Scheme of the Company

On 30 November 2012, a share option scheme (the

Share Option Scheme") of the Company was approved and adopted by the shareholders of the Company. The Share Option Scheme will remain in force for a period to be notified by the Board, such period shall not exceed the period of ten years from the adoption date.

The purposes of the Share Option Scheme are to attract and retain the best available personnel, to provide additional incentive to employees, directors, consultants and advisers of our Group and to promote the success of the business of our Group. Pursuant to the Share Option Scheme, the Board may offer any employee (whether full- time or part- time), Director, consultant or adviser of our Group (the "Eligible Person") options to subscribe for Shares. Upon acceptance of the option, the grantee shall pay HK$1.00 to the Company as consideration for the grant.

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The maximum number of shares which may be issued upon the exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and any other schemes of our Company shall not exceed such number of shares as shall represent 30% of the issued share capital of our Company from time to time. Subject to the above, the Board may grant options under the Share Option Scheme in respect of such number of Shares which may be issued upon exercise of all options to be granted under the Share Option Scheme and any other schemes in aggregate not exceeding 10% of the issued share capital of the Company as at the date on which dealings in the Shares commenced on the main board of the Stock Exchange (the "Scheme Mandate Limit") (being 400,000,000 Shares). Therefore, as at 31 December 2020, the total number of shares which may be issued on the exercise of options granted or to be granted under the Share O p t i o n S c h e m e a n d a n y o t h e r s c h e m e s i s 256,277,200, representing approximately 6.29% of the issued share capital of the Company as at the date of this report. Options lapsed in accordance with the Share Option Scheme shall not be counted for the purpose of calculating the Scheme Mandate Limit. Unless approved by the Shareholders in a general meeting, the total number of Shares issued and to be issued upon the exercise of the options granted to each Eligible Person (including exercised, cancelled and outstanding options) in any 12-month period shall not exceed 1% of the relevant class of securities of our Company in issue.

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The amount payable for each Share to be subscribed for under an option in the event of the option being exercised shall be determined by the Board and shall be not less than the greater of:

the closing price of the Shares on the Stock Exchange as stated in the Stock Exchange's daily quotations sheet on the date of grant;
the average closing price of the Shares on the Main Board as stated in the Stock Exchange's daily quotations sheets for the five business days immediately preceding the date of grant; and
the nominal value of the Shares.

An option may be exercised in whole or in part by the option holder in accordance with the terms of the Share Option Scheme at any time during the period to be notified by the Board to each option holder upon the grant of options, such period not to exceed ten years from the date of grant of the relevant option. Terms and conditions of options can be specified upon grant of such options, which may include provisions as to the performance conditions which must be satisfied before the option can be exercised, the minimum period for which an option must be held before it can be exercised, vesting conditions (if any), lapse conditions and such other provisions as the Board may determine provided such provisions are not inconsistent with the relevant requirements of the Share Option Scheme or the Listing Rules.

On 14 November 2017, the Company granted share options to the eligible participants to subscribe for a total of 134,200,000 Shares under the Share Option Scheme. The following table discloses movements in the outstanding share options granted under the Share Option Scheme during the Year:

					Number of share options
						Lapsed/
			Balance as at	Granted	Exercised	forfeited	Cancelled	Balance as at	Exercise
			1 January	during	during	during	during	31 December	price
Category	Date of grant	Exercisable period	2020	the period	the period	the period	the period	2020	per share
									HK$
Independent non-	14 November	15 November 2018 to	3,000,000	-	-	-	-	3,000,000	1.744
executive directors	2017	14 November 2022
Employees	14 November	15 November 2018 to	123,800,000	-	-	4,050,000	-	119,750,000	1.744
	2017	14 November 2022

Total			126,800,000	-	-	4,050,000	-	122,750,000

No option has been granted under the Share Option Scheme during the year ended 31 December 2020. Save as disclosed above, no option has been cancelled or lapsed during the year ended 31 December 2020.

Pre-IPO Share Option Scheme of the Company

On 30 November 2012, a Pre-IPO share option scheme (the "Pre-IPOShare Option Scheme") of the Company was approved and adopted by the shareholders of the Company. No further pre-IPO options shall be offered under the Pre-IPO Share Option Scheme after the Listing Date but the provisions of the Pre-IPO Share Option Scheme shall in all other respects remain in full force and effect to the extent necessary to give effect to the exercise of any pre-IPO options granted prior thereto or otherwise as may be required in accordance with the provisions of the Pre-IPO Share Option Scheme and pre- IPO options granted prior thereto but not yet exercised shall continue to be valid and exercisable in accordance with the Pre-IPO Share Option Scheme.

The purpose of the Pre-IPO Share Option Scheme is to enable our Company to grant pre-IPO options to eligible participants, including directors, senior management and employees of the Group and certain employees, executives and officers of Wison Group Holding Limited ("Wison Holding"), our controlling shareholder, and its subsidiaries as r e c o g n i t i o n a n d a c k n o w l e d g e m e n t o f t h e contributions that such eligible participants have made or may make to our Group or any affiliates.

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Each of the grantees to whom a pre-IPO option has been granted under the Pre-IPO Share Option Scheme shall be entitled to exercise his/her pre-IPO option at any time during the option period or such period as may be specified by the Board at the time of grant.

As at 31 December 2019, the maximum number of shares in respect of which pre-IPO options have been granted and outstanding under the Pre-IPO Share Option Scheme is 130,527,000 shares, representing approximately 3.20% of the issued share capital of our Company as at the date of this report. These pre-IPO options have an exercise price of HK$0.837 per share. No further options can be granted under the Pre-IPO Share Option Scheme after the Listing Date.

As at 31 December 2020, all outstanding pre-IPO options have lapsed and the pre-IPO Share Option Scheme has therefore been terminated.

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Report of the Directors

SUBSTANTIAL SHAREHOLDERS' AND OTHER PERSONS' INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES

As at 31 December 2020, the following persons (other than the Directors or the chief executive of the Company) has interests or short positions in the shares or underlying shares of the Company as recorded in the register required to be kept by the Company under section 336 of the SFO:

			Number of Shares	Approximate
	Company/Name of	Capacity/	directly or	percentage of
Name	Group Company	Nature of interest	indirectly held(1)	shareholding
Wison Engineering	Company	Beneficial owner	3,088,782,146(L)	75.82%
Investment Limited
("Wison Investment")
Wison Holding(2)	Company	Interest in controlled	3,088,782,146(L)	75.82%
		corporation
Mr. Hua Bangsong(3)	Company	Interest in controlled	3,088,782,146(L)	75.82%
		corporation
Ms. Huang Xing(4)	Company	Interest of spouse	3,088,782,146(L)	75.82%

Notes:

The letter "L" denotes the person's long position in such Shares.
Wison Holding, as the sole shareholder of Wison Investment, is deemed or taken to be interested in the Shares which are owned by Wison Investment.
Mr. Hua Bangsong, as the sole shareholder of Wison Holding, is deemed or taken to be interested in the Shares which are beneficially owned by Wison Holding.
Ms. Huang Xing is the spouse of Mr. Hua Bangsong. Under the SFO, Ms. Huang Xing is deemed to be interested in the same number of Shares in which Mr. Hua is interested.

Save as disclosed above, as at 31 December 2020, there are no other persons (other than Directors or chief executives of the Company) who had or are taken to have interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which are recorded in the register required to be kept by the Company under Section 336 of the SFO, or which are notified to the Company.

CONNECTED TRANSACTIONS

Mr. Hua Bangsong ("Mr. Hua"), a controlling shareholder of our Company, is a connected person of our Company under Rule 14A.07 (1) of the Listing Rules.

Wison Holding, a company wholly-owned by Mr. Hua, holds 100% of Wison Investment. Wison Investment owns approximately 75.82% of our Company as at the date of this report, and therefore is a controlling shareholder and a connected person of the Company under the Listing Rules.

Wison (China) Holding Company ("Wison (China) Investment") is an indirect wholly-owned subsidiary of Wison Holding. Therefore, Wison (China) Investment is an associate of Mr. Hua and a connected person of our Company under the Listing Rules.

Wison Engineering Ltd. ("Wison Engineering") is an indirect wholly-owned subsidiary of the Company.

Shanghai Wison Offshore & Marine Co., Ltd. ("Wison Marine") is an indirect subsidiary of Wison Holding. Wison Marine is therefore an associate of Mr. Hua and a connected person of our Company under the Listing Rules.

Wison (Taizhou) New Material Technology Co., Ltd. ("Wison Taizhou") is an indirect wholly-owned subsidiary of Wison Holding. Therefore, Wison Taizhou is an associate of Mr. Hua and a connected person of our Company under the Listing Rules.

Wison USA, LLC (formerly known as Wison Petrochemicals (NA), LLC) is an indirect wholly- owned subsidiary of the Company.

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Wison Holding and its subsidiaries are referred to as Wison Group herein.

One-off Connected Transaction

The following transactions are one-off connected transactions entered into by our Group during the year ended 31 December 2020:

Technical Collaboration Agreement

On 30 June 2020, Wison Engineering and Wison Taizhou entered into a technical collaboration a g r e e m e n t ( t h e " Technical Collaboration Agreement"), pursuant to which the parties agreed to jointly develop certain technologies and scale up engineering in relation to efficient synthesis of CO2 to chemicals. The total amount payable by Wison Engineering under the Technical Collaboration Agreement is expected to be no more than RMB12,000,000, which covers the costs of manpower and resources and the amount of capital to be incurred in the project. This maximum amount is determined based on an estimation of the man hours required and the associated costs of manpower required and the costs of materials and site preparation. The final total amount payable by Wison Engineering will depend on the actual costs to be incurred in the project. For the year ended 31 December 2020, the relevant cost of service fee recognized by the Group for this project during the year was nil.

The connected transaction contemplated under the Technical Collaboration Agreement was announced on 30 June 2020.

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Wison Taizhou CO2 to Chemicals EPC Contract

On 18 September 2020, Wison Engineering and Wison Taizhou entered into an EPC general contractor contract (the "Wison Taizhou CO2 to Chemicals EPC Contract"), pursuant to which Wison Engineering was engaged by Wison Taizhou as the EPC general contractor for its project in relation to efficient synthesis of CO2 to chemicals in Taixing Economic Development Zone, Jiangsu Province, the PRC. The total contract price payable by Wison Taizhou to Wison Engineering under the Wison Taizhou CO2 to Chemicals EPC Contract was expected to be RMB8,300,000, which comprises payment for the design fees, the equipment and materials procurement fees, the construction fees and the project management and other fees. The total amount finally receivable by Wison Engineering under the Wison Taizhou CO2 to Chemicals EPC Contract will be determined after completion of the project and will depend on the actual amount of engineering work and the prevailing market price of the equipment and materials involved in the project. The total amount finally receivable by Wison Engineering under the Wison Taizhou CO2 to Chemicals EPC Contract will be calculated by the parties after completion of the project. For the year ended 31 December 2020, the relevant revenue recognized by the Group for this project during the year was nil.

The connected transaction contemplated under the Wison Taizhou CO2 to Chemicals EPC Contract was announced on 18 September 2020.

Supplemental Agreement to the Wison Taizhou EPC Contract

On 30 October 2020, Wison Engineering and Wison Taizhou entered into a supplemental Agreement to the Wison Taizhou EPC Contract (the "Supplemental Agreement to the Wison Taizhou EPC Contract") to amend certain terms under the EPC general contractor contract dated 12 March 2019 and entered into between the same parties for the high performance polyamide project of Wison Taizhou in Taixing Economic Development Zone, Jiangsu Province, the PRC (the "Wison Taizhou EPC Contract"). Pursuant to the Supplemental Agreement to the Wison Taizhou EPC Contract, the parties agreed to (i) increase the total contract price payable by Wison Taizhou to Wison Engineering to RMB714,301,800, being the New Contract Price, (ii) amend the maximum amount for the final total amount receivable by Wison Engineering from RMB537,500,000 to no more than 105% of the New Contract Price (the "Receivable Limit"), and (iii) temporarily extend the expected timeline of intermediate handover of certain works by Wison Engineering, the latest being to 31 May 2021 (the "Extension"). The Supplemental Agreement to the Wison Taizhou EPC Contract was entered into after taking into account the updated volume and scope of work undertaken by Wison Engineering during the performance of the Wison Taizhou EPC Contract including additional piling foundation, floor deck, heavy-duty flooring and gravel flooring, as well as additional costs in renovation and greening and increased needs on civil engineering. The New Contract Price, Receivable Limit and the Extension were determined upon arm's length negotiation. For the year ended 31 December 2020, the relevant revenue recognized by the Group for this project during the year was RMB468,281,000.

The connected transaction contemplated under the Supplemental Agreement to the Wison Taizhou EPC Contract was announced on 30 October 2020 and was approved by independent Shareholders of the Company at the extraordinary general meeting held on 30 November 2020.

Continuing Connected Transactions

For the financial year ended 31 December 2020, all the continuing connected transactions (the "Continuing Connected Transactions") have not exceeded their respective annual caps:

1. 2020 Property Leasing Framework Agreement Wison Engineering, an indirect wholly-ownedsubsidiary of the Company, leased to Wison (China) Investment and Wison Marine of certain premises located at No.699 Zhongke Road, Pudong New District, Shanghai, the PRC (the "New Wison Complex"). The Group also provided property management services to Wison (China) Investment and Wison Marine for the premises under the Leases for office use. In this connection, Wison Engineering has entered into a number of agreements with Wison (China) Investment and Wison Marine, including a property leasing agreement dated 14 December 2018, a property leasing agreement dated 28 February 2019, a property leasing agreement dated 21 June 2019, a property leasing agreement dated 16 December 2019 and related supplemental agreements (together, the "Existing Agreements"). On 30 June 2020, Wison Engineering entered into a property leasing framework agreement (the

" 2 0 2 0 P r o p e r t y L e a s i n g F r a m e w o r k

Agreement") with Wison Holding, pursuant to which Wison Engineering may, following the principal terms of the 2020 Property Leasing Framework Agreement, from time to time let

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Report of the Directors

properties and provide property management services for premises located at the New Wison Complex to Wison Holding and its subsidiaries and any companies in which Wison Holding and/or its subsidiaries can control the exercise of 30% or more of the voting power at general meetings and/or control the composition of a majority of the board of directors (the "Wison Holding Entities"). The 2020 Property Leasing Framework Agreement covers and governs the leasehold relationship between the parties under all the Existing Agreements as well as any future lease arrangements entered into between Wison Engineering and the relevant Wison Holding Entities in relation to the leases of and the provision of property management services for premises located at the New Wison Complex during the term of the agreement. The rentals under the 2020 Property Leasing Framework Agreement shall be determined with reference to the prevailing market rates. Such rentals payable shall not be less than the rentals received by Wison Engineering from independent third party tenants for comparable properties at the time when the leasing arrangements and implementation agreements are entered into. The property management fees shall be determined with reference to the applicable laws and regulations of the PRC from time to time. Such property management fees shall not be less than the fees received by Wison Engineering from independent third parties for providing comparable property management services at the time when the leasing arrangements and implementation agreements are entered into. The utility charges arising from the actual usage of each of the leased premises shall be determined from time to time with reference to the prices prescribed by the relevant government

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authorities, property management agreements and property management conventions. The charges for conference facilities shall be determined with reference to market rates and shall not be less than the amounts charged by Wison Engineering from independent third parties. The 2020 Property Leasing Framework Agreement will expire on 31 December 2022 and the transactions contemplated thereunder w i l l b e s u b j e c t t o t h e a n n u a l c a p s o f R M B 3 3 , 6 0 0 , 0 0 0 , R M B 3 8 , 4 0 0 , 0 0 0 a n d RMB44,400,000 in respect of the three years ended and ending 31 December 2020, 2021 and 2022, respectively.

The 2020 Property Leasing Framework Agreement was announced by the Company on 30 June 2020.

The aggregate rental, property management fees, utility charges and charges for conference facilities payable to Wison Engineering under the 2020 Property Leasing Framework Agreement for the year ended 31 December 2020 were RMB24,542,000.

2. Service Agreement

On 7 June 2018, Wison Investment (HK) entered into a service agreement (the "Service Agreement") with Wison USA, LLC pursuant to which Wison USA, LLC shall provide consulting, marketing and new business development services in oil and gas and petrochemical fields to Wison Investment (HK) in relation to its current and proposed operations. The Service Agreement has a term of one year from 7 June 2018 and shall automatically be renewed for one year unless the parties terminate the Service Agreement. The Service Agreement was renewed for a one year term commencing

on 7 June 2020. The fee payable to Wison USA, LLC is determined based on the amount of time incurred in providing the services and is charged at an hourly rate of US$218.75, plus out-of-pocket expenses. The annual cap for the fees payable to Wison USA, LLC under the Service Agreement is US$617,000. For the year ended 31 December 2020, the relevant revenue recognised by the Group under the Service Agreement was RMB252,000.

3. Technical Consulting Services Framework Agreement

On 26 June 2018, Wison (China) Investment entered into a technical consulting services framework agreement (the " Technical Consulting Services Framework Agreement") with Wison Engineering, pursuant to which the parties set forth the principal terms under which Wison Engineering shall provide technical consulting services to Wison (China) Investment for its projects. The Technical Consulting Services Framework Agreement is effective from 1 January 2018 and has a term of three years . The fee payable to Wison Engineering is determined after arm's length negotiation between the parties and is based on the Notice on issuing the Interim Regulations on Consultancy Fees for Construction Projects at Preliminary Stage [1999] No. 1283 of the State Planning Commission. The annual cap for the consulting fees payable to Wison Engineering under the Technical Consulting Services Framework Agreement for the years ending 31 December 2018, 2019 and 2020 is RMB30 million. The consulting fees payable to Wison Engineering shall be paid by bank transfer every six months. For the year ended 31 December 2020, the relevant revenue

recognized by the Group under the Technical Consulting Services Framework Agreement was nil.

4. Engineering Construction Services Framework Agreement and New Engineering Construction Services Framework Agreement

On 3 August 2018, the Company and Wison

M a r i n e e n t e r e d i n t o a n e n g i n e e r i n g construction services framework agreement (the "Engineering Construction Services Framework Agreement"), pursuant to which relevant members of the Wison Marine Group (being Wison Marine and its subsidiaries and associates) may, following the principal terms of the Engineering Construction Services Framework Agreement, from time to time enter into separate agreements with relevant members of the Group in relation to the t r a n s a c t i o n s c o n t e m p l a t e d u n d e r t h e Engineering Construction Services Framework Agreement. Pursuant to the Engineering Construction Services Framework Agreement, W i s o n M a r i n e G r o u p s h o u l d p r o v i d e modularized pre-fabrication and engineering construction services . The Engineering Construction Services Framework Agreement will expire on 31 December 2020 and the contract sums contemplated thereunder will be subject to the annual caps of RMB750,000,000, RMB930,000,000 and RMB930,000,000 in respect of the three years ending 31 December 2018, 2019 and 2020, respectively. The pricing a n d terms of `each particular project c o n t e m p l a t e d u n d e r t h e E n g i n e e r i n g Construction Services Framework Agreement shall be determined in the ordinary and usual course of business on normal commercial terms and on an arm's length basis. The Group selects contractors by the way of tender, and accordingly determines the contract sum for

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each separate agreement in the tender process.

As the Engineering Construction Services Framework Agreement expired on 31 December 2020, the Company and Wison Marine entered into an engineering construction services framework agreement on 30 October 2020 (the

New Engineering Construction Services Framework Agreement ") to renew the Engineering Construction Services Framework Agreement. The subject matter and the pricing policy (i.e. pricing by way of tender) under the New Engineering Construction Services Framework Agreement are the same as that under the Engineering Construction Services Framework Agreement as described above. The New Engineering Construction Services Framework Agreement has a term of three years commencing from 1 January 2021 to 31

D e c e m b e r 2 0 2 3 . T h e c o n t r a c t s u m s contemplated under the New Engineering Construction Services Framework Agreement w i l l b e s u b j e c t t o t h e a n n u a l c a p o f RMB1,750,000,000 for each of the three years ending 31 December 2021, 2022 and 2023. The pricing and terms of each particular project contemplated under the New Engineering Construction Services Framework Agreement shall be determined in the ordinary and usual course of business on normal commercial terms and on an arm's length basis.

The aggregate contract sums entered into by the Company during the year ended 31 December 2020 was nil and the aggregate amount payable to Wison Marine Group for the y e a r e n d e d 3 1 D e c e m b e r 2 0 2 0 w a s RMB24,361,000.

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The New Engineering Construction Services Framework Agreement was announced by the Company on 30 October 2020 and was approved by independent Shareholders of the Company at the extraordinary general meeting held on 30 November 2020.

5. Service Agreement with Wison Holding

On 23 January 2020, the Company entered into a service agreement with Wison Holding ("Service Agreement with Wison Holding"), pursuant to which the Group shall provide to Wison Group consulting, marketing and new business development services in oil and gas and petrochemical areas in relation to the business operations of Wison Group, and Wison Group shall provide to the Group information technology services and legal and compliance services. The term of the Service Agreement commenced on 23 January 2020 and expires on 31 December 2022. The fees payable to the Group by Wison Group and the fees payable by the Group to Wison Group under the Service Agreement are determined based on the amount of time incurred by the qualified personnel assigned to provide the relevant services at hourly rates determined with reference to market rates for the remuneration of such qualified personnel, plus out-of-pocket expenses and general and administration expenses actually incurred. The fee shall be payable quarterly in cash. The annual cap for the fees receivable by the Group from Wison Group under the Service Agreement is RMB30,000,000 for each of the three years ended and ending 31 December 2020, 2021 and 2022 and the annual caps for the fees payable by the Group to Wison Group under the Service

A g r e e m e n t a r e R M B 1 8 , 0 0 0 , 0 0 0 . RMB19,800,000 and RMB21,780,000 for the

years ended and ending 31 December 2020, 2021 and 2022, respectively. For the year ended 31 December 2020, the service fee revenue recognised by the Group from Wison Group and the cost of service fee incurred by the Group from Wison Group was RMB10,086,000 and RMB6,489,000, respectively.

The Service Agreement with Wison Holding was announced by the Company on 23 January 2020.

In the opinion of the independent non-executive directors, the continuing connected transactions above were entered into by the Group:

in the ordinary and usual course of its business;
on normal commercial terms; and
in accordance with the relevant agreements governing such transactions and on terms that are fair and reasonable and in the interests of the shareholders of the Company as a whole.

Further, the Board has engaged the auditor of the Company to report on the Group's continuing connected transaction in accordance with Hong Kong Standard on Assurance Engagements 3000 "Assurance Engagements Other Than Audits or Reviews of Historical Financial Information" and with reference to Practice Note 740 "Auditor's Letter on Continuing Connected Transactions under the Hong Kong Listing Rules" issued by the Hong Kong Institute of Certified Public Accountants. The auditor has issued an unqualified letter containing their findings and conclusions in respect of the continuing connected transactions disclosed above in accordance with Rule 14A.56 of the Listing Rules.

A copy of the auditor's letter on the continuing connected transactions of the Group for the year ended 31 December 2020 has been provided by the Company to the Stock Exchange.

Details of the related party transactions of the Group during the year ended 31 December 2020 are set out in Note 33 to the financial statements. During the year ended 31 December 2020, the related party transactions set out in Notes 33(a)(i), 33(a)(ii), 33(a)(iii), 33(a)(iv), 33(a)(v), 33(a)(vi), 33(a)(xi), 33(a)(xii), 33(a)(xiii) and 33(a)(xxi) are regarded as continuing connected transactions of the Group, and the related party transactions set out in Notes 33(a)(vii), 33(a)(viii), 33(a)(ix), 33(a)(x), 33(a)(xiv), 33(a)(xv), 33(a)(xvi), 33(a)(xvii), 33(a)(xviii), 33(a)(xix), 33(a)(xxii) and 33(a)(xxiii) are regarded as connected transactions of the Group, under Chapter 14A of the Listing Rules.

In respect of the connected transactions and the continuing connected transactions, entered into during the year ended 31 December 2020, the Company has complied with the disclosure requirements under the Listing Rules.

EQUITY-LINKED AGREEMENTS

Other than the Pre-IPO Share Option Scheme and the Share Option Scheme as disclosed under the section "Share Option Schemes" above, no equity- linked agreements were entered into by the Company during the year.

Wison Engineering Services Co. Ltd. Annual Report 2020

Report of the Directors

PRE-EMPTIVE RIGHTS

There is no provision for pre-emptive rights under the articles of association of the Company, although there are no restrictions against such rights under the laws in the Cayman Islands.

PURCHASE, SALE AND REDEMPTION OF LISTED SECURITIES

The Company and its subsidiaries did not purchase, sell or redeem any of the listed securities of the Company during the year ended 31 December 2020.

FIVE YEAR FINANCIAL SUMMARY

A summary of the results and of the assets and liabilities of the Group for the last five financial years is set out on pages 6 to 7 of this report.

BANK AND OTHER LOANS

Particulars of bank and other loans of the Group as at 31 December 2020 are set out in Note 28 to the financial statements.

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Report of the Directors

EMOLUMENT POLICY

The Company is well aware of the importance of incentivising and retaining its employees. The Group offers competitive salaries and bonuses to its employees, and make contributions to various social welfare funds for its employees, which in turn provide retirement benefits, pension payments, medical insurance, unemployment insurance, public housing reserves, work injury insurance and maternity insurance benefits to the employees. The Company also offers a long-term incentive scheme in the form of share option schemes for eligible employees, details of which are set out under the paragraph headed "Share Option Schemes" above.

EMPLOYEE RETIREMENT BENEFITS

Particulars of the employee retirement benefits of the Group are set out in Note 8 to the financial statements.

PERMITTED INDEMNITY PROVISION

Pursuant to the Articles of Association of the Company, the Directors, secretary and other officers of the Company shall be indemnified and secured harmless out of the assets of the Company from and against all liabilities incurred by such Directors, secretary or other officers in the execution of their duty. The Company has arranged for appropriate insurance cover for Directors' and officers' liabilities in respect of legal actions that may be bought against the Directors, secretary or other officers of the Company.

PUBLIC FLOAT

The Company has obtained a waiver from the Stock Exchange and the Stock Exchange has accepted, under Rule 8.08(1)(d) of the Listing Rules, a lower public float percentage of 21.87% of our total issued share capital.

As at the date of this report and based on the information that is publicly available to the Company and to the knowledge of the Directors of the Company, the Company has maintained the minimum public float as permitted by the Stock Exchange.

AUDIT COMMITTEE

The Audit Committee has reviewed the accounting principles and policies adopted by the Group and discussed the Group's internal controls and financial reporting matters with the management. The Audit Committee has reviewed and discussed the annual results for the year ended 31 December 2020.

AUDITORS

The financial statements have been audited by Ernst

Young who shall retire at the forthcoming annual general meeting and, being eligible, offer themselves for reappointment.

By order of the Board

Yan Shaochun

Executive Director and Chief Executive Officer

Hong Kong, 26 March 2021

Corporate

Governance

Report

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Corporate Governance Report

The Board is committed to upholding high standards of corporate governance practices and business ethics in the firm belief that they are crucial to improving the efficiency and performance of the Group and to safeguarding the interests of the shareholders. The Board reviews the Company's corporate governance practices from time to time in order to meet the expectations of stakeholders and comply with increasingly stringent regulatory requirements, and to fulfill its commitment to excellence in corporate governance. Set out below are the principles of corporate governance as adopted by the Company during the year ended 31 December 2020.

During the year ended 31 December 2020, the Company has complied with the applicable code provisions of the Corporate Governance Code (the

Code") set out in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules").

the Board to the management of the Company, who will implement the strategy and direction as determined by the Board.

Executive Directors

Mr. Yan Shaochun (Chief Executive Officer)

Mr. Zhou Hongliang

Mr. Dong Hua

Mr. Zheng Shifeng

Non-executive Director

Mr. Liu Hongjun (Chairman)

Independent Non-executive Directors

Mr. Lawrence Lee

Mr. Tang Shisheng

Mr. Fung Guohua

The biographical information of the Directors is set out in the section headed "Directors and Senior Management" on pages 41 to 47 of this annual report.

BOARD OF DIRECTORS

The Board is charged with promoting the success of the Company by directing and supervising its affairs. The Board has general powers for the management and conduct of the Company's business. The day-today operations and management are delegated by

The list of Directors (by category) is also disclosed in all corporate communications issued by the Company from time to time pursuant to the Listing Rules. The independent non-executive Directors are expressly identified in all corporate communications pursuant to the Listing Rules.

The Directors do not have any financial, business, family or other material/relevant relationships with one another.

Mr. Yan Shaochun has entered into a service contract with us for a term of three years commencing from 5 February 2021 and shall continue thereafter unless terminated by not less than six months' written notice. Mr. Zhou Hongliang has entered into a service contract with us for a term of three years commencing from 10 September 2019 and shall continue thereafter unless terminated by not less than six months' written notice. Mr. Dong Hua has entered into a service contract with us for a term of three years commencing from 13 January 2020 and shall continue thereafter unless terminated by not less than six months' written notice. Mr. Zheng Shifeng has entered into a service contract with us for a term of three years commencing from 1 September 2020 and shall continue thereafter unless terminated by not less than six months' written notice. Mr. Liu Hongjun has entered into a letter of appointment with our Company for a term of three years commencing from 19 February 2020 unless terminated by three months' written notice or in certain circumstances in accordance with the terms of his letter of appointment. Each of Mr. Lawrence Lee, Mr. Tang Shisheng and Mr. Feng Guohua, has entered into a letter of appointment with our Company for a term of three years commencing from 30 March 2018, 7 December 2018 and 28 December 2018, respectively unless terminated by three months' written notice or in certain circumstances in accordance with the terms of the relevant letter of appointment. Notwithstanding the above, all Directors, including the independent non- executive Directors, are subject to retirement by rotation at least once every three years in accordance with the Listing Rules and the articles of association of the Company. A retiring director is eligible for re-election.

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Corporate Governance Report

Under the service contracts, our executive Directors are entitled to aggregate annual salaries of approximately RMB7.17 million, plus a discretionary bonus as determined by the Board and our Remuneration Committee. Mr. Liu Hongjun is not entitled to any director's fee for his appointment as non - executive Director . The basic annual remuneration payable by our Company to our independent non-executive Directors according to their respective letter of appointment is HK$240,000. The remuneration of the Directors is determined with reference to their duties, responsibilities and experience, and to prevailing market conditions. Details of the remuneration of the Directors for 2020 are set out in Note 9 to the financial statements.

The Company has received a written confirmation of independence from each of the independent non- executive Directors, and considers them to be independent.

Directors have access to the services of the Company Secretary to ensure that the Board procedures are followed. The Company Secretary of the Company is Ms. Luk Wai Mei until 31 January 2021. In compliance with Rule 3.29 of the Listing Rules, Ms. Luk has undertaken not less than 15 hours of relevant professional training during the year ended 31 December 2020. Ms. Tsang Chi Ka was appointed as the Company Secretary with effect from 18 February 2021.

Each of the Directors (other than Mr. Yan Shaochun whose appointment was effective from 5 February 2021) attended various trainings in 2020, including the training on regulatory updates for Main Board listed companies as well as ESG trend, as part of their professional development. The Company will arrange suitable training for all Directors in order to develop and refresh their knowledge and skills as part of their continuous professional development.

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Corporate Governance Report

Code provision A.1.1 of the CG Code prescribes that at least four regular Board meetings should be held in each year at approximately quarterly intervals with active participation of majority of directors, either in person or through electronic means of communication. Notices of not less than fourteen days are given for all regular Board meetings to provide all Directors with an opportunity to attend and include matters in the agenda for a regular meeting.

For other Board and Board committee meetings, reasonable notice is generally given. The agenda and accompanying board papers are dispatched to the Directors or Board committee members at least three days before the meetings to ensure that they have sufficient time to review the papers and are adequately prepared for the meetings. When Directors or Board committee members are unable to attend a meeting, they will be advised of the matters to be discussed and given an opportunity to make their views known to the Chairman prior to the meeting. Minutes of meetings are kept by the company secretary with copies circulated to all Directors for information and records.

Minutes of the Board meetings and Board committee meetings are recorded in sufficient detail about the matters considered by the Board and the Board committees and the decisions reached, including any concerns raised by the Directors. Draft minutes of each Board meeting and Board committee meeting are sent to the Directors for comments within a reasonable time after the date on which the meeting is held. Minutes of the Board meetings are open for inspection by Directors.

In 2020, the Board held 14 meetings. A total of 66 proposals were considered at these Board meetings, including proposals for the consideration of the Company's 2019 annual report, 2020 interim report, the change in accounting estimates relating to the useful lives of certain buildings of the Group and certain connected transactions and continuing connected transactions. The Board also considered the Company's compliance with the Code generally.

The table below sets out the details of Board meetings attendance of each Director during the year ended 31 December 2020.

	Number of meetings	Number of meetings
Director	requiring attendance	attended in person
Rong Wei(1)	14	11
Zhou Hongliang	14	14
Li Zhiyong(2)	8	8
Dong Hua	14	14
Zheng Shifeng(3)	3	3
Liu Hongjun(4)	10	10
Lawrence Lee	14	13
Tang Shisheng	14	14
Feng Guohua	14	14

Note:

Resigned with effect from 5 February 2021.
Resigned with effect from 7 August 2020.
Appointed with effect from 1 September 2020.
Appointed with effect from 19 February 2020.

In 2020, the Company convened and held two shareholders' general meetings, being the 2019 annual general meeting held on 18 June 2020 and the extraordinary general meeting held on 30 November 2020 for the approval of a connected transaction. All the Directors attended the 2019 annual general meeting and Ms. Rong Wei, Mr. Zhou Hongliang, Mr. Dong Hua, Mr. Zheng Shifeng, Mr. Lawrence Lee and Mr. Tang Shisheng attended the extraordinary general meeting.

DELEGATION BY THE BOARD

The Board reserves for its decision all major matters of the Company, including: approval and monitoring of all policy matters, overall strategies and budgets, internal control and risk management systems, material transactions (in particular those that may involve conflict of interests), financial information, appointment of Directors and other significant financial and operational matters. Directors could have recourse to seek independent professional advice in performing their duties at the Company's expense and are encouraged to access and to consult with the Company's senior management independently.

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The daily management, administration and operation o f t h e G r o u p a r e d e l e g a t e d t o t h e s e n i o r management . The delegated functions and responsibilities are periodically reviewed by the Board. Approval has to be obtained from the Board prior to any significant transactions entered into by the management.

CORPORATE GOVERNANCE FUNCTION

The Board recognizes that corporate governance should be the collective responsibility of the Directors which includes:

to review and monitor the Company's policies and practices on compliance with legal and regulatory requirements;
to review and monitor the training and continuous professional development of Directors and senior management;
to develop, review and monitor the code of conduct and compliance manual applicable to employees and Directors;
to develop and review the Company's policies and practices on corporate governance;
to review the Company's compliance with the CG Code and disclosure in the corporate governance report; and
to review and monitor the Company's compliance with the Company's whistleblowing policy.

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Corporate Governance Report

BOARD COMMITTEES

The Company has three principal Board committees, the Audit Committee, the Nomination Committee and the Remuneration Committee. Each of the Board committees operates under its terms of reference. The terms of reference of the Board committees are available on the website of the Company and that of the Stock Exchange.

The members of the Remuneration Committee, Audit Committee and Nomination Committee are independent non-executive Directors.

The Board committees are provided with sufficient resources to discharge their duties and, upon reasonable request, are able to seek independent professional advice in appropriate circumstances, at the Company's expense.

Audit Committee

The Audit Committee has three members. Mr. Lawrence Lee is the chairman of the committee and

Director

Lawrence Lee

Tang Shisheng

Feng Guohua

Nomination Committee

The Nomination Committee has three members. Mr. Tang Shisheng is the chairman of the committee and the other two members are Mr. Feng Guohua and Mr. Lawrence Lee. All members of the Nomination Committee are independent non-executive directors.

the other two members are Mr. Feng Guohua and Mr. Tang Shisheng. All members of the Audit Committee are independent non-executive directors.

The primary duties of the Audit Committee are to review and supervise the financial reporting process and risk management and internal control systems of our Group and provide advice and comments to the Board.

In 2020, the Audit Committee held 6 meetings, at which a total of 14 proposals were considered, including proposals for the consideration of the Company's 2019 annual report, 2020 interim report and the appointment of auditors for 2020, as well as the change in accounting estimates relating to the useful lives of certain buildings of the Group. The Audit Committee also assessed the risk management and internal control measures and the internal audit function of the Company.

The table below sets out the details of meetings attendance of each member of the Audit Committee during the year ended 31 December 2020.

Number of meetings	Number of meetings
requiring attendance	attended in person
6	6
6	6
6	6

The primary duty of the Nomination Committee is to make recommendations to our Board on the appointment of Directors and senior management. The Nomination Committee is also responsible for reviewing and assessing the composition of the Board and the independence of the independent n o n - e x e c u t i v e D i r e c t o r s a n d m a k i n g recommendations to the Board on appointment and removal of Directors.

Nomination Process

The Company has adopted a nomination policy (the "Nomination Policy"), which sets out the approach to guide the Nomination Committee in relation to the selection, appointment and re-appointment of the directors of the Company.

The Nomination Committee will recommend to the Board for the appointment of a Director in accordance with the following procedures and process as set out in the Nomination Policy:

the Nomination Committee will, taking into consideration the current composition, diversity and size of the Board, develop a list of desirable skills, perspectives and experience at the outset to focus the search effort on suitable candidates;
the Nomination Committee may consult any source it deems appropriate in identifying or selecting suitable candidates, such as referrals from existing Directors, advertisements, recommendations from an independent agency firm and proposals from shareholders of the Company;
the Nomination Committee may adopt any process it deems appropriate in evaluating the suitability of the candidates, such as interviews, background checks, presentations and third- party reference checks;
upon considering whether a candidate is suitable for the directorship, the Nomination Committee will hold a meeting and/or by way of written resolutions to, if thought fit, approve the recommendation to the Board for appointment;

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the Nomination Committee will thereafter make the recommendation to the Board in relation to the proposed appointment and the proposed remuneration package; and
the Board will have the final authority on determining the selection of nominees.

Board Diversity Policy

The Company has formulated and adopted the board diversity policy (the "Board Diversity Policy") for compliance with the Listing Rules and the code provisions concerning the diversity of board members. The Board Diversity Policy sets out the approach adopted by the Board regarding the diversity of Board members.

The Board continuously seeks to enhance its effectiveness and to maintain the highest standards of corporate governance and recognizes diversity at Board level as an essential element in maintaining c o m p e t i t i v e a d v a n t a g e a n d s u s t a i n a b l e development. In designing the Board's composition, Board diversity has been considered from a number of aspects, including but not limited to gender, age, cultural and educational background, professional experience, skills, knowledge, length of services and time to be devoted as a director. The Company will also take into account factors relating to its own business model and specific needs from time to time. The ultimate decision will be based on merit and contribution that the selected candidates will bring to the Board.

The Board strives to ensure that it has the appropriate balance of skills, experience and diversity of perspectives that are required to support the execution of its business strategies and in order for the Board to be effective.

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Corporate Governance Report

Nomination Criteria

In recommending candidates for appointment to the Board, the Nomination Committee will consider candidates on merit against objective criteria and with due regards to the benefits of diversity on the Board.

For nomination and appointment of Mr. Zheng Shifeng as an executive Director of the Company, the criteria and procedures set out above have been applied.

In 2020, the Nomination Committee held 3 meetings at which a total of 7 proposals were considered, including proposals for re-election of directors.

The table below sets out the details of meeting attendance of each member of the Nomination Committee during the year ended 31 December 2020.

Director

Tang Shisheng

Feng Guohua

Lawrence Lee

Remuneration Committee

The Remuneration Committee has three members. Mr. Feng Guohua is the chairman of the committee and the other two members are Mr. Lawrence Lee and Mr. Tang Shisheng. All members of the Remuneration Committee are independent non- executive directors.

The Remuneration Committee has adopted the model code described in code provision B.1.2 (c)(i) of the Code in its terms of reference. The Remuneration Committee considers and recommends to the Board

Number of meetings	Number of meetings
requiring attendance	attended in person
3	3
3	3
3	3

the remuneration and other benefits paid by our Company to our Directors. The remuneration of all Directors is subject to regular monitoring by the remuneration committee to ensure that the levels of their remuneration and compensation are appropriate.

In 2020, the Remuneration Committee held 2 meetings, at which a total of 2 proposals were considered, including proposals for the remuneration of executive Directors of the Company.

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Corporate Governance Report

The table below sets out the details of meetings attendance of each member of the Remuneration Committee during the year ended 31 December 2020.

Director

Feng Guohua

Lawrence Lee

Tang Shisheng

For the year ended 31 December 2020, the number of senior management (excluding directors) whose remuneration fell within the following bands is as follows:

HK$1,500,001 to HK$2,000,000	3
HK$2,000,001 to HK$2,500,000	-
HK$2,500,001 to HK$3,000,000	1

Further details of the remuneration of the Directors and the five highest paid employees are set out in note 9 to the financial statements.

Number of meetings	Number of meetings
requiring attendance	attended in person
2	2
2	2
2	2

Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). In accordance with its general goals, the Company identified, organized and analysed the key business- related risks for the purposes of risk management and value creation. Regular and ad hoc risk assessments were conducted and internal control systems were reviewed annually and a refined risk management system was adopted to identify, assess and minimize risks. All these measures can provide reasonable, though not absolute, assurance against material misstatement or loss and to manage rather than eliminate the risk of failure to achieve business objectives.

CORPORATE GOVERNANCE FUNCTIONS

Risk Management and Internal control

The Board is responsible for ensuring that the Company establishes good corporate governance practices and procedures. The Board also has the overall responsibility for evaluating and determining the nature and extent of the risks it is willing to take in achieving the Group's strategic objectives, maintaining sound and effective risk management and internal control systems and reviewing their effectiveness.

The Company has established and maintained the risk management system and internal control system

according to the Corporate Risk Management Framework (企業風險管理框架) published by the

The Company has a clear organizational structure that, to the extent required, delegates the day-today responsibility for the formulation and implementation of procedures and monitoring of risk. Processes used to identify, evaluate and manage significant risks and processes used to review the effectiveness of the risk management and internal control systems and to resolve material internal control defects are mainly carried out in accordance with the Group's various manuals, regulations and procedures, namely the "Risk Management Manual", "Regulations of Initial Risk Management of Engineering Projects" and "Procedures for Implementation of Risk Management of Engineering Projects".

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Corporate Governance Report

The main features of the risk management and internal control systems of the Company are comprehensive risk management which covers the entire business process of the Company and penetrates full-process control and monitoring. The effectiveness of the relevant systems is confirmed through regular and ad hoc risk identification, risk assessment and risk response and follow-up work conducted by the management and business departments and each engineering project on an annual basis. The Company has established its internal audit function to carry out examination and evaluation on the review process and results, and follow up on the progress of improvement after the examination. The examination and evaluation results, recommendation for improvement and the progress of improvement in terms of risk management are then reported to the Board and the Audit Committee.

Deficiencies and insufficiency of the internal control mechanism and its implementation were identified through self-evaluation of risk and inspection. These initiatives facilitated the enhancement of the risk management system and reasonably ensured the effective operation of the risk management and internal control systems in order to safeguard the legal interest of the investors and protect the Company's assets.

T h e B o a r d e v a l u a t e d t h e s u f f i c i e n c y a n d effectiveness of risk management and internal control systems and the internal audit function of the Company through the Audit Committee. The Board considered the existing systems to be effective and adequate.

In addition, procedures and Rules for information disclosure and report were also formulated and implemented in order to systematically collect and monitor the information disclosure of the Company.

MODEL CODE FOR SECURITIES

TRANSACTIONS BY DIRECTORS

The Company has adopted the "Model Code for Securities Transactions by Directors of Listed Issuers" (the "Model Code") as set out in Appendix 10 to the Listing Rules as its code of conduct regarding directors' securities transactions. All directors have confirmed, following specific enquiry by the Company, that they have complied with the Model Code during the year ended 31 December 2020.

DIRECTORS' RESPONSIBILITY IN RESPECT OF THE FINANCIAL STATEMENTS

The Directors are responsible for overseeing the preparation of the financial statements which give a true and fair view of the financial position of the Company and its subsidiaries and of the financial performance and cash flow during the reporting period. A statement from the auditors about their reporting responsibilities on the financial statements is set out on pages 84 to 85 of this report. In preparing the financial statements for the year ended 31 December 2020, the Directors have selected suitable accounting policies and applied them consistently, made judgments and estimates that are prudent, fair and reasonable and prepared the financial statements on a going concern basis.

The Board has further reviewed the effectiveness of the risk management and internal control systems of the Group to ensure that sound systems are maintained and operated by the management in compliance with the agreed procedures and standards. The review covered all material controls, including financial, operational and compliance controls and risk management functions. During the year ended 31 December 2020, no material weakness on risk management and internal control measures has been identified. In addition, the Board considered the adequacy of resources, staff qualifications and experience, training programmes and budget of the Company's accounting, internal audit and financial reporting function.

COMPANY SECRETARY

Ms. Tsang Chi Ka has been appointed as the company secretary of the Company on 18 February 2021. She is a full time employee of the Company who has day-to-day knowledge of the Company and

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Corporate Governance Report

is responsible for advising the Board on corporate governance matters.

Ms. Tsang confirmed that she has attended sufficient professional training as required in accordance with Rule 3.29 of the Listing Rules during the Year.

EXTERNAL AUDITORS

Ernst & Young are appointed as the external auditors of the Company. The Group also engaged some local auditors as its subsidiaries' statutory auditors.

In addition, Ernst & Young (China) Advisory Limited ("Ernst & Young Advisory", a member firm of Ernst & Young Global Network) has provided other non- audit service to the Group in 2020.

For the year ended 31 December 2020, the external auditors received the following remuneration for audit and non-audit services provided to the Group in respect of the following:

	RMB
Audit services provided by Ernst & Young	5,180,000
Audit services provided by other local auditors	1,446,000
Non-audit service provided by Ernst & Young Advisory for environmental, social and	290,000
governance service

	6,916,000

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Corporate Governance Report

DIVIDEND POLICY

The Company has adopted a dividend policy which is in accordance with the relevant provisions of the Articles of Association. Pursuant to the dividend policy, the Company may from time to time in general meeting declare dividends in any currency to be paid to the members of the Company but no dividend shall be declared in excess of the amount recommended by the Board. No dividend shall be declared or payable except out of the profits and reserves of the Company lawfully available for distribution, including share premium. No dividend shall carry interest against the Company.

The Board may, before recommending any dividend, set aside out of the profits of the Company such sums as it thinks fit as a reserve or reserves which shall, at the discretion of the Board, be applicable for meeting claims on or liabilities of the Company or contingencies or for paying off any loan capital or for equalising dividends or for any other purpose to which the profits of the Company may be properly applied, and pending such application may, at the like discretion, either be employed in the business of the Company or be invested in such investments as the Board may from time to time think fit, and so that it shall not be necessary to keep any reserves separate or distinct from any other investments of the Company.

The Board may also without placing the same to reserve carry forward any profits which it may think prudent not to distribute by way of dividend.

The Board may also, without convening a general meeting, from time to time declare interim dividends as appear to the Board to be justified by the financial conditions and the profits of the Company. The Board may also pay half-yearly or at other suitable intervals to be selected by it any dividend which may be payable at a fixed rate if the Board is of the opinion that the financial conditions and the profits available for distribution justify the payment. The Board may in addition from time to time declare and pay special dividends of such amounts and on such dates and out of such distributable funds of the Company as it thinks fit. Any dividend unclaimed shall be forfeited and shall be returned to the Company in accordance with the Articles of Association and all applicable laws and regulations.

The Board will review the dividend policy from time to time and may adopt changes as appropriate at the relevant time.

SHAREHOLDERS

The Company is incorporated in the Cayman Islands. Pursuant to the articles of association of the Company, extraordinary general meetings shall also be convened on the requisition of one or more Shareholders holding, at the date of deposit of the requisition, not less than one tenth of the paid up capital of the Company having the right of voting at general meetings. Such requisition shall be made in writing to the Board or the Secretary and deposited at the Company's principal place of business in Hong Kong at Room 5408, 54th Floor, Central Plaza, 18

Harbour Road, Wan Chai, Hong Kong, for the purpose of requiring an extraordinary general meeting to be called by the Board for the transaction of any business specified in such requisition. Such meeting shall be held within 2 months after the deposit of such requisition. If within 21 days of such deposit, the Board fails to proceed to convene such meeting, the requisitionist(s) himself (themselves) may do so in the same manner, and all reasonable expenses incurred by the requisitionist(s) as a result of the failure of the Board shall be reimbursed to the requisitionist(s) by the Company.

Pursuant to the Articles, if a shareholder wishes to propose a person other than a retiring Director for election as a Director at any general meeting (including annual general meeting), the shareholder should lodge a written notice at the registration office or head office of the Company in the period commencing no earlier than the day after the despatch of the notice of the meeting appointed for such election and ending no later than seven days prior to the date of such meeting, provided that such period shall be at least seven days. Such written notice must be accompanied by a notice signed by the person to be proposed of his willingness to be elected as a Director.

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Enquiries may be put to the Board by contacting the Company's Investor Relations Department through email at ir@wison.com or directly by raising the questions at an annual general meeting or extraordinary general meeting.

During the year ended 31 December 2020 and up to the date of this report, there has not been any change in the Company's memorandum and articles of association. The Company's memorandum and articles of association are available on the website of the Company and that of the Stock Exchange.

Wison Engineering Services Co. Ltd. Annual Report 2020

Independent Auditor's Report

22/F CITIC Tower

1 Tim Mei Avenue

Central, Hong Kong

Tel : +852 2846 9888

Fax : +852 2868 4432

www.ey.com

To the shareholders of Wison Engineering Services Co. Ltd.

(Incorporated in the Cayman Islands with limited liability)

香港中環添美道1號中信大廈22樓

電話 :+852 2846 9888

傳真 :+852 2868 4432

OPINION

We have audited the consolidated financial statements of Wison Engineering Services Co. Ltd. (the "Company") and its subsidiaries (the "Group") set out on pages 86 to 214, which comprise the consolidated statement of financial position as at 31 December 2020, and the consolidated statement of profit or loss, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2020, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards ("IFRSs") issued by the International Accounting Standards Board (the "IASB") and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

BASIS FOR OPINION

We conducted our audit in accordance with International Standards on Auditing ("ISAs") issued by the International Auditing and Assurance Standards Board ("IAASB"). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics for Professional Accountants (the "Code") issued by the Hong Kong Institute of Certified Public Accountants, and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

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Independent Auditor's Report

KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our opinion on the accompanying consolidated financial statements.

Key audit matter

Revenue recognition and measurement

The Group provides engineering, procurement and construction management services. Revenue from construction contracts was recognised using the input method, measured by reference to the proportion of costs incurred to date to the estimated total cost of the relevant contract, which requires significant management estimates.

Relevant disclosures are included in notes 4 and 6 to the consolidated financial statements.

How our audit addressed the key audit matter

Our procedures in relation to the contract costs and contract revenues recorded under the percentage- of-completion method by the Group included: (i) discussing the status of significant projects in progress with management and assessing management's estimates of the total budget of contract costs and forecast costs to completion, taking into account the historical accuracy of such estimates; (ii) checking the related project documents, such as invoices, contracts with subcontractors, variation orders between the Group and subcontractors and the independent surveyor's assessment on the progress of the work performed by the subcontractors for the significant projects; (iii) testing on a sample basis the actual costs incurred on construction works during the reporting period and performing cut-off testing procedures to check that costs had been recognised in the appropriate period; (iv) reviewing all the construction contracts and variation orders to evaluate whether the Group had made appropriate judgement in identifying the contract and performance obligations, and determining the transaction price considering the variable consideration; and (v) recalculating the revenue recognised by the Group based on the estimated progress of the construction works.

Wison Engineering Services Co. Ltd. Annual Report 2020

Independent Auditor's Report

Key audit matter

Recoverability of trade receivables and contract assets As at 31 December 2020, trade receivables and contract assets of the Group amounted to R M B 1 , 0 7 9 , 0 8 8 , 0 0 0 a n d R M B 1 , 7 5 5 , 1 4 0 , 0 0 0 , respectively. As at 31 December 2020, provisions for impairment of RMB239,799,000 and RMB137,362,000 were made for trade receivables and contract assets, respectively. The expected credit loss assessment of trade receivables and contract assets involves m a n a g e m e n t ' s s i g n i f i c a n t j u d g e m e n t a n d estimation, such as the existence of disputes, historical payment record, forward-lookingfactors and any other available information that may impact the estimated expected credit losses.

Relevant disclosures are included in notes 4, 21 and 23 to the consolidated financial statements.

How our audit addressed the key audit matter

Our procedures included (i) assessing and testing the Group's processes and controls relating to the monitoring of trade receivables and contract assets, and the Group's granting of credit terms and contract terms relating to billing milestones; (ii) evaluating the Group's provisions for trade receivables and contract assets by assessing the cash settlements from customers subsequent to the year end, the existence of disputes, historical payment record, historical credit loss experience and forward- looking factors; (iii) testing on a sample basis the accuracy of aging categories of trade receivables based on relevant invoices and construction contracts; (iv) obtaining and testing the historical observed default rates prepared by the Group; and (v) checking the calculation of expected credit loss based on the methodology adopted by the Group and assessing the adequacy of the Group's disclosures in the financial statements.

Valuation of buildings and leasehold land

The Group measures its buildings and related leasehold land situated in the People's Republic of China (the "PRC") under revaluation model. As at 31 December 2020, the fair value of buildings and leasehold land amounted to RMB1,339,350,000 and RMB2,291,741,000 respectively, which in aggregate represented 41% of the Group's total assets, combined with the judgements associated with determining their value values.

Relevant disclosures are included in notes 13 and 15 to the consolidated financial statements.

Our procedures in relation to the valuation of buildings and leasehold land stated at fair value included: (i) evaluating the competence, capabilities and objectivity of the external valuers; (ii) obtaining an understanding of the valuation processes and significant assumptions from the management of the Group and the valuer; (iii) checking the accuracy of related inputs applied into the valuation and involving our valuation specialists to assist us in reviewing the work of the external valuers and challenging the underlying assumptions, such as comparing them to external market rents and yields if available; and (iv) evaluating the adequacy of the disclosures on the valuation of buildings and leasehold land.

Wison Engineering Services Co. Ltd. Annual Report 2020

Independent Auditor's Report

OTHER INFORMATION INCLUDED IN THE ANNUAL REPORT

The directors of the Company are responsible for the other information. The other information comprises the Business Overview and Management Discussion and Analysis on pages 8 to 39 , which we obtained prior to the date of this auditor's report, and the other sections of the Annual Report not including the consolidated financial statements and the auditor's report thereon ("the Other Sections"), which are expected to be made available after that date.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed on the other information obtained prior to the date of this auditor's report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

When we read the Other Sections of the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the Group's Audit Committee.

RESPONSIBILITIES OF THE DIRECTORS FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with IFRSs issued by the IASB and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors of the Company determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the directors of the Company are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors of the Company either intends to liquidate the Group or to cease operations or have no realistic alternative but to do so.

The directors of the Company are assisted by the Audit Committee in discharging their responsibilities for overseeing the Group's financial reporting process.

Wison Engineering Services Co. Ltd. Annual Report 2020

Independent Auditor's Report

AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Our report is made solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by directors.
Conclude on the appropriateness of directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Wison Engineering Services Co. Ltd. Annual Report 2020

Independent Auditor's Report

AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with the Audit Committee, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is Cheung Ng.

Ernst & Young

Certified Public Accountants

Hong Kong

26 March 2021

Wison Engineering Services Co. Ltd. Annual Report 2020

Consolidated Statement of Profit or Loss

For the year ended 31 December 2020

		2020	2019
	Notes	RMB'000	RMB'000
REVENUE	6	5,296,064	4,367,271
Cost of sales		(4,994,862)	(3,959,044)
Gross profit		301,202	408,227
Other income and gains	6	182,141	293,850
Selling and distribution expenses		(104,552)	(132,916)
Administrative expenses		(245,777)	(288,774)
(Provision)/reversal of impairment losses on financial
and contract assets		(178,920)	8,312
Other expenses		(172,484)	(176,024)
Finance costs	7	(65,439)	(22,719)
Share of profit and loss of associates		9	(181)
(LOSS)/PROFIT BEFORE TAX	8	(283,820)	89,775
Income tax credit/(expense)	10	12,309	(39,217)
(LOSS)/PROFIT FOR THE YEAR		(271,511)	50,558
Attributable to:
Owners of the parent		(271,238)	50,609
Non-controlling interests		(273)	(51)
		(271,511)	50,558
(LOSS)/EARNINGS PER SHARE ATTRIBUTABLE TO
ORDINARY EQUITY HOLDERS OF THE PARENT	12
- Basic		RMB(6.66) cents	RMB1.24 cents
- Diluted		RMB(6.66) cents	RMB1.24 cents

Wison Engineering Services Co. Ltd. Annual Report 2020

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2020

	2020	2019
	RMB'000	RMB'000
(LOSS)/PROFIT FOR THE YEAR	(271,511)	50,558
OTHER COMPREHENSIVE INCOME
Other comprehensive income that may be reclassified to
profit or loss in subsequent periods:
Exchange differences on translation of foreign operations	(13,196)	(2,459)
Net other comprehensive income that may be reclassified to
profit or loss in subsequent periods	(13,196)	(2,459)
Other comprehensive income that will not be reclassified to profit or
loss in subsequent periods:
Equity investments designated at fair value through
other comprehensive income:
Changes in fair value	(45,643)	(9,297)
Gains on properties and land revaluation	2,729,393	-
Income tax effect	(409,409)	-
	2,319,984	-
Net other comprehensive income that will not be reclassified to
profit or loss in subsequent periods	2,274,341	(9,297)
OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF TAX	2,261,145	(11,756)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	1,989,634	38,802
Attributable to:
Owners of the parent	1,989,907	38,853
Non-controlling interests	(273)	(51)
	1,989,634	38,802

Wison Engineering Services Co. Ltd. Annual Report 2020

Consolidated Statement of Financial Position

At 31 December 2020

		2020	2019
	Notes	RMB'000	RMB'000
NON-CURRENT ASSETS
Property, plant and equipment	13	1,358,824	851,409
Investment property	14	10,449	11,098
Right-of-use assets	15(a)	2,326,338	165,163
Goodwill	16	15,752	15,752
Intangible assets	17	26,730	31,515
Investments in associates	18	192,796	7,587
Equity investments designated at fair value through
other comprehensive income	19	205,748	311,391
Long-term prepayments	22	159	2,202
Deferred tax assets	29	55,792	36,848
Total non-current assets		4,192,588	1,432,965
CURRENT ASSETS
Inventories	20	85,867	126,859
Trade receivables	21	839,289	1,003,866
Bills receivable		101,681	214,352
Contract assets	23	1,617,778	690,354
Prepayments and other receivables	22	709,885	510,530
Financial asset at fair value through profit or loss	24	500	112,734
Due from fellow subsidiaries	33	15,037	14,665
Pledged bank balances and time deposits	25	824,775	800,388
Cash and bank balances	25	470,966	814,251
Total current assets		4,665,778	4,287,999
CURRENT LIABILITIES
Trade and bills payables	26	2,430,439	2,051,091
Other payables and accruals	27	1,058,431	839,577
Interest-bearing bank and other borrowings	28	939,327	304,780
Lease liabilities	15(b)	15,670	4,686
Due to fellow subsidiaries	33	5,914	79,276
Due to an associate	33	630	630
Tax payable		188,871	176,446
Total current liabilities		4,639,282	3,456,486
NET CURRENT ASSETS		26,496	831,513
TOTAL ASSETS LESS CURRENT LIABILITIES		4,219,084	2,264,478

Wison Engineering Services Co. Ltd. Annual Report 2020

Consolidated Statement of Financial Position

At 31 December 2020

		2020	2019
	Notes	RMB'000	RMB'000
NON-CURRENT LIABILITIES
Interest-bearing bank and other borrowings	28	-	447,220
Lease liabilities	15(b)	19,571	8,534
Deferred tax liabilities	29	403,522	720
Government grants	30	4,247	4,377
Total non-current liabilities		427,340	460,851
NET ASSETS		3,791,744	1,803,627
EQUITY
Equity attributable to owners of the parent
Share capital	31	330,578	330,578
Share premium	31	869,201	869,201
Other reserves		2,592,289	603,899
		3,792,068	1,803,678
Non-controlling interests		(324)	(51)
Total equity		3,791,744	1,803,627

Yan Shaochun	Zhou Hongliang
Director	Director

Wison Engineering Services Co. Ltd. Annual Report 2020

Consolidated Statement of Changes in Equity

Year ended 31 December 2020

									Fairvalue
									reserveof
									financialassets
									atfairvalue
							Statutory	Statutory	through other	Exchange
		Share	Share	Shareoption	Capital	surplus	expansion	comprehensive	fluctuation	Retained		Non-controlling	Total
		Capital	premium		reserve*	reserve*	reserves*	reserve*	income*	reserve*	profits*	Total	interests	equity
		RMB'000	RMB'000		RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
		(note 31)	(note 31)		(note 32)	(note 31)	(note 31)	(note 31)
At 1 January 2019	330,299	861,129		318,591	(101,206)	32,588	32,590	-	12,041	263,787	1,749,819	-	1,749,819
Profit for the year	-	-		-	-	-	-	-	-	50,609	50,609	(51)	50,558
Other comprehensive income for the year:
Change in fair value of equity
investments at fair value through
other comprehensive income, net
of tax	-	-		-	-	-	-	(9,297)	-	-	(9,297)	-	(9,297)
Exchange differences on translation of
foreign operations	-	-		-	-	-	-	-	(2,459)	-	(2,459)	-	(2,459)
Total comprehensive income for the year	-	-		-	-	-	-	(9,297)	(2,459)	50,609	38,853	(51)	38,802
Transfer to the statutory reserves	-	-		-	-	13,953	4,189	-	-	(18,142)	-	-	-
Exercise of share options	279	8,072		(6,017)	-	-	-	-	-	-	2,334	-	2,334
Equity-settled share option arrangements	-	-		30,038	-	-	-	-	-	-	30,038	-	30,038
Dividends declared	-	-		-	-	-	-	-	-	(17,366)	(17,366)	-	(17,366)

At 31 December 2019	330,578	869,201		342,612	(101,206)	46,541	36,779	(9,297)	9,582	278,888	1,803,678	(51)	1,803,627


								Fairvalue
								reserveof
								financialassets
								atfairvalue
						Statutory	Statutory	throughother	Asset	Exchange
	Share	Share	Shareoption	Capital	surplus	expansion	comprehensive	revaluation	fluctuation	Retainedprofits/		Non-controlling	Total
	Capital	premium		reserve*	reserve*	reserve*	reserves*	income*	reserve*	reserve*	(accumulatedloss)*	Total	interests	equity
	RMB'000	RMB'000		RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
	(note 31)	(note 31)		(note32)	(note 31)	(note 31)	(note 31)
At1January2020	330,578	869,201		342,612	(101,206)	46,541	36,779	(9,297)	-	9,582	278,888	1,803,678	(51)	1,803,627
Lossfortheyear	-	-		-	-	-	-	-	-	-	(271,238)	(271,238)	(273)	(271,511)
Othercomprehensiveincome
fortheyear:
Changeinfairvalueofequity
investmentsatfairvalue
throughother
comprehensiveincome,net
oftax	-	-		-	-	-	-	(45,643)	-	-	-	(45,643)	-	(45,643)
Gainsonpropertiesandland
revaluation,netoftax	-	-		-	-	-	-	-	2,319,984	-	-	2,319,984	-	2,319,984
Exchangedifferenceson
translationofforeign
operations	-	-		-	-	-	-	-	-	(13,196)	-	(13,196)	-	(13,196)
Totalcomprehensiveincome
fortheyear	-	-		-	-	-	-	(45,643)	2,319,984	(13,196)	(271,238)	1,989,907	(273)	1,989,634
Transfertothestatutoryreserves	-	-		-	-	2,847	-	-	-	-	(2,847)	-	-	-
Equity-settledshareoption
arrangements	-	-		13,165	-	-	-	-	-	-	-	13,165	-	13,165
Dividendsdeclared	-	-		-	-	-	-	-	-	-	(14,682)	(14,682)	-	(14,682)
At31December2020	330,578	869,201		355,777	(101,206)	49,388	36,779	(54,940)	2,319,984	(3,614)	(9,879)	3,792,068	(324)	3,791,744

These reserve accounts comprised the consolidated other reserves of RMB2,592,289,000 and RMB603,899,000 in the consolidated statements of financial position as at 31 December 2020 and 2019, respectively.

Wison Engineering Services Co. Ltd. Annual Report 2020

Consolidated Statement of Cash Flows

For the year ended 31 December 2020

		2020	2019
	Notes	RMB'000	RMB'000
CASH FLOWS FROM OPERATING ACTIVITIES
(Loss)/profit before tax		(283,820)	89,775
Adjustments for:
Depreciation of property, plant and equipment and
investment properties	8,13,14	50,169	53,455
Depreciation of right-of-use assets	8,15	59,525	10,914
Amortisation of intangible assets	8,17	5,826	5,598
Recognition of government grants	6,8,30	(10,587)	(105,898)
Share of profit and loss of associates	18	(9)	181
Net foreign exchange losses		27,004	(4,384)
Dividend income from equity investments designated at
fair value through other comprehensive income	6	(12,689)	(4,726)
Fair value gains of equity investment at fair value through
profit or loss, net	6,8	-	(23,227)
Loss on derecognition of equity investment at fair value
through profit or loss, net	6,8	16,549	-
Loss on disposal of items of property, plant and equipment	8	568	269
Impairment of trade receivables	21	102,368	34,042
Provision/(reversal) of impairment of contract assets	23	76,046	(42,648)
Impairment of other receivables	22	506	294
Equity-settled share option expenses	8	13,165	30,038
Finance costs	7	65,439	22,719
Interest income	6	(16,302)	(24,993)
Income relating to lease modification		(84)	-
		93,674	41,409
Decrease/(increase) in inventories		40,992	(80,055)
Decrease in trade and bills receivables		174,880	266,835
Increase in prepayments, deposits and other receivables		(88,360)	(121,809)
Decrease in long-term prepayments		2,043	3,465
Increase in contract assets		(1,003,470)	(34,917)
(Increase)/decrease in amounts due from fellow subsidiaries		(372)	154,253
(Decrease)/increase in amounts due to fellow subsidiaries		(73,362)	42,189
Increase/(decrease) in trade and bills payables		379,348	(499,334)
Increase/(decrease) in other payables and accruals		213,893	(171,620)
(Increase)/decrease in pledged bank balances and
time deposits		(24,387)	142,640
Cash generated from operations		(285,121)	(256,944)
Interest received		16,302	24,993
Interest paid		(65,439)	(22,719)
Tax paid		(817)	(16,457)
Net cash flows used in operating activities		(335,075)	(271,127)

Wison Engineering Services Co. Ltd. Annual Report 2020

Consolidated Statement of Cash Flows

For the year ended 31 December 2020

		2020	2019
	Notes	RMB'000	RMB'000
CASH FLOWS FROM INVESTING ACTIVITIES
Dividend income from equity investments designated at fair
value through other comprehensive income	6	12,689	4,726
Purchases of items of property, plant and equipment	13	(10,645)	(27,807)
Proceeds from disposal of items of property, plant and
equipment		-	1,014
Purchase of intangible assets	17	(1,041)	(5,012)
Receipt of government grants	30	10,457	105,580
Proceeds from disposal of financial assets at fair value
through profit and loss		31,488	-
Purchases of equity investments designated at fair value
through other comprehensive income		-	(320,688)
Purchases of financial assets at fair value through profit
and loss		(500)	(89,507)
Purchases of investments in associates		(185,200)	(6,300)
Net cash flows used in investing activities		(142,752)	(337,994)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issue of new shares		-	2,334
New bank loans		704,327	752,000
Repayment of bank loans		(517,000)	(245,934)
Principal portion of lease payments	38(b)	(16,060)	(7,507)
Dividend paid		(14,682)	(17,366)
Net cash flows from financing activities		156,585	483,527
NET DECREASE IN CASH AND CASH EQUIVALENTS		(321,242)	(125,594)
Cash and cash equivalents at beginning of year		814,251	932,086
Effect of foreign exchange rate changes, net		(22,043)	7,759
CASH AND CASH EQUIVALENTS AT END OF YEAR		470,966	814,251
ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS
Cash and bank balances		422,766	814,251
Unpledged time deposits with original maturity of
less than three months when acquired		3,000	-
Frozen and unpledged cash balances		45,200	-
CASH AND CASH EQUIVALENTS AS STATED IN
THE STATEMENT OF FINANCIAL POSITION	25	470,966	814,251
CASH AND CASH EQUIVALENTS AS STATED IN
THE STATEMENT OF CASH FLOWS		470,966	814,251

Wison Engineering Services Co. Ltd. Annual Report 2020

Notes to Financial Statements

Year ended 31 December 2020

1. CORPORATE INFORMATION

The registered office address of the Company is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1108, Cayman Islands.

Wison Engineering Investment Limited ("Wison Investment") is the immediate holding company of the Company. In the opinion of the directors, Wison Group Holding Limited ("Wison Holding") is the ultimate holding company of the Company. Wison Holding and Wison Investment are exempted companies with limited liability incorporated in the British Virgin Islands.

The Group is principally engaged in the provision of project solutions to petrochemical and coal-to- chemicals producers in terms of design, constructing and commissioning of their production facilities through technology consultancy, engineering, procurement and construction management services in the PRC and overseas.

Information about subsidiaries

Particulars of the Company's principal subsidiaries are as follows:

	Place of	Issued
	incorporation/	ordinary/	Percentage of
	registration	registered	equity attributable
Name	and business	share capital	to the Company	Principal activities
			Direct	Indirect
Wison Engineering Technology	British Virgin	United States	100	-	Investment holding
Limited ("Wison Technology")	Islands ("BVI")	dollar ("US$")1
Wison Energy Engineering	Hong Kong	Hong Kong	-	100	Investment holding/import and
(Hong Kong) Limited		dollar ("HK$")			export sale of equipment and
("Wison Energy (HK)")		401,713,600			parts/provision of engineering,
					procurement and construction
惠生工程(中國)有限公司*					management services
PRC/Mainland	Renminbi	-	100	Provision of engineering,
(Wison Engineering Limited,	China	("RMB")			procurement and construction
"Wison Engineering")		510,000,000			management services
Wison USA, LLC	United States	Nil	-	100	Provision of engineering,
(formerly known as Wison					procurement and construction
Petrochemicals (NA), LLC)					management services
江蘇惠生建設科技有限公司**	PRC/Mainland	RMB120,800,000	-	100	Provision of procurement and
(Jiangsu Wison Construction	China				construction management
Technology Company Limited,					services
"Jiangsu Wison", formerly
known as Jiangsu Zhonghe
Yongtai Construction
Engineering Company Limited,
"Jiangsu Zhonghe Yongtai")

Wison Engineering is registered as a Sino-foreignco-operative enterprise under PRC law.
Jiangsu Wison is registered as a domestic enterprise under PRC law.

Wison Engineering Services Co. Ltd. Annual Report 2020

Notes to Financial Statements

Year ended 31 December 2020

1. CORPORATE INFORMATION (continued)

Information about subsidiaries (continued)

The above table lists the subsidiaries of the Company which, in the opinion of the directors, principally affected the results for the year or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

2.1 BASIS OF PRESENTATION

The Group incurred a net loss attributable to owner of the Company of RMB271,238,000 during the year ended 31 December 2020 and the Group had net current assets of RMB26,496,000 as at 31 December 2020. As a result of net loss recorded by the Group, the Group is in breach of financial covenant with certain bank (the "Bank") which is entitled to demand for immediate repayment of the principal amount of RMB805,000,000 and accrued interest as at 31 December 2020 as stipulated in the clauses of the loan agreement.

In order to improve the Group's operating and financial position, the directors of the Company have taken the following measures:

Subsequent to 31 December 2020, the Group has been granted a new bank loan of RMB192,000,000 and obtained credit facilities of performance bond and bills amounts of RMB40,482,000 from the Bank;
Subsequent to 31 December 2020, the Group has been granted extended credit terms by certain of the Group's subcontractors/suppliers for RMB484,914,000 for repayment of trade payables after 31 December 2021;
Subsequent to 31 December 2020, the Group has been granted credit facility of RMB200,000,000 from a fellow subsidiary of the Group, of which RMB81,700,000 was drawn down; and
The Group continues to take action to tighten cost controls over various operating expenses and is actively seeking new investment and business opportunities with an aim to attaining profitable and positive cash flow operations.

The Directors have reviewed the Group's cash flow forecast covering a period of twelve months from the end of the reporting period. They are of the opinion that, taking into account the above-mentioned plans and measures, the Group will have sufficient working capital to finance its operations and meet its financial obligations as and when they fall due in the foreseeable future.

Wison Engineering Services Co. Ltd. Annual Report 2020

Notes to Financial Statements

Year ended 31 December 2020

2.2 BASIS OF PREPARATION

These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") promulgated by the International Accounting Standards Board ("IASB") and the disclosure requirements of the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention, except for equity investments, buildings and leasehold land which have been measured at fair value. These financial statements are presented in RMB and all values are rounded to the nearest thousand except when otherwise indicated.

Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries (collectively referred to as the "Group") for the year ended 31 December 2020. A subsidiary is an entity (including a structured entity), directly or indirectly, controlled by the Company. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee (i.e. existing rights that give the Group the current ability to direct the relevant activities of the investee).

When the Company has, directly or indirectly, less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

the contractual arrangement with the other vote holders of the investee;
rights arising from other contractual arrangements; and
the Group's voting rights and potential voting rights.

The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. The results of subsidiaries are consolidated from the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

Wison Engineering Services Co. Ltd. Annual Report 2020

Notes to Financial Statements

Year ended 31 December 2020

2.2 BASIS OF PREPARATION (continued)

Basis of consolidation (continued)

Profit or loss and each component of other comprehensive income are attributed to the owners of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control described above. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognises (i) the assets (including goodwill) and liabilities of the subsidiary, (ii) the carrying amount of any non-controlling interest and (iii) the cumulative translation differences recorded in equity; and recognises (i) the fair value of the consideration received, (ii) the fair value of any investment retained and (iii) any resulting surplus or deficit in profit or loss. The Group's share of components previously recognised in other comprehensive income is reclassified to profit or loss or retained profits, as appropriate, on the same basis as would be required if the Group had directly disposed of the related assets or liabilities.

2.3 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES

The Group has adopted the Conceptual Framework for Financial Reporting 2018 and the following revised IFRSs, and the voluntary changes in accounting policy and estimate for the measurement of the buildings and leasehold land for the first time for the current year's financial statements.

Amendments to IFRS 3

Amendments to IFRS 9, IAS 39 and IFRS 7 Amendment to IFRS 16 Amendments to IAS 1 and IAS 8

Definition of a Business

Interest Rate Benchmark Reform Covid-19-Related Rent Concessions (early adopted) Definition of Material

Wison Engineering Services Co. Ltd. Annual Report 2020

Notes to Financial Statements

Year ended 31 December 2020

2.3 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES (continued)

The nature and the impact of the Conceptual Framework for Financial Reporting 2018 and the revised IFRSs are described below:

Conceptual Framework for Financial Reporting 2018 (the "Conceptual Framework") sets out a comprehensive set of concepts for financial reporting and standard setting, and provides guidance for preparers of financial statements in developing consistent accounting policies and assistance to all parties to understand and interpret the standards. The Conceptual Framework includes new chapters on measurement and reporting financial performance, new guidance on the derecognition of assets and liabilities, and updated definitions and recognition criteria for assets and liabilities. It also clarifies the roles of stewardship, prudence and measurement uncertainty in financial reporting. The Conceptual Framework is not a standard, and none of the concepts contained therein override the concepts or requirements in any standard. The Conceptual Framework did not have any significant impact on the financial position and performance of the Group.
Amendments to IFRS 3 clarify and provide additional guidance on the definition of a business. The amendments clarify that for an integrated set of activities and assets to be considered a business, it must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output. A business can exist without including all of the inputs and processes needed to create outputs. The amendments remove the assessment of whether market participants are capable of acquiring the business and continue to produce outputs. Instead, the focus is on whether acquired inputs and acquired substantive processes together significantly contribute to the ability to create outputs. The amendments have also narrowed the definition of outputs to focus on goods or services provided to customers, investment income or other income from ordinary activities. Furthermore, the amendments provide guidance to assess whether an acquired process is substantive and introduce an optional fair value concentration test to permit a simplified assessment of whether an acquired set of activities and assets is not a business. The Group has applied the amendments prospectively to transactions or other events that occurred on or after 1 January 2020. The amendments did not have any impact on the financial position and performance of the Group.
Amendments to IFRS 9, IAS 39 and IFRS 7 address issues affecting financial reporting in the period before the replacement of an existing interest rate benchmark with an alternative risk-free rate ("RFR"). The amendments provide temporary reliefs which enable hedge accounting to continue during the period of uncertainty before the introduction of the alternative RFR. In addition, the amendments require companies to provide additional information to investors about their hedging relationships which are directly affected by these uncertainties. The amendments did not have any impact on the financial position and performance of the Group as the Group does not have any interest rate hedging relationships.

Wison Engineering Services Co. Ltd. Annual Report 2020

Notes to Financial Statements

Year ended 31 December 2020

2.3 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES (continued)

The nature and the impact of the Conceptual Framework for Financial Reporting 2018 and the revised IFRSs are described below: (continued)

Amendment to IFRS 16 provides a practical expedient for lessees to elect not to apply lease modification accounting for rent concessions arising as a direct consequence of the covid-19 pandemic. The practical expedient applies only to rent concessions occurring as a direct consequence of the pandemic and only if (i) the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change; (ii) any reduction in lease payments affects only payments originally due on or before 30 June 2021; and (iii) there is no substantive change to other terms and conditions of the lease. The amendment is effective for annual periods beginning on or after 1 June 2020 with earlier application permitted and shall be applied retrospectively.
During the year ended 31 December 2020, no lease payments for the leases of the Group's assets have been reduced or waived by the lessors as a result of the pandemic.
Amendments to IAS 1 and IAS 8 provide a new definition of material. The new definition states that information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. The amendments clarify that materiality will depend on the nature or magnitude of information, or both. The amendments did not have any significant impact on the financial position and performance of the Group.

The nature and the impact of the voluntary changes in accounting policy and estimate for the measurement of the buildings and leasehold land are described below:

The Group accounted for buildings and leasehold land using the cost model in previous years. In order to more accurately reflect the value of buildings and leasehold land held by the Group and provide more relevant information to the users of the financial statements of the Group, the directors of the Company approved the change in the accounting policy of the Group for the buildings and leasehold land from cost model to revaluation model with effect from 17 May 2020.

In order to present a fairer and more appropriate view of the financial position and operating results of the Group where the depreciation period of each property, plant and equipment is aligned with its actual useful life, the Group has made changes to the estimated useful lives of buildings from 20 to 30 years to 30 to 50 years with effect from 1 July 2020.

The Group has adopted the changes in accounting policy and estimate prospectively.

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Wison Engineering Services Co. Ltd. published this content on 25 April 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 April 2021 10:07:07 UTC.

Market Closed - Hong Kong S.E. Other stock markets 04:08:17 2024-05-17 EDT			5-day change	1st Jan Change
0.234 ^HKD	-0.43%		-1.27%	-32.17%

04-19	Wison Engineering Services Co. Ltd. Announces Removal of Zhou Yu as Chief Financial Officer	CI
04-19	Wison Engineering Services Co. Ltd. Announces Removal of Zhou Yu as an Executive Director	CI

Wison Engineering Services Co. Ltd. Announces Removal of Zhou Yu as Chief Financial Officer	04-19	CI
Wison Engineering Services Co. Ltd. Announces Removal of Zhou Yu as an Executive Director	04-19	CI
Wison Engineering Services Co. Ltd. Reports Earnings Results for the Full Year Ended December 31, 2023	03-27	CI
Wison Engineering Services to Shrink Loss in 2023	02-29	MT
Wison Engineering Services Co. Ltd. Provides Consolidated Earnings Guidance for the Year Ended 31 December 2023	02-29	CI
Wison Engineering Services Named CFO	02-19	MT
Wison Engineering Services Co. Ltd. Appoints Zhou Yu as Chief Financial Officer	02-19	CI
Wison Engineering Services Co. Ltd. Appoints Zhou Yu as Executive Director	02-19	CI
Wison Engineering Services to Provide Services to Controlling Shareholders; Shares Drop 9%	23-09-25	MT
Wison Engineering Services Co. Ltd. Reports Earnings Results for the Half Year Ended June 30, 2023	23-08-25	CI
Wison Engineering Services' Loss to Narrow in H1	23-07-31	MT
Wison Engineering Services Co. Ltd. Provides Unaudited Consolidated Earnings Guidance for the Six Months Ended 30 June 2023	23-07-28	CI
Wison Engineering Services Co. Ltd. Announces Change of Principal Place of Business in Hong Kong	23-07-19	CI
Wison Engineering Services Unit to Provide Design Services to Affiliate	23-05-19	MT
Wison Engineering Services Co. Ltd. Reports Earnings Results for the Full Year Ended December 31, 2022	23-03-28	CI
Wison Engineering Services to Widen Loss in 2022	23-02-28	MT
Wison Engineering Services Co. Ltd. Provides Earnings Guidance for the Year Ended 31 December 2022	23-02-28	CI
Wison Engineering Promotes Senior VP to CEO as Incumbent Resigns	22-12-30	MT
Wison Engineering Services Co. Ltd. Announces Resignation of Yan Shaochun as Executive Director	22-12-30	CI
Wison Engineering Services Co. Ltd. Announces Chief Executive Officer Changes	22-12-30	CI
Wison Engineering Services Controlling Shareholder to Provide Guarantee for Unit	22-12-23	MT
Wison Engineering Services Unit Enters Engineering Design Agreement	22-11-16	MT
Wison Engineering Services' H1 Loss Widens	22-09-28	MT
Wison Engineering Services Co. Ltd. Reports Earnings Results for the Half Year Ended June 30, 2022	22-08-29	CI
Wison Engineering Services Co. Ltd. Announces Resignation of Dong Hua as Executive Director	22-08-02	CI

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Wison Engineering Services Co. Ltd.

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Wison Engineering Services : 2020 Annual Report

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