Shang Gong Group Co., Ltd.
Annual Report 2016
Important Notes
1. The Board of Directors, the Board of Supervisors, and all the directors, supervisors and senior
managers guarantee that there are no false statement, vital misunderstandings or important omissions
in this report, and hold both individual and joint liability for the authenticity, accuracy and integrity of
its contents.
2. All the directors of Shang Gong Group Co., Ltd. attended the meeting of the Board of Directors.
3. BDO China Shu Lun Pan Certified Public Accountants LLP. provided a standard unqualified opinion
audit report for the Company.
4. Zhang Min, Chairman of the Company, Li Jiaming, the principal in charge of the accounting, and
Zhao Lixin, Chief of Accounting Affairs, make the pledge for the authenticity, accuracy and integrity of
the attached financial report.
5. Plan of Profit Distribution or Transfer of Reserves Deliberated by the Board
Audited by BDO China Shu Lun Pan Certified Public Accountants LLP., the Company achieved the
consolidated net profit of 161,565,335.61 yuan in 2016, of which, the net profit attributable to parent company
owners is 144,231,343.84 yuan.
According to the provisions in the Articles of Association, before withdrawing the legal accumulation fund, the
Company should first cover the deficit with the profit of the year. As the profit of the year failed to make up
the annual of previous year, the Company did not draw the legal accumulation fund. The current-period net
profit of the parent company is 25,362,481.43 yuan; the practical profit available for distribution is
-206,831,240.38 yuan at the end of 2016. Considering the parent companys profit available for distribution is
negative, the profit distribution cannot be made in 2016, neither the transferring of capital reserves into share
capital.
6. The Risk of Forward-looking Statements
The Companys future plan, development strategy and other forward-looking statements in this annual report
do not constitute a substantial commitment to the Companys investors.
7. There was no occupation of fund of the Company occurred for non-operating use by holding
shareholder and its related parties.
I
8. There was no external guarantee against the rules and regulations of the Company.
9. Major Risk Waring
The Company has described in detail the risks faced by the Company in this annual report. For details see
“Discussion and Analysis on Business Operation” and other relevant chapters in this annual report.
10. If the English Version of this Annual Report involves any differences from the Chinese Version, the
latter shall be effective.
II
Table of Contents
Chapter 1 Definition ................................................................................................................................... 1
Chapter 2 Company Profile and Main Financial Index .............................................................................. 2
Chapter 3 Summary of Company Business ................................................................................................ 6
Chapter 4 Discussion and Analysis on Business Operation ........................................................................ 9
Chapter 5 Important Events ...................................................................................................................... 26
Chapter 6 Status of Shareholders and Share Capital Changes of Common Stock .................................... 34
Chapter 7 Relevant Situation about Preferred Shares ............................................................................... 38
Chapter 8 Situation about Directors, Supervisors, Senior Managers and Employees............................... 39
Chapter 9 Corporate Governance.............................................................................................................. 45
Chapter 10 Revelent Situation about Corporate Bonds ............................................................................ 49
Chapter 11 Financial Report ..................................................................................................................... 50
Chapter 12 For Reference ....................................................................................................................... 140
III
Chapter 1 Definition
1. Definition
As used in this Report, the following terms have the following meanings unless the context requires
otherwises:
Definition of common terms
ShangGong Group, SGG, the
refer to Shang Gong Group Co., Ltd.
Company
PKFR refers to Shanghai Puke Flyingman Investment Co., Ltd
State-owned Assets Supervision and Administration
Pudong SASAC refers to Commission of Shanghai Pudong New Area People's
Government
ShangGong Europe, SGE refer to ShangGong (Europe) Holding Corp. GmbH
DA AG refers to Dürkopp Adler AG
PFAFF GmbH refers to PFAFF Industriesysteme und Maschinen GmbH
PFAFF Industriesysteme und Maschinen GmbH
KSL refers to
Zweigniederlassung KSL
DAPSH refers to DAP (Shanghai) Co., Ltd.
SG & GEMSY refers to Zhejiang SG & GEMSY Sewing Technology Co., Ltd.
SG Butterfly refers to Shanghai Shanggong & Butterfly Sewing machine Co., Ltd.
SHENSY refers to Shanghai Shensy Enterprise Development Co., Ltd.
BDO refers to BDO China Shu Lun Pan Certified Public Accountants LLP
CSRC refers to China Securities Regulatory Commission
Report period refers to From January 1, 2016 to December 31, 2016
Yuan, RMB refers to The lawful currency of the Peoples Republic of China
Euro, EUR refers to The lawful currency of the European Union
Chapter 2 Company Profile and Main Financial Index
1. Company Inforamtion
Company name in Chinese 上工申贝（集团）股份有限公司
Abbreviation of the Company name in Chinese 上工申贝
Compay name in English Shang Gong Group Co., Ltd.
Abbreviation of the Company name in English ShangGong Group
Legal representative of the Company Zhang Min
2. Contact Information
Secretary of Board of Directors Representative of Securities Affairs
Name Zhang Jianguo Shen Lijie
No. 1566 New Jinqiao Road, Pudong New No. 1566 New Jinqiao Road, Pudong New
Address
Area, Shanghai Area, Shanghai
Telephone 021-68407515 021-68407700
Fax 021-63302939 021-63302939
Email zhangjianguo@sgsbgroup.com shenlj@sgsbgroup.com
3. Basic Situation Introduction
Room A-D, 12th Floor, Orient Mansion, No. 1500, Century Avenue,
Registered address
China (Shanghai) Free Trade Zone
Postal code of registered address 200122
Office address No. 1566 New Jinqiao Road, Pudong New Area, Shanghai
Postal code of office address 201206
Website http://www.sgsbgroup.com
Email sgsb@sgsbgroup.com
4. Information Disclosure and Place for Consulting
Shanghai Securities News, Hong Kong
Newspaper selected by the Company for information disclosure
Commercial Daily
Website appointed by CSRC for publishing annual report http://www.sse.com.cn
Lodging address of annual report of the Company Office of the Company
5. Corporate Stock
Stock abbreviation
Type of stock Stock exchange Stock abbreviation Stock code
before change
Shanghai Stock
A Share SGSB
Exchange
Shanghai Stock
B Share SGBG
Exchange
6. Other Information
BDO China Shu Lun Pan Certified Public
Name
Accounting firm Accountants LLP.
appointed by the Sixth Floor, New Huangpu Financial Plaza, No.
Address
Company (domestic) 61, East Nanjing Road, Shanghai
Signing name of accountants Li Yue, Li Jinhua
Sponsor engaged by SHENWAN HONGYUAN FINANCING
Name
the Company to SERVICES CO., LTD
conduct sustained Office address No. 2391, Changshu Road, Shanghai
supervision during Signing name of sponsors Huang Xuesheng, Feng Zhenyu
the report period
Consistent supervision periods From March 28,2014 to now
7. Main Accounting Data and Financial Index in the Last Three Years
7.1 Main Accounting Data
Unit: Yuan, Currency: RMB
Year-on-year
Main accounting data 2016 2015 increase/decrease
(%)
Operating income 2,759,855,136.98 2,314,039,610.25 19.27 1,971,244,833.88
Net profit attributable to
shareholders of listed 144,231,343.84 157,417,087.48 -8.38 197,616,061.21
company
Net profit attributable to
shareholders of listed
117,425,853.16 133,835,486.09 -12.26 74,094,778.99
company after non-recurrent
account profit/loss
Net cash flow from operating
99,056,912.42 50,886,863.54 94.66 101,603,959.96
activities
Year-on-year
December 31, December 31, December 31,
increase/decrease
2016 2015
(%)
Net assets attributable to
shareholders of listed 1,916,349,381.88 1,774,674,087.49 7.98 1,596,085,177.75
company
Total assets 3,506,172,981.71 3,146,701,717.06 11.42 2,732,574,497.28
7.2 Main Financial Index
Year-on-year
Main financial index 2016 2015 increase/decrease 2014
(%)
Basic earnings per share (yuan/share) 0.2629 0.2869 -8.37 0.3774
Diluted earning per share
0.2629 0.2869 -8.37 0.3774
(yuan/share)
Basic EPS after non-recurrent
0.2141 0.2440 -12.25 0.1415
account profit/loss (yuan/share)
Weighted rate of return on net assets Decrease 1.59
7.8098 9.3992 14.3895
(%) percent
Weighted rate of return on net assets
Decrease 1.63
after non-recurrent account 6.3584 7.9912 5.3953
percent
profit/loss (%)
8. Accounting Data Differences between Domestic and Foreign Accounting Standards
8.1 Net profit and Net Assets Attributable to Shareholders of Listed Company Disclosed in Accordance
with International Accounting Standards and in Accordance with Chinese Accounting Standards in the
Financial Reports
Not applicable.
8.2 Net profit and Net Assets Attributable to Shareholders of Listed Company Disclosed in Accordance
with Foreign Accounting Standards and in Accordance with Chinese Accounting Standards in the
Financial Reports
Not applicable.
8.3 Explanation of Differences between Chinese Accounting Standards and Foreign Accounting
Standards
Not applicable.
9. Main Accounting Data of Each Quarter in 2016
Unit: Yuan, Currency: RMB
The second
The first quarter The third quarter The forth quarter
quarter
(from January to (from July to (from Octember
(from April to
March) September) to December)
June)
Operating income 634,241,973.20 725,100,556.25 686,647,873.41 713,864,734.12
Net profit attributable to
42,192,782.33 58,971,935.37 56,125,040.93 -13,058,414.79
shareholders of listed company
Net profit attributable to
shareholders of listed company
40,583,276.90 55,342,569.94 52,151,959.85 -30,651,953.53
after non-recurrent account
profit/loss
Net cash flow from operating
-54,247,776.05 8,304,690.34 46,050,004.24 98,949,993.89
activities
9. Items and Amount of Non-recurring Profit and Loss
Unit: Yuan, Currency: RMB
Item 2016 2015
Profits and losses from disposal of
3,529,785.81 5,380,014.25 104,418,371.04
non-current assets
Government subsidies recorded in the
11,190,319.23 6,668,426.57 2,718,674.99
current profit and loss
Except effective hedging business relevant
to the normal business of the Company,
gains and losses from changes in fair value
arising from trading financial assets and
4,708,383.25 9,448,774.70 28,259,539.60
trading financial liabilities, and investment
income from disposal of trading financial
assets, trading financial liabilities and
available-for-sale financial assets
Other non-operating income and
17,172,464.17 6,472,839.74 -10,606,002.10
expenditure except the above-said items
Impact on minority interests -6,050,593.20 -2,612,504.42
Impact on income tax -3,744,868.58 -1,775,949.45 -1,269,301.31
Total 26,805,490.68 23,581,601.39 123,521,282.22
10. Items for Adopting Fair Value Measurement
Unit: Yuan, Currency: RMB
Influence on current
Item Opening balance Ending balance Current change
profit
Trading financial 4,000.00 4,000.00 11,448.29
assets
Financial assets for
118,127,307.02 107,980,989.31 -10,146,317.71 396,721.07
sale
Total 118,127,307.02 107,984,989.31 -10,142,317.71 408,169.36
Chapter 3 Summary of Company Business
1. The Company's Main Business, Business Model in the Report Period and Industry Situation
During the report period, the Company's main business is sewing equipment manufacturing industry. The
Companys business involves sewing equipment, office machinery, film materials, commerce and trade, and
logistics services.
The Company adheres to the globalization of business, adheres to professional multi brand marketing strategy,
and is forming a business model –“R & D and marketing in Shanghai, Production in Jiangsu and Zhejiang” in
China. In 2005, the Company successfully acquired Dürkopp Adler AG through its wholly-owned subsidiary
ShangGong Europe and started internationalized business operation. DA AG is a German sewing equipment
manufacturing enterprise with more than 150 years of history, enjoys high reputation in the global sewing
equipment industry, and is listed in the stock exchange in Frankfurt, Berlin and Dusseldorf. Through many
years of overseas practice, the Company has achieved a brilliant performance and successfully rolled out an
internationalized operation road suitable for its own development. It also firmed its confidence and decision to
further implement its internationalized operation strategy. In March and July 2013, ShangGong Group again
successfully acquired Germanys century-old PFAFF and the global leading enterprise in the industrial sewing
automation application field – KSL and rapidly acquired the worlds leading sewing technologies including the
3D sewing technology, which consolidated its leading status in the automation sewing technology field in the
world.
Chinas sewing machinery manufacturing industry is a branch of light industry in China. It has established the
most complete industrial system in the world, and is capable of manufacturing a full range of sewing
machinery products, including household and industrial sewing machine, embroidery machine and cutting
machine, and the related controller, motor ability and spare parts, which satisfies all kinds of social needs.
However, compared with the advanced in the world, there is still a large gap for Chinas sewing machinery
manufacturing industry in independent innovation ability, industrial structure, technology, product and brand
quality and other aspects. The whole industry is big but not strong. The development of the world sewing
machinery industry started in the middle of the nineteenth Century in Europe and the United States. After 100
years of development, at present the world sewing machine industry development center has been transferred
to the Asian region like China and Japan, and gradually formed tripartite confrontation pattern between China,
Germany and Japan.
In 2016, the overall economic situation faced by China's sewing machinery industry is still complex and grim.
Downstream textile and garment industry investment growth fell significantly. The growth momentum of
domestic and overseas market is weak, and the demand is generally weak. In view of this situation, the
industry enterprises on the one hand take the initiative to cut production and inventory, stablize business
development, on the other hand clutch the international manufacturing transfer opportunities, and actively
explore overseas markets, accelerate technological innovation, stimulate new market demand by intelligent
manufacturing, promote the smooth development of the industry, accelerate the conversion of industry growth
power.
China Sewing Machinery Association statistics show that total industrial output value of the industrys top 100
backbone machine manufacturers in 2016 is 14.19 billion yuan, an increase of 3.09%; cumulative production
of sewing machine machine products is 5.044 million units, down 3.61%. Industry production scale has been
reduced. The cumulative production of industrial sewing machine of industrys top 100 backbone machine
manufacturers in 2016 is 337 million units, an increase of 0.47%. Cumulative production of household sewing
machine is 1,473 thousand units, down 11.5%. Among them, the production of ordinary household sewing
machine is 659 thousand units, down 18.07% year on year; production of multi-functional household sewing
machine is 813 thousand, down by 5.38%. The market situation of China Sewing Machinery Industry in 2016
has improved year on year. The total operating income of industrys top 100 backbone machine manufacturers
is 15.32 billion yuan, an increase of 5.62%. The cumulative sales of sewing machine machine products is
51.69 million units, down 1.04%, of which industrial sewing machine sales is 3.538 million units, up 5.35%;
household sewing machine sales of 1.451 million units, down 12.02%. Household sewing machine market is
still continuing to decline, the situation is grim.
2. Description of Major Changes in the Main Assets of the Company during the Report Period
Not applicable.
3. Core Competitiveness Analysis in the Report Period
The Company is the first listed company with the longest history in the domestic sewing equipment industry,
and has more than 50 years experience in sewing equipment production. The Company successfully purchased
and controlled German Dürkopp Adler AG in 2005, one of the famous sewing machine manufacturing
companies in the world with more than 150 years history. In 2013, the Company successfully controlled
German PFAFF Industriesysteme und Maschinen AG, a famous sewing equipment manufacturer with 150
years history, and KSL GmbH and its affiliates, a company with the world's top sewing technology. In the
report period, the Company promoted the integration of global resources continusously. The Company
completed the investment in STOLL KG which expand the Companys industrial chain and supplement the
Companys business and products. The core competence of the Company is mainly shown in the following
aspects:
(1) Technology Advancement Advantage
German KSL GmbH, purchased by the Company, holds the leading position in CNC and robot controlled
automatic sewing technologies, and its products are not only applied in the traditional market for sewing
machine industry but also applied in some emerging fields, such as automobile, environmental protection,
aeronautics and astronautics and renewable energy, etc. In many fields, such as automobile airbags, filters
protecting environment, light carbon fiber structure for plane, etc., the sewing application technology of KSL
GmbH has the absolute competition advantage, and especially, it originally created the sewing technology for
light carbon fiber and 3D sewing automation. Technologies of KSL GmbH together with technologies of
German DA AG and PFAFF AG make the Company own the most advanced sewing technologies in the
world.
(2) Brand and Product Advantage
Through overseas acquisition, the Company owns some internationally well-known brands, such as “DA” and
“PFAFF” with 150 years history, and “KSL” and “Beisler” with more than 50 years history, etc., and some
famous domestic brands, such as “Butterfly” brand with more than 90 years history and “Shanggong” brand
with more than 50 years history. These brands have a high recognition and reputation in the sewing machine
industry. The products of the Company focus on smart, modularized and highly efficient automatic sewing unit
and other sewing equipment with integrated machinery and electronics, covering various advanced
technologies in the field of high-end sewing equipment, and the Company holds the leading position in the
segmented market of sewing equipment.
(3) Echnological Research and Development Capability
The Company highly attaches importance to the construction of technological research and development
capabilities, which have become the important force driving the development of the Company. The Company
has owned a powerful technological research and development team and had the complete and efficient
scientific and technological innovation system, the leading sewing machine design plan and the first class
assessment method for testing sewing machines in the world. Shanggong technology center domestically is the
city level of research and development center in Shanghai, and has the strong digestion and absorption and
supporting development capability.
(4) Sales Network throughout the Globe
The products of the Company are widely sold domestically, and the Company has established the relatively
perfect marketing channel and service network, and had a great number of valuable and stable high-end clients
which manufacture automobile accessories and luxuries.
(5) Internationalized Operation and Management Experience
Since 2005, the Company has started to implement strategies of “going out”, and after conducting the
internationalized operation of the main business, gradually cultured an operation and management team
accumulating a great deal of experience in cross-border operation and management.
Chapter 4 Discussion and Analysis on Business Operation
1. Discussion and Analysis of Operations
In 2016, the world saw the lowest economic and trade growth in seven years, growing volatility in global
financial markets, and sudden and frequent regional and global challenges. The European integration process
has suffered serious setbacks due to factors such as Brexit, refugee crisis and terrorism, and has had an impact
on European security and economic interests. Domestically, the economy has registered a slower but stable
performance with good momentum for growth. GDP reached 74.4 trillion yuan, representing 6.7 percent
growth, and seeing China outpace most other economies. However, China faced multiple difficulties: major
structural problems, prominent risks and dangers, and mounting downward pressure on the economy.
In 2016, the Company ushered in a major opportunity for market-oriented reform. With the trend of deepening
reform of state-owned enterprises, the Company steadily advanced mixed ownership reform, continued to
adhere to the leading technology enterprise development strategy, took efforts to expand the market, constantly
improved economic efficiency. The Company has achievd a good start of \"13th Five-Year\" plan.
The Company has carried out the following aspects of the work in 2016:
(1) Steadily Promote Market-Oriented Reform; Actively Explore Mergers and Acquisitions
In the Shanghai and Pudong New Area leaders at all levels of concern and support, the company began in early
2016 to start mixed ownership reform. Pudong SASAC, the former controlling shareholder and the actual
controller of the Company, transferred 60 million A shares of SGG through open collection of the transferee.
After public solicitation and the comprehensive review of the evaluation committee, Shanghai Pudong Science
and Technology Investment Co., Ltd. purchased these shares with its new wholly-owned subsidiary Shanghai
Puke Flyingman Investment Co., Ltd. After the completion of the share transfer, the Company changed from a
state-controlled listed company to a listed company without actual controller. The share transfer was approved
by the State-owned Assets Supervision and Administration Commission of the State Council, the Shanghai
Municipal People's Government and the Shanghai State-owned Assets Supervision and Administration
Commission before November 2016, and the transaction was successfully completed on December 29, 2016.
By promoting the market-oriented reform, the Company formed a shareholder structure with balanced private
shareholders and state-owned shareholders, which lay the foundation for the Company to truly establish the
corporate governance structure, operators incentive and restraint mechanisms that are adapted to the market
economy.
In 2016, the Company not only vigorously promoted the market-oriented reform, but also explored the
implementation of overseas mergers and acquisitions. According to the Company's global strategic layout, in
order to expand the industrial chain and emerging industry business, improve profitability and sustainable
development capacity, the Company suspended the stock in February 17, 2016, began to plan major asset
restructuring. The Company intends to acquire a high-end manufacturing company with advanced carbon fiber
composite material manufacturing process and patent and technology. Employees of the Company and SGE,
together with Chinese and foreign intermediaries, took several months to carry out due diligence and
multi-round negotiations on the subject company, and constantly improve the M & A program. As the
negotiations are more complex, the Company has not been able to reach agreement with the key shareholders
of the target company on the key terms in the deadline. The Company cannot sign the agreement with the
parties involved in the transaction within a specified time and disclose the major asset restructuring plan. In
order to protect the interests of the Company and its shareholders, the Board of Directors carefully discussed
and decided to terminate this major asset reorganization. Although the reorganization has been terminated, the
Company has gained a more thorough understanding of the carbon fiber composite structural parts
manufacturing and aerospace manufacturing industry, and has accumulated valuable experience in overseas
mergers and acquisitions.
SGE completed its investment in Stoll KG in the early 2016, becoming the largest limited partner holding a
26% stake in Stoll KG. Investing in Stoll KG extends the Company's industrial chain to computerized flat
knitting machine manufacturing. Stoll KG has the advantage of technological innovation and superior product
performance. Stoll KG has the foundation of a worldwide sales and service network. After the completion of
investing in Stoll KG, its operating conditions improved significantly from the original loss into a more
substantial profit, thus the Company has made a good investment income.
(2) Strengthen Unified Marketing Management; Actively Expand Market Share
In accordance with the Company's unified strategic plan, the Company has made gratifying business
performance after implementing unified management of DAP sales platform. In 2016, SGE's operating income
was about 1.35 billion yuan, up 7.04% year on year. SGE attaches great importance to the rapid development
of South Asian marketing. SGE set up a marketing office in Bangladesh to increase sales force in the South
Asian market, and achieved good results. The DA261 sewing machine produced by SGGEMSY has achieved
the first single sale in the Bengal market, which will help the company to speed up the shortcomings of the
standard sewing machine, helping to make Stronger and bigger manufacturing in China as soon as possible.
DA AG in 2016 continued to maintain a large market share in the high-end customer market of medium-thick
material machine. Meanwhile, in the garment processing, the sleeve machine, open bag machine, patch bag
machine, sewing machine, etc. have achieved good sales performance. PFAFF AG's new order was maintained
at a more stable level in 2016. PFAFF AG launched a cowboy week at Kaiserslautern with good results. The
newly developed jeans series sewing unit products are expected to begin mass sales in 2017. The new orders of
KSL Branch increased in 2016. KSL Branch also completed the delivery and acceptance of sewing machines
from Hongdu Aviation, a Chinese customer. KSL110 airbag machine orders also increased significantly in
2016.
The Company's domestic and Southeast Asian region's marketing work has also achieved good results,
achieving annual sales of industrial sewing machines more than 500 million yuan. DAPSH strengthened the
ongoing service to large customers, basically completed the Ruyi Group Yinchuan Factory large-scale
automatic sewing processing production line project. 2016 is the first full year after SG GEMSY was
established. In the global industry downturn, SG GEMSY basically stabilized the dealer network, enhanced the
confidence of dealers and customers to the Company.
(3) Adhere to Product Innovation and R & D; Promote the Upgrading of Technology and Products
In 2016, the Company continued to adhere to product innovative R & D and technological upgrading, adhere
to the automation, modular, smart product development direction, aim at new materials, new technology, new
industries, and adhere to promote technological upgrading with Industrial 4.0 as the development goal,
strengthen the Companys technology leadership in the industry, and continuously enhance the core
competitiveness of enterprises.
In order to continue to maintain the leading edge in the traditional products, DA AG continued to research and
develop new shirt, suit trousers automatic sewing unit, new medium-thick material machine, and other new
product in 2016. Besides, DA AG promoted the research of new DAC Comfort and DAC Compact electronic
control system, and continued the research and development, trial production and customer applications of
M2M system, a system with Industrial 4.0 characteristic.
PFAFF GmbH and its subsidiary PFAFF Zhangjiagang promoted the R & D of cowboy series automatic
sewing unit, shoe machine and other areas, and basically completed the R & D of cowboy series. In addition,
PFAFF GmbH organized a workshop on shoe machines that clearly defined the characteristics of the next
generation of shoe machines and planned to be exhibited at CISMA in 2017.
KSL continued to provide automated sewing equipment for the automotive industry in 2016, successfully
developed and manufactured a high-end automated sewing unit with programmable rotary head and
embroidery applications for the British Bentley Motor Company. KSL also participated in an important core
part of the SPEED FACTORY project jointly developed by Adidas and the Aachen University of Germany,
completing its automated sewing equipment and getting acceptance. In addition, KSL completed a new
FPS300 filter bag sewing production line for a German / Swedish global company.
In 2016 SG Butterfly focused on the R & D of sewing embroidery machine and BEE brand small
multi-function sewing machine. The first batch of 50 JX550L-W sewing embroidery machines was officially
put on the market in October 2016. The product was also awarded the Gold Medal and the Most Innovative
Old Brand Prize of the 7th China (Dalian) Light Industry Commodities Fair in 2016.
(4) Deepen Internal Integration; Achieve Better Synergistic Effect
In 2016, the Company further deepens internal integration. The Company began to implement the merger and
absorption of two subsidiaries, DAPSH and SG Butterfly. The purpose is to enable the Company to directly
control the sales and R & D and become a profit center, and gradually solve the problem that the Company
cannot distribute dividend for a long time because of the negative undistributed profits. Up to now, the
Company has completed the establishment of the SG Butterfly Branch, which was officially operational in
2017. The transfer of 40% equity of DAPSH has also completed. The establishment of DAPSH Branch and the
subsequent absorption merger are still in process.
With the establishment of SGE management team, which is mainly the staff of DA AG, SGE has played a
good synergistic effect on the integration of its subsidiaries. After the merger of KSL GmbH, PFAFF GmbH
has successfully transferred the production of standardized product with a certain scale to the factory in
Kaiserslautern. The factory in Lorch focuses on customized product, providing various kinds of automatic
solutions to customers. Under the coordination of SGE, DA AG continued to promote the integration of sales
subsidiaries with PFAFF GmbH in 2016. Meanwhile, according to the production synergy and integration
strategy of SGE, MIBO and DARO began processing and supplying parts for PFAFF GmbH and PFAFF KSL
Branch while ensure and improve DA production capacity. The completion of the above integration measures
will create a good condition for the Company to further deepen the integration and reorganization of SGE and
its subsidiaries in the future.
In order to achieve the strategic goal of building a domestic manufacturing base in the \"13th Five-Year\" period,
the Company completed the merger of DA Suzhou and PFAFF Taicang in 2016 and relocated them to
Zhangjiagang Base, the Companys thick material machines manufacturing base. With the operation of SG &
GEMSY tends to be stable, the Company gradually applied the garment machine technology of DA and
PFAFF to machines of SG & GEMSY, which would improve the technology level and stability of machines
made in China and produce more cost-effective products in ShangGong Taizhou Base.
(5) Improve Internal Management; Optimize Enterprise Human Resources
In 2016, the Company basically completed the merger of the Company, DAPSH and SG Butterfly, and
realized the integration of office and unified management.
In 2016, the Company continued to improve the performance appraisal, and comprehensively sort out and
revise the human resources system. According to the requirements of state-owned enterprise reform, the
Company also combed and revised the relevant aspects of the cadre and personnel system.
Overseas Subsidiaries Management Manual of Shang Gong Group Co., Ltd. has been compiled in 2016, which
will better promote the department of the Company fully participate in global management.
In 2016, the Company completed a lot of work and achieved good results. From the operating indicators, the
2016 budget target has been basically achieved. However, at the same time, we have to see the main problems
in the operation of the Company. First, The Company does not fully realize the marketization of human
resources; second, how to truly improve efficiency by improving corporate governance, implementing
incentive to operators, optimizing the organizational structure, etc. still needs to be explored and implemented;
third, the integration and restructuring of some domestic subsidiaries is not enough, the process is slow; fourth,
the profitability of some subsidiaries is negative for a long time and has not yet found solutions.
Therefore, in the new year, ShangGong Group will continue to deepen the market-oriented reform of
enterprises as the focus, continue to make breakthrough in internal integration and innovative development,
actively expand the market, and seek potential mergers and acquisitions projects, work hard to achieve
long-term sustainable development of the Company.
2. Main Operating Conditions in the Report Period
During the report period, the Company realized operating income of 2.76 billion yuan, an increase of 19.27%
over the same period of last year, mainly due to the increase of 316 million yuan in logistics services.
Operating profit was 200 million yuan, down 4.03% year on year. Net profit attributable to shareholders of
listed companies was 144 million yuan, down 8.38% year on year.
2.1 Main Business Analysis
Analysisi of Changes of Items in Profit statement and cash flow statement
Unit: Yuan, Currency: RMB
Variable Proportion
Item 2016
(%)
Operating income 2,759,855,136.98 2,314,039,610.25 19.27
Operating cost 2,037,344,042.71 1,614,750,228.46 26.17
Selling expenses 246,840,318.90 233,231,262.36 5.84
General and administration expenses 284,156,361.47 255,477,642.42 11.23
Finance expenses 15,536,094.51 6,091,859.10 155.03
Net cash flow from operating activities 99,056,912.42 50,886,863.54 94.66
Net cash flow from investing activities -197,170,890.70 176,941,826.95 -211.43
Net cash flow from financing activities 92,632,916.77 -54,687,975.39 269.38
Research and development expenditures 72,071,861.66 63,285,301.09 13.88
2.1.1 Analysis on Income and Cost
During the report period, the Company achieved operating income of 2.76 billion yuan, an increase of 19.55%,
mainly because the Companys sewing equipment sales revenue grew by 9.3%, and the logistics services
revenue grew by 82.8%.
(1) Status by Industry and Region
Unit: Yuan, Currency: RMB
Main Business by Industry
Operating Operating Gross
Income Cost Margin
Operating Gross
Industry Operating Cost Increase/ Increase/ Increase/
Income Margin (%)
Decrease Decrease Decrease
(%) (%) (%)
Decrease
Sewing
1,640,841,411.15 1,014,726,511.08 38.16 9.30 13.50 2.29
equipment
percent
Decrease
Logistic
696,721,541.84 647,853,075.73 7.01 82.80 93.95 5.35
service
percent
Increase
Export
243,234,010.93 238,246,303.92 2.05 -15.45 -15.47 0.03
trade
percent
Office
Decrease
equipment
69,082,667.56 61,193,808.40 11.42 -9.89 -1.19 7.80
and film
percent
materials
Decrease
Others 17,760,972.65 10,987,197.25 38.14 29.00 91.43 20.17
percent
Decrease
Total 2,667,640,604.13 1,973,006,896.38 26.04 18.01 25.07 4.17
percent
Main Business by Region
Operating Operating Gross
Income Cost Margin
Operating Gross
Region Operating Cost Increase/ Increase/ Increase/
Income Margin (%)
Decrease Decrease Decrease
(%) (%) (%)
Decrease
Domestic 1,420,334,052.05 1,262,642,336.20 11.10 31.29 34.07 1.84
percent
Decrease
Overseas 1,395,683,949.77 858,741,957.87 38.47 2.28 6.05 2.19
percent
(2) Analysis on Production and Sales
Increase/ Sales Inventory
Production Sales Decrease in Increase/ Increase/
Major Product Inventory
Output Volume Production Decrease Decrease
over the over the over the
Previous Previous Previous
Year (%) Year (%) Year (%)
Industrial sewing
equipment 132,757 133,650 25,695 327.8 198.4 52.1
(domestic)
Industrial sewing
15,381 15,298 137 -2.5 -3.1 153.7
equipment (OEM)
Industrial sewing
equipment 31,197 35,135 0.4 8.2
(overseas)
Household
multi-function
92,290 91,795 595 -1.4 -1.8 495.0
sewing machine
(OEM)
Household sewing
199,335 196,931 2,526 -35.0 -38.7 1,970.5
machine (OEM)
Note: After the normal operation at the end of 2015, SG & GEMSY completed the production of 130,000
industrial sewing machine and sales of 120,000 industrial sewing machines in 2016. Therefore, the output,
sales and inventory of industrial sewing machines in 2016 greatly improved. Production of SGE was flat with
last year while sales up 8.2% year-on-year. Affected by the international market downturn, the output of
ordinary household sewing machines (OEM-based) and sales respectively declined by 35% and 38.7% year on
year. Inventory also rose sharply. Multi-functional household sewing machine production and sales fell
slightly year on year.
(3) Cost Analysis
Unit: Yuan
By Industry
The amount of
Current Previous
the current
By Sum in Current Period Sum in Period
Cost Item period compared
Industry Period Proportion Previous Period Proportion
with the same
(%) (%)
period last year
Material 612,926,016.65 31.07 528,287,107.59 33.49 16.02
Labor 269,272,327.15 13.65 238,845,798.73 15.14 12.74
Sewing Depreciation 38,451,209.91 1.95 38,905,612.04 2.47 -1.17
equipment Manufacture
94,076,957.37 4.77 87,978,278.88 5.58 6.93
cost
Subtotal 1,014,726,511.08 51.43 894,016,797.24 56.67 13.50
Logistics Logistics
647,853,075.73 32.84 334,039,444.91 21.17 93.95
service cost
Export
238,246,303.92 12.08 281,846,373.05 17.87 -15.47
trade
Material 46,931,017.30 2.38 45,238,332.26 2.87 3.74
Office
Labor 9,393,336.37 0.48 9,914,850.94 0.63 -5.26
equipment
and film Depreciation 599,745.82 0.03 694,678.64 0.04 -13.67
materials Manufacture
4,269,708.91 0.22 6,084,026.40 0.37 -29.82
cost
Subtotal 61,193,808.40 3.10 61,931,888.24 3.93 -1.19
others 10,987,197.25 0.56 5,739,579.21 0.36 91.43
(4) Main Suppliers and Main Costomers
The sales of top five customers are 438.89 million yuan, accounting for 15.90% of the total annual sales.
The top five suppliers purchase amount is 121.77 million yuan, accounting for 5.93% of the total annual
purchase.
2.1.2 Expense
Unit: Yuan, Currency: RMB
Item 2016 2015 Increase / decrease (%)
Sales expense 246,840,318.90 233,231,262.36 5.84
General and administration expense 284,156,361.47 255,477,642.42 11.23
Financial expense 15,536,094.51 6,091,859.10 155.03
Income tax expense 71,680,360.28 53,282,857.16 34.53
Note 1: Financial expense grew by 155.03%, mainly due to an increase in foreign exchange losses.
Note 2: Income tax expense increased by 34.53% year on year, mainly due to the increase in the income tax
expense of European subsidiaries.
2.1.3 R & D Investment
Unit: Yuan
R & D investment capitalized in the report period 64,885,701.61
R & D investment expensing in the report period 7,186,160.05
Total 72,071,861.66
Total R & D investment in proportion to operating income (%) 2.61
Proportion of R & D investment capitalized（%） 9.97
2.1.4 Cash Flow
Unit: Yuan, Currency: RMB
Increase /
Item 2016 2015 Reason
Decrease (%)
Net cash flow from operating activities 99,056,912.42 50,886,863.54 94.66 Note 1
Net cash flow from investing activities -197,170,890.70 176,941,826.95 -211.43 Note 2
Net cash flow from financing activities 92,632,916.77 -54,687,975.39 269.38 Note 3
Influence of fluctuation of exchange rate
11,138,332.32 -10,288,945.38 208.26 Note 4
upon cash and cash equivalents
Note 1: Mainly caused by the year-on-year increase of cash received from selling good and providing services
and the year-on-year decline of cash purchase ratio.
Note 2: Mainly due to the investment in 26% of equity of Stoll KG and the year-on-year decrease of cash
received from investing bank financial products.
Note 3: Mainly due to the increase of bank loan and the decrease of cash for dividend distribution.
Note 4: Mainly due to the impact of changes in the euro exchange rate.
2.2 Explanation of Significant Changes in Profit Caused by Non-main Business
Unit: Yuan, Currency: RMB
Item 2016 2015 Increase / Decrease (%) Reason
Taxes and surcharges 9,646,577.26 6,115,310.63 57.74 Note 1
Financial expense 15,536,094.51 6,091,859.10 155.03 Note 2
Assets impairment loss 17,021,526.97 31,064,037.35 -45.21 Note 3
Non-operating income 33,946,275.31 20,497,344.53 65.61 Note 4
Non-operating expense 1,973,706.10 676,214.75 191.88 Note 5
Income tax expense 71,680,360.28 53,282,857.16 34.53 Note 6
Net after tax of other consolidated income -17,277,343.80 13,430,628.35 -228.64 Note 7
Note 1: Mainly caused by the implementation of Value-Added Tax Accounting Regulations (Accounting
[2016]22) by the Company.
Note 2: Mainly due to an increase in foreign exchange losses.
Note 3: Mainly due to a decrease in the provision of inventory depreciation, provision for impairment of
goodwill and an increase in accounts receivable bad debt provision.
Note 4: Mainly due to an increase in government subsidies and the liquidation of payables unable to pay.
Note 5: Mainly due to an increase in fixed assets disposal losses.
Note 6: Mainly due to an increase in the income tax expense of European subsidiaries.
Note 7: Mainly due to a decrease of changes in the fair value of available-for-sale financial assets, changes in
net debt / net assets for the benefit of the European subsidiary, and an increase in foreign currency translation
difference.
2.3 Analysis on Assets and Liabilities
Unit: Yuan
Ratio of Ratio of
Ending Ending
Ending Balance Ending Balance Increase /
Balance tor Balance tor
Item (December 31, (December 31, Decrease Reason
Total Assets Total Assets
2016) 2015) (%)
(December 31, (December 31,
2016) (%) 2015) (%)
Product
development 12,529,345.90 0.36 37,111,588.93 1.18 -66.24 Note 1
expenses
Long term
deferred 1,084,797.97 0.03 579,474.57 0.02 87.20 Note 2
expenses
Payment in
36,548,091.83 1.04 25,598,146.20 0.81 42.78 Note 3
advance
Interest
2,090,565.59 0.06 88,934.73 0.00 2,250.67 Note 4
payable
Other current
808,706.39 0.02 319,502.32 0.01 153.11 Note 5
liabilities
Long-term
68,624,863.27 1.96 29,374,120.87 0.93 133.62 Note 6
loan
Long term 37,338,461.61 1.06 4,724,683.15 0.15 690.28 Note 7
payables
Deferred
3,600,000.00 0.10 0.00 0.00 Note 8
income
Undistributed
494,754,465.24 14.11 350,523,121.40 11.14 41.15 Note 9
profit
Note 1: Due to sewing equipment development expenses of foreign subsidiaries was confirmed into intangible
assets.
Note 2: Mainly due to the increase of mold costs incurred by the Company's subsidiaries.
Note 3: Mainly due to an increase in advance payment by the Company's subsidiary.
Note 4: Mainly due to an increase in bank interest payable by the Company's foreign subsidiary.
Note 5: Mainly due to the increase in interest and rental expenses attributable to subsequent periods by the
Company's foreign subsidiary.
Note 6: Mainly due to the increase in long-term borrowings of SGE.
Note 7: Mainly caused by the increase of unpaid investment more than one year resulting from the agreement
of investing in Stoll KG by SGE.
Note 8: Caused by the 2016 Shanghai Promote Cultural and Creative Industries Development Financial
Support Funds received by the Company in the report period.
Note 9: Caused by the Company's current profit.
2.4 Analysis of Investment Situation
2.4.1 General Analysis
Unit: 10,000 Yuan, Currency: RMB
Long - term equity investment in the report period 25,359
Increase / Decrease -650
Long - term equity investment in 2015 26,009
Increase / Decrease (%) -2.50
For details, please refer to the long-term equity investment section of the financial statements.
2.4.2 Significant Equity Investment
Whether
Investment
it is
share and Sources of
Name Main Business Partner involved
shareholding Funds
in
ratio
litigation
Financing leasing business; leasing business;
Shanghai
purchase of domestic and foreign rental property;
SGSB USD 5.1
lease property residual value processing and
Financial million, Self-owned DA AG No
maintenance; leasing transaction consulting and
Leasing 51%
guarantee; engaged in factoring business related
Co., Ltd,
to main business.
Research and development, production and sales
235.71
H. Stoll AG of electronic and mechanical controlled automatic
million Self-owned No
& Co. KG knitting machine, including related services and
yuan, 26%
financing.
2.4.3 Significant Non-Equity Investment
Not applicable.
2.4.4 Financial Assets at Fair Value
Accounting
Profit or Changes in
Initial for the Book Value at
Stock Stock proportion of Loss for the Owners' Equity Accounting Source of
Investment the End of the
code Abbreviation the company's Report during the Report Item Shares
Cost Period
Period Period
equity (％)
Available
Changjiang
for sale
600757 Publishing & 72,085,722.82 0.85 85,580,817.54 325,124.72 -27,497,085.78 Note 1
financial
Media
assets
Available
for sale
900932 Lujia B Share 773,099.71 0.0067 2,292,359.95 47,305.05 -1,022,644.93 Enforcement
financial
assets
Available
Shenwan & for sale
000166 200,000.00 0.0011 1,366,387.50 24,291.30 -368,011.32 Purchased
Hongyuan financial
assets
Available
Bank of for sale
601229 951,400.00 0.013 18,741,424.32 17,790,024.32 Purchased
Shanghai financial
assets
Available
Central China for sale
601375 4,000.00 <5 4,000.00 Purchased
Securities financial
assets
Note 1: Shares of Changjiang Publishing & Media were transferred to the Company by bank to which interests
of Changjiang Publishing & Media were compensated in the bankruptcy and restructuring.
Note 2: While Senwan & Hongyuan and Bank of Shanghai were established,the Company subscribed to their
equity and holds them till now.
Note 3: Shares of Bank of Shanghai held by the Company were restricted to sell due to IPO of Bank of
Shanghai.
2.5 Significant Assets and Equity Sale
Not applicable.
2.6 Analysis of Main Subsidiaries and Joint Stock Company
Not applicable.
2.7 Structured Entities Controlled by the Company
Not applicable.
2.8 Stock Equity of Non-Listed Financial Institutions Held by the Company
Accounting Changes in
Shares for the Profit or Owners'
Initial Book Value
Held by proportion Loss for Equity Accounting Source of
Name Investment at the End of
the of the the Report during the Item Shares
Cost company's the Period
Company Period Report
equity (％) Period
Available for
Baoding
7,500.00 5,751 0.008 7,500.00 2,875.50 sale financial Purchased
Investment
assets
Total 7,500.00 5,751 / 7,500.00 2,875.50 / /
3 Discussion and Analysis on the Future Development of the Company
3.1 Industry Structure and Trends
In recent years, with the deep integration of the new generation of information technology and manufacturing,
information and communication technology, intelligent control technology, networking, big data and other
new technologies have been rapidly applied in the sewing machinery industry. Sewing machinery products are
rapidly upgraded in the direction of smart, and the corresponding production methods are also continuously
advanced. Based on the physical information system, the innovation of “Sewing Equipment + Internet” is now
leading the continuous expansion of sewing machinery industry and the downstream industry in the business
model, product areas and product value chain system. Industry development focus and growth point constantly
change. Global sewing machinery industry is faced with the task of transformation and upgrading, its
developing pattern is facing a major adjustment.
At present the world sewing machine industry development center has already formed tripartite confrontation
pattern between China, Germany and Japan. With the adjustment of the global industrial competition, Chinas
sewing machinery industry is facing great challenges. To maintain the industrial advantages, sewing
machinery companies in Europe and the United States take advantage of technology and brand, adhere to the
high-end market, and take the road of international brand management. Japans sewing machinery industry is
accelerating the layout of the international industry, strengthening the integration and complementation of
resources. On the one hand, in order to consolidate the high-end market advantages, Japans sewing machinery
companies make use of China's advanced manufacturing resources, and continue to shift the production of
high-end products to China. On the other hand, Japans sewing machinery companies accelerate the transfer of
low-end products to the lower-cost countries in Southeast Asia to compete with the sewing machinery
companies in China. Therefore, Chinas sewing machinery industry faces the “two way extrusion” of
developed countries such as Europe, Japan and the developing countries in Southeast Asia.
3.2 Company Development Strategy
In 2017, the Company will adhere to the market-oriented strategy, innovation-driven development, improve
product quality and enhance business efficiency. The Company will explore the potential of industries such as
robotics application and aerospace manufacturing and the processing of new materials like carbon fiber
composite materials, and actively expand the industrial chain. The Company will take the system reform as an
opportunity, play mechanism flexibility after the marketization reform, stabilize and expand domestic and
foreign markets, continue to promote the transnational business strategy, and strive to achieve the goal of
catching up with worlds top one enterprise in the sewing machinery industry.
(1) Deepen the Company's Market-Oriented Reform; Enhance the Level of Human Resources
After the completion of the mixed ownership system reform, the Company should promptly promote the
conversion of corporate mechanisms. Improve efficiency through system innovation, management agency
streamlining and other measures.
The Company should break through the bottleneck in human resource management in the former system, and
establish a market-oriented management philosophy. The leading cadres of enterprises should be appointed on
their merit. Appraisal should be based on contribution, and the reward and punishment should be clear. The
Company and its subsidiaries will further streamline and optimize the organizational structure. Fully
implement the Manager-Responsible Mechanism, strengthen the building of enterprise leadership team,
change the business philosophy and work style of the leaders, improve team cohesion and combat
effectiveness. Supplement and improve the employees salary incentive and performance appraisal program.
Employee compensation system should be consistent with the marketed principle of talent and manpower, and
gradually realize the employees salaries achieve the level of the market, so that the Company could better
introduce and retain the talent. The construction of young cadres is an important task to ensure the sustainable
development of the Company. The Company will make strengthen the training as the basis, choose to use as a
fundamental, strict management as the protection, to continue to improve the training plan for young cadres
and the introduction of young talent. And the Company will choose reliable, talented, responsible and honest
young talent in the practice of production and operation.
(2) Continue to Promote Mergers and Acquisitions; Accelerate the Integration and Development
The Company's growth over the past decade has been attributed to successful acquisitions at home and abroad.
The Company has basically realized the revitalization of \"ShangGong\" business plate, and achieved the
leading position in the scale of production and marketing nationwide and even in the world. The Company also
accumulated more experience and lessons about mergers, reorganization, and integration.
According to the Companys \"13th Five-Year\" plan, the Company will timely seize the opportunity to develop
the manufacturing of products related to aerospace field. In 2017, based on the exploration and practice in
2016, the Company should further investigate and research to find appropriate target project to invest in. Faced
with the market trends of rapid development of China's aerospace industry, especially the commercial aircraft
manufacturing industry, ShangGong Group should actively participate in and take the opportunity to expand
the business for better development of the Company.
In SMPIC business plate, the Company will actively seek M & A opportunities related to SMPICs industry.
On the basis of SMPIC brand, the Company will aim at the office equipment, medical equipment and imaging
equipment and other fields, looking for investment opportunities for mergers and acquisitions, and strive to
achieve the goal of early revival of SMPIC.
Practice has proved that the completion of mergers and acquisitions is only the beginning of entering into new
business or expanding the original business. Continuous integration after merger and acquisition is very
important to improve the core competitiveness of enterprises. Only in accordance with the changes in the
market and the actual situation of the enterprise to carry out human resources, financial resources and material
resources to coordinate and integrate, could the Company be able to fully play a synergistic effect and achieve
more benefits. The Company will continue to do a good job of streamlining and integration of internal
institutions, and truly realize entity operation of the Company. The Company will continue the subsequent
work of absorbing DAPSH and SG & Butterfly. DAP Branch of the Company will be directly in charge of
sales in China and South-east Asia; Butterfly Branch will be directly in charge of sales both domestic and
overseas. Besides, the Company's financial, administrative and other aspects of the work will be under unified
management, in this way the Company could improve management efficiency and enhance profitability.
The Company will vigorously promote the further integration of SGE and its subsidiaries to realize direct
management of DAP marketing platform as soon as possible and to realize direct management of R & D and
production of DA, PFAFF and KSL. In this way the Company could implement the strategic deployment of
overseas subsidiaries in R & D, production and sales. Through the solid integration and a clear division of
labor, it will be effective to eliminate the localism, avoid internal competition, achieve resource sharing, give
full play to their respective advantages, expand market share, and improve economic efficiency.
(3) Strengthen the Brand Image Promotion; Actively Expand Market Share
In 2017, the Company will continue to implement a multi-brand marketing strategy to expand the brand
influence, improve the market share of each kind of products. The Company and subordinate enterprises will
actively participate in the German Texprocess exhibition and CISMA 2017 to display product technology
strength, strengthen the corporate image and brand promotion. The Company should invite all types of
customers and distributors to participate in the exhibition as much as possible to enhance the confidence of
customers and distributors to improve the viscosity between them and the Company.
SGE is responsible for coordinating and managing DAP sales companies other than DAPSH, and does
marketing management work in Europe and the United States and South Asia. It is planned to set up sales
subsidiaries in Russia, India and Bangladesh to directly manage the operation of the rapid-developing market
and to dig the potential key customers. SGE should press ahead with the promotion and sale of the DA
traditional and SG & GEMSY products in South Asia and South America to expand the market share of
traditional standard products. SGE should give full play to the role of DAP sales companies, actively cooperate
with and support the Companys strategy of using the Mauser brand to sell package stretched chain stitch
sewing machine and low-end thick material machine, supplement the Company's industrial sewing equipment
products, expand the sale scale of China's manufacturing products. SGE should attach great importance to
supervise and coordinate the DAP sales companies to strengthen the sales of PFAFF and KSL brand products,
to achieve the sales volume and profit maximization of each brands products.
The Company will conduct direct marketing management to China and Southeast Asia market through DAP
Shanghai Branch. The Company will be more close to the market, play the role of DAP Vietnam, DAP
Indonesia to increase promotional efforts and improve customer service levels. The Company will continue to
improve and implement the system of customer visits, timely track major projects, grasp the customer
development of new products, and further expand the national prison market sales. We will continue to do a
good job of direct sales and new product promotion for medium-thick material machines, consolidate and
expand the market. Further overcome the sofa, bags, footwear and other weak market. In addition, the
Company will accelerate the pace of development to establish \"Two Suits Two Pants\" template line through
mergers and acquisitions of target automation enterprise and cooperation with DA Manufacturing, so as to
show the automation, modular and intelligence of the Companys multi-brand products, and win more
customers.
(4) Increase Investment in Product R & D; Promote Technology Innovation
The Company will further increase investment in research and development in automation, modular, intelligent
products, aiming at the fields of new materials and new technologies, new industries, and strive to develop a
\"blue ocean\" market, to enable enterprises to obtain the rapid, long-term and sustainable development. The
technical center of the Company should strengthen the management and development of the project
management, speed up the introduction of technical personnel, participate in the research and development of
domestic and foreign enterprises. The technology center shoud promote the domestic electronic control system
software R & D, and strive to design and develop the multi axis control system and drop the cost of single
axis.electric control system.
DA AG should complete the design and development of 581 automatic feeding round keyhole machine,
745-35-10 automatic bag machine with DAC Comfort electronic control, 550-12-33 / 34 interior wrinkling
workstation optimization design, M-Type 3 Thick material and other products, equip the Beisler 1220-6
automatic sewing unit with DAC Classic electronic control (new software), and promote the trial of M2M
system in Poland Lear and the Romanian JCI factory.
PFAFF GmbH will continue to promote the development of a new generation of shoe machine, and strive to
start commercial promotion during the CISMA 2017. PFAFF GmbH should start the development project of
the tape laying robot with the cooperation of the Chinese target customers and DA Manufacturing, and strive
to produce the prototype in 2017. Do a better job in the mass production of KSL 110 airbags machine, 244/246
mattresses machine and newly developed cowboy series sewing unit.
DA Manufacturing will undertake the production of DAC Comfort electronic controller, and strive to achieve
the annual production and sales of 500 sets. Continue to promote production and sales of shirt sleeve machine
and shirt automatic patch bag machine. Further improve the production and sales of shirt automatic sewing
machine. Equip KL 201 airbags sewing unit with DAC classic (new software). Meanwhile, replace PLC
control system used in automatic sewing units which are made in China with DAC Comfort.
SG & GEMSY will continue to focus on developing new product in 2017. SG & GEMSY will actively
advance the upgrade of standardization and modularization of standard products, and cooperate with the
technology center to upgrade electronic control system of lockstitch, over-lock, and flat seaming sewing
machine with high volume. At the same time, upgrade and develop the double needle, twists and turns, locks,
sets, patterns sewing machine with medium volume one by one and form unified production pattern with
platform-based, multi-brand, sub-grade.
(5) Improve Internal control; Enhance Operational Efficiency
The Company will continue to do a good job of headquarters and the subsidiary's internal control standard
system construction, consistently achieve 2016 annual reassessment of internal control testing and fault
rectification, as well as the construction supervision and perfection of the standardization of the Companys
internal control system; continue to do a good job in project cost audit and other special audit work.
Continue to improve the ERP system, and further improve the management efficiency of the Company.
Continue to do a good job in the implementation and management of the Company's annual budget, do a good
job in the Company's capital arrangements and fund co-ordination, do a good job in financial risk warning, and
realize early warning of major financial risks .
Continue to do a good job in the ISO9001 quality management system, further adjust the program after SG
Butterfly and DAPSH merged into the Company. Complete the ISO9001 revision certification, further
improve the quality management system, and improve product quality and enterprise operation quality. At the
same time, strengthen quality control of OEM brand products to protect brand reputation and improve
customer satisfaction.
In 2017, SGG has embarked on a new journey after market-oriented reform. Under the decision of the new
board of directors, we firmly believe that the mixed ownership system will bring new vitality to the enterprises.
The implementation of the new mechanism in line with the law of economic development will give a new
impetus to the cadres and employees and strongly promote the rapid development of the Company.
The main tasks and the business goals of 2017 have been identified. The task is urgent and arduous. Facing the
complicated international economic environment and the severe industry development situation, we should
establish confidence, faith, enhance determination and courage to overcome difficulties, work hard to realize
the smooth completion of the main tasks and the business goals of 2017, and strive for the sustainable
development of the Company!
3.3 Business Plan
The main business objectives of 2017 are: (1) operating income shall reach 2.95 billion yuan, increased by
6.88% year on year; (2) operating profits reach 0.244 billion yuan, increased by 21.14%; (3) net profits reach
0.18 billion yuan, rose by 11.40; (4) account receivable turnover rate is 7.29 and inventory turnover is 3.33.
3.4 Possible Risks
(1) Industrial and market risks
Tailoring machine industry is a competitive industry, largely depending on its downstream industries such as
the weaving, costume, leather, case and bags industries. Therefore, it develops along obvious periodicity and is
highly affected by macro-economic environment. Along with increasing of the rate of tailoring machine
production to company other industries, company development may be more and more affected by overall
industrial fluctuation, which may lead to decreasing of product price, more and more fierce competition and
decreasing of product gross profit rate, all will impact company business operation in the future.
(2) Cross-country operation and integration risks
By expanding of company overseas assets and business scope, the cross-country operation brings more strict
requirements for company organization, operation mode, talents and employees skills. Also, during company
production, operation and merger of overseas affiliates, more challenges may appear due to differences of
enterprise culture, management concept, policies and company regulations.
(3) Foreign exchange risks
The book-keeping standard money for company consolidated statements is RMB, but that used for daily
business operations of SGE and SGE holding subsidiaries is Euro dollar. Therefore, the change of RMB
foreign exchange rate may have exchange risks for company future operations.
4. Due to Non-Applicable Provisions or State Secrets, Trade Secrets and Other Special Reasons, the
Company did not Disclose the Situation According to the Guidelines and Reasons
Not applicable.
Chapter 5 Important Events
1. Profit Distribution or Capital Surplus Transferring and Increasing Proposal
1.1 The Formulation, Implementation and Adjustment of Cash Dividend Policy
According to the No.[2013] 43 of Notice on No. 3 Guidance of Cash Dividend Distribution Affairs for Listed
Companies issued by CSRC, combined with the Companys situations, the Company has made clear cash
dividend distribution policies and its mechanism of decision and adjustment.
During the report period, the Company strictly complied with the dividend distribution policies stipulated in the
Article of Association. Approved by 2015 Annual Shareholders Meeting, the profit distribution do not be
made in 2015, neither the transferring of capital reserves into share capital. The proposal of 2015 has been
implemented.
Audited by BDO China Shu Lun Pan Certified Public Accountants LLP., the Company achieved the
consolidated net profit of 161,565,335.61 yuan in 2016, of which, the net profit attributable to parent company
owners is 144,231,343.84 yuan.
According to the provisions in the Articles of Association, before withdrawing the legal accumulation fund, the
Company should first cover the deficit with the profit of the year. As the profit of the year failed to make up
the annual of previous year, the Company did not draw the legal accumulation fund. The current-period net
profit of the parent company is 25,362,481.43 yuan; the practical profit available for distribution is
-206,831,240.38 yuan at the end of 2016. Considering the parent companys profit available for distribution is
negative, the profit distribution cannot be made in 2016, neither the transferring of capital reserves into share
capital.
1.2 Company Profit Distribution Proposal in Recent Three Years (Including the Report Period) , Capital
Surplus Transferring to Increase Capital Stock Proposal
Unit: Yuan, Currency: RMB
Number
Number
Of Number Of Net Profit Listed
Of
Dividends Shares Number in the Dividend Rate to the Net Profit
Bonus
Year of (Taxes Converted By of Cash Annual in the Consolidated
Shares
Dividend Included) Capital Dividend Consolidated Statement Belongs to
Per 10
Distribution Per 10 Reserve Per (Taxes Statement Belongs Stockholders of
Common
Common 10 Common Included) to Stockholders of Public Company (%)
Shares
Shares Shares(Share) Public Company
(Share)
(Yuan)
2016 0 0 0 0 144,231,343.84
2015 0 0 0 0 157,417,087.48
2014 0 0 0 0 197,616,061.21
1.3 Cash Offer to Repurchase Shares Included in the Cash Dividend
Not applicable.
2. Committment
Whether
Whether Reason for Future Plan
Timely
Commitment There is Failure to if Fail to
Background Type Commitment Content and
Party a Time Fulfill Fulfill
Strictly
Limit CommitmentCommitment
Perform
Shares of SGG held by
PKFR will not be sold
Restricted N/A N/A
PKFR from December 29, Yes Yes
shares
2016 to December 28,
2017.
Shares of SGG held by
PKFR will not be less
Commitment
than shares held by N/A N/A
in the Others PKFR Yes Yes
Pudong SASAC From
Statement of
December 29, 2016 to
Changes in
December 28, 2017
Equity
From December 29,
2016 to December 28,
2017, PKFR or its
Others PKFR concerned action will Yes Yes N/A N/A
purchase shares of
SGG by not less than
10 million yuan
The Company will not
Commitment
Plan major asset
Related to The N/A N/A
Others restructuring from July Yes Yes
Major Asset Company
26, 2016 to January 25,
Restructuring
3. There was no occupation of fund of the Company occurred for non-operating use by holding
shareholder and its related parties.
4. Description of \"Non-Standard Opinion Audit Report\" Released by the Accounting Firm
Not applicable.
5. Analysis of the Company’s Change of Accounting Policy
Note (The name and
Contents and Reasons of Accounting Policy
Approval Procedures amount of the item
Changes
affected)
Adjust the \"Business taxes and surcharges\"
items in the income statement to \"Taxes and Taxes and surcharges
surcharges\" items. On December 3, 2016, the
The property tax, land use tax, travel tax and Ministry of Finance issued the Increase taxes and
stamp duty incurred from the business Provisions on Value-added Tax surcharges of
activities on May 1, 2016 will be reclassified Accounting (Accounting [2016] 4,770,099.93 yuan this
from the \"general and administrative No. 22), which applies to related year, reducing general
expenses\" item to the \"tax and surcharges\" transactions that occurred on May and administrative
project, which occurred before May 1, 2016 1, 2016 expenses this year the
The tax is not adjusted. The comparison data amount of 4,770,099.93
will not be adjusted. yuan.
6. Appointment and Dismiss of Certified Accountant’s Firm
Unit: 10,000 Yuan, Currency: RMB
Name of domentic accoutants firm BDO Chian Shu Lun Pan Certified Public Accountants LLP
Payment to the domestic accountants firm
Service life of the dometic accountants firm
10 years
providing audit service for the Company
Name Payment
Certified accountants firm
BDO Chian Shu Lun Pan Certified Public Accountants LLP
for internal control audit
Sponsor SHENWAN HONGYUAN FINANCING SERVICES CO., LTD
7. Risk of Suspension of Listing
Not applicable.
8. Termination of Listing and Reasons
Not applicable.
9. Bankruptcy
Not applicable.
10. Important Lawsuit and Arbitration
Not applicable.
11. Punishment on and Rectification of Listed Company and its Directors, Supervisors, Senior Managers,
Controlling Shareholders, Actual Controller and Purchaser
Not applicable.
12. Credit Status of the Company and its Controlling Shareholder and Actual Controller.
Not applicable.
13. Company Stock Right Incentives, ESPO, and Other Employee Incentives
Not applicable.
14. Major Related Party Transactions
14.1 Related Party Transactions Relevant to Daily Operations
Summary of Issues Inquiry Index
Shanghai SGSB Electronic Co., Ltd., one wholly-owned subsidiary The temporary bulletin No. 2016-015
of the Company, sells products to Fiji Xerox of Shanghai Limited., disclosed by the Company on March 22,
and is its permanent accessory supplier, and the above-said 2016, published in Shanghai Securities
transaction constitutes the daily associated transaction. It is News and Hong Kong Commercial
estimated that in 2016, the amount of products that it will sell to Daily and website of Shanghai Stock
Fiji Xerox is 33 million yuan, and in this report period, the sales Exchange.
amount was 30.49 million yuan, and there was no major change.
14.2 Related Party Transactions Arising from the Acquisition or Sale of Assets or Equity
Not applicable.
14.3 Co-Investing with a Related Party
Not applicable.
15. Significant Contracts and Their Implemention
15.1 Trusteeship, Contracting and Lease
Not applicable.
15.2 Guarantee
Unit: 10,000 Yuan, Currency: RMB
Company external guarantee list (excluded those for subsidiaries)
Guaran-
Relations
tee date If If Guaran-
Overdue
Relation
of the Amount Expira-
Gua- Security (agree- Start guaran- Overdue counter- tee for
guarantor guaran- tion Type
rantor party ment date tee amounts guarantee related
to listed teed date
sign-off is done available? party?
company
date)
Commerz-
Mar. Joint
The bank Mar. 25,
SGG 7,000 25, liability No No 0 Yes No No
Company Shanghai
2014 guarantee
Branch
Commerz-
Joint
The bank Jun. 30, Jul. 1,
SGG 6,430 liability No No 0 Yes No No
Company Shanghai 2014 2014
guarantee
Branch
Commerz-
Sept. Joint
The bank Sept. 19,
SGG 9,645 19, liability No No 0 Yes No No
Company Shanghai
2016 guarantee
Branch
Commerz-
Aug. Joint
The bank Aug. 28,
SGG 8,037 28, liability No No 0 No No No
Company Shanghai
2015 guarantee
Branch
Industrial
&
Commer-
Dec. Joint
The cial Bank Dec. 21, Dec. 21,
SGG 5,845 21, liability No No 0 No No No
Company of China 2015
2015 guarantee
Shanghai
Hongkou
Branch
Wholly Joint
Commer Jan. 7, Jan. 7, Jul. 30,
SGE owned 2,009 liability No No 0 No No No
z-bank 2016 2016 2017
subsidiary guarantee
Wholly Joint
Commer Jan. 7, Jan. 7, Jul. 30,
SGE owned 2,009 liability No No 0 No No No
z-bank 2016 2016 2018
subsidiary guarantee
Guarantee amounts spent during the report period (excluded guarantee to affiliate company. 13,664
Total balance of guarantee at the end of period (affiliate companies are not quailed.)（A） 40,977
Guarantee of company to affiliates
Total guarantee amounts of subsidiaries in the report period
Total balance of guarantee to subsidiaries at the end of report period (B)
Company total guarantee amounts (including those to subsidiaries)
Total guarantee amounts（A+B） 40,977
Ratio of total guarantee amounts to company net assets (%) 21.38
In which:
Guarantee amounts provided to stockholders, actual controller and affiliated parties (C)
Guarantee amounts directly or indirectly provided for liabilities of guarantor whose assets liabilities
ratio is higher than 70%（D）
Differences of total guarantee amounts exceeds 50% of the net assets（E）
Total guarantee amounts of the above-mentioned three items （C+D+E）
Note: 1. On March 25, 2014, ShangGong Europe, the Company's wholly owned subsidiary, applied to the
Bielefeld Branch of the Commerzbank for current funds equivalent to not more than RMB 58 million, the
Shanghai Branch of the Commerzbank issued a financing guarantee letter for the funds, and the Company
issued an unconditionally irrecoverable corporate letter of guarantee for payment of RMB 70 million as
counter guarantee for the abovementioned financing guarantee letter.
2. On June 30, 2014, ShangGong Europe, the Company's wholly owned subsidiary, applied to the Bielefeld
Branch of the Commerzbank for a current fund loan of EUR 8 million, the Shanghai Branch of the
Commerzbank issued a financing guarantee letter for the funds, and the Company issued an unconditionally
irrecoverable corporate letter of guarantee for payment of EUR 8.8 million as counter guarantee for the
abovementioned financing guarantee letter.
3. On September 19, 2016, ShangGong Europe, the Company's wholly owned subsidiary, applied to the
Bielefeld Branch of the Commerzbank for a short-term loan line of EUR 12 million, the Shanghai Branch of
the Commerzbank issued a financing guarantee letter for the funds, and the Company issued an
unconditionally irrecoverable corporate letter of guarantee for payment of EUR 13.2 million as counter
guarantee for the abovementioned financing guarantee letter.
4. On August 28, 2015, PFAFF GmbH, the Company's wholly owned subsidiary, applied to the Bielefeld
Branch of the Commerzbank for a loan of EUR 10 million, the Shanghai Branch of the Commerzbank issued a
financing guarantee letter for the funds, and the Company issued an unconditionally irrecoverable corporate
letter of guarantee for payment of EUR 11 million as counter guarantee for the abovementioned financing
guarantee letter.
5. On December 21, 2015, ShangGong Europe, the Company's wholly owned subsidiary, applied to the
Industrial & Commercial Bank of China Frankfurt Branch for a loan of EUR 7.878 million to pay for 26%
equity of Stoll KG. Industrial & Commercial Bank of China Shanghai Hongkou Branch issued a financing
guarantee letter for the funds, and the Company mortgaged real estate in No.603 Dapu Road, Shanghai for the
abovementioned counter guarantee.
15.3 Status of Investment in Entrusted Financing and Derivatives of Non-Financial Companies
15.3.1 Entrusted Financing
Unit: 10,000 Yuan, Currency: RMB
Whether
transaction is
relationship
impairment
Amount of
Affiliated
is involved
provision
affiliated
involved
Whether
Whether
Method of Principal Gains legal
lawsuit
Name of Starting
Product name Amount Ending date determining actually actually proceed-
for
partner date
gains recovered obtained ings are
involved
Bank of Shanghai
“Winner” Currency
Bank of and Bond Series Guarantee
Shanghai (Intravenous Drip November February gains with
5,000 5,000 47.14 Yes 0 No No
Fumin into Gold) Financial 2, 2015 3, 2016 guaranteed
Branch Product principal
（WG15154S）
Bank of Shanghai
“Winner” Currency
Bank of and Bond Series Guarantee
Shanghai (Intravenous Drip November February gains with
7,000 7,000 65.99 Yes 0 No No
Fumin into Gold) Financial 2, 2015 3, 2016 guaranteed
Branch Product principal
（WG15154S）
Bank of
Guarantee
Communi-
Yuntong Wealth November February gains with
cations 5,000 5,000 41.23 Yes 0 No No
Rizengli 86 Days 11, 2015 5, 2016 guaranteed
Xuhui
principal
Branch
Bank of Shanghai
“Winner” Currency
Bank of and Bond Series Guarantee
Shanghai (Intravenous Drip November February gains with
6,000 6,000 53.85 Yes 0 No No
Fumin into Gold) Financial 18, 2015 17, 2016 guaranteed
Branch Product principal
（WG15M03043）
Xiamen
Floating
International
Win Step-by-step December March 11, gains with
Bank 7,000 7,000 65.82 Yes 0 No No
Phase 152001 11, 2015 2016 guaranteed
Shanghai
principal
branch
Bank of
Guarantee
Communi-
Yuntong Wealth December March 14, gains with
cations 4,000 4,000 34.52 Yes 0 No No
Rizengli 90 Days 15, 2015 2016 guaranteed
Xuhui
principal
Branch
Bank of
Guarantee
Communi-
Yuntong Wealth December March 14, gains with
cations 1,000 1,000 8.63 Yes 0 No No
Rizengli 90 Days 15, 2015 2016 guaranteed
Xuhui
principal
Branch
Bank of Shanghai
“Winner” Currency
Bank of and Bond Series Guarantee
Shanghai (Intravenous Drip February May 5, gains with
5,000 5,000 39.64 Yes 0 No No
Fumin into Gold) Financial 4, 2016 2016 guaranteed
Branch Product principal
（WG16017S）
Bank of Shanghai
“Winner” Currency
Bank of and Bond Series Guarantee
Shanghai (Intravenous Drip February May 5, gains with
6,000 6,000 47.57 Yes 0 No No
Fumin into Gold) Financial 4, 2016 2016 guaranteed
Branch Product principal
（WG16017S）
Bank of
Guarantee
Communi-
Yuntong Wealth February May 4, gains with
cations 5,000 5,000.00 38.58 Yes 0 No No
Rizengli 88 Days 6, 2016 2016 guaranteed
Xuhui
principal
Branch
Bank of Shanghai
“Winner” Currency
Bank of and Bond Series Guarantee
Shanghai (Intravenous Drip February May 23, gains with
5,000 5,000 39.89 Yes 0 No No
Fumin into Gold) Financial 22, 2016 2016 guaranteed
Branch Product principal
（WG16018S）
Bank of “Wenjin” No. 2 March 15, September Floating
7,500 7,500 119.67 Yes 0 No No
Shanghai SD21606M018A 2016 13, 2016 gains with
Whether
transaction is
relationship
impairment
Amount of
Affiliated
is involved
provision
affiliated
involved
Whether
Whether
Method of Principal Gains legal
lawsuit
Name of Starting
Product name Amount Ending date determining actually actually proceed-
for
partner date
gains recovered obtained ings are
involved
Fumin guaranteed
Branch principal
Bank of
Guarantee
Communi-
Yuntong Wealth March 17, June 13, gains with
cations 2,500 2,500 19.29 Yes 0 No No
Rizengli 88 Days 2016 2016 guaranteed
Xuhui
principal
Branch
Bank of
Guarantee
Communi-
Yuntong Wealth March 17, June 13, gains with
cations 2,500 2,500 19.29 Yes 0 No No
Rizengli 88 Days 2016 2016 guaranteed
Xuhui
principal
Branch
Bank of Floating
Shanghai “Wenjin” No. 2 May 10, November gains with
8,300 8,300 128.87 Yes 0 No No
Fumin SD21606M031A 2016 10, 2016 guaranteed
Branch principal
Bank of Floating
Shanghai “Wenjin” No. 2 May 10, November gains with
1,200 1,200 18.63 Yes 0 No No
Fumin SD21606M031A 2016 10, 2016 guaranteed
Branch principal
Bank of Floating
Shanghai “Wenjin” No. 2 May 26, November gains with
8,000 8,000 119.67 Yes 0 No No
Fumin SD21606M034B 2016 24, 2016 guaranteed
Branch principal
Bank of
Guarantee
Communi-
Yuntong Wealth June 14, September gains with
cations 2,500 2,500 17.88 Yes 0 No No
Rizengli 87 Days 2016 9, 2016 guaranteed
Xuhui
principal
Branch
Bank of
Guarantee
Communi-
Yuntong Wealth June 14, September gains with
cations 2,500 2,500 17.88 Yes 0 No No
Rizengli 87 Days 2016 9, 2016 guaranteed
Xuhui
principal
Branch
Bank of
Floating
Communi-
Yuntong Wealth September January gains with
cations 2,500 Yes 0 No No
Rizengli S 9, 2016 24, 2017 guaranteed
Xuhui
principal
Branch
Bank of
Floating
Communi-
Yuntong Wealth September January gains with
cations 2,500 Yes 0 No No
Rizengli S 9, 2016 24, 2017 guaranteed
Xuhui
principal
Branch
Bank of Floating
August 25, November
Shanghai “Wenjin” No. 2 3,300 gains with 3,300 23.28
Fumin SD21601M077B 2016 24, 2016 guaranteed
Branch principal
Bank of Floating
Shanghai “Wenjin” No. 2 September October gains with
2,000 2,000 5.37 Yes 0 No No
Fumin SD21601M077B 22, 2016 27, 2016 guaranteed
Branch principal
Bank of Floating
Shanghai “Wenjin” No. 2 September March 23, gains with
8,000 Yes 0 No No
Fumin SD21606M049B 22, 2016 2017 guaranteed
Branch principal
Bank of Floating
Shanghai “Wenjin” No. 2 November February gains with
1,200 Yes 0 No No
Fumin SD21603M078A 15, 2016 14, 2017 guaranteed
Branch principal
Bank of Floating
Shanghai “Wenjin” No. 2 November February gains with
8,800 Yes 0 No No
Fumin SD21603M078A 15, 2016 14, 2017 guaranteed
Branch principal
Bank of Floating
Shanghai “Wenjin” No. 2 November February gains with
7,000 Yes 0 No No
Fumin SD21603M084A 29, 2016 28, 2017 guaranteed
Branch principal
Bank of Floating
Shanghai “Wenjin” No. November February gains with
3,200 Yes 0 No No
Fumin 2SD21603M084A 29, 2016 28, 2017 guaranteed
Branch principal
Total / 129,500 / / / 96,300 972.79 / / / /
Whether
transaction is
relationship
impairment
Amount of
Affiliated
is involved
provision
affiliated
involved
Whether
Whether
Method of Principal Gains legal
lawsuit
Name of Starting
Product name Amount Ending date determining actually actually proceed-
for
partner date
gains recovered obtained ings are
involved
Aggregate principal and gains amount
overdue and non-refunded (Yuan)
With the review and approval of the 21nd meeting of the Seventh Board of Directors on April 28, 2015, it
is resolved that idle raised funds of 250 million yuan and self-owned funds of 250 million yuan were
managed in purchasing RMB financial products of the bank with principal guaranteed. With the review
Note
and approval of the 26th meeting of the Seventh Board of Directors on March 18, 2016, it is resolved that
idle raised funds of 130 million yuan and self-owned funds of 250 million yuan were managed in
purchasing RMB financial products of the bank with principal guaranteed.
15.3.2 Entrusted Loan
Not applicable.
15.3.3 Other Investment in Financing Products and Derivatives
Not applicable.
16. Situations of Company Performing Social Liabilities Actively
16.1 Poverty Alleviation of Listed Companies
Not applicable.
16.2 Social Responsibility Work
The Company insists on complying with laws and regulations as the Companys basic operation principle, and
focuses on mutual development of economic benefits and social benefits. In 2016, the Company seriously
complied with national laws, regulations and policies, operated business by legal requirements, paid taxes
actively, controlled product qualities, given more employment chances, actively participated in charity
donation and volunteer activities in Pudong New Area, supported development of local economy, and never
behaved to destroy social economic development or environment protection.
17. Convertible Corporate Bonds
Not applicable.
Chapter 6 Status of Shareholders and Share Capital Changes of
Common Stock
1. Share Capital Changes of Common Stock
1.1 Share Capital Changes of Common Stock
During the report period, the total number of shares of the Company's common stock and equity structure
remain unchanged.
1.2 Change of Non-Tradable Shares
Not applicable
2. Securities Issuance and Listing
2.1 Securities Issuance during the Report Period
Not applicable
2.2 Total Share and Shareholder Change and Asset and Liability Structure Change
Total share has no change in the report period. Shareholder change refers to 1.1 “Share capital changes of
common stock”.
2.3 Employee Shareholding Status
No internal employee share in the report period.
3. Shareholder and Actual Controller
3.1 Total Number of Shareholders
Total number of shareholder at the end of report period 71,793 (A Share:43,300; B Share:28,493)
Total number of shareholder as of March 31, 2017 66,372 (A Share:38,323; B Share:28,049)
3.2 Shareholding Status of Top 10 Shareholders and Top 10 Unrestricted Shareholders
Unit: Share
Top 10 Shareholders
Total
Increase or Shares
Shares Holding
Decrease in Restricted Pledged Shareholder
Name of Shareholder Held as of Percentage
the Report Share or Status
December (%)
Period Frozen
31, 2016
Shanghai Puke Domestic
Flyingman Investmnt 60,000,000 60,000,000 10.94 0 Non-state-owned
Co., Ltd. Legal Person
State-owned Assets
Supervision and
Administration
-60,000,000 45,395,358 8.27 0 State
Commission of Shanghai
Pudong New Area
People's Government
Chian Great Wall Asset
State-owned
Management 0 22,200,000 4.05 0
Legal Person
Corporation
SHANGHAI
INTERNATIONAL State-owned
0 10,968,033 2.00 0
GROUP Asset Legal Person
Management Co., Ltd.
GREAT WALL
GUORONG
State-owned
INVESTMENT AND 4,770,654 4,770,654 0.87 0
Legal Person
MANAGEMENT CO.,
LTD.
SCBHK A/C KG
Foreign Legal
INVESTMENTS ASIA -262,088 4,590,955 0.84 0
Person
LIMITED
SCBHK A/C BBH S/A
VANGUARD
Foreign Legal
EMERGING 2,930,213 3,678,113 0.67 0
Person
MARKETS STOCK
INDEX FUND
GUOTAI JUNAN
SECURITIES Foreign Legal
-406,620 3,135,169 0.57 0
(HONGKONG) Person
LIMITED
VANGUARD TOTAL
Foreign Legal
INTERNATIONAL 453,700 2,999,096 0.55 0
Person
STOCK INDEX FUND
Foreign Legal
NORGES BANK 0 1,742,114 0.32 0
Person
Top 10 Unrestricted Shareholders
Share Type and Amount
Name of Shareholder Unrestricted Shares
Type Amount
Shanghai Puke Flyingman
60,000,000 A Share 60,000,000
Investmnt Co., Ltd.
State-owned Assets
Supervision and
Administration Commission 45,395,358 A Share 45,395,358
of Shanghai Pudong New
Area People's Government
China Great Wall Asset
22,200,000 A Share 22,200,000
Management Corporation
SHANGHAI
INTERNATIONAL GROUP 10,968,033 A Share 10,968,033
Asset Management Co., Ltd.
GREAT WALL GUORONG
INVESTMENT AND 4,770,654 A Share 4,770,654
MANAGEMENT CO., LTD.
Shanghai Puke Flyingman
4,590,955 B Share 4,590,955
Investmnt Co., Ltd.
SCBHK A/C BBH S/A
VANGUARD EMERGING
3,678,113 B Share 3,678,113
MARKETS STOCK INDEX
FUND
GUOTAI JUNAN
SECURITIES(HONGKONG) 3,135,169 B Share 3,135,169
LIMITED
VANGUARD TOTAL
INTERNATIONAL STOCK 2,999,096 B Share 2,999,096
INDEX FUND
NORGES BANK 1,742,114 B Share 1,742,114
GREAT WALL GUORONG INVESTMENT AND MANAGEMENT CO.,
Notes on Shareholder LTD. is the wholly-owned subsidiary of China Great Wall Asset Management
Relationship and Consistent Corporation.
Actions The Company does not know the relationship and consistent of other
shareholders
The Number of Restricted Shares Held by Top Ten Shareholders and the Conditions for Sale
Not applicable.
4. Controlling Shareholder and Actual Controller
4.1 Controlling Shareholder
4.1.1 Legal Person
Not applicable.
4.1.2 Natural person
Not applicable.
4.1.3 Special Explanation for the Absence of Controlling Shareholder of the Company
Pudong SASAC, the former controlling shareholder and the actual controller of the Company, transferred 60
million A shares of SGG to Shanghai Puke Flyingman Investment Co., Ltd. The transaction was successfully
completed on December 29, 2016. After the completion of the share transfer, the total share capital of the
Company remained unchanged, and the PKFR held 60 million A shares of the Company, accounting for
10.94% of the total share capital of the Company as the largest shareholder. Pudong SASAC held 45,395,358
A shares of the Company, accounting for 8.27% of the total share capital of the Company, which is the second
largest shareholder of the Company.
As a result of the relatively low proportion of the shares held by PKFR and Pudong SASAC, both held no
more than 30% and their shareholding ratio is closer. Therefore, after the completion of the share transfer, no
shareholder could control the Company separately, the Company will be changed to a listed company with no
controlling shareholder and no actual controller.
4.1.4 Index and Date of Change of Controlling Shareholder during the Report Period
The temporary bulletin No. 2016-069 disclosed by the Company on December 30, 2016, published in
Shanghai Securities News and Hong Kong Commercial Daily and website of Shanghai Stock Exchange.
4.1.5 The Property and Control Relationship between the Company and the Controlling Shareholder
Not applicable.
4.2 Actual Controller
4.2.1 Legal Person
Not applicable.
4.2.2 Natural Person
Not applicable.
4.2.3 Special Explanation for the Absence of Controlling Shareholder of the Company
Pudong SASAC, the former controlling shareholder and the actual controller of the Company, transferred 60
million A shares of SGG to Shanghai Puke Flyingman Investment Co., Ltd. The transaction was successfully
completed on December 29, 2016. After the completion of the share transfer, the total share capital of the
Company remained unchanged, and the PKFR held 60 million A shares of the Company, accounting for
10.94% of the total share capital of the Company as the largest shareholder. Pudong SASAC held 45,395,358
A shares of the Company, accounting for 8.27% of the total share capital of the Company, which is the second
largest shareholder of the Company.
As a result of the relatively low proportion of the shares held by PKFR and Pudong SASAC, both held no
more than 30% and their shareholding ratio is closer. Therefore, after the completion of the share transfer, no
shareholder could control the Company separately, the Company will be changed to a listed company with no
controlling shareholder and no actual controller.
4.2.4 Index and Date of Change of Actual Controller during the Report Period
The temporary bulletin No. 2016-069 disclosed by the Company on December 30, 2016, published in
Shanghai Securities News and Hong Kong Commercial Daily and website of Shanghai Stock Exchange.
4.2.5 The Property and Control Relationship between the Company and the Actual Controller
Not applicable.
4.3 Other Introduction about Controlling Shareholder and Actual Controller
Not applicable.
5. Other Shareholders (Legal Person) Holding More Than Ten Percent
Unit: 10,000 Yuan, Currency: RMB
Legal Date of Enterprise Unified Social Registered
Name Main Business
Representative Establishment Credit Code Capital
Industrial
Shanghai
investment,
Puke
investment
Flyingman Zhu Xudong June 16, 2016 91310115MA1K3D9W81 28,512
management,
Investment
investment
Co., Ltd
consulting
6. Description of the Limit of Share Reduction
Not applicable.
Chapter 7 Relevant Situation about Preferred Shares
Not applicable.
Chapter 8 Situation about Directors, Supervisors, Senior Managers
and Employees
1. Share Change and Compensation
1.1 Share Change and Compensation of Current and Former Directors, Supervisors ans Senior
Managers
Unit: Share
Pre Tax
Shares
Shares Comensation
Held at Reason Compensation
Starting Ending Held at the Increase/ Payable in the
Name Title) Gender Age the End fo the Payable by
Date Date Beginning Decrease Report Period
of the Change Related Parties
of the Year (Unit: 10,000
Year
yuan)
Zhang Chairman, December
Male 54 100,000 100,000 0 No
Min CEO 27, 2012
April 28,
Director Male 56
Li Jiaming Deputy 0 0 0 No
December
general Male 56
27, 2012
manager
Director,
Fang Deputy December
Male 50 0 0 0 No
Haixiang general 27, 2012
manager
December
Sun Gang Director Male 52 0 0 0 No
27, 2012
December
Lu Yujie Director Male 46 0 0 0 Yes
27, 2012
December
Bao Qi Director Female 40 0 0 0 No
27, 2012
Zhang Independent December
Male 58 0 0 0 No
Ming director 27, 2012
Independent December
Su Yong Male 61 0 0 0 No
director 27, 2012
Independent December
He Ye Female 53 0 0 0 No
director 27, 2012
Superisory
Qiao April 28,
Board Male 59 0 0 0 No
Junhai
Chairman
Ding December
Supervisor Male 52 0 0 0 No
Binhui 27, 2012
Zhuge December
Supervisor Female 48 0 0 0 No
Huiling 27, 2012
Chen December
Supervisor Female 54 12,645 12,645 0 No
Guoling 27, 2012
Xu December
Supervisor Male 54 0 0 0 No
Yuping 27, 2012
Deputy
Zheng December
general Female 51 21,500 21,500 0 No
Ying 27, 2012
manager
Deputy
Li December
general Male 42 0 0 0 No
Xiaofeng 27, 2012
manager
Zhang Secretary of December
Male 57 0 0 0 No
Jianguo the Board 27, 2012
Total / / / / / 134,145 134,145 0 / /
Main work experience:
Zhang Min: Former General Manager of Shanghai Zanussi Electric Machinery Co., Ltd., General Manager,
Chairman of Shanghai SMPIC Office Equipment Co. From July 2004, he has served as the Party Secretary,
President and CEO of the Company, Chairman of the Board of SGE and Chairman of the Supervisory Board of
DA AG, Vice President of China Sewing Machinery Association. He is the Chairman of the 7th Board of
Directors of the Company.
Li Jiaming: Former R&D Director, Deputy General Manager of Shanghai SMPIC Office Equipment Co., Ltd.,
Site Manager of SMPIC Photosensitive Materials Factory, General Manager and Party Secretary of Shanghai
Machinery Co., Ltd. Since April 2008, he served as Deputy General Manager of the Company. Since April 28,
2014, he served as managing director of the 7th Board.
Fang Haixiang: Former Deputy General Manager and Chief Engineer of Shanghai Xiechang Feiren Co., Ltd.
Since April 2008, he served as Deputy General Manager of the Company. And since March 2012, he served
as Chairman of Shanghai Shanggong Butterfly Sewing Machine Co., Ltd. He is the Managing Director of the
7th Board.
Sun Gang: Former Risk Detection Department Manager, Risk Compliance Senior Manager of China Great Wall
Asset Management Corporation, Party Committee Member and Deputy General Manager of China Great Wall
Asset Management Corporation Shanghai Office, the Deputy Party Committee Secretary (chair) of China Great
Wall Asset Management Corporation Guiyang Office. Since May 2016, he served as the Party Committee
Secretary and the General Manager of China Great Wall Asset Management Co., Ltd Guiyang Office. He is a
Director of the 7th Board of the Company.
Lu Yujie: Former Operation Director, Financial Controller, Investment Director and GM assistant of
Shanghai International Group Asset Management Co., Ltd., and since May 2015, he served as Deputy General
Manager. He is a Director of the 7th Board of the Company.
Bao Qi: From July 2008 to October 2014, she served as General Counsel, Operations Director, vice president of
Shanghai Pudong Science and Technology Investment Co., Ltd. From December 2014, she served as a
lawyer of Shanghai Haojia Law Firm. She is a Director of the 7th Board of the Company.
Zhang Ming: Professor, Doctor Tutor with Shanghai University of Finance and Economics, Director of China
Accounting Society, China Banking Accounting Society, Shanghai Accounting Association and Shanghai Cost
Research Institute. He is an Independent Director of the 7th Board.
Su Yong: Professor with Business Management Department, Deputy Director of Fudan Oriental Management
Research Center, Doctor Supervisor of Oriental, Vice Chairman of Shanghai Association of Productivity,
Standing Director of Chinese Enterprise Management Research Association, Chinese Culture Research
Association and Japan Oriental International Economics Association. He is an Independent Director of the 7th
Board.
He Ye: Former Deputy Secretary General, Vice Chairman and Secretary General, and Standing Vice Chairman
of China Sewing Machinery Association, starting from September 2011, she was appointed Chairman of
Sewing Machinery Association. She is an Independent Director of the 7th Board.
Qiao Junhai: Serve in the army from December 1976 to April 2005, former deputy commander. Former
director and secretary of party committee of Shanghai Nanhui District Sports Bureau, vice secretary and
secretary-general of Nanhui District Politics and Law Committee, director of Nanhui District Comprehensive
Management of Public. Former Party Committee Secretary of Pudong New Area Politics and Law Committee,
vice director of Comprehensive Management of Social Security Committee Office, member of Pudong New
Area Commission for Discipline Inspection. From April 28, 2014, he served as 7th Supervisory Board
Chairman of the Company.
Ding Binhui: Former Chief Accountant with Shanghai Lujiazui Property; from August 2009, work in Director
and Supervisor Center, Pudong SASAC. He is a Supervisor of the 7th Supervisory Board.
Zhuge Huiling: From September 2007 to December 2012, Deputy GM of the Company, from December
2012 Secretary of Discipline Committee of the Company. She is a Supervisor of the 7th Supervisory Board.
Chen Guoling: Former GM with Shanghai SMPIC Real Estate Development Co., Ltd. , Deputy GM, Union
Chairman of Shanghai Fengjian Real Estate, Party Secretary, Deputy GM, Secretary Office Manager, Union
Vice Chairman of Shanggong SMPIC Mechanical Branch, since December 2012 Company Union Chairman.
She is a Staff Supervisor of the 7th Supervisory Board.
Xu Yuping: Former Finance and Auditing Department Leader, Manager, Operation Deputy Manager of
Shanghai SMPIC Office Equipment Co., Ltd., Audit Department Deputy Manager of the Company. He
served as the Companys Audit Department Manager now. He is a Staff Supervisor of the 7th Supervisory
Board.
Zheng Ying: Party Secretary, Deputy GM of Fuji Xerox Co., since October 2008, Deputy General Manager of
the Company, and Executing Director of SGE and DA AG.
Li Xiaofeng: Former general manager Assistant of the Company, general manager of Shanghai Import &
Export Co., general manager of Shanghai Shanggong Butterfly Sewing Machine Co., Ltd., currently general
manager of DAP Shanghai. Since December 2012, he served as the Companys deputy general manager.
Zhang Jianguo: Former Party Secretary, Deputy DM of Fuji Xerox Co., Ltd. Since August 2011, he served as
Secretary of the Board of Directors of the Company.
Note 1: During the report period, Ms Zheng Ying, Deputy General Manager of the Company, worked in
Germany. She received her salary from the oversea subsidiary, not from Companys Headquarter.
Note 2: The 25th Meeting of the 7th Board of Directors deliberated and approved Proposal on the extension of
the7th Board of Directors. The election of the 8th Board of Directors will be postponed. Before electing the
8th Board of Directors, all the directors and senior officers of the 7th Board of Director would fulfill their
duties and obligations prescribed by the law and the Articles of Association. The 35th Meeting of the 7th
Board of Directors deliberated and approved Proposal on the Re-election of the Board of Directors, the
re-election of the Board of Directors is underway.
1.2 Equity Incentive Granted to Directors, Supervisors, and Senior Managers in the Report Period
Not applicable.
2. Current and Former Director, Supervisor and Senior Manager’s Employment
2.1 Employment with Shareholders
Name Shareholder Title Starting From End Date
Party Committee Secretary
China Great Wall Asset
Sun Gang and general manager of May 3, 2016
Management Co., Ltd
Guiyang Office
Deputy Party Committee
China Great Wall Asset December 10,
Sun Gang Secretary (chair) of Guiyang May 3, 2016
Management Corporation
Office
Shanghai International
Lu Yujie Group Asset Management Deputy general manager May 2015
Co., Ltd.
Professional Supervisor of August 1,
Ding Binhui Pudong SASAC
Supervisors Center
2.2 Employment with Other Institutions
Name Company Name Title Starting From End Date
China Sewing Machinery September 26,
Zhang Min Deputy Director
Association
China Light Industry
Zhang Min Deputy Director June 21, 2016
Federation
Shanghai Internation Group
Lu Yujie Executive Director March 1, 2009
Assets Operation Co., Ltd
KINGBURG INDUSTRY
Lu Yujie INVESTMENT FUND Director February 1, 2015
MANAGEMENT CO., LTD
SHANGHAI KINGBURG
Chairman of the December 1,
Lu Yujie INVESTMENT
Board
MANAGEMENT CO., LTD
Force Investment Fund
Lu Yujie Director June 1, 2014
Management Co., Ltd
New Shanghai International Deputy Chairman
Lu Yujie January 1, 2014
Mansion Co., Ltd of the Board
Fudan SIG Academic December 1,
Lu Yujie Director
Exchanges Center
Tonglian Payment Network
Lu Yujie Supervisor August 1, 2014
Service Co., Ltd
Independent
Zhang Ming Shanghai Shenda Co., Ltd. May 24, 2010 June 16, 2016
Director
Tibet Haisike Pharmaceutical Independent
Zhang Ming August 8, 2010 January 17, 2017
Group Co., Ltd. Director
Shanghai Jinqiao Export Independent
Zhang Ming Processing Area Development Director June 2, 2011
Co., Ltd.
Wuxi Commercial Mansion Independent
Zhang Ming May 20, 2015
Grand Orient Co., Ltd. Director
Independent
Zhang Ming Haitong securities co., Ltd June 12, 2016
Director
Shanghai Pudong Independent
Zhang Ming April 29, 2016
Development Bank Co., Ltd Director
Shanghai Pret Composites Co., Independent November 28,
Su Yong July 14, 2016
Ltd. Director
Maanshan Iron and Steel Independent September 1,
Su Yong
Company Limited Supervisor 2011
China Sewing Machinery September 26,
He Ye Chairman
Association
China Light Industry
He Ye Deputy Director June 21, 2016
Federation
3. Compensation for Director, Supervisor and Senior Managers
Decision Making Procedure for Apply the regulation on Officers Salary in Senior Management Personnel
Director, Supervisor and Officer Remuneration Management Regulation
Compensation
Basis for Director, Supervisor and Implement according to Senior Management Personnel Remuneration
Officer Compensation Management Regulation and other corporate internal control system
Director, Supervisor and Officer Compensation will be paid according KPI, according to independent
Compensation Payable director compensation standard and procedure approved by the shareholder
general meeting.
Total Compensation at End of
Reporting Period for Director, RMB 4,707.5 thousand, before tax.
Supervisor and Officer
4. Change of Directors, Supervisors and Senior Managers of the Company
Not applicable.
5. Punishment by the Securities Regulatory Authorities in Last Three Years
Not applicable.
6. Staff Condition of Parent Company and Major Subsidiaries
6.1 Staff Condition
Population of serving staff in parent company
Population of serving staff in major subsidiary companies 3,216
Total population of serving staff 3,275
Population of retired staff who have to undertake expense in parent
company and major subsidiary companies
Professional Composition
Type of Professional Composition Population of Professional Composition
Production Staff 2,193
Sales Personnel
Technician
Financial Staff
Administrative Staff
Total 3,275
Educational Degree
Type of Educational Degree Population
Postgraduate, undergraduate and above
Junior college 1,785
Junior college and below
Total 3,275
6.2 Compensation Policy
During the report period, the Company has formulated the Employee Performance Assessment and Salary
Management Method in the Department. The staff salary is implemented strictly according to stipulated
policies.
6.3 Training Plan
The Company carries out highly skilled technician training and professional technical force training in order to
create a staff team with adaptability, innovation, improvement and execution abilities, and enhance the staff
quality. In order to offer suitable human resources for the Company to become an enterprise with sustainable
development and competitiveness, the Company has formulated all levels and various forms of training plans.
6.4 Outsourcing
Not applicable.
Chapter 9 Corporate Governance
1. Illustration of Corporate Governance and Related Situation
During the report period, the Company has continuously improved the corporate governance structure and
regulated the Company operation in strict accordance with laws and regulations including the Corporate Law,
Securities Law and Code of Corporate Governance for Listed Companies, and the requirement of China
Securities Regulatory Commission, Shanghai Stock Exchange and other regulators. At present, the Company
has formed the legal governance structure with distinct rights and liabilities, each performing its own functions,
effective balance, scientific decisions and coordinating operation. The corporate government complies with the
requirement of relevant laws and regulations, and there is no rectification within a limited time required by any
supervision department. The stockholders meeting, board of directors and board of supervisors fulfill their
own duties and operate in a standard way to practically guarantee the interest of vast investors and the
company.
(1) Shareholders and Shareholders Meeting
The Company holds shareholders meeting in strict accordance with the laws and regulations including the
Corporate Law, Listing Rule of Shanghai Stock Exchange, and the requirement of the Articles of Association
and Procedure Rules of Shareholders Meeting to ensure that all the shareholders can enjoy equal status and
rights. Meanwhile, lawyers are invited to attend the shareholders meeting and confirm and witness the
convention procedure, deliberation matters and attendees identities. The meeting minutes should be complete
to guarantee the legitimacy and effectiveness of the shareholders meeting.
(2) Controlling Shareholders and Companies
The Company possesses independent business and management abilities. Both the Company and controlling
shareholders can realize “five independences” in terms of staff, asset, finance, organization and business. The
board of directors, board of supervisions and internal organizations can operate independently. The Companys
major decisions are made by the shareholders meeting according to the law. The controlling shareholders
exercise shareholders rights by law without the behavior of interfering with the Companys decision and
operating activities directly or indirectly exceeding the shareholders meeting. The Company has no related
transaction with controlling shareholders.
(3) Directors and Board of Directors
The Company has formulated the Procedure Rules of the Board of Directors according to the stipulation of the
Corporate Law and Articles of Association. The directors qualification and electoral procedure comply with
the stipulation of relevant laws and regulations. All the directors strictly abide by the directors declaration and
promise that they have made, fulfill the rights and obligations endowed by the Articles of Association
earnestly, and perform their duties loyally, diligently and sincerely.
The Companys independent directors shouldnt be less than 1/3 of total directors. During the report period,
they have attended the board meeting carefully, delivered their professional opinions on major issues including
periodic reports, related party transactions and external securities, and played a positive role in the scientific
decisions of the board of directors and the healthy development of the company.
(4) Supervisors and Board of Supervisors
The Company elects supervisors in strict accordance with the selection procedure of the Corporate Law and
Articles of Association. The Companys board of supervisors consists of five supervisors, including two staff
representatives. Population and staff composition comply with the requirement of laws and regulations. All the
supervisors can carefully fulfill the obligations according to the Procedure Rule of the Board of Supervisors.
Driven by the responsibility for all the shareholders, especially minority shareholders, supervisors fulfill
responsibilities carefully, according to the Procedure Rules of the Board of Supervisors, supervise the
Companys finance, the legitimacy and compliance of directors and senior executives in fulfilling their duties.
(5) Information Disclosure and Transparency
The Company appoints the secretary of the board to be responsible for the Companys information disclosure,
receiving investors visit and consultation, and designates Shanghai Securities News and Hong Kong
Commercial Daily to disclose the Companys information. The Company strictly abides relevant stipulations
of information disclosure, effectively prevents selective information disclosure and occurrence of insider
trading, and makes everything in a just, impartial and open way. The Company can disclose relevant
information truly, accurately, completely and timely according to relevant stipulations of laws, regulations and
the Articles of Association to ensure that all the shareholders have the equal opportunity to gain information.
During the report period, the Company has revised the Information Disclosure Affairs Management System in
order to enhance the internal control and further stipulate the Companys information disclosure affairs
management according to the stipulation of the Shanghai Stock Exchange on implementing direct business in
information disclosure.
(6) About Investors Relation and Related Interest Parties
The Company further enhances the channel to communicate with investors, fully respects and maintains the
legitimate interest of related interest parties realizes the balance of the interest of shareholders, staff and
society, commonly promotes the sustainable and healthy development of the company according to the
Investor Relations Management. A specially-assigned person in the Companys board office is responsible for
receiving investors incoming calls, letters, visits and questions, and replies them by instant answers, relying
letters or emails.
In order to regulate the Companys insider information management, enhance the privacy of inside information
and maintain information disclosure fairness, the Company formulates and strictly executes the Inside
Information and Insiders Management System according to laws and regulations of the Corporate Law,
Securities Law, Administrative Measures on Information Disclosure by Listed Companies, Stock Listing Rule
of Shanghai Stock Exchange, relevant stipulations of the Articles of Association and the actual condition of the
company. The Companys inside information management will be under the centralized leadership and
management of the board of directors to guarantee that the information insiders files are true, accurate and
complete. The chairman will become the major person in charge. The secretary of the board organizes the
implementation and is responsible for registering and filling information insiders. The board of supervisors
supervises the management system implementation of information insiders.
During the report period, the Company has strictly implemented the registration management system of inside
information and normalized information transfer process. During the regular report and temporary
announcement disclosure period, the company has strictly controlled insiders range for private information,
organized to fill in the Information Insider Registration Form, and truly and completely recorded the list of all
the information insiders before the information above were public, and the time when insiders knew the inside
information, etc.
During the report period, the Companys directors, supervisors, senior executives and other relevant staff have
strictly abided by the management system of information insiders. No information insider has been discovered
to utilize inside information to buy and sell Companys stocks, and no information insider has been
investigated by the supervision department for being suspected of being involved in inside information trade.
During the report period, the Company has revised the Articles of Association, Rules for the Shareholders'
Meetings, and various regulations and systems to further perfect the corporate governance and normalize
operation.
During the report period, the Company has developed Senior Management Personnel Remuneration
Management Regulation to further perfect the corporate governance and normalize operation.
There is no significant difference between the Companys corporate governance and the requirements of
relevant provisions released by CSRC.
2. Brief Introduction of Shareholder’s Meeting
Inquiry Index of Designated Disclosure Date for
Name of Meeting Date of Meeting Website for Publishing Publishing
Resolutions Resolutions
The 2015 Annual
April 15, 2016 www.sse.com.cn April 16, 2016
Shareholders Meeting
First Temporary Shareholders
May 24, 2016 www.sse.com.cn May 25, 2016
Meeting in 2016
3. Duty Fulfillment of Directors
3.1 Attendance of Directors in Board Meeting and Shareholders Meeting
Attendance in Board Meeting
Whether two Attendance
Whether times in a
By in
Name Independent Scheduled Personal By row did not Shareholders
Director Telecommuni- Absent
Meeting Attendance Proxy personally Meeting
cation
attend the
meeting
Zhang
No 10 10 8 0 0 No
Min
Li
No 10 10 8 0 0 No
Jiaming
Fang
No 10 10 8 0 0 No
Haixiang
Sun
No 10 10 8 0 0 No
Gang
Lu Yujie No 10 10 8 0 0 No
Bao Qi No 10 10 8 0 0 No
Zhang
Yes 10 9 8 1 0 No
Ming
Su Yong Yes 10 10 8 0 0 No
He Ye Yes 10 10 9 0 0 No
Number of Board Meetings Held During the Year
Including on-site meeting
meetings by telecommunication
On-site with telecommunication meeting
3.2 Independent Directors’ Objection against Significant Events of the Company
Not applicable.
4. Important Opinions and Recommendations of the Special Committees under the Board during
Report Period
Not applicable.
5. Explanation by Supervisory Board on the Risks of the Company
Not applicable.
6. Explanation on Structural Independence of the Company on Business, Personnel, Assets,
Organization and Finance from the Holding Shareholder
Not applicable.
6. Appraisal and Incentive System for Senior Managers
The Company established the performance evaluation systems by which the income of senior managers was
linked with their performance and operation objective. In accordance with Senior Management Personnel
Remuneration Management Regulation and standards and procedures of performance evaluation, the
Remuneration and Evaluation Committee made evaluation on the senior officers according to 2016 operation
situation, in combination with the respective duty fulfillment, business innovation and profit contribution of
every senior manager and their yearly work.
The Company is exploring long-term incentive mechanism for senior officers to further optimize
compensation system and incentive and restraint mechanism of the Company.
7. Self-evaluation Report of Internal Control
There were not factors which have influence on evaluation conclusion of effectiveness of internal control
from the benchmark date of self-evaluation report of internal control to issuance date of self-evaluation
report of internal control. For details of self-evaluation report of internal control, please see the complete
report released in the website of Shanghai Stock Exchange.
8. Internal Control Audit Report
Appointed by the Company, BDO conducted an audit on the effectiveness of internal control of financial
statements, and issued a standard audit report for internal control without reserved opinions. For details of audit
report for internal control, please see the complete report released in the website of Shanghai Stock Exchange.
Chapter 10 Revelent Situation about Corporate Bonds
Not applicable.
Chapter 11 Financial Report
Auditor’s Report
XinKuaiShiBaoZi [2017] No: ZA11774.
To all the shareholders of Shang Gong Group Co., Ltd.:
We have audited the accompanying financial statements of Shang Gong Group Co., Ltd. (hereinafter referred
to as “the Company), including the consolidated statement of financial position and statement of financial
position as of December 31, 2016, consolidated statement of comprehensive income and statement of
comprehensive income, consolidated statement of changes in equity and statement of changes in equity and
consolidated statement of cash flows and statement of cash flows for the year then ended, and notes to the
financial statements.
1. Management’s responsibility for the financial statements
Management of the Company is responsible for the preparation and fair presentation of the financial
statements. These responsibilities include: (1) preparing the financial statements in accordance with the
requirements of Accounting Standards for Business Enterprises to achieve a fair presentation; (2) designing,
implementing and maintaining internal control that is necessary to ensure that the financial statements are free
from material misstatements, whether due to frauds or errors.
2. Auditors’ responsibilities
Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our
audit in accordance with PRC Independent Standards on Audit for Certified Public Accountants. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance whether the financial statements are free from material misstatement.
Our audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditors judgment, including the assessment of
the risks of material misstatement of the financial statements, whether due to fraud or error. In making those
risk assessments, the auditors consider internal control relevant to the entitys preparation and fair presentation
of the financial statements in order to design audit procedures that are appropriate in the circumstances. An
audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by management, as well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidences we have obtained are sufficient and appropriate to provide a basis for our
audit opinion.
3. Opinion
In our opinion, the financial statements of SHANG GONG are prepared in all material respects in accordance
with the Accounting Standards for Business Enterprises and fairly present the consolidated financial position
and the Companys financial position as of December 31, 2016 and the consolidated and the Companys
operating results and cash flows for the year then ended
BDO China Shu Lun Pan
Certified Public Accountants LLP Certified Public Accountant of China: Li Yue
Certified Public Accountant of China: Li Jinhua
Shanghai, China March 31, 2017
This auditors’ report and the accompanying notes to the financial statements are English translation of the Chinese auditors’
report. In case of doubt as to the presentation of these documents, the Chinese version shall prevail.
Shang Gong Group Co., Ltd.
Consolidated Statement of Financial Position
As of December 31, 2016
(Presented in RMB unless otherwise specified)
Assets Note 5 Ending Balance Beginning Balance
Current assets:
Cash and cash equivalents 5.1 763,655,704.57 773,572,182.69
Deposit reservation for balance
Lending funds
Financial assets at fair value whose fluctuation
5.2 4,000.00
is attributed to profit or loss for current period
Derivative financial assets
Notes receivable 5.3 78,841,448.05 63,502,861.92
Accounts receivable 5.4 389,252,678.87 373,164,448.57
Prepayment 5.5 33,709,357.11 27,058,587.15
Premiums receivable
Reinsurance accounts receivable
Provision of cession receivable
Interest receivable
Dividends receivable
Other receivables 5.6 50,885,073.48 62,684,178.64
Redemptory monetary capital for sale
Inventories 5.7 663,766,440.95 581,295,155.15
Classified as assets held for sale
Non-current assets maturing within one year
Other current assets 5.8 357,418,547.35 373,659,277.60
Total current assets 2,337,533,250.38 2,254,936,691.72
Non-current assets:
Loans and payments on behalf
Available-for-sale financial assets 5.9 137,219,246.11 148,716,963.61
Held-to-maturity investments
Long-term receivables
Long-term equity investments 5.10 253,586,574.99
Investment properties 5.11 107,616,254.96 105,831,480.56
Fixed assets 5.12 354,223,210.04 336,334,409.01
Construction in progress 5.13 20,199,928.64 24,088,386.74
Project materials
Disposal of fixed assets
Productive biological assets
Oil and gas assets
Intangible assets 5.14 155,237,899.69 127,464,082.18
Development expenditures 5.15 12,529,345.90 37,111,588.93
Goodwill 5.16 67,878,923.12 65,913,195.29
Long-term deferred expenses 5.17 1,084,797.97 579,474.57
Deferred income tax assets 5.18 59,063,549.91 45,725,444.45
Other non-current assets
Total non-current assets 1,168,639,731.33 891,765,025.34
Total assets 3,506,172,981.71 3,146,701,717.06
Accompanying notes to financial statements are an integral part of the financial statements.
Legal representative: Zhang Min Financial director: Li Jiaming Financial manager: Zhao Lixin
Shang Gong Group Co., Ltd.
Consolidated Statement of Financial Position (Continued)
As of December 31, 2016
(Presented in RMB unless otherwise specified)
Liabilities and Shareholder's Equity Note Ending balance Beginning balance
Current liabilities:
Short-term loans 5.19 351,368,604.62 300,547,829.62
Borrowings from central bank
Deposits from customers and interbank
Borrowings from banks and other financial
institutions
Financial liabilities at fair value whose
fluctuation is attributed to profit or loss for current
period
Derivative financial liabilities
Notes payable
Accounts payable 5.20 174,828,356.05 161,024,708.59
Receipt in advance 5.21 36,548,091.83 25,598,146.20
Financial assets sold for repurchase
Handling charges and commissions payable
Employee benefits payable 5.22 80,928,692.78 78,096,683.38
Taxes and surcharges payable 5.23 54,740,867.60 49,065,663.29
Interest payable 5.24 2,090,565.59 88,934.73
Dividends payable 5.25 1,032,818.86 1,032,818.86
Other payables 5.26 193,117,136.53 171,163,174.57
Reinsurance accounts payable
Provision for insurance contracts
Acting trading securities
Acting underwriting securities
Classified as liabilities held for sale
Non-current liabilities maturing within one year
Other current liabilities 5.27 808,706.39 319,502.32
Total current liabilities 895,463,840.25 786,937,461.56
Non-current liabilities:
Long-term loans 5.28 68,624,863.27 29,374,120.87
Bonds payable
Including: preference shares
Perpetual bond
Long-term payables 5.29 37,338,461.61 4,724,683.15
Long-term employee benefits payable 5.30 255,686,948.92 239,476,427.52
Special payables
Estimated liabilities
Deferred income 3,600,000.00
Deferred income tax liabilities 5.31 36,604,917.60 35,136,271.15
Other non-current liabilities 5.32 520,000.00 520,000.00
Total non-current liabilities 402,375,191.40 309,231,502.69
Total liabilities 1,297,839,031.65 1,096,168,964.25
Owners' equity
Share capital 5.33 548,589,600.00 548,589,600.00
Other equity instruments
Including: preference shares
Perpetual bond
Liabilities and Shareholder's Equity Note Ending balance Beginning balance
Capital reserves 5.34 971,603,120.27 956,286,021.43
Less: treasury stock
Other comprehensive income 5.35 -103,144,046.15 -85,270,897.86
Special reserves
Surplus reserves 5.36 4,546,242.52 4,546,242.52
General risk reserves
Undistributed profits 5.37 494,754,465.24 350,523,121.40
Total owners' equity attributable to the parent
company 1,916,349,381.88 1,774,674,087.49
Minority equity 291,984,568.18 275,858,665.32
Total owners' equity 2,208,333,950.06 2,050,532,752.81
Liabilities and owners' equity 3,506,172,981.71 3,146,701,717.06
Accompanying notes to financial statements are an integral part of the financial statements.
Legal representative: Zhang Min Financial director: Li Jiaming Financial manager: Zhao Lixin
Shang Gong Group Co., Ltd.
Statement of Financial Position
As of December 31, 2016
(Presented in RMB unless otherwise specified)
Assets Note 13 Ending balance Beginning balance
Current assets:
Cash and cash equivalents 119,210,234.41 139,839,269.51
Financial assets at fair value whose fluctuation
4,000.00
is attributed to profit or loss for current period
Derivative financial assets
Notes receivable 150,000.00 210,000.00
Accounts receivable 13.1 3,401,851.42 2,768,214.13
Prepayment 531,129.23 532,941.05
Interest receivable
Dividends receivable
Other receivables 13.2 78,393,221.55 58,219,199.88
Inventories 2,329,420.55 4,310,781.84
Classified as assets held for sale
Non-current assets maturing within one year
Other current assets 301,893,339.18 351,766,361.40
Total current assets 505,913,196.34 557,646,767.81
Non-current assets:
Available-for-sale financial assets 137,219,238.80 148,716,956.51
Held-to-maturity investments
Long-term receivables 123,602,509.87 116,625,633.32
Long-term equity investments 13.3 629,485,100.90 564,142,909.37
Investment properties 86,205,621.96 86,239,724.61
Fixed assets 11,768,787.39 18,441,058.74
Construction in progress 4,045,139.74 4,740,428.42
Project materials
Disposal of fixed assets
Productive biological assets
Oil and gas assets
Intangible assets 12,859,594.30 13,245,172.99
Development expenditures
Goodwill
Long-term deferred expenses
Deferred income tax assets
Other non-current assets
Total non-current assets 1,005,185,992.96 952,151,883.96
Total assets 1,511,099,189.30 1,509,798,651.77
Accompanying notes to financial statements are an integral part of the financial statements.
Legal representative: Zhang Min Financial director: Li Jiaming Financial manager: Zhao Lixin
Shang Gong Group Co., Ltd.
Statement of Financial Position (Continued)
As of December 31, 2016
(Presented in RMB unless otherwise specified)
Liabilities and Shareholder's Equity Note Ending balance Beginning balance
Current liabilities:
Short-term loans 348,148.62 348,148.62
Financial liabilities at fair value whose fluctuation is
attributed to profit or loss for current period
Derivative financial liabilities
Notes payable
Accounts payable 4,014,190.85 20,234,518.45
Receipt in advance 2,694,254.66 2,993,707.32
Employee benefits payable 4,000,000.00 4,000,000.00
Taxes and surcharges payable 588,400.56 50,849.35
Interest payable
Dividends payable 1,032,818.86 1,032,818.86
Other payables 108,821,954.19 107,026,319.64
Classified as liabilities held for sale
Non-current liabilities maturing within one year
Other current liabilities
Total current liabilities 121,499,767.74 135,686,362.24
Non-current liabilities:
Long-term loans 1,489,984.87 1,489,984.87
Bonds payable
Including: preference shares
Perpetual bond
Long-term payables 1,574,312.63 1,611,944.32
Long-term employee benefits payable
Special payables
Provisions
Deferred income 1,260,000.00
Deferred income tax liabilities 1,197,067.41 1,197,067.41
Other non-current liabilities 520,000.00 520,000.00
Total non-current liabilities 6,041,364.91 4,818,996.60
Total liabilities 127,541,132.65 140,505,358.84
Owners' equity
Share capital 548,589,600.00 548,589,600.00
Other equity instruments
Including: preference shares
Perpetual bond
Capital reserves 1,003,282,687.73 1,003,282,687.73
Less: treasury stock
Other comprehensive income 33,970,766.78 45,068,484.49
Special reserves
Surplus reserves 4,546,242.52 4,546,242.52
Undistributed profits -206,831,240.38 -232,193,721.81
Total owners' equity 1,383,558,056.65 1,369,293,292.93
Liabilities and owners' equity 1,511,099,189.30 1,509,798,651.77
Accompanying notes to financial statements are an integral part of the financial statements.
Legal representative: Zhang Min Financial director: Li Jiaming Financial manager: Zhao Lixin
Shang Gong Group Co., Ltd.
Consolidated Statement of Comprehensive Incomes
For the Year Ended 31 December 2016
(Presented in RMB unless otherwise specified)
Item Note 5 Current Year Prior Year
1. Incomes 2,759,855,136.98 2,314,039,610.25
Including: operating income 5.38 2,759,855,136.98 2,314,039,610.25
Interest income
Premiums earned
Income from handling charges and commissions
2. Costs 2,610,544,921.82 2,146,730,340.32
Including: Cost of sales 5.38 2,037,344,042.71 1,614,750,228.46
Interest expenses
Handling charges and commissions expenses
Surrender value
Net amount of compensation payout
Net amount withdrawn for insurance contract
reserves
Policy dividend payment
Reinsurance costs
taxes and surcharges 5.39 9,646,577.26 6,115,310.63
Selling expenses 5.40 246,840,318.90 233,231,262.36
General and administrative expenses 5.41 284,156,361.47 255,477,642.42
Financial expenses 5.42 15,536,094.51 6,091,859.10
Losses from asset impairment 5.43 17,021,526.97 31,064,037.35
Plus: gains from changes in fair value (\"-\" for losses)
Investment income (\"-\" for losses) 5.44 51,962,911.52 42,409,391.70
Including: income from investment in associates and
17,937,107.88
joint ventures
Foreign exchange gains (\"-\" for losses)
3. Operating profits (\"-\" for losses) 201,273,126.68 209,718,661.63
Plus: non-operating income 5.45 33,946,275.31 20,497,344.53
Including: gains from disposal of non-current assets 4,772,309.14 5,728,673.89
Less: non-operating expenses 5.46 1,973,706.10 676,214.75
Including: losses from disposal of non-current assets 1,242,523.33 348,659.64
4. Total profits (\"-\" for total losses) 233,245,695.89 229,539,791.41
Less: income tax expenses 5.47 71,680,360.28 53,282,857.16
5. Net profit (\"-\" for net loss) 161,565,335.61 176,256,934.25
Net profit attributable to owners of the parent company 144,231,343.84 157,417,087.48
Non-controlling interests 17,333,991.77 18,839,846.77
6. Net of tax of other comprehensive income -17,277,343.80 13,430,628.35
Net of tax of other comprehensive income attributable to
owners of the parent company -17,873,148.29 14,196,084.84
(1) Other comprehensive income can't be reclassified to gains
and losses later -12,495,261.60 -1,857,057.19
a. Changes in net liabilities or assets due to the remeasurement
and redefinition of the benefit plan -12,495,261.60 -1,857,057.19
b. The shares in other comprehensive income of the investee
that can't be reclassified to gains and losses under the equity
method
(2) Other comprehensive income to be reclassified to gains
and losses later -5,377,886.69 16,053,142.03
a. The shares in other comprehensive income of the investee
Item Note 5 Current Year Prior Year
that can be reclassified to gains and losses under the equity
method
b. Gains and losses from changes in fair value of
available-for-sale financial assets -11,097,717.71 28,278,699.44
c. Gains and losses from the reclassification of the
held-to-maturity investment to held-for-sale financial assets
d. The effective portion of the gains and losses from cash flow
hedging
e. Translation differences of financial statements 5,719,831.02 -12,225,557.41
f. Others
Net of tax of other comprehensive income attributable to
595,804.49
non-controlling shareholders -765,456.49
7. Total comprehensive incomes 144,287,991.81 189,687,562.60
Total comprehensive income attributable to owners of the
parent company 126,358,195.55 171,613,172.32
Total comprehensive income attributable to non-controlling
shareholders 17,929,796.26 18,074,390.28
8. Earnings per share
(1) Basic earnings per share 14.2 0.2629 0.2869
(2) Diluted earnings per share 14.2 0.2629 0.2869
Accompanying notes to financial statements are an integral part of the financial statements.
Legal representative: Zhang Min Financial director: Li Jiaming Financial manager: Zhao Lixin
Shang Gong Group Co., Ltd.
Statement of Comprehensive Incomes
For the Year Ended 31 December 2016
(Presented in RMB unless otherwise specified)
Item Note 13 Current Year Prior Year
1. Operating income 13.4 35,625,008.15 34,548,625.46
Less: Operating cost 13.4 19,862,743.87 21,121,277.36
tax and surcharges 3,573,897.61 3,362,049.55
Selling expenses 666,232.68 4,571,117.56
General and Administration expenses 34,763,998.55 58,257,264.15
Finance expenses -5,612,406.59 -3,363,560.28
Impairment losses on assets 7,646,657.27 68,737.09
Plus: gains from changes in fair value (\"-\" for losses)
Investment income (\"-\" for losses) 13.5 33,758,732.27 42,496,460.42
Including: Investment income in associates and joint ventures
2. Operating profits (\"-\" for losses) 8,482,617.03 -6,971,799.55
Plus: Non-operating income 17,153,106.40 12,772,336.42
Including: gains from disposal of non-current assets 4,141,777.76 4,933,421.38
Less: non-operating expenses 273,242.00 293,264.60
Including: losses from disposal of non-current assets 15,845.61 93,264.60
3. Total profits (\"-\" for total losses) 25,362,481.43 5,507,272.27
Less: income tax expenses
4. Net profit (\"-\" for net loss) 25,362,481.43 5,507,272.27
4. Net of tax of other comprehensive income -11,097,717.71 28,278,699.44
(1) Other comprehensive income can't be reclassified to gains and
losses later
a. Changes in net liabilities or assets due to the remeasurement and
redefinition of the benefit plan
b. The shares in other comprehensive income of the investee that can't
be reclassified to gains and losses under the equity method
(2) Other comprehensive income to be reclassified to gains and losses
later -11,097,717.71 28,278,699.44
a. The shares in other comprehensive income of the investee that can be
reclassified to gains and losses under the equity method
b. Gains and losses from changes in fair value of available-for-sale
financial assets -11,097,717.71 28,278,699.44
c. Gains and losses from the reclassification of the held-to-maturity
investment to held-for-sale financial assets
d. The effective portion of the gains and losses from cash flow hedging
e. Translation differences of financial statements
f. Others
6. Total comprehensive incomes 14,264,763.72 33,785,971.71
7. Earnings per share:
(1) Basic earnings per share
(2) Diluted earnings per share
Accompanying notes to financial statements are an integral part of the financial statements.
Legal representative: Zhang Min Financial director: Li Jiaming Financial manager: Zhao Lixin
Shang Gong Group Co., Ltd.
Consolidated Statement of Cash Flows
For the Year Ended 31 December 2016
(Presented in RMB unless otherwise specified)
Item Note 5 Current Year Prior Year
1. Cash flows from operating activities:
Cash received from sale of goods and provision
of services 2,861,454,370.86 2,423,940,682.96
Net increase in customer bank deposits and
placement from banks and other financial institutions
Net increase in borrowings from central bank
Net increase in loans from other financial
institutions
Premiums received from original insurance
contracts
Net cash received from reinsurance business
Net increase in deposits and investments from
policyholders
Net increase from disposal of financial assets at
fair value whose fluctuation is attributed to profit or
loss for current period
Cash received from interest, handling charges and
commissions
Net increase in loans from banks and other
financial institutions
Net capital increase in repurchase business
Refunds of taxes and surcharges 69,330,555.14 70,853,762.65
Cash received from other operating activities 5.48 38,699,965.56 33,218,268.78
Sub-total of cash inflows from operating activities 2,969,484,891.56 2,528,012,714.39
Cash paid for goods purchased and services received 1,924,760,971.83 1,672,502,940.41
Net increase in loans and advances to customers
Net increase in deposits in central bank and other
banks and financial institutions
Cash paid for original insurance contract claims
Cash paid for interests, handling charges and
commissions
Cash paid for policy dividends
Cash paid to and on behalf of employees 604,502,319.23 513,249,764.12
Cash paid for taxes and surcharges 130,590,650.51 93,594,469.70
Cash paid for other operating activities 5.48 210,574,037.57 197,778,676.62
Sub-total of cash outflows from operating activities 2,870,427,979.14 2,477,125,850.85
Net cash flows from operating activities 99,056,912.42 50,886,863.54
2. Cash flows from investing activities:
Cash inflow from divestment 984,900,686.67 1,510,814,497.97
Cash inflow from investment incomes 22,987,656.97 21,180,266.62
Cash gain from disposal of fixed assets, intangible
assets, and other long-term investment 7,982,714.60 70,690,557.56
Cash inflow from disposal of subsidiaries and other
operating units
Cash received from other investing activities 60,250,855.95
Sub-total of cash inflows from investing activities 1,015,871,058.24 1,662,936,178.10
Cash paid for acquisition of fixed assets, intangible
assets and other long-term assets 88,210,551.07 128,675,422.75
Cash paid for investments 956,336,856.38 1,320,000,000.00
Item Note 5 Current Year Prior Year
Net increase in pledge loans
Net cash paid to acquire subsidiaries and other
business units 168,494,541.49 37,318,928.40
Cash paid for other investing activities
Sub-total of cash outflows from investing activities 1,213,041,948.94 1,485,994,351.15
Net cash flows from investing activities -197,170,890.70 176,941,826.95
3. Cash flows from financing activities
Cash received from investors 400,000.00
Including: cash received by subsidiaries from
investments by non-controlling shareholders
Cash received from loans 609,186,272.20 135,348,800.00
Cash received from bonds issuance
Cash received from other financing activities 5.48 25,402,158.23 29,523,531.37
Sub-total of cash inflows from financing activities 634,588,430.43 165,272,331.37
Cash paid for debt repayments 531,799,099.38 115,774,173.60
Cash paid for distribution of dividends and profits or
payment of interest 10,156,414.28 54,186,133.16
Including: dividends and profits paid to
non-controlling shareholders by subsidiaries 1,803,893.40
Cash paid for other financing activities 5.48 50,000,000.00
Sub-total of cash outflows from financing activities 541,955,513.66 219,960,306.76
Net cash flows from financing activities 92,632,916.77 -54,687,975.39
4. Effect of fluctuation in exchange rate on cash
and cash equivalents 11,138,332.32 -10,288,945.38
5. Net increase in cash and cash equivalents 5,657,270.81 162,851,769.72
Plus: beginning balance of cash and cash equivalents 744,700,658.82 581,848,889.10
6. Ending balance of cash and cash equivalents 750,357,929.63 744,700,658.82
Accompanying notes to financial statements are an integral part of the financial statements.
Legal representative: Zhang Min Financial director: Li Jiaming Financial manager: Zhao Lixin
Shang Gong Group Co., Ltd.
Statement of Cash Flows
For the Year Ended 31 December 2016
(Presented in RMB unless otherwise specified)
Item Note Current Year Prior Year
1. Cash flows from operating activities:
Cash received from sale of goods and provision of
services 38,220,460.65 34,974,046.52
Refunds of taxes and surcharges
Cash received from other operating activities 32,211,185.98 19,592,703.56
Sub-total of cash inflows from operating activities 70,431,646.63 54,566,750.08
Cash paid for goods purchased and services received 10,605,180.10 14,818,256.04
Cash paid to and on behalf of employees 22,440,142.31 19,524,656.21
Cash paid for taxes and surcharges 4,185,014.48 4,956,512.01
Cash paid for other operating activities 60,374,841.77 37,260,055.68
Sub-total of cash outflows from operating activities 97,605,178.66 76,559,479.94
Net cash flows from operating activities -27,173,532.03 -21,992,729.86
2. Cash flows from investing activities:
Cash inflow from divestment 940,633,615.30 1,510,814,497.97
Cash inflow from investment incomes 22,987,656.97 23,518,734.69
Cash gain from disposal of fixed assets, intangible assets, and
other long-term investment 3,977,441.76 68,676,512.54
Cash inflow from disposal of subsidiaries and other
operating units
Cash received from other investing activities
Sub-total of cash inflows from investing activities 967,598,714.03 1,603,009,745.20
Cash paid for acquisition of fixed assets, intangible assets and
other long-term assets 17,323,229.55 5,396,993.26
Cash paid for investments 943,745,370.00 1,580,090,000.00
Net cash paid to acquire subsidiaries and other business units
Cash paid for other investing activities 56,197,536.51
Sub-total of cash outflows from investing activities 961,068,599.55 1,641,684,529.77
Net cash flows from investing activities 6,530,114.48 -38,674,784.57
3. Cash flows from financing activities
Cash received from investors
Cash received from loans
Cash received from bonds issuance
Cash received from other financing activities 25,000,000.00 25,000,000.00
Sub-total of cash inflows from financing activities 25,000,000.00 25,000,000.00
Cash paid for debt repayments
Cash paid for distribution of dividends and profits or payment
of interest
Cash paid for other financing activities
Sub-total of cash outflows from financing activities
Net cash flows from financing activities 25,000,000.00 25,000,000.00
4. Effect of fluctuation in exchange rate on cash and cash
equivalents 14,382.45 2,083.66
5. Net increase in cash and cash equivalents 4,370,964.90 -35,665,430.77
Plus: beginning balance of cash and cash equivalents 114,839,269.51 150,504,700.28
6. Ending balance of cash and cash equivalents 119,210,234.41 114,839,269.51
Accompanying notes to financial statements are an integral part of the financial statements.
Legal representative: Zhang Min Financial director: Li Jiaming Financial manager: Zhao Lixin
Shang Gong Group Co., Ltd.
Consolidated Statement of Changes in Equity
For the Year Ended 31 December 2016
(Presented in RMB unless otherwise specified)
Current Year
Owners' equity attributable to the parent company
Item Other equity instruments Less: Other General Total owners'
Special Surplus Undistributed Minority equity
Share capital Preference Perpetual Capital reserves treasury comprehensive risk equity
Others reserves reserves profits
shares bond stock income reserves
1. Previous year ending balance
brought forward 548,589,600.00 956,286,021.43 -85,270,897.86 4,546,242.52 350,523,121.40 275,858,665.32 2,050,532,752.81
Plus: accounting policy
changes
Correction of
previous-period accounting errors
Business combination
involving entities under common
control
Others
2. Beginning balance of current
year 548,589,600.00 956,286,021.43 -85,270,897.86 4,546,242.52 350,523,121.40 275,858,665.32 2,050,532,752.81
3. Increase/(decrease) for the
current year (\"-\" for losses) 15,317,098.84 -17,873,148.29 144,231,343.84 16,125,902.86 157,801,197.25
(1) Total comprehensive
incomes -17,873,148.29 144,231,343.84 17,929,796.26 144,287,991.81
(2) Investment/(divestment) 15,317,098.84 15,317,098.84
a. Common shares from
shareholders
b. Investment capital from the
holders of other equity
instruments
c. Amount of the share-based
payment included in the owners'
equity
d. Others 15,317,098.84 15,317,098.84
(3) Distribution of profits -1,803,893.40 -1,803,893.40
a. Surplus reserves
Current Year
Owners' equity attributable to the parent company
Item Other equity instruments Less: Other General Total owners'
Special Surplus Undistributed Minority equity
Share capital Preference Perpetual Capital reserves treasury comprehensive risk equity
Others reserves reserves profits
shares bond stock income reserves
b. General risk reserves
c. Distribution to owners or
shareholders -1,803,893.40 -1,803,893.40
d. Others
(4) Internal transfer of owners'
equity
a. Capital reserve turn to stock
equity
b. Surplus reserve turn to stock
equity
c. Surplus reserve to recover
loss
d. Others
(5) Special reserves
a. Appropriation for current year
b. Use in current year
(6) Others
4. Ending balance of the current
year 548,589,600.00 971,603,120.27 -103,144,046.15 4,546,242.52 494,754,465.24 291,984,568.18 2,208,333,950.06
Accompanying notes to financial statements are an integral part of the financial statements.
Legal representative: Zhang Min Financial director: Li Jiaming Accounting department: Zhao Lixin
Shang Gong Group Co., Ltd.
Consolidated Statement of Changes in Equity (Continued)
For the Year Ended 31 December 2016
(Presented in RMB unless otherwise specified)
Previous Year
Owners' equity attributable to the parent company
Item Other equity instruments Less: Other General Total owners'
Special Surplus Undistributed Minority equity
Share capital Preference Perpetual Capital reserves treasury comprehensive risk equity
Others reserves reserves profits
shares bond stock income reserves
1. Previous year ending balance
548,589,600.00 949,310,284.01 -99,466,982.70 4,546,242.52 193,106,033.92 40,079,662.83 1,636,164,840.58
brought forward
Plus: accounting policy
changes
Correction of
previous-period accounting errors
Business combination
involving entities under common
control
Others
2. Beginning balance of current
548,589,600.00 949,310,284.01 -99,466,982.70 4,546,242.52 193,106,033.92 40,079,662.83 1,636,164,840.58
year
3. Increase/(decrease) for the
6,975,737.42 14,196,084.84 157,417,087.48 235,779,002.49 414,367,912.23
current year (\"-\" for losses)
(1) Total comprehensive
14,196,084.84 157,417,087.48 18,074,390.28 189,687,562.60
incomes
(2) Investment/(divestment) 6,975,737.42 199,406,922.36 206,382,659.78
a. Common shares from
shareholders
b. Investment capital from the
holders of other equity
instruments
c. Amount of the share-based
payment included in the owners'
equity
d. Others 6,975,737.42 199,406,922.36 206,382,659.78
(3) Distribution of profits
a. Surplus reserves
Previous Year
Owners' equity attributable to the parent company
Item Other equity instruments Less: Other General Total owners'
Special Surplus Undistributed Minority equity
Share capital Preference Perpetual Capital reserves treasury comprehensive risk equity
Others reserves reserves profits
shares bond stock income reserves
b. General risk reserves
c. Distribution to owners or
shareholders
d. Others
(4) Internal transfer of owners'
equity
a. Capital reserve turn to stock
equity
b. Surplus reserve turn to stock
equity
c. Surplus reserve to recover
loss
d. Others
(5) Special reserves
a. Appropriation for current year
b. Use in current year
(6) Others 18,297,689.85 18,297,689.85
4. Ending balance of the current
548,589,600.00 956,286,021.43 -85,270,897.86 4,546,242.52 350,523,121.40 275,858,665.32 2,050,532,752.81
year
Accompanying notes to financial statements are an integral part of the financial statements.
Legal representative: Zhang Min Financial director: Li Jiaming Accounting department: Zhao Lixin
Shang Gong Group Co., Ltd.
Separate Statement of Changes in Equity
For the Year Ended 31 December 2016
(Presented in RMB unless otherwise specified)
Current Year
Other equity instruments Less: Other
Item Special Surplus Undistributed Total owners'
Share capital Preferen Perpetual Capital reserves treasury comprehensive
Others reserves reserves profits equity
ce shares bond stock income
1. Previous year ending balance brought forward 548,589,600.00 1,003,282,687.73 45,068,484.49 4,546,242.52 -232,193,721.81 1,369,293,292.93
Plus: accounting policy changes
Correction of previous-period accounting errors
Others
2. Beginning balance of current year 548,589,600.00 1,003,282,687.73 45,068,484.49 4,546,242.52 -232,193,721.81 1,369,293,292.93
3. Increase/(decrease) for the current year (\"-\" for losses) -11,097,717.71 25,362,481.43 14,264,763.72
(1) Total comprehensive incomes -11,097,717.71 25,362,481.43 14,264,763.72
(2) Investment/(divestment)
a. Common shares from shareholders
b. Investment capital from the holders of other equity instruments
c. Amount of the share-based payment included in the owners'
equity
d. Others
(3) Distribution of profits
a. Surplus reserves
b. Distribution to owners or shareholders
c. Others
(4) Internal transfer of owners' equity
a. Capital reserve turn to stock equity
b. Surplus reserve turn to stock equity
c. Surplus reserve to recover loss
d. Others
(5) Special reserves
a. Appropriation for current year
b. Use in current year
(6) Others
4. Ending balance of the current year 548,589,600.00 1,003,282,687.73 33,970,766.78 4,546,242.52 -206,831,240.38 1,383,558,056.65
Accompanying notes to financial statements are an integral part of the financial statements.
Legal representative: Zhang Min Financial director: Li Jiaming Accounting department: Zhao Lixin
Shang Gong Group Co., Ltd.
Separate Statement of Changes in Equity (Continued)
For the Year Ended 31 December 2016
(Presented in RMB unless otherwise specified)
Previous Year
Other equity instruments Less: Other
Item Special Surplus Undistributed Total owners'
Share capital Preferen Perpetual Capital reserves treasury comprehensive
Others reserves reserves profits equity
ce shares bond stock income
1. Previous year ending balance brought forward 548,589,600.00 1,003,282,687.73 16,789,785.05 4,546,242.52 -237,700,994.08 1,335,507,321.22
Plus: accounting policy changes
Correction of previous-period accounting errors
Others
2. Beginning balance of current year 548,589,600.00 1,003,282,687.73 16,789,785.05 4,546,242.52 -237,700,994.08 1,335,507,321.22
3. Increase/(decrease) for the current year (\"-\" for losses) 28,278,699.44 5,507,272.27 33,785,971.71
(1) Total comprehensive incomes 28,278,699.44 5,507,272.27 33,785,971.71
(2) Investment/(divestment)
a. Common shares from shareholders
b. Investment capital from the holders of other equity instruments
c. Amount of the share-based payment included in the owners' equity
d. Others
(3) Distribution of profits
a. Surplus reserves
b. Distribution to owners or shareholders
c. Others
(4) Internal transfer of owners' equity
a. Capital reserve turn to stock equity
b. Surplus reserve turn to stock equity
c. Surplus reserve to recover loss
d. Others
(5) Special reserves
a. Appropriation for current year
b. Use in current year
(6) Others
4. Ending balance of the current year 548,589,600.00 1,003,282,687.73 45,068,484.49 4,546,242.52 -232,193,721.81 1,369,293,292.93
Accompanying notes to financial statements are an integral part of the financial statements.
Legal representative: Zhang Min Financial director: Li Jiaming Accounting department: Zhao Lixin
Shang Gong Group Co., Ltd.
Notes to the Financial Statements
For the Year Ended December 31, 2016
(Amounts are expressed in RMB unless otherwise stated)
1. Background information
1.1 Company profile
Shang Gong Group Co., Ltd. (hereinafter referred to as “the Company”), a joint stock limited company with
publicly issued A & B shares on the Shanghai Stock Exchange, is the first listed company in the sewing machinery
industry of China. The Company was incorporated in April 1994. The registration number has changed to
91310000132210544K at 2016. The organizational form of the Company is a joint stock limited company (a
Sino-foreign joint venture and a listed company) and the registered capital amounts to RMB 548,589,600.00. The
registered address is Room A-D, Floor 12, Orient Mansion, No. 1500 Century Avenue, Pudong New Area, Shanghai
and the head office is located in No. 1566 New Jinqiao Road, Pudong New Area, Shanghai. The legal representative
is Mr. Zhang Min.
On May 22, 2006, it was decided on the General Meeting on equity division reform by the Company that: the
non-tradable equity stockholders pay partially their shares to all the tradable equity shareholders at a ratio of 10 to 6
as consideration of getting tradable rights. After the above consideration of share donation, the total number of
shares remains unchanged, but consequently the equity structure has changed. As at December 31, 2013, there were
448,886,777 shares in total.
On February 28, 2014, the China Securities Regulatory Commission approved the non-public offering of A shares of
the Company under the Official Reply to the Approval of Non-public Offering of Shares of Shang Gong Group Co.,
Ltd. ([2014] No. 237). The number of shares issued was 99,702,823.00 and the total number of share capital after
the issue was 548,589,600.00. The Company handled equity registration and escrow formalities with the CSDC
Shanghai Branch; the corresponding registered capital was changed to RMB 548,589,600.00 and had been verified
by the Verification Report (PCPAR [2014] No.111126) issued by BDO CHINA Shu Lun Pan Certified Public
Accountants LLP on March 26, 2014.
On 29 December 2016, The Shanghai Pudong New Area State-owned Assets Supervision and Administration
Commission which is the original controlling shareholder and actual controller of the Company had sold 60.00
million A shares of the Company to Shanghai Puke Flyman Investment Co., Ltd. which is the wholly-owned
subsidiary of Shanghai Pudong Science and Technology Investment Co., Ltd. China Securities Depository and
Clearing Co., Ltd. has issued a \"transfer registration confirmation\" on the same day.
After the transfer, Shanghai Puke Flyman Investment Co., Ltd. held A shares accounted for 10.94% of the total
share capital of the Company, the largest shareholder of the Company; Shanghai Pudong New Area State-owned
Assets Supervision and Administration Commission held A shares accounted for 8.27% , the second largest
shareholder of the Company. After the completion of the equity transfer, the Company has changed to a listed
company with no controlling shareholder and no actual controller. As of December 31, 2016, the Company total
share capital was 548,589,600.00 shares, involve 548,589,600.00 shares with no restrictive terms, accounting for
100.00% of the total number of shares.
The Company belongs to special equipment manufacturing industry; main operating activities of the Company are:
production and sales of sewing equipment.
According to the decision in the thirty-fifth board meeting (7th round), the financial statements were approved by all
directors of the Company for disclosure on 31 March 2017.
1.2 Scope of the consolidated financial statements
As at December 31, 2016, subsidiaries within the scope of the consolidated financial statements of the Company are
as follows:
Subsidiaries
1. Shanghai Shanggong & Butterfly Sewing Machine Co., Ltd.
2. DAP (Shanghai) Co., Ltd.
3. Shanghai SMPIC IMPORT & EXPORT CO.,LTD.
4. Shanghai SGSB Electronics Co., Ltd.
5. Shanghai SGSB Asset Management Co., Ltd.
6. Shanghai Sewing Construction Property Co., Ltd.
7. Dürkopp Adler Sewing Equipment (Suzhou) Co., Ltd.
8. ShangGong (Europe) Holding Corp. GmbH
9. Zhejiang SG & GEMSY Sewing Technology Co., Ltd.
10. Shanghai Shensy Enterprise Development Co., Ltd.
11. Shanghai ShangGong Financial Leasing Co.,Ltd.
See “Note 6 Changes in the scope of consolidation\" and “Note 7 Equity in other subjects\" for details of the scope of
consolidated financial statements in the current year and the changes thereof.
2. Preparation basis of financial statements
2.1 Preparation basis
The Company prepares the financial statements based on going concern, according to the transactions and events
actually occurred and in accordance with the Accounting Standards for Business Enterprises - Basic Standard and
various specific accounting standards, application guidance and interpretations for accounting standards for business
enterprises and other relevant provisions (hereinafter collectively referred to as \"Accounting Standards for Business
Enterprises\") promulgated by the Ministry of Finance and disclosure provisions of the Rules for the Information
Disclosure and Compilation of Companies Publicly Issuing Securities No. 15 - General Rules on Financial Reports
of the China Securities Regulatory Commission.
2.2 Going concern
The Company has going-concern ability within 12 months as of the end of the reporting period and has no matters or
situations that may lead to serious doubts about the Company's going-concern ability.
3. Principal accounting policies and accounting estimates
The following disclosure has covered the Company's specific accounting policies and accounting estimates prepared
according to the actual production and operation characteristics.
3.1 Statement on compliance with Accounting Standards for Business Enterprises
The financial statements prepared by the Company meet the requirements of the Accounting Standards for Business
Enterprises and truly and completely reflect the Companys financial position, operating results, cash flows and
other related information in the reporting period.
3.2 Accounting period
The accounting year is from January 1st to December 31th in calendar year.
3.3 Operating cycle
The Company's operating cycle is 12 months.
3.4 Functional currency
The Company adopts RMB as its functional currency.
3.5 Accounting treatment methods of business combinations under common control and not under common
control
Business combinations under common control: Assets and liabilities acquired from business combinations by the
Company are measured at book value of assets and liabilities (including goodwill formed from the purchase of the
acquiree by the ultimate controller) in the consolidated financial statements of the ultimate controller. Stock
premium in the capital reserve should be adjusted according to the difference between the book value of net asset
acquired from the combinations and that of consideration (or total face value of the shares issued) paid. In case the
stock premium in the capital reserve is not enough, the retained earnings need to be adjusted.
Business combinations not under common control: Assets paid for consideration and liabilities incurred or borne by
the Company on the acquisition date shall be measured at their fair values. The difference between the fair value and
the book value should be included in the current profit and loss. The Company shall recognize the difference of the
combination costs in excess of the fair value of the identifiable net assets acquired from the acquiree as goodwill.
The Company shall include the difference of the combination costs in short of the fair value of the identifiable net
assets acquired from the acquiree in the current profit and loss after review.
Intermediary service charges such as audit fee, legal service fee, appraisal and consultancy fee paid for business
combinations and other directly relevant expenses are included in the current profit and loss when incurred; the
transaction costs for the issuance of equity securities shall be used to offset equities.
3.6 Preparation methods of consolidated financial statements
3.6.1 Scope of consolidation
The scope of consolidation of the Company's consolidated financial statements is recognized based on the control.
All subsidiaries (including the divisible part of the investee controlled by the Company) should be included in the
consolidated financial statements.
3.6.2 Consolidation procedure
The Company prepares consolidated financial statements based on its own financial statements and financial
statements of its subsidiaries according to other relevant materials. When the Company prepares its consolidated
financial statements, it shall regard the whole enterprise group as an accounting entity to reflect the overall financial
position, operating results and cash flows of the enterprise group according to the requirements for recognition,
measurement and presentation of the relevant Accounting Standards for Business Enterprises and the uniform
accounting policies.
Accounting policies and accounting periods adopted by all subsidiaries included in the consolidation scope of the
consolidated financial statements should be consistent with those of the Company. If accounting policies and
accounting periods adopted by all subsidiaries are inconsistent with those of the Company, in the preparation of the
consolidated financial statements, necessary adjustments shall be made according to the accounting policies and
accounting periods of the Company. For the subsidiaries acquired through business combination not under common
control, adjustments to their financial statements shall be made based on the fair values of net identifiable assets on
the acquisition date. For the subsidiaries acquired through business combination not under common control,
adjustments to their financial statements shall be made based on the fair values of their assets and liabilities
(including goodwill from acquisition of the subsidiaries by the ultimate controller) in the financial statements of the
ultimate controller.
The share of owner's equity, net profits and losses in the current year and comprehensive income in the current year
of subsidiaries attributable to minority shareholders should separately presented under the item of owner's equity of
the Consolidated Balance Sheet, the item of net profit of the Consolidated Income Statement and the item of total
comprehensive income. The difference formed by the loss in the current year shared by minority shareholders of the
subsidiaries in excess of the share of minority shareholders in the owner's equity at the beginning of the year of the
subsidiaries should be used to offset the minority equity.
(1) Increase in subsidiaries or business
In the reporting period, if the Company increased subsidiaries or business from business combinations under
common control, then the beginning amount of the Consolidated Balance Sheet should be adjusted; the incomes,
expenses and profits from the combinations of the subsidiaries and business from the beginning of the current year
to the end of the reporting period shall be included in the Consolidated Income Statement; cash flows from the
combinations of the subsidiaries and business from the beginning of the current year to the end of the reporting
period shall be included in the Consolidated Cash Flow Statement. At the same time, the Company should adjust the
relevant items of the comparative statements and deem that the reporting entity already exists when the ultimate
controller starts its control.
Where the Company can control the investee under common control from additional investments, it should deem
that parties involved in the combination have make adjustments at the current state when the ultimate controller
starts its control. Equity investments held before the Company controls the acquiree, the relevant profit and loss
recognized during the period from the later of the date when the Company obtains the original equity and the date
when the acquirer and the acquiree are under common control, other comprehensive income and changes in other
net assets shall be used to offset the retained earnings at the beginning of the year or the current profit and loss in the
period of the comparative statements.
In the reporting period, if the Company increased subsidiaries or business from business combinations not under
common control, then the beginning amount of the Consolidated Balance Sheet should not be adjusted; the incomes,
expenses and profits from the subsidiaries and business from the acquisition date to the end of the reporting period
shall be included in the Consolidated Income Statement; cash flows from the subsidiaries and business from the
acquisition date to the end of the reporting period shall be included in the Consolidated Cash Flow Statement.
Where the Company can control the investee not under common control from additional investments, it shall
re-measure equity of the acquiree held before the acquisition date at the fair value of such equity on the acquisition
date and include the difference of the fair value and book value in the investment income in the current year. Where
equity of the acquiree held before the acquisition date involves in other comprehensive income accounted for under
equity method and other changes in owner's equity other than net profit and loss, other comprehensive income and
profit distribution, the relevant other comprehensive income and other changes in owner's equity shall be transferred
to investment income in the current year which the acquisition date falls in, except for other comprehensive income
from changes arising from re-measurement of net liabilities or net assets of defined benefit plan.
(2) Disposal of subsidiaries or business
a. General treatment methods
In the reporting period, if the Company disposed subsidiaries or business, then the incomes, expenses and profits
from the subsidiaries and business from the beginning of the year to the disposal date shall be included in the
Consolidated Income Statement; cash flows from the combinations of the subsidiaries and business from the
beginning of the year to the disposal date shall be included in the Consolidated Cash Flow Statement.
When the Company losses the control over the original subsidiary due to disposal of partial equity investments or
other reasons, the remaining equity investments after the disposal will be re-measured at the fair value at the date of
loss of the control. The difference of total amount of the consideration from disposal of equities plus the fair value
of the remaining equities less the shares calculated at the original shareholding ratio in net assets of the original
subsidiary which are continuously calculated as of the acquisition date is included in the investment income of the
period at the loss of control. Other comprehensive income associated with the original equity investments of the
subsidiary and other changes in owner's equity other than net profit and loss, other comprehensive income and profit
distribution are transferred into investment income in the current year when the control is lost, except for other
comprehensive income from changes arising from re-measurement of net liabilities or net assets of defined benefit
plan.
b. Disposal of subsidiary by stages
Where the Company disposes the equity investments in subsidiary through multiple transactions and by stages until
it loses the control, if the effect of the disposal on the terms and conditions of all transactions of equity investments
in subsidiary and economic effect meet one or more of the following circumstance, it usually indicates that the
multiple transactions should be accounted for as a package deal:
i. These transactions are concluded at the same time or under the consideration of mutual effect;
ii. These transactions as a whole can reach a complete business results;
iii. The occurrence of a transaction depends on the occurrence of at least one other transaction;
ⅳ. A single transaction is uneconomical but it is economical when considered together with other transactions.
Where various transactions of disposal of equity investments in subsidiaries until loss of the control belong to a
package deal, accounting treatment shall be made by the Company on the transactions as a transaction to dispose
subsidiaries and lose the control; however, the difference between each disposal cost and net asset share in the
subsidiaries corresponding to each disposal of investments before loss of the control should be recognized as other
comprehensive income in the consolidated financial statements and should be transferred into the current profit or
loss at the loss of the control.
Where various transactions of disposal of equity investments in subsidiaries until loss of the control do not belong to
a package deal, before the loss of the control, accounting treatment shall be made according to the relevant policies
for partial disposal of equity investments in the subsidiary without losing control; at the loss of the control,
accounting treatment shall be made according to general treatment methods for disposal of subsidiaries.
(3) Purchase of minority interest of subsidiaries
The difference between long-term equity investments newly acquired by the Company through purchase of minority
interest and the subsidiarys identifiable net assets attributable to the Company calculated continuously from the
acquisition date (or the combination date) in accordance with the newly increased shareholding ratio shall be
charged against stock premium within capital reserves in the consolidated balance sheet; when stock premium
within capital reserves is insufficient to offset, the retained earnings shall be adjusted.
(4) Partial disposal of equity investments in the subsidiary without losing control
The difference between the proceeds from partial disposal of equity investments in the subsidiary and the share of
identifiable net assets of the subsidiary attributable to the Company which are calculated continuously from the
acquisition date (or the combination date) and which are corresponding to the disposal of long-term equity
investments without losing control shall be charged against stock premium within capital reserves in the
consolidated balance sheet; when stock premium within capital reserves is insufficient to offset, the retained
earnings shall be adjusted.
3.7 Cash and cash equivalents
In preparing the cash flow statement, cash on hand and the unrestricted deposits of the Company are recognized as
cash. Short-term (maturing within three months as of the acquisition date) and highly liquid investments held by the
Company that are readily convertible to known amounts of cash and which are subject to an insignificant risk of
change in value are recognized as cash equivalents.
3.8 Foreign currency transactions and translation of foreign currency statements
3.8.1 Foreign currency transactions
Foreign currency transactions are, on initial recognition, translated to RMB at the spot exchange rates at the dates of
the transactions.
The balance of foreign currency monetary items is adjusted and translated into functional currency at balance sheet
date using the spot exchange rate. Regarding the year-end differences of translation in foreign currency, except those
special borrowing accounts under the acquisition, building or production of assets to be capitalized are capitalized
and accounted into related assets cost, all the other differences are accounted into current profits and losses. The
foreign currency non-monetary items at historical cost are translated using the spot exchange rate. And the foreign
currency non-monetary items at fair value are adjusted and translated into measurement currency at adoption date of
fair value using the spot exchange rate. The difference of translation between different currencies is accounted into
current profits and losses or capital reserves.
3.8.2 Translation of foreign currency statements
The assets and liabilities of foreign operation are translated to RMB at the spot exchange rate at the balance sheet
date. The equity items, excluding “Retained earning”, are translated to RMB at the spot exchange rates at the
transaction dates. The income and expenses of foreign operation are translated to RMB at the spot exchange rates or
the rates that approximate the spot exchange rates at the transaction dates. The resulting exchange differences are
recognized in a separate component of equity.
Upon entire/partial disposal of a foreign operation, the entire/partial cumulative amount of the exchange differences
recognized in equity which relates to that foreign operation is transferred to profit or loss in the period in which the
disposal occurs.
3.9 Financial instruments
Financial instruments include financial assets, financial liabilities and equity instruments.
3.9.1 Classification of financial instruments
At the initial recognition, financial assets and financial liabilities are classified as: financial assets or financial
liabilities measured at fair value through current profit and loss, including financial assets or financial liabilities held
for trading, and financial assets or financial liabilities that are directly to be measured at fair value through current
profit and loss, held-to-maturity investments, accounts receivable, available-for-sale financial assets and other
financial liabilities, etc.
3.9.2 Recognition basis and measurement method of financial instruments
(1) Financial assets (financial liabilities) measured at fair value through current profit and loss.
Financial assets (financial liabilities) are initially recorded at fair values when acquired (deducting cash dividends
that have been declared but not distributed and bond interest that has matured but not been drawn). Relevant
transaction expenses are included in the current profit and loss.
The interest or cash dividends to be received during the holding period is or are recognized as investment income.
Change in fair values is included in the current profit and loss at the end of the period.
Upon the disposal, difference between the fair value and the initial book-entry value is recognized as investment
income; meanwhile, adjustment is made to gains or losses from changes in fair values.
(2) Held-to-maturity investments
Held-to-maturity investments are initially recorded at the sum of fair values (less the bond interest that has matured
but not been drawn) and relevant transaction expenses when acquired.
During the period of holding the investment, the interest income is calculated and recognized according to the
amortized costs and effective interest rate, and included in the investment income. The effective interest rates are
determined upon acquisition and remain unchanged during the expected remaining period, or a shorter period if
applicable.
Difference between the proceeds and the book value of the investment is recognized as investment income upon
disposal.
(3) Receivables
For creditors rights receivable arising from external sales of goods or rendering of service by the Company and
creditor's rights of other enterprises (excluding creditors right quoted in the active market) held by the Company,
including accounts receivable, other receivables, the initial recognition amount shall be the contract price or
agreement price receivable from the purchasing party; for those with financing nature, they are initially recognized
at their present values.
The difference between the amount received and the book value of accounts receivable is included in the current
profit and loss upon the recovery or disposal.
(4) Available-for-sale financial assets
Available-for-sale financial assets are initially recorded at the sum of fair values (deducting cash dividends that have
been declared but not distributed and bond interest that have matured but not been drawn) and relevant transaction
costs when acquired.
The interest or cash dividends to be received during the holding period is or are recognized as investment income.
Available-for-sale financial assets are measured at fair value at the end of the year and the changes in fair value are
included in other comprehensive income. However, equity instrument investments that have no quoted price in the
active market and of which fair values cannot be measured reliably and derivative financial assets that relate to such
equity instruments and that shall be settled through the delivery of such equity instruments shall be measured at cost.
Difference between the proceeds and the book value of the financial assets is recognized as investment income upon
disposal; meanwhile, amount of disposal corresponding to the accumulated change in fair value which is originally
and directly included in other comprehensive income shall be transferred out and recognized as the current profit
and loss.
(5) Other financial liabilities
Other financial liabilities are initially recognized at fair values plus related transaction costs. The subsequent
measurement is based on amortized costs.
3.9.3 Recognition and measurement of transfer of financial assets
Upon occurrence of transfer of a financial asset, the Company shall de-recognize the transfer of the financial asset if
nearly all the risks and rewards associated with the ownership of the financial assets have been transferred to the
transferee; and shall not de-recognize the transfer of the financial asset if nearly all the risks and rewards associated
with the ownership of the financial assets are retained.
The principle of substance over form is adopted to determine whether a financial asset meets the above
de-recognition conditions for the financial asset. The transfer of a financial asset of the Company is classified into
the entire transfer and the partial transfer of financial asset. If the entire transfer of financial asset satisfies the
criteria for de-recognition, the difference between the amounts of the following two items shall be included in the
current profit and loss:
(1) The book value of the transferred financial asset;
(2) The sum of the consideration received from the transfer and the accumulated amount of the changes in fair value
originally and directly included in shareholders equity (the situation where the financial asset transferred is an
available-for-sale financial asset is involved in).
If the partial transfer of financial asset satisfies the criteria for de-recognition, the entire book value of the
transferred financial asset shall be split into the derecognized part and recognized part according to their respective
fair value and the difference between the amounts of the following two items shall be included in the current profit
and loss:
(1) The book value of derecognized part;
(2) The sum of the consideration for the derecognized part and the portion of de-recognition corresponding to the
accumulated amount of the changes in fair value originally and directly included in owners' equity (the
situation where the financial asset transferred is an available-for-sale financial asset is involved in).
If the transfer of financial assets does not meet the de-recognition criteria, the financial assets shall continue to be
recognized and the consideration received will be recognized as a financial liability.
3.9.4 Derecognition criteria of financial liabilities
A financial liability shall be wholly or partly derecognized if its present obligations are wholly or partly dissolved.
Where the Company enters into an agreement with a creditor so as to substitute the existing financial liabilities with
any new financial liability, and the new financial liability is substantially different from the contractual stipulations
regarding the existing financial liability, it shall derecognize the existing financial liability, and shall at the same
time recognize new financial liability.
Where substantial revisions are made to some or all of the contractual stipulations of the existing financial liability,
the Company shall derecognize the existing financial liability wholly or partly, and at the same time recognize the
financial liability with revised contractual stipulations as a new financial liability.
Upon whole or partial derecognition of financial liabilities, the difference between the book value of the financial
liabilities derecognized and the consideration paid (including non-cash assets surrendered or new financial liabilities
assumed) shall be included in the current profit and loss.
Where the Company redeems part of its financial liabilities, it shall, on the redemption date, allocate the entire book
value of financial liabilities according to the comparative fair value of the part that continues to be recognized and
de-recognized part. The difference between the book value allocated to the derecognized part and the considerations
paid (including non-cash assets surrendered and the new financial liabilities assumed) shall be included in the
current profit and loss.
3.9.5 Determination method of fair value of financial assets and financial liabilities
Where there is an active market for financial instruments, the fair values shall be determined according to quoted
prices in active markets. Where there is no active market, the fair values shall be determined using reasonable
valuation techniques. At the time of valuation, the Company adopted valuation techniques applicable in the current
situation and supported by enough available data and other information, select input values consistent with the
features of assets or liabilities considered by market participants in the transaction related to the assets or liabilities,
and give priority to using the relevant observable input values. Only when it is unable or impracticable to obtain the
relevant observable input values, unobservable input values can be used.
3.9.6 Test method and accounting treatment of depreciation of financial assets (excluding receivables)
Except for the financial assets measured at fair values through current profit and loss, the book value of financial
assets on the balance sheet date should be checked. If there is objective evidence that a financial asset is impaired,
provision for impairment shall be made.
(1) Provision for impairment of available-for-sale financial assets:
If the fair value of available-for-sale financial assets has significantly declined at the end of the period, or it is
expected that the trend of decrease in value is non-temporary after considering of various relevant factors, the
impairment shall be recognized, and accumulated losses from decreases in fair value originally and directly included
in owners' equity shall be all transferred out and recognized as impairment loss.
For available-for-sale debt instruments whose impairment losses have been recognized, if their fair values rise in the
subsequent accounting period and such rise is objectively related to the matters occurring after the recognition of
impairment loss, the previously recognized impairment loss shall be reversed and recorded into the current profit
and loss.
Impairment losses on available-for-sale equity instruments should not be reversed through profit and loss.
Criteria of the Company for \"serious\" decline of fair value of investments in available-for-sale equity instruments: In
general, for highly liquid equity investments that are actively traded in the market, over 50% of the decline is
considered to be a serious fall. Criteria for \"non-temporary\" decline of fair value: In general, if a continuous decline
lasts for more than six months, it is considered as \"non-temporary decline.\"
(2) Provision for impairment of held-to-maturity investments:
Measurement of provision for impairment loss on held-to-maturity investments is treated in accordance with the
measurement method of impairment loss on accounts receivable.
3.10 Provision for bad debts of receivables
3.10.1 Receivables that are individually significant but with provision for bad debts made on an individual
basis:
Assessment basis or standard of amount individually significant: Top five biggest balance accounts.
Method of provision for bad debts of receivables that are individually significant:
An impairment test shall be separately made and provision for bad debts shall be made according to the difference
between the present value of estimated future cash flows lower than the book value and should be included in the
current profit and loss. For short-term receivables, the difference between expected future cash flows and the present
value is too small to discount the expected future cash flows when recognizing the relevant impairment losses.
3.10.2 Provision for bad debts of receivables made on credit risk characteristics portfolio basis:
Methods of provision for bad debts made on credit risk characteristics portfolio basis
Balances of receivables other than accounts receivable subject to provisions for bad debts on
Portfolio
an individual basis and other receivables
Methods of provision for bad debts made on the basis of portfolio
Portfolio Aging analysis method
Provision for bad debts made at aging analysis method in the portfolio:
Proportion of provision for Proportion of provision for
Aging
accounts receivable (%) other receivables (%)
Within 1 year (including 1 year) 5
1 to 2 years 20
2 to 3 years 50
Over 3 years 100
3.10.3 Receivables that are individually insignificant but with provision for bad debts made on an individual
basis:
Reason for bad debt provision provided on an individual basis: Receivables of a particular object.
Method of provision for bad debts: An impairment test should be separately made. When there is objective evidence
suggesting that receivables are impaired, provision for bad debts shall be made at the difference of present value of
estimated future cash flows in short of their book values and should be included in the current profit and loss.
3.11 Inventories
3.11.1 Classification of inventories
Inventories are classified into Materials in transit, raw materials, revolving materials, stock commodities, goods in
progress, dispatched goods, consigned processing materials labor cost and others.
3.11.2 Measurement method of dispatched inventories
Inventories are measured with weighted average method when dispatched. The percentage matches method of the
labor cost and labor revenue. One-off amortization method is adopted for low-cost consumables when they are
consumed.
3.11.3 Recognition basis for net realizable values of inventories of different categories
In normal operation process, for merchandise inventories for direct sale, including finished goods, stock
commodities and materials for sale, their net realizable values are determined at the estimated selling prices minus
the estimated selling expenses and relevant taxes and surcharges; in normal operation process, for material
inventories that need further processing, their net realizable values are determined at the estimated selling prices of
finished goods minus estimated costs to completion, estimated selling expenses and relevant taxes and surcharges;
for inventories held to execute sales contract or service contract, their net realizable values are calculated on the
basis of contract price. If the quantities of inventories specified in sales contracts are less than the quantities held by
the Company, the net realizable value of the excess portion of inventories shall be based on general selling prices.
At the end of the period, provisions for inventory depreciation reserve are made on an individual basis. For
inventories with large quantity and low unit price, the provisions for inventory depreciation reserve are made on a
category basis. For inventories related to the product portfolios manufactured and sold in the same area, and of
which the final usage or purpose is identical or similar thereto, and which is difficult to separate from other items for
measurement purposes, the provisions for inventory depreciation reserve shall be made on a portfolio basis.
Except that there is clear evidence that the market price is abnormal on the balance sheet date, the net realizable
value of inventory items shall be recognized at the market price on the balance sheet date.
Net realizable value of inventory items at the end of the year is recognized at the market price on the balance sheet
date.
3.11.4 Inventory system
Perpetual inventory system is adopted.
3.12 Long-term equity investments
3.12.1 Criteria for judgment of common control and significant influence
The term common control refers to the joint control, according to the relevant provisions, over an arrangement, of
which the relevant activities should be agreed and decided by the participants that share the control. Where the
Company and other investors exert common joint control over the investee and the Company is entitled to net assets
of the investee, the investee is the joint venture of the Company.
Significant influence refers to the power to participate in making decisions on the financial and operating policies of
an enterprise, but not the power to control, or jointly control, the formulation of such policies with other parties.
Where the Company is able to exert significant influence over the investee, the investee is its associate.
3.12.2 Recognition of initial investment costs
(1) Long-term equity investments acquired from business combination
Business combination under common control: if the Company makes payment in cash, transfers non-cash assets or
bears debts and issues equity securities as the consideration for the business combination, the book value of the
owner's equity of the acquiree in the consolidated financial statements of the ultimate controller is recognized as the
initial cost of the long-term equity investment on the combination date. In case the Company can exercise control
over the investee under common control for additional investment or other reasons, the initial investment cost of
long-term equity investments is recognized at the share of book value of net asset of the acquiree after the
combination in the consolidated financial statements of the ultimate controller on the combination date. The stock
premium should be adjusted at the difference between the initial investment cost of long-term equity investments on
the combination date and the book value of long-term equity investments before the combination plus the book
value of consideration paid for additional shares; if there is no sufficient stock premium for write-downs, the
retained earnings are adjusted.
Business combination not under common control: The Company recognizes the combination cost determined on the
combination date as the initial cost of long-term equity investments. Where the Company can exercise control over
the investee not under common control for additional investments or other reasons, the initial investment cost
changed to be accounted for under the cost method should be recognized at the book value of originally held equity
investments plus costs of additional investments.
(2) Long-term equity investment acquired by other means
For a long-term equity investment acquired through making payments in cash, its initial cost is the actually paid
purchase cost.
For a long-term equity investment acquired from issuance of equity securities, its initial cost is the fair value of the
issued equity securities.
If the exchange of non-monetary assets has commercial substance and the fair values of assets traded out and traded
in can be measured reliably, the initial cost of long-term equity investment traded in with non-monetary assets are
determined based on the fair values of the assets traded out and the relevant taxes and surcharges payable unless
there is any conclusive evidence that the fair values of the assets traded in are more reliable; if the exchange of
non-monetary assets does not meet the above criteria, the book value of the assets traded out and the relevant taxes
and surcharges payable are recognized as the initial cost of long-term equity investment traded in.
For a long-term equity investment acquired from debt restructuring, its initial cost is determined based on the fair
value.
3.12.3 Subsequent measurement and recognition of gains and losses
(1) Long-term equity investment accounted for under the cost method
Long-term equity investments in subsidiaries are accounted for under the cost method. Except for the actual price
paid for acquisition of investment or the cash dividends or profits contained in the consideration which have been
declared but not yet distributed, the Company recognizes the investment income in the current year at the cash
dividends or profits declared by the investee.
(2) Long-term equity investments accounted for under the equity method
Long-term equity investments in associates and joint ventures are accounted for under the equity method. If the cost
of initial investment is in excess of the proportion of the fair value of the net identifiable assets in the investee when
the investment is made, the difference will not be adjusted to the initial cost of the long-term equity investments; if
the cost of initial investment is in short of the proportion of the fair value of the net identifiable assets in the investee
when the investment is made, the difference will be included in the current profit and loss.
The Company shall recognize the investment income and other comprehensive income at the shares of net profit and
loss and other comprehensive income realized by the investee which the Company shall enjoy or bear and adjust the
book value of long-term equity investments at the same time; the Company shall calculate the shares according to
profits or cash dividends declared by the investee and correspondingly reduce the book value of long-term equity
investments; the book value of long-term equity investments shall be adjusted according to the investee's other
changes in owner's equity other than net profit and loss, other comprehensive income and profit distribution, which
should be included in owner's equity.
The share of the investee's net profit or loss should be recognized after adjustments are made to net profit of the
investee based on the fair value of identifiable net assets of the investee upon acquisition of investments and
according to accounting policies and accounting period of the Company. When holding the investment, the investee
should prepare the consolidated financial statements, it shall account for the investment income based on the net
profit, other comprehensive income and the changes in other owner's equity attributable to the investee.
When the Company recognizes its share of loss incurred to the investee, treatment shall be done in following
sequence: firstly, the book value of the long-term equity investment shall be reduced. Secondly, where the book
value thereof is insufficient to cover the share of losses, investment losses are recognized to the extent of book value
of other long-term equities which form net investment in the investee in substance and the book value of long term
receivables shall be reduced. Finally, after all the above treatments, if the Company is still responsible for any
additional liability in accordance with the provisions stipulated in the investment contracts or agreements, provisions
are recognized and included into current investment loss according to the obligations estimated to undertake.
(3) Disposal of long-term equity investments
For disposal of long-term equity investment, the difference between its book value and the actual price shall be
included in the current profit and loss.
For long-term equity investments accounted for under the equity method, when the Company disposes such
investments, accounting treatment should be made to the part that is originally included in other comprehensive
income according to the corresponding proportion by using the same basis for the investee to directly dispose the
relevant assets or liabilities. Owner's equity recognized at the changes in the investee's other owner's equity other
than net profit or loss, other comprehensive income and profit distribution shall be transferred to the current profit
and loss according to the proportion, except for other comprehensive income from changes arising from
re-measurement of net liabilities or net assets of defined benefit plan.
In case the joint control or significant influence over the investee is lost for disposing part of equity investments or
other reasons, the remaining equity will be changed to be accounted for according to the recognition and
measurement principles of financial instruments. The difference between the fair value and the book value on the
date of the loss of joint control or significant influence should be included in the current profit and loss. For other
comprehensive income recognized from accounting of the original equity investments under the equity method,
accounting treatment should be made by using the same basis for the investee to directly dispose the relevant assets
or liabilities when the equity method is no longer adopted. Owner's equity recognized from the investee's changes in
other owner's equity other than net profit or loss, other comprehensive income and profit distribution should all
transferred to the current profit and loss when the equity method confirmed is no longer adopted.
In case the control over the investee is lost for disposing part of equity investments or other reasons, when the
Company prepares the individual financial statements, where the remaining equity after the disposal can exercise
joint control or significant effect on the investee, then such equity will be changed to be accounted for under the
equity method and the remaining equity is deemed to have been adjusted under the equity method on acquisition;
where the remaining equity after the disposal cannot exercise joint control or significant effect on the investee, then
accounting treatment shall be changed to be made according to the relevant provisions on the recognition and
measurement principles of financial instruments. The difference between the fair value and the book value on the
date of the loss of joint control or significant influence should be included in the current profit and loss.
In case the disposed equity is acquired from additional investments or other reasons, when the Company prepares
the individual financial statements, where the remaining equity after the disposal is accounted for under the cost
method or the equity method, other comprehensive income and other owner's equity recognized from the accounting
of equity investments held before the acquisition date under the equity method shall be transferred according to the
proportion; where accounting treatment of the remaining equity after the disposal is changed to be made according
to the recognition and measurement principles of financial instruments, all of other comprehensive income and other
owner's equity shall be transferred.
3.13 Investment property
Investment properties are properties to earn rentals or for capital appreciation or both. Examples include land leased
out under operating leases, land held for long-term capital appreciation, buildings leased out under operating leases,
(including buildings that have been constructed or developed for future lease out under operating leases, and
buildings that are being constructed or developed for future lease out under operating leases).
The Company adopts the cost model to measure all current investment properties. The Company adopts the same
depreciation policy for the investment property measured at cost model - building for renting as that for the
Companys fixed assets and the same amortization policy of land use right for renting as that for the Companys
intangible assets.
3.14 Fixed assets
3.14.1 Recognition criteria for fixed assets
Fixed assets refer to tangible assets held for the purpose of producing commodities, providing services, renting or
business management with useful lives exceeding one accounting year. Fixed assets will only be recognized when
all the following criteria are satisfied:
(1) It is probable that the economic benefits relating to the fixed assets will flow into the Company; and
(2) the costs of the fixed asset can be measured reliably.
3.14.2 Depreciation method
Depreciation of fixed assets is provided on a category basis using the straight-line method. The depreciation rates
are determined according to the categories, estimated useful lives and estimated net residual rates of fixed assets. If
the components of a fixed asset have different useful lives or cause economic benefit for the Company in different
ways, different depreciation rate or method shall be adopted for depreciation on an individual component basis.
Depreciation of fixed assets, depreciation period, residual rate and annual depreciation rates are as follows:
Category Depreciation life (years) Residual rate (%) Annual depreciation rate (%)
Buildings and
constructions 5-50 0-10 2.00-25.00
Machinery equipment 3-15 0-10 6.00-33.33
Transportation equipment 3-14 0-10 6.43-33.33
Electronic equipment 3-14 0-10 6.43-33.33
Renovations of fixed
assets 5-15 0 6.67-20.00
Other equipment 3-14 0-10 6.43-33.33
3.15 Construction in progress
The book values of the construction in progress are stated at total expenditures incurred before reaching working
condition for their intended use. For construction in progress that has reached working condition for intended use
but relevant budgets for the completion of projects have not been completed, the estimated values of project budgets,
prices, or actual costs should be included in the costs of relevant fixed assets, and depreciation should be provided
according to relevant policies of the Company when working condition is reached. After the completion of budgets
needed for the completion of projects, the estimated values should be substituted by actual costs, but depreciation
already provided is not adjusted.
3.16 Borrowing costs
3.16.1 Recognition criteria for capitalization of borrowing costs
Borrowing costs include the interest on borrowings, the amortization of discount or premium, auxiliary expenses,
exchange differences incurred by foreign currency borrowings, etc.
The borrowing costs incurred to the Company and directly attributable to the acquisition and construction or
production of assets eligible for capitalization should be capitalized and recorded into asset costs; other borrowing
costs should be recognized as costs according to the amount incurred and be included into current profit and loss.
Assets eligible for capitalization refer to fixed assets, investment property, inventories and other assets which may
reach their intended use or sale status only after long-time acquisition and construction or production activities.
Borrowing costs may be capitalized only when all the following conditions are met at the same time:
(1)the asset disbursements have already incurred, which shall include the cash paid, non-cash assets transferred or
interest bearing debts undertaken for the acquisition and construction or production activities for preparing
assets eligible for capitalization;
(2)the borrowing costs has already incurred; and
(3) Purchase, construction or manufacturing activities that are necessary to prepare the asset for its intended use or
sale have already started.
3.16.2 Capitalization period of borrowing costs
Capitalization period refers to the period from commencement of capitalization of borrowing costs to its cessation;
period of suspension for capitalization is excluded.
When the qualified asset under acquisition and construction or production is ready for the intended use or sale, the
capitalization of the borrowing costs shall be ceased.
When some projects among the acquired and constructed or produced assets eligible for capitalization are completed
and can be used separately, the capitalization of borrowing costs of such projects should be ceased.
Where construction for each part of assets purchased, constructed or manufactured has been completed separately
but can be used or sold only after the entire assets have been completed, capitalization of attributable borrowing
costs should cease at the completion of the entire assets.
3.16.3 Period of capitalization suspension
If the acquisition and construction or production activities of assets eligible for capitalization are interrupted
abnormally and this condition lasts for more than three months, the capitalization of borrowing costs should be
suspended; if the interruption is necessary for the acquisition and construction or production to prepare the assets for
their intended use or sale, the capitalization of borrowing costs should continue. The borrowing costs incurred
during interruption are recognized in the current profit and loss, and the capitalization of borrowing costs continues
after the restart of the acquisition and construction or production activities of the assets.
3.16.4 Capitalization rate and measurement of capitalized amounts of borrowing costs
As for special borrowings borrowed for acquiring and constructing or producing assets eligible for capitalization, the
to-be-capitalized amount shall be determined at interest expense of special borrowing actually incurred in the
current period less the interest income of the borrowings unused and deposited in bank or return on temporary
investment.
As for general borrowings used for acquiring and constructing or producing assets eligible for capitalization, the
to-be-capitalized amount should be calculated by multiplying the weighted average of asset disbursements of the
part of accumulated asset disbursements exceeding special borrowings by the capitalization rate of used general
borrowings. The capitalization rate is calculated by using the weighted average interest rate of general borrowings.
3.17Intangible assets
3.17.1 Measurement of intangible assets
(1) The Company initially measures intangible assets at cost on acquisition
The costs of external purchase of intangible assets comprise their purchase prices, related taxes and surcharges and
any other directly attributable expenditure incurred to prepare the asset for its intended use. If payments for the
purchase of intangible assets are extended beyond the normal credit terms with financing nature, the costs of
intangible assets are determined on the basis of present values of the purchase prices.
For intangible assets obtained from debtors in settlement of his liabilities in case of debt restructuring, they should
be initially stated at their fair values. Differences between the book values and the fair values of the intangible assets
are charged to profit or loss for the current period.
If the exchange of non-monetary assets has commercial substance, and the fair values of these assets can be
measured reliably, the book-entry values of intangible assets traded in are based on the fair values of the intangible
assets traded out unless there is any conclusive evidence that the fair values of the assets traded in are more reliable.
If the exchange of non-monetary assets does not meet the above criteria, the costs of the intangible assets traded in
should be the book values of the assets traded out and relevant taxes and surcharges paid, and no profit or loss shall
be recognized.
(2) Subsequent measurement
The useful lives of the intangible assets are analyzed and determined on their acquisition.
As for intangible assets with limited useful life, straight-line amortization method is adopted in the period when the
intangible assets generate economic benefit for enterprise; if the period when the intangible assets generate
economic benefit for enterprise cannot be forecasted, the intangible assets shall be deemed as those with indefinite
useful life and shall not be amortized.
3.17.2 Estimate of the useful life of the Intangible assets with finite useful lives
Item Estimated useful lives
Land use right 50 years
Right to use trade mark 10 years
Patent and non-patent technology 4-8 years
Computer software 3-10 years
The useful lives and amortization methods of intangible assets with limited useful lives are reviewed at each year
end.
Upon review, the useful lives and amortization method of the intangible assets as at the end of the year were not
different from those estimated before.
3.17.3 Specific criteria divided the research stage and development stage
Expenditure internal research and development project is divided into research expenditures and development
expenditures.
Research stage: the planned investigation and research activities to acquire and understand new scientific or
technological knowledge.
Development stage: before commercial production and use, the research findings or other knowledge are applied in
some plan or design to produce new or substantially improved materials, devices, products, etc.
3.17.4 Specific criteria to fulfill for development costs to be capitalized
If it can be reliably estimated that future economic benefits will flow to the entity, and that the purchase and
production costs can be reliably measured, the development cost should be capitalized. The measurement of
production cost of internally generated intangible assets is based on direct cost, indirect cost and amortization.
If it can be clearly defined that newly developed products or methods are technically feasible, and that they are
intended for private use or sale, the development cost should be capitalized. The capitalized development cost
should be amortized within a products expected 5 to 8 years life cycle, using a straight-line method. If the value in
use cannot be recognized, impairment and amortization should be carried out. Research cost and the development
cost which cannot be capitalized should be expense when it occurs.
3.18 Impairment of long-term assets
The Company will conduct the impairment test if any evidence suggests that the long assets, such as the long-term
equity investment and the investment property, fixed assets, construction in progress and intangible assets, are
impaired on the balance sheet date. If impairment test results indicate that the recoverable amounts of the assets are
lower than their carrying amounts, the provision for impairment is made based on the differences which are
recognized as impairment losses. The recoverable amounts of intangible assets are the higher of their fair values less
costs to sell and the present values of the future cash flows expected to be derived from the assets. The provision for
assets impairment is calculated and recognized by the individual asset. If it is difficult to estimate the intangible
amount of an individual asset, the Company shall estimate the recoverable amount of the asset portfolio that the
individual asset belongs to. The asset portfolio is the minimum asset group that can independently generate the cash
inflow.
At least the impairment test is conducted at the year-end in respect of the goodwill.
The Company conducts an impairment test for the goodwill. The book value of goodwill arising from business
combinations is amortized to relevant asset groups with a reasonable method since the date of acquisition; or
amortized to relevant combination of asset groups if it is difficult to be amortized to relevant asset groups. The book
value of goodwill is amortized to relevant asset groups or combinations of asset groups according to the proportion
of the fair value of such asset groups or combinations of asset groups in the total fair value of relevant asset groups
or combinations of asset groups. Where the fair value cannot be reliably measured, it should be amortized according
to proportion of the book value of each asset group or combination of asset group in the total book value of relevant
asset groups or combinations of asset groups.
When making an impairment test on the relevant asset groups or combination of asset groups containing goodwill, if
any indication shows that the asset groups or combinations of asset groups related to the goodwill may be impaired,
the Company shall first conduct an impairment test on the asset groups or combinations of asset groups not
containing goodwill, calculate the recoverable amount and compare it with the relevant book value to recognize the
corresponding impairment loss. Then the Company shall conduct an impairment test on the asset groups or
combinations of asset groups containing goodwill, and compare the book value of these asset groups or
combinations of asset groups (including the book value of the goodwill apportioned thereto) with the recoverable
amount. Where the recoverable amount of the relevant asset groups or combinations of asset groups is lower than
the book value thereof, the Company shall recognize the impairment loss of the goodwill.
The above impairment loss is not reversed in the future accounting period once recognized.
3.19Employee compensation
3.19.1 Accounting treatment of short-term remuneration
During the accounting period in which employees provide service to the Company, the short-term remuneration
actually incurred is recognized as liabilities and charged to the current profit or loss or the relevant assets cost.
The medical insurance premium, work-related injury insurance premium and the housing provident fund paid by the
Company for its employees, together with the labor union expenditures and employee education are used to
calculate and determine the relevant employee compensation amount based on the prescribed accrual basis and
accrual proportion.
The non-monetary benefits for employees that can be measured reliably are measured at fair value.
3.19.2 Accounting treatment of benefits paid after departure
(1) Defined withdrawal plan
The basic endowment insurance premium and unemployment insurance premium paid by the Company for its
employees in accordance with relevant provisions of the local government are recognized as liabilities and charged
to the current profit or loss or the relevant assets cost, with the payable amount calculated based on the local
prescribed payment base and percentage, during the accounting period in which the employees provide services to
the Company.
In addition to the basic endowment insurance, the Company also builds the enterprise annuity payment system
(supplementary pension insurance) in accordance with relevant national policies for enterprise annuity system. The
Company pays a certain percentage of the total employee compensation to the local social institution, and record the
relevant expenditures into the current profit or loss or the relevant assets cost.
(2) Defined benefit plan
The Company attributes the welfare obligation arising from the defined benefit plan to the period during which the
employees provide services, in accordance with the formula determined under the estimated accumulated welfare
unit method, and records the same into the current profit or loss or the relevant asset cost.
A net liability or net asset in relation to the defined benefit plan is recognized at the present value of the obligation
under the defined benefit plan less the deficit or surplus arising out of the fair value of the assets in relation to the
defined benefit plan. Where the defined benefit plan has any surplus, the Company will determine the net assets in
relation to the defined benefit plan at the lower of the surplus of the defined benefit plan or the asset cap.
The obligations under the defined benefit plan, including the estimated payment obligation within 12 months
following the annual report period during which the employees provide service, are discounted to the present value
at the market return of the national debt of which the term and currency match those of the obligation under the
defined benefit plan on the balance sheet date, or of the high-quality corporate debt in an active market.
The service cost incurred by the defined benefit plan, together with the net interest on the net liability or net asset in
relation to the defined benefit plan, are charged to the current profit or loss or the relevant asset cost; the change
arising from the re-measurement of the net liability or net asset in relation to the defined benefit plan are recorded
into other comprehensive income and are not reversed to the profit or loss in the subsequent accounting period.
The gains or losses on the settlement in respect of the defined benefit plan are recognized at the difference between
the present value and the settlement price of the obligation under the defined benefit plan on the settlement date.
3.19.3 Accounting treatment of dismissal welfare
Where the Company cannot unilaterally withdraw the dismissal welfare offered in view of the cancellation of the
labor relation plan or the layoff proposal, or recognizes the cost or expenses as to the restructuring involving the
payment of dismissal welfare (whichever is earlier), the employee compensation arising from the dismissal welfare
should be recognized as the liabilities and charged to the current profit or loss.
3.20 Estimated liabilities
3.20.1 Recognition criteria for estimated liabilities
The Company should recognize an obligation in relation to contingencies as an estimated liability, such as the
litigation, debt guarantee, loss-making contract or restructuring, when all the following conditions are satisfied:
(1) that obligation is a present obligation of the Company;
(2) The performance of such obligation is likely to result in outflow of economic benefits from the Company;
(3) The amount of the obligation can be measured reliably.
3.20.2 Measurement of estimated liabilities
The estimated liabilities of the Company are initially measured as the best estimate of expenses required for the
performance of relevant present obligations.
the risks, uncertainties, time value of money, and other factors relating to the contingencies. If the time value of
money is significant, the best estimates shall be determined after discount of relevant future cash outflows.
The best estimates shall be treated as follows in different circumstances:
If there is continuous range (or interval) for the necessary expenses, and probabilities of occurrence of all the
outcomes within this range are equal, the best estimate shall be determined at the average amount of upper and
lower limits within the range.
Given the fact that there is no continuous range (or interval) for the necessary expenses, or probabilities of
occurrence of all the outcomes within this range are unequal despite such a range exists, in case that the contingency
involves a single item, the best estimate shall be determined at the most likely outcome; if the contingency involves
two or more items, the best estimate should be determined according to all the possible outcomes with their relevant
probabilities.
When all or part of the expenses necessary for the settlement of an estimated liabilities are expected to be
compensated by a third party or other parties, the compensation shall be separately recognized as an asset only when
it is virtually certain that the compensation will be received. The amount recognized for the compensation shall not
exceed the book value of the estimated liabilities.
3.21 Revenues
3.21.1 Timing for recognition of revenues from sales of goods
Revenues from sales of goods are recognized when the Company has transferred to the buyer the significant risks
and rewards of ownership of the goods; the Company retains neither continuous management rights associated with
ownership of the goods sold nor effective control over the goods sold; the relevant amount of revenue can be
measured reliably; it is highly likely that the economic benefits associated with the transaction will flow into the
Company; and the relevant amount of cost incurred or to be incurred can be measured reliably.
3.21.2 Recognition of the revenues from transfer of assets use right
When the economic benefit related to the transaction is probably to flow into the Company and the relevant revenue
can be reliably measured, the revenue from transfer of the assets use right is determined as follows:
(1) measured based on the length of time for which the Company's monetary funds is used by others and the
applicable interest rate; or
(2) amount of royalties revenues, which shall be measured according to the period and method of charging as
stipulated in the relevant agreements or contracts.
3.21.3 Measurement principles and methods of completion stage where revenues from rendering of labor are
recognized under percentage-of-completion method
The Company provides confirmation of the written income of the customer when the service income is confirmed
and issued the settlement certificate.
If the outcome of transactions can be estimated reliably at the balance sheet date, revenues from rendering of labor
services are recognized under the percentage-of-completion method. The percentage of completion is determined by
measurement of completed work as a percentage of total estimated costs.
Revenues from rendering of labor services are determined by prices stated in the contracts or agreements, whether
already received or to be received, unless such relevant prices are unfair. The current revenue from the rendering of
labor services is recognized at the amount of multiplying the total revenue from the rendering of labor services by
completion progress and deducting the accumulated revenue from the rendering of labor services recognized in
previous accounting periods on the balance sheet date; meanwhile, the current cost of labor services is carried
forward by the amount of multiplying the total costs of the rendering of labor services by completion progress and
deducting the accumulated revenue from the rendering of labor services recognized in previous accounting periods.
When the outcome of transactions involving the rendering of services cannot be estimated reliably, revenues shall be
recognized and measured at the balance sheet date as follows:
(1) if the service costs incurred are expected to be fully recoverable, the amounts equal to the labor costs
incurred shall be recognized as revenues and the equivalent amounts of labor costs shall be carried forward;
(2) if the service costs incurred are not expected to be fully recoverable, the labor costs incurred shall be
included in the current profit and loss, with no revenue from the rending of labor services not recognized.
3.22 Government subsidies
3.22.1 Types
Government grants refer to the monetary or non-monetary assets obtained by the Company from the government for
free. Government subsidies are classified into government subsidies related to assets and government subsidies
related to income.
Government grants relating to purchase or construction of long-term assets, such as fixed assets and intangible
assets, etc., shall be recognized as deferred income and amortized over the useful lives of assets constructed or
purchased and charged to non-operating income by stage. Government subsidies related to income refer to those
other than the government subsidies related to assets.
The Company divides the government subsidies into those related to assets according to the following specific
standards: the government subsidies acquired by the Company to acquire, construct or otherwise form the long-term
assets;
The Company divides the government subsidies into those related to income according to the following specific
standards: the government subsidies other than those related to assets;
If the targets of subsidies are not specified in the government documents, the basis for the Company to determine the
classification of the subsidies related to assets or income is: Whether such government subsidies are used to acquire,
construct or otherwise form the long-term assets
3.22.2 Accounting treatment
Government subsidies relating to assets shall be recognized as deferred income and amortized over the useful lives
of assets constructed or purchased and charged to non-operating income by stage;
If government subsidies related to income are used to compensate the Companys relevant expenses or losses in
future periods, such government subsidies should be recognized as deferred income on acquisition and be included
into the current non-operating income in the period of recognizing relevant expenses; if government subsidies
related to income are used to compensate the enterprises relevant expenses or losses incurred, such government
subsidies are directly included into the current non-operating income on acquisition.
3.23 Deferred income tax assets and deferred income tax liabilities
Deferred income tax assets shall be recognized for deductible temporary differences to the extent that it is probable
that taxable profit will be available against which the deductible temporary differences can be utilized. Deferred
income tax assets should be recognized for deductible temporary differences to the extent that it is probable that
taxable profit will be available against which the deductible temporary differences can be utilized.
Taxable temporary differences are recognized as deferred income tax liabilities except in special circumstances.
Special circumstances in which deferred income tax assets or deferred income tax liabilities shall not be recognized
include: the initial recognition of goodwill; other transactions or events excluding business combinations, which
affect neither accounting profits nor the taxable income (or deductible losses) when occurred.
If the Company has the legal right of netting and intends to settle in net amount or to obtain assets and discharge
liabilities simultaneously, the income tax assets and income tax liabilities of the Company for the current period
shall be presented based on the net amount after offset.
When the Company has the legal rights to balance income tax assets and income tax liabilities for the current period
with net settlement, and deferred income tax assets and deferred income tax liabilities are related to the income tax
which are imposed on the same taxpaying subject by the same tax collection authority or on different tax paying
subjects, but, in each important future period in connection with the reverse of deferred income tax assets and
liabilities, the involved tax paying subject intends to balance income tax assets and liabilities for the current period
with net settlement at the time of obtaining assets and discharging liabilities, deferred income tax assets and deferred
income tax liabilities shall be presented based on the net amount after offset.
3.24 Lease
3.24.1 Accounting Treatment of operating lease
(1) Lease fees paid by the Company for leased asset shall be amortized at straight-line method over the whole lease
period (including rent-free period) and shall be included in the current expenses. Initial direct costs relating to lease
transactions incurred by the Company shall be recognized as the current expenses.
If the expense related to the lease which shall be paid by the Company is assumed by the lessor of the asset, then
such expenses shall be deducted from total lease fees, and the balances shall be amortized over the lease term s and
charged to the current expenses.
(2) The lease fees received for the assets acquired under lease shall be recognized as current expenses over the lease
terms (including rent-free periods) on a straight-line basis. The initial direct costs related to lease transactions paid
by the Company, included in the current expenses; if a larger amount is to be capitalized, according to confirm the
same basis throughout the period of the lease installments related to the lease income is recognized in profit gains.
If expenses relating to leases which should be borne by the lessee of the assets are paid by the Company, they shall
be deducted from the total lease income and the balances shall be amortized over the lease terms by the Company.
3.25 Discontinued operation
Discontinued operation is the component that meets any of the following conditions, is disposed or classified as the
held-for-sale one and can be separately distinguished at the time of preparation of financial statements:
(1) such component represents an independent primary business or a major business area;
(2) such component is part of the disposition plan for an independent primary business or a major business area;
(3) such component is a subsidiary acquired for just re-sale.
3.26 Adjustment for changes in principal accounting policies and accounting estimates
3.26.1 Adjustment for changes in accounting policies
Implementation of the \"VAT accounting treatment guidelines\"
According to Ministry of Finance issued \"VAT accounting treatment\" (Accounting [2016] No. 22) on December 3,
2016, the related transactions after May 1st, 2016 need to adjust. The Company has implemented the main effects of
this provision as follows:
The content and reasons of accounting policy changes Influence report item and amount
1. Change the name of “Sales tax and surcharges” to “Tax and
Tax and surcharges
surcharges” in P/L statement.
2. After May 1st, 2016, the property tax, land use tax, vehicle and Increase “tax and surcharges” amount of
vessel tax and stamp tax incurred by the Company business activity are 4,770,099.93 yuan in this year, and
reclassified from the “General and Administration expenses \" item to reduce “General and Administration
the \"Tax and surcharges\" item; before May 1st, 2016, the taxes and fees expenses” amount of 4,770,099.93 yuan
are not adjusted. The comparison data will not be adjusted. in this year.
3.26.2 Adjustment for changes in principal accounting estimates
There were no changes in the accounting estimates in the current reporting period.
4 Tax
Main taxes and tax rates applicable to the Company
Tax type Basis of tax assessment Tax rate
The output tax is calculated based on the revenue from sales of goods
3%, 5%, 6%,
Value-added tax and the provision of taxable labor services according to tax law, and
7%, 11%,
(VAT) value added tax payable should be the balance of the output tax for the
13%,17%, 19%
period after deducting the deductible input tax for the period.
Levied based on the taxable income (reclassified to VAT from May
Business tax
1st,2016) 5%
Enterprise income tax Levied based on the taxable income 16%-38%, 25%
Urban maintenance
Levied based on the actual payment of business tax and VAT.
and construction tax 1%,5%, 7%
Education surtax and
Levied based on the actual payment of business tax and VAT.
local education surtax 2%, 3%
Note: The tax rate applicable to ShangGong (Europe) Holding Corp. GmbH, the subsidiary of the Company, and
other companies in the scope of consolidation varies in a range from16% to 38%. The VAT rate is 19%
5 Notes to the items of consolidated financial statements
5.1 Cash and cash equivalents
Item Ending balance Beginning balance
Cash on hand 1,137,409.87 1,454,927.52
Bank deposit 751,831,391.58 759,297,757.06
Other cash and cash equivalents 10,686,903.12 12,819,498.11
Total 763,655,704.57 773,572,182.69
Including: Total amount of cash and cash
equivalents offshore 463,089,363.62 445,777,843.66
Details of cash and cash equivalents restricted for use due to mortgage, pledge or freezing are as follows:
Item Ending balance Beginning balance Remark
L/C deposit 744,130.00 Note 1
Fixed term deposit used for guarantee 25,000,000.00 Note 2
Other guaranteed deposit 3,319,935.24 3,127,393.87 Note 3
Deposit held for foreign exchange
9,977,839.70 Note 4
inspection
Total 13,297,774.94 28,871,523.87
[Note 1]: The L/C deposit represents the deposit for the letter of credit issued by China Construction Bank, Shanghai
4th Sub-branch for Shanghai SMPIC Import & Export Co., Ltd., the subsidiary of the Company, and was refunded
in the current period.
[Note 2]: In order to acquire the working capital loan from Commerzbank AG, Bielefeld Branch for ShangGong
(Europe) Holding Corp. GmbH, the subsidiary of the Company, the newly issued Letter of Guarantee this year
agrees that no longer using the fixed-term deposit, amounting to 25,000,000.00, as the pledge to counter guarantee
for Commerzbank AG, Shanghai Branch.
[Note 3]: The other guaranteed deposit consists of the guarantees for crackdown on counterfeit goods, amounting to
400,000.00, and the guarantees for future settlement of exchange margin, amounting to 100,000.00, of Shanghai
Butterfly Import & Export Co., Ltd., the wholly-owned subsidiary of Shanghai Shanggong Butterfly Sewing
Machines Co., Ltd., the subsidiary of the Company; and the guaranteed deposit pledged by ShangGong (Europe)
Holding Corp. GmbH to the Commerzbank Germany, amounting to EUR 385,933.00 (equivalent to RMB
2,819,935.24).
[Note 4]: The deposit held for foreign exchange inspection represents the retained funds acquired from import and
export trade of the Companys subsidiaries, awaiting for the inspection of State Administration of Foreign Exchange.
The deposit held for foreign exchange inspection of Shanghai Butterfly Import & Export Co., Ltd. amounts to
691,710.12. The deposit held for foreign exchange inspection of DAP (Shanghai) Co., Ltd. and its subsidiary,
Duerkopp Adler Manufacturing (Shanghai) Co., Ltd. amounts to 8,543,871.69. The deposit held for foreign
exchange inspection of Shanghai SMPIC Import & Export Co., Ltd. amounts to 742,257.89.
5.2 Financial assets at fair value whose fluctuation is attributed to profit or loss for current period
Item Ending balance Beginning balance
Trading financial assets 4,000.00
Debt instrument investment
Equity instrument investment 4,000.00
Derivative financial asset
Other financial asset
Financial Assets Measured at Fair Value and
the Changes Are Recorded into Current
Period Profit or Loss
Debt instrument investment
Equity instrument investment
Other financial asset
Total 4,000.00
Note: The current period equity instrument investment is the 1,000.00 shares acquired through the IPO of Central
China Securities Co., Ltd. The stock has not started trading as of December 31, 2016.
5.3 Notes receivable
5.3.1 Presentation of notes receivable by category
Item Ending balance Beginning balance
Bank acceptance bills 51,427,934.60 48,897,695.47
Commercial acceptance bills 27,413,513.45 14,605,166.45
Total 78,841,448.05 63,502,861.92
5.3.2 Notes endorsed to other parties by the Company but not yet due amount to 2,148,832.86.
5.3.3 Notes receivable pledged as at the end of period: None.
5.3.4 Notes receivable transferred to accounts receivable due to the issuer's performance failure: None.
5.4 Accounts receivable
5.4.1 Disclosure of accounts receivable by category
Ending balance Beginning balance
Type Book balance Provision for bad debt Book balance Provision for bad debt
Book value Book value
Amount Proportion (%) Amount Proportion (%) Amount Proportion (%) Amount Proportion (%)
Accounts receivable with
significant individual
amount and provision for 69,228,371.46 13.86 18,376,602.00 26.54 50,851,769.46 59,416,103.38 12.38 17,844,428.00 30.03 41,571,675.38
bad debt is accrued
separately
Accounts receivable with
provision for bad debt
124,946,418.14 25.02 73,206,008.31 58.59 51,740,409.83 139,096,685.51 28.97 74,788,750.49 53.77 64,307,935.02
accrued by credit risk
characteristics of a portfolio
Accounts receivable with
insignificant individual
amount but provision for 305,199,419.71 61.12 18,538,920.13 6.07 286,660,499.58 281,547,899.02 58.65 14,263,060.85 5.07 267,284,838.17
bad debt is accrued
separately
Total 499,374,209.31 100.00 110,121,530.44 22.05 389,252,678.87 480,060,687.91 100.00 106,896,239.34 22.27 373,164,448.57
Accounts receivable with significant individual amount and provision for bad debt is accrued separately at the end
of the period
Accounts Ending balance
receivable Accounts Provision for bad Proportion of
Reason for provision
(by unit) receivable debt provision
No.1 Unimpaired according to the
29,995,647.96
Client separate test
No.2 Impaired according to the separate
18,376,602.00 18,376,602.00 100.00%
Client test
No.4 Unimpaired according to the
11,072,316.30
Client separate test
No.5 Unimpaired according to the
9,783,805.20
Client separate test
Total 69,228,371.46 18,376,602.00 26.54%
Accounts receivable with provision for bad debt accrued using the aging analysis method in the portfolio
Ending balance
Aging
Accounts receivable Provision for bad debt Proportion of provision
Within 1 year 48,450,159.45 2,422,507.97 5.00%
1-2 years 5,532,483.14 1,106,496.62 20.00%
2-3 years 2,573,543.68 1,286,771.85 50.00%
Over 3 years 68,390,231.87 68,390,231.87 100.00%
Total 124,946,418.14 73,206,008.31 58.59%
Accounts receivable with insignificant individual amount but provision for bad debt is accrued separately
Ending balance
Accounts receivable (by
Accounts Proportion of Reason for
unit) Provision for bad debt
receivable provision provision
Other insignificant accounts Impaired according
2,020,198.55 2,020,198.55 100.00%
receivable (Note 1) to the separate test
Other insignificant accounts Impaired according
24,403,746.83 7,351,719.64 30.13%
receivable (Note 2) to the separate test
Other insignificant accounts Impaired according
478,333.80 478,333.80 100.00%
receivable (Note 3) to the separate test
Other insignificant accounts Impaired according
11,610.00 11,610.00 100.00%
receivable (Note 4) to the separate test
Other insignificant accounts Impaired according
171,773,730.99 8,677,058.14 5.05%
receivable (Note 5) to the separate test
Unimpaired
Other insignificant accounts 106,511,799.54 according to the
receivable (Note 6) separate test
Total 305,199,419.71 18,538,920.13 6.07%
[Note 1]: It mainly represents the accounts receivable due from the subsidiary, Shanghai Shanggong Butterfly
Sewing Machines Co., Ltd., and the provision for impairment is accrued based on the separate test.
[Note 2]: It mainly represents the accounts receivable due from the subsidiary, Duerkopp PFAFF Trading (Shanghai)
Co., Ltd., and the provision for impairment is accrued based on the separate test.
[Note 3]: It mainly represents the accounts receivable due from the subsidiary, Shanghai SMPIC Import & Export
Co., Ltd, and the provision for impairment is accrued based on the separate test.
[Note 4]: It mainly represents the accounts receivable due from the subsidiary, Shanghai SGSB Electronics Co., Ltd,
and the provision for impairment is accrued based on the separate test.
[Note 5]: It mainly represents the accounts receivable due from the subsidiary, ShangGong (Europe) Holding Corp.
GmbH, and the provision for impairment is accrued based on the separate test.
[Note 6]: It mainly represents the accounts receivable due from the subsidiary, Shanghai Shensi Enterprise
Development Co., Ltd, and is unimpaired based on the separate test.
5.4.2 The accrual, reversal or recovery of the provision for bad debts in the current period
The provision for bad debts accrued in the current period is RMB 17,398,131.97. The amount reversed due to the
recovery of accounts receivable is RMB 11,323,379.51.
5.4.3 Actual write-off of accounts receivable in the current period
The actual write-off of accounts receivable in the current period amounts to RMB 3,529,678.99, due to the long
aging of accounts receivable. All of them are unrecoverable due to deregistration/cancellation of the client
companies.
5.4.4 No amount is due from shareholders with 5% or more of voting shares of the Company among the
accounts receivables as at the end of period.
5.4.5 Top five accounts receivable in terms of their ending balance
Ending balance
Company name Proportion in total accounts receivable ratio
Accounts receivable Provision for bad debt
(%)
No.1 Client 29,995,647.96 6.01
No.2 Client 18,376,602.00 3.68 18,376,602.00
No.3 Client 11,530,775.39 2.31 11,530,775.39
No.4 Client 11,072,316.30 2.22
No.5 Client 9,783,805.20 1.96
Total 80,759,146.85 16.17 29,907,377.39
5.4.6 See Note 9.6 for details of accounts receivable due from related parties.
5.5 Prepayment
5.5.1 Presentation of prepayments by aging
Ending balance Beginning balance
Aging
Book balance Proportion (%) Book balance Proportion (%)
Within 1 year 24,955,584.89 74.03 24,526,404.72 90.64
1-2 years 7,892,719.27 23.41 1,330,069.97 4.92
2-3 years 839,461.69 2.49 56,999.54 0.21
Over 3 years 21,591.26 0.07 1,145,112.92 4.23
Total 33,709,357.11 100.00 27,058,587.15 100.00
5.5.2 Top five prepayments to suppliers in terms of their ending balance
Supplier Ending balance Proportion in total ending balance of advances to suppliers (%)
No.1 Supplier 6,874,421.03 20.39
No.2 Supplier 3,680,555.18 10.92
No.3 Supplier 2,433,907.54 7.22
No.4 Supplier 1,800,000.00 5.34
No.5 Supplier 1,163,246.81 3.45
Total 15,952,130.56 47.32
5.5.3 The actual write-off of prepayments: None.
5.5.4 No amount is due from shareholders with 5% or more of voting shares of the Company among the
prepayments to suppliers as at the end of period.
5.5.5 See Note 9.6 for details of prepayment due from related parties.
5.6 Other receivables
5.6.1 Classified disclosure of other receivables
Ending balance Beginning balance
Type Book balance Provision for bad debt Book balance Provision for bad debt
Proportion Proportion Book value Proportion Proportion Book value
Amount Amount Amount Amount
(%) (%) (%) (%)
Other receivables with significant
individual amount and provision 32,993,470.54 41.20 12,600,914.20 38.19 20,392,556.34 39,127,176.28 42.80 11,881,666.00 30.27 27,245,510.28
for bad debt is accrued separately
Other receivables with provision
for bad debt accrued by credit 19,082,416.29 23.83 16,077,736.42 84.25 3,004,679.87 24,148,336.32 26.42 16,797,190.17 69.56 7,351,146.15
risk characteristics of a portfolio
Other receivables with
insignificant individual amount
28,014,947.49 34.97 527,110.22 1.88 27,487,837.27 28,139,602.21 30.78 52,080.00 0.19 28,087,522.21
but provision for bad debt is
accrued separately
Total 80,090,834.32 100.00 29,205,760.84 36.47 50,885,073.48 91,415,114.81 100.00 28,730,936.17 31.43 62,684,178.64
Other receivables with significant individual amount and provision for bad debt is accrued separately at the end of
period
Ending balance
Other receivables (by unit)
Other receivables Provision for bad debt Proportion of provision Reason for provision
No.1 Client 12,600,914.20 12,600,914.20 100.00% Impaired according to the separate test
Export tax refund receivable (Note) 8,712,556.34 Unimpaired according to the separate test
No.3 Client 5,180,000.00 Unimpaired according to the separate test
No.4 Client 3,500,000.00 Unimpaired according to the separate test
No.5 Client 3,000,000.00 Unimpaired according to the separate test
Total 32,993,470.54 12,600,914.20 38.19%
Note: It mainly represents the export tax refund receivable arising from the export sale by the subsidiary, and is
unimpaired according to the separate impairment test.
Other receivables with provision for bad debt accrued using the aging analysis method in the portfolio
Ending balance
Aging
Other receivables Provision for bad debt Proportion of provision
Within 1 year 2,895,574.32 144,778.73 5.00%
1-2 years 223,487.01 44,697.40 20.00%
2-3 years 150,189.35 75,094.68 50.00%
Over 3 years 15,813,165.61 15,813,165.61 100.00%
Total 19,082,416.29 16,077,736.42 84.25%
Other receivables with insignificant individual amount but provision for bad debt is accrued separately at the end of
period
Content of other receivables Book balance Provision for bad debt Proportion of provision (%) Reason for provision
Other insignificant other 320,980.00 18,025.00 5.62%
receivables (Note 1) Impaired according to the separate test
Other insignificant other receivables 1,370,038.81 21,494.12 1.57%
(Note 2) Impaired according to the separate test
Other insignificant other 50,000.00 50,000.00 100.00%
receivables (Note 3) Impaired according to the separate test
Other insignificant other 2,000.00
receivables (Note 4) Unimpaired according to the separate test
Other insignificant other 4,798,076.93
receivables (Note 5) Unimpaired according to the separate test
Other insignificant other 21,473,851.75 437,591.10 2.04%
receivables (Note 6) Impaired according to the separate test
28,014,947.49 527,110.22 1.88%
Total
[Note 1]: It mainly represents the other receivables due from the subsidiary, Shanghai Shanggong Butterfly Sewing
Machines Co., Ltd., and the provision for impairment is accrued based on the separate test.
[Note 2]: It mainly represents the other receivables due from the subsidiary, Duerkopp PFAFF Trading (Shanghai)
Co., Ltd., and the provision for impairment is accrued based on the separate test.
[Note 3]: It mainly represents the other receivables due from the subsidiary, Shanghai SGSB Electronics Co., Ltd.,
and the provision for impairment is accrued based on the separate test.
[Note 4]: It mainly represents the other receivables due from the subsidiary, Durkopp Adler Sewing Machines
Suzhou Co., Ltd., and is unimpaired based on the separate test.
[Note 5]: It mainly represents the other receivables due from the subsidiary, ShangGong (Europe) Holding Corp.
GmbH, and is unimpaired based on the separate test.
[Note 6]: It mainly represents the other receivables due from the subsidiary, Shanghai Shensi Enterprise
Development Co., Ltd., and the provision for impairment is accrued based on the separate test.
5.6.2 The accrual, reversal or recovery of the provision for bad debts in the current period
The provision for bad debts accrued in the current period is RMB 1,235,297.18. The amount reversed due to the
recovery of other receivables is RMB 633,293.82.
5.6.3 Actual write-off of other receivables in the current period
The actual write-off of other receivables in the current period amounts to RMB 124,820.06, mainly due to the
bankruptcy of the client companies.
5.6.4 Top five other receivables in terms of their ending balance
Proportion in the ending Provision for
Company name Nature Ending balance Aging balance of total other bad debt
receivable (%) Ending balance
No.1 Client Current accounts 12,600,914.20 Over 3 years 15.73 12,600,914.20
Proportion in the ending Provision for
Company name Nature Ending balance Aging balance of total other bad debt
receivable (%) Ending balance
Export tax refund Export tax refund
8,712,556.34 Within 1year 10.88
receivable receivable
No.3 Client Current accounts 5,180,000.00 Within 1year 6.47
No.4 Client Current accounts 3,500,000.00 Within 1year 4.37
No.5 Client Current accounts 3,000,000.00 Within 1year 3.75
Total 32,993,470.54 41.20 12,600,914.20
5.6.5 No amount is due from shareholders with 5% or more of voting shares of the Company among the other
receivables as at the end of period.
5.6.6 See Note 9.6 for details of other receivables due from related parties.
5.7 Inventories
5.7.1 Classification of inventories
Balance as at December 31, 2016 Balance as at January 1, 2016
Item
Book balance Provision for impairment Book value Book balance Provision for impairment Book value
Raw
244,335,565.64 41,630,636.86 202,704,928.78 238,545,363.19 43,490,629.95 195,054,733.24
materials
Revolving
1,221,161.27 1,221,161.27 4,677,820.47 2,254,846.51 2,422,973.96
materials
Consigned
processing 603,268.15 603,268.15 1,806,944.86 1,806,944.86
materials
Goods in
136,310,148.14 27,492,514.68 108,817,633.46 136,221,003.08 28,022,238.05 108,198,765.03
progress
Finished
267,450,476.53 39,117,293.46 228,333,183.07 225,253,531.44 33,480,586.14 191,772,945.30
goods
Goods
7,972,002.36 7,972,002.36 13,451,415.73 13,451,415.73
shipped
Material
32,250.55 32,250.55 87,404.47 87,404.47
purchase
Labor costs 114,082,013.31 114,082,013.31 68,499,972.56 68,499,972.56
Others 2,166,889.90 2,166,889.90
Total 772,006,885.95 108,240,445.00 663,766,440.95 690,710,345.70 109,415,190.55 581,295,155.15
5.7.2 Inventory Valuation Allowance
Increase in 2016 Decrease in 2016
Item Balance as at January 1, 2016 Reversal Balance as at December 31, 2016
Provision Others Others
or write-off
Raw
43,490,629.95 226,900.72 1,296,013.88 3,382,907.69 41,630,636.86
materials
Revolving
2,254,846.51 2,254,846.51
materials
Consigned
processing
materials
Goods in
28,022,238.05 493,579.97 782,878.10 1,806,181.44 27,492,514.68
progress
Finished
33,480,586.14 9,765,174.98 1,724,852.59 5,853,320.25 39,117,293.46
goods
Goods
shipped
Material
purchase
Labor costs
Others 2,166,889.90 2,166,889.90
Total 109,415,190.55 10,485,655.67 3,803,744.57 15,464,145.79 108,240,445.00
5.8 Other current assets
Item Balance as at December 31, 2016 Balance as at January 1, 2016
Held-to-maturity investments 10,288,261.77 10,163,252.89
Input tax to be credited 11,164,758.87 11,845,579.89
Rentals and insurance fees 1,529,650.89 1,638,714.56
Overpaid enterprise income tax 1,946,694.20 11,730.26
Financial products 50,000,000.00 280,000,000.00
Structured deposit 282,000,000.00 70,000,000.00
Unamortized expense 489,181.62
Total 357,418,547.35 373,659,277.60
5.9 Available-for-sale financial assets
5.9.1 Available-for-sale financial assets
Balance as at December 31, 2015 Balance as at January 1, 2015
Item Provision for
Book balance Provision for impairment Book value Book balance Book value
impairment
Available for sale debt
instruments
Available for sale equity
138,917,378.02 1,698,131.91 137,219,246.11 150,415,095.52 1,698,131.91 148,716,963.61
instruments
Including: measured at
107,980,989.31 107,980,989.31 118,127,307.02 118,127,307.02
fair value
Measured at cost 30,936,388.71 1,698,131.91 29,238,256.80 32,287,788.50 1,698,131.91 30,589,656.59
Total 138,917,378.02 1,698,131.91 137,219,246.11 150,415,095.52 1,698,131.91 148,716,963.61
5.9.2 Available-for-sale financial assets measured at fair value as at December 31, 2016
Classification of available-for-sale Available-for-sale
Available-for-sale equity instruments Total
financial assets debt instruments
Cost of equity instruments 74,010,222.53 74,010,222.53
Fair value 107,980,989.31 107,980,989.31
Accumulated changes in fair value
included in other comprehensive 33,970,766.78 33,970,766.78
income
Accrued provision for impairment
5.9.3 Available-for-sale financial assets measured at cost as at December 31, 2016
Book balance Provision for impairment
Shareholding
As at Cash dividend in
Investee Decrease in As at December As at January Increase Decrease in ratio in investee
As at January 1, 2016 Increase in 2016 December 31,
2016 31, 2016 1, 2016 in 2016 2016 (%)
Shanghai Fuji Xerox Co., Ltd. 29,140,749.49 29,140,749.49 15.92 22,285,760.00
Shanghai Hirose Precision Industrial
30.00 300,000.00
Co., Ltd. (Note 1)
Bank of Shanghai Co., Ltd. (Note 2) 951,400.00 951,400.00 <5.00
Changshu Qixing Elec-plating Co.,
90.00
Ltd.
Shanghai Huazhijie Plastic Co., Ltd.
736,283.66 736,283.66 736,283.66 736,283.66 23.04
(Note 3)
Shanghai Hualian Sewing Machinery
400,000.00 400,000.00
Co., Ltd.
Shanghai Xingguang Underwear
308,033.99 308,033.99 308,033.99 308,033.99 14.30
(South Africa)
Wuxi Shanggong Sewing Machines
153,814.26 153,814.26 153,814.26 153,814.26 80.00
Co., Ltd. (Note 4)
China Perfect Machinery Co., Ltd. 90,000.00 90,000.00 <5.00
Shanghai Baoding Investment Co.,
7,500.00 7,500.00 <5.00 5,175.90
Ltd.
Shanghai Shanggong Jiarong Sewing
500,000.00 500,000.00 500,000.00 500,000.00 12.50
Machine Trade Co., Ltd.
Pfaff Industrial Iberica S.A.U. 7.10 0.21 7.31 49.00
32,287,788.50 0.21 1,351,400.00 30,936,388.71 1,698,131.91 1,698,131.91 22,590,935.90
Total
[Note 1]: Shang Gong Group Co., Ltd. holds 30% shares of Shanghai Hirose Precision Industrial Co., Ltd. According to the articles of association, Shang Gong Group Co., Ltd.
obtains guaranteed minimum revenue each year. In addition, it does not participate in the decision-making process of daily operations, and does not have significant influence on the
invested enterprise. Therefore, it adopts cost accounting to measure its revenue from its shares of Shanghai Hirose Precision Industrial Co., Ltd.
[Note 2]: Bank of Shanghai Co., Ltd. finished IPO in 2016, and the reliable fair value can be acquired. Shang Gong Group Co., Ltd. changed its holding shares measured at cost to be
measured at fair value in 2016.
[Note 3]: Shang Gong Group Co., Ltd. holds 23.04% shares of Shanghai Huazhijie Plastic Co., Ltd. According to the articles of association, Shang Gong Group Co., Ltd. does not
have facto control over the invested enterprise. In addition, it does not participate in the decision-making process of daily operations, and does not have significant influence on the
invested enterprise. Therefore, it adopts cost accounting to measure its revenue from its shares of Shanghai Huazhijie Plastic Co., Ltd.
[Note 4]: Shang Gong Group Co., Ltd. holds 80.00% shares of Wuxi Shanggong Sewing Machines Co., Ltd. According to the articles of association, Shang Gong Group Co., Ltd.
does not have facto control over the invested enterprise. In addition, it does not participate in the decision-making process of daily operations, and does not have significant influence
on the invested enterprise. Therefore, it adopts cost accounting to measure its revenue from its shares of Wuxi Shanggong Sewing Machines Co., Ltd.
5.9.4 Changes in available-for-sale financial assets for this year
Classification of available-for-sale financial assets Available-for-sale equity instruments Available-for-sale debt instruments Total
Balance of provision for impairment accrued as at January 1, 2016 1,698,131.91 1,698,131.91
Provision in 2016
Including: transfer-in from other comprehensive income
Decrease in 2016
Including: reversal due to the subsequent increase in fair value
Balance of provision for impairment accrued as at December 31,
1,698,131.91 1,698,131.91
2016
5.10 Long-term Equity Investment
Changes in current period Provision of
Provision of
Balance Other Other impairment
Return on Declared cash Balance at impairment
Name of the Investees at Jan.1, Increase in Decrease in Comprehensive change balance at
investment under dividends or Other Dec.31, 2016 accrued in current
2016 investment investment Income s in Dec.31,
equity method profit period
Adjustment Equity
1．Joint Venture
2．Joint operation
H. Stoll AG & Co.
235,713,310.68 17,937,107.88 -63,843.57 253,586,574.99
KG
Subtotal 235,713,310.68 17,937,107.88 -63,843.57 253,586,574.99
Total 235,713,310.68 17,937,107.88 -63,843.57 253,586,574.99
Note: The Company’s wholly-owned subsidiary, ShangGong (Europe) Holding Corp. GmbH acquired 26% shares of H. Stoll AG & Co. KG, a German company,
and became the limited partner at Jan.1, 2016. The fixed amount and floating amount of share transfer is EUR 32,250,000.90 in total, and shall pay in three
installments. The first installment payment amounts to EUR 22,990,000.90, and was fully paid in June, 2016. The second and third installment payments are EUR
2,750,000.00 each, along with the floating part of share transfer, shall be paid in 2017 and 2018.
5.11 Investment properties
5.11.1 Investment property measured at cost
Item Use right of leased land Leasehold improvement Buildings and constructions Total
1. Total original book value - - - -
(1) Balance as at January 1, 2016 50,523,752.24 2,583,492.92 151,624,469.83 204,731,714.99
(2) Increase in 2016 20,707,044.45 20,707,044.45
- Outsourcing
- Inventories \ fixed assets \ transfer-in from construction in progress 19,295,688.95 19,295,688.95
- Increase due to exchange rate fluctuations 1,411,355.50 1,411,355.50
(3) Decrease in 2016
- Reclassification to fixed assets
- Exchange rate fluctuation
(4) Balance as at December 31, 2016 50,523,752.24 2,583,492.92 172,331,514.28 225,438,759.44
2. Total accumulated depreciation and accumulated amortization
(1) Balance as at January 1, 2016 13,906,301.91 344,465.76 77,618,137.89 91,868,905.56
(2) Increase in 2016 1,173,017.16 172,233.00 17,367,324.72 18,712,574.88
Item Use right of leased land Leasehold improvement Buildings and constructions Total
- Provision or amortization 1,173,017.16 172,233.00 3,891,494.40 5,236,744.56
- Transfer-in from fixed assets 12,858,454.52 12,858,454.52
- Exchange rate fluctuations 617,375.80 617,375.80
(3) Decrease in 2016
- Reclassification to fixed assets
- Exchange rate fluctuation
(4) Balance as at December 31, 2016 15,079,319.07 516,698.76 94,985,462.61 110,581,480.44
3. Provision for impairment
(1) Balance as at January 1, 2016 7,031,328.87 7,031,328.87
(2) Increase in 2016 209,695.17 209,695.17
- Provision
- Exchange rate fluctuations 209,695.17 209,695.17
(3) Decrease in 2016
- Disposal
- Exchange rate fluctuation
(4) Balance as at December 31, 2016 7,241,024.04 7,241,024.04
4. Book value
(1) Book value as at December 31, 2016 35,444,433.17 2,066,794.16 70,105,027.63 107,616,254.96
(2) Book value as at January 1, 2016 36,617,450.33 2,239,027.16 66,975,003.07 105,831,480.56
5.12 Fixed assets
Transportation
Item Buildings and constructions Machinery equipment Electronic equipment Other equipment Total
equipment
1.Total original book value
(1) Balance as at January 1, 2016 427,577,258.71 308,851,865.56 15,621,511.70 4,118,493.33 222,468,855.52 978,637,984.82
(2) Increase in 2016 11,292,587.20 43,007,282.55 234,605.13 664,585.85 22,912,342.93 78,111,403.66
- Acquisition 1,154,474.40 33,941,526.88 234,605.13 485,789.24 15,046,158.98 50,862,554.63
-Transfer-in from construction in
1,430,943.42 1,899,403.70 9,339.45 1,491,517.29 4,831,203.86
progress
Increase due to exchange rate
8,707,169.38 7,166,351.97 169,457.16 6,374,666.66 22,417,645.17
fluctuation
Transportation
Item Buildings and constructions Machinery equipment Electronic equipment Other equipment Total
equipment
(3) Decrease in 2016 19,322,482.55 13,140,062.82 1,269,784.04 707,224.25 3,926,666.41 38,366,220.07
- Disposal or write-off 26,793.60 11,900,339.98 1,269,784.04 707,224.25 3,783,632.07 17,687,773.94
- Transfer-out to Investment
19,295,688.95 19,295,688.95
property
- Exchange rate fluctuation 143,034.34 143,034.34
- Transfer-out to Investment
1,239,722.84 1,239,722.84
property
(4) Balance as at December
419,547,363.36 338,719,085.29 14,586,332.79 4,075,854.93 241,454,532.04 1,018,383,168.41
31, 2016
2.Total accumulated
depreciation
(1) Balance as at January 1, 2016 204,574,789.41 224,080,185.14 9,061,909.59 2,409,658.56 194,074,594.83 634,201,137.53
(2) Increase in 2016 14,947,199.65 14,038,626.31 1,395,671.80 917,941.90 16,128,070.46 47,427,510.12
- Depreciation 9,567,392.95 8,737,764.73 1,360,204.48 799,671.84 10,523,872.69 30,988,906.69
- Transfer-out to Investment
property
- Exchange rate fluctuation 5,379,806.70 5,300,861.58 35,467.32 118,270.06 5,604,197.77 16,438,603.43
(3) Decrease in 2016 12,869,164.72 9,303,059.70 912,400.20 589,387.69 3,628,640.03 27,302,652.34
- Disposal or write-off 10,710.20 9,303,059.70 912,400.20 589,387.69 3,532,536.91 14,348,094.70
- Transfer-out to Investment
12,858,454.52 12,858,454.52
property
- Exchange rate fluctuation 96,103.12 96,103.12
(4) Balance as at December 31,
206,652,824.34 228,815,751.75 9,545,181.19 2,642,109.65 206,670,128.38 654,325,995.31
2016
3. Provision for impairment
(1) Balance as at January 1,
4,913,777.92 3,024,604.52 48,170.70 59,705.35 56,179.79 8,102,438.28
2016
(2) Increase in 2016 3,280,617.68 3,280,617.68
- Provision 3,280,617.68 3,280,617.68
(3)Decrease in 2016 1,472,429.20 21,886.74 54,776.96 1,549,092.90
- Disposal or write-off 1,472,429.20 21,886.74 54,776.96 1,549,092.90
(4) Balance as at December 31,
4,913,777.92 4,832,793.00 48,170.70 37,818.61 1,402.83 9,833,963.06
2016
Transportation
Item Buildings and constructions Machinery equipment Electronic equipment Other equipment Total
equipment
4. Book value
(1) Book value as at December
207,980,761.10 105,070,540.54 4,992,980.90 1,252,892.33 34,926,035.17 354,223,210.04
31, 2016
(2) Book value as at January 1,
218,088,691.38 81,747,075.90 6,511,431.41 1,649,129.42 28,338,080.90 336,334,409.01
2016
Note: among the above balance of fixed assets as at December 31, 2016, the buildings and constructions of RMB127,403,798.21 (Include EUR 13,120,005.86 in RMB
95,865,258.82) are used to obtain a loan from banks; see the Note 10.1 Commitments and Contingencies for information on mortgage loans and credit extension.
5.12.2 There were no idle fixed assets as at December 31, 2016.
5.12.3 There were no held-for-sale fixed assets as at December 31, 2016.
5.12.4 There were no fixed assets without certificate of title as at December 31, 2016.
Expected date of completion of the formalities for
Item Book value Reason for failure in completing the formalities for obtaining certificates of title
obtaining the certificates of title
Buildings and constructions (Note 1) 1,868,341.60 Self-built housing, the certificates are in the process
Buildings and constructions (Note 2) 2,155,179.74 Self-built housing, the certificates are in the process
Total 4,023,521.34
Note 1 Self-built housing for Shanghai SGSB Asset Management Co., Ltd.,
Note 2 Self-built housing, for the Company
5.13 Construction in progress
5.13.1 Construction in progress
Balance as at December 31, 2016 Balance as at January 1, 2016
Item
Book balance Provision for impairment Book value Book balance Provision for impairment Book value
Sewing Equipment Engineering 2,036,361.68 2,036,361.68 3,917,373.59 3,917,373.59
Sewing unit and electronic control 2,856,279.73 2,856,279.73
ERP project 2,130,376.16 2,130,376.16 1,629,852.20 1,629,852.20
Shenbei building
407,258.58 407,258.58 280,881.22 280,881.22
decoration-household multifunctional
sewing machine
Zhangjiagang manufacture base
1,207,505.00 1,207,505.00 854,000.00 854,000.00
project
Information management system 258,490.56 258,490.56 14,550,000.00 14,550,000.00
Nanxiang factory reconstruction 300,000.00 300,000.00
Mold development 139,000.00 139,000.00
Exhaust project 298,345.06 298,345.06
DFT factory reconstruction 13,422,591.60 13,422,591.60
Total 20,199,928.64 20,199,928.64 24,088,386.74 24,088,386.74
5.13.2 Major changes in construction in progress for the current year
Amount Proportion of the Including:
Accumulated Interest
Balance as at transferred in Other Balance as at accumulated amount of
Increase in Construction amount of capitalizati
Project Name Budget January 1, the fixed decreases in December 31, investment in interest Source of fund
2016 in progress interest on rate in
2016 assets for the 2016 2016 project in budget capitalization
capitalization 2016(%)
current year (%) in 2016
Sewing Equipment Engineering 3,917,373.59 1,740,727.73 3,382,684.10 239,055.54 2,036,361.68 Self-owned fund
Sewing unit and electronic
2,856,279.73 9,339.45 2,846,940.28 Raised fund
control
ERP project 1,629,852.20 579,136.76 78,612.80 2,130,376.16 Raised fund
Shenbei building
Raised fund/
decoration-household 280,881.22 126,377.36 407,258.58
Self-owned fund
multifunctional sewing machine
Zhangjiagang manufacture base
854,000.00 1,784,448.42 1,430,943.42 1,207,505.00 Self-owned fund
project
Information management system 14,550,000.00 643,490.56 14,935,000.00 258,490.56 Self-owned fund
JingYuan Building 236,388.53 8,236.89 228,151.64 Self-owned fund
Nanxiang factory reconstruction 424,222.43 124,222.43 300,000.00 Self-owned fund
Mold development 139,000.00 139,000.00 Self-owned fund
Exhaust project 298,345.06 298,345.06 Self-owned fund
DFT factory reconstruction 13,422,591.60 13,422,591.60 Self-owned fund
Total 24,088,386.74 19,394,728.45 19,766,203.86 3,516,982.69 20,199,928.64
Note: The amount of Information management system transferred to the intangible assets of the company's subsidiary Shanghai Shensi Enterprise Development Co., Ltd.
14,500,000.00 yuan for land transaction fees, deed tax 435,000.00 yuan, total 14,935,000.00 yuan.
5.14 Intangible assets
Patent and
7 Trademark right Computer
Land use right non-patent Others Total
of use software
technology
1. Original book value
(1) Balance as at January 1, 2016 90,660,420.23 20,161,268.51 3,082,118.91 79,375,268.18 5,627,912.64 198,906,988.47
(2) Increase in 2016 14,935,000.00 103,435.36 39,405,003.97 167,841.12 54,611,280.45
- Acquisition 90,368.49 2,053,210.80 2,143,579.29
-Exchange rate fluctuation 13,066.87 3,190,317.12 167,841.12 3,371,225.11
-Transferred from construction in process 14,935,000.00 14,935,000.00
-Transferred from R&D cost 34,161,476.05 34,161,476.05
-Others
(3) Decrease in 2016 825,668.40 825,668.40
- Disposal 825,668.40 825,668.40
-Decrease due to consolidation
-Exchange rate fluctuation
-Others
(4) Balance as at December 31, 2016 105,595,420.23 20,161,268.51 3,185,554.27 117,954,603.75 5,795,753.76 252,692,600.52
2. Total accumulated amortization
(1) Balance as at January 1, 2016 5,589,786.23 20,161,268.51 1,827,037.52 38,236,901.39 5,627,912.64 71,442,906.29
(2) Increase in 2016 2,509,716.33 421,197.54 23,738,707.95 167,841.12 26,837,462.94
- Accrual 2,509,716.33 409,265.58 22,639,027.20 25,558,009.11
- Exchange rate fluctuation 11,931.96 1,099,680.75 167,841.12 1,279,453.83
-Others
(3) Decrease in 2016 825,668.40 825,668.40
- Disposal 825,668.40 825,668.40
-Decrease due to consolidation
- Exchange rate fluctuation
-Others
(4) Balance as at December 31, 2016 8,099,502.56 20,161,268.51 2,248,235.06 61,149,940.94 5,795,753.76 97,454,700.83
3. Provision for impairment
(1) Balance as at January 1, 2016
(2) Increase in 2016
- Accrual
- Exchange rate fluctuation
-Others
(3) Decrease in 2016
- Disposal
- Exchange rate fluctuation
-Others
(4) Balance as at December 31, 2016
4. Book value
(1) Book value as at December 31, 2016 97,495,917.67 937,319.21 56,804,662.81 155,237,899.69
(2) Book value as at January 1, 2016 85,070,634.00 1,255,081.39 41,138,366.79 127,464,082.18
5.15 Development expenditures
Transfer-out in 2016 Balance as at
Balance as at
Item Increase in 2016 Included in the current profit Recognized as December 31,
January 1, 2016
and loss intangible assets
Sewing equipment 35,533,287.07 6,883,907.31 34,161,476.05 8,255,718.33
WeChat platform 374,528.29 512,794.69 887,322.98
Freight platform 1,203,773.57 2,078,490.53 3,282,264.10
Paper Shredder 104,040.49 104,040.49
Total 37,111,588.93 9,579,233.02 34,161,476.05 12,529,345.90
[Note] The development expenditures of sewing equipment represent the development costs of the subsidiary,
ShangGong (Europe) Holding Corp. GmbH. The development expenditures of WeChat platform and Freight
platform represent the development costs of the subsidiary, Shanghai Shensi Enterprise Development Co., Ltd. The
development expenditures of paper shredder represent the development costs of the subsidiary, Shanghai SMPIC
Import & Export Co., Ltd.
5.16 Goodwill
5.16.1 Book value of goodwill
Increase in 2016 Decrease in 2016
Balance as at
Name of investee or goodwill Balance as at Formation due to
Exchange rate Exchange rate December 31,
formation events January 1, 2016 business
fluctuation fluctuation 2016
combinations
PFAFF Industriesysteme und
65,913,195.29 1,965,727.83 67,878,923.12
Maschinen AG
Beisler 20,672,574.72 616,517.76 21,289,092.48
Total 86,585,770.01 2,582,245.59 89,168,015.60
.
5.16.2 Provision for impairment of goodwill
Decrease in
Name of investee or Increase in 2016 Balance as at
Balance as at
goodwill formation December 31,
January 1, 2016 Exchange rate
events Accrual Disposal
fluctuation
Beisler 20,672,574.72 616,517.76 21,289,092.48
Total 20,672,574.72 616,517.76 21,289,092.48
5.17 Long-term deferred expenses
Other
Balance as at Increase in Amortization in Balance as at December 31,
Item decreases in
January 1, 2016 2016 2016
Enterprise Mailbox rental
26,400.00 6,600.00 19,800.00
expense
Online brand registration fee 320,702.67 54,716.98 34,874.22 340,545.43
Landscape engineering 232,371.90 48,920.40 183,451.50
Leasehold improvements 155,000.00 18,083.33 136,916.67
Tooling cost 437,853.61 33,769.24 404,084.37
Total 579,474.57 647,570.59 142,247.19 1,084,797.97
[Note] In 2016, the amortized amount of long-term deferred expenses is RMB 142,247.19, and its recorded in
administrative expenses.
5.18 Deferred income tax assets and deferred income tax liabilities
5.18.1 Deferred income tax assets
Item Balance as at December 31, 2016 Balance as at January 1, 2016
Provision for asset impairment 16,211,080.71 9,183,493.71
Unrealized profits of internal transactions 7,876,034.19 6,301,546.87
Deductible losses 305,975.02
Pension (Europe) 34,426,435.01 29,934,428.85
Deferred income 550,000.00
Total 59,063,549.91 45,725,444.45
5.18.2 Deferred income tax liabilities
Item Balance as at Balance as at January
December 31, 2016 1, 2016
Appreciation of assets evaluation due to business combinations
35,407,850.19 31,520,487.16
not under common control
Others 1,197,067.41 3,615,783.99
Total 36,604,917.60 35,136,271.15
Appreciation of assets evaluation due to business combinations not under common control is formed mainly due to
the acquisition of subsidiaries overseas by Shanggong (Europe) Co., Ltd.
5.19 Short-term loans
Item Balance as at December 31, 2016 Balance as at January 1, 2016
mortgage loans 19,143,816.00 18,589,424.00
Guaranteed loans 331,876,640.00 271,341,134.57
Credit loans 348,148.62 10,617,271.05
Total 351,368,604.62 300,547,829.62
Note 1: DA AG book value of 94,735,775.72 yuan (13,352,093.77 euros) of fixed assets as collateral to borrow
money in the German Commercial Bank Co., Ltd. total 65,062,984.00 yuan (9,170,000.00 euros). The loans up
December 31, 2016 total repaid 38,287,632.00 yuan (5,240,000.00 euros) Ending balance is 28,715,724.00 yuan
(3,930,000.00 euros), of which 19,143,816.00 yuan (2,620,000.00 euros) are short-term loans, 9,571908.00 yuan
(1,310,000.00 euros) are long-term loans.
Note 2: The guaranteed loans which the Company's wholly-owned subsidiary Shanggong (Europe) Holding Co., Ltd.
to borrow money from the Germany Bielefeld Commercial Bank branches; and the Companys wholly-owned
subsidiary PFAFF Industrial Systems and Machinery Co., Ltd. to borrow the money from the German commercial
Bank branch Kaiserslautern, guarantees related to the above matters refer to Note \"X. commitments and matter\" and
\"(b) Contingencies\" and \"Note 1, 2, 3, 4”
Note 3: Expect the guaranteed loans above; other guaranteed loans which the Companys wholly-owned subsidiary
Shanghai Shensi Enterprise Development Co., Ltd to borrow 57,600,000.00 yuan from China Construction Bank
Shanghai Baoshan Baogang Branch, 10,000,000.00 yuan from Bank of Communications Shanghai Branch of
Baoshan and 10,000,000.00 yuan from SPD Bank Branch of Waigaoqiao Free Trade Zone, the guarantee company
which was the Shanghai Shensi Kaile Internet of Things Co., Ltd.
5.20 Accounts payable
5.20.1. Presentation of accounts payable
Item Balance as at December 31, 2016 Balance as at January 1, 2016
Payables to suppliers 174,828,356.05 161,024,708.59
Total 174,828,356.05 161,024,708.59
5.20.2 No amount was due to shareholders holding more than 5% (inclusive) voting shares of the Company
among amounts as at December 31, 2016.
5.20.3 Please refer to the Note 9.6 for details on amounts due to related parties among accounts payable as at
December 31, 2016.
5.20.4. There were no accounts payable with aging of more than one year and large amount among amounts
as at December 31, 2016.
5.21 Receipt in advance
5.21.1 Presentation of advances from customers
Item Balance as at December 31, 2016 Balance as at January 1, 2016
Advances on sales 36,548,091.83 25,598,146.20
Total 36,548,091.83 25,598,146.20
5.21.2 There were no advances from shareholders holding more than 5% (inclusive) voting shares of the
Company among amounts as at December 31, 2016.
5.21.3 There were no advances from related parties among amounts as at December 31, 2016.
5.21.4. There were no advances from customers with aging of more than one year and large amount among
amounts as at December 31, 2016.
5.22 Employee compensation payable
5.22.1 Presentation of employee compensation payable
Item Balance as at January 1, 2016 Increase in 2016 Decrease in 2016 Balance as at December 31, 2016
Short-term remuneration 56,177,117.00 572,512,407.88 567,880,691.81 60,808,833.07
Post-employment benefits -
427,882.72 14,071,829.96 14,049,758.57 449,954.11
defined benefit plans
Dismissal welfare 418,939.66 182,800.44 601,740.10
Defined benefit plan maturing
21,072,744.00 20,495,574.00 21,898,412.40 19,669,905.60
within one year
Total 78,096,683.38 607,262,612.28 604,430,602.88 80,928,692.78
Note: the defined benefit plan maturing within one year refers to the employee compensation payable relating to the
subsidiary, ShangGong (Europe) Holding Corp. GmbH
5.22.2 Presentation of short-term remuneration
Item Balance as at January 1, 2016 Increase in 2016 Decrease in 2016 Balance as at December 31, 2016
(1) Salary, bonus, allowance
55,728,197.76 454,009,343.62 449,377,091.23 60,360,450.15
and subsidy
(2) Employee welfare 88,691.79 106,570,232.59 106,658,395.38 529.00
(3) Social insurance expenses 246,872.69 7,872,447.82 7,837,069.39 282,251.12
Including: medical insurance
206,709.03 6,308,470.43 6,288,571.73 226,607.73
premium
Work-related injury insurance
18,345.57 607,608.10 597,055.19 28,898.48
premium
Maternity insurance premium 21,818.09 520,078.40 525,654.58 16,241.91
Other 436,290.89 425,787.89 10,503.00
(4) Housing provident funds 110,220.80 2,658,837.55 2,603,455.55 165,602.80
(5) Labor union expenditures
and employee education 3,133.96 1,401,546.30 1,404,680.26
expenses
(6) Short-term paid absences
(7) short-term profit-sharing
plan
Total 56,177,117.00 572,512,407.88 567,880,691.81 60,808,833.07
5.22.3 Presentation of defined benefit plans
Balance as at
Balance as at Decrease in
Item Increase in 2016 December 31,
January 1, 2016
Basic endowment insurance premium 393,324.08 12,660,633.16 12,629,938.16 424,019.08
Unemployment insurance premium 34,558.64 734,465.20 743,088.81 25,935.03
Payment of annuity 676,731.60 676,731.60
Total 427,882.72 14,071,829.96 14,049,758.57 449,954.11
5.23 Taxes and surcharges payable
Tax and surcharge items Balance as at December 31, 2016 Balance as at January 1, 2016
Value-added tax 5,721,081.61 1,627,575.29
Business tax 47,864.23
Enterprise income tax 41,900,219.50 42,415,008.13
Individual income tax 6,172,515.51 4,473,566.06
Urban maintenance and construction tax 301,166.34 88,576.02
Property tax 264,414.62 179,294.70
Educational surtax 227,392.77 73,626.10
River management fee 29,199.23 14,725.17
Foundation for water construction 24,237.67
Use tax of land 121,189.92 121,189.92
Stamp tax 3,688.10
Total 54,740,867.60 49,065,663.29
Overseas subsidiaries were subject to the statutory tax rates in accordance with the corresponding countries' tax law.
5.24 Interest payable
Item Balance as at December 31, 2016 Balance as at January 1, 2016
Term interest on long-term borrowings due
441,316.11
in installments
Short-term loan interest payable 1,649,249.48 88,934.73
Total 2,090,565.59 88,934.73
5.25 Dividends payable
Balance as at
Balance as at Reasons for failure to pay
Company name December 31,
January 1, 2016 for more than one year
Light Industrial Holding Group Co., Ltd 959,269.79 959,269.79 long aging, unable to pay
Privately-owned corporate shares 73,549.07 73,549.07 long aging, unable to pay
Total 1,032,818.86 1,032,818.86
5.26 Other payables
5.26.1 Presentation of other payables by nature of accounts
Item Balance as at December 31, 2016 Balance as at January 1, 2016
Other payables: 193,117,136.53 171,163,174.57
5.26.2 No amount was due to shareholders holding more than 5% (inclusive) voting shares of the Company
among amounts as at December 31, 2016.
5.26.3 Please refer to the Note 9.6 for details on amounts due to related parties among accounts payable as at
December 31, 2016.
5.27 Other current liabilities
Item Balance as at December 31, 2016 Balance as at January 1, 2016
Interest and rentals 808,706.39 319,502.32
Total 808,706.39 319,502.32
5.28 Long-term loans
Item Balance as at December 31, 2016 Balance as at January 1, 2016
Mortgage loans 67,134,878.40 27,884,136.00
Credit loans 1,489,984.87 1,489,984.87
Total 68,624,863.27 29,374,120.87
Note 1: the amount of 9,571,908.00 yuan (1,310,000.00 euros) mortgage loans at Dec 31st, 2016. The relevant
matters of the mortgage loan above see note “5. Notes to the items of consolidated financial statements” and”5.19
short-term loans note 1.”
Note 2: the amount of 57,562,970.40 yuan (7,878,000.00 euros) mortgage loans at December 31, 2016. The relevant
matters of the mortgage loan above see note guarantees related to the above matters refer to Note \"X. commitments
and matter\" and \"(b) Contingencies\" and \"Note 5”.
5.29 Long-term payables
Item Balance as at December 31, 2016 Balance as at January 1, 2016
STOLL stock equity transfer fee 33,831,447.47
Others 3,507,014.14 4,724,683.15
Total 37,338,461.61 4,724,683.15
5.30 Long-term employee compensation payable
5.30.1 Presentation of long-term employee compensation payable
Item Balance as at December 31, 2016 Balance as at January 1, 2016
1. Post-employment benefits - net liability of
251,784,116.62 237,994,365.76
defined benefit plan
2. Dismissal welfare
3. Other long-term benefits 3,902,832.30 1,482,061.76
Total 255,686,948.92 239,476,427.52
5.30.2 Changes in defined benefit plan liabilities
(i) Present value of defined benefit plan liabilities
Item Year 2016 Year 2015
1．Beginning Balance 259,067,109.76 284,922,506.24
2．Defined benefit cost included in P&L
（1）Cost in current period 931,278.30 837,147.58
（2）Cost in prior period
（3）Gain (+) / Loss (-)
（4）Net Interests 5,103,698.40 5,299,628.45
3．Defined benefit cost included in OCI
（1）Actuarial gain (+) / loss (-) 19,268,031.60 2,696,176.00
4．Other changes
（1）Payment in settlement
（2）Benefit paid -20,693,443.80 -20,548,167.75
（3）Changes in exchange rate 7,777,347.96 -14,140,180.76
5．Ending Balance 271,454,022.22 259,067,109.76
(ii)Defined benefit plan of ShangGong (Europe) Holding Corp. GmbH, is based on supporting commitment.
The base of measuring supporting liability is on actuarial and hypothesis, not only consider known and possessed
right to draw defined benefit plan, but the increase of future payroll and defined benefit plan. By the end of 2016,
the weighted average period of defined benefit plan liability is 10.36 year. (10.32 year by the end of 2015). Assumed
payment of defined benefit plan in 2017 is the same as in 2016.
(iii) The significant actuarial assumptions
The method used to calculate pension obligations is actuarial. The computation basis includes life expectancy,
developed rate, changes in pension, and developed payroll trends.
In 2016, actuarial assumptions are below, compared with 2015
Item Year 2016 Year 2015
Actuaria rate 1.45% 2.00% or 2.10%
Rate of payroll increase 2.00% 2.00%
Rate of pension increase 1.50% 1.50%
(iv) Sensitivity analysis
On Dec 31, 2016, sensitivity analysis was executed based on rational judgment possible changes in assumptions.
Other assumptions remain unchanged.
PV of defined benefit plan PV of defined benefit plan
Item
liability increase liability decrease
Discount rate (changed by 0.5%) 15,553,080.90 -14,071,835.10
Increase in payroll (changed by 0.5%) 432,641.10 -395,976.60
Increase in pension (changed by 0.5%) 12,751,913.10 -11,827,967.70
Life expectancy (changed by 1 year) 23,303,956.20
The sensitivity analysis above may not reflect the actual change of present value of defined benefit plan.
5.31 Deferred income
Balance as at
Balance as at
Item Increase in 2016 Decrease in 2016 December 31, Reason
January 1, 2016
Government
3,600,000.00 3,600,000.00
subsidies
Total 3,600,000.00 3,600,000.00
The item of the government subsidies:
subsidies Asset-related
Balance as at Balance as at
Increase in included in /
Liability item January 1, Other change December 31,
2016 current profit income-relate
2016
and loss d
subsidies Asset-related
Balance as at Balance as at
Increase in included in /
Liability item January 1, Other change December 31,
2016 current profit income-relate
2016
and loss d
New product
development 1,260,000.00 1,260,000.00 Asset-related
fund subsidy
Development
of services to
2,200,000.00 2,200,000.00 Asset-related
guide the
funds
Taizhou
science and
140,000.00 140,000.00 Asset-related
technology
funds
Total 3,600,000.00 3,600,000.00
5.32 Other non-current liabilities
Item Balance as at December 31, 2016 Balance as at January 1, 2016
Other long-term loan 520,000.00 520,000.00
Total 520,000.00 520,000.00
5.33 Share capital
Increase (+) and decrease (-) for the current year
Item Balance as at January 1, 2016 Balance as at December 31, 2016
Issuance of new shares Others Sub-total
Total shares 548,589,600.00 548,589,600.00
5.34 Capital reserves
Balance as at December
Item Balance as at January 1, 2016 Increase in 2016 Decrease in 2016
31, 2016
Stock premium 851,345,853.61 851,345,853.61
Other capital reserves 104,940,167.82 15,317,098.84 120,257,266.66
Total 956,286,021.43 15,317,098.84 971,603,120.27
Note 1: the changes in capital reserve of subsidiaries within the combination scope were the reason for the increase
in other capital reserves in 2016.
5.35 Other comprehensive income
Year 2016
Less: recognized as
other comprehensive Balance as at
Balance as at Accrual before Attributable to Attributable to
Item income for previous Less: income December 31,
January 1, 2016 income tax for owners of the minority
years and transferred in tax expenses
the current year parent company shareholders
the profit or loss for the
current year
1. Other comprehensive income that cannot be
reclassified in the loss and gain in the future -36,674,709.19 -18,222,256.50 -5,726,994.90 -12,495,261.60 -747,955.80 -49,169,970.79
Including: change in re-measurement of the net
liabilities and net assets under defined benefit plan -36,674,709.19 -18,222,256.50 -5,726,994.90 -12,495,261.60 -747,955.80 -49,169,970.79
A share in other comprehensive income of investee
that cannot be reclassified in the losses and gains
under the equity method
2. Other comprehensive income that will be
reclassified in the loss and gain in the future -48,596,188.67 -5,377,886.69 -5,377,886.69 1,343,760.29 -53,974,075.36
Including: a share in other comprehensive income
of investee that will be reclassified in the loss
and gain under the equity method
Losses and gains on the change in fair value of
available-for-sale financial assets 45,068,484.49 -11,097,717.71 -11,097,717.71 33,970,766.78
Held-to-maturity investments reclassified as losses
and gains on available-for-sale financial assets
Effective portion of losses and gains on cash flow
hedges
Foreign currency translation differences -93,664,673.16 5,719,831.02 5,719,831.02 1,343,760.29 -87,944,842.14
Total other comprehensive income -85,270,897.86 -23,600,143.19 -5,726,994.90 -17,873,148.29 595,804.49 -103,144,046.15
5.36 Surplus reserves
Balance as at Increase in Decrease in Balance as at December
Item
January 1, 2016 2016 2016 31, 2016
Statutory surplus reserves 2,273,121.26 2,273,121.26
Discretionary surplus reserves 2,273,121.26 2,273,121.26
Total 4,546,242.52 4,546,242.52
5.37 Retained earnings
Item Year 2016 Year 2015
Adjustments to retained earnings as at December 31, 2015 350,523,121.40 193,106,033.92
Adjustments to total retained earnings as at January 1, 2016 (\"+\"
for increase, \"-\" for decrease)
Adjusted retained earnings as at January 1, 2016 350,523,121.40 193,106,033.92
Plus: net profit attributable to owners of the parent company for
144,231,343.84 157,417,087.48
2016
Less: withdrawal of statutory surplus reserves
Withdrawal of discretionary surplus reserves
Withdrawal of general risk reserves in 2016
Ordinary share dividends payable
Ordinary share dividend transferred to share capital (paid-in
capital)
Other transfer-out
Adjustments to retained earnings as at December 31, 2016 494,754,465.24 350,523,121.40
5.38 Operating income and operating costs
Year 2016 Year 2015
Item
Income Cost Income Cost
Primary business 2,667,640,604.13 1,973,006,896.38 2,260,456,212.19 1,577,574,082.65
Other businesses 92,214,532.85 64,337,146.33 53,583,398.06 37,176,145.81
Total 2,759,855,136.98 2,037,344,042.71 2,314,039,610.25 1,614,750,228.46
5.39 Taxes and surcharges
Item Year 2016 Year 2015
Business tax 786,921.23 1,679,642.73
Urban maintenance and construction tax 2,184,946.31 1,135,588.26
Educational surtax 1,645,996.37 950,832.41
Property tax 3,371,024.49
land use tax 921,590.00
Vehicle and vessel tax 15,749.00
Stamp tax 461,736.44
Others 258,613.42 2,349,247.23
Total 9,646,577.26 6,115,310.63
5.40 Selling expenses
Item Year 2016 Year 2015
Employee compensation 110,465,795.57 96,546,655.69
Fix and after-sale service charges 17,671,290.99 17,213,323.86
Office expenses 1,500,776.07 2,715,458.14
Travelling expenses 15,269,611.85 13,714,875.35
Transportation cost 20,672,105.74 18,224,966.53
Advertising expense 3,880,845.81 5,163,436.61
Commission 30,827,727.63 22,738,387.55
Leasing and storage charges 5,810,727.46 7,023,480.02
Item Year 2016 Year 2015
Insurance premium 1,116,520.51 1,471,044.93
Conference fees 1,734,678.36 3,069,708.59
Depreciation costs 1,801,274.49 801,739.84
Exhibition fees 1,993,478.12 3,829,967.91
Samples, printing materials and scraps 10,131,407.47 8,759,310.16
Business entertainment expense 400,375.64 2,408,047.25
Online retail fee 1,408,135.92 1,454,397.05
Amortization of low cost and short lived articles 18,986.93
Others 22,136,580.34 28,096,462.88
Total 246,840,318.90 233,231,262.36
5.41 General and administrative expenses
Item Year 2016 Year 2015
Employee compensation 132,919,579.03 118,229,442.75
Office expenses 10,179,594.34 9,298,355.85
Utility bills 1,058,233.35 555,379.88
Entertainment expenses 4,507,195.41 3,497,508.54
Property insurance premium 2,163,291.56 1,959,199.76
Conference fees 988,892.40 182,653.16
Travelling expenses 10,256,106.62 7,252,530.39
Depreciation costs 8,297,542.45 7,746,387.90
Repair charges 1,350,753.40 738,092.06
Transportation cost 1,942,276.13 2,123,236.75
Rental fees 7,498,641.99 8,972,272.86
Costs of board meetings and supervisors' meetings 437,325.77 452,564.30
Agency fees and advisory expenses 15,075,759.60 12,081,241.13
Litigation cost 107,166.64 189,767.32
New product development expenses 79,875,768.91 71,828,659.40
Taxes and surcharges 1,039,261.95 1,118,433.43
Amortization of intangible assets 2,197,402.83 2,196,274.28
Long-term deferred expenses 142,247.19 22,250.10
Amortization of low cost and short lived articles 622,627.46
Others 3,496,694.44 7,033,392.56
Total 284,156,361.47 255,477,642.42
5.42 Financial expenses
Type Year 2016 Year 2015
Interest expenses 14,429,199.42 14,591,904.92
Less: interest income 3,379,640.96 5,432,888.28
Gains and losses on exchange 2,596,952.55 -5,699,202.02
Others 1,889,583.50 2,632,044.48
Total 15,536,094.51 6,091,859.10
5.43 Losses from asset impairment
Item Year 2016 Year 2015
Losses from bad debts 6,676,755.82 -1,057,684.84
Losses from inventory impairment 7,064,153.47 14,286,392.05
Losses from long-term investment impairment 3,280,617.68 825,260.18
Losses on impairment of goodwill 17,010,069.96
Total 17,021,526.97 31,064,037.35
5.44Investment income
Item Year 2016 Year 2015
Long-term equity investments measured under equity method 17,937,107.88
Investment income from financial assets measured at fair value
1,071,204.85
through current profit and loss during the
Investment income from disposal of financial assets measured at fair
45,684.32
value through current profit and loss
Investment income from holding of available-for-sale financial assets 23,537,656.97 18,275,165.03
Investment income from disposal of available-for-sale financial assets 715,552.60 2,228,941.34
Others 9,726,909.75 20,834,080.48
Total 51,962,911.52 42,409,391.70
Note: \"others\" mainly refer to the gains of 6,388,717.79 yuan from finance products among other current assets and
the investment income of RMB 3,338,191.96 yuan from yield enhancement products.
5.45 Non-operating income
Amounts included in
the non-recurrent
Item Year 2016 Year 2015
profit and loss for the
current year
Total gains from disposal of non-current assets 4,772,309.14 5,728,673.89 4,772,309.14
Including: gains from disposal of fixed assets 4,772,309.14 5,728,673.89 4,772,309.14
Gains on disposal of intangible assets
Gains from debt restructuring
Gains from exchange of non-monetary assets/Gains
from transaction of non-currency assets
Donation accepted
Government subsidies 11,190,319.23 6,668,426.57 11,190,319.23
Penalty revenue 4,799.00 100.00 4,799.00
Payables unable to pay 12,985,247.33 1,299,849.22 12,985,247.33
Others 4,993,600.61 6,800,294.85 4,913,600.61
Total 33,946,275.31 20,497,344.53 33,866,275.31
Government subsidies included in current profit and loss
Asset-related /
Item Year 2016 Year 2015
income-related
Governmental financial subsidies 9,812,695.21 649,000.00 Income-related
Special funds of Shanghai Municipality for overseas
1,214,100.00 Income-related
investment cooperation
Subsidies for dyeing out of yellow-label cars 10,000.00 Income-related
Subsidies for Management of Old Public Houses in
558,166.58 222,543.19 Income-related
Shanghai Municipality
Development zone subsidies 4,566,783.38 Income-related
Subsidies for small and medium sized enterprises
6,000.00 Income-related
international market FSC certification
Industry development funds 500,000.00 Income-related
Workers occupational funds 120,345.62 Income-related
Others 199,111.82 Income-related
Total 11,190,319.23 6,668,426.57
5.46 Non-operating expenses
Amounts included in the
Item Year 2016 Year 2015 non-recurrent profit and
loss for the current year
Total losses from disposal of non-current assets 1,242,523.33 348,659.64 1,242,523.33
Including: losses from disposal of fixed assets 1,242,523.33 348,659.64 1,242,523.33
Amounts included in the
Item Year 2016 Year 2015 non-recurrent profit and
loss for the current year
Losses from disposal of intangible assets
Losses from debt restructuring
Losses from exchange of non-monetary assets
Donations made 202,000.00 200,000.00 202,000.00
Amercement and overdue fine outlay 461,786.38 127,555.11 461,786.38
Extraordinary losses 10,000.00 10,000.00
Others 57,396.39 57,396.39
Total 1,973,706.10 676,214.75 1,973,706.10
5.47 Income tax expenses
Item Year 2016 Year 2015
Current income tax calculated according to the tax
77,053,098.86 55,356,116.31
law and relevant provisions
Deferred income tax expenses -5,372,738.58 -2,073,259.15
Total 71,680,360.28 53,282,857.16
5.48 Items of the statement of cash flows
5.48.1 Cash received from other operating activities
Item Year 2016 Year 2015
Current accounts and advances withdrawn 11,155,962.13 13,467,371.42
Special subsidies and grants 17,695,144.32 6,514,074.10
Interest income 3,285,423.73 5,927,147.86
Non-operating income: 4,691,897.24 7,193,338.62
Other income 1,871,538.14 116,336.78
Total 38,699,965.56 33,218,268.78
5.48.2 Cash paid for other operating activities
Item Year 2016 Year 2015
Current accounts paid 22,397,687.95 53,926,015.62
Selling expenses 96,985,103.94 87,959,171.04
General and administrative expenses 86,993,815.09 55,612,388.75
Non-operating expenses 672,888.73 281,101.21
Other 3,524,541.86
Total 210,574,037.57 197,778,676.62
5.48.3 Cash received from other investing activities
Item Year 2016 Year 2015
Cash and cash equivalents held by subsidiary on the date
60,250,855.95
of purchase
Total 60,250,855.95
5.48.4 Cash received from other financing activities
Item Year 2016 Year 2015
Guarantee deposit 25,402,158.23 29,523,531.37
Total 25,402,158.23 29,523,531.37
5.48.5 Cash paid for other financing activities
Item Year 2016 Year 2015
Directiaonal seasoned offering and the relevant expenses 50,000,000.00
Total 50,000,000.00
5.49 Supplementary information to the statement of cash flows
5.49.1 Supplementary information to the statement of cash flows
Supplementary information: Year 2016 Year 2015
1. Net profit adjusted to cash flows from operating
activities
Net profit 161,565,335.61 176,256,934.25
Plus: provision for assets impairment 17,021,526.97 31,064,037.35
Depreciation of fixed assets and others 36,225,651.25 43,725,355.85
Amortization of intangible assets 25,558,009.11 9,729,544.56
Amortization of long-term deferred expenses 142,247.19 31,150.10
Losses on disposal of fixed assets, intangible assets and
-3,540,682.92 -5,380,014.25
other long-term assets (\"-\" for gains)
Losses on write-off of fixed assets （“-” for gains） 10,897.11
Losses from changes in fair value (\"-\" for gains)
Financial expenses (“-” for income) 3,290,867.10 24,880,850.30
Investments losses (\"-\" for gains) -51,962,911.52 -42,409,391.70
Decreases in the deferred income tax assets (“-” for
-8,296,099.30
increases) -3,974,648.75
Increases in the deferred income tax liabilities (“-” for
-2,418,716.58
decreases) 970,342.34
Decreases in inventories (“-” for increases) -69,253,896.66 -74,102,597.39
Decreases in operating payables (“-” for increases) -17,020,310.57 -28,937,336.74
Increases in operating payables (“-” for decreases) 8,889,638.76 -80,967,362.38
Others
Net cash flows from operating activities 99,056,912.42 50,886,863.54
2. Significant investment and financing activities
involving no cash receipts and payments
Conversion of debt into capital
Convertible corporate bonds maturing within one year
Fixed assets acquired under financial lease
3. Net change in cash and cash equivalents:
Balance of cash as at December 31, 2014 750,357,929.63 744,700,658.82
Less: balance as at January 1, 2014 of cash 744,700,658.82 581,848,889.10
Plus: balance as at December 31, 2014 of cash equivalents
Less: balance as at January 1, 2014 of cash equivalents
Net increase in cash and cash equivalents 5,657,270.81 162,851,769.72
5.49.2 Net cash paid to acquire subsidiaries for the current year: None
5.49.3 Breakdowns of cash and cash equivalents:
Item Balance as at December 31, 2016 Balance as at January 1, 2016
1. Cash 750,357,929.63 744,700,658.82
Including: cash on hand 1,137,409.87 1,454,927.52
Unrestricted bank deposit 749,011,456.34 731,170,363.19
Other unrestricted monetary funds 209,063.42 12,075,368.11
Deposit in central bank available for payment
Deposits with banks and other financial
institutions
Loans from banks and other financial
institutions
Item Balance as at December 31, 2016 Balance as at January 1, 2016
2. Cash equivalents
Including: bond investments maturing within
three months
3. Balance of cash and cash equivalents as at
750,357,929.63
December 31, 2015 744,700,658.82
Including: cash and cash equivalents restricted
for use by the parent company or subsidiaries
within the group
Note: Cash and cash equivalents restricted for use were not included in cash and cash equivalents
5.50 Monetary items in foreign currency
5.50.1 Monetary items in foreign currency
balance of foreign Balance of conversion into
Item currency as at December Exchange rate RMB as at December 31,
31, 2016
Cash and cash equivalents
Including: HKD 513,044.74 0.8945 458,918.52
USD 6,449,518.98 6.9370 44,740,313.17
EUR 64,533,125.33 7.3068 471,530,640.10
JPY 79,667.64 4.7995 382,364.84
SGD 255,000.00 0.059591 15,195.71
5.50.2 Description of overseas operating entities
The domicile of primary operation of the Company's subsidiary, Shanggong (Europe) Holding Co., Ltd. is in
Germany, with Euro as functional currency for it is the applicable currency for the operation region.
6. Change in the scope of consolidation
6.1 Business combinations not under common control
None.
6.2 Other changes in the scope of consolidation
The Company and Dürkopp Adler AG (hereby referred to as the “DA AG”) which is the wholly-owned subsidiary
of ShangGong (Europe) Holding Corp. GmbH jointly set up Shanghai ShangGong Financial Leasing Co.,Ltd.
(hereby referred to as the “Financial Leasing Co.,Ltd”) on Jun 22nd, 2016, in which: the Company monetary
invested 5,100,000.00 USD, equal to 33,452,430.00 yuan, accounting for 51.00% of the share capital; DA AG
monetary invested 4,900,000.00USD, equal to 32,237,590.36 yuan, accounting for 49.00%. The proportion of the
board of directors is the same as the proportion of shares held, and President and Chief Financial Officer dispatched
by the Company, the Company could totally Control Financial Leasing Co., Ltd., thereby Financial Leasing Co., Ltd.
shall be included in the consolidation scope in the current period.
7. Equity in other entities
7.1 Equity in subsidiaries
7.1.1 The composition of enterprise groups
Domicile of Shareholding ratio (%) Way of
Name of subsidiary primary Registered place Business nature
Direct Indirect acquisition
operation
Domicile of Shareholding ratio (%) Way of
Name of subsidiary primary Registered place Business nature
Direct Indirect acquisition
operation
Shanghai Shanggong Butterfly Production and sales
Shanghai Shanghai 100.00 Investment
Sewing Machines Co.,Ltd of sewing machines
DAP Trade (Shanghai) Co., Sales of sewing
Shanghai Shanghai 100.00 Investment
Ltd. machines
Sales of office
Shanghai SMPIC Imp. & Exp. equipment and
Shanghai Shanghai 100.00 Investment
Co., Ltd. import and export
service
Production and sales
Shanghai Shanggong SMPIC
Shanghai Shanghai of electronic 100.00 Investment
Electronics Co., Ltd.
equipment
Shanghai SGSB Asset and property
Shanghai Shanghai 100.00 Investment
Asset-management Co., Ltd. management
Business
Shanghai Fengjian Property Property combination
Shanghai Shanghai 100.00
Co., Ltd. Management under common
control
Business
Durkopp Adler Sewing Production and sales combination not
Suzhou Suzhou 51.00 49.00
Machines (Suzhou) Co., Ltd. of sewing machines under common
control
ShangGong (Europe) Holding Production and sales
Europe Europe 100.00 Investment
Co., Ltd. of sewing machines
Zhejiang Shanggong GEMSY Production and sales
Taizhou Taizhou 60.00 Investment
Sewing Technology Co., Ltd. of sewing machines
Business
Shanghai Shensi Enterprise combination not
Shanghai Shanghai Physical distribution 40.03
Development Co., Ltd. under common
control
Shanghai ShangGong Financial
Shanghai Shanghai Financial Leasing 51.00 49.00 Investment
Leasing Co.,Ltd.
7.1.2 Important non - wholly owned subsidiary
Other
Profit and loss comprehensive The dividend The minority
Minority attributable to income declared to shareholders
Name of subsidiary shareholders minority attributable to minority Equity balance
Shareholding% shareholders for the minority shareholders in at the end of
current period shareholders in the current period period
this period
Dürkopp Adler AG 6.00 12,693,565.07 595,804.49 1,803,893.40 62,243,046.90
Zhejiang Shanggong GEMSY Sewing
40.00 226,405.74 86,169,489.98
Technology Co., Ltd.
Shanghai Shensi Enterprise
59.97 4,414,020.96 143,572,031.30
Development Co., Ltd.
7.2 Equity in joint operation and joint venture
7.2.1 Important joint operation and joint venture
Name of joint Domicile of Shareholding ratio (%) Accounting measurement for
Registered
operation and joint primary Business nature investment in joint operation and joint
place Direct Indirect
venture operation venture
H. Stoll AG & Co. Reutlingen Reutlingen Machine
26.00 Equity method
KG ，Germany ，Germany manufacturing
7.2.2 The main financial information of joint operation and joint venture
(Monetary unit: RMB'10,000)
Item Ending balance/Year 2016 Beginning balance/Year 2015
Current assets 146,192.99 132,231.82
Non-current assets 25,725.05 25,201.44
Total assets 171,918.04 157,433.26
Current liabilities 49,572.98 58,530.43
Non-current liabilities 27,952.89 9,890.71
Total liabilities 77,525.87 68,421.14
The book value of equity
investments in joint operation and 25,358.66
joint venture
The fair value of the equity
investment in the joint venture
Operating profits 205,175.28 168,029.96
Net profits 11,607.98 10,079.02
8. Disclose of fair value
The input value used for measuring fair value is divided into three levels:
- The input value of the first level is the unadjusted quotation of similar assets and liabilities that can be obtained in
an active market on the measurement date.
- The input value of second level is the directly and indirectly observable input value of the relevant assets or
liabilities other than the input value of the first level.
- The input value of the third level is the unobservable input value of the relevant assets or liabilities.
The level of the result of measurement of fair value is the lowest level that the input value which is significantly
meaningful for the overall measurement of fair value belongs to.
8.1 The fair value as at December 31, 2016 of assets and liabilities measured at fair value
Fair value as at December 31, 2016
Measured at the fair Measured at the Measured at the
Item
value of the first fair value of the fair value of the Total
level second level third level
1. Measurement at fair value based on going concern
(1) Financial assets measured at fair value through
4,000.00 4,000.00
current profit and loss
A. Financial assets held for trading 4,000.00 4,000.00
a. Investment in debt instruments
b. Investments in equity instruments 4,000.00 4,000.00
c. Derivative financial assets
B. Financial assets designated to be measured at fair
value through current profit and loss
a. Investment in debt instruments
b. investments in equity instruments
(2) Available-for-sale financial assets 107,980,989.31 107,980,989.31
a. Investment in debt instruments
b. Investments in equity instruments 107,980,989.31 107,980,989.31
c. Others
(3) Investment property
A. Use right of leased land
B. Leased buildings
C. Land use right held for transfer upon appreciation
Total amount of assets measured at fair value based
107,980,989.31 107,980,989.31
on going concern
(4) Financial liabilities held for trading
Including: issued bonds held for trading
Derivative financial liabilities
Others
(5) Designated financial liabilities measured at fair
value through current profit and loss
Fair value as at December 31, 2016
Measured at the fair Measured at the Measured at the
Item
value of the first fair value of the fair value of the Total
level second level third level
Total amount of liabilities measured at fair value
based on going concern
2. Measurement at fair value based on going concern
(1) Assets held for trading
Total amount of assets measured at fair value not
based on going concern
Total amount of liabilities measured at fair value not
based on going concern
8.2 Basis for determination of market price for measurement of fair value of the first level based on going
concern and not based on going concern.
The fair value as at December 31, 2016 of available-for-sale financial assets was determined on the basis of the
closing price of Shenzhen Stock Exchange and Shanghai Stock Exchange on December 31, 2016.
9. Related party and related party transaction
9.1 The parent company of the Company
On 29 December 2016, The Shanghai Pudong New Area State-owned Assets Supervision and Administration
Commission which is the original controlling shareholder and actual controller of the Company had sold 60.00
million A shares of the Company to Shanghai Puke Flyman Investment Co., Ltd. which is the wholly-owned
subsidiary of Shanghai Pudong Science and Technology Investment Co., Ltd. China Securities Depository and
Clearing Co., Ltd. has issued a \"transfer registration confirmation\" on the same day.
After the transfer, Shanghai Puke Flyman Investment Co., Ltd. held A shares accounted for 10.94% of the total
share capital of the Company, the largest shareholder of the Company; Shanghai Pudong New Area State-owned
Assets Supervision and Administration Commission held A shares accounted for 8.27%, the second largest
shareholder of the Company. After the completion of the equity transfer, the Company has changed to a listed
company with no controlling shareholder and no actual controller.
9.2 The subsidiaries of the Company
See the Note 7 Equity in Other Entities for the details of subsidiaries of the Company
9.3 The joint operation and joint ventures of the Company
See the Note 7 Equity in Other Entities for the details of joint operation and joint ventures of the Company
9.4 Other related parties of the Company
Name of other related parties Relationship with the Company
Shanghai Hirose Precision Industrial Co., Ltd. Investee
Shanghai Fuji Xerox Co., Ltd. Investee
Shanghai Kaile Investment Management Co., Ltd. Controlled by subsidiarys minority shareholders
Zhejiang GEMSY Electromechanical Co., Ltd. Controlled by subsidiarys minority shareholders
Stoll Electronics Co., Ltd. Other related company
9.5 Related party transactions
9.5.1Purchase and sale of goods, and rendering and receipt of services
Table of purchase of goods / receipt of services
Related party Content of related transaction Year 2016 Year 2015
Zhejiang GEMSY Electromechanical Co., Ltd. Purchase of fix assets 11.398,608.00 6,719,945.84
Zhejiang GEMSY Electromechanical Co., Ltd. Purchase of goods 420,458.64 55,513,209.93
Stoll Electronics Co., Ltd. Receiving of service 5,939,203.09
Table of sales of goods/rendering of services
Related party Content of related transaction Year 2016 Year 2015
Shanghai Fuji Xerox Co., Ltd. Sales of goods 30,492,057.89 37,539,189.14
Shanghai Fuji Xerox Co., Ltd. Rendering of service 403,666.58 230,666.62
Zhejiang GEMSY Electromechanical Co., Ltd. Sales of goods 92,240.42 4,196.58
Stoll Electronics Co., Ltd. Sales of goods 249,611.04
9.5.2 Leasing
The Company acted as lessor
(Monetary unit: RMB'10,000)
Name of leasee Type of leased asset Rental recognized in 2016 Rental recognized in 2015
Shanghai Hirose Precision
Machinery equipment 25.00 25.00
Industrial Co., Ltd.
9.5.3 Remuneration of key management members
(Monetary unit: RMB10,000)
Item Year 2016 Year 2015
Remuneration of key management members 470.75 366.77
Note: The remunerations of the Company's key management: the total remunerations of key management members
of the Company for 2016 amounted to RMB470.75 million (vs. RMB366.77 million for 2015). The key
management members of the Company in 2016 included directors, supervisors, general managers, duputy general
managers and secretaries of the Board, 17 persons in total (17 persons in 2015).
9.5.4 Other related transactions
None.
9.6 Accounts due from/to the related parties
9.6.1 Accounts receivable
Balance as at December 31, 2016 Balance as at January 1, 2016
Item Related party Provision for bad Provision for bad
Book balance Book balance
debts debts
Accounts
receivable
Shanghai Fuji Xerox Co., Ltd. 2,986,768.97 149,338.45 3,413,421.14 170,671.06
Zhejiang Baoshi Electromechanical
112,831.24 5,641.56
Co., Ltd.
Other
receivables
Zhejiang Baoshi Electromechanical
481,669.48
Co., Ltd.
Prepayment
Zhejiang GEMSY Electromechanical
6,874,421.03 7,366,357.64
Co., Ltd.
9.6.2 Accounts payable
Balance as at December Balance as at January 1,
Item Related party
31, 2016
Account payables
Stoll Electronics Co., Ltd. 750,113.09
Other payables
Zhejiang GEMSY Electromechanical Co., Ltd. 814,068.18
Shanghai Kaile Investment Management Co., Ltd. 900,000.00
Receipt in advance
Zhejiang GEMSY Electromechanical Co., Ltd. 90.00
10. Commitments or contingencies
10.1 Major commitment events
Mortgage loans and credit extension
Amount of
Mortgages/Collaterals Estimated use Borrower
borrowing
Bank deposits of EUR 328.40 thousands Guaranty ShangGong (Europe) Holding Corp. GmbH
Bank deposits of EUR 57.50 thousands Guaranty ShangGong (Europe) Holding Corp. GmbH
Surety margin of credit
Fixed assets of EUR13,120.00 thousands EUR3,930,000.00 ShangGong (Europe) Holding Corp. GmbH
line
Fixed assets of RMB31,538.50 thousand Guaranty ShangGong (Europe) Holding Corp. GmbH
500 thousand shares of Dürkopp Adler AG Guaranty EUR7,878,000.00 ShangGong (Europe) Holding Corp. GmbH
Note: ShangGong (Europe) Holding Corp. GmbH uses its holding of 500 thousand shares of Dürkopp Adler as
collateral to obtain two pieces of 2,750,000 bank letter (the guarantee period is from 7 January 2016 to 30 July
2017 and from 7 January 2016 to 30 July 2018, respectively), issued by German commercial bank. Shanggong
(Europe) holding Co., Ltd. guarantees that it will pay the consideration of share purchase to the seller of German
H.Stoll AG & Co.KG.
10. 2 Contingencies
10.2.1 The contingent liabilities arising from the provision of debt guarantees by the Company for its
subsidiary, ShangGong (Europe) Holding Corp. GmbH as at December 31, 2016
Commencement Expiration date of Whether the guarantee has
Guarantee Guarantee amount Remark
date of guarantee guarantee been fulfilled or not
The equivalent of
Shanghai Branch of the RMB58.00 million 2014/03/25 No Note 1
Commerzbank in EUR
Shanghai Branch of the
EUR8.00 million 2014/07/01 No Note 2
Commerzbank
Shanghai Branch of the
EUR12.00 million 2016/09/19 No Note 3
Commerzbank
Shanghai Branch of the
EUR10.00 million 2015/08/28 No Note 4
Commerzbank
Industrial and Commercial
bank Shanghai Hongkou EUR7.878 million 2015/12/21 2020/12/21 No Note 5
Branch
Note 1: On March 25, 2014, the Company's wholly-owned subsidiary, ShangGong (Europe) Holding Corp. GmbH,
applied to the Bielefeld Branch of the Commerzbank for a current fund loan of not more than the equivalent of RMB
58 million in EUR, the Shanghai Branch of the Commerzbank issued a financing guarantee letter for the funds, and
the Company issued a corporate letter of guarantee for payment of RMB 70 million as counter guarantee for the
abovementioned financing guarantee letter.
Note 2: on June 30, 2014, the Company's wholly owned subsidiary, ShangGong (Europe) Holding Corp. GmbH,
applied to the Bielefeld Branch of the Commerzbank for a current fund loan of EUR8 million, the Shanghai Branch
of the Commerzbank issued a financing guarantee letter for the funds, and the Company issued an unconditionally
irrecoverable corporate letter of guarantee for payment of EUR8.8 million as counter guarantee for the
abovementioned financing guarantee letter.
Note 3: on September 19, 2016, the Company's wholly owned subsidiary, ShangGong (Europe) Holding Corp.
GmbH, applied to the Bielefeld Branch of the Commerzbank for a short-term credit loan of EUR12 million, the
Shanghai Branch of the Commerzbank issued a financing guarantee letter for the funds, and the Company issued an
unconditionally irrecoverable corporate letter of guarantee for payment of EUR13.20 million.
Note 4: on August 28, 2015, the Company's wholly owned subsidiary, PFAFF Industrial Systems and Machinery
Co., Ltd., applied to the Kaiserslautern Branch of the Commerzbank for a loan of EUR10.00 million, the Shanghai
Branch of the Commerzbank issued a financing guarantee letter for the funds, and the Company issued an
unconditionally irrecoverable corporate letter of guarantee for payment of EUR11.00 million as counter guarantee
for the abovementioned financing guarantee letter.
Note 5: on December 21, 2015, the Company's wholly owned subsidiary, ShangGong (Europe) Holding Corp.
GmbH., applied to the Frankfurt Branch of the Commerzbank for a limit loan of EUR7.878 million, in order to
ShangGong (Europe) Holding Corp. GmbH. Pay the acquisition fee to Stoll Co., Ltd. Industrial and Commercial
bank Shanghai Hongkou Branch issued a financing guarantee letter for the funds, and the Company issued an
unconditionally irrecoverable corporate letter of guarantee for self-using fix assets where No.603 Dapu Road as
counter guarantee for the abovementioned financing guarantee letter.
As of December 31, 2016, there is no outflow of economic benefits arising from the above contingencies.
10.2.2 The agreement to increase capital to Shanghai Shensi Enterprise Development Co., Ltd.
According to our new capital increase agreement with Shanghai Shensi Enterprise Development Co., Ltd., by 30
June 2018, if Shensi has not realized IPO and listed independently in A shares market, the persons acting in concert,
Shanghai Pudong new Industrial Investment Co., Ltd., will be entitled to require our company and another
shareholder, Zhang Ping, to repurchase all or some of the shares that Shanghai Pudong new Industrial Investment
Co., Ltd. holds in cash, within 3 months after it requests in writing. And we should assist it in the approval process
of state-owned Assets Supervision and Administration Commission, commercial registration, etc. Per the agreement,
our company and Zhang Ping will assume 50% of the above mentioned amount, respectively, and our company
bears unconditional joint responsibility to repurchase the shares that Shanghai Pudong new Industrial Investment
Co., Ltd. holds.
If Shanghai Pudong new Industrial Investment Co., Ltd. has not listed in A shares market by 30 June 2018, it has 6
months(e.g. before 31 December 2018) to request our company and Zhang Ping to repurchase the shares which it
holds in Shanghai Shensi Enterprise Development Co., Ltd.. If not, our company and Zhang Ping will not assume
the above mentioned repurchase responsibility.
As of Dec. 31, 2016, its uncertain that Shensi will complete IPO in the A share market by June 30, 2018.
11. Post Balance Sheet Events
11.1 Profit Distribution
According to the decision of the Companys 35th Board Meeting (7th Round) on March 31, 2017, no dividends of
2016 will be distributed.
11.2 The merger of Shanghai Shanggong Butterfly Sewing Machines Co., Ltd.
According to the decision of the Companys 26th Board Meeting (7th Round) on March 18, 2016, the Company will
merge its wholly-owned subsidiary, Shanghai Shanggong Butterly Sewing Machines Co., Ltd. (hereinafter referred
to as Shanggong Butterfly), and after the merger, Shanggong Butterflys status of independent legal entity will be
cancelled by the Industrial and Commercial Administrations.
As of the audit report issuance date, Shanggong Butterfly, the branch company, has acquired the business license
with the uniform credit code of 91310000MA1FL2DPXG, and the other related merger events are in process.
11.3 The merger of DAP (Shanghai) Co., Ltd.
According to the decision of the Companys 32th Board Meeting (7th Round) on September 18, 2016, the Company
will merge its holding subsidiary, DAP (Shanghai) Co., Ltd. (hereinafter referred to as DAP Shanghai), and after the
merger, DAP Shanghais status of independent legal entity will be cancelled by the Industrial and Commercial
Administrations.
As of the audit report issuance date, the Company has transferred out the non-controlling interest, which amounts
to 40% of the shares. The registration of change at the Industrial and Commercial Administrations has completed,
and the merger events are still waiting for examination and approval by the Shareholders Meeting.
11.4 The merger of Durkopp Adler Sewing Machines Suzhou Co., Ltd.
According to the decision of the Companys 32th Board Meeting (7th Round) on September 18, 2016, the
Companys subsidiary, PFAFF Industrial Sewing Machines (Zhangjiagang) Co., Ltd. will merge the Companys
holding subsidiary, Durkopp Adler Sewing Machines Suzhou Co., Ltd. (hereinafter referred to as DA Suzhou), and
after the merger, DA Suzhous status of independent legal entity will be cancelled by the Industrial and Commercial
Administrations.
As of the audit report issuance date, the above merger events are in process.
11.5 Other post balance sheet events
None.
12. Other significant events
On December 13, 2016, the resolution of the 34th meeting of the 7th Board of Directors approved that the
Company's joint venture H. Stoll AG & Co. KG, intend to sign a loan agreement with a syndicate consisted of six
financial institutions which include Deutsche Bank's German Business Branch, Commerzbank, Baden-Württemberg
State banks. This agreement allows H. Stoll AG & Co. KG to have access to credit line of 60 million euros in total.
The subsidiary of the Company, ShangGong (Europe) Holdings Corp. GmbH, as a limited partner of H. Stoll AG &
Co. KG signed a contract with the syndicates. According to the contract, if H. Stoll AG & Co. KG did not meet the
key financial indicators agreed in the syndicated loan agreement, the income of H. Stoll AG & Co. KG would be
used to repay the syndicated loan prior to being allocated to ShangGong (Europe) Holdings Corp. GmbH
The board of directors of the Company has authorized the management of the subsidiary, ShangGong (Europe)
Holdings Corp. GmbH to sign the relevant agreement and to handle the relevant procedures.
13. Notes to mains items of the financial statements of the parent company:
13.1 Accounts receivable
13.1.1 Disclosure of classification of accounts receivable
Balance as at December 31, 2016 Balance as at January 1, 2016
Type Book balance Provision for bad debts Book balance Provision for bad debts
Proportion Proportion Book value Proportion Proportion Book value
Amount Amount Amount Amount
(%) (%) (%) (%)
Accounts
receivable with
significant single
amount and
provision for bad
debt made on an
individual basis
Accounts
receivable with
provision for bad
debt made on a
59,365,318.22 100.00 55,963,466.80 94.27 3,401,851.42 62,209,774.91 100.00 59,441,560.78 95.55 2,768,214.13
portfolio with
similar risk credit
characteristics
basis
Accounts
receivables with
insignificant
single amount
and provision for
bad debt made on
an individual
basis
Total 59,365,318.22 100.00 55,963,466.80 94.27 3,401,851.42 62,209,774.91 100.00 59,441,560.78 95.55 2,768,214.13
Accounts receivable with provision for bad debt made using the aging analysis method among the portfolios:
Balance as at December 31, 2016
Aging
Accounts receivable Provision for bad debts Provision ratio
Within 1 year 3,495,304.58 174,765.24 5.00%
1 to 2 years 56,134.09 11,226.82 20.00%
2 to 3 years 72,809.62 36,404.81 50.00%
Over 3 years 55,741,069.93 55,741,069.93 100.00%
Total 59,365,318.22 55,963,466.80
13.1.2 Accounts receivables provided, reversed or recovered in the report year.
The provision for bad debts for the current year amounted to RMB 51,585.01; there is no provision for bad debts
recovered or reversed in the current year.
13.1.3 Accounts receivable actually written off for the current year
The write-off of receivables amounted to RMB 3,529,678.99, representing those receivables with long ageing. All of
them are unrecoverable due to deregistration/cancellation of the customers.
13.1.4 Top five accounts receivable by the balance as at December 31, 2016 of the borrowers
Balance as at December 31, 2016
Company name Proportion in total accounts
Accounts receivable Provision for bad debts
receivable (%)
Customer A 11,530,775.39 19.72 11,530,775.39
Customer B 7,480,189.67 12.79 7,480,189.67
Customer C 4,679,327.49 8.00 4,679,327.49
Customer D 1,795,394.94 3.07 89,769.75
Customer E 1,687,149.74 2.89 1,687,149.74
Total 27,172,837.23 46.47 25,467,212.04
13.2 Other receivables
13.2.1 Disclosure of classification of other receivables
Balance as at December 31, 2016 Balance as at January 1, 2016
Type Book balance Provision for bad debts Book balance Provision for bad debts
Proportion Proportion Book value Proportion Proportion Book value
Amount Amount Amount Amount
(%) (%) (%) (%)
Other receivables
with significant
single amount and
58,951,200.82 37.63 58,951,200.82 100.00 55,927,851.11 42.24 55,927,851.11 100.00
provision for bad
debt made on an
individual basis
Other receivables
with provision for
bad debt made on
a portfolio with 97,725,812.44 62.37 19,332,590.89 19.78 78,393,221.55 76,488,791.16 57.76 18,269,591.28 23.89 58,219,199.88
similar risk credit
characteristics
basis
Other receivables
with insignificant
single amount and
provision for bad
debt made on an
individual basis
Total 156,677,013.26 100.00 78,283,791.71 49.97 78,393,221.55 132,416,642.27 100.00 74,197,442.39 56.03 58,219,199.88
Other receivables with significant single amount and provision for bad debts made on an individual basis as at
December 31, 2016:
Balance as at December 31, 2016
Other receivables
Provision for bad
(by entity): Other receivables Proportion of Provision Reason for provision
debts
Customer A 46,350,286.62 46,350,286.62 100.00% Not expected to recover
Customer B 12,600,914.20 12,600,914.20 100.00% Not expected to recover
Total 58,951,200.82 58,951,200.82 100.00%
Other receivables with provision for bad debts made using the aging analysis method among those portfolios:
Balance as at December 31, 2016
Aging
Other receivables Provision for bad debts Proportion of Provision
Within 1 year 82,457,879.57 4,122,893.98 5.00%
1 to 2 years 66,723.39 13,344.68 20.00%
2 to 3 years 9,714.50 4,857.25 50.00%
Over 3 years 15,191,494.98 15,191,494.98 100.00%
Total 97,725,812.44 19,332,590.89
13.2.2 Provision for bad debts provided, reversed or recovered in the report year.
The provision for bad debts provided in the current year amounted to RMB 4,215,755.52; there are RMB 4,586.14
provision for bad debts recovered or reversed in the current year.
13.2.3 Other receivables actually written off during the reporting period.
The total accounts receivable actually written off in the current reporting period amounted to RMB124,820.06; the
key reason for write-off was that the customers have filed an application for bankruptcy and deregistration.
13.2.4 Top five other receivables by the balance as at December 31, 2016 of the borrowers
Balance of
Balance as at provision for bad
Company Nature of Proportion in total
December 31, Aging debts as at
name fund other receivable (%)
2016 December 31,
Current Within 1 year
Customer A 49,358,232.97 31.32 46,500,683.94
accounts or over 3 years
Current
Customer B 38,797,432.82 Within 1 year 24.62 1,939,871.64
accounts
Current
Customer C 27,599,125.00 Within 1 year 17.52 1,379,956.25
accounts
Current
Customer D 12,600,914.20 Over 3 years 8.00 12,600,914.20
accounts
Current
Customer E 11,572,940.88 Within 1 year 7.34 578,647.04
accounts
Total 139,928,645.87 88.80 63,000,073.07
13.3 Long-term equity investments
Balance as at December 31, 2016 Balance as at January 1, 2016
Item Provision for Provision for
Book balance Book value Book balance Book value
impairment impairment
Investments in subsidiaries 638,117,724.99 8,632,624.09 629,485,100.90 569,642,909.37 5,500,000.00 564,142,909.37
Investments in associates and joint
ventures
Total 638,117,724.99 8,632,624.09 629,485,100.90 569,642,909.37 5,500,000.00 564,142,909.37
Among which, details on investments in subsidiaries
Provision for Balance of provision for
Balance as at Increase in Decrease Balance as at
Investee impairment provided impairment as at
January 1, 2016 2016 in 2016 December 31, 2016
in the current year December 31, 2016
ShangGong (Europe)
142,370,693.64 142,370,693.64
Holding Corp. GmbH
Shanghai Shanggong
Butterfly Sewing Machines 79,000,000.00 79,000,000.00
Co., Ltd
DAP (Shanghai) Co., Ltd. 24,403,443.11 35,022,385.62 59,425,828.73
Shanghai SMPIC
20,000,000.00 20,000,000.00
Electronics Co., Ltd.
Duerkopp Adler Sewing
15,685,694.98 15,685,694.98 3,132,624.09 3,132,624.09
Machines Suzhou Co., Ltd
Shanghai SMPIC Imp. &
12,000,000.00 12,000,000.00
Exp. Co., Ltd.
Shanghai SGSB
60,000,000.00 60,000,000.00 5,000,000.00
Asset-management Co., Ltd.
Shanghai Fengjian Property
500,000.00 500,000.00 500,000.00
Co., Ltd.
Zhejiang SG & GEMSY
Sewing Technology Co., 129,600,000.00 129,600,000.00
Ltd.
Shanghai Shensy Enterprise 86,083,077.64 86,083,077.64
Development Co., Ltd.
Shanghai ShangGong
33,452,430.00 33,452,430.00
Financial Leasing Co.,Ltd.
Total 569,642,909.37 68,474,815.62 638,117,724.99 3,132,624.09 8,632,624.09
13.4 Operating income and operating costs
Year 2016 Year 2015
Item
Income Cost Income Cost
Primary business 8,240,323.71 6,794,097.74 12,496,983.24 10,738,637.59
Other businesses 27,384,684.44 13,068,646.13 22,051,642.22 10,382,639.77
Total 35,625,008.15 19,862,743.87 34,548,625.46 21,121,277.36
13.5 Investment income
Item Year 2016 Year 2015
Long-term equity investment measured at cost method 6,768,786.51
Long-term equity investment measured at equity method
Investment income from disposal of long-term equity
investments
Investment income from holding of financial assets measured at
1,071,204.85
fair value through current profit and loss
Investment income from disposal of financial assets measured at
11,448.29
fair value through current profit and loss
Investment income from holding of available-for-sale financial
13,844,846.59
assets
Investment income from holding of available-for-sale financial
23,537,656.97
assets
Investment income from disposal of available-for-sale financial
715,552.60
assets
Gains from re-measurement of residual equity at fair value after
the loss of control right
Others 9,494,074.41 20,811,622.47
Total 33,758,732.27 42,496,460.42
Note: \"others\" mainly refer to the gains of RMB 6,388,717.79 from financing product and gains of RMB
3,105,356.62 from structured deposits among other current assets.
14. Supplementary information
14.1 Extraordinary profit or loss for the current year
Item Amount Remark
Profits or losses from disposal of non-current assets 3,529,785.81
Tax returns, deduction and exemption approved beyond the
-
authority or without official approval documents
Government grants included in current profits and losses (except for
government grants closely related to the enterprise business, 11,190,319.23
obtained by quota or quantity at unified state standards)
Payment for use of state funds received from non-financial
-
institutions recorded in current profits and losses
Gains from the difference between the investment costs of
acquisition of subsidiaries, associates and joint ventures and share in
-
the net fair value of the identifiable assets of the investee when
investing
Gains or losses from non-monetary asset exchange -
Gains or losses from entrusting the investments or management of
-
asset
Impairment provision for force majeure such as natural calamities -
Gains or losses from debt restructuring -
Item Amount Remark
Restructure expenses, such as the compensation for employee
-
relocation and integration costs
Gains or losses from transactions with obvious unfair transaction
-
price
Year-to-date net profits or losses of subsidiaries arising from
-
business combinations under common control
Profits or losses arising from contingencies not related to the
-
companys normal business
Except for effective hedging business related to the normal business
of the company, profits or losses from fair value changes in
held-for-trading financial assets and held-for-trading financial
4,708,383.25
liabilities, and investment income from disposal of held-for-trading
financial assets, held-for-trading financial liabilities and
available-for-sale financial assets
Reversal of the impairment provision for receivables subject to
