2021 Annual Report
April 2022
Section I Important Notice, Contents and DefinitionsThe Board of Directors and the Board of Supervisors of the Company and itsdirectors, supervisors and senior management warrant that the informationcontained in this annual report is true, accurate and complete without any falserecords, misleading statements or material omissions, and severally and jointlyaccept legal liability thereof.Xie Bingzheng, the person in charge of the Company, Tang Xinqiao, the personin charge of accounting of the Company, and Chen Shaobing, the person incharge of the accounting department of the Company, have declared that theywarrant the truthfulness, accuracy and completeness of the financial statementsset out in this annual report.All directors of the Company attended the Board meeting on which this reportwas reviewed.The forward-looking statements in this annual report, including developmentstrategies and business plans, do not constitute substantive commitments of theCompany to investors. Investors and related personnel should remain vigilantand understand the differences between plans, forecasts and commitments.Investors should be aware of the investment risks.The Company needs to comply with information disclosure requirements on thetextile and garment-related industries as stipulated in the SZSE Guidelines No. 3
for the Self-discipline and Supervision of Listed Companies — IndustryInformation Disclosure.The Company has described potential risks it may face in the future in “SectionIII Discussion and Analysis of the Management” and “Section XI FutureDevelopment Prospects of the Company”. Investors should be aware of theinvestment risks.The Board meeting has deliberated and approved the following profitdistribution proposal: Distribute a cash dividend of RMB3.00 (tax inclusive) forevery 10 shares to all shareholders based on a total share capital of 570,707,084shares as at March 31, 2022; no bonus shares will be issued and no capitalreserve will be converted into share capital.
Contents
Section I Important Notice, Contents and Definitions ...... 2
Section II Company Profile and Key Financial Indicators ...... 8
Section III Discussion and Analysis of the Management ...... 13
Section IV Corporate Governance ...... 59
Section V Environmental and Social Responsibilities ...... 83
Section VI Significant Events ...... 85
Section VII Changes in Shareholding and Information of Shareholders ...... 95
Section VIII Particulars of Preference Shares ...... 103
Section IX Particulars of Bonds ...... 104
Section X Financial Report ...... 108
Documents Available for Inspection
(1) Financial statements affixed with official stamps and the signatures of the Company’s responsible person, the person in charge ofaccounting, and the person in charge of accounting department of the Company;
(2) Original of the audit report affixed with the stamp of the accounting firm as well as stamps and signatures of the certified publicaccountants;
(3) All original copies of the Company’s documents and the original drafts of the Company’s announcements as disclosed onwebsites designated by the CSRC during the reporting period;
(4) Place for document inspection: Office of the Board of Directors.
Terms and Definitions
| Term | Definition | |
| Issuer, Company, the Company, joint-stock company, BIEM.L.FDLKK | BIEM.L.FDLKK Garment Co., Ltd. | |
| Controlling shareholder, actual controller | Xie Bingzheng and Feng Lingling, who are a couple | |
| Persons acting in concert | Xie Bingzheng, Feng Lingling and Xie Ting | |
| Articles of Association | Articles of Association of BIEM.L.FDLKK Garment Co., Ltd. | |
| A shares | RMB-denominated ordinary shares with a par value of RMB1.00 per share | |
| RMB | Official currency of PRC | |
| Company Law | The Company Law of the People’s Republic of China | |
| Securities Law | The Securities Law of the People’s Republic of China | |
| CSRC | China Securities Regulatory Commission | |
| SZSE | Shenzhen Stock Exchange | |
| Huaxing | Huaxing Certified Public Accountants LLP | |
| Garment | A general term for articles that decorate the human body, including clothes, shoes, hats, socks, gloves, scarves, ties, bags, etc. | |
| Direct sale |
A model where the Company opens direct retail terminals, is responsiblefor the management of the terminal stores and bears all channel costs
| Franchise | A model where the Company signs a franchise contract with enterprises or individuals up to certain certifications, granting them the right to run the Company’s branded clothes by opening franchise stores within a certain period of time and region, while the Company provides corresponding guidance and support. The franchisee is responsible for the management and operation of the terminal store and bears channel expenses. | |
| Joint operation | A model where the Company signs an agreement with the joint operation party (shopping malls, airports, golf clubs) who provides the business premise, collects payments from and issues invoices to consumers, and settles with the Company after deducting a certain percentage from the sales revenue. This model is also called “store-within-a-store” in the industry, and the joint operation party allows the Company to renovate and display based on its own styles for brand image presentation and promotion. | |
| Garment factory | Manufacturing enterprises that process fabrics and accessories into |
| garments | ||
| Supplier | A collective term for fabric suppliers, accessory suppliers and garment factories |
Section II Company Profile and Key Financial IndicatorsI. Company Information
| Stock abbreviation | BYLF | Stock code | 002832 |
| Stock exchange on which the shares are listed | Shenzhen Stock Exchange | ||
| Chinese name of the Company | 比音勒芬服饰股份有限公司 | ||
| Abbreviation of Chinese name of the Company | 比音勒芬 | ||
| English name of the Company (if any) | BIEM.L.FDLKK GARMENT CO., LTD. | ||
| Abbreviation of English name of the company (if any) | BIEM | ||
| Legal Representative of the Company | Xie Bingzheng | ||
| Registered address | No. 608 East Xingye Avenue, Nancun Town, Panyu District, Guangzhou City | ||
| Postal code of registered address | 511442 | ||
| Historical changes of the Company’s registered address | Date of first registration: January 2, 2003; Registered address: Room 3001, Tianyu Garden, No. 138 Linhe Middle Road, Tianhe District, Guangzhou; Date of registration change: November 28, 2007; Registered address: All of No. 309 Xingye Avenue, Nancun Town, Panyu District, Guangzhou; Date of registration change: March 18, 2020; Registered address: No. 608 East Xingye Avenue, Nancun Town, Panyu District, Guangzhou City. | ||
| Office address | No. 608 East Xingye Avenue, Nancun Town, Panyu District, Guangzhou City | ||
| Postal code of office address | 511442 | ||
| Company website | www.biemlf.com | ||
| investor@biemlf.com | |||
II. Contact Persons and Contact Methods
| Sectary to the Board | Representative of securities affairs | |
| Name | Chen Yang | Chen Haihua |
| Address | No. 608 East Xingye Avenue, Nancun Town, Panyu District, Guangzhou City | No. 608 East Xingye Avenue, Nancun Town, Panyu District, Guangzhou City |
| Tel | 020-39952666 | 020-39952666 |
| Fax | 020-39958289 | 020-39958289 |
| investor@biemlf.com | investor@biemlf.com |
III. Information Disclosure and Location for Inspection of Documents
| Websites on which the annual report is published as required by the stock exchange | Shenzhen Stock Exchange (http://www.szse.cn) |
| Media on which the annual report is published | Securities Times, Shanghai Securities News, China Securities Journal, Securities Daily, and http://www.cninfo.com.cn |
| Location for inspection of the annual report | Shenzhen Stock Exchange, Office of the Board of Directors |
IV. Historical Changes of the Company’s Registration Information
| Organization code | 914401017462725710 |
| Changes in the Company’s main businesses since listing (if any) | None |
| Changes of controlling shareholder (if any) | None |
V. Other Relevant InformationAccounting firm engaged by the Company
| Name | Huaxing Certified Public Accountants LLP |
| Office address | Floor 7-9, Block B, Zhongshan Building, No. 152 Hudong Road, Gulou District, Fuzhou City, Fujian Province |
| Name of signing accountants | Hong Wenwei, He Ting |
Sponsor engaged by the Company to fulfill continuous supervision obligation during the reporting period
√ Applicable □ Not applicable
| Name of sponsor | Office address of sponsor | Name of sponsor representative | Period of continuous supervision |
| Guotai Junan Securities Co., Ltd. | Room 2506, R&F Center, No. 10 Huaxia Road, Zhujiang New Town, Guangzhou | Fang Zilong, Liu Xiangmao | Until December 31, 2021 |
Financial advisor engaged by the Company to fulfill continuous supervision obligation during the reporting period
□ Applicable √ Not applicable
VI. Main Accounting Data and Financial IndicatorsWhether the Company needs to perform retrospective adjustment or restatement of accounting data for previous years
□ Yes √ No
| 2021 | 2020 | Changes over last year | 2019 | |
| Revenue (RMB) | 2,719,989,257.14 | 2,303,326,211.84 | 18.09% | 1,825,516,844.69 |
| Net profit attributable to shareholders of the listed company (RMB) | 624,541,483.00 | 498,822,424.55 | 25.20% | 406,606,998.01 |
| Net profit attributable to shareholders of the listed company after deducting non-recurring profit and loss (RMB) | 580,283,266.50 | 463,280,686.95 | 25.26% | 388,974,096.92 |
| Net cash flow from operating activities (RMB) | 897,523,638.07 | 636,849,599.20 | 40.93% | 333,469,113.65 |
| Basic earnings per share (RMB/share) | 1.15 | 0.95 | 21.05% | 0.78 |
| Diluted earnings per share (RMB/share) | 1.15 | 0.94 | 22.34% | 0.78 |
| Weighted average return on net assets | 21.73% | 22.97% | -1.24% | 22.86% |
| End of 2021 | End of 2020 | Changes over end of last year | End of 2019 | |
| Total assets (RMB) | 4,862,956,852.42 | 3,748,598,697.97 | 29.73% | 2,524,364,584.28 |
| Net assets attributable to shareholders of the listed company (RMB) | 3,245,441,596.49 | 2,416,825,789.61 | 34.29% | 1,957,377,185.61 |
The lower of the net profits before and after deducting the non-recurring profit and loss in the most recent three accounting years isall negative, and the audit report of the most recent year shows that the Company’s ability to continue operations is uncertain.
□ Yes √ No
The lower of the net profits before and after deducting the non-recurring profit and loss is negative.
□ Yes √ No
VII. Difference in Accounting Data under Domestic and International Accounting Standards
1. Net profit and net asset differences under International Financial Reporting Standards (IFRS) andChinese Accounting Standards (CAS)
□ Applicable √ Not applicable
No such differences for the reporting period
2. Net profit and net asset differences under foreign accounting standards and Chinese AccountingStandards (CAS)
□ Applicable √ Not applicable
No such differences for the reporting periodVIII. Major Financial Indicators by Quarter
Unit: RMB
| Q1 | Q2 | Q3 | Q4 | |
| Revenue | 622,634,600.78 | 586,926,011.59 | 759,005,521.13 | 751,423,123.64 |
| Net profit attributable to shareholders of the listed company | 150,536,147.62 | 94,838,031.69 | 213,672,889.31 | 165,494,414.38 |
| Net profit attributable to shareholders of the listed company after deducting non-recurring profit and loss | 145,396,952.74 | 79,019,300.39 | 203,893,570.87 | 151,973,442.50 |
| Net cash flow from operating activities | 366,315,799.97 | 87,618,879.85 | 233,014,106.31 | 210,574,851.94 |
Whether there are significant differences between the above-mentioned financial indicators or its total number and the relevantfinancial indicators disclosed in the Company’s quarterly reports and semi-annual report
□ Yes √ No
IX. Non-recurring Items and Amounts
√ Applicable □ Not applicable
Unit: RMB
| Item | Amount in 2021 | Amount in 2020 | Amount in 2019 | Description |
| Profits/losses from the disposal of non-current asset (including the write-off that accrued for impairment of assets) | -411,065.65 | -54,727.43 | 881,981.37 |
Governmental grants reckoned into currentprofits/losses (not including grants enjoyedin quota or ration according to nationalstandards, which are closely relevant to thecompany’s normal business)
| 14,577,835.79 | 19,663,426.38 | 5,298,362.00 | ||
| Gain or loss from debt restructuring | 104,009.33 | |||
| Gain or loss from changes in fair value of financial assets and financial liabilities held for trading, and investment income from the disposal of financial assets and financial liabilities held for trading and available-for-sale financial assets, excluding the effective hedging business related to the normal operation of the Company | 3,424,832.00 | 425,333.33 |
| Reversal of write-down for receivables whose impairment was tested individually | 1,944,412.53 | |||
| Other non-operating revenue and expenses except for the aforementioned items | -4,924,109.89 | -980,592.68 | -2,105,395.15 | |
| Other profit and loss items that meet the definition of non-recurring profit and loss | 38,711,860.90 | 24,501,459.48 | 16,863,429.42 | |
| Less: Influence of income tax | 9,169,558.51 | 8,013,161.48 | 3,289,353.72 | |
| Impacted amount of equity of minority shareholders | 16,122.83 | |||
| Total | 44,258,216.50 | 35,541,737.60 | 17,632,901.09 | -- |
Details of other profit and loss items that meet the definition of non-recurring profit and loss:
□ Applicable √ Not applicable
The Company has no other profit and loss items that qualified the definition of non-recurring profit and loss.Descriptions where the Company defines any non-recurring profit and loss items listed in the No. 1 Explanatory Announcement onInformation Disclosure of Companies Offering Securities to the Public—Non-recurring Profit and Loss as recurring profit and lossitems during the reporting period
□ Applicable √ Not applicable
The Company did not define any non-recurring profit and loss items listed in the No. 1 Explanatory Announcement on InformationDisclosure of Companies Offering Securities to the Public—Non-recurring Profit and Loss as recurring profit and loss items duringthe reporting period.
Section III Discussion and Analysis of the ManagementI. Status of the Industry in Which the Company Is Located during the Reporting PeriodThe Company needs to comply with information disclosure requirements on the textile and garment-related industries as stipulated inthe SZSE Guidelines No. 3 for the Self-discipline and Supervision of Listed Companies — Industry Information Disclosure.
1. China’s garment industry continues to pick up, with profit growing at an accelerated rate.China’s garment industry continued the recovery trend as of December 2021, with steady improvement in domestic sales and rapidgrowth in exports. As both performances and profitability of enterprises were picking up, the overall economic operation of theindustry was stabilized during the reporting period. From January to December 2021, there were 12,653 industrial enterprises abovedesignated size in China’s garment industry, which realized revenue of RMB1,482.336 billion, an increase of 6.51% over theprevious year; their total profit reached RMB76.782 billion, up by 14.41% over the previous year. Both the quality and efficiency ofthe garment industry are improving, with profit growing at a faster speed.
Source: National Bureau of Statistics of China
2. China’s garment industry will usher in a golden decade, with high end and branding as the main theme.The China National Garment Association (CNGA) complied and published the Guiding Opinions on the Development of China’sGarment Industry during the 14th Five-Year Plan and the Long-range Objectives through the Year 2035 in October 2021.Thedocument proposed the following brand development goals: During the 14th Five-Year Plan, the quality of apparel products willcontinue to improve while cultural connotations and influences of brands will continue to be enhanced. The brand incubation andmanagement system will be further optimized to create a batch of well-known brands with market recognition and good reputation.Efforts will be stepped up to foster three to five international brands with discourse power in the global fashion circle and to buildindustrial clusters with total brand value over hundreds of billions.
In January 2022, the State Council printed and distributed the 14th Five-Year Plan for Market Regulation Modernization. Accordingto the document, China will roll out an initiative of brand building. Pilot efforts will be made in the consumer goods sector includingcosmetics, garment, textile and electronics to cultivate a batch of high-end brands. In the next golden decade, China’s garmentindustry will accelerate integration into the new “dual circulation” development pattern and, focusing on the “technology, fashion andgreen” theme, speed up the branding, digital, fashion and green based transformation. Efforts will be made to strengthen thecompetitiveness of enterprises in the new era and forge a new industrial ecology that integrates technology, fashion and sustainabledevelopment, to effectively promote the high-quality development of the industry.
3. Domestic sportswear market boasts huge potential, and high-end fashion sportswear becomes the new wind gap.In March 2022, the General Office of the Central Committee of the Communist Party of China and the General Office of the StateCouncil jointly promulgated the Opinions on Building a Higher-level Public Service System for National Fitness, which proposed toimplement the “National Fitness Program”. By 2035, the public service system for national fitness that is compatible with modernsocialist countries will be established in an all-round way, while more than 45% of the population will exercise regularly. Fitness andsports will become a common way of life and people’s physical quality and health level will lie at the forefront of the world.Previously, the National Fitness Plan (2021-2025) pointed out that by 2025, the total output value of China’s sports industry wouldincrease to RMB5 trillion, meaning a compound annual growth rate of about 9% in the next five years. This will provide ample roomfor the growth of domestic sportswear industry.Moreover, according to a report of Global Industry Analysts Inc., global sports & fitness clothing market is expected to reachUS$221.3 billion by 2026, and China is forecast to reach US$27 billion. Wherein, the global market for Top Wear segment isestimated at US$100.5 billion by 2026 reflecting a compound annual growth rate of 5.1%. China is poised to register the fastestcompound annual growth rate of 8.3%, to reach US$14.5 billion by 2026. If calculated on this basis, the high-end market will soonoccupy half of the entire sportswear industry. In addition, as consumers pay more attention to the design beauty and fashion elementsof clothes, the domestic high-end fashion sportswear will usher in new growth momentum.
4. With the rise of China-chic, domestic accessible luxury sportswear brands have the opportunity of corner overtaking.In March 2021, the Fourth Session of the 13th National People’s Congress deliberated and approved the Outline of the 14th Five-YearPlan for Economic and Social Development and Long-Range Objectives through the Year 2035. On the supply side, the Outlineemphasizes to build a strong manufacturing country and promote the optimization and upgrading of the manufacturing industry. Onthe consumption side, priority is given to accelerate the cultivation of a complete domestic demand system, strengthen thefundamental role of consumption in economic development, and steadily improve the level of household consumption. The “dualupgrade” of both supply and demand has given rise to a new round of brand upgrading. Therefore, domestic brands user in ahistorical opportunity.In accordance with the Report on Yong People’s Consumption of Domestic Brands 2021, about 70% of the 90s and 80% of themillenniums tend to choose domestic brands in shopping, indicating that young consumers have shifted their preferences to localbrands.Under the influence of global environment, coupled with the support of domestic consumers for local brands, the sales of
international brands have declined in China. At the same time, domestic sports brands are increasing their investments in innovativeresearch and development, supply chain and new retail. International brands no longer have an obvious edge in China’s mid- tohigh-end markets, while domestic brands gradually take on a trend of “high-end + segmentation + digitalization”. Domestic brandsnow have the possibility of overtaking international brands in the mid- to high-end markets. China’s local accessibly luxury sportsbrands will usher in a good opportunity for development.During the reporting period, there were no significant changes to national taxation, import and export policies that would exert asignificant impact on the Company against the industry in which the Company is located.
II. Principal Businesses of the Company during the Reporting PeriodThe Company needs to comply with information disclosure requirements on the textile and garment-related industries as stipulated inthe SZSE Guidelines No. 3 for the Self-discipline and Supervision of Listed Companies — Industry Information Disclosure.(I) Principal businessesBIEM.L.FDLKK Garment Co., Ltd. mainly engages in the research and design of sportswear, brand promotion, marketing networkconstruction and supply chain management. Adhering to the positioning of a high-end fashion sportswear brand, the Company digsdeep in its principal businesses. It is dedicated to meeting the multi-scenario dressing needs of the elites and the pursuit of a refinedand beautiful life, with a brand design concept of “three high and one innovation”, i.e. “high quality, high taste and high technologyand innovative spirit”.
Product research and
design
Brand promotionand marketingnetworkconstruction
| Brand promotion and marketing network construction | Digital operation Supply chain management |
Principal businesses of the Company
The Company focuses on a segment of the garment industry and implements a multi-brand strategy. Priority is given to thecultivation of core competitiveness, so as to build a leading brand in the segmented garment sector. Currently, the Company has twobrands: BIEM.L.FDLKK () and CARNAVAL DE VENISE ().
1. BIEM.L.FDLKK brand
The BIEM.L.FDLKK brand () is positioned as a high-end golf casual apparel brand. Continuous product innovation,brand power enhancement, and channel expansion have driven the high growth of the brand. The Company intends to build it into thefirst brand that would pop up in the minds of people when think of high-end golf casual apparel. The BIEM.L.FDLKK brand() comprises four series: lifestyle series, fashion series, palace culture series and golf series
(1) Lifestyle series
The lifestyle series adopt internally-renowned fabrics and accessories, ultimate craftsmanship and brilliant designs to ensure highquality and high taste. The series target at consumers who are keen on their image and influence with a casual, low-key yet luxurious
taste.
(2) Fashion series
The fashion series integrate elements of international trends and use high-quality fabrics and acme tailoring to ensure the fashionsense and quality of the products. The series target at young consumers who are keen on self-image and attire charm with a taste forpersonality and accessible luxury.
(3) Palace culture series co-branded with the Forbidden City
The palace culture of the Forbidden City is a symbol of nobility and classics, which has withstood the changes of the times withendless new vitality. Golf is the representative of aristocratic culture. The Company combines the design essence and spiritual charmof the two and gives them a new taste and charm with quality craftsmanship, to show the national confidence of contemporaryChinese people. Under the continued, in-depth cooperation, the two parties have introduced series of co-branded products, including“Zhen Dou Yi Ni” (the Emperor is at your service), “Tian Guan Ci Fu” (heaven official’s blessing), “Fu Lu Shou” (three gods offortune, prosperity and longevity), and “Feng Tian Cheng Yun” (Mandate from Heaven). These joint products bring trendy clotheswith signature Chinese styles to consumers.
(4) Golf series
Golf series are positioned as a high-end fashion sportswear. Using the world’s leading functional fabrics and integratingcharacteristics of the golf sport into design, the products boast both functionality and comfort. Target consumers are golf enthusiasts
who pay attention to sports, fashion and functionality.
2. CARNAVAL DE VENISE
The CARNAVAL DE VENISE brand () is positioned to tap the blue ocean market of vacation and travel apparel.The products cater to the segmented market sector and satisfy the multi-scenario dressing needs of middle-class consumers inhigh-quality travels. It is hoped that when people think of vacation travel apparel, CARNAVAL DE VENISE would be the first to popup in their minds.
During the reporting period, CARNAVAL DE VENISE () and Snoopy launched a joint series that were widely
recognized by the market. The brand furthered cooperation with Snoopy and added the Doraemon series, a well-known Japanese IP.In the future, the Company will launch more designer joint series and cross-brand joint series, to meet the demands of middle-classconsumers for theme and culture.(II) Business models of the Company
1. Operation model: Being committed to high value-added links on the business chain such as product design anddevelopment and brand promotionAs the operator of a domestic high-end fashion sportswear brand, the Company adopts the “dumbbell” business model; that is, itfocuses on the core upstream links with high value-addition such as product design and development, brand operation and saleschannel development and control, and outsources links of low value-addition such as production, transportation and distribution.Such a business model takes on the “U-shaped smile curve” with division of labor in the industry chain as the horizontal axis andvalue addition as the vertical axis.
U-shaped smile curve
2. Design and development model: Building high-end, differentiated products with ingenuity and craftsmanshipAdhering to the product design and development concept of “three high and one innovation”, i.e. high quality, high taste and hightechnology, and one innovation, the Company improves product taste and cultural connotations of brands through fabric innovation,process innovation, plate innovation, and crossover design innovation. It strives to offer consumers with high-value products andmeet their differentiated demands in consumption upgrading.The product design and development process of the Company mainly comprises four stages: market data analysis and forecast,conception and initial design, plate making and review, verification on ordering meetings and design finalization
Value addition
Keylinks
KeylinksNon-keylinks
Non-keylinksBrand operation
Brand operationChannel and retail
Channel and retailIT management
IT managementLogistics
LogisticsProductmanufacturing
ProductmanufacturingBusiness chain
Business chainUpstream
| Upstream | Midstream | Downstream |
Design anddevelopment
3. Sales model: Online + offline omni-channel layout
The Company mainly adopts a sales model of direct sales plus franchise, so it boasts obvious advantages in offline channels. Salesoutlets of the Company’s products are divided into company-operated stores and franchise stores. Currently, the Company mainlysets up company-operated stores in the first- and second-tier cities and franchise stores in other cities.Meanwhile, the Company makes active deployments in digital new retail channels and has opened flagship stores on Tmall, JD andVipshop. Livestream shopping and recommendations on Xiaohongshu (Little Red Book), TikTok and WeChat mini-programs are alsoutilized to tap customers with high stickiness and products with high repurchase rates. The integration of offline and online channelshave achieved omni-channel layout.
(III) Status of the Company in the industry
1. The Company occupies a leading position in the industry with revenue and net profit growing rapidly in the year.During the reporting period, the Company has driven growth via continued R&D investment, production innovation, brandenhancement, marketing network upgrade, supply chain management improvement, and opening of stores at a faster speed. Therevenue and net profit attributable to shareholders of the parent company maintained an upward trend throughout the year, whileprofitability ranked among the top. Compared with previous year, both revenue and net profit hit a new high.
Market data analysisand forecast
| Market data analysis and forecast | Conception and initial design | Plate making and review | Verification on ordering meetings and design finalization | |||
2. Taking up the largest comprehensive market share for four consecutive years, T-shirts have become a super category of theCompany.According to a statistical survey on T-shirt sales of national large-scale retail enterprises conducted by the China General Chamber ofCommerce and the China National Commercial Information Center, the comprehensive market share (weighted average of marketshare by volume and market coverage) of BIEM T-shirts dwarfed all other products of the same kind for four consecutive years(2018-2021). Judging from the sales volume, T-shirts have become a super category of the Company. From 2022 onwards, theCompany will continue to tap its advantages, build itself into the “T-shirt Expert”, and drive strategic upgrading under the leadershipof a single category. This could facilitate the further open-up of market space.
3. Golf series rank first in comprehensive market share for five consecutive years (2017-2021)According to a statistical survey on national large-scale retail enterprises conducted by the China General Chamber of Commerce and
the China National Commercial Information, in 2021, golf series, with a lion’s share of 62.87%, ranked the first in comprehensivemarket share (weighted average of market share by volume and market coverage) among similar products, while its market share byvolume and market coverage took up 62.87% and 72.18%, respectively. The golf series have ranked the first in comprehensivemarket share for five consecutive years (2017-2021).
4. Continue to sponsor the Chinese National Golf Team and firmly occupy the commanding height of the domesticprofessional golf apparel market.The Company and the Chinese National Golf Team embarked on a journey of partnership in 2013. Now, eight years later, the twoparties have renewed the sponsorship for another eight years. The Company continuously provides professional training andcompetition uniforms for the national team with constant innovations and the craftsmanship spirit. The uniforms have demonstratedthe confidence of China as a nation and the confidence of Chinese brands in international competitions such as the Olympic Gamesand the World Cup. This is our way of contributing to China’s golf industry. In 2021, the Company designed the second-generationfive-star uniforms for the national team to help them compete in the Tokyo Olympics and win glory for the country. The two hasmade a pact of fighting together in Paris 2024.
Golf series leading themarket for fiveconsecutive years
Comprehensivemarket share
Comprehensivemarket share
62.87%
62.87%
Market share byvolume
Market share byvolume
72.81%
72.81%
Market coverage
Market coverage
56.25%
III. Analysis of Core Competitiveness(I) Competitiveness in respect of brand positioning: High-end, distinctive, unique and differentiated segment marketTargeting at quality segment tracks, the Company implements a multi-brand development strategy and a differentiated marketpositioning strategy to accurately meet consumers’ differentiated dressing needs for different dressing scenarios in the context ofconsumption upgrading.The BIEM.L.FDLKK brand () is positioned in the segment market combing golf sport and fashionable, leisure lifestyleand aims to become a high-end golf casual apparel brand. Target consumers include golf enthusiasts and middle-income or aboveconsumers who agree with golf culture and like golf-style clothing. The products feature distinctive personality and consistent stylein design that emphasize on “resonance” with target consumers. They are committed to providing consumers with high-quality,high-grade and high-tech wearing experience. Driven by constant product innovation, brand power enhancement and channelexpansion, the brand aims to become the foremost sports casual apparel brand in the minds of consumers.The CARNAVAL DE VENISE brand () focuses on the vacation travel market. The Company intends to build anew brand worth tens of billions that would pop up in the minds of consumers whenever they think of vacation travel apparel.
(II) Competitiveness in respect of product R&D: Industry-leading product development and design edgesThe Company is equipped with a high-quality design and development team, who have years of experience in the design of luxurybrands and golf apparel series of international well-known brands. They are rather proficient in aspects like design concepts, colorapplication, process design and performance, fabric processing and grasping, etc. When it comes to design, priority is given to theuse of new technologies, new craftsmanship and high-tech fabrics. Under the guidance of cross-border design concepts, sportselements, leisure elements and fashion elements are fused to achieve the unity of functionality and aesthetics. Each year, theCompany’s design department would come up with over a thousand designs, which is a testimony to the Company’s strong R&D anddesign capabilities. Up to now, the Company owns 107 invention, utility model and design patents, of which 6 are authorizedinvention patents, 69 authorized utility model patents and 32 authorized design patents. Another 7 invention patents are undersubstantive examination.In the future, the Company will continue to increase investment in research and development and build highly competitive productsthrough fabric innovation, plate optimization, design breakthroughs and cultural empowerment, to maintain and solidify itscompetitive edges in product R&D.
Korean designer LEE HYOJEONG French design master SAFA SAHIN(III) Competitiveness in respect of product quality: Consistently adhering to the high quality of products
Products are the core competitiveness of brands while quality is the lifeline of brands. The pursuit of quality has been a consistenttheme of the Company. Regarding “high-quality fabrics, bright colors, novel styles and fine workmanship” as advantages of itsproducts, the Company strives to offer high-quality products to consumers. In order to ensure product quality, the Company insists onstrictly selecting high-grade, high-performance fabrics. For example, the selected anti-bacterial fabrics can inhibit bacteria anddeodorize for a long period of time; the elastic and quick-dry fabrics have quick-drying and breathable effect without binding feeling,so the apparel feels refreshing and non-sticky; the diamond fiber fabrics are light, warm, wear-resistant, and environmental friendly,being 1/3 lighter than ordinary fiber fabrics of the same thickness but 50% higher heat preservation rate; the Hungarian white goosedown has 1,000 fill power, ensuring that the down jacket is lighter and warmer.The Company maintains stable cooperative relations will renowned fabric suppliers in Italy, South Korea and Japan that are alsopartners of international top brands. Technical and R&D staff of the Company regularly exchange with fabric suppliers. Sometimes,joint efforts are made to conduct targeted development of products based on style characteristics of the Company’s products.(IV) Competitiveness in respect of channels: Offline channel advantages + digital new retailOffline channels of the Company have a presence in high-end department stores, shopping centers, airport and high-speed rail hubsand golf courses throughout the country. As of December 31, 2021, the Company’s marketing network has covered 31 provinces,autonomous regions and municipalities, including core business districts, high-end department stores, airports, well-known golf clubs,etc. The number of stores at the end of 2021 reached 1,100, up by 121 compared with 979 at the end of 2020, of which 532 wereCompany-operated stores and 568 were franchise stores.The number of outlet stores increased steadily year by year. Outlet stores are the main channel to digest inventories. Generallyinventories within two years of aging can be well digested. Even at 40% to 60% off, there is still large profit margin.The middle class in third- and fourth-tier cities will become the fastest growing group in the future. Increased income hassignificantly improved the consumption confidence of residents in these cities. Particularly, their demand for high-end brands hasrisen significantly. The Company remains optimistic about the prospects of high-end consumer markets in lower-tier cities, and willseize the opportunity and sink its channels to the fast-growing third- and fourth-tier cities.Moreover, the Company actively deploys online channels and cooperates in-depth with e-commerce platforms. Throughlivestreaming platforms, it steers quality VIP customers from offline to online. An “offline + online” channel layout could provideconsumers with more choices and more convenient services.(V) Competitiveness in respect of branding and marketing strategies: Consistent with its positioningThe Company, closely revolving around main target consumer groups, implements integrated marketing from commodity planning,product design, terminal visual image, window advertising to product display, brand endorsement and planning of marketingactivities, with a view to enhancing brand popularity and reputation. Based on its high-end positioning, the Company has analyzedthe habits of target consumer groups and adopted a series of new media marketing measures thereupon. A matrix of measuresincluding celebrity endorsement, sports competition sponsorship, entertainment marketing, event marketing, and contribution topublic welfare activities were carried out, to continuously consolidate brand power.
Hawick Lau Hoi-Wai was invited to BIEM stores to meet and interact with fans.(VI) Competitiveness in respect of management: Experienced management teamThe Company boasts a management team with rich experiences, consistent philosophy, aggressiveness, dedication and perseverance.They have a deep and thorough understanding of China’s golf apparel culture and market. Core executives have been granted sharesof the Company, thereby guaranteeing the stability and sustained development of the management. Meanwhile, with years ofexperience in the industry, the management has a rather clear idea about the Company’s positioning, development strategies andmanagement improvement. The Company has established a business process catering to brand and corporate operations, a terminalmanagement system with strong control, a supply chain system with fast responses, and a standardized decision-making andexecution mechanism over years of development. All these could ensure its healthy and fast development.IV. Analysis of Principal Businesses
1. Overview
(I) Financial performancesDuring the reporting period, the Company recorded total revenue of RMB2.7 billion, an increase of 18.09% over the same period ofthe previous year. The operating profit and total profit were RMB738 million and RMB733 million, respectively, up by 26.76% and
25.22%, respectively, over the previous year. In addition, the Company posted a net profit attributable to shareholders of the listedcompany of RMB625 million and basic earnings per share of RMB1.15, a year-on-year increase of 25.20% and 21.05%, respectively.Overall, the Company maintained steady growth during the reporting period.
(II) Operation
1. Continue to create scarce, differentiated and high-end products with an adherence to craftsmanship and innovation.The Company continued to invest highly into product research and development during the reporting period. Efforts were made tointegrate international high-quality fabric resources, introduce outstanding R&D and design talents both at home and abroad, andfoster a designer team with an international horizon. With craftsmanship, every product is endowed with “high quality, high taste andhigh-tech content”. The Company strives to create scarce, differentiated and high-end products through constant innovations andpursues excellence in every piece of clothes by pooling resources throughout the world.
2. Demonstrate “China-Chic” through in-depth cross-border cooperation with the palace culture of the Forbidden City.During the reporting period, the Company continued to co-brand with the Palace Culture IP of the Forbidden City and rolled out the“Fu Lu Shou” (three gods of fortune, prosperity and longevity) series in spring and summer and the “Feng Tian Cheng Yun”(Mandate from Heaven) series in fall and winter. The series are filled with the charm of traditional Chinese culture and arewell-received in the market. In 2021, the Company teamed up with French design master SAFA SAHIN and jointly launched the dadshoe series. Reproducing the collision of classic and popular with contrasting colors and splicing designs of different materials, theco-branded dad shoes put on a new charm and bring a new wearing experience to consumers. In the future, the Company willcontinue to dip deep into traditional culture to reproduce the classics with ingenuity, show to the world what is “China-Chic”, anddemonstrate the glamor of a big country brand.
3. Continuously upgrade the monogram pattern to create a super symbol for high-end brand.Starting from 2020, to cater to the current fashion trends, the Company introduced a distinctive monogram into its design. Byincorporating golf and green flag elements into its signature “BG” letters, the Company has created its own “BG” monogram patternswith the collision of colors, which is both classic and retro, showing a real sense of high-end fashion. Once launched, the productshave been widely praised by the market. In 2021, the Company continued to upgrade the monogram pattern and apply the patter inmore SKUs. The Company intends to build it into a super symbol of high-end brands that can continuously inject new cultural genesinto BIEM brands.
4. Online sales model achieves remarkable results, with VIP members exceeding 700,000.
The Company makes full use of offline channels and steers traffic online through marketing assistant, Chaojidaogou (super shoppingguide), intelligent goods tracking system, OP Retail and other systems. The Company promoted comprehensive refined managementof VIP customers combining online and offline. The new retail marketing model achieved remarkable results and sales continued torise. VIP members exceeded 700,000 during the reporting period.At present, online channels of the Company mainly comprise Tmall, Vipshop, JD and WeChat mini-program. Focusing on experienceand services, the Company insists on offering convenient online shopping experiences to high-end consumers. Prices of online andoffline channels remain consistent, to facilitate the new model of accessibly luxury sales.
5. Establish a unified information platform and fully embrace digital operations.
The Company further accelerated its IT system construction during the reporting period. A unified information management systemwas established covering production, distribution, inventory, procurement, supplier, membership, finance, marketing, etc. In addition,business intelligence (BI) has been introduced to provide analytical data support for the Company’s decision making. The Companyintends to gradually realize digital, efficient and intelligent operation management and fully launch digital operations.
Currently, main information systems of the Company include omni-channel middle-platform system, production management system,
DigitalEfficientIntelligent
Finance
Finance
Distribution
Distribution
Membership
| Supplier | Membership |
Procurement
Procurement
Production
distribution management system, warehouse management system, and membership management system.
6. Continue to consolidate brand power and demonstrate the glamor of a national brand.
The Company officially initiated the “big communication era” in 2021. While carrying out competition sponsorship, entertainmentmarketing, event marketing, and contribution to public welfare activities, the Company also embraced promotion in CCTV-1 andhigh-speed rail. This could deepen the cultural connotation of the brand on one hand, and accelerate brand communication on theother.
(1) Olympics marketing: Strengthening its positioning as a professional golf brand
At the 2021 Tokyo Olympics, the Company designed the second-generation five-star uniforms for the Chinese National Golf Team,helping famous golfers, including Feng Shanshan, Lin Xiyu, Wu Ashun and Yuan Yechun, to compete on the field. Thesecond-generation uniforms focus on “China-chic” elements and combine the color of the national flag with the traditional color ofthe Forbidden City. In the gradation of color, the “dragon” rises into the sky hidden in the auspicious clouds, symbolizing blessingsand good luck. While helping the national team to compete in the games, the uniforms also embody the confidence of Chineseculture and show to the world the charm of “China-chic”.
During Olympic marketing, the Company adopted an online + offline integrated communication strategy. Online-wise, focusing onthe theme of Olympic competition, it utilized the media matrix to achieve full coverage; offline-wise, pre-sales were conducted forthe five-star uniforms, to enhance consumer involvement and deepen emotional connection and interaction. The moves were widelyrecognized in the industry.
(2) Entertainment marketing: Comprehensively consolidating brand momentum via a number of celebrities and KOLsThe Company increased inputs in celebrity endorsement during 2021. It cooperated in depth with a group of well-known celebritieshighly compatible with the brand to strengthen brand awareness and spread the elite dress culture.On May 15, spokesperson of BIEM.L.FDLKK Yang Shuo appeared in Tianmei Xintiandi Square, Taiyuan and interacted in-depthwith users.
On September 25, actor Hawick Lau, wearing the Company’s fall-winter 2021 collection, showed up in Shanxi Tianmen Shanshanflagship store. He shared how to dress like an elite with fans and audiences at the site, which brought a unique and beautifulexperience to users.Moreover, the Company also joined forces with a number of popular stars such as Huang Yuan, Duan Yihong, Hu Jun, Lan Yingying,Wu Qilong, Wu Zun, Liu Ye and Miriam Yeung, to effectively enhance brand influence through continuous exposure and contentinnovation.
At the same time, the Company accelerated the construction of the KOL and KOC matrix on social media platforms such asXiaohongshu and TikTok. On one hand, diversified topics on social media and a large number of UGC contents could attract theattention of more users especially young users; on the other hand, strong recommendations from various dressing KOLs, knowledgeKOLs and vertical golf KOLs can further solidify its positioning as a high-end sportswear brand.
(3) Event marketing: Enhancing brand credibility with endorsement from authoritative mediaOn December 10, 2021, the Age of Creators was officially aired on the hot program The Growing of the Great Brand on CCTV-1.The episode tells the story of the Company’s inheritance, innovation and tribute to the times. Being aired on CCTV as a “great brand”,the credibility and authority of the Company are further elevated under the endorsement of the national authoritative media.
(4) Event marketing: Contracting with Yongda Media and entering a new era of communicationOn July 12, the contract signing ceremony between the Company and Yongda Media with regard to their strategic cooperation onhigh-speed rail communication was successfully held in Nanjing, China. The media of high-speed rail will fuel the Company’s brandconstruction process. Through screens of high-speed rail, the Company will be able to convey its brand concepts and cultural valuesto hundreds of millions of users, thereby consolidating brand momentum and increasing brand exposure. This will help the Companyto reach a new brand height and usher in a new era of communication.
(5) Contributing to public welfare undertakings: Sticking to the original intention and shouldering corporate socialresponsibilities of a national brandIn October 2021, many regions in Shanxi Province suffered from heavy rain, resulting in severe waterlogging, floods and otherdisasters. As a result, the province initiated provincial level 3 emergency response to geological disasters. In view of this, theCompany quickly responded and raised disaster-relief materials day and night worth millions, including cotton clothes, down jackets,blankets and other cold-proof materials, to shoulder its corporate social responsibilities.In November 2021, sponsored by Guangzhou Panyu District Charity Organization and BIEM.L.FDLKK Charity Fund and organizedby Panyu Qiwu Social Services Center, the Children and Adolescent Peace of Mind Project was officially launched at the Childrenand Adolescent Peach of Mind Station in Nancun Town. By sponsoring the children and youth peace of mind project in the name ofits charity fund, the Company hopes to illuminate more families, which fully embodies the sense of responsibility of a national brand.
2. Revenue and cost
(1) Composition of revenue
Unit: RMB
| 2021 | 2020 | YoY changes | |||
| Amount | Proportion in revenue | Amount | Proportion in revenue | ||
| Total revenue | 2,719,989,257.14 | 100% | 2,303,326,211.84 | 100% | 18.09% |
| By industry | |||||
| Garment and apparel | 2,719,989,257.14 | 100.00% | 2,303,326,211.84 | 100.00% | 18.09% |
| By product | |||||
| Tops | 1,155,253,965.36 | 42.47% | 1,012,743,434.04 | 43.97% | 14.07% |
| Bottoms | 577,413,010.84 | 21.23% | 526,734,820.51 | 22.87% | 9.62% |
| Jackets | 760,953,959.00 | 27.98% | 585,445,807.40 | 25.42% | 29.98% |
| Others | 226,323,052.12 | 8.32% | 178,376,989.51 | 7.74% | 26.88% |
| Income from other businesses | 45,269.82 | 0.00% | 25,160.38 | 0.00% | 79.93% |
| By region | |||||
| Northeast China | 257,702,259.73 | 9.47% | 215,148,453.18 | 9.34% | 19.78% |
| North China | 438,055,235.73 | 16.11% | 343,575,868.76 | 14.92% | 27.50% |
| East China | 509,188,940.50 | 18.72% | 413,696,487.92 | 17.96% | 23.08% |
| South China | 599,071,826.19 | 22.02% | 532,080,821.87 | 23.10% | 12.59% |
| Central China | 199,039,149.25 | 7.32% | 177,353,893.67 | 7.70% | 12.23% |
| Northwest China | 140,100,579.39 | 5.15% | 111,151,396.94 | 4.83% | 26.04% |
| Southwest China | 454,255,647.71 | 16.70% | 412,069,554.66 | 17.89% | 10.24% |
| E-commerce | 122,575,618.64 | 4.51% | 98,249,734.84 | 4.27% | 24.76% |
| By sales model | |||||
| Online | 122,575,618.64 | 4.51% | 98,249,734.84 | 4.27% | 24.76% |
| Direct sale | 1,914,079,312.33 | 70.37% | 1,628,792,927.31 | 70.71% | 17.52% |
| Franchise | 683,334,326.17 | 25.12% | 576,283,549.69 | 25.02% | 18.58% |
(2) Industries, products, regions or sales models that accounted for over 10% of the Company’s revenue oroperating profit
√ Applicable □ Not applicable
The Company needs to comply with information disclosure requirements on the textile and garment-related industries as stipulated inthe SZSE Guidelines No. 3 for the Self-discipline and Supervision of Listed Companies — Industry Information Disclosure.
Unit: RMB
| Revenue | Cost of revenue | Gross profit margin | YoY changes of revenue | YoY changes of cost of revenue | YoY changes of gross profit margin | |
| By industry | ||||||
| Garment and apparel | 2,719,989,257.14 | 634,160,601.71 | 76.69% | 18.09% | 5.42% | 2.81% |
| By product | ||||||
| Tops | 1,155,253,965.36 | 240,366,386.18 | 79.19% | 14.07% | -4.58% | 4.06% |
| Bottoms | 577,413,010.84 | 116,434,061.13 | 79.84% | 9.62% | -9.26% | 4.20% |
| Jackets | 760,953,959.00 | 190,307,785.69 | 74.99% | 29.98% | 18.53% | 2.41% |
| Others | 226,323,052.12 | 87,052,368.71 | 61.54% | 26.88% | 43.24% | -4.39% |
| Income from other businesses | 45,269.82 | 100.00% | 79.93% | |||
| By region | ||||||
| Northeast China | 257,702,259.73 | 65,875,917.73 | 74.44% | 19.78% | 10.59% | 2.13% |
| North China | 438,055,235.73 | 87,674,526.21 | 79.99% | 27.50% | 8.32% | 3.55% |
| East China | 509,188,940.50 | 106,276,965.26 | 79.13% | 23.08% | 14.13% | 1.64% |
| South China | 599,071,826.19 | 139,445,063.97 | 76.72% | 12.59% | 3.07% | 2.15% |
| Central China | 199,039,149.25 | 47,703,604.73 | 76.03% | 12.23% | -0.81% | 3.15% |
| Northwest China | 140,100,579.39 | 28,622,176.96 | 79.57% | 26.04% | 11.71% | 2.62% |
| Southwest China | 454,255,647.71 | 98,410,989.87 | 78.34% | 10.24% | 0.84% | 2.02% |
| E-commerce | 122,575,618.64 | 60,151,356.98 | 50.93% | 24.76% | -1.91% | 13.34% |
| By sales model | ||||||
| Online | 122,575,618.64 | 60,151,356.98 | 50.93% | 24.76% | -1.91% | 13.34% |
| Direct sale | 1,914,079,312.33 | 361,489,790.71 | 81.11% | 17.52% | 2.10% | 2.85% |
| Franchise | 683,334,326.17 | 212,519,454.02 | 68.90% | 18.58% | 14.15% | 1.21% |
Where the statistical standards for the Company’s principal business data were adjusted in the reporting period, principal businessdata of the Company in the recent year adjusted as per statistical standards at the end of the reporting period
□ Applicable √ Not applicable
Whether the Company has physical store sales terminals
√ Yes □ No
Distribution of physical stores
| Type of store | Number of stores | Area of stores | Number of new stores opened in the period | Number of stores closed in the period | Reason for close | Brands involved |
| Company-operated stores | 532 | 83,877 | 82 | 36 | Mainly due to expiration of contract, adjustment of stores, etc. | BIEM.L.FDLKK, CARNAVAL DE VENISE |
| Franchise stores | 568 | 91,975 | 112 | 37 | Mainly due to expiration of contract, adjustment of stores, etc. | BIEM.L.FDLKK, CARNAVAL DE VENISE |
Total area and efficiency of company-operated storesTop 5 stores by income
| No. | Name of store | Date of opening | Revenue (RMB) | Sales per square meter |
| 1 | Store 1 | November 14, 2007 | 46,070,740.88 | RMB50,400 |
| 2 | Store 2 | July 01, 2012 | 30,629,080.00 | RMB97,200 |
| 3 | Store 3 | March 01, 2003 | 26,592,235.40 | RMB112,700 |
| 4 | Store 4 | April 01, 2015 | 20,948,091.15 | RMB162,400 |
| 5 | Store 5 | April 27, 2007 | 20,218,092.92 | RMB122,500 |
| Total | -- | -- | 144,458,240.35 | RMB82,100 |
New stores of the listed company
√ Yes □ No
The Company had 1,100 terminal sales stores at the end of the reporting period, an increase of 121 compared with the end of 2020. Itis expected that the new stores will not have a significant impact on the Company’s business operations.Whether the Company discloses top 5 franchise stores
□ Yes √ No
(3) Whether the Company’s goods sales income is greater than the labor service income
√ Yes □ No
| Industry | Item | Unit | 2021 | 2020 | YoY changes |
| Garment and apparel | Sales volume | Pieces | 3,681,850 | 3,606,443 | 2.09% |
| Garment | Garment (RMB) | 2,719,989,257.14 | 2,303,326,211.84 | 18.09% |
Reasons for YoY changes of relevant data over 30%
□ Applicable √ Not applicable
(4) Performance of major sales contracts and major procurement contracts already signed by the Companyas of the end of the reporting period
□ Applicable √ Not applicable
(5) Composition of cost of revenue
By industry and product
Unit: RMB
| Industry | Item | 2021 | 2020 | YoY changes | ||
| Amount | Proportion in cost of revenue | Amount | Proportion in cost of revenue | |||
| Garment and apparel | Garment and apparel | 634,160,601.71 | 100.00% | 601,546,395.40 | 100.00% | 5.42% |
Unit: RMB
| Product | Item | 2021 | 2020 | YoY changes | ||
| Amount | Proportion in cost of revenue | Amount | Proportion in cost of revenue | |||
| Garment and apparel | Tops | 240,366,386.18 | 37.90% | 251,898,615.05 | 41.88% | -4.58% |
| Garment and apparel | Bottoms | 116,434,061.13 | 18.36% | 128,317,766.79 | 21.33% | -9.26% |
| Garment and apparel | Jackets | 190,307,785.69 | 30.01% | 160,555,872.81 | 26.69% | 18.53% |
| Garment and apparel | Others | 87,052,368.71 | 13.73% | 60,774,140.75 | 10.10% | 43.24% |
(6) Whether there are changes to the consolidated scope during the reporting period
√ Yes □ No
During the reporting period, one new subsidiary was added to the Company’s consolidation scope, i.e. Ningbo BIEM.L.FDLKKSmart Technology Co., Ltd., which is a wholly-owned subsidiary of the Company established in April 21, 2021.
(7) Whether there are significant changes or adjustments to the Company’s businesses, products or servicesduring the reporting period
□ Applicable √ Not applicable
(8) Major customers and suppliers
Major customers of the Company
| Total sales to the top five customers (RMB) | 420,648,671.83 |
| Proportion of sales to top five customers in total annual sales | 15.46% |
| Proportion of sales to related party among the top five customers in total annual sales | 0.00% |
Information of the top five customers of the Company
| No. | Name of customer | Sales amount (RMB) | Proportion in total annual sales |
| 1 | Customer 1 | 116,042,331.58 | 4.27% |
| 2 | Customer 2 | 95,272,603.00 | 3.50% |
| 3 | Customer 3 | 93,897,752.87 | 3.45% |
| 4 | Customer 4 | 58,798,058.63 | 2.16% |
| 5 | Customer 5 | 56,637,925.75 | 2.08% |
| Total | -- | 420,648,671.83 | 15.46% |
Other description of major customers
□ Applicable √ Not applicable
Major suppliers of the Company
| Total purchase amount from the top five suppliers (RMB) | 269,552,019.07 |
| Proportion of the total purchase amount from the top five suppliers in total annual purchase amount | 33.75% |
| Proportion of purchase amount from related parties among the top five suppliers in total annual purchase amount | 0.00% |
Information of the top five suppliers of the Company
| No. | Name of supplier | Purchase amount (RMB) | Proportion in total annual purchase amount |
| 1 | Supplier 1 | 62,933,640.13 | 7.88% |
| 2 | Supplier 2 | 57,001,049.09 | 7.14% |
| 3 | Supplier 3 | 55,134,523.46 | 6.90% |
| 4 | Supplier 4 | 48,271,392.90 | 6.04% |
| 5 | Supplier 5 | 46,211,413.49 | 5.79% |
| Total | -- | 269,552,019.07 | 33.75% |
Other description of major suppliers
□ Applicable √ Not applicable
3. Expenses
Unit: RMB
| 2021 | 2020 | YoY changes | Description of significant changes | |
| Selling expenses | 1,041,052,486.14 | 885,368,459.26 | 17.58% | |
| Administrative expenses | 156,267,574.26 | 132,633,430.58 | 17.82% | |
| Finance expenses | 21,805,535.69 | 9,699,259.37 | 124.82% | Mainly owing to the increase in interest expenses on lease liabilities arising from the implementation of the New Lease Standards |
| R&D expenses | 83,388,128.67 | 64,804,859.36 | 28.68% |
The Company needs to comply with information disclosure requirements on the textile and garment-related industries as stipulated inthe SZSE Guidelines No. 3 for the Self-discipline and Supervision of Listed Companies — Industry Information Disclosure.
Unit: RMB
| Item | Incurred in the current period | Incurred in the prior period | YoY changes of selling expenses | Reason of change |
Employee benefits
| Employee benefits | 292,614,931.34 | 245,331,238.57 | 19.27% | |
| Store operating expenses | 359,724,699.13 | 461,267,036.64 | -22.01% | |
| Decoration and renovation expenses | 84,303,737.40 | 76,410,689.85 | 10.33% |
| Advertising expenses | 78,889,887.30 | 62,254,284.32 | 26.72% | |
| Office and business travel expenses | 20,281,804.02 | 13,647,638.74 | 48.61% | Mainly owing to the increase in sales scale |
Transportation expenses
| Transportation expenses | 10,068,692.80 | 8,614,867.40 | 16.88% | |
| E-commerce service fees | 8,659,135.65 | 6,549,205.73 | 32.22% | Mainly owing to the growth of online business |
| Depreciation of right-of-use assets | 175,539,936.53 | 100.00% | Mainly owing to the implementation of the New Lease Standards | |
| Others | 10,969,661.97 | 11,293,498.01 | -2.87% | |
| Total | 1,041,052,486.14 | 885,368,459.26 | 17.58% |
4. Other information required by guidelines for information disclosure of textile and garment relatedindustriesThe Company needs to comply with information disclosure requirements on the textile and garment-related industries as stipulated inthe SZSE Guidelines No. 3 for the Self-discipline and Supervision of Listed Companies — Industry Information Disclosure.
(1) Production capacity
The Company’s own production capacityCapacity utilization rate had a YoY change of more than 10%
□ Yes √ No
Whether there is overseas production capacity
□ Yes √ No
(2) Sales models and channels
Product sales channels and actual operation methodsThe Company adopts an omni-channel sales model of “direct sale + franchise” and “online + offline” that cover high-end departmentstores, shopping centers, airport and high-speed rail hubs and golf courses across the country and Tmall flagship stores.Offline channels are classified into company-operated stores and franchise stores.Direct sale refers to the model where the Company sets up counters or stores in high-end shopping malls, airports with largepassenger flow, well-known golf clubs, hotels, etc. in first- and second-tier cities to sell products. Direct sale can be divided into jointoperation and non-joint operation models. Under the joint operation model, the Company signs a joint operation agreement with theshopping mall, airport or golf club, under which the other party provides the venue and collection services while the Companyprovides products and sales management. The two parties share the sales revenue according to the agreed proportion. Under thenon-joint operation model, the Company signs a lease agreement with the provider of the business premise and obtains the use ofpremise via payment of rent. The Company is responsible for product and sales management.As for the franchise model, the franchisee signs a franchise contract with the Company to acquire the franchise qualification of BIEM
brands. The franchisee is responsible for acquiring business premises as well as daily operation and management of stores, whileenforcing product pricing, price adjustment and other policies formulated by the Company. Under the franchise model, products ofthe Company are sold to the franchisee in the form of buyouts, which are then sold externally through franchise stores. Thefranchisee bears benefits and risks associated with their operations.For online sales, main channels include Tmall, JD, Vipshop, and other third-party platforms. The Company opens official flagshipstores on these platforms and pays a certain amount of platform fee or certain share of the sales according to the sales volume on theplatform.
Unit: RMB
| Sales channel | Revenue | Cost of revenue | Gross profit margin | YoY changes of revenue | YoY changes of cost of revenue | YoY changes of gross profit margin |
| Online sale | 122,575,618.64 | 60,151,356.98 | 50.93% | 24,325,883.80 | -1,170,384.82 | 13.34% |
| Direct sale | 1,914,079,312.33 | 361,489,790.71 | 81.11% | 285,286,385.02 | 7,443,148.39 | 2.85% |
| Franchise sale | 683,334,326.17 | 212,519,454.02 | 68.90% | 107,050,776.48 | 26,341,442.74 | 1.21% |
(3) Franchise and distribution
Whether sales revenue of franchisees and distributors accounted for more than 30%
□ Yes √ No
Top 5 franchisees
| No. | Name of franchisee | Cooperation start time | Whether a related party | Total sales (RMB) | Level of franchisee |
| 1 | Franchisee 1 | September 01, 2006 | No | 29,276,021.22 | Level 1 |
| 2 | Franchisee 2 | December 01, 2007 | No | 23,401,646.06 | Level 1 |
| 3 | Franchisee 3 | February 01, 2019 | No | 17,853,002.34 | Level 1 |
| 4 | Franchisee 4 | October 01, 2011 | No | 16,886,763.54 | Level 1 |
| 5 | Franchisee 5 | December 01, 2013 | No | 13,067,322.07 | Level 1 |
| Total | -- | -- | -- | 100,484,755.23 | -- |
(4) Online sales
Whether sales revenue of online sales accounted for more than 30%
□ Yes √ No
Whether the Company had self-built sales platform
□ Yes √ No
Whether the Company cooperated with third-party sales platforms
√ Yes □ No
The Company opened or closed online sales channels
√ Applicable □ Not applicable
| Name of channel | Main brands | Main product categories | Channel status | Reason for close | Opening time | Operation conditions during opening |
| TikTok | BIEM.L.FDLKK | Garment | Open | November 08, 2021 | Normal operation | |
| TikTok | CARNAVAC DE VENISE | Garment | Open | November 08, 2021 | Normal operation |
Explanation of the impact on the current and future development of the CompanyBy adding online channels and carrying out in-depth cooperation with e-commerce platforms, the Company could offer more choicesto the shopping experience of consumers and further optimize channels and diversify traffic.
(5) Agent operation
Whether agent operation was involved
√ Yes □ No
| Name of partner | Main content of cooperation | Fee payment |
| Partner 1 | Provide operation services for the Company on JD, Tmall and TikTok platforms | Agency fee is paid based on a certain percentage of the actual sales amount |
(6) Inventory
Particulars of inventory
| Main product | Days of inventory turnover | Quantity | Aging | YoY changes of inventory balance | Reason |
| Garment | 360 | 3,909,789 | Within 1 year: RMB388.5076 million 1-2 years: RMB155.1531 million 2-3 years: RMB87.7364 million Over 3 year: RMB28.8171 million | Balance at the end of the year increased by RMB52,534,400 or 8.65% over the end of previous year. | Mainly owing to the increase in sales scale during the period |
Provision for inventory write-downMethods for recognition of the net realizable value of inventories and inventory write-downInventories at the end of the reporting period are measured at the lower of cost and net realizable value. If the net realizable value ofinventories at the end of the reporting period is lower than the book cost, the difference is set aside as inventory write-down. Netrealizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion, the estimatedcosts necessary to make the sale, and related taxes and fees.
1. Basis for determining the net realizable value of inventories: For materials held for production, if the net realizable value offinished product using the material is higher than its cost, the material is still measured at cost. However, when a decline in the priceof materials indicates that the cost of the finished product exceeds net realizable value, the material is written down to net realizablevalue. For inventories held to satisfy sales contracts or service contracts, their net realizable value is based on the contract price. Ifthe sales contracts are less than the inventory quantities held, the net realizable value of the excess part is based on general sellingprices.
2. Methods for determining inventory write-down: At the end of the reporting period, the Company determines the net realizablevalue of out-of-season clothes as the estimated selling price less selling cost and related taxes and fees. If the net realizable value islower than the book cost, the difference is set aside as inventory write-down. The reversed inventory write-down during the reportingperiod is for inventories sold in the current period but with write-down already recognized in the previous period.For specific inventory write-downs, please refer to “Section X Financial Report” --> “VII. Notes to Items of the ConsolidatedFinancial Statements” --> “6. Inventory”.Inventories of terminal channels such as franchisees or distributors
(7) Brand building
Whether the Company was involved in the production and sales of branded clothing, apparel and household textile products
√ Yes □ No
Own brands
| Name of brand | Name of trademark | Main product types | Characteristics | Target consumers | Price range | Main sales areas | City level |
| BIEM.L.FDLKK | BIEM.L.FDLKK | Casual sportswear | High-end, combination of leisure and sports | Middle class and above-income groups who advocate a healthy, sunny and comfortable lifestyle | 1500-8000 | Chinese | 1st-4th tier cities |
| CARNAVAL DE VENISE | Vocation travel apparel | Family outfits, parent-child outfits and couples outfits, catering to different vocation and travel scenarios | Middle-class consumers who pursue high-quality travels | 300-2000 | Chinese | 1st-4th tier cities |
Marketing and operation of each brand during the reporting period
Targeting at quality segment tracks, the Company implements a multi-brand development strategy and a differentiated marketpositioning strategy to accurately meet consumers’ differentiated dressing needs for different dressing scenarios in the context ofconsumption upgrading.The BIEM.L.FDLKK brand is positioned in the segment market combing golf sport and fashionable, leisure lifestyle and aims tobecome a high-end golf casual apparel brand. Target consumers include golf enthusiasts and middle-income or above consumers whoagree with golf culture and like golf-style clothing. The products feature distinctive personality and consistent style in design thatemphasize on “resonance” with target consumers. They are committed to providing consumers with high-quality, high-grade andhigh-tech wearing experience. Driven by constant product innovation, brand power enhancement and channel expansion, the brandaims to become the foremost sports casual apparel brand in the minds of consumers.The CARNAVAL DE VENISE brand focuses on the vacation travel market. The Company intends to build a new brand worth tens ofbillions that would pop up in the minds of consumers whenever they think of vacation travel apparel.During the reporting period, the Company continued to co-brand with the Palace Culture IP of the Forbidden City and rolled out the“Fu Lu Shou” (three gods of fortune, prosperity and longevity) series in spring and summer and the “Feng Tian Cheng Yun”(Mandate from Heaven) series in fall and winter. The series are filled with the charm of traditional Chinese culture and arewell-received in the market. In 2021, the Company teamed up with French design master SAFA SAHIN and jointly launched the dadshoe series. Reproducing the collision of classic and popular with contrasting colors and splicing designs of different materials, theco-branded dad shoes put on a new charm and bring a brand new wearing experience to consumers. In the future, the Company willcontinue to dip deep into traditional culture to reproduce the classics with ingenuity, show to the world what is “China-Chic”, anddemonstrate the glamor of a big country.The Company, closely revolving around main target consumer groups, implements integrated marketing from commodity planning,product design, terminal visual image, window advertising to product display, brand endorsement and planning of marketingactivities, with a view to enhancing brand popularity and reputation. Based on its high-end positioning, the Company has analyzedthe habits of target consumer groups and adopted a series of new media marketing measures thereupon. A matrix of measuresincluding celebrity endorsement, sports competition sponsorship, entertainment marketing, event marketing, and contribution topublic welfare activities were carried out, to continuously consolidate brand power.Trademark ownership disputes, etc. in which the Company was involved
□ Applicable √ Not applicable
(8) Others
Whether the Company was engaged in clothing design related businesses
√ Yes □ No
| Number of self-owned designers | 85 | Number of contracted designers | 7 |
| Operation of the built designer platform | Not applicable | ||
Whether the Company organized order meetings
√ Yes □ No
5. R&D investment
√ Applicable □ Not applicable
| Name of main R&D project | Project purpose | Project progress | Intended goals | Expected impact on the future development of the Company |
| Design, development and research on clothes with multi-functional composite blended materials | Promote the Company’s innovative product design, innovative fabric research and development, innovative process research and development, and research and development of standards for innovative function testing; under the research and development concept of “three high and one innovation” — high quality, high taste and high technology and innovation, comprehensively elevate features, performances and images of products and strengthen brand awareness, so that the Company’s products could continue to lead the market. | Ongoing | Master the key technologies of functional clothes with multi-functional composite blended materials | Maintain a leading position in the high-end fashion sportswear sector, continuously expand market boundaries, consolidate market competitiveness and brand influence of the Company’s products, and lay the foundation for building a century-old brand. |
Information on R&D personnel of the Company
| 2021 | 2020 | Change ratio | |
| Number of R&D personnel | 205 | 187 | 9.63% |
| Proportion of R&D personnel | 6.47% | 6.59% | -0.12% |
| Educational structure of R&D personnel | —— | —— | —— |
| Bachelor | 76 | 61 | 24.59% |
| Master | 7 | 7 | 0.00% |
| Associate degree | 70 | 62 | 12.90% |
| Others | 52 | 57 | -8.77% |
| Age structure of R&D personnel | —— | —— | —— |
| Under 30 | 42 | 30 | 40.00% |
| 30~40 | 117 | 114 | 2.63% |
| 40~50 | 42 | 39 | 7.69% |
| Above 50 | 4 | 4 | 0.00% |
R&D investment of the Company
| 2021 | 2020 | Change ratio | |
| Amount of R&D investment (RMB) | 83,388,128.67 | 64,804,859.36 | 28.68% |
| Proportion of R&D investment in total revenue | 3.07% | 2.81% | 0.26% |
| Amount of capitalized R&D investment (RMB) | 0.00 | 0.00 | 0.00% |
| Proportion of capitalized R&D investment in total R&D investment | 0.00% | 0.00% | 0.00% |
Reason for and impact of marked changes in the composition of the Company’s R&D personnel
□ Applicable √ Not applicable
Reason for marked changes in the proportion of R&D investment in total revenue over the last year
□ Applicable √ Not applicable
Reason for marked changes in the proportion of capitalized R&D investment and its reasonable explanation
□ Applicable √ Not applicable
6. Cash flow
Unit: RMB
| Item | 2021 | 2020 | YoY changes |
| Sub-total of cash inflow from operating activities | 2,794,084,680.61 | 2,193,006,746.73 | 27.41% |
| Sub-total of cash outflow from operating activities | 1,896,561,042.54 | 1,556,157,147.53 | 21.87% |
| Net cash flow from operating activities | 897,523,638.07 | 636,849,599.20 | 40.93% |
| Sub-total of cash inflow from | 3,170,817,478.89 | 1,791,379,059.48 | 77.00% |
| investing activities | |||
| Sub-total of cash outflow from investing activities | 3,354,579,606.23 | 2,835,956,575.40 | 18.29% |
| Net cash flow from investing activities | -183,762,127.34 | -1,044,577,515.92 | 82.41% |
| Sub-total of cash inflow from financing activities | 681,200,000.00 | -100.00% | |
| Sub-total of cash outflow from financing activities | 225,027,351.47 | 155,805,296.95 | 44.43% |
| Net cash flow from financing activities | -225,027,351.47 | 525,394,703.05 | -142.83% |
| Net increase in cash and cash equivalents | 488,734,159.26 | 117,666,786.33 | 315.35% |
Major influencing factors for significant YoY changes in relevant data
√ Applicable □ Not applicable
(1) During the reporting period, the net cash flow from operating activities recorded an increase of 40.93% compared with the sameperiod of the previous year, mainly owing to the expansion of sales scale and effective control of expenditures;
(2) During the reporting period, the cash inflow from investing activities recorded an increase of 77.00% compared with the sameperiod of the previous year, mainly owing to the increase in the income from purchasing wealth management products in the currentperiod;
(3) During the reporting period, the net cash flow from investing activities recorded an increase of 82.41% compared with the sameperiod of the previous year, mainly owing to the increase in wealth management investment in the previous period;
(4) During the reporting period, the net cash outflow from financing activities recorded an increase of 44.43% compared with thesame period of the previous year, mainly owing to the implementation of the New Lease Standards in the current period;
(5) During the reporting period, the net cash flow from financing activities recorded a decrease of 142.83% compared with the sameperiod of the previous year, mainly owing to the implementation of the New Lease Standards in the current period;
(6) During the reporting period, the net increase in cash and cash equivalents recorded an increase of 315.35% compared with thesame period of the previous year, mainly owing to the growth in performance.Reason for significant differences between the net cash flow from operating activities and the net profit of the year during thereporting period
□ Applicable √ Not applicable
V. Analysis of Non-principal Businesses
√ Applicable □ Not applicable
Unit: RMB
| Amount | Proportion in total profit | Explanation of reason | Whether it is sustainable |
| Investment income | 38,815,870.23 | 5.30% | Yes | |
| Profit and loss from changes in fair value | 3,424,832.00 | 0.47% | Yes | |
| Asset impairment | -78,683,952.73 | -10.74% | Yes | |
| Non-operating revenue | 531,942.90 | 0.07% | Yes | |
| Non-operating expense | 5,613,342.65 | 0.77% | No | |
| Credit impairment loss | 314,860.76 | 0.04% | Yes |
VI. Analysis of Assets and Liabilities
1. Significant changes in the composition of assets
Unit: RMB
| End of 2021 | Beginning of 2021 | Proportion changes | Description of significant changes | |||
| Amount | Proportion in total assets | Amount | Proportion in total assets | |||
| Monetary funds | 1,082,712,218.58 | 22.26% | 578,783,443.79 | 13.70% | 8.56% | |
| Accounts receivable | 279,717,057.14 | 5.75% | 301,061,376.99 | 7.13% | -1.38% | |
| Inventory | 660,214,219.41 | 13.58% | 607,679,776.22 | 14.38% | -0.80% | |
| Fixed assets | 244,337,754.20 | 5.02% | 239,216,423.50 | 5.66% | -0.64% | |
| Construction in progress | 148,165,548.36 | 3.05% | 49,120,792.27 | 1.16% | 1.89% | |
| Right-of-use assets | 407,448,654.74 | 8.38% | 478,604,887.71 | 11.33% | -2.95% | |
| Contract liabilities | 140,669,127.30 | 2.89% | 81,677,368.60 | 1.93% | 0.96% | |
| Lease liabilities | 217,323,756.45 | 4.47% | 298,677,940.84 | 7.07% | -2.60% | |
| Other current assets | 830,640,713.41 | 17.08% | 1,377,984,359.67 | 32.62% | -15.54% | Mainly owing to the decrease in purchased structured deposits |
| Investment in other equity instruments | 98,099,300.47 | 2.02% | 92,785,368.67 | 2.20% | -0.18% | |
| Intangible assets | 119,548,729.29 | 2.46% | 114,864,801.65 | 2.72% | -0.26% | |
| Long-term prepaid expenses | 105,243,120.55 | 2.16% | 104,972,941.26 | 2.48% | -0.32% | |
| Other payables | 55,878,486.28 | 1.15% | 44,335,743.56 | 1.05% | 0.10% | |
| Bonds payable | 284,554,163.11 | 5.85% | 630,982,939.14 | 14.94% | -9.09% | Mainly owing to the conversion of convertible bonds into shares |
High proportion of overseas assets
□ Applicable √ Not applicable
2. Assets and liabilities measured at fair value
√ Applicable □ Not applicable
Unit: RMB
| Item | Opening balance | Profit or loss from changes in fair value of the period | Accumulated changes in fair value included in equity | Write-down in the period | Amount purchased in the period | Amount sold in the period | Other changes | Closing balance |
| Financial assets | ||||||||
| 4. Investment in other equity instruments | 92,785,368.67 | 5,313,931.80 | 98,099,300.47 | |||||
| Sub-total of financial assets | 92,785,368.67 | 5,313,931.80 | 98,099,300.47 | |||||
| Total | 92,785,368.67 | 5,313,931.80 | 98,099,300.47 | |||||
| Financial liabilities | 0.00 | 0.00 | ||||||
Other changesWhether there were significant changes to measurement attributes of the Company’s main assets during the reporting period
□ Yes √ No
3. Restriction of asset rights at the end of the reporting period
Unit: RMB
| Item | Book value at the end of the period | Reason for restriction |
| Monetary funds | 13,334,484.75 | Deposits for bank acceptance bills |
Total
| Total | 13,334,484.75 |
VII. Analysis of Investment
1. Overview
□ Applicable √ Not applicable
2. Major equity investment during the reporting period
□ Applicable √ Not applicable
3. Major non-equity investment during the reporting period
□ Applicable √ Not applicable
4. Financial asset investment
(1) Security investment
□ Applicable √ Not applicable
The Company did not invest in securities during the reporting period.
(2) Derivative investment
□ Applicable √ Not applicable
The Company did not invest in derivatives during the reporting period.
5. Use of proceeds
√ Applicable □ Not applicable
(1) Overall use of proceeds
√ Applicable □ Not applicable
Unit: RMB10,000
| Year of raising | Method of raising | Total amount of proceeds raised | Amount of proceeds used in the period | Cumulative amount of proceeds used | Amount of proceeds whose use was changed in the period | Cumulative amount of proceeds whose use was changed | Proportion of cumulative proceeds whose use was changed in total proceeds raised | Amount of unused proceeds | Purpose and whereabouts of unused proceeds | Amount of proceeds that have been idle for over two years |
| 2016 | IPO | 62,407.7 | 7,604.43 | 52,102.16 | 0 | 22,412 | 35.91% | 13,826.38 | Wealth management products, deposited in regulatory banks | 0 |
| 2020 | Convertible bonds | 67,872.93 | 5,352.1 | 26,526.18 | 0 | 0 | 0.00% | 42,634.35 | Wealth management products, deposited in regulatory banks | 0 |
| Total | -- | 130,280.63 | 12,956.53 | 78,628.34 | 0 | 22,412 | 17.20% | 56,460.73 | -- | 0 |
| Description on overall use of proceeds | ||||||||||
| (1) Proceeds raised in IPO: Under “CSRC Approval [2016] No. 2860” issued by China Securities Regulatory Commission, BIEM.L.FDLKK Garment Co., Ltd. issued 26,670,000 RMB-denominated ordinary shares (A shares) to the public, each having a par value of RMB1.00 and an issue price of RMB26.17. The total capital raised was RMB697,953,900.00, and the net amount was RMB624,077,000.00 after deducting the issuance fees of RMB73,876,900.00 (tax exclusive). The raised proceeds were received in full amount on December 20, 2016, for which GP Certified Public Accountants (Limited Liability Partnership) had verified and presented the Capital Verification Report (GP Verification Doc. [2016] No. G14002150538) As of December 31, 2021, RMB521,021,571.05 of the proceeds had been used and RMB138,263,789.81 had not been used (including interest income less service charge). (2) Proceeds raised through convertible bonds: Under “CSRC Approval [2020] No. 638” issued by China Securities Regulatory Commission, BIEM.L.FDLKK Garment Co., Ltd. issued a total of RMB689 million convertible bonds to the general public, each having a par value of RMB100. The total capital raised was RMB689,000,000.00, and the net amount was RMB678,729,339.62 after deducting the underwriting fee, sponsor fee and other issuance fees of RMB10,270,660.38 (tax exclusive). The raised proceeds were received in full amount on June 19, 2020, for which Zhongxinghua Certified Public Accountants (Limited Liability Partnership) had verified and presented the Capital Verification Report (ZXH Verification Doc. [2020] No. 410005). As of December 31, 2021, RMB265,261,784.43 of the proceeds had been used and RMB426,343,457.48 had not been used (including interest income less service charge). | ||||||||||
(2) Projects committed with proceeds raised
√ Applicable □ Not applicable
Unit: RMB10,000
| Committed investment projects and use of over-raised funds | Whether committed projects have been changed (includin | Total committed investment at raising | Total investment after adjustment (1) | Amount invested in the period | Cumulative amount invested as of the end of the period (2) | Investment progress as of the end of the period (3) = (2)/(1) | Date for the project is ready for intended use | Benefits realized in the period | Whether expected benefits are achieved | Whether project feasibility changed significantly |
| g partial change) | ||||||||||
| Committed investment project | ||||||||||
| Marketing network construction project | Yes | 52,053.82 | 29,641.82 | 0 | 29,641.82 | 100.00% | December 31, 2019 | 27,529 | Yes | No |
| Information system improvement project | No | 5,383.88 | 5,383.88 | 0 | 5,384.03 | 100.00% | December 31, 2019 | Not applicable | No | |
| Supplementing working capital | No | 5,000 | 5,000 | 0 | 5,000 | 100.00% | Not applicable | No | ||
| BIEM.L.FDLKK intelligent storage center | Yes | 0 | 22,412 | 7,604.43 | 12,076.31 | 53.88% | December 31, 2022 | Not applicable | No | |
| Marketing network construction and upgrading project | No | 30,972.93 | 30,972.93 | 2,191.03 | 3,461.02 | 11.17% | June 30, 2023 | 1,800.18 | Yes | No |
| Supply chain park project | No | 14,000 | 14,000 | 1,699.69 | 1,740.54 | 12.43% | June 30, 2022 | Not applicable | No | |
| R&D design center project | No | 4,000 | 4,000 | 1,461.38 | 2,424.62 | 60.62% | June 30, 2022 | Not applicable | No | |
| Supplementing working capital | No | 18,900 | 18,900 | 0 | 18,900 | 100.00% | Not applicable | No | ||
| Sub-total of committed investment projects | -- | 130,310.63 | 130,310.63 | 12,956.53 | 78,628.34 | -- | -- | 29,329.18 | -- | -- |
| Investment direction of over-raised funds | ||||||||||
| None | ||||||||||
| Total | -- | 130,310.63 | 130,310.63 | 12,956.53 | 78,628.34 | -- | -- | 29,329.18 | -- | -- |
| Description of failure to achieve the planned progress or expected benefits and reasons (by project) | The “intelligent storage center” project of the Company progresses slowly, mainly because the land is a piece of land reserve won by the Company through auction; the “three supplies and one leveling” (supply of water, electricity and road and ground leveling) work of relevant departments have been delayed, leading to delayed project progress. The Company has applied to the national planning department to extend the construction and completion time of the land plot as well as the validity period under the Construction Land Approval, which has been approved. The “marketing network construction and upgrading project” is behind the expected schedule, mainly | |||||||||
| because under the impact of COVID-19 and other factors, the Company has been advancing the investment project cautiously so as to reduce investment risks of the proceeds. The “supply chain park project” is behind the expected schedule, mainly because relevant departments have made adjustments to the planning of the plot while construction progresses slowly due to prolonged supply cycle of workers and materials under the influence of COVID-19. | |
| Description of significant changes in project feasibility | None |
| Amount, purpose and progress of use of over-raised funds | Not applicable |
| Changes in implementation locations of projects invested with raised proceeds | Applicable |
| Occurred in previous years | |
| In July 2017, the 17th meeting of the Second Board of Directors deliberated and approved the Proposal on Changing the Specific Locations of Certain Projects Invested with Raised Proceeds, which agreed to change the locations of some stores under the “marketing network construction project”. Specific locations of stores were adjusted by the management according to actual business needs. The change of locations would not change the use of raised proceeds, nor would it cause any substantial impact on the implementation of the project. | |
| Adjustments to implementation methods of projects invested with raised proceeds | Applicable |
| Occurred in previous years | |
| The “marketing network construction project” originally planned to establish 224 company-operated stores across the country, including 206 joint-operation stores in shopping malls and airports and 18 stores in golf clubs. On October 25, 2018, the 6th meeting of the Third Board of Directors and the 5th meeting of the Third Board of Supervisors deliberated and approved the Proposal on Adjusting the Number of Stores under the Marketing Network Construction Project, which stated to increase the number of stores under the marketing network construction project from 224 to no more than 400 under the premise of not changing the total investment amount, investment purpose and implementation entity. Specific implementation decisions will be made by the management according to actual business needs. The matter has been approved by the 2018 Second Extraordinary General Meeting. | |
| Advance investments for projects planned with raised funds and their exchange | Applicable |
| (1) Proceeds raised in IPO: In April 2017, upon deliberation and approval at the 16th meeting of the Second Board of Directors, in accordance with the Authentication Report of Having Used Self-raised Funds to Invest in Projects Planned with Raised Proceeds in Advance issued by GP Certified Public Accountants LLP (GP Special Doc. [2017] No. G17003810041), independent directors, the Board of Supervisors and the sponsor expressed their consent to exchange the Company’s self-raised funds that had invested in the projects planned under raised proceeds in advance at an amount of RMB99,223,778.79 on February 28, 2017 with the raised proceeds. (2) Proceeds raised through convertible bonds: On September 25, 2020, upon deliberation and approval at the 28th meeting of the Third Board of Directors, in accordance with the Authentication Report of |
| Exchanging the Self-raised Funds That Have Been Used for Projects Planned with the Raised Proceeds and Issuance Fees with Raised Proceeds issued by Huaxing Certified Public Accountants LLP (HX Audit Doc. [2020] No. GD-280), independent directors, the Board of Supervisors and the sponsor expressed their consent to exchange the Company’s self-raised funds that had invested in the projects planned under raised proceeds in advance at an amount of RMB11,826,344.79 and self-owned funds that had been used to pay for issuance fees at an amount of RMB2,470,660.38 with the raised proceeds at an amount of RMB14,297,005.17. | |
| Temporary replenishment of working capital with idle proceeds | Not applicable |
| Amount of proceed balance after project implementation and reasons | Not applicable |
| Unused proceeds and their whereabouts | The Company convened the 6th meeting of the Fourth Board of Directors and the 4th meeting of the Fourth Board of Supervisors on September 24, 2021 and the 2021 Second Extraordinary General Meeting on October 13, 2021. The meetings deliberated and approved the Proposal on Using Idle Proceeds and Idle Self-owned Funds for Cash Management, which agreed to use no more than RMB650 million of temporarily idle proceeds for cash management under the premise of not affecting the progress of the investment projects and daily operations of the Company. The above cash management quota is valid for 12 months from the date of approval by the general shareholder meeting, and, within the validity period, the funds may be used on a rolling basis. Independent directors and the sponsor all expressed their consent. As of December 31, 2021, the Company had used RMB100 million idle proceeds to purchase the Li Duo Duo RMB structured corporate deposit products of Shanghai Pudong Development Bank and RMB380 million to purchase capital-guaranteed wealth management products of banks and securities companies. Other unused proceeds are still stored in the special account for the raised funds. |
| Problems or other situations in the use and disclosure of proceeds | None |
(3) Change the use of proceeds
□ Applicable √ Not applicable
The Company did not change the use of proceeds during the reporting period.
VIII. Major Asset and Equity Sales
1. Sales of major assets
□ Applicable √ Not applicable
The Company did not sell major assets during the reporting period.
2. Sales of major equity
□ Applicable √ Not applicable
IX. Analysis of Main Holding and Joint-stock Companies
□ Applicable √ Not applicable
The Company had no main holding and joint-stock companies that should be disclosed during the reporting period.
X. Structured Entities Controlled by the Company
□ Applicable √ Not applicable
XI. Outlook of the Company’s Future Development
2021 is a landmark year that witnessed another strategic cultural upgrade of the Company. The Company aims to build a century-old,world-renowned clothing group. It has defined its core culture as “responsibility and ultimate experience” and has established acorporate value of “one dedication and three haves”, i.e. dedication to principal business, continuous innovation, and having passion,resilience and responsibility. With a mission of continuously creating values for consumers, the Company has specified a strategy ofleading brand development with a single category, namely “Biemlfdlkk T-shirt Expert”, to lay the foundation for further opening upmarket space.Under the macro environment of the rise of China-chic, cultural confidence and consumption upgrading, the Company will seizeopportunities to speed up the pace of development. Priority is given to the creation of product power, channel power and brand powerand the improvement of operational capabilities, to rapidly enhance brand awareness and consolidate its leading position in thehigh-end fashion sportswear market.
1. Focusing on core categories with strategic upgrading and building the T-shirt Expert
According to data in the Report on Market Panoramic Survey of China’s T-shirt Industry and Investment Evaluation 2020-2025,worldwide billions of T-shirts are sold each year. As a big consumer of T-shirts, China consumes more than 3 billion T-shirts annually.When China’s per capita GDP exceeds US$3,000, people would raise higher demands for clothes in terms of both level and quality.Therefore, high-end T-shirts would possess greater market space.
After 20 years of dedication in the golf apparel market, the Company boasts a great number of utility model patents regarding plates,materials and processes of T-shirts. It has accumulated the somatic data of tens of millions of people that could enable the Companyto design fitter and more comfortable T-shirts. As a result, products of the Company are highly recognized by target consumers.According to a statistical sales survey conducted by the China General Chamber of Commerce and the China National CommercialInformation Center, T-shirts of the Company have taken up the first place in comprehensive market share (weighted average ofmarket share by volume and market coverage) for four consecutive years (2018-2021). T-shirt has become a super category of theCompany. Featuring “rigid demand”, “consumable”, “cross-region” and “cross-season”, T-shirts have a high repurchase rate, withbroad market space and continuous growth potential.Based on its own advantages, the Company has launched a strategic upgrade plan of driving development with a single category. Byfocusing on T-shirts, the Company hopes to transform itself from the “first golf brand” to the “first T-shirt brand” that would pop upin the minds of consumers whenever they think of that category.
2. Firmly grasping the trend of high-end fashion sports and opening independent stores for golf seriesUnder the influence of multiple factors including China’s economic development, consumption upgrading, catalytic effect of thepandemic, and the introduction of a series of national support policies for the sports industry, the domestic high-end sports market hasbecome a new wind gap. High end and segmented markets are effective channels for domestic brands to overtake internationalbrands.At present, BIEM.L.FDLKK has taken up the largest comprehensive share in the domestic golf apparel market for five consecutiveyears. Under the leadership of the new Korean designer, the golf series are equipped with a better fashion sense and richer SKUs toadapt to different sportswear scenarios. The products have attracted a group of loyal consumers. Considering advantages of theproduct, it becomes suitable to open up independent stores for the golf series.
In 2022, the Company initiated independent operations for the golf series with independent stores. Positioning at a high-end fashionbrand, the series can be further divided into fashion and professional series. Adhering to the style of “young, fashionable andinnovative” and the R&D concept of “high quality, high taste and high technology”, the products offer high-value experience for golfenthusiasts who value sports, fashion and functionality.Opening independent stores for the series could further enhance the experience of high-end consumers toward fashion sportswear,which is conducive to consolidate the Company’s status as the first and foremost golf apparel brand.
3. Increasing R&D investment to consolidate brand value
In the future, the Company will continue to increase R&D investment and, with a reliance on the self-built fabric laboratory, form aunique style with regards to the R&D and application of new materials, innovation of fabrics, etc. It will upgrade its R&D Center,introduce high-quality R&D and design talents, increase investment in the R&D of related materials, and cooperate with universitiesand scientific research institutions. By ways of constant plate optimization, design breakthroughs and cultural empowerment, theCompany will continue to innovate, create values for consumers, and build highly competitive products to constantly enhance brandvalue.
4. Upgrading both brand image and services to build signature brand culture
In the future, the Company will upgrade both brand images and services with a view to highlighting its competitive edges and forginga signature brand culture. In terms of brand image upgrading, the Company will build the new look of terminal stores via design anddisplay upgrades. As for brand service upgrading, the Company will elevate the images and qualities of all employees andcomprehensively improve store services.
5. Continuous efforts in brand promotion to enhance brand power in an all-round way
Enhancing brand power is a key strategy of the Company for future development, for which the Company will continue to increaseadvertising efforts. The adoption of a series of new branding channels and models is helpful for building a brand image of young,international and high-end and enhancing brand cultural values and influences. Priority is given to two mainstream platforms,WeChat and Xiaohongshu. Advertisements and KOL recommendations can help incubate young consumers. At the same time, theCompany has established an endorsement matrix by introducing young spokesperson. Other activities such as offline interactionswith celebrities and VIP experience activities are also conducive to boosting brand awareness and influence.
6. Optimizing talent strategy and strengthening HR management
In 2021, the Company rolled out the new promotion mechanism and the new remuneration and benefits system and established thetalent reserve mechanism. When it comes to talent training and management, the Company has introduced advanced managementphilosophies. In order to give full play to the talent competition mechanism and initiative in store management, the new model ofstore contracting system was piloted. In the future, the Company will continue to innovate on the traditional management models androll out new management models. Emphasis is placed on the cultivation of a young, diverse talent team and the improvement oforganizational capacity, so as to consolidate its overall competitiveness and promote its long-term, sustainable development.(II) Potential risks faced by the Company
1. Risks of production outsourcing
The Company adopts the brand operation model; i.e. it focuses on links with higher added value such as design in the upstream aswell as brand operation and sales channel construction in the downstream of the business chain, and outsources production. Theoutsourcing of production allows the Company to effectively reduce operating costs while enhancing core competitiveness. Atpresent, the garment industry chain in China boasts obvious advantages and there are many garment factories with highmanufacturing level to choose from. Meanwhile, for products with special requirements, the Company will choose some factoriesoverseas (such as South Korea) for production to ensure product quality. It has also established a factory selection, inspection andevaluation system, and constantly strengthens and improves product quality by dispatching quality specialists to factories, inspectingtheir warehouses, entrusting third-parties to conduct special tests, etc. Despite so, there is still the risk that production processes ofthe factories are not up to quality requirements of the Company or production arrangement could not meet delivery schedule whichresult in delayed supply, thereby affecting the promotion and sales of the Company’s products.
2. Management risks brought by marketing network expansion
Products of the Company are sold through company-operated stores and franchise stores. The expansion of marketing network is animportant way for the Company to increase market share and improve business performance. In recent years, with steady businessdevelopment, store expansion has maintained a rapid growth rate. Although the Company has accumulated strong experience inchannel expansion and management, possesses certain high-quality channel resources, has established a sound talent cultivation
mechanism, and is equipped with strong store replication capabilities, along with the availability of proceeds raised through thisoffering and the unfolding of investment projects, the scale of the Company will grow rapidly and the marketing network will befurther expanded. The rapid growth of the number of stores will raise more demanding requirements on the Company’s managementand operation. If the Company’s talent reserve, HR management, selection of suitable locations for new stores and performancemanagement cannot adapt to its development, the profitability of the Company in the future will be impacted to a certain extent.
3. Risks of large inventory balance
For high-end clothing brands, inventory usually takes up a high proportion in total assets while the turnover rate is low, which isconsistent with their business models. This is also the case for the Company. Despite the fact inventories of the Company have beenkept at a reasonable level required for normal production and operation and the aging is mostly within 2 years, if there are changes inthe market environment or the competition is intensified in future years, it may lead to inventory backlog or impairment. This willcause adverse effects to operations of the Company.XII. Reception of Researches, Communications, Interviews and Other Activities
√ Applicable □ Not applicable
| Reception time | Reception location | Reception method | Type of reception object | Reception object | Main content discussed and information provided | Index of the basic situation of the survey |
| May 14, 2021 | Online platform (http://rs.p5w.net) | Others | Others | Online investors | For details, please refer to the IR Activity Record Form (No. 2021-001) | CNINFO (http://www.cninfo.com.cn). |
Section IV Corporate GovernanceI. Basic Situation of Corporate Governance
During the reporting period, the Company has constantly improved its corporate governance structure and optimized its internalmanagement systems in strict compliance with requirements of the Company Law, the Securities Law, the Code of CorporateGovernance for Listed Companies, the Rules Governing the Listing of Shares on Shenzhen Stock Exchange, and other relevant laws,administrative regulations and normative rules promulgated by China Securities Regulatory Commission (CSRC) and ShenzhenStock Exchange (SZSE).(I) Shareholders and general meeting of shareholdersThe Company has formulated the Rules of Procedure for the General Meetings of Shareholders and implements them strictly. Duringthe reporting period, the Company convened five general meetings of shareholders. The calling and convening procedures,notifications, authorizations and delegations, resolutions, deliberations and announcements of the general meeting of shareholders areall compliant with relevant laws and regulations. In addition, all the meetings conducted voting both on site and via Internet, so thatall shareholders, especially minority shareholders, can fully exercise their rights.(II) Directors and the Board of DirectorsThe Board of Directors of the Company currently comprises 9 directors, among which 3 are independent directors. The number andcomposition of the Board of Directors meet requirements of laws, regulations, and the Articles of Association. The Companyorganized the directors to attend relevant training activities of regulatory authorities. Further study and familiarity with relevant lawsand regulations has effectively improved the capabilities of directors to perform their duties. Independent directors of the Companyhave fulfilled their duties in a serious and responsible manner. They are responsible for safeguarding the overall interests of theCompany, with a special focus on the protection of the legitimate interests of minority shareholders, and expressing independentopinions on material and important matters.(III) Supervisors and the Board of SupervisorsThe Board of Supervisors of the Company comprises 3 supervisors, among which 1 is an employee representative supervisor. Thenumber and composition of the Board of Supervisors meet requirements of laws, regulations, and the Articles of Association. Allsupervisors earnestly perform their duties as per requirements of the Rules of Procedure of the Board of Supervisors and otherrelevant regulations, to supervise the decision-making procedures and resolutions of the Board of Directors and the Company’s legaloperations and to effectively oversee the legality and compliance of directors, managers and other senior executives of the Companyin their duty performance.(IV) Relationship between controlling shareholders and the CompanyThe controlling shareholder of the Company is a natural person, Mr. Xie Bingzheng, who is also the actual controller and theChairman of the Company. Mr. Xie strictly regulates his behaviors in accordance with relevant requirements on listed companies. Allmajor business decisions of the Company have been made in line with standardized operating procedures, and there are nocircumstances of damaging the interests of the Company and other shareholders. The Company is independent from the controllingshareholder in terms of business, personnel, assets, institution, finance, etc. and has independent and complete business systems and
independent operation capabilities.(V) Other stakeholdersThe Company fully respects and safeguards the legitimate rights and interests of all stakeholders including shareholders, employees,suppliers and customers. While creating the optimal profits, the Company strives to achieve a balance of interests among the society,shareholders, employees and other relevant parties, to jointly promote its continual, sustainable development.(VI) Information disclosure and transparencyThe Board of Directors has designated the Secretary to the Board in accordance with provisions of the Measures of the Company onInformation Disclosure Management, who is responsible for investor relations management and daily information disclosure and forreceiving visits and consultations from shareholders. The Company strives to disclose information in a fair, timely, accurate andcomplete manner such that all shareholders may learn about information of the Company timely and fairly.
Whether there are significant differences between the Company’s actual status of corporate governance and laws, administrativeregulations and CSRC normative documents on the governance of listed companies
□ Yes √ No
There were no significant differences between the Company’s actual conditions and laws, administrative regulations and CSRCnormative documents on listed company governance.
II. The Company’s Independence from Its Controlling Shareholders in terms of Business,Personnel, Finance, Organization, Business, etc.During the reporting period, the Company operates in strict compliance with the Company Law and the Articles of Association. It isentirely independent from the controlling shareholder in terms of business, personnel, assets, institution, finance, etc. and hasindependent and complete business systems and independent operation capabilities.(I) In respect of businessThe Company is equipped with independent R&D design, procurement, marketing and supply systems. It faces the market andoperates independently, without any reliance on the controlling shareholder and other related parties for production and operation. Itsbusinesses are also independent from the controlling shareholder and other related parties.(II) In respect of personnelThe Company has set up an independent HR Dept. with independent personnel files, recruitment, appointment and dismissal systems,and appraisal, reward and punishment rules in accordance with relevant state laws and regulations. All employees are recruitedthrough standard recruitment procedures and have signed a labor contract with the Company. Directors, supervisors and seniormanagement of the Company have been elected and appointed in strict accordance with provisions of the Company Law and theArticles of Association. Senior management of the Company including the Chairman, General Manager, Deputy General Manager,Chief Financial Officer and Board Secretary serve full-time in the Company. They do not hold any positions other than directors andsupervisors in the controlling shareholder or actual controller or other companies controlled by them, nor do they receiveremuneration from the controlling shareholder or actual controller or other companies controlled by them. Finance personnel of theCompany do not moonlight in the controlling shareholder or actual controller or other companies controlled by them.(III) In respect of assets
The Company legally owns the ownership or use rights of lands, properties, and trademark patents, and other assets relating to itscurrent businesses. The property rights of assets between the Company and its shareholders are clearly defined. There is no situationwhere assets, equities or reputation of the Company are used as guarantees for debts of shareholders, or where controllingshareholder and related parties embezzle funds, assets and other resources of the listed company.(IV) In respect of institutionThe Company has established and improved an independent and complete organizational structure in line with the needs of its ownbusiness development, with clear division of labor as well as coordination and cooperation among units and departments. Functionaldepartments are completely independent from the controlling shareholder and actual controller in respects of personnel, office sitesand management systems. The Company has put in place a relatively complete corporate governance structure in accordance withrelevant laws. General meetings of shareholders, the Board of Directors and the Board of Supervisors operate standardly in strictaccordance with the Company Law and the Articles of Association. Moreover, the Company is also equipped with an independentdirector system. Office premises of the Company are independent of those of the shareholder units, without any co-working or mixedoperation.(V) In respect of financeThe Company has set up an independent finance department equipped with full-time financial personnel. It has also established anindependent accounting system and a standardized financial management system in accordance with the Accounting Law of thePeople’s Republic of China and the Accounting Standards for Business Enterprises, and is able to make decisions relating to financialmatters independently. The Company opens independent bank accounts and files for tax returns and performs taxation obligationsindependently. There is no shared bank account with the controlling shareholder or actual controller or other companies controlled bythem.
III. Horizontal Competition
□ Applicable √ Not applicable
IV. Annual General Meeting and Extraordinary General Meetings Held during the ReportingPeriod
1. Shareholder meetings during the reporting period
| Session of meeting | Type | Ratio of investor participation | Date of convening | Date of disclosure | Resolutions of the meeting |
| 2021 First Extraordinary General Meeting | Extraordinary general meeting of shareholders | 59.16% | January 29, 2021 | December 30, 2021 | Deliberated and approved all proposals. Details can be found in the Announcement on Resolutions of 2021 First Extraordinary |
| General Meeting (Announcement No.: 2021-008) on CNINFO (http://www.cninfo.com.cn). | |||||
| 2020 Annual General Meeting of Shareholders | Annual general meeting | 49.27% | May 19, 2021 | May 20, 2021 | Deliberated and approved all proposals. Details can be found in the Announcement on Resolutions of 2020 Annual General Meeting of Shareholders (Announcement No.: 2021-044) on CNINFO (http://www.cninfo.com.cn). |
| 2021 Second Extraordinary General Meeting | Extraordinary general meeting of shareholders | 49.04% | October 13, 2021 | October 14, 2021 | Deliberated and approved all proposals. Details can be found in the Announcement on Resolutions of 2021 Second Extraordinary General Meeting (Announcement No.: 2021-080) on CNINFO (http://www.cninfo.com.cn). |
2. Extraordinary general meetings of shareholders proposed to be convened by preferred shareholderswhose voting rights were resumed
□ Applicable √ Not applicable
V. Particulars of Directors, Supervisors and Senior Management
1. Basic information
| Name | Position | Position status | Gender | Age | Start date of term of office | End date of term of office | Number of shares held at the beginning of the period | Increase of shares during the period | Decrease of shares during the period | Other changes (shares) | Number of shares held at the end of the period | Reason for change |
| Xie Bingzheng | Chairman | Incumbent | Male | 53 | February 15, 2015 | January 28, 2024 | 216,172,000 | -1,200 | 216,170,800 | Operation error of the securities account | ||
| Shen Jindong | Director and General Manager | Incumbent | Male | 47 | February 15, 2015 | January 28, 2024 | 19,652,000 | 19,652,000 | ||||
| Tang Xinqiao | Director, Deputy General Manager, and Chief Financial Officer | Incumbent | Female | 49 | February 15, 2015 | January 28, 2024 | 5,895,600 | 5,895,600 | ||||
| Chen Yang | Director, Deputy General Manager, and Board Secretary | Incumbent | Male | 42 | February 15, 2015 | January 28, 2024 | ||||||
| Liu Yueping | Independent Director | Resigned | Male | 62 | February 15, 2015 | January 29, 2021 | ||||||
| Xu Xiaoxia | Independent Director | Incumbent | Female | 59 | January 26, 2018 | January 28, 2024 | ||||||
| Feng | Independ | Resigned | Female | 43 | January | January |
| Minhong | ent Director | 26, 2018 | 29, 2021 | |||||||||
| Xie Qing | Independent Director | Incumbent | Male | 57 | January 29, 2021 | January 28, 2024 | ||||||
| Zeng Yamin | Independent Director | Incumbent | Female | 43 | January 29, 2021 | January 28, 2024 | ||||||
| Shi Minqiang | Chairman of the Board of Supervisors | Incumbent | Male | 40 | February 15, 2015 | January 28, 2024 | ||||||
| Cao Yong | Supervisor | Incumbent | Male | 48 | February 15, 2015 | January 28, 2024 | ||||||
| Zhou Cancan | Employee Representative Supervisor | Incumbent | Female | 50 | January 26, 2018 | January 28, 2024 | ||||||
| Jin Fenlin | Deputy General Manager | Incumbent | Female | 43 | January 22, 2017 | January 28, 2024 | ||||||
| Total | -- | -- | -- | -- | -- | -- | 241,719,600 | 0 | 0 | -1,200 | 241,718,400 | -- |
Whether there is any resignation of directors and supervisors or dismissal of senior management within their term of office during thereporting period
□ Yes √ No
Changes in directors, supervisors and senior management of the Company
√ Applicable □ Not applicable
| Name | Position | Type | Date | Reason |
| Liu Yueping | Independent Director | Resigned upon expiry of term of office | January 29, 2021 | Resigned upon expiry of term of office |
| Feng Minhong | Independent Director | Resigned upon expiry of term of office | January 29, 2021 | Resigned upon expiry of term of office |
| Xie Qing | Independent Director | Elected | January 29, 2021 | Elected upon the change of board |
| Zeng Yamin | Independent Director | Elected | January 29, 2021 | Elected upon the change of board |
2. Main working experience
Professional background, main working experience and main current responsibilities of the Company’s in-service directors,supervisors and senior management(I) DirectorsMr. Xie Bingzheng, born in 1969, is of Chinese nationality and has no permanent residency abroad. Mr. Xie holds an EMBA degreefrom Jinan University. He is a National Textile Industry Model Worker, the Vice Chairman of China Golf Association, the VicePresident of China National Garment Association, the Vice President of China Fashion Color Association, the Vice President ofChina Textile Planning Research Association, and the Vice President of Guangzhou Federation of Industry & Commerce. He startedto serve as the Executive Director (Legal Representative) of the Company in October 2007 and has been the Chairman of theCompany ever since February 2012.Mr. Shen Jindong, born in 1975, is of Chinese nationality and has no permanent residency abroad. Mr. Shen holds an EMBA degreefrom Jinan University. He is the Vice President of Guangdong Association of Garment and Garment Article Industry He became theExecutive Deputy General Manager of the Company in March 2003 and has been the director and General Manager of the Companysince February 2012.Ms. Tang Xinqiao, born in 1973, is of Chinese nationality and has no permanent residency abroad. She has a college degree and is anassistant accountant. Ms. Tang acted as the Deputy General Manager and Chief Financial Officer of the Company from December2006 and currently serves as the director, Deputy General Manager, and Chief Financial Officer of the Company.Mr. Chen Yang, born in 1980, is of Chinese nationality and has no permanent residency abroad. Mr. Chen holds a master’s degree.He once worked as the Director of the Alumni Services Office, School of Business Administration, South China University ofTechnology and the General Manager of Jiangshan Dijing Golf Club. He became the Deputy General Manager and Board Secretaryof the Company in September 2011 and currently serves as the director, Deputy General Manager and Board Secretary of theCompany.Mr. Xie Qing, born in 1965, is of Chinese nationality and has no permanent residency abroad. He is a senior economist with amaster’s degree. He once acted as the Vice President of China National Garment Association, the Deputy Director of the Economyand Information Technology Bureau of Xinjiang Uygur Autonomous Region (Aid Xinjiang Program), the Deputy Director-Generalof the Industry and Information Technology Department of Xinjiang Uygur Autonomous Region (Aid Xinjiang Program), and theVice President of China Textile Enterprise Association. He has been serving as the Deputy Director of the Planning Department(Industry Development Department), China National Textile and Apparel Council since October 2015 and as the Executive VicePresident of China Textile Enterprise Association since December 2020. Currently, he is an independent director of the Company.Ms. Xu Xiaoxia, born in 1963, is of Chinese nationality and has no permanent residency abroad. She holds a master’s degree. Ms. Xuonce worked as an engineer in Shantou AD Photographic Material Research Institute, the Deputy General Manager of theElectromechanical Equipment Company of Guangdong Shantou International Industrial Group, the Assistant to the Dean and
Director of the Training Center of the School of Business Administration, South China University of Technology. Currently, Sheserves as the Executive Director of the Research and Consultancy Center for Guangdong Small and Medium-Sized Firms, School ofBusiness Administration, South China University of Technology, and the Managing Director of Baibu Youth (Guangzhou)Management Consulting Co., Ltd. She has part-timed as a director of the Guangdong Industrial Finance Holding Company sinceSeptember 2018 and a director of the Huada Capital Management (Guangdong) Co., Ltd. since February 2019. Currently she is anindependent director of the Company.Ms. Zeng Yamin, born in 1979, is a PhD of Xiamen University and post-doctoral scholar of Tsinghua University. In 2019, she wasselected into the International high-Level Accounting Talent Training Program of the Ministry of Finance. She has presided over anumber of projects under the National Natural Science Foundation, the National Social Science Fund of China, and the Sciences andHumanities Research Fund, the Ministry of Education. She was once an accounting lecturer at Shanghai University and NankaiUniversity, and has been a professor and doctoral supervisor of the Accounting Department of Jinan University since November 2014.Meanwhile, she has served as an independent director of the Rising Nonferrous Metals Share Co., Ltd. since October 2020, anindependent director of Guangdong Anda Automation Solutions Co., Ltd. since November 2020, an independent director ofGuangdong PAK Corporation Co., Ltd. since May 2021, and an independent director of Guangdong Lin’s Home Furnishing Co., Ltd.since October 2021. She is also an independent director of the Company at present.
(II) SupervisorsMr. Shi Minqiang, born in 1982, is of Chinese nationality and has no permanent residency abroad. Mr. Shi has a master’s degree. Hejoined the Company in October 2011 and currently serves as the Chairman of the Board of Supervisors.Mr. Cao Yong, born in 1974, is of Chinese nationality and has no permanent residency abroad. Mr. Cao has a master’s degree. Heonce worked in Bank of China Guangdong Branch. He has been the Investment Director of the Investment Department, GuangzhouJinan Investment Co., Ltd. since September 2010 and part-timed as a director of Guangdong Zhongyao Kiln Stock Co., Ltd. sinceAugust 2017. Currently he is a supervisor of the Company.Ms. Zhou Cancan, born in 1972, is of Chinese nationality and has no permanent residency abroad. She holds a college degree and hasbeen working in the Company since 2008. Currently she is a supervisor of the Company.(III) Senior managementMr. Shen Jindong is the General Manager of the Company. For details on his resume, please refer to the above “(I) Directors”.Ms. Tang Xinqiao is the Deputy General Manager and Chief Financial Officer of the Company. For details on her resume, pleaserefer to the above “(I) Directors”.Mr. Chen Yang is the Deputy General Manager and Board Secretary of the Company. For details on his resume, please refer to theabove “(I) Directors”.Ms. Jin Fenlin, born in 1979, is of Chinese nationality and has no permanent residency abroad. Ms. Jin holds a master’s degree and isthe Executive Director of China Fashion Color Association. She joined the Company in 2008 and currently serves as the DeputyGeneral Manager of the Company.Positions in shareholder entities
√ Applicable □ Not applicable
| Name | Name of shareholder entity | Position held in shareholder entity | Start date of term of office | End date of term of office | Whether receiving remuneration and allowance from shareholder entity |
| Xie Bingzheng | Guangzhou Jinan Investment Co., Ltd. | Director | January 01, 2010 | No | |
| Cao Yong | Guangzhou Jinan Investment Co., Ltd. | Investment Director | September 01, 2010 | Yes | |
| Description on position held in shareholder entity | None | ||||
Positions in other entities
√ Applicable □ Not applicable
| Name | Name of other entity | Position held in other entity | Start date of term of office | End date of term of office | Whether receiving remuneration and allowance from other entity |
| Xie Qing | Planning Department (Industry Development Department), China National Textile and Apparel Council | Deputy Director | October 01, 2015 | No | |
| Xie Qing | China Textile Enterprise Association | Executive Vice President | December 01, 2020 | Yes | |
| Xu Xiaoxia | Research and Consultancy Center for Guangdong Small and Medium-Sized Firms, South China University of Technology | Executive Director | January 01, 2022 | Yes | |
| Xu Xiaoxia | Baibu Youth (Guangzhou) Management Consulting Co., Ltd. | Managing Director | September 01, 2021 | No | |
| Xu Xiaoxia | Guangdong Industrial Finance Holding Company | Director | September 01, 2018 | No | |
| Xu Xiaoxia | Huada Capital Management (Guangdong) Co., Ltd. | Director | February 01, 2019 | No | |
| Zeng Yamin | Rising Nonferrous Metals Share Co., Ltd. | Independent Director | October 20, 2020 | Yes | |
| Zeng Yamin | Guangdong Anda Automation Solutions Co., Ltd. | Independent Director | November 30, 2020 | Yes |
| Zeng Yamin | Guangdong PAK Corporation Co., Ltd. | Independent Director | May 12, 2021 | Yes | |
| Zeng Yamin | Guangdong Lin’s Home Furnishing Co., Ltd. | Independent Director | November 01, 2021 | Yes | |
| Zeng Yamin | Accounting Department of Jinan University | Professor, doctoral supervisor | November 01, 2014 | Yes | |
| Tang Xinqiao | Guangdong Quality Energy Beverage Co., Ltd. | Director | July 25, 2018 | No | |
| Tang Xinqiao | Guangzhou Chuanqi Intelligent Technology Co., Ltd. | Executive Director and General Manager | April 26, 2019 | No | |
| Cao Yong | Guangdong Zhongyao Kiln Stock Co., Ltd. | Director | August 01, 2017 | No | |
| Description on position held in other entity | None | ||||
Penalties by regulatory authorities on the Company’s directors, supervisors and senior management both incumbent and resignedduring the reporting period in the last three years
□ Applicable √ Not applicable
3. Remuneration of directors, supervisors and senior management
Procedures and basis for determining the remuneration of directors, supervisors and senior management and actual paymentProcedures and basis for determining the remuneration of directors, supervisors and senior management and actual paymentFor the remuneration and appraisal of directors, the Remuneration and Review Committee proposes the program, which is thensubmitted to the general meeting of shareholders for approval. For the remuneration and appraisal of supervisors, the Board ofSupervisors proposes the program, which is then submitted to the general meeting of shareholders for approval. For the remunerationand appraisal of senior management, the Remuneration and Review Committee proposes the program, which is then submitted to theBoard of Directors for approval.The annual allowance for independent directors is determined after being reviewed and approved by the general meeting ofshareholders. The standard is RMB60,000/year for each independent director, which is paid monthly.During the reporting period, remunerations of directors, supervisors and senior management of the Company are reasonable and paidin time, which are consistent with requirements of regulatory authorities and relevant regulations of the Company.Remuneration of directors, supervisors and senior management of the Company during the reporting period
Unit: RMB10,000
| Name | Position | Gender | Age | Position status | Total | Whether |
| remuneration before tax received from the Company | receiving remuneration from related parties of the Company | |||||
| Xie Bingzheng | Chairman | Male | 53 | Incumbent | 108.68 | No |
| Shen Jindong | Director and General Manager | Male | 47 | Incumbent | 118.84 | No |
| Tang Xinqiao | Director, Deputy General Manager, and Chief Financial Officer | Female | 49 | Incumbent | 109.62 | No |
| Chen Yang | Director, Deputy General Manager, and Board Secretary | Male | 42 | Incumbent | 69.26 | No |
| Liu Yueping | Independent Director | Male | 62 | Resigned | 0.5 | No |
| Xu Xiaoxia | Independent Director | Female | 59 | Incumbent | 6 | No |
| Feng Minhong | Independent Director | Female | 43 | Resigned | 0.5 | No |
| Shi Minqiang | Chairman of the Board of Supervisors | Male | 40 | Incumbent | 29.23 | No |
| Cao Yong | Supervisor | Male | 48 | Incumbent | 2.4 | Yes |
| Zhou Cancan | Employee Representative Supervisor | Female | 50 | Incumbent | 44.5 | No |
| Jin Fenlin | Deputy General Manager | Female | 43 | Incumbent | 49.74 | No |
| Xie Qing | Independent Director | Male | 57 | Incumbent | 0 | No |
| Zeng Yamin | Independent Director | Female | 43 | Incumbent | 5.5 | No |
| Total | -- | -- | -- | -- | 544.77 | -- |
VI. Performance of Duties by Directors during the Reporting Period
1. Board meetings during the reporting period
| Session of meeting | Date of convening | Date of disclosure | Resolutions of the meeting |
| 32nd Meeting of the Third Board of Directors | January 13, 2021 | January 14, 2021 | No proposal was rejected at the meeting. For details, please refer to the announcement on CNINFO (http://www.cninfo.com.cn). |
| 1st Meeting of the Fourth Board of Directors | January 29, 2021 | January 30, 2021 | No proposal was rejected at the meeting. For details, please refer to the announcement on CNINFO (http://www.cninfo.com.cn). |
| 2nd Meeting of the Fourth Board of Directors | April 27, 2021 | April 29, 2021 | No proposal was rejected at the meeting. For details, please refer to the announcement on CNINFO (http://www.cninfo.com.cn). |
| 3rd Meeting of the Fourth Board of Directors | April 28, 2021 | April 29, 2021 | No proposal was rejected at the meeting. For details, please refer to the announcement on CNINFO (http://www.cninfo.com.cn). |
| 4th Meeting of the Fourth Board of Directors | August 17, 2021 | August 18, 2021 | No proposal was rejected at the meeting. For details, please refer to the announcement on CNINFO (http://www.cninfo.com.cn). |
| 5th Meeting of the Fourth Board of Directors | August 17, 2021 | August 18, 2021 | No proposal was rejected at the meeting. For details, please refer to the announcement on CNINFO (http://www.cninfo.com.cn). |
| 6th Meeting of the Fourth Board of Directors | September 24, 2021 | September 25, 2021 | No proposal was rejected at the meeting. For details, please refer to the announcement on CNINFO (http://www.cninfo.com.cn). |
| 7th Meeting of the Fourth Board of Directors | October 28, 2021 | October 29, 2021 | No proposal was rejected at the meeting. For details, please |
2. Directors’ attendance to Board meetings and general meetings of shareholders
refer to the announcement onCNINFO(http://www.cninfo.com.cn).Directors’ attendance to Board meetings and general meetings of shareholders
| Directors’ attendance to Board meetings and general meetings of shareholders | |||||||
| Name of director | Number of Board meetings required to attend during the reporting period | Number of Board meetings attended in person | Number of Board meetings attended via communication methods | Number of Board meetings attended by proxy | Number of absence | Any failure in attending in person for two consecutive meetings | Number of general shareholder meetings attended |
| Xie Bingzheng | 8 | 7 | 1 | 0 | 0 | No | 3 |
| Shen Jindong | 8 | 7 | 1 | 0 | 0 | No | 3 |
| Tang Xinqiao | 8 | 7 | 1 | 0 | 0 | No | 3 |
| Chen Yang | 8 | 7 | 1 | 0 | 0 | No | 3 |
| Liu Yueping | 1 | 1 | 0 | 0 | 0 | No | 1 |
| Xu Xiaoxia | 8 | 6 | 2 | 0 | 0 | No | 2 |
| Feng Minhong | 1 | 1 | 0 | 0 | 0 | No | 1 |
| Xie Qing | 7 | 4 | 3 | 0 | 0 | No | 2 |
| Zeng Yamin | 7 | 5 | 2 | 0 | 0 | No | 2 |
Explanation of failure in attending in person for two consecutive meetingsNot applicable
3. Objections by directors to the Company’s relevant matters
Whether directors raised objections to relevant matters of the Company
□ Yes √ No
Directors did not raise objections to relevant matters of the Company during the reporting period.
4. Other descriptions on directors’ performance of duty
Whether opinions from directors were adopted
√ Yes □ No
Description on whether opinions from directors were adoptedDuring the reporting period, all the directors of the Company performed their duties faithfully and diligently in strict accordance withthe Company Law, the Securities Law, the Rules Governing the Listing of Shares on Shenzhen Stock Exchange and other relevant
laws and regulations. They paid attention to the Company’s standardized operations and reviewed various matters of the Companyscientifically and prudently, and put forward valuable, professional suggestions regarding operations and development of theCompany according to actual situations of the Company. Efforts were also made to actively protect the legitimate rights and interestsof the Company and all shareholders.VII. Particulars of the Special Committees under the Board of Directors during the ReportingPeriod
| Name of committee | Members | Number of meetings convened | Date of convening | Contents | Important opinions and suggestions raised | Other situations of duty performance | Specifics of objections (if any) |
| Strategy Committee | Xie Bingzheng, Shen Jindong, Tang Xinqiao, Chen Yang, Xu Xiaoxia, Liu Yueping, Feng Minhong | 1 | January 13, 2021 | Discussed and reviewed the Proposal on the Strategic Planning of Branches in 2021. | The meeting recommended making deployment and development according to the Company’s business strategies. | None | None |
| Strategy Committee | Xie Bingzheng, Shen Jindong, Tang Xinqiao, Chen Yang, Xu Xiaoxia, Xie Qing, Zeng Yamin | 1 | April 27, 2021 | Discussed and reviewed the Proposal on the 2020 Work Report of the General Manager. | The meeting reviewed operations in 2020 and put forward prospects for 2021. | ||
| Remuneration and Review Committee | Xu Xiaoxia, Shen Jindong, Zeng Yamin | 1 | April 27, 2021 | Reviewed the remuneration program for directors in 2021; reviewed the remuneration program for senior management in 2021. | |||
| Nomination Committee | Liu Yueping, Xie Bingzheng, | 1 | January 13, 2021 | Reviewed the Proposal on | After fully reviewing and |
| Xu Xiaoxia | the Election of Non-Independent Directors of the Fourth Board of Directors and the Proposal on the Election of Independent Directors of the Fourth Board of Directors. | considering the qualifications of the proposed candidates based on the principle of professional experience diversification and competence complementation of board members, the meeting agreed to submit the proposals to the Board of Directors for review and approval. | |||||
| Nomination Committee | Xie Qing, Xie Bingzheng, Xu Xiaoxia | 1 | January 29, 2021 | Reviewed the Proposal on the Appointment of the General Manager, the Proposal on the Appointment of the Deputy General Manager, the Proposal on the Appointment of the Chief Financial Offer, and the Proposal on the Appointment of the Secretary to the Board. | After considering that qualifications of the candidates were up to requirements on senior management of listed companies and requirements of the post, the meeting agreed to submit the proposals to the Board of Directors for review and approval. |
| Audit Committee | Zeng Yamin, Chen Yang, Xu Xiaoxia | 5 | March 23, 2021 | Discussed and reviewed the 2020 Internal Audit Work Report of the Company. | All the proposals were agreed. | ||
| April 26, 2021 | Reviewed the 2020 audit work of Zhongxinghua Certified Public Accounts LLP; reviewed the 2020 Internal Control Self-evaluation Report; reviewed the First Quarter Report 2021; reviewed the Internal Audit Work Report of 2021 Q1. | All the proposals were agreed. | |||||
| August 17, 2021 | Reviewed the Semi-annual Report 2021; reviewed the Internal Audit Work Report of 2021 Q2. | All the proposals were agreed. | |||||
| September 24, 2021 | Reviewed the Proposal on the Engagement of the Accounting Firm. | The meeting agreed to submit the proposal to the Board of Directors for review and approval. | |||||
| October 28, 2021 | Reviewed the Third Quarter Report 2021; | All the proposals were agreed. |
VIII. Work of the Board of Supervisors
Whether the Board of Supervisors discovered risks in supervisory activities during the reporting period
□ Yes √ No
The Board of Supervisors had no objections to supervised events during the reporting period.IX. Employees of the Company
1. Number, profession composition and education level of employees
reviewed theInternal AuditWork Report of2021 Q3;reviewed theInternal AuditWork Plan of2022.Number of in-service employees of the Parent Company at theend of the reporting period
| Number of in-service employees of the Parent Company at the end of the reporting period | 530 |
| Number of in-service employees of the major subsidiaries at the end of the reporting period | 2,637 |
| Total number of in-service employees at the end of the reporting period | 3,167 |
| Total number of employees receiving remuneration in the reporting period | 3,167 |
| Number of retired employees whose expenses are borne by the Parent Company and its major subsidiaries | 6 |
| Composition of professions | |
| Type of professions | Number of staff in the profession |
| Sales staff | 2,631 |
| Administrative staff | 163 |
| Operation staff | 288 |
| R&D and design staff | 85 |
| Total | 3,167 |
| Education level | |
| Type of education level | Number of persons |
| Postgraduates and above | 9 |
| University graduates | 199 |
| College graduates | 689 |
| Technical school graduates and lower | 2,270 |
| Total | 3,167 |
2. Remuneration policy
Remunerations of the Company should be performance-oriented and encourage and give full play to the initiatives and innovations ofemployees internally, and remain competitive externally. The Company pays attention to both performance and position values, andadopts a flexible remuneration structure for different sequences of positions. The remuneration base and total amount aredynamically managed in line with business performance of the Company. Adhering to the value proposition of people-oriented,remuneration policy of the Company should be able to enhance the cohesion and competitiveness of the Company, to promote itssustainable, smooth and fast development.
3. Training program
The Company values the growth of every employee and has set up different training programs for employees and managers based ontheir different professional sequence and management level. Moreover, targeted courses have been developed in combination withthe results of survey on annual training needs, to ensure the scientific nature and effectiveness of the curriculum. Catering to differenttrainees, the Company has forged a series of classic training programs like the “National New Product Tour Training”, “NationalStore Management Training” and “Orientation Training”. The E-learning platform developed by the Company features pocketcourses and short teaching videos, which could satisfy the learning needs of all employees throughout the country anytime,anywhere.The Company has established the BIEM.L.FDLKK Business Academy targeting at mid-level managers and backbone employees.Combining offline and CEIBS online platform, the program aims to tap the potentials of employees by strengthening their strategicmanagement, project management and process management capabilities and solidifying their work abilities. It could help themidentify key capabilities and practical design with a focus on business pain points, stimulate their awareness of learning andinnovation, and solidify their work abilities.
4. Labor outsourcing
□ Applicable √ Not applicable
X. Profit Distribution of the Ordinary Shares and Conversion of Capital Reserve to ShareCapital of the CompanyFormulation, implementation or adjustment of profit distribution policies of ordinary shares especially the cash dividend plan in thereporting period
√ Applicable □ Not applicable
The Company has formulated the Shareholder Return Plan for the Next Three Years (2019-2021) in accordance with provisions andrequirements of the Notice on Further Implementing Issues Concerning Cash Dividends of Listed Companies released by ChinaSecurities Regulatory Commission (CSRC Doc. [2012] No. 37), the Guidelines on the Supervision and Administration of ListedCompanies No. 3 – Cash Dividend Distribution of Listed Companies (CSRC Announcement [2013] No. 43) and the Articles ofAssociation. During the reporting period, the Company has strictly enforced the profit distribution policies stipulated under theArticles of Association and the Shareholder Return Plan for the Next Three Years (2019-2021).During the reporting period, the Board of Directors and the general shareholder meeting deliberated and approved the 2020 profitdistribution plan on April 27 and May 15, 2021, respectively, which is: Distribute a cash dividend of RMB3.0 (tax inclusive) forevery 10 shares to all shareholders based on the total share capital on the equity registration date as specified in the announcement on2020 equity distribution implementation, with a total amount of RMB164,406,977.10. The plan was completed in July 2021.
| Special explanation on cash dividend policy | |
| Whether the policy complies with provisions of the Articles of Association or requirements of the resolutions made on the shareholders’ general meeting: | Yes |
| Whether dividend standards and ratio are definite and clear: | Yes |
| Whether relevant decision-making procedure and mechanism are well-established: | Yes |
| Whether independent directors have performed duties and played their roles properly: | Yes |
| Whether minority shareholders have sufficient opportunities to express opinions and requests, and whether their legitimate rights and interests were sufficiently protected: | Yes |
| Where the cash dividend policy undergoes any adjustment or change, whether the conditions and procedures are compliant and transparent: | Not applicable |
The Company gained profits in the reporting period and the retained profit of the Parent Company for holders of ordinary shares ispositive, but no plan of cash dividend is proposed
□ Applicable √ Not applicable
Profit distribution and conversion of capital reserve to share capital during the reporting period
√ Applicable □ Not applicable
| Number of bonus shares for every 10 shares | 0 |
| Amount of dividend for every 10 shares (tax included) (RMB) | 3.00 |
| Basis of the shares for distribution proposal | 570,707,084 |
| Amount of cash dividends (RMB) (tax included) | 171,212,125.20 |
| Cash dividend amount in other ways (such as share repurchase) (RMB) | 0.00 |
| Total amount of cash dividends (including other ways) (RMB) | 171,212,125.20 |
| Distributable profit (RMB) | 1,809,851,821.97 |
| Proportion of total cash dividends (including other ways) in distributable profit | 100% |
| Cash dividend of the reporting period | |
| If the Company is in the growth period and there are major capital expenditure arrangements, when the profit is distributed, the proportion of cash dividends in this profit distribution should be at least 20%. | |
| Details of the profit distribution proposal or share conversion proposal from capital reserve | |
| The Company plans to distribute a cash dividend of RMB3.0 (tax inclusive) for every 10 shares to all shareholders based on a total share capital of 570,707,084 shares as at March 31, 2022, with a total amount of RMB171,212,125.20; no bonus shares will be issued and no capital reserve will be converted into share capital; the remaining undistributed profits will be carried forward to the next year. Where there are any changes to the Company’s total share capital after the announcement of the profit distribution proposal and before the equity registration date for actual implementation, the Company will maintain the same distribution ratio per share and adjusts the total distribution amount accordingly. | |
XI. Implementation of the Stock Incentive Plan, Employee Stock Ownership Plan, and OtherEmployee Incentives of the Company
√ Applicable □ Not applicable
1. Equity incentive
NoneEquity incentives granted to directors and senior management during the reporting period
□ Applicable √ Not applicable
Performance appraisal and incentives of senior managementNone
2. Implementation of the employee stock ownership plan
√ Applicable □ Not applicable
All valid employee stock ownership plans during the reporting period
| Scope of employees | Number of entitled employees | Total shares held | Changes | Proportion to the total share capital of the listed company | Source of funds for implementing the plan |
| 1. Directors (excluding independent | 851 | 6,494,626 | None | 1.18% | Self-raised funds by employees and borrowed funds from |
| directors), supervisors and senior management of the Company; 2. Other core and backbone employees | the controlling shareholder |
Shareholdings of directors, supervisors and senior management in the Employee Stock Ownership Plan during the reporting period
| Name | Position | Number of shares held at the beginning of the reporting period | Number of shares held at the end of the reporting period | Proportion to the total share capital of the listed company |
| Shen Jindong | Director and General Manager | 0 | 413,590 | 0.08% |
| Tang Xinqiao | Director, Deputy General Manager, and Chief Financial Officer | 0 | 241,187 | 0.04% |
| Chen Yang | Director, Deputy General Manager, and Board Secretary | 0 | 55,500 | 0.01% |
| Jin Fenlin | Deputy General Manager | 0 | 47,234 | 0.01% |
| Shi Minqiang | Chairman of the Board of Supervisors | 0 | 44,872 | 0.01% |
| Zhou Cancan | Employee Representative Supervisor | 0 | 35,425 | 0.01% |
Changes in asset management institution during the reporting period
□ Applicable √ Not applicable
Changes in equity due to disposal of shares by holders during the reporting period
□ Applicable √ Not applicable
Exercise of shareholder rights during the reporting periodDuring the reporting period, the Employee Stock Ownership Plan exercised the shareholder right of entitlement to cash dividends in2020, but did not exercise the right of voting on the shareholder meetings and other shareholder rights.Other situations of the employee stock ownership plan during the reporting period and explanation
□ Applicable √ Not applicable
Changes in the members of the management committee of the employee stock ownership plan
□ Applicable √ Not applicable
Financial impact of the employee stock ownership plan on the listed company during the reporting period and related accountingtreatment
□ Applicable √ Not applicable
Termination of employee stock ownership plan during the reporting period
□ Applicable √ Not applicable
Other description
3. Other employee incentives
□ Applicable √ Not applicable
XII. Construction and Implementation of Internal Control Systems during the ReportingPeriod
1. Internal control construction and implementation
The Company has put in place a relatively complete corporate governance structure and a relatively sound internal control system,which are consistent with the Company’s management requirements and development needs and compliant with relevant laws,regulations and securities regulatory requirements. Various internal systems of the Company were well implemented and furtherrevised and optimized in 2021, and have basically achieved the overall goal of internal control. They have played a positive role incontrolling and preventing operation and management risks, protecting the legitimate rights and interests of investors, and promotingthe standardized operation and healthy development of the Company. As of December 31, 2021, the design and operations of theCompany’s internal control system are effective, without any major defects.The internal control system needs to be continuously improved with the expansion of the Company’s businesses and scale. TheCompany will continue to optimize the building of the internal control system, and strengthen the awareness of standardizedoperation and internal supervision mechanism, so as to promote its sustainable, stable and healthy development.
2. Particulars of material internal control defects detected during the reporting period
□ Yes √ No
XIII. Management and Control of the Company for Subsidiaries during the Reporting Period
| Name of company | Integration plan | Integration progress | Problems in integration | Solutions taken | Solution progress | Subsequent solution plan |
| Not applicable | Not applicable | Not applicable | Not applicable | Not applicable | Not applicable | Not applicable |
XIV. Self-assessment Report on Internal Control or Internal Control Audit Report
1. Self-assessment report on internal control
| Disclosure date of the assessment report on internal control | April 16, 2022 |
| Disclosure index of the assessment report on internal control | CNINFO (http://www.cninfo.com.cn) |
| Percentage of total assets of units included in the assessment scope to the total assets | 100.00% |
| in the Company’s consolidated financial statements | ||
| Percentage of total revenue of units included in the assessment scope to the revenue in the Company’s consolidated financial statements | 100.00% | |
| Defect identification criteria | ||
| Category | Financial report | Non-financial report |
| Qualitative criteria | Material defect: (1) The internal control is invalid; (2) Directors, supervisors and senior management have committed fraud and caused serious losses and severe adverse impacts to the company; (3) Significant errors in the current financial reports were identified by the certified public accountants but not by internal control; (4) The internal control and supervision conducted by the company’s audit committee and internal auditing units are invalid; (5) There exist one or a combination of control defects that may cause the company to materially deviate from the objectives of internal control. Major defect: (1) The company fails to select and apply accounting policies based on generally accepted accounting standards; (2) There are no anti-fraud procedures and control measures; (3) There is no control mechanism for significant non-routine or special transactions or the mechanism is not implemented, while there is no compensatory control; (4) There are one or multiple defects in the control of the financial reporting process at the end of the period such that the authenticity and completeness of the prepared financial reports could not be reasonably guaranteed. General defect: Other internal control defects than material defects and major defects. | Material defect: Its probability of occurrence is high or the defect severely reduces work efficiency or effectiveness, or severely increases the uncertainty of effects or causes severe deviations from expected objectives. Major defect: Its probability of occurrence is relatively high or the defect significantly reduces work efficiency or effectiveness, or significantly increases the uncertainty of effects or causes obvious deviations from expected objectives. General defect: Its probability of occurrence is low or the defect reduces work efficiency or effectiveness, or increases the uncertainty of effects or causes deviations from expected objectives. |
| Quantitative criteria | Quantitative criteria take revenue and total assets as measurement indicators. (1) In respect of revenue: General defect: The misstated amount in the | The quantitative criteria for non-financial |
| financial report arising from the defect alone or in combination with other defects is less than 1% of revenue. Major defect: The misstated amount is between 1% (inclusive) and 2% of the revenue. Material defect: The misstated amount is more than 2% (inclusive) of revenue. (2) In respect of total assets: General defect: The misstated amount in the financial report arising from the defect alone or in combination with other defects is less than 0.5% of total assets. Major defect: The misstated amount is between 0.5% (inclusive) and a% of total assets. Material defect: The misstated amount is more than 1% (inclusive) of total assets. | report defects are subject to those of financial report defects. | |
| Number of material defects in financial reports | 0 | |
| Number of material defects in non-financial reports | 0 | |
| Number of major defects in financial reports | 0 | |
| Number of major defects in non-financial reports | 0 | |
2. Internal control audit report
□ Applicable √ Not applicable
XV. Rectification of Detected Problems in the Corporate Governance Special Action of ListedCompaniesNot applicable
Section V Environmental and Social Responsibilities
I. Main Environmental Protection Issues
Whether the listed company and its subsidiaries are the key pollution discharge units published by the environmental protectiondepartment
□ Yes √ No
Administrative penalties due to environmental issues during the reporting period
| Name of company or subsidiary | Reason of penalty | Violation | Penalty result | Impact on production and operation of the listed company | Rectification measures of the Company |
| Not applicable | Not applicable | Not applicable | Not applicable | Not applicable | Not applicable |
Refer to other environmental information disclosed by key pollutant discharge unitsNot applicableMeasures taken to reduce carbon emissions during the reporting period and their effects
□ Applicable √ Not applicable
Reason for not disclosing other environmental informationNot applicableThe Company needs to comply with information disclosure requirements on the textile and garment-related industries as stipulated inthe SZSE Guidelines No. 3 for the Self-discipline and Supervision of Listed Companies — Industry Information Disclosure.Environmental protection compliance of the Company during the reporting periodThe Company does not belong to key pollution discharge units published by the environmental protection department.
II. Corporate Social Responsibilities
(1) Corporate governance and investor protection
Pursuant to the Company Law, the Securities Law and relevant regulatory requirements of China Securities Regulatory Commissionand Shenzhen Stock Exchange, the Company has defined a governance structure with general shareholder meetings as the organ ofauthority, the Board of Directors as the decision-making body and the Board of Supervisors as the supervisory body, and hasformulated their rule of procedure and decision-making procedure. Moreover, the Articles of Association of the Company is at thecenter of the Company’s governance system, which is continuously revised and improved according to new requirements.The Company attaches great importance to the protection of rights and interests of investors and has formulated the Rules ofProcedures of the General Meeting of Shareholders and the Investor Relations Management System, to regulate the elections ofdirectors and supervisors, ensure full exercise of power by shareholders and safeguard the interests of minority shareholders.
(2) Contributing to social welfare undertakings and actively shouldering corporate social responsibilities
In October 2021, many regions in Shanxi Province suffered from heavy rain, resulting in severe waterlogging, floods and otherdisasters. As a result, the province initiated provincial level 3 emergency response to geological disasters. In view of this, theCompany quickly responded and raised disaster-relief materials day and night worth millions, including cotton clothes, down jackets,blankets and other cold-proof materials. This is a perfect combination of branding and corporate social responsibilities.In November 2021, sponsored by Guangzhou Panyu District Charity Organization and BIEM.L.FDLKK Charity Fund and organizedby Panyu Qiwu Social Services Center, the Children and Adolescent Peace of Mind Project was officially launched at the Childrenand Adolescent Peach of Mind Station in Nancun Town. By sponsoring the children and youth peace of mind project in the name ofits charity fund, the Company hopes to illuminate more families, which fully embodies the sense of responsibility of a national brand.III. Efforts Regarding Poverty Alleviation and Rural RevitalizationThe Company did not engage in any poverty alleviation and rural revitalization work during the reporting period.
Section VI Significant EventsI. Implementation of Commitments
1. Commitments completed by actual controllers, shareholders, related parties, purchasers, or theCompany within the reporting period and commitments not fulfilled by the end of the reporting period
√ Applicable □ Not applicable
| Cause of commitment | Undertaking party | Type of commitment | Content of commitment | Time of commitment | Term of commitment | Fulfillment of commitment |
| Share reform commitment | ||||||
| Commitments in the acquisition report or the equity change report | ||||||
| Commitments made during asset restructuring | ||||||
| Commitments made during the initial public offering or refinancing | Xie Bingzheng, Feng Lingling | Commitment to share reduction | They promise not to reduce any shares held in the Company within two years upon the expiration of the lock-up period. | December 23, 2016 | Within two years upon expiration of the lock-up period | Ongoing normally |
| Xie Ting | Commitment to share reduction | He promises that the total share reduction in the first year upon the expiration of the lock-up period will not exceed 80% of the shares he held in the issuer before the issuance; after the | December 23, 2016 | Within two years upon expiration of the lock-up period | Ongoing normally |
| reduction in the second year, his total number of shares will not be lower than 5% of the shares he held in the issuer before the issuance; the reduction price will not be lower than the issuance price (the reduction price will be adjusted accordingly for any ex-rights and ex-dividends of the issuer after listing). | |||||
| Xie Bingzheng, Feng Lingling, Shen Jindong, Tang Xinqiao | Commitment to share reduction | They promise that during their term as a director, supervisor and senior management of the Company, they will not transfer more than 25% of the total shares they hold in the Company each year; if they leave office, they | December 23, 2016 | During the term when they serve as the director, supervisor and senior management and within a specific period after reporting for leaving office | Ongoing normally |
| will not transfer any shares within six months after leaving office; within 12 months upon the expiration of the aforesaid 6 months after reporting for leaving office, the number of shares sold through stock exchange listing will not exceed 50% of the total number of shares they hold in the Company. | ||||||
| Xie Bingzheng, Feng Lingling | Not-to-compete commitment | They have presented the Letter of Commitment to Avoid Horizontal Competition, promising not to compete with the Company in the same business sector. | January 15, 2013 | During the period when they act as the controlling shareholder and actual controller of the Company and within three years after they no longer act as the controlling shareholder and actual controller | Ongoing normally | |
| Equity incentive commitments | ||||||
| Other commitments to minority |
| shareholders | |
| Whether commitments are fulfilled on time | Yes |
| If there are commitments not fulfilled within the specified period of time, specify reasons for failure to do so and follow-up work plans | Not applicable |
2. If there are assets or projects of the Company which have profit forecast while the reporting period isstill in the forecast period, the Company should state whether the assets or projects have attained the profitforecast and explain reasons
□ Applicable √ Not applicable
II. Appropriation of Funds for Non-operating Purposes by Controlling Shareholder and ItsRelated Parties
□ Applicable √ Not applicable
During the reporting period, the Company did not have any funds appropriated for non-operating purposes by the controllingshareholder and its related parties.III. External Guarantee in Violation of Prescribed Procedures
□ Applicable √ Not applicable
During the reporting period, there was no external guarantee in violation of prescribed procedures.IV. Explanation by the Board of Directors of the “Non-standard Audit Report” of the LatestPeriod
□ Applicable √ Not applicable
V. Explanation by the Board of Directors, the Board of Supervisors, and IndependentDirectors (if any) of the “Non-standard Audit Report” for the Reporting Period Issued by theAccounting Firm
□ Applicable √ Not applicable
VI. Explanation of Changes in Accounting Policies and Estimates or Correction of SignificantAccounting Errors Compared with the Financial Report of Last Fiscal Year
√ Applicable □ Not applicable
1. Significant changes of accounting policies
| Contents and reasons for changes to accounting policies | Approval procedure | Remarks (financial statement |
items affected by such changesand impacted amount)
On December 07, 2018, the Ministry of Finance issued the revisedAccounting Standards for Business Enterprises No. 21 -- Leases (C.K.[2018] No. 35) (hereinafter referred to as the “New Lease Standards”),requiring that other enterprises that implement the AccountingStandards for Business Enterprises shall implement these revisedStandards from January 1, 2021. The Company starts to implementthem from the stipulated effective date.
| On December 07, 2018, the Ministry of Finance issued the revised Accounting Standards for Business Enterprises No. 21 -- Leases (C.K. [2018] No. 35) (hereinafter referred to as the “New Lease Standards”), requiring that other enterprises that implement the Accounting Standards for Business Enterprises shall implement these revised Standards from January 1, 2021. The Company starts to implement them from the stipulated effective date. | Reviewed and approved at the 2nd meeting of the Fourth Board of Directors and 2nd meeting of the Fourth Board of Supervisors | For details, see “Other descriptions (1)”. |
| In January 2021, the Ministry of Finance issued the Interpretation No. 14 to Accounting Standards for Business Enterprises (C.K. [2018] No. 01) (hereinafter referred to as the “Interpretation No. 14”), which came into force on January 1, 2021. The Company starts to implement them from the stipulated effective date. | Not applicable | For details, see “Other descriptions (2)”. |
| In December 2021, the Ministry of Finance issued the Interpretation No. 15 to Accounting Standards for Business Enterprises (C.K. [2018] No. 35) (hereinafter referred to as the “Interpretation No. 15”), of which contents on “presentation concerning centralized management of funds” came into force as of the date of issuance. The Company starts to implement them from the stipulated effective date. | Not applicable | For details, see “Other descriptions (3)”. |
Other description:
(1) For specific policies of the New Lease Standards, please refer to “Note V (36)”.
The Company started to implement the New Lease Standards from January 1, 2021. Under requirements of the New Lease Standards,the amounts of retained earnings and other relevant items in the financial statements at the beginning of the period for the first timeadoption of the new standards (i.e. January 1, 2021) are adjusted based on the accumulative impact amount at the first time adoption,while comparative financial information for the previous accounting periods is not adjusted. For specific changes of correspondingfinancial statement items, please refer to “Note V (38) (3) Description on the adjustment of relevant items in the financial statementsat the beginning of the year for the first time adoption of the New Leasing Standards since 2021”.Pursuant to the New Lease Standards, for contracts that already exist prior to the enforcement of the new standards, the Companychooses not to re-evaluate whether they are a lease or contain a lease on the adoption date of the new standards. For lease contracts inwhich the Company is the lessee, the Company elects to only adjust the accumulative impact amount of lease contracts not yetcompleted as of January 1, 2021.For operating leases whose leased assets belong to low-value assets prior to the adoption date or whose remaining lease term is lessthan 12 months, the Company adopts a simplified method and does not recognize them as right-of-use assets and lease liabilities.Moreover, the Company adopts the following simplified treatment methods for operating leases prior to the adoption date of the newstandards:
A. When measuring lease liabilities, the same discount rate is used for leases with similar characteristics; the measurement of theright-of-use assets excludes initial direct costs;B. If there is an extension option or termination option, the Company determines the lease term based on the actual exercise of the
option before the adoption date and other latest conditions;C. As an alternative to the impairment test for right-of-use assets, the Company assesses whether a contract that contains a lease is aloss contract before the adoption date, and adjusts the right-of-use asset based on the loss amount already recognized in the balancesheet prior to the adoption date;D. For lease modifications before the adoption date, the Company accounts them according to their final arrangements.The unpaid minimum lease payments of major operating leases disclosed in 2020 financial statements are adjusted based on thedifference between the present value discounted at the incremental borrowing rate on January 1, 2021 where the Company is thelessee and the lease liabilities included in the balance sheet on January 1, 2021. The adjustment process is as follows:
Unit: RMB
| Item | Amount |
Minimum lease payments of major operating leases on December 31, 2020
| Minimum lease payments of major operating leases on December 31, 2020 | 49,263,688.50 |
Plus: Minimum lease payments of other operating leases on December 31, 2020
| Plus: Minimum lease payments of other operating leases on December 31, 2020 | 472,137,522.60 |
| Less: Minimum lease payments accounted with simplified treatment (short-term and low-value) | 6,427,811.10 |
| Undiscounted amount of operating lease commitments on January 1, 2021 | 514,973,400.00 |
Weighted average of incremental borrowing rates on January 1, 2021
| Weighted average of incremental borrowing rates on January 1, 2021 | 4.75% |
| Present value of minimum lease payments under the New Lease Standards on January 1, 2021 | 476,151,493.32 |
Plus: Minimum lease payments of finance leases on December 31, 2020
| Plus: Minimum lease payments of finance leases on December 31, 2020 | 239,296.50 |
| Lease liabilities on January 1, 2021 | 476,390,789.82 |
Including: Non-current liabilities due within one year
| Including: Non-current liabilities due within one year | 177,712,848.98 |
(2) The Company starts to implement the Interpretation No. 14 from January 1, 2021. Under requirements of the Interpretation No.14, the amounts of retained earnings and other relevant items in the financial statements at the beginning of the period for the firsttime adoption of this interpretation (i.e. January 1, 2021) are adjusted based on the accumulative impact amount at the first timeadoption, while comparative financial information for the previous accounting periods is not adjusted. This interpretation has noimpact on the Company.
(3) On December 30, 2021, the Ministry of Finance issued the Interpretation No. 15, of which contents on “presentation concerningcentralized management of funds” came into force as of the date of issuance. The Company starts to implement this interpretationfrom December 30, 2021.The Interpretation No. 15 stipulates that where funds of the parent company and member units are centrally managed through theinternal settlement center, a financial company, etc., it shall distinguish funds of member units that are collected to accounts of theparent company and those that are directly deposited to the financial company; the interpretation also specifies items of member units,financial company and parent company that should be presented in the balance sheet. It also clarifies whether financial assets andfinancial liabilities under centralized management funds can be offset.The Company has implemented this interpretation from the effective date. The interpretation has no impact on the Company.
2. Significant changes of accounting estimates
There were no significant changes to the Company’s accounting estimates during the reporting period.VII. Description of Changes in the Scope of Consolidated Statements Compared with theFinancial Report of Last Year
√ Applicable □ Not applicable
During the reporting period, one new subsidiary was added to the Company’s consolidation scope, i.e. Ningbo BIEM.L.FDLKKSmart Technology Co., Ltd., which is a wholly-owned subsidiary of the Company established in April 21, 2021.
VIII. Engagement and Dismissal of Accounting FirmAccounting firm engaged
| Name of the domestic accounting firm | Huaxing Certified Public Accountants LLP |
| Remuneration for the domestic accounting firm (RMB 10,000) | 138 |
| Consecutive years of auditing service provided by the domestic accounting firm | 2 years |
| Name of domestic certified public accountants | Hong Wenwei He Ting |
| Consecutive years of auditing service provided by domestic certified public accountants | 1 year 1 year |
Whether the accounting firm was changed in the reporting period
□ Yes √ No
Appointment of accounting firm, financial advisor or sponsor for internal control audit
□ Applicable √ Not applicable
IX. The Company Facing Delisting after the Disclosure of the Annual Report
□ Applicable √ Not applicable
X. Matters relating to Bankruptcy and Restructuring
□ Applicable √ Not applicable
No bankruptcy and restructuring-related matters of the Company happened during the reporting period.
XI. Material Litigations and Arbitrations
□ Applicable √ Not applicable
There were no material litigations or arbitrations during the reporting period.
XII. Penalties and Rectifications
□ Applicable √ Not applicable
No penalties and rectifications of the Company occurred during the reporting period.
XIII. Integrity Records of the Company and its Controlling Shareholder and ActualController
□ Applicable √ Not applicable
XIV. Material Related Party Transactions
1. Related party transactions relating to daily operations
□ Applicable √ Not applicable
The Company had no related party transactions relating to daily operations during the reporting period.
2. Related party transactions relating to acquisition and sale of assets or equity
□ Applicable √ Not applicable
During the reporting period, there was no related party transaction relating to acquisition and sale of assets or equity.
3. Related party transactions relating to joint outbound investment
□ Applicable √ Not applicable
During the reporting period, there was no related party transaction relating to joint outbound investment.
4. Related party transactions relating to credits and debts
□ Applicable √ Not applicable
During the reporting period, there was no related party transaction relating to credits and debts.
5. Transactions with related party financial companies
□ Applicable √ Not applicable
The Company did not have deposit, loan, credit or other financial business transactions with financial companies that have relatedrelationship and the associated related parties.
6. Transactions between financial companies controlled by the Company and related parties
□ Applicable √ Not applicable
Financial companies controlled by the Company did not have deposit, loan, credit or other financial business transactions with relatedparties.
7. Other significant related party transactions
□ Applicable √ Not applicable
During the reporting period, there were no other significant related party transactions.XV. Significant Contracts and Their Performance
1. Custody, contracting and leasing matters
(1) Custody
□ Applicable √ Not applicable
During the reporting period, there was no custody.
(2) Contracting
□ Applicable √ Not applicable
During the reporting period, there was no contracting.
(3) Leasing
√ Applicable □ Not applicable
Description of leasing mattersFor details on leasing matters, please refer to “Section X Financial Report --> XVI. Other Significant Matters --> 3. Leases”.
Projects whose profits or losses brought to the Company reached more than 10% of the total profits of the Company during thereporting period
□ Applicable √ Not applicable
During the reporting period, there were no leasing projects whose profits or losses brought to the Company reached more than 10%of the total profits of the Company during the reporting period.
2. Material guarantee
□ Applicable √ Not applicable
During the reporting period, there was no material guarantee of the Company.
3. Entrusting others to manage cash assets
(1) Entrusted wealth management
√ Applicable □ Not applicable
Overview of entrusted wealth management during the reporting period
Unit: RMB10,000
| Specific type | Source of entrusted wealth management funds | Incurred amount of entrusted wealth management | Undue balance | Amount overdue but not recovered | Amount overdue but not recovered with impairment having been accrued |
| Wealth management product of bank | Proceeds | 65,000 | 28,000 | 0 | 0 |
| Wealth management product of securities company | Proceeds | 30,000 | 20,000 | 0 | 0 |
| Wealth management product of bank | Self-owned fund | 85,000 | 75,000 | 0 | 0 |
| Wealth management product of securities company | Self-owned fund | 10,000 | 10,000 | 0 | 0 |
| Total | 190,000 | 133,000 | 0 | 0 | |
Explanation of high-risk entrusted wealth management with large individual amount or low safety and poor liquidity
□ Applicable √ Not applicable
Entrusted wealth management is expected to fail to recover the principal or there are other circumstances that may lead to impairment
□ Applicable √ Not applicable
(2) Entrusted loans
□ Applicable √ Not applicable
There were no entrusted loans during the reporting period.
4. Other significant contracts
□ Applicable √ Not applicable
There were no other significant contracts during the reporting period.XVI. Other Significant Events
□ Applicable √ Not applicable
There were no other significant matters that need to be explained during the reporting period.XVII. Significant Events of Subsidiaries of the Company
□ Applicable √ Not applicable
Section VII Changes in Shareholding and Information of Shareholders
I. Changes in Share Capital
1. Changes in shares
Unit: share
| Before change | Increase/decrease (+, -) of this change | After change | |||||||
| Number | Percentage | New shares issued | Bonus shares | Shares transferred from surplus reserve | Others | Subtotal | Number | Percentage | |
| I. Restricted shares | 182,763,599 | 34.87% | -1,473,899 | -1,473,899 | 181,289,700 | 32.94% | |||
| 1. Shares held by the state | |||||||||
| 2. Shares held by state-owned legal person | |||||||||
| 3. Shares held by other domestic shareholders | 182,763,599 | 34.87% | -1,473,899 | -1,473,899 | 181,289,700 | 32.94% | |||
| Including: Shares held by domestic legal persons | |||||||||
| Shares held by domestic natural persons | 182,763,599 | 34.87% | -1,473,899 | -1,473,899 | 181,289,700 | 32.94% | |||
| 4. Shares held by foreign shareholders | |||||||||
| Including: Shares held by foreign legal persons | |||||||||
| Shares held by foreign natural persons | |||||||||
| II. Unrestricted shares | 341,311,486 | 65.13% | 27,725,526 | 27,725,526 | 369,037,012 | 67.06% | |||
| 1. RMB-denominated ordinary shares | 341,311,486 | 65.13% | 27,725,526 | 27,725,526 | 369,037,012 | 67.06% | |||
| 2. Domestic listed foreign shares | |||||||||
| 3. Overseas listed foreign | |||||||||
| shares | |||||||||
| 4. Others | |||||||||
| III. Total number of shares | 524,075,085 | 100.00% | 26,251,627 | 26,251,627 | 550,326,712 | 100.00% |
Explanation on changes in shares
√ Applicable □ Not applicable
1. Lock-up shares of senior management held by directors of the Company are lifted at a ratio of 25% of the shares held by them atthe end of the previous year for each year during their term as a director.
2. During the reporting period, 26,251,627 shares were converted from “BYZZ” convertible bonds, leading to the increase of theCompany’s total share capital.
Approval of changes in shares
√ Applicable □ Not applicable
The Company convened the 16th meeting of the Third Board of Directors on September 10, 2019 and the 2019 Third ExtraordinaryGeneral Meeting of Shareholders on September 27, 2019. The meetings deliberated and approved the Proposal on the PublicOffering of Convertible Bonds and other relevant proposals.Under the approval of “CSRC Approval [2020] No. 638”, the Company issued 6.89 million convertible bonds to the general public,with a par value of RMB100.00 each and a total amount of RMB689 million. Under the approval of “SZSE Listing [2020] No. 604”,the Company listed the convertible bonds worth RMB689 million on Shenzhen Stock Exchange from July 15, 2020, with anabbreviation of “BYZZ” and a bond code of “128113”. In accordance with relevant provisions of the laws, regulations and theProspectus for the Public Offering of Convertible Bonds by BIEM.L.FDLKK Garment Co., Ltd., the convertible bonds can beconverted into shares of the Company starting from December 21, 2020.
Transfer of title of changed shares
√ Applicable □ Not applicable
Convertible bonds can be converted into shares of the Company and are therefore directly credited to the securities accounts ofshareholders.
Impact of share changes on basic earnings per share and diluted earnings per share, net assets per share attributable to ordinaryshareholders of the Company, and other financial indicators in last year and the latest period
√ Applicable □ Not applicable
The conversion of convertible bonds into shares of the Company would reduce basic earnings per share, diluted earnings per share,and net assets per share attributable to ordinary shareholders of the Company.
Other contents considered necessary by the Company or required to be disclosed by the securities regulatory authority
□ Applicable √ Not applicable
2. Changes in restricted shares
√ Applicable □ Not applicable
Unit: share
| Shareholder’s name | Number of restricted shares at the beginning of the period | Increase in restricted shares during the period | Number of shares released from selling restrictions during the period | Number of restricted shares at the end of the year | Reason for selling restrictions | Date of lifting selling restrictions |
| Xie Bingzheng | 162,128,999 | 1 | 162,129,000 | Lock-up shares of senior management | Subject to relevant provisions on lock-up shares of senior management | |
| Shen Jindong | 14,739,000 | 14,739,000 | Lock-up shares of senior management | Subject to relevant provisions on lock-up shares of senior management | ||
| Tang Xinqiao | 5,895,600 | 1,473,900 | 4,421,700 | Lock-up shares of senior management | Subject to relevant provisions on lock-up shares of senior management | |
| Total | 182,763,599 | 1 | 1,473,900 | 181,289,700 | -- | -- |
II. Issuance and Listing of Securities
1. Issuance of securities (excluding preference shares) during the reporting period
□ Applicable √ Not applicable
2. Changes in total shares and shareholder structure as well as changes in asset and liability structure of theCompany
√ Applicable □ Not applicable
The convertible bonds issued by the Company (bond abbreviation: BYZZ; bond code: 128113) can be converted into company sharesstarting from December 21, 2020. As of December 31, 2021, the convertible bonds had converted into a total of 26,257,002 shares,and the Company’s total share capital increased to 550,326,712 shares after the conversion.
3. Internal employee shares
□ Applicable √ Not applicable
III. Information of Shareholders and Actual Controllers
1. Total number of shareholders
Unit: share
| Total number of ordinary shareholders at the end of the reporting period | 9,539 | Total number of ordinary shareholders at the end of the month preceding the disclosure date of the annual report | 8,480 | Total number of preferred shareholders whose voting rights were resumed at the end of the reporting period (if any) (see Note VIII) | 0 | Total number of preferred shareholders whose voting rights were resumed at the end of the month preceding the disclosure date of the annual report (if any) (see Note VIII) | 0 | |||||||
| Shareholdings of shareholders with more than 5% or the top 10 shareholders | ||||||||||||||
| Name of shareholder | Nature of shareholder | Shareholding percentage (%) | Shares held at the end of the reporting period | Increase/decrease during the reporting period | Number of restricted shares | Number of unrestricted shares | Pledged, marked or frozen | |||||||
| Share status | Number | |||||||||||||
| Xie Bingzheng | Domestic natural person | 39.28% | 216,170,800 | -1200 | 162,129,000 | 54,041,800 | ||||||||
| Feng Lingling | Domestic natural person | 3.57% | 19,652,000 | 0 | 19,652,000 | |||||||||
| Shen Jindong | Domestic natural person | 3.57% | 19,652,000 | 0 | 14,739,000 | 4,913,000 | ||||||||
| Hong Kong Securities Clearing Co., Ltd. | Foreign legal person | 3.32% | 18,250,621 | 11757847 | 18,250,621 | |||||||||
| Xie Ting | Domestic natural person | 2.64% | 14,554,284 | -12799098 | 14,554,284 | |||||||||
| National Social Security Fund Portfolio 103 | Others | 2.18% | 12,000,379 | 12000379 | 12,000,379 | |||||||||
| ICBC - GF Steady Growth Securities Investment Fund | Others | 2.00% | 11,000,000 | 6790084 | 11,000,000 | |||
| Xie Bingluan | Domestic natural person | 1.75% | 9,627,254 | -5454480 | 9,627,254 | |||
| Li Huiqiang | Domestic natural person | 1.75% | 9,622,697 | -5458926 | 9,622,697 | |||
| ICBC - GF Steady Growth Hybrid Securities Investment Fund | Others | 1.69% | 9,323,250 | -676750 | 9,323,250 | |||
| Strategic investors or general legal persons becoming top ten shareholders due to private placement of new shares (if any) (see Note 3) | None | |||||||
| Description on the related relationship or persons acting-in-concert arrangements among the above shareholders | Xie Bingzheng and Feng Lingling are husband and wife; Xie Bingzheng and Xie Ting are brothers; Xie Bingzheng, Feng Lingling, and Xie Ting are persons acting in concert. | |||||||
| Description on entrusting/being entrusted with voting rights and waver of voting rights by the aforementioned shareholders: | None | |||||||
| Description on special repurchase account among top 10 shareholders (if any) (see Note 10) | None | |||||||
| Top 10 shareholders not subject to selling restrictions | ||||||||
| Name of shareholder | Number of unrestricted shares held at the end of reporting period | Type of shares | ||||||
| Type of shares | Number | |||||||
| Xie Bingzheng | 54,041,800 | RMB-denominated ordinary shares | 54,041,800 | |||||
| Feng Lingling | 19,652,000 | RMB-denominated ordinary shares | 19,652,000 | |||||
| Hong Kong Securities Clearing Co., Ltd. | 18,250,621 | RMB-denominated ordinary shares | 18,250,621 | |||||
| Xie Ting | 14,554,284 | RMB-denominated ordinary | 14,554,284 | |||||
| shares | |||
| National Social Security Fund Portfolio 103 | 12,000,379 | RMB-denominated ordinary shares | 12,000,379 |
| ICBC - GF Steady Growth Securities Investment Fund | 11,000,000 | RMB-denominated ordinary shares | 11,000,000 |
| Xie Bingluan | 9,627,254 | RMB-denominated ordinary shares | 9,627,254 |
| Li Huiqiang | 9,622,697 | RMB-denominated ordinary shares | 9,622,697 |
| ICBC - GF Steady Growth Hybrid Securities Investment Fund | 9,323,250 | RMB-denominated ordinary shares | 9,323,250 |
| National Social Security Fund Portfolio 403 | 7,952,470 | RMB-denominated ordinary shares | 7,952,470 |
| Description on the related relationship or persons acting-in-concert among the top ten ordinary shareholders without selling restrictions and between the top ten ordinary shareholders without selling restrictions and the top ten ordinary shareholders | Xie Bingzheng and Feng Lingling are husband and wife; Xie Bingzheng and Xie Ting are brothers; Xie Bingzheng, Feng Lingling, and Xie Ting are persons acting in concert. It is unknown to the Company whether other shareholders are related parties or persons acting in concert as stipulated in the Administrative Measures on Acquisition of Listed Companies. | ||
| Description on the top 10 ordinary shareholders’ participation in margin trading and securities lending business (if any) (see Note 4) | None | ||
Whether the top ten ordinary shareholders and the top ten shareholders without selling restrictions conducted the agreed repurchasetransaction during the reporting period
□ Yes √ No
The Company’s top ten ordinary shareholders and top ten ordinary shareholders without selling restrictions did not conduct agreedrepurchase transactions during the reporting period.
2. Controlling shareholder of the Company
Nature of controlling shareholder: Natural person holdingType of controlling shareholder: Natural person
| Name of controlling shareholder | Nationality | Whether having obtained the right of abode in other |
| countries or regions | ||
| Xie Bingzheng | Chinese | No |
| Feng Lingling | Chinese | No |
| Main occupation and position | Xie Bingzheng is the Chairman of the Company; Feng Lingling is the Head of the R&D Center of the Company. | |
| Equity interests in other controlled and invested companies whose shares were listed in the PRC or overseas during the reporting period | None | |
Changes of controlling shareholders during the reporting period
□ Applicable √ Not applicable
There was no change of the Company’s controlling shareholder during the reporting period.
3. Actual controller and person acting in concert
Nature of actual controller: Domestic natural personType of actual controller: Natural person
| Name | Relationship with actual controller | Nationality | Whether having obtained the right of abode in other countries or regions |
| Xie Bingzheng | Self | Chinese | No |
| Feng Lingling | Self | Chinese | No |
| Xie Ting | Acting in concert (including through agreement, relatives, or under common control) | Chinese | No |
| Main occupation and position | Xie Bingzheng is the Chairman of the Company; Feng Lingling is the Head of the R&D Center of the Company. Xie Ting is the brother of the Company’s Chairman Xie Bingzheng and holds no position in the Company. | ||
| Holding of domestic and overseas listed companies over the past ten years | None | ||
Changes of actual controllers during the reporting period
□ Applicable √ Not applicable
There was no change of the Company’s actual controllers during the reporting period.Diagram on equity and control relationship between the Company and actual controllers
Actual controller controls the Company by entrust or other asset management methods
□ Applicable √ Not applicable
4. Share pledge by controlling shareholder or largest shareholder and person acting in concert reaching80% of shareholding
□ Applicable √ Not applicable
5. Other legal person shareholders holding 10% or more of shares
□ Applicable √ Not applicable
6. Restrictions on share reductions of controlling shareholder, actual controller, restructuring parties andother commitment subjects
□ Applicable √ Not applicable
IV. Implementation of Share Repurchase during the Reporting PeriodImplementation progress of share repurchase
□ Applicable √ Not applicable
Implementation of share repurchase by centralized bidding
□ Applicable √ Not applicable
Section VIII Particulars of Preference Shares
□ Applicable √ Not applicable
The Company had no preference shares during the reporting period.
Section IX Particulars of Bonds
√ Applicable □ Not applicable
I. Corporate Bonds
□ Applicable √ Not applicable
The Company had no corporate bonds during the reporting period.II. Enterprise Bonds
□ Applicable √ Not applicable
The Company had no enterprise bonds during the reporting period.III. Debt Financing Instruments of Non-financial Enterprises
□ Applicable √ Not applicable
The Company had no debt financing instruments of non-financial enterprises during the reporting period.IV. Convertible Bonds
√ Applicable □ Not applicable
1. Adjustment of share conversion prices
Under the approval of “CSRC Approval [2020] No. 638”, the Company issued 6.89 million convertible bonds to the general publicon June 15, 2020, with a par value of RMB100.00 each and a total amount of RMB689 million. Under the approval of “SZSE Listing[2020] No. 604”, the Company listed the publicly-offered convertible bonds worth RMB689 million on Shenzhen Stock Exchangefrom July 15, 2020, with an abbreviation of “BYZZ” and a bond code of “128113”. The initial conversion price wasRMB14.90/share.The Company implemented the 2020 equity distribution plan on July 7, 2021 and distributed RMB3.0 (tax inclusive) for every 10shares to all shareholders. In accordance with relevant provisions of the Prospectus of the Convertible Bonds and relevant regulationsof CSRC on the offering of convertible bonds, the share conversion price of “BYZZ” was adjusted from RMB14.90/share toRMB14.60/share. The adjusted price became effective on July 7, 2021.
2. Accumulated share conversion
√ Applicable □ Not applicable
| Abbreviation | Start and end | Total quantity | Total amount | Cumulative | Cumulative | Proportion of | Amount of | Proportion of |
| of convertible bond | dates of share conversion | of bonds issued | issued | amount of shares converted (RMB) | number of shares converted | the number of converted shares to the Company’s total issued shares before conversion state date | bonds not yet converted | the amount of bonds not converted to total amount of bonds issued |
| BYZZ | December 21, 2020 | 6,890,000 | 689,000,000.00 | 391,133,400.00 | 26,257,002 | 5.01% | 297,866,600.00 | 43.23% |
3. Top ten holders of convertible bonds
Unit: share
| No. | Name of convertible bond holder | Nature of convertible bond holder | Number of convertible bonds held at the end of the reporting period | Amount of convertible bonds held at the end of the reporting period (RMB) | Proportion of convertible bonds held at the end of the reporting period |
| 1 | ICBC - ZO Ruihong Regular Open and Flexible Allocation Hybrid Securities Investment Fund | Others | 275,484 | 27,548,400.00 | 9.25% |
| 2 | China Foreign Economy and Trade Trust Co., Ltd. - Foreign Trade Trust - Ruijun Steady Private Equity Investment Fund | Others | 242,726 | 24,272,600.00 | 8.15% |
| 3 | CCB - ChinaAMC Convertible Bond Enhanced Securities Investment Fund | Others | 206,609 | 20,660,900.00 | 6.94% |
| 4 | ICBC Credit Suisse Rayleigh Hybrid Pension Product - Industrial and Commercial Bank of China Limited | Others | 147,340 | 14,734,000.00 | 4.95% |
| 5 | ICBC Credit Suisse | Others | 143,948 | 14,394,800.00 | 4.83% |
| Ruixi Fixed Income Pension Product - Bank of China Limited | |||||
| 6 | Hua Life Insurance Co., Ltd. - Self-owned funds | Others | 128,211 | 12,821,100.00 | 4.30% |
| 7 | AEGON-Industrial Fund - Industrial Bank - Industrial Securities | Others | 118,190 | 11,819,000.00 | 3.97% |
| 8 | BOC - Tianhong Enhanced Return Bond Securities Investment Fund | Others | 100,516 | 10,051,600.00 | 3.37% |
| 9 | National Social Security Fund Portfolio 1005 | Others | 94,590 | 9,459,000.00 | 3.18% |
| 10 | ChinaAMC Growth Securities Investment Fund | Others | 72,470 | 7,247,000.00 | 2.43% |
4. Significant changes in guarantor’s profitability, assets and credit standing
□ Applicable √ Not applicable
5. Liabilities and credit changes of the Company at the end of the reporting period and cash arrangementfor debt payments in the coming yearsThe Company boasts sound credit standing and reasonable asset-liability structure. Banks and other financial institutions havegranted sufficient comprehensive credit lines, so the Company can quickly and effectively acquire financing support from financialinstitutions. Also, the Company features stable operations and good performances, and is therefore able to acquire stable cash flowsfrom operating activities through endogenous growth. At the same time, the Company will actively promote the implementation ofprojects invested under proceeds of convertible bonds, to further enhance its profitability.If terms on call options and put options specified in the bond prospectus are met or the Company needs to pay principle plus interestupon maturity of the bonds, it has the ability to pay the principals plus interests to bond holders through self-owned funds andfinancing.
V. Loss in Consolidate Statements during the Reporting Period Exceeding 10% of the NetAssets at the End of the Previous Year
□ Applicable √ Not applicable
VI. Overdue of Other Interest-Bearing Debts than Bonds at the End of the Reporting Period
□ Applicable √ Not applicable
VII. Violations of Rules and Regulations during the Reporting Period
□ Yes √ No
VIII. Main Accounting Data and Financial Indicators of the Company in the Latest TwoYears as of the End of the Reporting Period
Unit: RMB10,000
| Item | End of current period | End of previous year | Changes over end of previous year |
| Current ratio | 3.37 | 4.61 | -26.90% |
| Debt to asset ratio | 33.24% | 35.50% | -2.26% |
| Quick ratio | 2.7 | 3.61 | -25.21% |
| Current period | Same period of previous year | Changes over same period of previous year | |
| Net profits after deducting non-recurring profit and loss | 58,028.33 | 46,328.07 | 25.26% |
| Total Debt/EBITDA | 54.31% | 52.22% | 2.09% |
| Interest coverage ratio | 19.44 | 42.7 | -54.47% |
| Cash interest coverage ratio | 707.04 | 0 | 0.00% |
| EBITDA-to-Interest Coverage Ratio | 22.1 | 42.7 | -48.24% |
| Loan repayment rate | 100.00% | 100.00% | 0.00% |
| Interest coverage rate | 100.00% | 100.00% | 0.00% |
Section X Financial ReportI. Audit Report
| Type of auditor’s opinion | Standard unqualified |
| Signing date of the Audit Report | April 15, 2022 |
| Name of auditing organization | Huaxing Certified Public Accountants LLP |
| Reference number of the Audit Report | Hua-Xing-Shen-Zi [2022] No. 22000460018 |
| Name of certified public accountants | Hong Wenwei, He Ting |
Audit ReportI. OpinionWe have audited the accompanying financial statements of BIEM.L.FDLKK Garment Co., Ltd. (hereinafter “the Company”), whichcomprise the consolidated and the Parent Company’s balance sheet as at December 31, 2021, the consolidated and the ParentCompany’s income statement, the consolidated and the Parent Company’s cash flow statement, and the consolidated and the ParentCompany’s statement of the changes in equity for 2021, and notes to the financial statements.In our opinion, the accompanying financial statements have been prepared in accordance with the Accounting Standards for BusinessEnterprises in all material aspects, and they fairly present the consolidated and the Parent Company’s financial position as ofDecember 31, 2021, and the consolidated and the Parent Company’s operating results and cash flows for 2021.II. Basis of OpinionWe conducted our audit in accordance with the Auditing Standards for PRC Certified Public Accountants. Our responsibilities underthose standards are further described in the “Certified Public Accountants’ Responsibilities for the Audit of the Financial Statements”section of our report. We are independent of the Company in accordance with the Code of Ethics for Chinese Certified PublicAccountants (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that theaudit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.III. Key Audit MattersKey audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financialstatements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, andin forming our opinion thereon, and we do not provide a separate opinion on these matters.(I) Inventory write-down
1. Description of the matter
With regard to inventory impairment, please refer to “Note III (14)”for accounting policies and “Note V (6) Inventories” for specificamount.BIEM.L.FDLKK adopts a sales model primarily based on direct chain operation and supplemented by franchise operation. As aresult, the Company needs and maintains a relatively high level of inventories. Inventories are measured at the lower of cost and net
realizable value. When determining whether the inventories have impaired, the management needs to make judgments and estimatesbased on conclusive evidence while taking into account purpose of holding inventories and impacts of events after the balance sheetdate. Given that the amount involved is large and the management needs to make significant judgments, we have identified inventorywrite-down as a key audit matter.
2. How the matter was addressed in our audit
Our audit procedures included:
(1) We evaluated the design and implementation of internal controls relating to the Company’s inventory write-down;
(2) We counted inventories in the Company’s main warehouse and self-owned stores and inspected the quantity, condition and agingof the inventories;
(3) We obtained the purchase-sell-stock data of the Company’s inventories and analyzed changes in unit prices of inventories andtheir reasonableness.
(4) We obtained the aging list of the Company’s inventories at fiscal year-end, and compared and analyzed changes in inventoryaging with comparable periods and their reasonableness.
(5) We interviewed major responsible people of the Company to understand the pricing policies and clearance rate of out-of-seasonproducts in the year and judged the risks of inventory impairment at the end of the period.
(6) We obtained the gross profit table of all channels of the Company, and judged the probability of the impairment of inventories ofdifferent seasons based on product discount information, shopping mall deduction rates and other information we had learned.
(7) We obtained the Company’s calculation sheet for inventory write-down and its impairment tests for inventories, checked whetherthe Company has implemented according to relevant accounting policies and whether write-down recognized in previous periods hadany changes in the current period, and analyzed whether the write-down was sufficient.(II) Recognition of revenue
1. Description of the matter
With regard to revenue recognition, please refer to “Note III (32)”for accounting policies and “Note V (33) Revenue and cost ofrevenue” for specific amount.Since the amount of revenue is significant and a key performance indicator of the Company, there is an inherent risk that themanagement may manipulate the timing of recognition in order to achieve specific goals or expectations. So, we identified therecognition of revenue as a key audit matter.
2. How the matter was addressed in our audit
Our audit procedures included:
(1) We obtained an understanding of and evaluated the internal control design over the recognition of sales income and tested theeffectiveness of key controls;
(2) We checked the revenue recognition policies of the Company and judged whether they are consistent with the requirements of theAccounting Standards for Business Enterprises;
(3) We obtained the store list of the Company and analyzed the distribution and changes of stores to determine whether they match
changes in income;
(4) We acquired the agreement signed between the Company and main franchisees and associates, and checked key terms andconditions;
(5) We checked the industrial and commercial information of the Company’s main franchisees and associates and interviewedrelevant employees of the Company, to confirm whether there is related party relationship between the Company and thefranchisees/associates;
(6) We acquired the goods return and exchange records in the Company’s supply chain system, to confirm whether there are anysignificant, abnormal returns and exchanges that affect income recognition and to review whether the Company has fully accruedlosses for returns and exchanges of franchise stores at the end of the reporting period;
(7)We sample-checked the purchase orders, delivery documents, shipping documents, accounting vouchers, payment receipts andother information of the Company and franchise stores;
(8) We sample-checked the monthly statements and payment receipts of the Company and joint operation stores;
(9) We sampled and conducted external confirmation for current sales and current balances, and checked any subsequent paymentcollections of joint operation stores;
(10) We conducted the sales cutoff test, sample-checked several original sales documents and accounting vouchers before and afterthe balance sheet date, and compared the dates of the accounting vouchers and the attached shipping records, to assess whether therevenue is included in the appropriate accounting period.IV. Other InformationThe Company’s management is responsible for other information. Other information includes the information included in theCompany’s 2021 Annual Report, but excludes the financial statements and our audit report.Our audit opinion on the financial statements does not cover the other information and we do not express any form of assuranceconclusion thereon.In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, considerwhether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit processor otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that if there is a material misstatement of this other information, we arerequired to report that fact. We have nothing to report in this regard.V. Responsibilities of Management and Governance Layer for Financial StatementsThe management of BIEM.L.FDLKK Garment Co., Ltd. (hereinafter the “Management”) is responsible for preparing financialstatements in accordance with the Accounting Standards for Business Enterprises, and fairly presenting them; the Management alsoneeds to design, implement and maintain necessary internal control to enable that the financial statements are free from materialmisstatement, whether due to fraud or error.In preparing the financial statements, the Management is responsible for assessing the Company’s ability to continue as a goingconcern, disclosing matters in relation to going concern (if applicable) and applying the going-concern assumption unless the
Management intends to liquidate the Company, cease operations, or have no realistic alternative but to do so.The governance layer is responsible for overseeing the financial reporting process of the Company.VI. Certified Public Accountants’ Responsibilities for the Audit of the Financial StatementsOur objectives are to obtain reasonable assurance about whether these financial statements as a whole are free from materialmisstatement, whether due to fraud or error, and to issue an audit report that includes our opinion. Reasonable assurance is a highlevel of assurance, but is not a guarantee that an audit conducted in accordance with CSAs will always detect a material misstatementwhen it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they couldreasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.As part of an audit work in accordance with CSAs, we exercise professional judgment and maintain professional skepticismthroughout the audit. We also:
(I) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design andperform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, asfraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.(II) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in thecircumstances.(III) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosuresmade by management.(IV) Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidenceobtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’sability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to drawing attention in ouraudit report to the related disclosures in these financial statements or, if such disclosures are inadequate, to modify our opinion. Ourconclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions maycause the Company to cease to continue as a going concern.(V) Evaluate the overall presentation, structure and content of the financial statements, and whether the financial statements representthe underlying transactions and events in a manner that achieves fair presentation.(VI) Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities withinthe Company to express an audit opinion on the financial statements. We are responsible for the direction, supervision andperformance of the group audit, and remain solely responsible for our audit opinion.We communicate with those charged with governance regarding, the planned scope and timing of the audit and significant auditfindings, including any significant deficiencies in internal control that we identify during our audit.We also provide those charged with governance with a statement that we comply with relevant ethical requirements regardingindependence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on ourindependence, and related safeguards (if applicable).From the matters communicated with those charged with governance, we determine those matters that were of most significance in
the audit of the financial statements of the period and are therefore the key audit matters. We describe these matters in our auditreport unless law or regulation precludes public disclosure about the matter or when, in tiny minority circumstances, we determinethat a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expectedto outweigh the public interest benefits of such communication.
II. Financial StatementsUnit of financial statements: RMB
1. Consolidated balance sheet
Prepared by: BIEM.L.FDLKK GARMENT CO., LTD.
December 31, 2021
Unit: RMB
| Item | December 31, 2021 | December 31, 2020 |
| Current assets: | ||
| Monetary funds | 1,082,712,218.58 | 578,783,443.79 |
| Settlement reserve | ||
| Lending funds | ||
| Financial assets held for trading | 634,763,818.96 | 100,425,333.33 |
| Derivative financial assets | ||
| Notes receivable | ||
| Accounts receivable | 279,717,057.14 | 301,061,376.99 |
| Accounts receivable financing | ||
| Prepayments | 67,028,355.09 | 59,678,780.04 |
| Premium receivable | ||
| Reinsurance payables | ||
| Reinsurance contract reserves receivable | ||
| Other receivables | 89,889,485.22 | 53,587,328.86 |
| Including: Interest receivable | ||
| Dividends receivable | ||
| Financial assets held under resale agreements | ||
| Inventory | 660,214,219.41 | 607,679,776.22 |
| Contract assets |
| Assets held for sale | ||
| Non-current assets due within one year | ||
| Other current assets | 830,640,713.41 | 1,377,984,359.67 |
| Total current assets | 3,644,965,867.81 | 3,079,200,398.90 |
| Non-current assets: | ||
| Loans and advances | ||
| Debt investments | ||
| Other debt investments | ||
| Long-term receivable | ||
| Long-term equity investment | ||
| Investment in other equity instruments | 98,099,300.47 | 92,785,368.67 |
| Other non-current financial assets | ||
| Investment property | ||
| Fixed assets | 244,337,754.20 | 239,216,423.50 |
| Construction in progress | 148,165,548.36 | 49,120,792.27 |
| Productive biological assets | ||
| Oil & gas assets | ||
| Right-of-use assets | 407,448,654.74 | |
| Intangible assets | 119,548,729.29 | 114,864,801.65 |
| Development expenses | ||
| Goodwill | ||
| Long-term prepaid expenses | 105,243,120.55 | 104,972,941.26 |
| Deferred income tax assets | 93,314,368.55 | 65,802,510.71 |
| Other non-current assets | 1,833,508.45 | 2,635,461.01 |
| Total non-current assets | 1,217,990,984.61 | 669,398,299.07 |
| Total assets | 4,862,956,852.42 | 3,748,598,697.97 |
| Current liabilities: | ||
| Short-term loans | ||
| Borrowings from PBC | ||
| Placements from banks and other financial institutions | ||
| Financial liabilities held for trading | ||
| Derivative financial liabilities |
| Notes payable | 38,098,527.79 | 27,139,705.66 |
| Accounts payable | 126,522,502.78 | 107,698,978.83 |
| Payments received in advance | ||
| Contract liabilities | 140,669,127.30 | 81,677,368.60 |
| Proceeds from financial assets sold under repo | ||
| Deposits from customers and interbank | ||
| Funds from securities trading agency | ||
| Funds from securities underwriting agency | ||
| Employee benefits payable | 64,027,461.27 | 52,788,749.44 |
| Taxes payable | 130,969,262.60 | 102,577,815.02 |
| Other payables | 55,878,486.28 | 44,335,743.56 |
| Including: Interests payable | ||
| Dividends payable | ||
| Service charge and commission receivable | ||
| Reinsurance payable | ||
| Liabilities held for sale | ||
| Non-current liabilities due within one year | 197,019,114.42 | |
| Other current liabilities | 328,630,853.34 | 251,166,311.70 |
| Total current liabilities | 1,081,815,335.78 | 667,384,672.81 |
| Non-current liabilities: | ||
| Insurance contract reserves | ||
| Long-term loans | ||
| Bonds payable | 284,554,163.11 | 630,982,939.14 |
| Including: Preference shares | ||
| Perpetual bonds | ||
| Lease liabilities | 217,323,756.45 | |
| Long-term payable | 239,296.50 | |
| Long-term employee benefits payable | ||
| Provision |
| Deferred income | 30,000,000.00 | 30,000,000.00 |
| Deferred income tax liabilities | 2,854,265.46 | 2,253,279.00 |
| Other non-current liabilities | ||
| Total non-current liabilities | 534,732,185.02 | 663,475,514.64 |
| Total liabilities | 1,616,547,520.80 | 1,330,860,187.45 |
| Owner’s equity: | ||
| Share capital | 550,326,712.00 | 524,075,085.00 |
| Other equity instruments | 27,524,454.16 | 63,661,135.54 |
| Including: Preference shares | ||
| Perpetual bonds | ||
| Capital reserve | 600,470,446.15 | 226,927,846.51 |
| Less: Treasury shares | ||
| Other comprehensive income | -842,173.72 | -6,249,160.64 |
| Special reserves | ||
| Surplus reserves | 258,110,335.93 | 194,828,010.62 |
| General reserves | ||
| Retained earnings | 1,809,851,821.97 | 1,413,582,872.58 |
| Total equity attributable to owners of the parent company | 3,245,441,596.49 | 2,416,825,789.61 |
| Equities of minority shareholders | 967,735.13 | 912,720.91 |
| Total owner’s equity | 3,246,409,331.62 | 2,417,738,510.52 |
| Total liabilities and owners’ equity | 4,862,956,852.42 | 3,748,598,697.97 |
Legal representative: Xie Bingzheng Person in charge of accounting: Tang Xinqiao Person in charge of accountingdepartment: Chen Shaobing
2. Balance sheet of the Parent Company
Unit: RMB
| Item | December 31, 2021 | December 31, 2020 |
| Current assets: | ||
| Monetary funds | 1,001,684,939.89 | 540,424,839.01 |
| Financial assets held for trading | 634,763,818.96 | 100,425,333.33 |
| Derivative financial assets | ||
| Notes receivable | ||
| Accounts receivable | 279,717,057.14 | 301,061,376.99 |
| Accounts receivable financing | ||
| Prepayments | 46,156,432.50 | 32,532,816.93 |
| Other receivables | 93,306,779.94 | 60,685,628.95 |
| Including: Interest receivable | ||
| Dividends receivable | ||
| Inventory | 921,517,571.29 | 804,477,022.56 |
| Contract assets | ||
| Assets held for sale | ||
| Non-current assets due within one year | ||
| Other current assets | 861,560,189.31 | 1,400,727,863.45 |
| Total current assets | 3,838,706,789.03 | 3,240,334,881.22 |
| Non-current assets: | ||
| Debt investments | ||
| Other debt investments | ||
| Long-term receivable | ||
| Long-term equity investment | 111,000,000.00 | 111,000,000.00 |
| Investment in other equity instruments | ||
| Other non-current financial assets | ||
| Investment property | ||
| Fixed assets | 244,337,754.20 | 239,216,423.50 |
| Construction in progress | 148,165,548.36 | 49,120,792.27 |
| Productive biological assets | ||
| Oil & gas assets | ||
| Right-of-use assets | 381,889,568.21 | |
| Intangible assets | 119,548,729.29 | 114,864,801.65 |
| Development expenses | ||
| Goodwill | ||
| Long-term prepaid expenses | 99,655,978.73 | 90,663,986.71 |
| Deferred income tax assets | 52,843,305.91 | 35,049,787.12 |
| Other non-current assets | 1,833,508.45 | 2,635,461.01 |
| Total non-current assets | 1,159,274,393.15 | 642,551,252.26 |
| Total assets | 4,997,981,182.18 | 3,882,886,133.48 |
| Current liabilities: |
| Short-term loans | ||
| Financial liabilities held for trading | ||
| Derivative financial liabilities | ||
| Notes payable | 38,098,527.79 | 27,139,705.66 |
| Accounts payable | 231,476,161.90 | 146,213,104.37 |
| Payments received in advance | ||
| Contract liabilities | 140,669,127.30 | 81,677,368.60 |
| Employee benefits payable | 3,243,444.48 | 2,785,243.25 |
| Taxes payable | 93,757,929.83 | 96,992,722.80 |
| Other payables | 54,674,918.89 | 43,079,684.64 |
| Including: Interests payable | ||
| Dividends payable | ||
| Liabilities held for sale | ||
| Non-current liabilities due within one year | 183,853,949.82 | |
| Other current liabilities | 328,630,853.34 | 251,166,311.70 |
| Total current liabilities | 1,074,404,913.35 | 649,054,141.02 |
| Non-current liabilities: | ||
| Long-term loans | ||
| Bonds payable | 284,554,163.11 | 630,982,939.14 |
| Including: Preference shares | ||
| Perpetual bonds | ||
| Lease liabilities | 204,320,772.36 | |
| Long-term payable | 239,296.50 | |
| Long-term employee benefits payable | ||
| Provision | ||
| Deferred income | 30,000,000.00 | 30,000,000.00 |
| Deferred income tax liabilities | 2,854,265.46 | 2,253,279.00 |
| Other non-current liabilities | ||
| Total non-current liabilities | 521,729,200.93 | 663,475,514.64 |
| Total liabilities | 1,596,134,114.28 | 1,312,529,655.66 |
| Owner’s equity: | ||
| Share capital | 550,326,712.00 | 524,075,085.00 |
| Other equity instruments | 27,524,454.16 | 63,661,135.54 |
| Including: Preference shares | ||
| Perpetual bonds | ||
| Capital reserve | 600,470,446.15 | 226,927,846.51 |
| Less: Treasury shares | ||
| Other comprehensive income | ||
| Special reserves | ||
| Surplus reserves | 258,110,335.93 | 194,828,010.62 |
| Retained earnings | 1,965,415,119.66 | 1,560,864,400.15 |
| Total owner’s equity | 3,401,847,067.90 | 2,570,356,477.82 |
| Total liabilities and owners’ equity | 4,997,981,182.18 | 3,882,886,133.48 |
3. Consolidated income statement
Unit: RMB
| Item | 2021 | 2020 |
| I. Total Revenue | 2,719,989,257.14 | 2,303,326,211.84 |
| Including: Revenue | 2,719,989,257.14 | 2,303,326,211.84 |
| Interest income | ||
| Insurance premiums earned | ||
| Service charge and commission income | ||
| II. Costs and Expenses | 1,960,636,804.05 | 1,708,035,736.04 |
| Including: Cost of revenue | 634,160,601.71 | 601,546,395.40 |
| Interest expenses | ||
| Service charge and commission expenses | ||
| Surrender value | ||
| Net compensation expenses | ||
| Net appropriation of insurance reserve | ||
| Commissions on insurance policies | ||
| Reinsurance costs | ||
| Tax and surcharges | 23,962,477.58 | 13,983,332.07 |
| Selling expenses | 1,041,052,486.14 | 885,368,459.26 |
| Administrative expenses | 156,267,574.26 | 132,633,430.58 |
| R&D expenses | 83,388,128.67 | 64,804,859.36 |
| Finance expenses | 21,805,535.69 | 9,699,259.37 |
| Including: Interest fees | 39,729,487.13 | 15,998,242.73 |
| Interest income | 18,147,338.76 | 6,842,458.41 |
| Plus: Other income | 14,781,618.40 | 15,496,701.82 |
| Return on investment (“-” indicates loss) | 38,815,870.23 | 24,501,459.48 |
| Including: Return on investment in associates and joint ventures | ||
| Income from the derecognition of financial assets measured at amortized cost | ||
| Exchange gains (“-” indicates loss) | ||
| Gains from net exposure hedging (“-” indicates loss) | ||
| Gains from changes in fair value (“-” indicates loss) | 3,424,832.00 | 425,333.33 |
| Credit impairment losses (“-” indicates loss) | 314,860.76 | -5,259,711.60 |
| Asset impairment losses (“-” indicates loss) | -78,683,952.73 | -48,457,945.87 |
| Return on disposal of assets (“-” indicates loss) | -253,775.79 | -2,728.63 |
| III. Operating Profit (“-” indicates loss) | 737,751,905.96 | 581,993,584.33 |
| Plus: Non-operating revenue | 531,942.90 | 4,790,100.02 |
| Less: Non-operating expenses | 5,613,342.65 | 1,655,966.94 |
| IV. Total Profit (“-” indicates total loss) | 732,670,506.21 | 585,127,717.41 |
| Less: Income tax expense | 108,129,572.76 | 86,325,344.93 |
| V. Net Profit (“-” indicates net loss) | 624,540,933.45 | 498,802,372.48 |
| i. Classified by operation sustainability | ||
| 1. Net profit from continued operation (“-” indicates net loss) | 624,540,933.45 | 498,802,372.48 |
| 2. Net profit from discontinued operation (“-” indicates net loss) | ||
| ii. Classified by attribution of |
| ownership | ||
| 1. Net profit attributable to shareholders of the parent company | 624,541,483.00 | 498,822,424.55 |
| 2. Minority shareholders’ profits and losses | -549.55 | -20,052.07 |
| VI. Net Amount of Other Comprehensive Income after Tax | 5,462,550.69 | -6,613,201.70 |
| Total other comprehensive after-tax net income attributable to owners of the parent company | 5,406,986.92 | -6,547,731.01 |
| i. Other comprehensive income not able to be reclassified into profit or loss | 5,406,986.92 | -6,547,731.01 |
| 1. Changes of remeasurement of the defined benefit plan | ||
| 2. Other comprehensive income that cannot be transferred into profit or loss under equity method | 5,406,986.92 | -6,547,731.01 |
| 3. Changes in fair value of investment in other equity instruments | ||
| 4. Changes in fair value of credit risk of the enterprise | ||
| 5. Others | ||
| ii. Other comprehensive income reclassified into profit or loss | ||
| 1. Other comprehensive income to be transferred into profit or loss under equity method | ||
| 2. Changes in fair value of other debt investments | ||
| 3. Financial assets reclassified into other comprehensive income | ||
| 4. Provision for credit impairment of other debt investments | ||
| 5. Reserve of cash flow hedge | ||
| 6. Converted difference in foreign currency financial statements |
| 7. Others | ||
| Total other comprehensive after-tax net income attributable to minority shareholders | 55,563.77 | -65,470.69 |
| VII. Total Comprehensive Income | 630,003,484.14 | 492,189,170.78 |
| Total comprehensive income attributable to owners of the parent company | 629,948,469.92 | 492,274,693.54 |
| Total comprehensive income attributable to minority shareholders | 55,014.22 | -85,522.76 |
| VIII. Earnings per Share: | ||
| i. Basic earnings per share | 1.15 | 0.95 |
| ii. Diluted earnings per share | 1.15 | 0.94 |
For business combinations under common control in the reporting period, the net profit realized by the combined party before thecombination is: RMB; the net profit realized by the combined party in the previous period is: RMB.Legal representative: Xie Bingzheng Person in charge of accounting: Tang Xinqiao Person in charge of accountingdepartment: Chen Shaobing
4. Income statement of the Parent Company
Unit: RMB
| Item | 2021 | 2020 |
| I. Revenue | 2,719,989,257.14 | 2,303,326,211.84 |
| Less: Cost of revenue | 908,931,832.35 | 750,466,115.63 |
| Tax and surcharges | 18,989,718.37 | 10,441,205.54 |
| Selling expenses | 832,868,004.50 | 720,086,941.36 |
| Administrative expenses | 81,338,858.08 | 70,825,642.56 |
| R&D expenses | 83,388,128.67 | 64,804,859.36 |
| Finance expenses | 21,048,966.28 | 10,190,092.39 |
| Including: Interest fees | 38,214,760.84 | 15,998,242.73 |
| Interest income | 17,369,687.41 | 6,346,728.96 |
| Plus: Other income | 3,268,741.44 | 831,339.48 |
| Return on investment (“-” indicates loss) | 38,815,870.23 | 24,501,459.48 |
| Including: Return on investment in associates and joint ventures |
| Profits from derecognition of financial assets at amortized cost | ||
| Gains from net exposure hedging (“-” indicates loss) | ||
| Gains from changes in fair value (“-” indicates loss) | 3,424,832.00 | 425,333.33 |
| Credit impairment losses (“-” indicates loss) | 330,127.11 | -5,256,151.43 |
| Asset impairment losses (“-” indicates loss) | -78,683,952.73 | -48,457,945.87 |
| Return on disposal of assets (“-” indicates loss) | -253,775.79 | -2,728.63 |
| II. Operating Profit (“-” indicates loss) | 740,325,591.15 | 648,552,661.36 |
| Plus: Non-operating revenue | 514,429.16 | 4,663,957.39 |
| Less: Non-operating expenses | 5,613,342.65 | 1,655,966.94 |
| III. Total Profit (“-” indicates total loss) | 735,226,677.66 | 651,560,651.81 |
| Less: Income tax expense | 102,403,424.54 | 92,626,189.57 |
| IV. Net Profit (“-” indicates net loss) | 632,823,253.12 | 558,934,462.24 |
| i. Net profit from continued operation (“-” indicates net loss) | 632,823,253.12 | 558,934,462.24 |
| ii. Net profit from discontinued operation (“-” indicates net loss) | ||
| V. Net Amount of Other Comprehensive Income after Tax | ||
| i. Other comprehensive income not able to be reclassified into profit or loss | ||
| 1. Changes of remeasurement of the defined benefit plan | ||
| 2. Other comprehensive income that cannot be transferred into profit or loss under equity method | ||
| 3. Changes in fair value of investment in other equity instruments | ||
| 4. Changes in fair value of credit risk of the enterprise | ||
| 5. Others |
| ii. Other comprehensive income reclassified into profit or loss | ||
| 1. Other comprehensive income to be transferred into the profit or loss under equity method | ||
| 2. Changes in fair value of other debt investments | ||
| 3. Financial assets reclassified into other comprehensive income | ||
| 4. Provision for credit impairment of other debt investments | ||
| 5. Reserve of cash flow hedge | ||
| 6. Converted difference in foreign currency financial statements | ||
| 7. Others | ||
| VI. Total Comprehensive Income | 632,823,253.12 | 558,934,462.24 |
| VII. Earnings per Share: | ||
| i. Basic earnings per share | ||
| ii. Diluted earnings per share |
5. Consolidated cash flow statement
Unit: RMB
| Item | 2021 | 2020 |
| I. Cash Flows from Operating Activities: | ||
| Cash received from sale of goods or rendering of services | 2,753,544,575.74 | 2,138,794,296.89 |
| Net increase in deposits from customers, banks and non-bank financial institutions | ||
| Net increase in borrowings from central bank | ||
| Net increase in placements from other financial institutions | ||
| Cash received from the premium of direct insurance contracts |
| Net cash from reinsurance business | ||
| Net increase in deposits and investment of the insured | ||
| Cash obtained from interest, net fee and commission | ||
| Net increase in placements from banks and other financial institutions | ||
| Net increase in repo service fund | ||
| Net cash from agent securities trading | ||
| Tax rebates | ||
| Cash received related to other operating activities | 40,540,104.87 | 54,212,449.84 |
| Sub-total of cash inflow from operating activities | 2,794,084,680.61 | 2,193,006,746.73 |
| Cash paid for goods purchased and services rendered | 796,569,983.10 | 772,357,223.81 |
| Net loans and advances | ||
| Net increase in deposits with the central bank, banks and non-bank financial institutions | ||
| Cash paid for claims of direct insurance contracts | ||
| Net increase in placements with banks and non-bank financial institutions | ||
| Cash paid for interest, fee and commission | ||
| Cash paid for dividends of the insured | ||
| Cash paid to and on behalf of employees | 409,595,105.86 | 327,235,510.71 |
| Payments of all types of taxes | 308,402,214.51 | 195,947,543.83 |
| Cash payments related to other operating activities | 381,993,739.07 | 260,616,869.18 |
| Sub-total of cash outflow from operating activities | 1,896,561,042.54 | 1,556,157,147.53 |
| Net cash flow from operating activities | 897,523,638.07 | 636,849,599.20 |
| II. Cash Flows from Investing Activities: | ||
| Cash received from recovery of investment | ||
| Cash received from the return on investments | 40,700,749.76 | 21,071,459.48 |
| Net cash received from the disposal of fixed assets, intangible assets, and other long-lived assets | 116,729.13 | 307,600.00 |
| Net amount of cash received from the disposal of subsidiaries and other operating organizations | ||
| Cash received related to other investing activities | 3,130,000,000.00 | 1,770,000,000.00 |
| Sub-total of cash inflow from investing activities | 3,170,817,478.89 | 1,791,379,059.48 |
| Cash paid for the acquisition and construction of fixed assets, intangible assets, and other long-lived assets | 215,579,606.23 | 95,261,251.30 |
| Cash paid for investments | ||
| Net increase in pledged loans | ||
| Net amount of cash paid for acquisition of subsidiaries and other operating organizations | ||
| Cash payments related to other investing activities | 3,139,000,000.00 | 2,740,695,324.10 |
| Sub-total of cash outflow from investing activities | 3,354,579,606.23 | 2,835,956,575.40 |
| Net cash flows from investing activities | -183,762,127.34 | -1,044,577,515.92 |
| III. Cash Flows from Financing Activities: | ||
| Cash received from capital contribution | ||
| Including: Proceeds received by subsidiaries from minority shareholders’ investment | ||
| Cash received from borrowings | 681,200,000.00 | |
| Cash received related to other financing activities |
| Sub-total of cash inflow from financing activities | 681,200,000.00 | |
| Cash paid for repayments of borrowings | ||
| Cash payment for interest expenses and distribution of dividends or profits | 166,432,183.18 | 154,138,150.00 |
| Including: Dividend and profit paid by subsidiaries to minority shareholders | ||
| Cash payments related to other financing activities | 58,595,168.29 | 1,667,146.95 |
| Sub-total of cash outflow from financing activities | 225,027,351.47 | 155,805,296.95 |
| Net cash flows from financing activities | -225,027,351.47 | 525,394,703.05 |
| IV. Effect of Exchange Rate Changes on Cash and Cash Equivalents | ||
| V. Net Increase in Cash and Cash Equivalents | 488,734,159.26 | 117,666,786.33 |
| Plus: Opening balance of cash and cash equivalents | 569,284,546.79 | 451,617,760.46 |
| VI. Closing Balance of Cash and Cash Equivalents | 1,058,018,706.05 | 569,284,546.79 |
6. Cash flow statement of the Parent Company
Unit: RMB
| Item | 2021 | 2020 |
| I. Cash Flows from Operating Activities: | ||
| Cash received from sale of goods or rendering of services | 2,753,005,028.87 | 2,139,745,579.93 |
| Tax rebates | ||
| Cash received related to other operating activities | 28,232,062.82 | 39,051,358.04 |
| Sub-total of cash inflow from operating activities | 2,781,237,091.69 | 2,178,796,937.97 |
| Cash paid for goods purchased and services rendered | 1,270,471,067.33 | 970,401,547.36 |
| Cash paid to and on behalf of | 57,528,684.66 | 57,065,643.64 |
| employees | ||
| Payments of all types of taxes | 268,948,328.65 | 160,740,642.35 |
| Cash payments related to other operating activities | 351,748,141.22 | 342,948,378.12 |
| Sub-total of cash outflow from operating activities | 1,948,696,221.86 | 1,531,156,211.47 |
| Net cash flow from operating activities | 832,540,869.83 | 647,640,726.50 |
| II. Cash Flows from Investing Activities: | ||
| Cash received from recovery of investment | ||
| Cash received from the return on investments | 40,700,749.76 | 21,071,459.48 |
| Net cash received from the disposal of fixed assets, intangible assets, and other long-lived assets | 116,729.13 | 307,600.00 |
| Net amount of cash received from the disposal of subsidiaries and other operating organizations | ||
| Cash received related to other investing activities | 3,130,000,000.00 | 1,770,000,000.00 |
| Sub-total of cash inflow from investing activities | 3,170,817,478.89 | 1,791,379,059.48 |
| Cash paid for the acquisition and construction of fixed assets, intangible assets, and other long-lived assets | 209,979,606.23 | 95,261,251.30 |
| Cash paid for investments | ||
| Net amount of cash paid for acquisition of subsidiaries and other operating organizations | ||
| Cash payments related to other investing activities | 3,139,000,000.00 | 2,745,695,324.10 |
| Sub-total of cash outflow from investing activities | 3,348,979,606.23 | 2,840,956,575.40 |
| Net cash flows from investing activities | -178,162,127.34 | -1,049,577,515.92 |
| III. Cash Flows from Financing Activities: | ||
| Cash received from capital contribution |
| Cash received from borrowings | 681,200,000.00 | |
| Cash received related to other financing activities | 3,363,413.96 | 10,140,096.03 |
| Sub-total of cash inflow from financing activities | 3,363,413.96 | 691,340,096.03 |
| Cash paid for repayments of borrowings | ||
| Cash payment for interest expenses and distribution of dividends or profits | 166,432,183.18 | 154,138,150.00 |
| Cash payments related to other financing activities | 45,244,487.92 | 1,667,146.95 |
| Sub-total of cash outflow from financing activities | 211,676,671.10 | 155,805,296.95 |
| Net cash flows from financing activities | -208,313,257.14 | 535,534,799.08 |
| IV. Effect of Exchange Rate Changes on Cash and Cash Equivalents | ||
| V. Net Increase in Cash and Cash Equivalents | 446,065,485.35 | 133,598,009.66 |
| Plus: Opening balance of cash and cash equivalents | 530,925,942.01 | 397,327,932.35 |
| VI. Closing Balance of Cash and Cash Equivalents | 976,991,427.36 | 530,925,942.01 |
7. Consolidated statement of changes in owner’s equity
Amount of the current period
Unit: RMB
| Item | 2021 | ||||||||||||||
| Owner’s equity attributable to the Parent Company | Equity of minority shareholders | Total owner’s equity | |||||||||||||
| Share capital | Other equity instruments | Capital reserve | Less: Treasury shares | Other comprehensive income | Special reserves | Surplus reserves | General reserves | Retained earnings | Others | Subtotal | |||||
| Preference shares | Perpetual bonds | Others | |||||||||||||
| I. Closing Balance of Previous Year | 524,075,085.00 | 63,661,135.54 | 226,927,846.51 | -6,249,160.64 | 194,828,010.62 | 1,413,582,872.58 | 2,416,825,789.61 | 912,720.91 | 2,417,738,510.52 | ||||||
| Plus: | |||||||||||||||
| Changes in accounting policies | |||||||||||||||
| Correction of previous period errors | |||||||||||||||
| Business combinations under common control | |||||||||||||||
| Others | |||||||||||||||
| II. Opening Balance of Current Year | 524,075,085.00 | 63,661,135.54 | 226,927,846.51 | -6,249,160.64 | 194,828,010.62 | 1,413,582,872.58 | 2,416,825,789.61 | 912,720.91 | 2,417,738,510.52 | ||||||
| III. Changes in the Period (“-” Indicates Decrease) | 26,251,627.00 | -36,136,681.38 | 373,542,599.64 | 5,406,986.92 | 63,282,325.31 | 396,268,949.39 | 828,615,806.88 | 55,014.22 | 828,670,821.10 | ||||||
| i. Total comprehensive income | 5,406,986.92 | 624,541,483.00 | 629,948,469.92 | 55,014.22 | 630,003,484.14 | ||||||||||
| ii. Capital contributed or reduced by owners | 26,251,627.00 | -36,136,681.38 | 373,542,599.64 | 363,657,545.26 | 363,657,545.26 | ||||||||||
| 1. Ordinary shares contributed by owners | |||||||||||||||
| 2. Capital contributed by owners of other equity instruments | 26,251,627.00 | -36,136,681.38 | 373,542,599.64 | 363,657,545.26 | 363,657,545.26 | ||||||||||
| 3. Share-based payments recognized as owner’s equity |
| 4. Others | |||||||||||||||
| iii. Profit distribution | 63,282,325.31 | -228,272,533.61 | -164,990,208.30 | -164,990,208.30 | |||||||||||
| 1. Appropriation of surplus reserves | 63,282,325.31 | -63,282,325.31 | |||||||||||||
| 2. Appropriation of general risk reserves | |||||||||||||||
| 3. Distribution to owners (or shareholders) | -164,990,208.30 | -164,990,208.30 | -164,990,208.30 | ||||||||||||
| 4. Others | |||||||||||||||
| iv. Internal carry-over of owner’s equity | |||||||||||||||
| 1. Capital (or share capital) increased from capital reserves | |||||||||||||||
| 2. Capital (or share capital) increased from surplus reserves | |||||||||||||||
| 3. Surplus reserve offsetting losses | |||||||||||||||
| 4. Retained earnings carried over from changes in defined benefit plans | |||||||||||||||
| 5. Retained earnings carried over from other comprehensive income | |||||||||||||||
| 6. Others |
| v. Special reserves | |||||||||||||||
| 1. Appropriation for the period | |||||||||||||||
| 2. Use for the period | |||||||||||||||
| vi. Others | |||||||||||||||
| IV. Closing Balance of the Period | 550,326,712.00 | 27,524,454.16 | 600,470,446.15 | -842,173.72 | 258,110,335.93 | 1,809,851,821.97 | 3,245,441,596.49 | 967,735.13 | 3,246,409,331.62 |
Amount of last period
Unit: RMB
| Item | 2020 | ||||||||||||||
| Owner’s equity attributable to the Parent Company | Equity of minority shareholders | Total owner’s equity | |||||||||||||
| Share capital | Other equity instruments | Capital reserve | Less: Treasury shares | Other comprehensive income | Special reserves | Surplus reserves | General reserves | Retained earnings | Others | Subtotal | |||||
| Preference shares | Perpetual bonds | Others | |||||||||||||
| I. Closing Balance of Previous Year | 308,276,300.00 | 442,647,168.74 | 298,570.37 | 133,177,418.18 | 1,072,977,728.32 | 1,957,377,185.61 | 998,243.67 | 1,958,375,429.28 | |||||||
| Plus: Alternation to accounting policies | |||||||||||||||
| Correction of previous period errors | 5,757,146.22 | 51,814,315.93 | 57,571,462.15 | 57,571,462.15 | |||||||||||
| Business combinations under common control | |||||||||||||||
| Others | |||||||||||||||
| II. Opening Balance of | 308,276,30 | 442,647,168. | 298,57 | 138,934,564. | 1,124,792,04 | 2,014,948,64 | 998,243 | 2,015,946,891. | |||||||
| Current Year | 0.00 | 74 | 0.37 | 40 | 4.25 | 7.76 | .67 | 43 | |||||||
| III. Changes in the Period (“-” Indicates Decrease) | 215,798,785.00 | 63,661,135.54 | -215,719,322.23 | -6,547,731.01 | 55,893,446.22 | 288,790,828.33 | 401,877,141.85 | -85,522.76 | 401,791,619.09 | ||||||
| i. Total comprehensive income | -6,547,731.01 | 498,822,424.55 | 492,274,693.54 | -85,522.76 | 492,189,170.78 | ||||||||||
| ii. Capital contributed or reduced by owners | 5,375.00 | 63,661,135.54 | 74,087.77 | 63,740,598.31 | 63,740,598.31 | ||||||||||
| 1. Ordinary shares contributed by owners | |||||||||||||||
| 2. Capital contributed by owners of other equity instruments | 5,375.00 | 63,661,135.54 | 74,087.77 | 63,740,598.31 | 63,740,598.31 | ||||||||||
| 3. Share-based payments recognized as owner’s equity | |||||||||||||||
| 4 Others | |||||||||||||||
| iii. Profit distribution | 55,893,446.22 | -210,031,596.22 | -154,138,150.00 | -154,138,150.00 | |||||||||||
| 1. Appropriation of surplus reserves | 55,893,446.22 | -55,893,446.22 | |||||||||||||
| 2. Appropriation of general risk reserves | |||||||||||||||
| 3. Distribution to owners (or shareholders) | -154,138,150.00 | -154,138,150.00 | -154,138,150.00 | ||||||||||||
| 4. Others |
| iv. Internal carry-over of owner’s equity | 215,793,410.00 | -215,793,410.00 | |||||||||||||
| 1. Capital (or share capital) increased from capital reserves | 215,793,410.00 | -215,793,410.00 | |||||||||||||
| 2. Capital (or share capital) increased from surplus reserves | |||||||||||||||
| 3. Surplus reserve offsetting losses | |||||||||||||||
| 4. Retained earnings carried over from changes in defined benefit plans | |||||||||||||||
| 5. Retained earnings carried over from other comprehensive income | |||||||||||||||
| 6. Others | |||||||||||||||
| v. Special reserves | |||||||||||||||
| 1. Appropriation for the period | |||||||||||||||
| 2. Use for the period | |||||||||||||||
| vi. Others | |||||||||||||||
| IV. Closing Balance of the Period | 524,075,085.00 | 63,661,135.54 | 226,927,846.51 | -6,249,160.64 | 194,828,010.62 | 1,413,582,872.58 | 2,416,825,789.61 | 912,720.91 | 2,417,738,510.52 |
8. Statement of changes in owner’s equity of the Parent Company
Amount of the current period
Unit: RMB
| Item | 2021 | |||||||||||
| Share capital | Other equity instruments | Capital reserve | Less: Treasury shares | Other comprehensive income | Special reserves | Surplus reserves | Retained earnings | Others | Total owner’s equity | |||
| Preference shares | Perpetual bonds | Others | ||||||||||
| I. Closing Balance of Previous Year | 524,075,085.00 | 63,661,135.54 | 226,927,846.51 | 194,828,010.62 | 1,560,864,400.15 | 2,570,356,477.82 | ||||||
| Plus: Alternation to accounting policies | ||||||||||||
| Correction of previous period errors | ||||||||||||
| Others | ||||||||||||
| II. Opening Balance of Current Year | 524,075,085.00 | 63,661,135.54 | 226,927,846.51 | 194,828,010.62 | 1,560,864,400.15 | 2,570,356,477.82 | ||||||
| III. Changes in the Period (“-” Indicates Decrease) | 26,251,627.00 | -36,136,681.38 | 373,542,599.64 | 63,282,325.31 | 404,550,719.51 | 831,490,590.08 | ||||||
| i. Total comprehensive income | 632,823,253.12 | 632,823,253.12 | ||||||||||
| ii. Capital contributed or reduced by owners | 26,251,627.00 | -36,136,681.38 | 373,542,599.64 | 363,657,545.26 | ||||||||
| 1. Ordinary shares contributed by owners | ||||||||||||
| 2. Capital contributed by owners of other equity instruments | 26,251,627.00 | -36,136,681.38 | 373,542,599.64 | 363,657,545.26 | ||||||||
| 3. Share-based payments recognized as owner’s equity | ||||||||||||
| 4. Others | ||||||||||||
| iii. Profit distribution | 63,282,325.31 | -228,272,533.61 | -164,990,208.30 | |||||||||
| 1. Appropriation of surplus reserves | 63,282,325.31 | -63,282,325.31 | ||||||||||
| 2. Distribution to owners (or shareholders) | -164,990,208.30 | -164,990,208.30 | ||||||||||
| 3. Others | ||||||||||||
| iv. Internal carry-over of owner’s equity | ||||||||||||
| 1. Capital (or share capital) increased from capital reserves | ||||||||||||
| 2. Capital (or share capital) increased from surplus reserves | ||||||||||||
| 3. Surplus reserve offsetting losses | ||||||||||||
| 4. Retained earnings carried over from changes in defined benefit plans |
| 5. Retained earnings carried over from other comprehensive income | ||||||||||||
| 6 Others | ||||||||||||
| v. Special reserves | ||||||||||||
| 1. Appropriation for the period | ||||||||||||
| 2. Use for the period | ||||||||||||
| vi. Others | ||||||||||||
| IV. Closing Balance of the Period | 550,326,712.00 | 27,524,454.16 | 600,470,446.15 | 258,110,335.93 | 1,965,415,119.66 | 3,401,847,067.90 |
Amount of last period
Unit: RMB
| Item | 2020 | |||||||||||
| Share capital | Other equity instruments | Capital reserve | Less: Treasury shares | Other comprehensive income | Special reserves | Surplus reserves | Retained earnings | Others | Total owner’s equity | |||
| Preference shares | Perpetual bonds | Others | ||||||||||
| I. Closing Balance of Previous Year | 308,276,300.00 | 442,647,168.74 | 133,177,418.18 | 1,160,147,218.20 | 2,044,248,105.12 | |||||||
| Plus: Alternation to accounting policies | ||||||||||||
| Correction of previous period errors | 5,757,146.22 | 51,814,315.93 | 57,571,462.15 | |||||||||
| Others | ||||||||||||
| II. Opening Balance of | 308,276,300. | 442,647,168.74 | 138,934,564.40 | 1,211,961,534.13 | 2,101,819,567.27 | |||||||
| Current Year | 00 | |||||||||||
| III. Changes in the Period (“-” Indicates Decrease) | 215,798,785.00 | 63,661,135.54 | -215,719,322.23 | 55,893,446.22 | 348,902,866.02 | 468,536,910.55 | ||||||
| i. Total comprehensive income | 558,934,462.24 | 558,934,462.24 | ||||||||||
| ii. Capital contributed or reduced by owners | 5,375.00 | 63,661,135.54 | 74,087.77 | 63,740,598.31 | ||||||||
| 1. Ordinary shares contributed by owners | ||||||||||||
| 2. Capital contributed by owners of other equity instruments | 5,375.00 | 63,661,135.54 | 74,087.77 | 63,740,598.31 | ||||||||
| 3. Share-based payments recognized as owner’s equity | ||||||||||||
| 4. Others | ||||||||||||
| iii. Profit distribution | 55,893,446.22 | -210,031,596.22 | -154,138,150.00 | |||||||||
| 1. Appropriation of surplus reserves | 55,893,446.22 | -55,893,446.22 | ||||||||||
| 2. Distribution to owners (or shareholders) | -154,138,150.00 | -154,138,150.00 | ||||||||||
| 3 Others | ||||||||||||
| iv. Internal carry-over of owner’s equity | 215,793,410.00 | -215,793,410.00 | ||||||||||
| 1. Capital (or | 215,79 | -215,79 |
| share capital) increased from capital reserves | 3,410.00 | 3,410.00 | ||||||||||
| 2. Capital (or share capital) increased from surplus reserves | ||||||||||||
| 3. Surplus reserve offsetting losses | ||||||||||||
| 4. Retained earnings carried over from changes in defined benefit plans | ||||||||||||
| 5. Retained earnings carried over from other comprehensive income | ||||||||||||
| 6 Others | ||||||||||||
| v. Special reserves | ||||||||||||
| 1. Appropriation for the period | ||||||||||||
| 2. Use for the period | ||||||||||||
| vi. Others | ||||||||||||
| IV. Closing Balance of the Period | 524,075,085.00 | 63,661,135.54 | 226,927,846.51 | 194,828,010.62 | 1,560,864,400.15 | 2,570,356,477.82 |
III. Basic Information of the CompanyRegistered address of the Company and office address of the headquarters: No. 608 East Xingye Avenue, Nancun Town, PanyuDistrict, Guangzhou CityPrincipal business activities: R&D and design of brand clothing, brand promotion, marketing network construction and supply chainmanagement
Date of approval for the issue of the financial statements: April 15, 2022In the reporting period, the Company has 6 subsidiaries that are included in the consolidated scope, as detailed in “Note IX Equitiesin Other Entities”. Compared with previous period, one new subsidiary has been established and added, which is detailed in “NoteVIII Changes in Consolidated Scope”.IV. Preparation Basis for Financial Statements
1. Basis of preparation
The Company has prepared the financial statements on a going concern based on actual transactions and events that are recognizedand measured in accordance with the Accounting Standards for Business Enterprises - Basic Standards as well as other specificaccounting standards, application guidelines, standard interpretations and other relevant regulations (hereinafter collectively referredto as “Accounting Standards for Business Enterprises”) and in combination with provisions set out in Rules No. 15 on thePreparation of Information Disclosure Documents by Companies That Offer Securities to the Public - General Rules for FinancialStatements (2014 Revision) issued by China Securities Regulatory Commission.
2. Going concern
The Company has the ability to continue as a going concern for at least 12 months following the end of the reporting period. Thereare no material events that will affect the Company’s going concern.V. Significant Accounting Policies and Accounting EstimatesSpecific accounting policies and accounting estimates:
The Company has set out specific accounting policies and accounting estimates for transactions and events with relation to thedepreciation of fixed assets, amortization of intangible assets, income recognition, etc. based on its production and operationcharacteristics in accordance with relevant Accounting Standards for Business Enterprises.
1. Statement of compliance with the accounting standards for business enterprisesThe financial statements of the Company conform to the requirements set out in the Accounting Standards for Business Enterprisesand truthfully and completely reflect the financial status, operating results, changes in owner’s equity, cash flow, and other relevantinformation of the Company.
2. Accounting period
The accounting year of the Company is from January 1 to December 31 of each calendar year.
3. Operating cycle
The Company sets 12 months as a full operating cycle.
4. Standard currency for accounting
The Company uses RMB as the standard currency for bookkeeping.
5. Accounting treatment measures of business combinations of entities under common control and businesscombinations of entities not under common control
1. Business combinations of entities under common control: Assets and liabilities acquired by the Company in the businesscombination are measured at the book value of the combined party’s assets and liabilities (including the goodwill incurred to theultimate controlling party from the acquisition of the combined party) in the financial statements of the ultimate controlling party onthe combination date. If there are differences between the book values of the net assets acquired and the book values of thecombination consideration paid (or the par values of the issued shares), the difference will be used to adjust capital reserves or sharepremiums. Where capital reserves or share premiums are insufficient to offset, retained earnings will be adjusted.
2. Business combinations of entities not under common control: Assets paid by the Company as the consideration of businesscombination on the acquisition date or liabilities incurred to or assumed by the Company are measured at fair value, and thedifference between their fair value and book value is included in the profit and loss of the current period. If the costs of businesscombinations are higher than the fair values of identifiable net assets of the acquiree on the acquisition date, the gap between them isconfirmed as goodwill. If the costs of business combinations are lower than the fair values of the identifiable net assets of theacquiree on the acquisition date, the fair values of identifiable assets and liabilities obtained as well as the fair values of the non-cashassets or equity securities issued that are used as the consideration of the combination are reassessed; if, upon reassessment, thedetermined fair values of the identifiable assets and liabilities are defined as reasonable, the difference between the businesscombination costs and the fair values of the identifiable net assets of the acquiree is included in the non-operating revenue of theperiod when the combination occurs.For business combinations not under common control that are achieved in stages, the business combination costs shall be the sum ofthe consideration paid on the acquisition date and fair values of the equities in the acquiree held before the acquisition date.Meanwhile, the equities in the acquiree held before the acquisition date shall be remeasured at the fair value on the acquisition date,and the difference between the fair value and the book value is recognized as the return on investment of the current period. For othercomprehensive income incurred from the long-term equity investment of equities in the acquiree held before the acquisition date ascalculated under the equity model, accounting processing shall be done by adopting the same basis for directly disposing relevantassets or liabilities of the acquiree. That is, other changes in shareholders’ equity, except for net profit and loss, other comprehensiveincome and profit distribution, shall be transferred to the return on investment of the current period For other equity instrumentinvestments in the acquiree held before the acquisition date, the changes in the fair value of the equity instrument investmentsaccumulated under other comprehensive income before the acquisition date are transferred to retained profits and losses.
3. Treatment of relevant expenses in business combination: Intermediary fees for auditing, legal services, evaluation, consultation, etc.and other relevant management expenses incurred for the business combination are included in the profit and loss of the period whenthey occur; the transaction fees of the equity securities or debt securities issued as the consideration for the combination are includedin the initial recognition amount of the equity securities or debt securities.
6. Methods for preparation of consolidated financial statements
1. Scope of consolidated financial statements
The consolidation scope of consolidated financial statements shall be subject to the basis of control, which includes not onlysubsidiaries determined based on voting rights (or similar rights) themselves or in combination with other arrangements, but alsostructured entities determined based on one or more contractual arrangements. Control refers to the power the investor owns againstthe investee which allows the investor to enjoy the variable return by attending relevant activities of the investee and to be capable ofusing such power to affect the amount of return.
2. Combination procedures
The consolidated financial statements are prepared based on the financial statements of the Company and its subsidiaries and otherrelevant information.The Company unifies the accounting policies and accounting periods adopted by its subsidiaries, so that they are consistent withthose adopted by the Company. During the preparation of consolidated financial statements, the materiality principle is followed; i.e.internal transactions and equity investment projects between the parent company and the subsidiary and between subsidiaries areoffset.The equities and profits and losses attributable to minority shareholders of subsidiaries are listed separately under the item of“owner’s equity” in the consolidated balance sheet and under the item of “net profit” in the consolidated income statement. If the lossof a subsidiary which is shared by its minority shareholders exceeds the minority shareholders’ share in the owner’s equity of thesubsidiary at the beginning of the period, the equity of minority shareholders shall be reduced.
(1) Addition of subsidiary and business
If subsidiaries and businesses are added due to business combinations of enterprises under the same control during the reportingperiod, the opening balance of the consolidated balance sheet should be adjusted; the consolidated income statement should includethe incomes, expenses and profits of these subsidiaries and businesses from the beginning to the end of the reporting period when thecombination occurs; the consolidated cash flow statement should include cash flows of these subsidiaries and businesses from thebegging to the end of the reporting period when the combination occurs. Meanwhile, relevant items in the comparative statementsshould be adjusted, as if the consolidated reporting entity had been existing since the time when the ultimate controlling party beganto have control.If subsidiaries and businesses are added due to business combinations of enterprises not under the same control during the reportingperiod, the opening balance of the consolidated balance sheet are not adjusted; the consolidated income statement should include the
incomes, expenses and profits of these subsidiaries and businesses from the acquisition date to the end of the reporting period; theconsolidated cash flow statement should include cash flows of these subsidiaries and businesses from the acquisition date to the endof the reporting period.The Company prepares consolidated financial statements based on the amount of identifiable assets, liabilities and contingentliabilities on the balance sheet date of the current period as determined on the basis of their fair values in the individual financialstatements of the subsidiary on the acquisition date. If the costs of business combinations are higher than the identifiable net assets ofthe acquiree, the gap between them is confirmed as goodwill. If the costs of business combinations are lower than the identifiable netassets of the acquiree, the gap between them, upon reassessment, is included in the profit and loss of the current period.For business combinations not under common control that are achieved through multiple transactions in stages, when compiling theconsolidated financial statements, the equities in the acquiree held before the acquisition date should be remeasured at the fair valueon the acquisition date, and the difference between the fair value and the book value is recognized as the return on investment of thecurrent period. For other comprehensive income incurred from the long-term equity investment of equities in the acquiree held beforethe acquisition date as calculated under the equity model, accounting processing shall be done by adopting the same basis for directlydisposing relevant assets or liabilities of the acquiree. That is, other changes in shareholders’ equity, except for net profit and loss,other comprehensive income and profit distribution, shall be transferred to the return on investment of the current period For otherequity instrument investments in the acquiree held before the acquisition date, the changes in the fair value of the equity instrumentinvestments accumulated under other comprehensive income before the acquisition date are transferred to retained profits and losses.
(2) Disposal of subsidiaries and businesses
A. General disposal methodsWhere the Company disposes subsidiaries and businesses during the reporting period, the incomes, expenses and profits of thesesubsidiaries and businesses from the beginning of the reporting period to the disposition date are included in the consolidated incomestatement, while their cash flows from the beginning of the period to the disposition date are included in the consolidated cash flowstatement.If the Company loses control of a subsidiary due to partial disposal of equity investment or other reasons, the remaining equityshould be remeasured in the consolidated financial statements at fair value on the date of loss of control. The sum of considerationobtained from equity disposal and fair value of the remaining equity, minus the Company’s share in the subsidiary’s net assetsproportional to its original shareholding percentage that is continuously calculated from the acquisition date or acquisition date, isrecognized as return on investment of the reporting period when the loss of control takes place. For other comprehensive incomeincurred from the equity investment in the subsidiary, accounting processing is done by adopting the same basis for directly disposingrelevant assets or liabilities of the subsidiary at the loss of control. That is, other changes in shareholders’ equity, except for net profitand loss, other comprehensive income and profit distribution, shall be transferred to the return on investment of the period when thecontrol is lost.B. Disposal of equities in steps until loss of controlWhere the Company loses control of a subsidiary by disposing equity investments in the subsidiary in steps, if those transactions of
equity disposal are a package deal, each transaction shall be treated as a transaction that results in loss of control of the subsidiary inaccounting processing. However, the difference between each disposal price before loss of control and the Company’s share in thesubsidiary’s net assets proportional to the disposed equity shall be recognized as other comprehensive income in the consolidatedfinancial statements and, upon loss of control, transferred to the profit and loss of the current period.If the terms, conditions, and economic effects of transactions of disposing equity investment in the subsidiary conform to one or moreof the following circumstances, that means these multiple transactions should be treated as package deals in accounting processing:
(A) those transactions are reached at the same time or after taking into consideration the influence of each other;(B) those transactions together produce a complete commercial outcome;(C) the occurrence of one transaction depends on the occurrence of at least one other transaction;(D) one transaction alone does not seem to be economical, but all those transactions are economical when are considered as a whole.
(3) Purchase of minority stakes in subsidiaries
The difference between the long-term equity investment newly acquired by the Company due to the purchase of minority stakes andits share in the identifiable net assets of the subsidiary proportional to the increased shareholding ratio as continuously calculatedfrom the acquisition date (or combination date) is used to adjust the capital premium or share premium under capital reserve in theconsolidated balance sheet; if the capital premium or share premium is insufficient to offset, retained earnings will be adjusted.
(4) Partial disposal of equity investment in subsidiaries without losing control
The consideration received by the Company for disposing the long-term equity investments in a subsidiary without losing control andits share in the identifiable net assets of the subsidiary proportional to the disposed equity ratio as continuously calculated from theacquisition date (or combination date) is used to adjust the capital premium or share premium under capital reserve in theconsolidated balance sheet; if the capital premium or share premium is insufficient to offset, retained earnings will be adjusted.
7. Classification of joint arrangements and accounting treatment methods
A joint arrangement is an arrangement over which two or more parties have joint control. Joint arrangements are required to beclassified as either a joint operation or a joint venture.
1. A joint operation is the joint arrangement where the Company has the rights to the assets and the obligations for the liabilities ofthe arrangement. The Company recognizes in relation to its interest in a joint operation:
(1) its assets, including its share of any assets held jointly;
(2) its liabilities, including its share of any liabilities incurred jointly;
(3) its revenue from the sale of its share of the output of the joint operation;
(4) its share of the revenue from the sale of the output by the joint operation; and
(5) its expenses, including its share of any expenses incurred jointly.
2. A joint venture is a joint arrangement where the Company only has an interest to the net assets of the arrangement. The Companyaccounts for its interest in a joint venture using the equity method.
8. Criteria for recognition of cash and cash equivalents
The Company recognizes cash on hand and deposits that can be used for payment at any time as cash when compiling the cash flowstatement. Meanwhile, short-term (due within three months from the acquisition date) investments held by the Company with highliquidity, easy to convert to cash in a known amount, and low risk of value changes are recognized as cash equivalents. Restrictedbank deposits are not recognized as cash and cash equivalents in the cash flow statement.
9. Translation of transactions and financial statements denominated in foreign currencies
1. Foreign currency transactions
Upon the occurrence of foreign currency transactions, the amount of foreign currency is accounted by translating into RMB at theapproximate spot exchange rate on the transaction date, while foreign currency monetary items and non-monetary items are treatedaccording to the following methods at the end of the reporting period:
(1) Foreign currency monetary items are translated at the spot exchange rate on the balance sheet date. Exchange difference resultingfrom the difference between the spot exchange rate on the balance sheet date and that at the initial recognition or on the previousbalance sheet date is recognized as the profit and loss of the current period.
(2) Foreign currency non-monetary items that are measured at historical cost shall still be converted at the spot exchange rate on thetransaction date, without changing the amount of the standard bookkeeping currency.
(3) Foreign currency non-monetary items that are measured at fair value are translated using the foreign exchange rate at the datewhen the fair value is recognized. The difference arising therefrom is recognized as profit and loss or other comprehensive income.
(4) Exchange gains and losses, except for those arising from special foreign-currency borrowings related to the purchase orproduction of assets eligible for capitalization, are included in the cost of the asset eligible for capitalization before the asset is readyfor its intended use or sale, while others are included in the profit and loss of the current period.
2. Translation of foreign-currency financial statements
(1) Assets and liabilities in the balance sheet shall be converted at the spot exchange rate on the balance sheet date; except for the“undistributed profits” item, all the other items under “owner’s equity” are converted at the spot exchange rate at the time ofoccurrence.
(2) Income and expense items in the income statement shall be translated using the foreign exchange rate ruling at the date of thetransaction.
(3) Difference resulting from translation of foreign-currency financial statements by the above methods shall be included in othercomprehensive income. When disposing an overseas operation, the difference resulting from the conversion of foreign currencystatements relating to the operation is transferred from the owner’s equity item to the profit and loss of the current period.
(4) The cash flow statement is converted at the spot exchange rate on the date of cash flow occurrence. The impact of exchange ratechanges on cash is regarded as an adjustment item and listed separately in the cash flow statement.
10. Financial instruments
When the Company becomes a party to a financial instrument contract, the financial instrument is confirmed to be either a financialasset or financial liability.
1. Classification, recognition, and measurement of financial assets
According to the business model of managing financial assets and the contractual cash flow characteristics of financial assets, theCompany classifies financial assets into the following three categories: financial assets measured at the amortized cost, financialassets measured at fair value where gains and losses are recognized in other comprehensive income (hereinafter, fair value throughother comprehensive income), and financial assets measured at fair value where gains and losses are recognized in profit or loss ofthe current period (hereinafter, fair value through profit or loss).Financial assets are measured at fair value upon initial recognition. For financial assets measured at fair value through profit or loss,transaction costs are directly included in profit and loss of the current period. For other types of financial assets, related transactioncosts are included in their initial recognized amounts. Where the accounts receivable initially recognized by the Company does notcontain significant financing components as defined in the Accounting Standards for Business Enterprises No. 14 -- Revenue or theaccounts receivable does not consider financing components in contacts whose term is less than a year pursuant to provisions of theAccounting Standards for Business Enterprises No. 14 -- Revenue, the initial measurement shall be made according to the price oftransactions that are expected to be entitled to receive consideration.
(1) Financial assets measured at amortized cost
A financial asset is classified as being subsequently measured at amortized cost if the asset is held within a business model whoseobjective is to collect contractual cash flows, and the contractual terms of the financial asset give rise to cash flows that are solelypayments of principal and interest on the principal amount outstanding. This kind of financial assets is subsequently measured atamortized cost using the effective interest method. Gains or losses arising from amortization or impairment are recognized in profitand loss of the current period.
(2) Financial assets measured at fair value through other comprehensive income
A financial asset is classified as being subsequently measured at fair value through other comprehensive income if the asset is heldwithin a business model whose objective is to both collect contractual cash flows and sell the financial asset, and the contractualterms of the financial asset give rise to cash flows that are solely payments of principal and interest on the principal amountoutstanding. The Company measures this kind of financial assets at fair value where gains and losses are recognized in othercomprehensive income, but the impairment losses or gains, exchange profits or losses, and interest income calculated by the effectiveinterest method are recognized as the profit and loss of the current period.If an equity investment is not held for trading, the Company can make an irrevocable election at initial recognition to measure it atfair value through other comprehensive income. The designation hereof is made on an individual investment basis, and the relevantinvestment meets the definition of an equity instrument from the perspective of the issuer. The Company recognizes relevantdividend income from such financial assets as the profit and loss of the current period, and changes in fair value as othercomprehensive income. When such financial assets are derecognized, the accumulated gains or losses previously recognized as other
comprehensive income shall be transferred from other comprehensive income to retained earnings and not recognized as the profitand loss of the current period.
(3) Financial assets measured at fair value through profit or loss
All financial assets other than the other two preceding types are classified as financial assets measured at fair value through profit orloss. Moreover, at initial recognition, to eliminate or significantly reduce accounting mismatches that would otherwise arise, theCompany may designate a financial asset as financial asset measured at fair value through profit or loss. Such financial assets aresubsequently measured at fair value, and changes in fair value are recognized as the profit and loss of the current period.
2. Classification, recognition, and measurement of financial liabilities
At initial recognition, financial liabilities are classified into financial liabilities measured at fair value through profit or loss and otherfinancial liabilities. For financial liabilities measured at fair value through profit or loss, transaction costs are directly included inprofit and loss of the current period. For other types of financial liabilities, related transaction costs are included in their initialrecognition amounts.
(1) Financial liabilities measured at fair value through profit or loss
Financial liabilities measured at fair value through profit or loss include financial liabilities held for trading (including derivativesbelonging to financial liabilities) and financial liabilities designated to be measured at fair value where changes in fair value areincluded in the profit and loss of the current period.Financial liabilities held for trading (including derivatives belong to financial liabilities) are subsequently measured at fair value, andchanges in fair value, except for those related to hedge accounting, are recognized as profit and loss of the current period.For those that are designated as financial liabilities measured at fair value through profit or loss, the amount of change in fair valueattributable to changes in the credit risk of the Company is presented in other comprehensive income; cumulative gains or losses ofchange in fair value attributable to changes in the credit risk of the Company are transferred to retained earnings at the derecognitionof the financial liability. Other changes in fair value shall be recognized as the profit and loss of the current period. If the accountingtreatment of the credit risk changes in such financial liabilities by the above methods will create or expand the accounting mismatchin the profit and loss, the Company shall recognize all gains or losses in such financial liabilities (including the amount attributable tochanges in the credit risk of the Company) as the profit and loss of the current period.
(2) Other financial liabilities
Except for financial liabilities that continue to be recognized when a transfer of a financial asset does not qualify for derecognition orcontinue to be recognized to the extent of continuing involvement, or financial guarantee contracts, other financial liabilities shall beclassified into the financial liabilities measured at amortized cost, which are subsequently measured at amortized cost, and the gainsor losses resulting from derecognition or amortization shall be recognized as the profit and loss of the current period.
3. Methods for determining the fair value of financial assets and financial liabilities
If there are active markets for a financial instrument, the Company establishes its fair value by using quoted price in the activemarkets. If there is no active market, valuation techniques is used to measure fair value. During valuation, the Company adopts thevaluation techniques that are applicable under current circumstances and supported by sufficient available data and other information,
selects the input values that are consistent with the characteristics of the assets or liabilities considered by the market participants inthe transaction of the relevant assets or liabilities, and preferentially uses the relevant observable inputs. Unobservable input valuesare used only when relevant observable input values are not available or are not practicable.
4. Recognition and measurement of financial asset transfer
Recognition of financial asset transfer
| Circumstance | Result of confirmation |
| Transferring substantially all of the risks and rewards of ownership of the asset | Derecognize the financial asset (recognize new asset/liability) |
Neither transferring nor retainingsubstantially all the risks andrewards of ownership of the asset
| Neither transferring nor retaining substantially all the risks and rewards of ownership of the asset | Give up control of the transferred asset | |
| Retain control of the transferred asset | Continue to recognize the transferred asset and liability to the extent of continuing involvement |
Retaining substantially all therisks and rewards of ownershipof the asset
| Retaining substantially all the risks and rewards of ownership of the asset | Continue to recognize the financial asset and recognize the consideration received as financial liability |
The Company distinguishes financial asset transfer into transfer in entirety and transfer in part.
(1) If a financial asset is qualified for derecognition in its entirety, the difference between the following two shall be recognized inprofit and loss of the current period: the book value of the financial asset at the date of derecognition; and the consideration received,plus the cumulated amount of changes in fair value directly included in other comprehensive income (only for financial assetsmeasured at fair value through other comprehensive income as classified in accordance with Article 18 of the Accounting Standardsfor Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments).
(2) If the transferred asset is part of a larger financial asset, when the part transferred qualifies for derecognition in its entirety, theprevious book value of the larger financial asset shall be allocated between the part that continues to be recognized and the part thatis derecognized (for this purpose, a retained serving asset should be treated as the part continuing to be recognized), on the basis ofthe relative fair values of those parts on the date of the transfer. The difference between the following two shall be recognized inprofit and loss of the current period: the book value allocated to the part derecognized at the date of derecognition; and theconsideration received for the part derecognized (including any new asset obtained less any new liability assumed), plus thecumulated amount of changes in fair value proportionate to the part derecognized directly included in other comprehensive income(only for financial assets measured at fair value through other comprehensive income as classified in accordance with Article 18 ofthe Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments).If the transferred financial asset does not qualify for derecognition, the Company continues to recognize the financial asset in itsentirety and the consideration received as a financial liability.
5. Derecognition of financial liabilities
The Company removes a financial liability (or a part of it) from its financial statements when the obligation specified in the contractis discharged or canceled or expires. For the following circumstances:
(1) If the Company transfers the asset to repay a financial liability to an institution or establish a trust thereof, while the repayment
obligation still exists, the financial liability should not be derecognized.
(2) If the Company (borrower) and the lender sign an agreement under which the Company assumes a new financial liability toreplace the original financial liability (or a part of it), while contractual terms of the two are different in substance, the Company shallderecognize the original financial liability (or a part of it) and recognize a new financial liability.If a financial liability is derecognized in whole (or in part), the difference between the book value of the derecognized portion and theconsideration paid (including the non-cash assets transferred out or the new financial liability assumed) is recognized as the profitand loss of the current period.
6. Impairment of financial assets
(1) Methods for recognizing impairment provision
Financial assets measured at amortized cost (including receivables), investments in debt instruments measured at fair value throughother comprehensive income, and lease receivables are measured using the expected credit loss (ECL) approach. In addition, forcontract assets, loan commitments and financial guarantee contracts, loss allowance and credit impairment loss are recognizedaccording to the above accounting policies.Expected credit loss (ECL) is the weighted average of credit losses with the respective risks of a default occurring as the weightings.Credit loss refers to the difference between the present value of all contractual cash flows discounted at the original interest rate andthe present value of expected future cash flows, i.e. the “cash shortfall”.With the exception of purchased or originated credit-impaired financial assets, the Company assesses whether the credit risk ofrelevant financial assets has been significantly increased since initial recognition. If the credit risk has not increased significantlysince initial recognition, it is in Stage 1; the Company recognizes loss allowance based on the 12-month ECL of the financial asset. Ifthe credit risk increases significantly since initial recognition but the financial asset is not considered credit-impaired, it is in Stage 2;the Company measures loss allowance based on the lifetime ECL of the financial asset. If the credit risk of a financial asset increasesto the point that is considered credit-impaired, it is in Stage 3; the Company measures the loss allowance based on the lifetime ECLof the financial asset. When assessing expected credit loss, the Company considers reasonable and evidence-based information,including forward-looking information, which is available at the balance sheet date without undue additional cost or effort regardingpast events, current conditions and forecasts of future economic conditions.The 12-month ECL refers to expected credit losses that result from those default events on the financial instrument that are possiblewithin 12 months after the reporting date (or the lifetime if the expected duration of a finical asset is less than 12 months). The12-Month ECL constitutes a part of the lifetime ECL.For financial assets with a low credit risk, the Company assumes that their credit risk has not increased significantly since initialrecognition and elects to measure their loss allowance through 12-month ECL.For financial assets in Stage 1 and Stage 2 and those with a low credit risk, interest revenue is calculated based on the gross carryingamount and effective interest rate without deduction for loss allowance. For financial assets in Stage 3, interest revenue is calculatedbased on the amortized coast (i.e. the gross carrying amount less the loss allowance) and the effective interest rate.
(2) Credit-impaired financial assets
An asset is recognized as credit-impaired if one or more events have occurred that have a detrimental impact on the estimated futurecash flows of the asset. Evidences for credit-impaired asset include the following observable data:
A. significant financial difficulty of the issuer or borrower;B. a breach of contract of the borrower, such as a default or past-due payment of interest or principal;C. the lenders for economic or contractual reasons relating to the borrower’s financial difficulty granted the borrower a concessionthat would not otherwise be considered;D. it becoming probable that the borrower will enter bankruptcy or other financial reorganization;E. the disappearance of an active market for the financial asset because of financial difficulties of the issuer or borrower; orF. the purchase or origination of a financial asset at a deep discount that reflects incurred credit losses.It may not be possible to identify a single discrete event. Instead, the combined effect of several events may cause financial assets tobecome credit-impaired.
(3) Purchased or originated credit-impaired financial assets
For purchased or originated credit-impaired financial assets, the Company recognizes cumulative changes in lifetime expected lossessince initial recognition as a loss allowance on the balance sheet date. On each balance sheet date, changes in lifetime expected lossesare included in profit and loss of the current period as impairment loss or gain. Any favorable changes for such assets are animpairment gain even if the resulting expected cash flows of a financial asset exceed the estimated cash flows on initial recognitionas determined on the balance sheet date.
(4) Standards for judging whether credit risk has increased significantly
If the probability of default (PD) of a financial asset in the expected duration recognized on the balance sheet date is significantlyhigher than that in the expected duration recognized at the time of initial recognition, the credit risk of the financial asset hasincreased significantly. Except for special circumstances, the Company determines whether credit risk has increased significantlysince initial recognition by using PD changes in the coming 12 months as reasonable estimates for PD changes in lifetime.
(5) Methods for assessing ECL of financial assets
The Company assesses ECLs of financial assets on an individual basis or at a portfolio level. Financial assets with significantlydifferent credit risks are assessed individually, such as receivables for which there are obvious signs that the debtor is very unlikely tofulfill the repayment obligation.In addition to financial assets whose credit losses are measured on an individual level, the Company classifies financial assets intogroups based on shared credit risk characteristics and measures the expected credit losses on a collective basis.
(6) Accounting methods for impairment of financial assets
The Company calculates the expected credit losses of various financial assets on the balance sheet date. The addition or reversal ofloss allowance resulting therefrom is included in the profit and loss of the current period as impairment loss or gain.If the Company suffers actual credit losses and determines that the relevant financial asset cannot be recovered, while the asset iswritten off upon approval, the book value of the financial asset will be directly written down. If the written-down financial asset is
recovered later, it is included in the profit and loss of the current period as reversal of impairment loss.
7. Financial guarantee contract
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss itincurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debtinstrument. Financial guarantee contracts are initially recognized at fair value. Subsequent measurement for financial guaranteecontracts is at the higher of the amount of the loss allowable and the amount initially recognized less cumulative amortization inaccordance with revenue recognition principles.
8. Offsetting financial assets and financial liabilities
Financial assets and financial liabilities are presented separately in the balance sheet and are not offset against each other. However, afinancial asset and a financial liability shall be offset and the net amount is present in the balance sheet if the following twoconditions are both met:
(1) The Company has a legally enforceable right to set off the recognized amount; and
(2) The Company intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
9. Equity instruments
An equity instrument refers to a contract that can prove the Company owns the remaining equity in the assets after deducting allliabilities. The Company’s issuance (including refinancing), repurchase, sales or cancellation of equity instruments are treated aschanges in equities. The Company does not recognize changes in the fair value of equity instruments. Transaction costs related toequity transactions are deducted from equities.The Company’s various distributions to holders of equity instruments (excluding share dividends) are recognized as profitdistribution to reduce owner’s equity. The share dividends issued do not affect the total owner’s equity.
11. Accounts receivable
The Company measures the loss allowance of receivables without a major financing component as defined in the AccountingStandards for Business Enterprises -- Revenue (including cases where the contract containing the financial component has a term lessthan one year according to the above Standard) at an amount equivalent to lifetime ECL.The Company classifies accounts receivables into different groups by common credit risk characteristics such as customer type:
| Item | Basis for determining the portfolio |
Portfolio of clothing sales business
| Portfolio of clothing sales business | Clothing sales business as the credit risk characteristic |
| Portfolio of related parties | Related parties within the consolidation scope |
For accounts receivables classified into portfolios, the Company prepares a comparison table between the aging of the accountsreceivables and the ECL rate and calculates ECL with a reference to historical credit loss experience and in combination with currentsituation and forecast of future economic conditions. For details, please refer to “Note V (10) Financial instruments -- Impairment offinancial assets”.
12. Accounts receivable financing
Accounts receivable financing reflects bills receivable and accounts receivable that are measured at fair value while changes in fairvalue are included in other comprehensive income. For their accounting methods, please refer to “Note V (10) Financial instruments-- Financial assets measured at fair value through other comprehensive income”.
13. Other receivables
Recognition and accounting methods for ECLs of other receivablesECLs of other receivables are determined based on historical experience data and forward-looking information. The Company usesthe 12-month ECL or lifetime ECL to measure impairment loss according to whether the credit risk of other receivables hassignificantly increased since initial recognition.Other receivables are classified into groups based on common risk characteristics:
| Item | Basis for determining the portfolio |
Margins and deposits
| Margins and deposits | Deposits receivable |
| Employee reserve fund | Reserve funds receivable |
Related-party amount within the consolidated scope
| Related-party amount within the consolidated scope | Amounts of related parties within the consolidation scope |
| Others | Other amounts receivable |
14. Inventory
1. Classification of inventories
Inventories of the Company refer to assets held for sale in the ordinary course of business, or in the process of production for suchsale, or in the form of materials or supplies to be consumed in the production process or in the rendering of services, including rawmaterials, materials for consigned processing, stock commodities, etc.
2. Pricing methods for inventory acquisition and delivery
Inventories are initially measured at cost. The cost of inventories comprises purchase costs, processing costs, and other costs.Borrowing costs that should be included in the cost of inventories are handled in accordance with the Accounting Standards forBusiness Enterprises No. 17 - Borrowing Costs. The cost of investing in inventories by investors shall be determined according to thevalue stipulated in the investment contract or agreement, unless the value thereof is not fair.Valuation method of delivered inventories: weighted average.
3. Inventory counting system
Perpetual inventory system is adopted.
4. Methods for recognition of the net realizable value of inventories and inventory write-down
Inventories at the end of the reporting period shall be measured at the lower of cost and net realizable value. If the net realizable
value of inventories at the end of the reporting period is lower than the book cost, the difference is set aside as inventory write-down.Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion, theestimated costs necessary to make the sale, and related taxes and fees.
(1) Basis for determining the net realizable value of inventories: For materials held for production, if the net realizable value offinished product using the material is higher than its cost, the material is still measured at cost. However, when a decline in the priceof materials indicates that the cost of the finished product exceeds net realizable value, the material is written down to net realizablevalue.For inventories held to satisfy sales contracts or service contracts, their net realizable value is based on the contract price. If the salescontracts are less than the inventory quantities held, the net realizable value of the excess part is based on general selling prices.
(2) Method of inventory write-down: Inventories are written down according to the lower of the cost and the net realizable value itemby item. However, inventories with large quantities and low unit value are written down according to inventory category.
15. Contract assets
1. Recognition methods and standards of contract assets
Contract assets refer to the Company’s right to consideration in exchange for goods or services that the entity has transferred to acustomer when that right is conditioned on something other than the passage of time. For example, if the Company sells two clearlydistinguishable commodities to the customer and has the right to consideration as one of them has been delivered, but the receipt ofpayment depends on the delivery of the other commodity, the right to consideration hereof is recognized as a contract asset.
2. Recognition and accounting methods for ECLs of contract assets
The Company always measures the loss allowance of contract assets based on lifetime ECL, regardless of whether they containsignificant financing components or not. The increase or reversal of loss allowance therefrom is included in the profit and loss of thecurrent period as impairment loss or gain.The Company calculates the ECL of a contract asset at the balance sheet date. If the ECL is higher than the carrying amount of thecurrent provision for the impairment of the contract asset, the difference is recognized as impairment loss. Afterwards, the Companyremeasures the ECL on each balance sheet date, and any reversal of loss allowance is recognized as impairment gain.
16. Assets held for sale
1. Basis for classifying an asset as held for sale
The Company classifies a disposal group (or non-current asset) as held for sale if the following conditions are simultaneously met:
(1) the asset or disposal group is available for immediate sale in its present condition according to customs of similar transactions;
(2) the sale is high probable, i.e. the company has made the resolution for the sale and received a firm purchase commitment, and thesale is expected to be completed within one year. If relevant regulations require that the sale can be made only after approval ofcompetent governing bodies of the company or competent regulatory authorities, the approval has been obtained.A firm purchase commitment refers to a legally binding purchase agreement signed between the Company and other entities, whichcontains important terms such as transaction price, time and sufficiently severe breach of contract penalties such that the possibilityof major adjustment or revocation of the agreement is extremely unlikely.
2. Accounting methods of assets held for sale
During initial measurement or remeasurement of the non-current assets or disposal groups classified into held-for-sale assets on thebalance sheet date, the difference between the book value and fair value less costs to sell is confirmed as the impairment loss andrecognized in profit or loss of the current period, while impairment provision is set aside for the asset held for sale. In the event ofany gains for any increase in fair value less cost to sell of a non-current asset held for sale on subsequent balance sheet dates, therecognized impairment losses can be reversed but not in excess of the cumulative impairment losses that have been recognized sinceit was classified as held for sale, and the reversal amount is included in profit or loss. Impairment losses recognized before the assetwas classified as held for sale cannot be reversed.The impairment loss recognized for a disposal group held for sale shall first reduce the book value of the goodwill in the disposalgroup, and then the book values of other non-current assets in the disposal group proportionate to their percentage in the book valueof the disposal group. If the impairment loss recognized for a disposal group held for sale is subsequently reversed, the book valuesof non-current assets other than goodwill in the disposal group are increased proportionate to their percentage in the disposal group.The Company does not depreciate (or amortize) a non-current asset while it is classified as held for sale or while it is part of adisposal group classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group shall continue tobe recognized.When a non-current asset or a disposal group held for sale is derecognized, the un-recognized gains or losses are included in theprofit and loss of the current period.The Company measures a non-current asset that ceases to be classified as held for sale or ceases to be included in a disposal groupclassified as held for sale at the lower of:
(1) its book value before the asset (or disposal group) was classified as held for sale, adjusted for any depreciation, amortization orrevaluation that would have been recognized had the asset (or disposal group) not been classified as held for sale, and
(2) its recoverable amount.
17. Debt investments
The Company determines the ECL of debt investments on each balance sheet date based on the type of counterparty and riskexposure while taking into consideration historical defaults and industry forward-looking information or various external actual andexpected economic information. For recognition and accounting methods of ECLs, please refer to “Note V (10) Financial
instruments”.
18. Long-term receivables
1. Basis of determining joint control and significant influence over the investee
Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevantactivities require the unanimous consent of the parties sharing the control. When judging whether there is joint control, firstly,determine whether all participants or a group of participants collectively control the arrangement. If all participants or a group ofparticipants must act in unison to decide relevant activities of an arrangement, it is considered that all participants or the group ofparticipants collectively control the arrangement. Secondly, determine whether decisions of relevant activities of the arrangementmust be unanimously agreed by all parties sharing the collective control of the arrangement. The joint control is formed when andonly when decisions of relevant activities must be unanimously agreed by all parties sharing the collective control. If the combinationof two or more participants is needed to collectively control an arrangement, it does not constitute joint control. Protective rightsenjoyed are not considered when judging whether there is joint control.Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control orjoint control of those policies. When assessing whether there is significant influence over the investee, existence and effect ofpotential voting rights that are currently exercisable or convertible, including potential voting rights held by other entities, areconsidered, including warrants, share call options, debt or equity instruments that are convertible into ordinary shares or other similarinstruments issue by the investee. An entity is regarded as having significant influence over the investee if the external investmentmeets the following conditions: (1) representation on the board of directors or equivalent governing body of the investee; (2)participation in the decision-making processes of the investee’s financial and operational policies; (3) material transactions betweenthe entity and its investee; (4) designation of managerial personnel to the investee; (e) provision of essential technical information tothe investee. If an entity holds, directly or indirectly, more than 20% but less than 50% of the voting power of the investee, it isgenerally considered as having significant influence over the investee.
2. Determination of initial investment cost
(1) Long-term equity investment formed by business combination
A. For long-term equity investments formed from business combination of entities under common control, if the consideration takesthe form of cash, transfer of non-cash assets, debt assumption or issuance of equity securities, the book value of the owner’s equity ofthe combined party in the consolidated financial statements of the ultimate controlling party on the combination date shall beregarded as the initial investment cost of the long-term equity investment. For acquiring control of the investee under commoncontrol by ways of additional investment, the book value of the investee’s net assets attributable to the investor in the consolidatedfinancial statements of the ultimate controlling party on the combination date shall be regarded as the initial investment cost of thelong-term equity investment. Capital surplus or share surplus is written down based on the difference between the initial investmentcost of the long-term equity investment and the carrying amount of the investment before combination plus the carrying amount of
consideration paid to obtain the new shares on the combination date; if it is insufficient for offsetting, retained earnings are reduced.B. For long-term equity investments formed from business combinations of entities not under common control, the combination costdetermined on the acquisition date in accordance with the Accounting Standards for Business Enterprises No. 20 - BusinessCombinations is used as the initial investment cost of the long-term equity investment. For acquiring control of the investee not undercommon control by ways of additional investment, the sum of the carrying amount of the equity investment original held and the costof additional investment is used as the initial investment cost upon adoption of the cost method.
(2) Except for long-term equity investments formed through business combinations, the initial investment cost of other long-termequity investments is determined as follows:
A. For long-term equity investment obtained by paying cash, the consideration actually paid is the initial investment cost. The initialinvestment cost includes expenses, taxes, and other necessary expenditures directly related to the acquisition of the long-term equityinvestment.B. For long-term equity investments obtained by issuing equity securities, the fair value of the equity securities issued is the initialinvestment cost.C. For long-term equity investments obtained through the exchange of non-monetary assets, the initial investment cost is determinedpursuant to the Accounting Standards for Business Enterprises No. 7 - Exchange of non-monetary assets.D. For long-term equity investments obtained through debt restructuring, the initial investment cost is determined pursuant to theAccounting Standards for Business Enterprises No. 12 - Debt restructuring.
3. Subsequent measurement and recognition of profit and loss
(1) Cost method: If the Company can make control of the investee through the long-term equity investments, the cost method is used.When the cost method is used, additional or recovered investment will adjust the cost of the long-term equity investment. Forlong-term equity investments accounted using the cost method, with the exception of the price actually paid at the acquisition ofinvestment or cash dividends or profits included in consideration, declared but not issued yet, the return on investment of the currentperiod shall be recognized according to the cash dividends or profits declared to be issued by the investee, without distinguishingwhether the net profit is realized before or after the investment.
(2) Equity method: When the Company has an investment in an associate, a portion of which is held indirectly through a venturecapital organization, or a mutual fund, unit trust and similar entities including investment-linked insurance funds, the Company electsto measure that portion of the investment in the associate at fair value through profit or loss using the equity method in accordancewith provisions of Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments,regardless of whether the venture capital organization, or the mutual fund, unit trust and similar entities including investment-linkedinsurance funds, has significant influence over that portion of the investment. When the equity method is used, after the Companyobtains the long-term equity investments, return on investment and other comprehensive income shall be respectively determinedbased on the share of net profit or loss and other comprehensive income realized by the investee that shall be attributable to orassumed by the Company, and the book value of long-term equity investments shall be adjusted at the same time. Attributable shareshall be calculated based on the profit or cash dividends declared by the investee and the book value of long-term equity investments
shall be accordingly decreased. In respect to other changes of owner’s equity of the investee in addition to net profit or loss, othercomprehensive income and profit distribution, the book value of long-term equity investments shall be adjusted and recognized asowner’s equity. When the Company confirms the limit of net loss incurred by the investee, the limit is the extent that the book valueof the long-term equity investments and other long-term equity that substantially constitutes a long-term equity in the investmenttarget is written down to zero, unless the Company is obliged to bear additional losses. Where the investee records net profit in thefuture, the Company resumes and recognizes the profit-sharing amount after such amount makes up the unrecognized loss-sharingamount. When confirming the share of the investee’s net profit and loss, the Company shall confirm the investee’s net profit afteradjustment based on the fair value of the identifiable net assets of the investee at the acquisition of the investment, and set off profitor loss of internal transactions with the associates and joint ventures and recognize investment gain or loss thereupon. If losses ofinternal transactions between the Company and the investee belong to asset impairment losses in accordance with the AccountingStandards for Business Enterprises No. 8 -- Impairment of assets, the full amount is recognized. If the investee uses accountingpolicies and periods that differ from those of the Company, financial statements of the investee should be adjusted in accordance withthose of the Company to reflect investment gain or loss.For long-term equity investments in associates and joint ventures held before the date of initial adoption, if there is a debit balance ofequity investment, it shall be amortized over the original remaining period on a straight-line basis, and the amortization amount isincluded in profit or loss of the period.
(3) For the disposal of long-term equity investments, the difference between the carrying amount and actual consideration is includedin profit or loss of the period. For long-term equity investments accounted using the equity method, with regard to any changes inequity other than the net profit or loss of the investee, the portion originally included in owner’s equity is transferred to profit or lossof the period at the disposal of the investment, except for other comprehensive income arising from changes in net assets or liabilitiesof defined benefit plans remeasured by the investee.
19. Fixed assets
(1) Recognition conditions
Fixed assets are tangible assets with a useful life of more than one accounting year that are held for production or supply of goods orlabor services, for rental to third parties, or for use in the organizations.
(2) Depreciation method
| Category | Depreciation method | Depreciation life | Residual value rate | Annual depreciation rate |
| Properties and buildings | Straight-line depreciation | 20-40 | 5 | 2.38-4.75 |
| Equipment | Straight-line depreciation | 3-5 | 5 | 19.00-31.67 |
| Motor vehicles | Straight-line depreciation | 5 | 5 | 19.00 |
| Office equipment | Straight-line depreciation | 3-5 | 5 | 19.00-31.67 |
The Company reassesses the useful life, estimated net residual value and depreciation method of fixed assets at the end of each fiscalyear.
20. Construction in process
Construction in progress is measured at actual cost. Borrowing costs and foreign currency translation differences associated withloans for engineering construction projects are capitalized in accordance with relevant provisions of the Accounting Standards forBusiness Enterprises No. 17 - Borrowing Costs or included in profit or loss. Construction in progress is transferred to fixed assetsfrom the date when it reaches the intended use, regardless of whether the project has completed the final account. Meanwhile,adjustments will be made upon completion of the final account.
21. Borrowing costs
1. Principles for borrowing cost capitalization
Borrowing costs include interest in connection with the borrowing of funds, amortizations of discounts or premiums, incidentalexpenses, exchange differences arising from foreign-currency borrowings, etc. Borrowing costs that are directly attributable to theacquisition, construction or production of a qualifying asset should be capitalized and included in the cost of that asset. Otherborrowing costs are recognized as an expense in the period in which it incurs them.Qualifying asset refers to fixed assets, investment properties, inventories and other assets that necessarily take a substantial period oftime to get ready for its intended use or sale.The Company begins capitalizing borrowing costs if all of the following conditions are met:
(1) it incurs expenditures for the asset; expenditures on a qualifying asset include only those expenditures that have resulted inpayments of cash, transfers of other assets or the assumption of interest-bearing liabilities.
(2) it incurs borrowing costs; and
(3) it undertakes activities that are necessary to prepare the asset for its intended use or sale.
2. Period for borrowing cost capitalization
Borrowing costs incurred for the acquisition, construction or production of a qualifying asset, when meeting the above capitalizationconditions, are included in the cost of the asset before the asset reaches its intended use or sale. If acquisition or production activitiesof the asset are interrupted abnormally and the interruption period thereof lasts for more than 3 months, the capitalization ofborrowing costs should be suspended, while the borrowing costs are recognized as an expense in the period until the acquisition orproduction activities of the asset resume. Moreover, capitalization is ceased when the qualifying asset reaches its intended use or sale.Borrowing costs incurred after the asset reaches its intended use or sale are included in the financial expenses of the period when theyincur.
3. Calculation methods for the amount of borrowing costs eligible for capitalization
During the capitalization period, the amount of interests eligible for capitalization (including amortization of discount or premium)
for each reporting period shall be determined in accordance with the following:
(1) To the extent that the Company borrows funds specially for the purpose of acquiring or producing a qualifying asset, the amountof interests for capitalization is determined as the actual interest expense incurred on that borrowing during the period less anyinvestment income obtained by depositing the unused borrowings in the bank or any investment income from temporary investments.
(2) To the extent that the Company borrows funds generally and uses them for the purpose of acquiring or producing a qualifyingasset, the Company determines the amount of interests eligible for capitalization by applying a capitalization rate of the generalborrowings to the weighted average of the cumulative asset expenditure over the specific borrowing portion.
22. Right-of-use assets
Except for short-term leases or low-value asset leases, the Company, as the lessee, may recognize the right to use the leased assetduring the lease term as a right-of-use asset.
1. Basis for determining right-of-use assets
At the commencement date, the Company measures the right-of-use asset at cost, which includes:
(1) the amount of the initial measurement of the lease liability;
(2) any lease payment made at or before the commencement date, less any lease incentives received;
(3) any initial direct costs incurred;
(4) any estimate of costs to be incurred in dismantling and removing the underlying asset, restoring the site on which it is located orrestoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred toproduce inventories.
2. Depreciation and impairment of right-of-use assets
(1) The Company applies a cost model for the subsequent measurement of the right-of-use asset.
(2) The Company depreciates right-of-use assets through the straight-line method.
If it can be reasonably ascertained that the ownership of the asset leased can be obtained by the expiration of the tenancy, the asset isdepreciated over its useful life; if not, the asset is depreciated over the shorter of the tenancy and the useful life of the leased asset. Ifthe right-of-use asset is impaired, the Company measures subsequent depreciation according to the book value less the impairmentloss.
(3) When the Company remeasures the lease liability according to the present value of the changed lease payments and adjusts thebook value of the right-of-use asset accordingly, if the book value of the right-of-use asset has been reduced to zero but the leaseliability still needs to be further reduced, the remaining amount is included in the profit and loss of the current period.
(4) Impairment test method and impairment provision method for right-of-use assets are detailed in “Note V (24) Impairment oflong-lived assets”.
23. Intangible assets
(1) Pricing method, service life, and impairment test
An intangible asset is initially measured at cost. The cost of a separately acquired intangible asset comprises its purchase price,related taxes and fees, and any directly attributable cost of preparing the asset for its intended use. For intangible assets purchased byinstallment, if the payment is deferred beyond normal credit terms, the asset has a financing component in nature and its cost is thepresent value of the purchase price. The cost of purchasing intangible assets by investors shall be determined according to the valuestipulated in the investment contract or agreement; if the value in the investment contract or agreement is not fair, the fair value of theintangible asset is used. For intangible assets obtained through the exchange of non-monetary assets, the initial investment cost isdetermined pursuant to Accounting Standards for Business Enterprises No. 7 - Exchange of non-monetary assets. For intangibleassets obtained through debt restructuring, the initial investment cost is determined pursuant to Accounting Standards for BusinessEnterprises No. 12 - Debt restructuring. If an intangible asset is acquired in a business combination of entities under common control,the cost of that intangible asset is book value of the combined party; if an intangible asset is acquired in a business combination ofentities not under common control, the cost of that intangible asset is its fair value at the acquisition date.The Company assesses the useful life of an intangible asset at acquisition. For intangible assets with a finite useful life, theamortization begins when the asset is available for use and ceases when it is derecognized by using the straight-line method, which isrecognized in profit or loss. An intangible asset with an indefinite useful life is not amortized. Intangible assets of the Companyinclude land use rights, trademarks and software. Among them, the land use rights are amortized equally over the period of use,trademarks are amortized over 10 years, and software over 3 years.The Company reviews the useful life and amortization method of intangible assets with finite useful life at each financial year-end. Ifthe expected useful life and amortization method of an intangible asset is different from previous estimates, the amortization periodand method should be changed accordingly. The Company reviews the useful life of intangible assets with indefinite useful life ateach accounting period. If evidence shows that the useful life of the asset is changed from indefinite to finite, its useful life isestimated and the accounting is handled as per the above provisions.Impairment test method and impairment provision method for intangible assets are detailed in “Note V (24) Impairment of long-livedassets”.
(2) Accounting policy for expenditure on internal research and developmentFor internally generated intangible assets, expenditure on the research phase is recognized as profit and loss of the current periodwhen incurred. Expenditure on the development phase can be recognized as an intangible asset if and only if all the followingconditions are met:
(1) technically feasible to complete the intangible asset so that it will be available for use or sale;
(2) the intention to complete the intangible asset and use or sell it;
(3) how the intangible asset will generate probable future economic benefits; among other things, the Company can demonstrate theexistence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulnessof the intangible asset;
(4) the availability of adequate technical, financial and other resources to complete the development and the ability to use or sell theintangible asset;
(5) the ability to measure reliably the expenditure attributable to the intangible asset during the development.Expenditure previously recognized as an expense is not adjusted.
24. Impairment of long-lived assets
The Company performs an impairment test for long-lived assets such as long-term equity investments, investment properties, fixedassets, construction in progress, intangible assets, right-of-use assets if there is any sign of impairment on the balance sheet date. Ifthe impairment test shows that the recoverable amount of an asset is lower than its book value, the difference is recognized as aprovision for impairment and recognized as the impairment loss. The recoverable amount is determined based on the higher of (1) theasset’s fair value less costs of disposal and (2) the present value of the asset’s expected future cash flows. Provisions for assetimpairment are calculated and recognized on an individual basis. If it is difficult to estimate the recoverable amount of individualassets, the Company will determine the recoverable amount on the basis of the asset group to which the asset belongs. Asset grouprefers to the smallest a group of assets that can independently generate cash flows.Goodwill is tested for impairment at least at each fiscal year-end. The Company performs impairment tests for goodwill. Goodwillacquired in a business combination shall, from the acquisition date, be reasonably allocated to the relevant asset group or, ifimprobable, a combination of asset groups. Carrying amount of goodwill is allocated to relevant asset group or asset groups based onthe proportion of their respective fair values in the group or groups. Where the fair value cannot be reliably measured, the allocationshould be based on the proportion of their respective carrying amounts in the group or groups. When performing impairment tests forrelevant asset group or asset groups to which goodwill has been allocated, if there is an indication that the asset group or asset groupsmay be impaired, the asset group or asset groups not containing the goodwill should be tested before the asset group or asset groupscontaining the goodwill. The recoverable amount is calculated and compared with the relevant carrying amount to recognizeimpairment loss. Then, the asset group or asset groups containing the goodwill are tested for impairment. Their carrying amounts(including the carrying amount of the goodwill apportioned) and the recoverable amount are compared. If the recoverable amount islower than the carrying amount, impairment loss for goodwill is recognized.The above impairment losses, once recognized, will not be reversed in subsequent accounting periods.
25. Long-term prepaid expenses
Long-term paid expenses are expenditures that are paid in one accounting period but will be amortized over 1 year that cover thecurrent period and future accounting periods. They include renovation expenditures for fixed assets leased in through operating lease.Long-term prepaid expenses shall be amortized equally over the expected benefit period.
26. Contract liabilities
The Company has the performance obligation to transfer goods or services to the customer and the right to collect consideration forthe goods transferred or services provided. A contract liability is the Company’s obligation to transfer goods or services to a customerfor which the Company has received consideration from the customer.Contract assets and contract liabilities under the same contract are presented on a net basis; contract assets and contract liabilitiesunder different contracts are not offset.
27. Employee benefits
(1) Accounting treatment method for short-term benefits
Employee benefits refer to various forms of remuneration or compensation given by the Company for obtaining services provided byemployees or for terminating labor relations. Benefits offered to employees’ spouses, children, dependents or to survivors or otherbeneficiaries of deceased employees are also considered employee benefits. Employee benefits include short-term benefits,post-employment benefits, termination benefits and other long-term benefits.Short-term employee benefits are those expected to be settled wholly before twelve months after the end of the annual reportingperiod during which employee services are rendered, but do not include post-employment benefits and termination benefits. Duringthe accounting period when employees provide services, the actually incurred short-term benefits are recognized as a liability andincluded in the cost and expense of relevant assets according to beneficiaries of the services rendered.
(2) Accounting treatment method for post-employment benefits
Post-employment benefits are various forms of remuneration and benefits provided by the Company after employee retirement orupon termination of labor relations with the Company, but do not include short-term benefits and termination benefits.Post-employment benefit plan is classified as either a defined contribution plan or a defined benefit plan. Under a definedcontribution plan, the Company pays fixed contributions into a fund but has no legal or constructive obligation to make furtherpayments. Other post-employment benefit plans than defined contribution plans are defined benefit plans.
(1) Defined contribution plan
Defined contribution plans include basic pension insurance and unemployment insurance. The Company shall, within the accounting
period when employees provide service, contribute relevant amounts based on the contribution base and ration prescribed by thelocal government, which are recognized as a liability and included in profit or loss or relevant asset costs.Contributions to a defined contribution plan during the accounting period when employees provide service are recognized as aliability and included in profit or loss or relevant asset costs.
(2) Defined benefit plan
The obligation arising from the defined benefit plan is attributed to accounting periods when employees provide service through thebenefit formula determined according to the projected unit credit method and included in profit or loss or relevant asset costs. Costsarising from the Company’s defined benefit plans contain the following components:
A. Service costs, including current service costs, past service costs and gain or loss on settlement Among them, current service costrefers to the increase in the present value of the defined benefit obligation resulting from employee service in the current period. Pastservice cost refers to the change in the present value of the defined benefit obligation for employee service in prior periods, resultingfrom a plan amendment.B. Net interest on the net defined benefit liability (asset), including interest income on plan assets, interest cost on the defined benefitobligation and interest on the effect of the asset ceilingC. Re-measurements of the net defined benefit liability (asset)Unless other accounting standards require or permit employee benefit costs to be recognized as asset costs, the Company includes theabove items A and B in profit or loss and item C in other comprehensive income. Amounts recognized in other comprehensiveincome will not be reclassified to profit or loss in a subsequent period; however, amounts recognized in other comprehensive incomemay be transferred within equity.
(3) Accounting treatment method for termination benefits
Termination benefits refer to compensation given to employees for terminating the labor relations with the employee before theexpiration of the labor contract or for encouraging employees to accept an offer of benefits in exchange for the termination ofemployment. The Company recognizes a liability for termination benefits at the earlier of the following dates, which is included inprofit or loss: (a) when the company can no longer unilaterally withdraw the offer of those benefits; and (b) when the Companyrecognizes costs for a restructuring that involves the payment of termination benefits.
(4) Accounting treatment method for other long-term employee benefits
Other long-term employee benefits refer to all other employee benefits than short-term benefits, post-employment benefits andtermination benefits, including long-term paid absences, long-term disability benefits, and long-term profit sharing plans. For otherlong-term benefits offered by the Company to employees, if they meet the conditions of a defined contribution plan, they areaccounted in accordance with relevant provisions of defined contribution plans; the remaining are accounted in accordance with
defined benefit plans to recognize and measure their net liability or asset. At the end of the reporting period, obligations of otherlong-term benefit plans are attributed to accounting periods when employees provide service and included in profit or loss or relevantasset costs.
28. Lease liabilities
Except for short-term leases or low-value asset leases, the Company recognizes the right to use the leased asset during the lease termas a right-of-use asset and recognizes the present value of unpaid lease payments as a lease liability.When calculating the present value of lease payments, the Company adopts the interest rate implicit in the lease as the discount rate;if the interest rate implicit in the lease cannot be determined, the Company’s incremental borrowing rate is used as the discount rate.For lease liabilities, the Company calculates its interest expenses in each period of the lease term at a fixed periodic interest ratewhich is included in the profit and loss of the current period. Variable lease payments that are not included in the measurement oflease liabilities are included in the current profit and loss when they are actually incurred.After the commencement date of the lease term, when there is a change in the actual fixed payment amount, a change in theestimated payable amount of the guaranteed residual value, a change in the index or ratio used to determine the lease paymentamount, or a change in the evaluation results or actual exercise of the purchase option, renewal option or termination option, theCompany remeasures the lease liability according to the present value of the changed lease payments and adjusts the book value ofthe right-of-use asset accordingly.
29. Provision
A provision is a liability of uncertain timing or amount, and is recognized when all the following are met: (1) it is present obligationof the Company; (2) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation;and (3) a reliable estimate can be made of the amount of the obligation.Where some or all of the expenditure required to settle a provision is expected to be reimbursed by a third party, the reimbursement istreated as a separate asset when it is virtually certain that reimbursement will be received; the amount recognized for thereimbursement shall not exceed the amount of the provision. The amount recognized as a provision should be the best estimate of theexpenditure required to settle the present obligation at the end of the reporting period, while taking risks, uncertainties and time valuerelating to the matter into account. Where the effect of the time value of money is material, the best estimate is the determined bydiscounting the relevant future cash outflows.The Company reviews provisions on each balance sheet date. If there is conclusive evidence that the book value of the provision canno longer truly reflect the current best estimate, the current best estimate is used to adjust the book value of the provision.
30. Share-based payment
1. Types of share-based payment
The Company’s share-based payment transactions include equity-settled share-based payment and cash-settled share-based payment.Equity-settled share-based payment transactions are measured at the fair value of the equity instruments granted to the employees. Ifthe granted equity instruments vest immediately, the vested equity instruments are recognized into relevant costs or expenses basedon fair value at the grant date and capital reserve is increased accordingly. If the granted equity instruments vest conditional upon thecompletion of a specified period of service or upon the achievement of a performance condition, based on the best available estimateof the number of equity instruments expected to vest, services rendered in the period are recognized into relevant costs or expensesbased on fair value of the vested equities on the grant date, and capital reserve is increased accordingly. No subsequent adjustmentwill be made to recognized relevant costs or expenses and total equity after vesting date.For cash-settled share-based payment transactions, the Company measures the fair value of the liabilities to be assumed by theCompany as determined based on the number of shares or other equity instruments. If the shares are vested immediately, the vestedshares are recognized into relevant costs or expenses based on the fair value of the liabilities assumed by the Company, and liabilitiesare increased accordingly. If the cash-settled share-based payment transaction vests conditional upon the completion of a specifiedperiod of service or upon the achievement of a performance condition, services rendered in the period are recognized as the fair valueof the liability assumed by the Company based on the best available estimates of the number of share options expected to vest at eachbalance sheet during the vesting period, and included in costs or expenses and corresponding liability. The Company remeasures thefair value of the liability at each balance sheet date prior to the settlement of the liability and at the date of settlement, with anychanges in fair value recognized in profit or loss for the period.
2. Accounting of modifications to share-based payment transactions, including cancellations and settlementsThe Company shall recognize, as s minimum, the services received measured at the grant date fair value of the equity instrumentsgranted, unless those equity instruments do not vest because of failure to satisfy a vesting condition (other than a market condition).This applies irrespective of any modifications to the terms and conditions on which the equity instruments were granted, or acancellation or settlement of that grant of equity instruments.If the Company cancels or settles a grant of equity instruments during the vesting period (other than a grant canceled by forfeiturewhen the vesting conditions are not satisfied), it will handle as follows:
(1) account for the cancellation or settlement as an acceleration of vesting and therefore recognize immediately the amount thatotherwise would have been recognized over the remainder of the vesting period;
(2) any payment made to the employee on the cancellation or settlement of the grant shall be accounted for as the repurchase of anequity interest, i.e. as a deduction from equity, except to the extent that the payment exceeds the fair value of the equity instrumentsgranted, measured at the repurchase date. Any such excess shall be recognized as an expense.
(3) if new equity instruments are granted to the employee and, on the date when those new equity instruments are granted, theCompany identifies the new equity instruments granted as replacement equity instruments for the canceled equity instruments,accounts for the granting of replacement equity instruments in the same way as a modification to the original grant of equity
instruments.
31. Other financial instruments such as preference shares and perpetual bondsFinancial instruments issued by the Company are initially recognized and measured in accordance with relevant accounting standardsfor financial instruments and distinction between financial liabilities and equity instruments. Afterwards, the Company accounts forthe interest expense or dividend distribution of the instrument based on its classification. For financial instruments classified asequity instruments, interest expense or dividend distribution is recognized as profit distribution of the issuer, and their repurchase andredemption as changes in equity. For financial instruments classified as financial liability, interest expense or dividend distribution isallocated to borrowing costs in principle, and gains or losses from their repurchase or redemption are included in profit or loss.Transaction costs arising from the issuance of the financial instruments, such as handling fees and commissions, are measured atamortized cost and included in their initial recognition amount if the instrument is classified as a debt instrument, and are deductedfrom equity if the instrument is classified as an equity instrument.
32. Revenue
Accounting policy for recognition and measurement of revenue
1. Accounting policy for recognition and measurement of revenue
Revenue is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreasesof liabilities that result in an increase in equity, other than those relating to contributions from equity participantsThe Company recognizes revenue when it satisfies a performance obligation, which is when the customer obtains control of the good.Obtaining control of the good means being able to direct the use of the good and obtain almost all economic benefits therefrom andto prevent others from directing the use of the good and obtaining almost all economic benefits therefrom.The transaction price is the amount of consideration in a contract to which the Company expects to be entitled in exchange fortransferring promised goods, excluding amounts collected on behalf of third parties or amounts expected to be refunded to thecustomer. If the consideration promised in a contract includes a variable amount, the Company estimates the amount of considerationbased on the expected value or the most likely amount of the variable consideration, to the extent that it is highly probable that asignificant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variableconsideration is subsequently resolved. If the contract contains a significant financing component, the Company recognizestransaction price at an amount that reflects the price that a customer would have paid for the promised goods if the customer has paidcash for those goods when they transfer to the customer (i.e. cash selling price). The difference between the amount of promisedconsideration and the cash selling price is amortized using the effective interest method during the contractual term. However, if theperiod between when the Company transfers of a promised good to a customer and when the customer pays for that good is one yearor less, the Company does not consider the financing component. For contracts in which a customer promises consideration in a form
other than cash, the Company measures the non-cash consideration at fair value at the contract commencement date. If the fair valueof the non-cash consideration cannot be reasonably estimated, the Company measures the transaction price indirectly by reference tothe stand-alone selling price of the goods promised to the customer. Amounts to be refunded to the customer are used to reduce thetransaction price, unless the payment to the customer is in exchange for a distinct good that the customer transfers to the Company. Ifthe amount of consideration payable to the customer exceeds fair value of the distinct good that the Company receives from thecustomer, then such an excess is accounted as reduction of the transaction price. If the Company cannot reasonable estimate the fairvalue of the good received from the customer, it accounts for all of the consideration payable to the customer as a reduction of thetransaction price. If consideration payable to a customer is accounted for as a reduction of the transaction price, the Companyrecognizes the reduction of the revenue when the later of either of the two following events occurs: transfer of the related goods tothe customer; and pay or promise to pay the consideration.If the contract contains one or more performance obligations, the Company allocates the transaction price to each performanceobligation on a relative stand-alone selling price basis at contract inception in proportion to stand-alone selling prices of the distinctgood underlying each performance obligation. Where the transaction price changes after contract inception, the Company allocatesthese subsequent changes to the performance obligations in the contract on the same basis as at contract inception. For changes instand-alone selling prices after contract inception, the transaction price is not re-allocated.A performance obligation is one satisfied over time if one of the following criteria is met; otherwise, it is a performance obligationssatisfied at a point in time:
(1) the customer simultaneously receives and consumes the benefits provided by the Company’s performance as the entity performs;
(2) the Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced;
(3) the Company’s performance does not create an asset with an alternative use to the Company and the Company has an enforceableright to payment for performance completed to date.For performance obligations satisfied over time, the Company recognizes revenue over the period based on performance progress,unless the performance progress cannot be reasonably determined. The Company measures the progress of service provision basedon input methods. When the performance progress cannot be reasonably determined, if the costs incurred are expected to becompensated, the Company recognizes revenue based on the amount of costs incurred, until the progress of performance can bereasonably determined.For performance obligations satisfied at a point in time, the Company recognizes revenue when the customer obtains control of thepromised good. The Company considers the following indicators when judging whether the customer has obtained control of thegood:
(1) the Company has a present right to payment for the good, i.e. the customer is presently to pay for the good;
(2) the Company has transferred the legal title to the customer, i.e. the customer has legal title of the good;
(3) the Company has transferred physical possession of the good, i.e. the customer physically possesses the good;
(4) the Company has transferred significant risks and rewards of ownership of the good to the customer, i.e. the customer has theobtained significant risks and rewards of ownership of the good;
(5) the customer has accepted the good.
2. Recognition methods for the Company’s main activities of revenue generation
The Company’s revenue primarily comes from clothing sales, which is divided into two models: direct operation (including jointoperation and non-joint operation) model and franchise model. The recognition methods for revenue are as follows:
For the joint operation model, the Company signs an agreement with the joint operation party (such as shopping malls, airports andgolf clubs), and the joint operation party collects all the money from the customer when delivering the goods to the customer. Underthis model, the Company recognizes revenue based on the total consideration received or receivable from the customer.Under the non-joint operation model, the Company recognizes sales revenue when the goods are delivered to the customer andpayment is received.Under the franchise model, the Company recognizes sales revenue when the goods are delivered to the customer and receives theconfirmation receipt from the customer.
Different operation models are adopted for the same business, which may lead to the differences in the accounting policy forrecognition of revenue.Not applicable
33. Contract costs
Contract costs comprise incremental costs of obtaining a contract and costs to fulfill a contract.The incremental costs of obtaining a contract are those costs that the Company incurs to obtain a contract with a customer that wouldnot have incurred if the contract had not been obtained (for example, a sales commission). If the incremental cost incurred by theCompany for obtaining a contract is expected to be recovered, the cost of obtaining the contract is recognized as an asset. Other costsfor obtaining a contract than incremental costs that are expected to be recovered are recognized as profit or loss when they incur.If the costs incurred in fulfilling a contract with a customer are not within the scope of standards for inventories, fixed assets orintangible assets, the Company regards them as costs to fulfill a contract and recognizes them as an asset when all of the followingcriteria are met:
(1) the costs relate directly to a contract or to an anticipated contract, including direct labor cost, direct material cost, manufacturingoverhead (or similar expenses), costs specifically to be borne by the customer and other costs incurred solely as a result of thecontract;
(2) the costs generate or enhance resources of the Company that will be used in satisfying performance obligation in the future;
(3) the costs are expected to be recovered.
An asset recognized in accordance with incremental costs of obtaining a contract and costs incurred to fulfill a contract shall beamortized on a basis that is consistent with the transfer to the customer of the goods or services to which the asset relates.If the carrying amount of assets recognized in accordance with contract costs is higher than the difference of the following tow, theexcess portion will be reserved for impairment and recognized as impairment:
(1) the remaining amount of consideration that the Company expects to receive in exchange for the goods to which the asset relates;
(2) the costs that relate directly to providing the goods.
The Company shall recognize in profit or loss a reversal of some or all of an impairment loss previously recognized in accordance theabove (1) and (2) when the impairment conditions on longer exist or have improved. The increased carrying amount of the asset shallnot exceed the amount that would have been determined if no impairment loss had been recognized previously.
34. Government grants
1. Types of government grants
Government grants refer to monetary and non-monetary assets received from the government free of charge, including grants relatedto assets and grants related to income.Grants related to assets are government grants obtained by the Company from the government for purchasing, constructing orotherwise acquiring long-lived assets.Grants related to income are government grants other than those related to assets.
2. Recognition principle and timing for government grants
Principle for recognizing government grants:
(1) the Company will comply with the conditions attaching to them; and
(2) the grants will be received.
Government grants are recognized when and only when the above two criteria are met.
3. Measurement of government grants
(1) Monetary government grants are measured at the amount received or receivable;
(2) Non-monetary government grants are measured at fair value; if the fair value cannot be obtained reliably, they are measured at anominal amount (which is RMB1).
4. Accounting treatment methods of government grants
(1) Government grants related to assets are presented by deducting the grant in arriving at the carrying amount of the asset or settingup the grant as deferred income. If the grant is presented as deferred income, it is recognized as income on a systemic and rationalbasis over the useful life of the asset. The government grants measured at the nominal amount shall be directly accounted as profit orloss.
(2) Grants related to income are handled as follows:
A. Government grants related to income as compensation for expenses or losses incurred in future periods are recognized as deferredincome when they are obtained, and are included in profit or loss or reduce income during the periods when the related expenses orlosses are recognized.B. Government grants related to income as compensation for expenses or losses incurred in a previous period are recognized asincome of the period in which they are obtained or reduce relevant costs.
(3) Government grants related to both assets and income are accounted for by distinguishing different parts; if it is difficult to
distinguish, they shall be, as a whole, classified as income-related government grants.
(4) Government grants related to the Company’s daily activities are recognized as other profit and loss or write down relevant costsaccording to the essence of economic business. Those unrelated to the Company’s daily activities are recognized as non-operatingrevenue and expenditure. If the treasury directly allocates interest subsidies to the Company, the interest subsidies will be used to setoff relevant borrowing costs.
(5) Repayment of recognized government grants is handled as follows:
A. If the grant was recognized by reducing the carrying amount of relevant asset, the carrying amount of the asset is adjusted;B. If the grant was recognized as deferred income, the carrying amount of deferred income is adjusted and the excess is recognized asprofit and loss of the current period.C. For other situations, the repayment is directly included in profit or loss of the period.
35. Deferred income tax assets/deferred tax liabilities
The Company determines its tax base when obtaining an asset or liability. If there is a temporary difference between the carryingamount of the asset or liability and its tax base, a deferred tax asset or liability is recognized in accordance with relevant provisions.
1. Recognition of deferred tax assets
(1) The Company recognizes a deferred tax asset to the extent that it is probable that taxable profit will be available against which thedeductible temporary difference can be utilized, unless the deferred tax asset arises from the initial recognition of an asset or liabilityin a transaction that: (a) is not a business combination; and (b) at the time of the transaction, affects neither accounting profit nortaxable profit (tax loss).
(2) The Company shall recognize a deferred tax liability for deductible temporary differences associated with investments insubsidiaries, branches and associates, and interests in joint ventures to the extent that, and only to the extent that, it is probable that:
(a) the temporary difference will reverse in the foreseeable future; and (b) taxable profit will be available against which thetemporary difference can be utilized.
(3) A deferred tax asset shall be recognized for the carryforward of unused tax losses and unused tax credits to the extent that it isprobable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized.
2. Recognition of deferred tax liabilities
(1) A deferred tax liability shall be recognized for all taxable temporary differences, except to the extent that the deferred tax liabilityarises from: (a) the initial recognition of goodwill; or (b) the initial recognition of an asset or liability in a transaction which: is not abusiness combination; and at the time of the transaction, affects neither accounting profit or taxable profit (tax loss).
(2) A deferred tax liability is recognized for taxable temporary differences associated with investments in subsidiaries, branches andassociates, and interests in joint ventures. However, circumstances if both of the following conditions are satisfied are excluded: (a)the investor is able to control the timing of the reversal of the temporary difference; and (b) it is probable that the temporarydifference will not reverse in the foreseeable future.
(3) Offsetting
When the Company has a legally enforceable right of set-off and an intention to settle net, it sets off a current tax asset against acurrent tax liability and presents it in a net amount.When the Company has a legally enforceable right of set off current assets against current liabilities, it presents them on a net amountif the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either: (i) thesame taxable entity; or (ii) different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or torealize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilitiesor assets are expected to be settled or removed.
36. Leases
(1) Accounting treatment method for operating lease
Effective from January 1, 2021A contract is, or contains, a lease if the contract provides a customer with the right to control the use of an asset in exchange forconsideration.
1. Identifying a lease
At inception of a contract, the Company assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if thecontract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assesswhether a contract conveys the right to control the use of an identified asset for a period of time, the Company assesses:
(1) the contract involves the use of an identified asset An asset is typically identified by being explicitly specified in a contract or bybeing implicitly specified at the time that the asset is made available for use by the customer. A capacity portion of an asset is anidentified asset if it is physically distinct. A capacity or other portion of an asset that is not physical distinct is not an identified asset,unless it represents substantially all of the capacity of the asset and thereby provides the customer with the right to obtainsubstantially all of the economic benefits from use of the asset. If the supplier has the substantive right to substitute the assetthroughout of use, the asset is not an identified asset.
(2) the right to obtain substantially all of the economic benefits from use of the identified asset;
(3) has the right to direct the use of an identified asset throughout the period of use.
2. Separating and combining components of a contract
If a contract contains multiple separate leases, the Company separates components of the contract and accounts for each separatelease individually.The right to use an underlying asset is a separate lease component if both:
(1) the lessee can benefit from use of the underlying asset either on its own or together with other resources that are readily availableto the lessee.
(2) the underlying asset is neither highly dependent on, nor highly interrelated with, the other underlying assets in the contract.
3. The Company as the lessee
(1) Right-of-use assets
Recognition and accounting treatment methods for right-of-use assets are detailed in “Note V (22) Right-of-use assets”.
(2) Lease liabilities
Recognition and accounting treatment methods of lease liabilities are detailed in “Note V (28) Lease liabilities”.
(3) Lease term
Lease term refers to the non-cancellable period for which a lessee has the right to use an underlying asset.The lease term includes periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option.The lease term includes periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise thatoption.The Company reassesses whether it is reasonably certain to exercise an extension option, or not to exercise a termination option,upon the occurrence of either a significant event or a significant change in circumstances.
(4) Lease modifications
The Company accounts for a lease modification as a separate lease if both of the following criteria are met:
A. the modification increases the scope of the lease by adding the right to use one or more underlying assets; andB. the consideration for the lease increase by an amount commensurate with the stand-alone price for the increase in scope and anyappropriate adjustments to that stand-alone price.
(5) Short-term leases and low-value asset leases
Short-term lease is a lease that, at the commencement date, has a lease term of 12 months or less. Low-value asset lease refers toleases whose underlying asset is of low value when new. If the Company subleases an asset, or expects to sublease an asset, the headlease does not qualify as a lease of a low-value asset.The Company elects not to recognize short-term leases or low-value asset leases as the right-of-use assets and lease liabilities, butrecognizes the lease payments associated with those leases as an expense on a straight-lien basis over the lease term, which isincluded in the profit or loss or relevant asset costs.
4. The Company as the lessor
The Company classifies each of its leases as either an operating lease or a finance lease from the lease inception date. A lease isclassified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. Titlemay or may not eventually be transferred. Other leases than the finance leases are classified as operating leases. If the Company isthe intermediate lessor, the sublease is classified as a right-of-use asset arising from the head lease.
(1) Accounting treatment methods for operating lease
Lease payments from operating leases are recognized as income on a straight-line basis over the lease term. The Company capitalizesinitial direct costs incurred in obtaining an operating lease and recognizes those costs as an expense over the lease term on the samebasis as the lease income. Variable lease payments related to operating leases that are not included in lease receipts are included in thecurrent profit and loss when they are actually incurred.
(2) Accounting treatment methods for finance lease
The Company recognizes the finance lease receivable and derecognizes the finance lease asset on the commencement date of thelease term. The financial lease receivables are initially measured by the net investment in the lease. The net investment in the lease isthe sum of the unguaranteed residual value and the present value of the lease receipts not yet received at the beginning of the leaseterm, discounted at the interest rate implicit in the lease.Interest income is calculated and recognized according to the fixed periodic interest rate in each period of the lease term. For detailson derecognition and impairment of finance lease receivables, please refer to “Note V (10) Financial instruments”.Variable lease payments that are not included in the measurement of the net investment in the lease are included in the current profitand loss when they are actually incurred.At the commencement date, a manufacturer or dealer lessor shall recognize revenue at the lower of the fair value of the underlyingasset and the present value of the lease payments accruing to the lessor, discounted using a market rate of interest; it shall alsorecognize the cost of sale as the carrying amount of the underlying asset less the present value of the unguaranteed residual value.Costs arising from obtaining a finance lease are recognized as profit or loss of the period at the lease commencement date.
5. Leaseback transactions
The Company determines whether the transfer of an asset in the leaseback transaction is accounted for as a sale of that asset.
(1) The Company as the lessee
If the transfer of an asset arising from the leaseback is accounted for as a sale of that asset, the Company measures the right-of-useasset arising from the leaseback at the proportion of the previous carrying amount of the asset that relates to the right of use retained,and recognizes only the amount of any gain or less that relates to the rights transferred.If the fair value of the consideration for the sale of an asset does not equal the fair value of the asset, or if the payments for the leaseare not at market rates, the Company accounts any below-market terms as a prepayment of lease payments and any above-marketterms as additional financing provided by the lessor to the Company. Meanwhile, fair value is used to adjust any sales gain or loss.If the transfer of an asset in the leaseback transaction is not accounted for as a sale of the asset, the Company continues to recognizethe transferred asset and recognizes a financial liability equal to the transfer proceeds.
(2) The Company as the lessor
If the transfer of an asset arising from the leaseback is accounted for as a sale of that asset, the Company accounts for the purchase ofthe asset in accordance with applicable standards.If the fair value of the consideration for the sale of an asset does not equal the fair value of the asset, or if the payments for the leaseare not at market rates, the Company accounts any below-market terms as a prepayment of lease payments and any above-marketterms as additional financing provided by the Company to the lessee. Meanwhile, market rates are used to adjust lease payments.If the transfer of an asset in the leaseback transaction is not accounted for as a sale of the asset, the Company recognizes a financialasset equal to the transfer proceeds.
6. Rent concessions triggered by COVID-19
For any rent concessions such as rent reductions and deferred payments between by the Company and the lessor or lessee directlycaused by COVID-19, if all of the following conditions are met, the Company adopts a simplified approach for leases of propertiesand buildings:
(1) the lease consideration after concession is reduced or basically unchanged from that before the concession, of which the leaseconsideration may be undiscounted or discounted at the same rate as before the concession;
(2) the concession is only for lease payments due before June 30, 2022;
(3) there are no significant changes to other lease terms and conditions after comprehensively considering qualitative and quantitativefactors.The Company does not assess whether there are lease modifications.When the Company acts as the lessee, it continues to calculate the interest expenses of lease liabilities at the same discount rate asbefore the concession, and depreciate and subsequently measure right-of-use assets according to the same method as before theconcession. In the event of any rent reduction or exemption, the Company treats the reduced amount as variable lease payment andwrites down relevant asset costs or expenses at an undiscounted amount or a discounted amount using the same discount rate asbefore the rent reduction when the Company and the lessor reach a concession agreement for relieving the original rent paymentobligation. In the event of deferred rent payment, the Company reduces recognized lease liabilities when the payment is actual made.For short-term leases and low-value asset leases that adopt simplified accounting methods, the Company continues to recognize therents for the original contract as relevant asset cost or expense in the same way as before the concession. In the event of any rentreduction or exemption, the Company treats the reduced amount as variable lease payment and writes down relevant asset costs orexpenses during the reduction and exemption period. In the event of deferred rent payment, the Company recognizes the rent payableas a payable during the original payment period and reduces the recognized payable when the payment is actual made.When the Company acts as the lessor, for operating leases, the Company continues to recognize rents of the original contract as leaseincome in the same way as before the concession. In the event of any rent reduction or exemption, the Company treats the reducedamount as variable lease payment and writes down lease payments during the reduction and exemption period. In the event ofdeferred rent payment, the Company recognizes the rent receivable as a receivable during the original collection period and reducesthe recognized receivable when the payment is actual made. For finance leases, the Company continues to calculate interest incomeand recognize as lease income in the same way as before the concession. In the event of any rent reduction or exemption, theCompany treats the reduced amount as variable lease payment and writes down the recognized lease income at an undiscountedamount or a discounted amount using the same discount rate as before the rent reduction when the Company and the lessee reach aconcession agreement for wavering the original rent collection obligation; if it is insufficient for offsetting, the gap is included ininvestment income and the finance lease receivables are adjusted at the same time. In the event of deferred rent payment, theCompany reduces recognized lease receivables when the payment is actual made.
Effective before January 1, 2021
1. Accounting treatment methods for operating lease
For rents under an operating lease, the lessor and the lessee shall recognize them on a straight-line basis over the lease term andinclude them in profit and loss of the current period. Initial direct costs incurred to the lessor and the lessee shall be included in profitor loss. Contingent rentals are included in profit or loss when they are actually incurred.
(2) Accounting treatment methods for finance lease
(1) The Company as the lessee
At the lease commencement date, the Company takes the lower of the fair value of the rented asset and the present value of theminimum lease payments as the entry value of the rented asset, the minimum lease payments as the entry value of the long-termpayable, and the difference as unrecognized financing cost. Initial direct costs (same for below) attributable to the lease projectincurred during the lease negotiations and signing of the lease contract, such as handling fees, attorney fees and travel expenses, areincluded in the value of the leased asset. When calculating the present value of the minimum lease payments, if the interest rateimplicit in the lease of the lessor can be readily determined, the interest rate implicit in the lease is used as the discount rate; if not,the interest rate stipulated in the lease contract is used as the discount rate. If the interest rate implicit in the lease of the lessor cannotbe readily determined while the lease contract does not stipulate an interest rate, the bank loan interest rate of the same period is usedas the discount rate. Unrecognized financing expenses are calculated and recognized as financing expense in the lease term using theeffective interest method.The leased-in fixed assets adopt the same depreciation policy as self-owned fixed assets. For leased assets, if it is reasonablyascertained that the ownership of the asset will be transferred to the lessee at the end of the lease term, then depreciation period runsto the end of the useful life of the asset. If it cannot be reasonably ascertained that the ownership of the leased asset will betransferred to the lessee at the end of the lease term, then depreciation period runs to the earlier of the end of the useful life of theasset or the end of the lease term. Contingent rentals are included in profit or loss when they are actually incurred.
(2) The Company as the lessor
At the lease commencement date, the Company takes the sum of the minimum lease payments and initial direct costs on the inceptiondate as the entry value of the finance lease receivable, and records the unguaranteed residual value at the same time. Meanwhile, thedifference between the sum of the minimum lease payments, initial direct costs and unguaranteed residual value and the sum of theirpresent values is recognized as unrealized financing income.The unrealized financing income is calculated and recognized as financing income during the lease term using the effective interestmethod.Contingent rentals are included in profit or loss when they are actually incurred.
37. Other important accounting policies and accounting estimates
Discontinued operationA discontinued operation is a component of an entity that either has been disposed of or is classified as held for sale, and meets any
of the following: (1) represents either a separate major line of business or a geographical area of operations; (2) is part of a singleco-ordinated plan to dispose of a separate major line of business or geographical area of operations; (3) is a subsidiary acquiredexclusively with a view to resale.
38. Significant changes of accounting policies and accounting estimates
(1) Significant changes of accounting policies
√ Applicable □ Not applicable
| Contents and reasons for changes to accounting policies | Approval procedure | Remarks |
| On December 07, 2018, the Ministry of Finance issued the revised Accounting Standards for Business Enterprises No. 21 -- Leases (C.K. [2018] No. 35) (hereinafter referred to as the “New Lease Standards”), requiring that other enterprises that implement the Accounting Standards for Business Enterprises shall implement these revised Standards from January 1, 2021. The Company starts to implement them from the stipulated effective date. | Reviewed and approved at the 2nd meeting of the Fourth Board of Directors and 2nd meeting of the Fourth Board of Supervisors | For details, see “Other descriptions (1)”. |
| In January 2021, the Ministry of Finance issued the Interpretation No. 14 to Accounting Standards for Business Enterprises (C.K. [2021] No. 01) (hereinafter referred to as the “Interpretation No. 14”), which came into force on January 1, 2021. The Company starts to implement them from the stipulated effective date. | Not applicable | For details, see “Other descriptions (2)”. |
| In December 2021, the Ministry of Finance issued the Interpretation No. 15 to Accounting Standards for Business Enterprises (C.K. [2021] No. 35) (hereinafter referred to as the “Interpretation No. 15”), of which contents on “presentation concerning centralized management of funds” came into force as of the date of issuance. The Company starts to implement them from the | Not applicable | For details, see “Other descriptions (3)”. |
Other descriptions:
(1) For specific policies of the New Lease Standards, please refer to “Note V (36)”.
The Company started to implement the New Lease Standards from January 1, 2021. Under requirements of the New Lease Standards,the amounts of retained earnings and other relevant items in the financial statements at the beginning of the period for the first timeadoption of the new standards (i.e. January 1, 2021) are adjusted based on the accumulative impact amount at the first time adoption,while comparative financial information for the previous accounting periods is not adjusted. For specific changes of correspondingfinancial statement items, please refer to “Note V (38) (3) Description on the adjustment of relevant items in the financial statementsat the beginning of the year for the first time adoption of the New Leasing Standards since 2021”.Pursuant to the New Lease Standards, for contracts that already exist prior to the enforcement of the new standards, the Companychooses not to re-evaluate whether they are a lease or contain a lease on the adoption date of the new standards. For lease contracts inwhich the Company is the lessee, the Company elects to only adjust the accumulative impact amount of lease contracts not yetcompleted as of January 1, 2021.For operating leases whose leased assets belong to low-value assets prior to the adoption date or whose remaining lease term is lessthan 12 months, the Company adopts a simplified method and does not recognize them as right-of-use assets and lease liabilities.Moreover, the Company adopts the following simplified treatment methods for operating leases prior to the adoption date of the newstandards:
A. When measuring lease liabilities, the same discount rate is used for leases with similar characteristics; the measurement of theright-of-use assets excludes initial direct costs;B. If there is an extension option or termination option, the Company determines the lease term based on the actual exercise of theoption before the adoption date and other latest conditions;C. As an alternative to the impairment test for right-of-use assets, the Company assesses whether a contract that contains a lease is aloss contract before the adoption date, and adjusts the right-of-use asset based on the loss amount already recognized in the balancesheet prior to the adoption date;D. For lease modifications before the adoption date, the Company accounts them according to the their final arrangements.The unpaid minimum lease payments of major operating leases disclosed in 2020 financial statements are adjusted based on thedifference between the present value discounted at the incremental borrowing rate on January 1, 2021 where the Company is thelessee and the lease liabilities included in the balance sheet on January 1, 2021. The adjustment process is as follows:
Unit: RMB
stipulated effective date.
Item
| Item | Amount |
Minimum lease payments of major operating leases on December 31, 2020
| Minimum lease payments of major operating leases on December 31, 2020 | 49,263,688.50 |
| Plus: Minimum lease payments of other operating leases on December 31, 2020 | 472,137,522.60 |
Less: Minimum lease payments accounted with simplified treatment (short-term andlow-value)
| Less: Minimum lease payments accounted with simplified treatment (short-term and low-value) | 6,427,811.10 |
| Undiscounted amount of operating lease commitments on January 1, 2021 | 514,973,400.00 |
Weighted average of incremental borrowing rates on January 1, 2021
| Weighted average of incremental borrowing rates on January 1, 2021 | 4.75% |
| Present value of minimum lease payments under the New Lease Standards on January 1, 2021 | 476,151,493.32 |
Plus: Minimum lease payments of finance leases on December 31, 2020
| Plus: Minimum lease payments of finance leases on December 31, 2020 | 239,296.50 |
Lease liabilities on January 1, 2021
| Lease liabilities on January 1, 2021 | 476,390,789.82 |
| Including: Non-current liabilities due within one year | 177,712,848.98 |
(2) The Company starts to implement the Interpretation No. 14 from January 1, 2021. Under requirements of the Interpretation No.14, the amounts of retained earnings and other relevant items in the financial statements at the beginning of the period for the firsttime adoption of this interpretation (i.e. January 1, 2021) are adjusted based on the accumulative impact amount at the first timeadoption, while comparative financial information for the previous accounting periods is not adjusted. This interpretation has noimpact on the Company.
(3) On December 30, 2021, the Ministry of Finance issued the Interpretation No. 15, of which contents on “presentation concerningcentralized management of funds” came into force as of the date of issuance. The Company starts to implement this interpretationfrom December 30, 2021.The Interpretation No. 15 stipulates that where funds of the parent company and member units are centrally managed through theinternal settlement center, a financial company, etc., it shall distinguish funds of member units that are collected to accounts of theparent company and those that are directly deposited to the financial company; the interpretation also specifies items of member units,financial company and parent company that should be presented in the balance sheet. It also clarifies whether financial assets andfinancial liabilities under centralized management funds can be offset.The Company has implemented this interpretation from the effective date. The interpretation has no impact on the Company.
(2) Significant changes of accounting estimates
□ Applicable √ Not applicable
(3) Description on the adjustment of relevant items in the financial statements at the beginning of the yearfor the first time adoption of the new leasing standards since 2021
√ Applicable □ Not applicable
Whether to adjust the subjects of the balance sheet at the beginning of the year
√ Yes □ No
Consolidated balance sheet
Unit: RMB
| Item | December 31, 2020 | January 01, 2021 | Adjustment number |
| Current assets: | |||
| Monetary funds | 578,783,443.79 | 578,783,443.79 | |
| Settlement reserve | |||
| Lending funds |
| Financial assets held for trading | 100,425,333.33 | 100,425,333.33 | |
| Derivative financial assets | |||
| Notes receivable | |||
| Accounts receivable | 301,061,376.99 | 301,061,376.99 | |
| Accounts receivable financing | |||
| Prepayments | 59,678,780.04 | 57,225,385.65 | -2,453,394.39 |
| Premium receivable | |||
| Reinsurance payables | |||
| Reinsurance contract reserves receivable | |||
| Other receivables | 53,587,328.86 | 53,587,328.86 | |
| Including: Interest receivable | |||
| Dividends receivable | |||
| Financial assets held under resale agreements | |||
| Inventory | 607,679,776.22 | 607,679,776.22 | |
| Contract assets | |||
| Assets held for sale | |||
| Non-current assets due within one year | |||
| Other current assets | 1,377,984,359.67 | 1,377,984,359.67 | |
| Total current assets | 3,079,200,398.90 | 3,076,747,004.51 | -2,453,394.39 |
| Non-current assets: | |||
| Loans and advances | |||
| Debt investments | |||
| Other debt investments | |||
| Long-term receivable | |||
| Long-term equity investment | |||
| Investment in other equity instruments | 92,785,368.67 | 92,785,368.67 |
| Other non-current financial assets | |||
| Investment property | |||
| Fixed assets | 239,216,423.50 | 239,216,423.50 | |
| Construction in progress | 49,120,792.27 | 49,120,792.27 | |
| Productive biological assets | |||
| Oil & gas assets | |||
| Right-of-use assets | 478,604,887.71 | 478,604,887.71 | |
| Intangible assets | 114,864,801.65 | 114,864,801.65 | |
| Development expenses | |||
| Goodwill | |||
| Long-term prepaid expenses | 104,972,941.26 | 104,972,941.26 | |
| Deferred income tax assets | 65,802,510.71 | 65,802,510.71 | |
| Other non-current assets | 2,635,461.01 | 2,635,461.01 | |
| Total non-current assets | 669,398,299.07 | 1,148,003,186.78 | 478,604,887.71 |
| Total assets | 3,748,598,697.97 | 4,224,750,191.29 | 476,151,493.32 |
| Current liabilities: | |||
| Short-term loans | |||
| Borrowings from PBC | |||
| Placements from banks and other financial institutions | |||
| Financial liabilities held for trading | |||
| Derivative financial liabilities | |||
| Notes payable | 27,139,705.66 | 27,139,705.66 | |
| Accounts payable | 107,698,978.83 | 107,698,978.83 | |
| Payments received in advance | |||
| Contract liabilities | 81,677,368.60 | 81,677,368.60 | |
| Proceeds from financial assets sold under repo |
| Deposits from customers and interbank | |||
| Funds from securities trading agency | |||
| Funds from securities underwriting agency | |||
| Employee benefits payable | 52,788,749.44 | 52,788,749.44 | |
| Taxes payable | 102,577,815.02 | 102,577,815.02 | |
| Other payables | 44,335,743.56 | 44,335,743.56 | |
| Including: Interests payable | |||
| Dividends payable | |||
| Service charge and commission receivable | |||
| Reinsurance payable | |||
| Liabilities held for sale | |||
| Non-current liabilities due within one year | 177,712,848.98 | 177,712,848.98 | |
| Other current liabilities | 251,166,311.70 | 251,166,311.70 | |
| Total current liabilities | 667,384,672.81 | 845,097,521.79 | 177,712,848.98 |
| Non-current liabilities: | |||
| Insurance contract reserves | |||
| Long-term loans | |||
| Bonds payable | 630,982,939.14 | 630,982,939.14 | |
| Including: Preference shares | |||
| Perpetual bonds | |||
| Lease liabilities | 298,677,940.84 | 298,677,940.84 | |
| Long-term payable | 239,296.50 | -239,296.50 | |
| Long-term employee benefits payable | |||
| Provision | |||
| Deferred income | 30,000,000.00 | 30,000,000.00 |
| Deferred income tax liabilities | 2,253,279.00 | 2,253,279.00 | |
| Other non-current liabilities | |||
| Total non-current liabilities | 663,475,514.64 | 961,914,158.98 | 298,438,644.34 |
| Total liabilities | 1,330,860,187.45 | 1,807,011,680.77 | 476,151,493.32 |
| Owner’s equity: | |||
| Share capital | 524,075,085.00 | 524,075,085.00 | |
| Other equity instruments | 63,661,135.54 | 63,661,135.54 | |
| Including: Preference shares | |||
| Perpetual bonds | |||
| Capital reserve | 226,927,846.51 | 226,927,846.51 | |
| Less: Treasury shares | |||
| Other comprehensive income | -6,249,160.64 | -6,249,160.64 | |
| Special reserves | |||
| Surplus reserves | 194,828,010.62 | 194,828,010.62 | |
| General reserves | |||
| Retained earnings | 1,413,582,872.58 | 1,413,582,872.58 | |
| Total equity attributable to owners of the parent company | 2,416,825,789.61 | 2,416,825,789.61 | |
| Equities of minority shareholders | 912,720.91 | 912,720.91 | |
| Total owner’s equity | 2,417,738,510.52 | 2,417,738,510.52 | |
| Total liabilities and owners’ equity | 3,748,598,697.97 | 4,224,750,191.29 | 476,151,493.32 |
Explanation of adjustmentThe impact of the New Lease Standards on the consolidated balance sheet on the adoption date is as follows:
Unit: RMB
| Item | In accordance with the Original Lease Standards | In accordance with the New Lease Standards | Impacted amount |
| (January 1, 2021) | |||
| Prepayments | 59,678,780.04 | 57,225,385.65 | -2,453,394.39 |
| Right-of-use assets | 478,604,887.71 | 478,604,887.71 | |
| Non-current liabilities due within one year | 177,712,848.98 | 177,712,848.98 |
| Lease liabilities | 298,677,940.84 | 298,677,940.84 |
Long-term payable
| Long-term payable | 239,296.50 | -239,296.50 |
Balance sheet of the Parent Company
Unit: RMB
| Item | December 31, 2020 | January 01, 2021 | Adjustment number |
| Current assets: | |||
| Monetary funds | 540,424,839.01 | 540,424,839.01 | |
| Financial assets held for trading | 100,425,333.33 | 100,425,333.33 | |
| Derivative financial assets | |||
| Notes receivable | |||
| Accounts receivable | 301,061,376.99 | 301,061,376.99 | |
| Accounts receivable financing | |||
| Prepayments | 32,532,816.93 | 30,079,422.54 | -2,453,394.39 |
| Other receivables | 60,685,628.95 | 60,685,628.95 | |
| Including: Interest receivable | |||
| Dividends receivable | |||
| Inventory | 804,477,022.56 | 804,477,022.56 | |
| Contract assets | |||
| Assets held for sale | |||
| Non-current assets due within one year | |||
| Other current assets | 1,400,727,863.45 | 1,400,727,863.45 | |
| Total current assets | 3,240,334,881.22 | 3,237,881,486.83 | -2,453,394.39 |
| Non-current assets: | |||
| Debt investments | |||
| Other debt investments | |||
| Long-term receivable | |||
| Long-term equity investment | 111,000,000.00 | 111,000,000.00 | |
| Investment in other equity instruments |
| Other non-current financial assets | |||
| Investment property | |||
| Fixed assets | 239,216,423.50 | 239,216,423.50 | |
| Construction in progress | 49,120,792.27 | 49,120,792.27 | |
| Productive biological assets | |||
| Oil & gas assets | |||
| Right-of-use assets | 440,183,237.33 | 440,183,237.33 | |
| Intangible assets | 114,864,801.65 | 114,864,801.65 | |
| Development expenses | |||
| Goodwill | |||
| Long-term prepaid expenses | 90,663,986.71 | 90,663,986.71 | |
| Deferred income tax assets | 35,049,787.12 | 35,049,787.12 | |
| Other non-current assets | 2,635,461.01 | 2,635,461.01 | |
| Total non-current assets | 642,551,252.26 | 1,082,734,489.59 | 440,183,237.33 |
| Total assets | 3,882,886,133.48 | 4,320,615,976.42 | 437,729,842.94 |
| Current liabilities: | |||
| Short-term loans | |||
| Financial liabilities held for trading | |||
| Derivative financial liabilities | |||
| Notes payable | 27,139,705.66 | 27,139,705.66 | |
| Accounts payable | 146,213,104.37 | 146,213,104.37 | |
| Payments received in advance | |||
| Contract liabilities | 81,677,368.60 | 81,677,368.60 | |
| Employee benefits payable | 2,785,243.25 | 2,785,243.25 | |
| Taxes payable | 96,992,722.80 | 96,992,722.80 | |
| Other payables | 43,079,684.64 | 43,079,684.64 | |
| Including: Interests payable |
| Dividends payable | |||
| Liabilities held for sale | |||
| Non-current liabilities due within one year | 164,345,303.54 | 164,345,303.54 | |
| Other current liabilities | 251,166,311.70 | 251,166,311.70 | |
| Total current liabilities | 649,054,141.02 | 813,399,444.56 | 164,345,303.54 |
| Non-current liabilities: | |||
| Long-term loans | |||
| Bonds payable | 630,982,939.14 | 630,982,939.14 | |
| Including: Preference shares | |||
| Perpetual bonds | |||
| Lease liabilities | 273,623,835.90 | 273,623,835.90 | |
| Long-term payable | 239,296.50 | -239,296.50 | |
| Long-term employee benefits payable | |||
| Provision | |||
| Deferred income | 30,000,000.00 | 30,000,000.00 | |
| Deferred income tax liabilities | 2,253,279.00 | 2,253,279.00 | |
| Other non-current liabilities | |||
| Total non-current liabilities | 663,475,514.64 | 936,860,054.04 | 273,384,539.40 |
| Total liabilities | 1,312,529,655.66 | 1,750,259,498.60 | 437,729,842.94 |
| Owner’s equity: | |||
| Share capital | 524,075,085.00 | 524,075,085.00 | |
| Other equity instruments | 63,661,135.54 | 63,661,135.54 | |
| Including: Preference shares | |||
| Perpetual bonds | |||
| Capital reserve | 226,927,846.51 | 226,927,846.51 | |
| Less: Treasury shares | |||
| Other comprehensive |
| income | |||
| Special reserves | |||
| Surplus reserves | 194,828,010.62 | 194,828,010.62 | |
| Retained earnings | 1,560,864,400.15 | 1,560,864,400.15 | |
| Total owner’s equity | 2,570,356,477.82 | 2,570,356,477.82 | |
| Total liabilities and owners’ equity | 3,882,886,133.48 | 4,320,615,976.42 | 437,729,842.94 |
Explanation of adjustmentThe impact of the New Lease Standards on the parent company’s balance sheet on the adoption date is as follows:
Unit: RMB
| Item | In accordance with the Original Lease Standards | In accordance with the New Lease Standards | Impacted amount |
| (January 1, 2021) |
Prepayments
| Prepayments | 32,532,816.93 | 30,079,422.54 | -2,453,394.39 |
Right-of-use assets
| Right-of-use assets | 440,183,237.33 | 440,183,237.33 | |
| Non-current liabilities due within one year | 164,345,303.54 | 164,345,303.54 |
Lease liabilities
| Lease liabilities | 273,623,835.90 | 273,623,835.90 | |
| Long-term payable | 239,296.50 | -239,296.50 |
(4) Description on the retrospective adjustment of previous comparable data at the first time adoption ofthe new leasing standards in 2021
□ Applicable √ Not applicable
VI. Taxes
1. Main tax types and tax rates
| Tax | Tax basis | Tax rate |
| Value-added tax | Value added during the sale of goods or provision of taxable services | 13%, 6% |
| City construction and maintenance tax | Turnover tax payable | 7% |
| Corporate income tax | Income tax payable | 25%, 20%, 15% |
| Education surcharges | Turnover tax payable | 3% |
| Local education surcharges | Turnover tax payable | 2% |
Description of disclosure if different income tax rates apply to different corporate taxpayers
| Name of taxpayer | Income tax rate |
| BIEM.L.FDLKK Garment Co., Ltd. | 15% |
| Guangzhou BIEM.L.FDLKK Business Consulting Co., Ltd. | 25% |
| Guangzhou BIEM.L.FDLKK Supply Chain Management Co., Ltd. | 20% |
| Ningbo BIEM.L.FDLKK Supply Chain Management Co., Ltd. | 25% |
| Guangzhou BIEM.L.FDLKK Ejam Equity Investment Partnership (Limited Partnership) | 5%- 35% |
| Xuzhou BIEM.L.FDLKK Supply Chain Management Co., Ltd. | 25% |
| Ningbo BIEM.L.FDLKK Smart Technology Co., Ltd. | 25% |
2. Tax incentive
(1) BIEM.L.FDLKK Garment Co., Ltd.
BIEM.L.FDLKK Garment Co., Ltd. was certified as a high-tech enterprise on December 20, 2021 and was awarded the Certificate ofHigh-tech Enterprise (No. GR202144002604). In accordance with relevant provisions of the Enterprise Income Tax Law of thePeople’s Republic of China promulgated in 2007 and the Administrative Measures for the Certification of High-tech Enterprises, thecorporate income tax of the company is calculated at a tax rate of 15% in 2021.
(2) Guangzhou BIEM.L.FDLKK Supply Chain Management Co., Ltd.
Pursuant to relevant provisions of the Announcement of the State Administration of Taxation on Matters Concerning theImplementation of Preferential Income Tax Policies for Small and Low-profit Enterprises and Individual Industrial and CommercialHouseholds (SAT Doc. No. 2021 [008]), if the annual taxable income of a small and low-profit enterprise does not exceed RMB1million, the taxable income is calculated at a reduced rate of 12.5% with a corporate income tax rate of 20%. These standards arevalid from January 1, 2021 to December 31, 2022. Guangzhou BIEM.L.FDLKK Supply Chain Management Co., Ltd. meets thestandard of small and low-profit enterprises, so the applicable corporate income tax rate is 20%.VII. Notes to Items of the Consolidated Financial Statements
1. Monetary fund
Unit: RMB
| Item | Closing balance | Opening balance |
| Cash on hand | 142,548.00 | 135,833.35 |
| Bank deposits | 1,069,235,185.83 | 569,148,713.44 |
| Other monetary funds | 13,334,484.75 | 9,498,897.00 |
| Total | 1,082,712,218.58 | 578,783,443.79 |
| Total amount of funds with use restrictions due to mortgage, pledge or | 13,334,484.75 | 9,498,897.00 |
Other description— Balance of other monetary funds at the end of the reporting period is the security deposit for issuing bank acceptance bills.— All bank deposits are in bank accounts opened in banks and other relevant financial institutions in the name of the Company andsubsidiaries/second-tier subsidiaries included in the consolidated scope of financial statements.— As of December 31, 2021, except for other monetary funds whose use is restricted with a total amount of RMB13,334,484.75, theCompany had no funds whose use is restricted due to mortgage, pledge or freezing or which are deposited overseas or have thepotential risk of recovery.
2. Financial assets held for trading
Unit: RMB
freezingItem
| Item | Closing balance | Opening balance |
| Financial assets measured at fair value through profit or loss | 634,763,818.96 | 100,425,333.33 |
| Including: | ||
| Wealth management products | 633,424,832.00 | 100,425,333.33 |
| Others | 1,338,986.96 | |
| Including: | ||
| Total | 634,763,818.96 | 100,425,333.33 |
Other description:
— The closing balance of the financial assets held for trading increased by RMB534,338,485.63 or 532.08% compared with theopening balance in 2021, mainly owing to the increase in the purchased wealth management products.
3. Accounts receivable
(1) Accounts receivable disclosure by category
Unit: RMB
| Category | Closing balance | Opening balance | ||||||||
| Book balance | Bad debt reserve | Book value | Book balance | Bad debt reserve | Book value | |||||
| Amount | Percentage | Amount | Provision ratio | Amount | Percentage | Amount | Provision ratio | |||
| Accounts receivable for which bad debt reserve is set aside individually | 618,282.56 | 0.21% | 618,282.56 | 100.00% | 3,026,981.81 | 0.94% | 2,562,695.09 | 84.66% | 464,286.72 | |
| Including: | ||||||||||
| Accounts receivable | 295,013, | 99.79% | 15,296,6 | 5.19% | 279,717,0 | 318,875,6 | 99.06% | 18,278,51 | 5.73% | 300,597,09 |
| for which bad debt reserve is set aside in portfolios | 683.59 | 26.45 | 57.14 | 01.30 | 1.03 | 0.27 | ||||
| Including: | ||||||||||
| Clothing sales business | 295,013,683.59 | 99.79% | 15,296,626.45 | 5.19% | 279,717,057.14 | 318,875,601.30 | 99.06% | 18,278,511.03 | 5.73% | 300,597,090.27 |
| Total | 295,631,966.15 | 100.00% | 15,914,909.01 | 5.38% | 279,717,057.14 | 321,902,583.11 | 100.00% | 20,841,206.12 | 6.47% | 301,061,376.99 |
Bad debt reserve by item:
Unit: RMB
| Name | Closing balance | |||
| Book balance | Bad debt reserve | Ratio of provision | Reason for provision | |
| Institution 1 | 618,282.56 | 618,282.56 | 100.00% | It is expected that the amount cannot be recovered. |
| Total | 618,282.56 | 618,282.56 | -- | -- |
Bad debt reserve by portfolio:
Unit: RMB
| Name | Closing balance | ||
| Book balance | Bad debt reserve | Ratio of provision | |
| Within 1 year | 294,480,218.78 | 14,763,161.64 | 5.01% |
| 1-2 years | 190,299.54 | 190,299.54 | 100.00% |
| Over 3 years | 343,165.27 | 343,165.27 | 100.00% |
| Total | 295,013,683.59 | 15,296,626.45 | -- |
Description of reason for the portfolio:
If the bad debt reserve of accounts receivable is set aside according to general model of expected credit loss, please refer to thedisclosure method of other receivables to disclose relevant information on bad debt reserve:
□ Applicable √ Not applicable
Disclose by aging
Unit: RMB
| Aging | Book balance |
| Within 1 year (inclusive) | 294,480,218.78 |
| 1 to 2 years | 808,582.10 |
| Over 3 years | 343,165.27 |
| 3 to 4 years | 2,173.75 |
| 4 to 5 years | 132,467.43 |
| Over 5 years | 208,524.09 |
| Total | 295,631,966.15 |
(2) Bad debt reserve that is set aside, recovered or transferred back in the reporting period
Bad debt reserve of the reporting period:
Unit: RMB
| Category | Opening balance | Amount of change in the reporting period | Closing balance | |||
| Provision | Recovery or reversal | Write-off | Others | |||
| Bad debt reserve for accounts receivable | 20,841,206.12 | 2,224,051.58 | 2,702,245.53 | 15,914,909.01 | ||
| Total | 20,841,206.12 | 2,224,051.58 | 2,702,245.53 | 15,914,909.01 | ||
Due to debt restructuring, the Company wrote off bad debt reserve for accounts receivable at an amount of RMB2,702,245.53 in2021.
(3) Accounts receivable actually written off in the reporting period
Unit: RMB
| Item | Write-off amount |
Write-offs of important accounts receivable:
Unit: RMB
| Name of institution | Nature of accounts receivable | Write-off amount | Write-off reason | Write-off procedures | Whether the amount is caused by related party transaction |
Description on the write-offs of accounts receivables:
As of December 31, 2021, the Company did not write off any accounts receivable.
(4) Top five debtors in closing balance of accounts receivable
Unit: RMB
| Name of institution | Balance of accounts receivable at the end of the period | Percentage in total balance of accounts receivable at the end of the period | Balance for bad debt reserve at the end of the period |
| Institution 1 | 17,159,920.18 | 5.80% | 858,111.72 |
| Institution 2 | 7,928,133.02 | 2.68% | 400,747.57 |
| Institution 3 | 7,847,238.43 | 2.65% | 392,361.92 |
| Institution 4 | 6,665,554.40 | 2.25% | 333,423.95 |
| Institution 5 | 5,171,664.81 | 1.75% | 258,583.24 |
| Total | 44,772,510.84 | 15.13% |
(5) Amounts of assets and liabilities that are formed by the transfer of accounts receivable and theCompany’s continuing involvementAs of December 31, 2021, the Company had no assets and liabilities that were formed by the transfer of accounts receivable and itscontinuing involvement.
(6) Accounts receivable derecognized due to transfer of financial assets
As of December 31, 2021, no accounts receivable was derecognized due to transfer of financial assets.
4. Prepayments
(1) Prepayments presentation by aging
Unit: RMB
| Aging | Closing balance | Opening balance | ||
| Amount | Percentage | Amount | Percentage | |
| Within 1 year | 66,490,875.59 | 99.20% | 56,817,241.39 | 99.29% |
| 1 to 2 years | 426,940.68 | 0.64% | 408,144.26 | 0.71% |
| 2 to 3 years | 110,538.82 | 0.16% | ||
| Total | 67,028,355.09 | -- | 57,225,385.65 | -- |
Explanation on the reason of untimely settlement of prepayments whose age exceeds one year with significant amount:
(2) Top five payees in closing balance of prepayment
Unit: RMB
| Name of institution | Closing balance | Percentage in total balance of prepayments at the end of the period |
Institution 1
| Institution 1 | 17,737,138.98 | 26.46 |
| Institution 2 | 7,029,494.67 | 10.49 |
Institution 3
| Institution 3 | 4,175,089.92 | 6.23 |
| Institution 4 | 3,361,681.45 | 5.02 |
Institution 5
| Institution 5 | 2,311,555.65 | 3.45 |
| Total | 34,614,960.67 | 51.65 |
5. Other receivables
Unit: RMB
| Item | Closing balance | Opening balance |
| Other receivables | 89,889,485.22 | 53,587,328.86 |
| Total | 89,889,485.22 | 53,587,328.86 |
(1) Other receivables
1) Classification of other receivables by nature
Unit: RMB
| Nature | Book balance at the end of the period | Book balance at the beginning of the period |
| Margins and deposits | 88,691,812.02 | 52,061,952.75 |
| Employee reserve fund | 3,069,483.92 | 2,348,617.12 |
| Other amounts | 2,857,765.83 | 1,997,144.72 |
| Total | 94,619,061.77 | 56,407,714.59 |
2) Bad debt reserve
Unit: RMB
| Bad debt reserve | Phase I | Phase II | Phase III | Total |
| 12-month ECL | Lifetime ECL (without credit impairment) | Lifetime ECL (with credit impairment) | ||
| Balance as at January 1, 2021 | 2,820,385.73 | 2,820,385.73 | ||
| Balance as at January 1, 2021 in the reporting period | —— | —— | —— | —— |
| Provision in the reporting period | 1,909,190.82 | 1,909,190.82 | ||
| Balance as at December 31, 2021 | 4,729,576.55 | 4,729,576.55 |
Description of changes in the book balance where there are significant changes in provision for the current period
□ Applicable √ Not applicable
Disclose by aging
Unit: RMB
| Aging | Book balance |
| Within 1 year (inclusive) | 94,619,061.77 |
| Total | 94,619,061.77 |
3) Bad debt reserve that is set aside, recovered or transferred back in the reporting period
Bad debt reserve of the reporting period:
Unit: RMB
| Category | Opening balance | Amount of change in the reporting period | Closing balance | |||
| Provision | Recovery or reversal | Write-off | Others | |||
| Bad debt reserve by portfolio | 2,820,385.73 | 1,909,190.82 | 4,729,576.55 | |||
| Total | 2,820,385.73 | 1,909,190.82 | 4,729,576.55 | |||
4) Top five debtors in closing balance of other accounts receivable
Unit: RMB
| Name of institution | Nature of the amount | Closing balance | Aging | Percentage in total balance of other receivables at the end of the period | Balance of bad debt reserve at the end of the period |
| Institution 1 | Margins and deposits | 29,000,000.00 | Within 1 year | 30.65% | 1,450,000.00 |
| Institution 2 | Margins and deposits | 7,441,978.00 | Within 1 year | 7.87% | 372,098.90 |
| Institution 3 | Margins and deposits | 5,560,610.00 | Within 1 year | 5.88% | 278,030.50 |
| Institution 4 | Margins and deposits | 4,288,619.00 | Within 1 year | 4.53% | 214,430.95 |
| Institution 5 | Margins and deposits | 3,150,000.00 | Within 1 year | 3.33% | 157,500.00 |
| Total | -- | 49,441,207.00 | -- | 52.26% | 2,472,060.35 |
5) Other receivables derecognized due to the transfer of financial assets
As of December 31, 2021, no other receivable was derecognized due to transfer of financial assets.
6) Amount of assets and liabilities that are formed by the transfer of other receivables and the Company’scontinuing involvementAs of December 31, 2021, the Company had no assets and liabilities that were formed by the transfer of other receivables and itscontinuing involvement.
6. Inventory
Whether the Company needs to comply with requirements for disclosure in the real estate industryNo
(1) Classification of inventories
Unit: RMB
| Item | Closing balance | Opening balance | ||||
| Book balance | Provision for impairment of inventories and contract performance cost | Book value | Book balance | Provision for impairment of inventories and contract performance cost | Book value | |
| Raw materials | 18,331,168.60 | 18,331,168.60 | 9,633,505.86 | 9,633,505.86 | ||
| Commodity stocks | 735,027,540.76 | 106,428,861.75 | 628,598,679.01 | 654,339,389.50 | 65,159,344.75 | 589,180,044.75 |
| Materials for consigned processing | 13,284,371.80 | 13,284,371.80 | 8,866,225.61 | 8,866,225.61 | ||
| Total | 766,643,081.16 | 106,428,861.75 | 660,214,219.41 | 672,839,120.97 | 65,159,344.75 | 607,679,776.22 |
(2) Provision for impairment of inventories and contract performance cost
Unit: RMB
| Item | Opening balance | Increase in the current period | Decrease in the current period | Closing balance | ||
| Provision | Others | Reversal or written off | Others | |||
| Commodity stocks | 65,159,344.75 | 78,683,952.73 | 37,414,435.73 | 106,428,861.75 | ||
| Total | 65,159,344.75 | 78,683,952.73 | 37,414,435.73 | 106,428,861.75 | ||
7. Other current assets
Unit: RMB
| Item | Closing balance | Opening balance |
| Return cost receivable | 99,103,788.91 | 66,756,179.30 |
| Structured deposit | 704,879,722.24 | 1,256,445,833.33 |
| Large-denomination Certificate of Deposit | 20,117,555.56 | 20,115,000.00 |
| Input tax credits and input tax creditable | 6,539,646.70 | 34,667,347.04 |
| within subsequent periods | ||
| Total | 830,640,713.41 | 1,377,984,359.67 |
Other description:
Return cost receivable is the adjustment to the clothing selling costs of franchise stores made by the Company based on the returnand exchange policies and estimated return and exchange rate.— The closing balance of other current assets decreased by RMB547,343,646.26 or 39.72% compared with the opening balance in2021, mainly owing to the decrease in the purchased structured deposits.
8. Investment in other equity instruments
Unit: RMB
| Item | Closing balance | Opening balance |
| Shenzhen Youanmi Technology Co., Ltd. | 8,999,300.47 | 3,685,368.67 |
| Fast Fashion (Guangzhou) Co., Ltd. | 89,100,000.00 | 89,100,000.00 |
| Total | 98,099,300.47 | 92,785,368.67 |
Disclosure of investments in equity instruments not held for trading in the reporting period item by item
Unit: RMB
| Project | Recognized dividend income | Cumulative gain | Cumulative loss | Amount of retained earnings transferred from other comprehensive income | Reason for designation as measured at fair value through other comprehensive income | Reason for transferring from other comprehensive income to retained earnings |
| Shenzhen Youanmi Technology Co., Ltd. | 1,000,699.53 | Long-term holding for strategic purposes | Not applicable | |||
| Fast Fashion (Guangzhou) Co., Ltd. | Long-term holding for strategic purposes | Not applicable |
9. Fixed assets
Unit: RMB
| Item | Closing balance | Opening balance |
| Fixed assets | 244,337,754.20 | 239,216,423.50 |
| Total | 244,337,754.20 | 239,216,423.50 |
(1) Information on fixed assets
Unit: RMB
| Item | Properties and buildings | Equipment | Motor vehicles | Office equipment | Total |
| I. Original Book Value | |||||
| 1. Opening balance | 228,574,129.51 | 5,983,488.04 | 4,777,800.08 | 34,086,740.34 | 273,422,157.97 |
| 2. Increase in the current period | 19,194,513.66 | 77,679.61 | 1,110,796.46 | 8,771,910.01 | 29,154,899.74 |
| (1) Procurement | 77,679.61 | 1,110,796.46 | 8,771,910.01 | 9,960,386.08 | |
| (2) Transfer from construction in progress | 19,194,513.66 | 19,194,513.66 | |||
| (3) Increase in business combination | |||||
| 3. Decrease in the current period | 701,845.15 | 530,808.00 | 1,965,857.54 | 3,198,510.69 | |
| (1) Disposal or scrap | 701,845.15 | 530,808.00 | 1,965,857.54 | 3,198,510.69 | |
| 4. Closing balance | 247,768,643.17 | 5,359,322.50 | 5,357,788.54 | 40,892,792.81 | 299,378,547.02 |
| II. Accumulated Depreciation | |||||
| 1. Opening balance | 10,529,677.04 | 507,784.23 | 3,832,802.80 | 19,335,470.40 | 34,205,734.47 |
| 2. Increase in the current period | 12,897,772.86 | 1,104,103.16 | 266,389.88 | 9,178,593.74 | 23,446,859.64 |
| (1) Provision | 12,897,772.86 | 1,104,103.16 | 266,389.88 | 9,178,593.74 | 23,446,859.64 |
| 3. Decrease in the current period | 210,722.57 | 504,267.60 | 1,896,811.12 | 2,611,801.29 | |
| (1) Disposal or scrap | 210,722.57 | 504,267.60 | 1,896,811.12 | 2,611,801.29 | |
| 4. Closing balance | 23,427,449.90 | 1,401,164.82 | 3,594,925.08 | 26,617,253.02 | 55,040,792.82 |
| III. Impairment Provision | |||||
| 1. Opening balance | |||||
| 2. Increase in the current period | |||||
| (1) Provision | |||||
| 3. Decrease in the current period | |||||
| (1) Disposal or scrap | |||||
| 4. Closing balance | |||||
| IV. Book Value | |||||
| 1. Book value at the end of the period | 224,341,193.27 | 3,958,157.68 | 1,762,863.46 | 14,275,539.79 | 244,337,754.20 |
| 2. Book value at the beginning of the period | 218,044,452.47 | 5,475,703.81 | 944,997.28 | 14,751,269.94 | 239,216,423.50 |
(2) Fixed assets that the certificate of title has not been issued
Other description--- The Company had no fixed assets whose certificate of title had not been issued at the end of the reporting period.
10. Construction in process
Unit: RMB
| Item | Closing balance | Opening balance |
| Construction in process | 148,165,548.36 | 49,120,792.27 |
| Total | 148,165,548.36 | 49,120,792.27 |
(1) Information on construction in progress
Unit: RMB
| Item | Closing balance | Opening balance |
| Book balance | Impairment provision | Book value | Book balance | Impairment provision | Book value | |
| Intelligent storage center | 130,966,928.76 | 130,966,928.76 | 48,013,204.45 | 48,013,204.45 | ||
| Supply chain park | 17,198,619.60 | 17,198,619.60 | 1,107,587.82 | 1,107,587.82 | ||
| Total | 148,165,548.36 | 148,165,548.36 | 49,120,792.27 | 49,120,792.27 |
(2) Changes of significant construction in progress in the current period
Unit: RMB
| Project | Budget number | Opening balance | Increase in the current period | Amount of fixed assets transferred in the current period | Decrease in the current period | Closing balance | Proportion of the cumulative construction input in budget | Construction progress | Accumulative amount of interest capitalization | Including: Amount of interest capitalization in the period | Interest capitalization rate in the current period | Source of fund |
| Intelligent storage center | 224,120,000.00 | 48,013,204.45 | 82,953,724.31 | 130,966,928.76 | 58.44% | 58.44% | Proceeds raised | |||||
| Supply chain park | 149,607,224.00 | 1,107,587.82 | 16,091,031.78 | 17,198,619.60 | 11.50% | 11.50% | Proceeds raised | |||||
| Others | 19,194,513.66 | 19,194,513.66 | Proceeds raised | |||||||||
| Total | 373,727,224.00 | 49,120,792.27 | 118,239,269.75 | 19,194,513.66 | 148,165,548.36 | -- | -- | -- |
11. Right-of-use assets
Unit: RMB
| Item | Properties and buildings | Total |
| I. Original Book Value | ||
| 1. Opening balance | 478,604,887.71 | 478,604,887.71 |
| 2. Increase in the current period | 123,036,592.73 | 123,036,592.73 |
| (1) New lease | 84,208,913.97 | 84,208,913.97 |
| (2) Modification | 38,827,678.76 | 38,827,678.76 |
| 3. Decrease in the current period | 7,515,067.64 | 7,515,067.64 |
| (1) Modification | 7,515,067.64 | 7,515,067.64 |
| (2) Termination | ||
| 4. Closing balance | 594,126,412.80 | 594,126,412.80 |
| II. Accumulated Depreciation | ||
| 1. Opening balance | ||
| 2. Increase in the current period | 187,984,952.77 | 187,984,952.77 |
| (1) Provision | 187,984,952.77 | 187,984,952.77 |
| (2) Modification | ||
| 3. Decrease in the current period | 1,307,194.71 | 1,307,194.71 |
| (1) Disposal | ||
| (2) Modification | 1,307,194.71 | 1,307,194.71 |
| 4. Closing balance | 186,677,758.06 | 186,677,758.06 |
| III. Impairment Provision | ||
| 1. Opening balance | ||
| 2. Increase in the current period | ||
| (1) Provision | ||
| 3. Decrease in the current period | ||
| (1) Disposal | ||
| 4. Closing balance | ||
| IV. Book Value | ||
| 1. Book value at the end of the period | 407,448,654.74 | 407,448,654.74 |
| 2. Book value at the beginning of the period | 478,604,887.71 | 478,604,887.71 |
12. Intangible assets
(1) Intangible assets
Unit: RMB
| Item | Land use right | Patent right | Non-patented technology | Software | Trademark | Total |
| I. Original Book Value |
| 1. Opening balance | 120,559,562.12 | 20,081,557.10 | 436,252.84 | 141,077,372.06 | ||
| 2. Increase in the current period | 14,862,616.07 | 14,862,616.07 | ||||
| (1) Procurement | 14,862,616.07 | 14,862,616.07 | ||||
| (2) Internal R&D | ||||||
| (3) Increase in business combination | ||||||
| 3. Decrease in the current period | 1,749,482.29 | 1,749,482.29 | ||||
| (1) Disposal | 1,749,482.29 | 1,749,482.29 | ||||
| 4. Closing balance | 120,559,562.12 | 33,194,690.88 | 436,252.84 | 154,190,505.84 | ||
| II. Accumulated Amortization | ||||||
| 1. Opening balance | 14,588,830.46 | 11,408,433.05 | 215,306.90 | 26,212,570.41 | ||
| 2. Increase in the current period | 2,645,340.68 | 7,492,542.47 | 40,805.28 | 10,178,688.43 | ||
| (1) Provision | 2,645,340.68 | 7,492,542.47 | 40,805.28 | 10,178,688.43 | ||
| 3. Decrease in the current period | 1,749,482.29 | 1,749,482.29 | ||||
| (1) Disposal | 1,749,482.29 | 1,749,482.29 | ||||
| 4. Closing balance | 17,234,171.14 | 17,151,493.23 | 256,112.18 | 34,641,776.55 |
| III. Impairment Provision | ||||||
| 1. Opening balance | ||||||
| 2. Increase in the current period | ||||||
| (1) Provision | ||||||
| 3. Decrease in the current period | ||||||
| (1) Disposal | ||||||
| 4. Closing balance | ||||||
| IV. Book Value | ||||||
| 1. Book value at the end of the period | 103,325,390.98 | 16,043,197.65 | 180,140.66 | 119,548,729.29 | ||
| 2. Book value at the beginning of the period | 105,970,731.66 | 8,673,124.05 | 220,945.94 | 114,864,801.65 |
Percentage of the intangible assets generated through internal R&D of the Company in the balance of intangible assets at the end ofthe reporting period
13. Long-term prepaid expenses
Unit: RMB
| Item | Opening balance | Increase in the current period | Amortized amount of the current period | Other decreases | Closing balance |
| Store decoration fee | 83,645,692.08 | 64,616,297.07 | 52,092,090.97 | 96,169,898.18 | |
| Warehouse decoration fee | 1,128,704.24 | 967,436.85 | 161,267.39 | ||
| Advertising fee | 15,807,555.11 | 7,341,352.16 | 16,190,069.45 | 6,958,837.82 | |
| Software rental fee | 3,920,692.84 | 292,896.23 | 2,354,531.22 | 1,859,057.85 | |
| Others | 470,296.99 | 376,237.68 | 94,059.31 |
| Total | 104,972,941.26 | 72,250,545.46 | 71,980,366.17 | 105,243,120.55 |
14. Deferred tax assets/deferred tax liabilities
(1) Deferred income tax assets that were not offset
Unit: RMB
| Item | Closing balance | Opening balance | ||
| Deductible temporary differences | Deferred income tax assets | Deductible temporary differences | Deferred income tax assets | |
| Provision for asset impairment | 127,073,347.31 | 19,068,898.59 | 91,665,747.53 | 13,329,510.35 |
| Deductible loss | 3,819,736.80 | 954,934.20 | 4,868,848.00 | 1,217,212.00 |
| Intangible asset amortization | 623,224.29 | 93,483.64 | ||
| Gross profits temporarily unrecognized due to expected goods exchange | 215,096,618.75 | 32,264,492.81 | 144,284,785.12 | 21,642,717.77 |
| Unrealized profit in internal transaction | 261,303,351.88 | 39,195,502.78 | 196,797,246.34 | 29,519,586.95 |
| Tax-accounting difference for right-of-use assets | 10,806,767.10 | 1,681,921.28 | ||
| Changes in fair value of investments in other equity instruments | 990,792.60 | 148,618.89 | ||
| Total | 619,090,614.44 | 93,314,368.55 | 438,239,851.28 | 65,802,510.71 |
(2) Deferred income tax liabilities that were not offset
Unit: RMB
| Item | Closing balance | Opening balance | ||
| Taxable temporary differences | Deferred income tax liabilities | Taxable temporary differences | Deferred income tax liabilities | |
| Depreciation of fixed assets | 15,603,604.41 | 2,340,540.66 | 14,596,526.68 | 2,189,479.00 |
| Valuation of financial instruments and derivatives measured at fair value through profit | 3,424,832.00 | 513,724.80 | 425,333.33 | 63,800.00 |
| or loss | ||||
| Total | 19,028,436.41 | 2,854,265.46 | 15,021,860.01 | 2,253,279.00 |
(3) Presentation of deferred tax assets or liabilities by the net amount after offset
Unit: RMB
| Item | Offset amount of the deferred tax assets and liabilities at the end of the reporting period | Balance of the deferred tax assets or liabilities after offset at the end of the reporting period | Offset amount of the deferred tax assets and liabilities at the beginning of the reporting period | Balance of the deferred tax assets or liabilities after offset at the beginning of the reporting period |
| Deferred income tax assets | 93,314,368.55 | 65,802,510.71 | ||
| Deferred income tax liabilities | 2,854,265.46 | 2,253,279.00 |
(4) Breakdown of unconfirmed deferred tax assets
Unit: RMB
| Item | Closing balance | Opening balance |
15. Other non-current assets
Unit: RMB
| Item | Closing balance | Opening balance | ||||
| Book balance | Impairment provision | Book value | Book balance | Impairment provision | Book value | |
| Prepayment for construction work | 1,130,640.00 | 1,130,640.00 | 2,635,461.01 | 2,635,461.01 | ||
| Prepayment for acquisition of long-lived assets | 702,868.45 | 702,868.45 | ||||
| Total | 1,833,508.45 | 1,833,508.45 | 2,635,461.01 | 2,635,461.01 | ||
Other description:
— The closing balance of other non-current assets decreased by RMB801,952.56 or 30.43% compared with the opening balance in2021, mainly owing to the decrease in the prepayments for construction work.
16. Notes payable
Unit: RMB
| Category | Closing balance | Opening balance |
| Banker’s acceptance | 38,098,527.79 | 27,139,705.66 |
| Total | 38,098,527.79 | 27,139,705.66 |
17. Accounts payable
(1) List of accounts payable
Unit: RMB
| Item | Closing balance | Opening balance |
| Accounts payable | 126,522,502.78 | 107,698,978.83 |
| Total | 126,522,502.78 | 107,698,978.83 |
18. Contract liabilities
Unit: RMB
| Item | Closing balance | Opening balance |
| Product sales | 140,669,127.30 | 81,677,368.60 |
| Total | 140,669,127.30 | 81,677,368.60 |
Amount with significant changes in book value during the reporting period and reason
Unit: RMB
| Item | Change amount | Reason of change |
19. Employee benefits payable
(1) List of employee benefits payable
Unit: RMB
| Item | Opening balance | Increase in the current period | Decrease in the current period | Closing balance |
| I. Short-term Benefits | 52,788,749.44 | 399,443,448.13 | 388,204,736.30 | 64,027,461.27 |
| II. Post-employment Benefits - Defined Contribution Plan | 21,195,870.31 | 21,195,870.31 | ||
| III. Termination Benefits | 593,908.00 | 593,908.00 | ||
| Total | 52,788,749.44 | 421,233,226.44 | 409,994,514.61 | 64,027,461.27 |
(2) List of short-term benefits
Unit: RMB
| Item | Opening balance | Increase in the current | Decrease in the current | Closing balance |
| period | period | |||
| 1. Salary, bonus and subsidy | 52,788,749.44 | 364,677,995.12 | 353,439,283.29 | 64,027,461.27 |
| 2. Employee welfare | 10,704,713.61 | 10,704,713.61 | ||
| 3. Social insurance premiums | 14,571,967.86 | 14,571,967.86 | ||
| Including: Medical insurance | 13,495,938.93 | 13,495,938.93 | ||
| Employment injury insurance | 412,523.07 | 412,523.07 | ||
| Maternity insurance | 663,505.86 | 663,505.86 | ||
| 4. Housing provident fund | 7,347,924.98 | 7,347,924.98 | ||
| 5. Labor union fee and staff education fee | 2,140,846.56 | 2,140,846.56 | ||
| Total | 52,788,749.44 | 399,443,448.13 | 388,204,736.30 | 64,027,461.27 |
(3) List of defined contribution plans
Unit: RMB
| Item | Opening balance | Increase in the current period | Decrease in the current period | Closing balance |
| 1. Basic endowment insurance | 20,570,802.95 | 20,570,802.95 | ||
| 2. Unemployment insurance | 625,067.36 | 625,067.36 | ||
| Total | 21,195,870.31 | 21,195,870.31 |
Other description:
20. Taxes payable
Unit: RMB
| Item | Closing balance | Opening balance |
| Value-added tax | 36,201,763.85 | 30,271,977.65 |
| Corporate income tax | 91,276,509.31 | 70,175,903.75 |
| City construction and maintenance tax | 1,329,110.07 | 910,458.57 |
| Education surcharges | 949,697.81 | 651,088.07 |
| Others | 1,212,181.56 | 568,386.98 |
| Total | 130,969,262.60 | 102,577,815.02 |
Other description:
21. Other payables
Unit: RMB
| Item | Closing balance | Opening balance |
| Other payables | 55,878,486.28 | 44,335,743.56 |
| Total | 55,878,486.28 | 44,335,743.56 |
(1) Other payables
1) Other payables based on amount nature
Unit: RMB
| Item | Closing balance | Opening balance |
| Margins and deposits | 34,064,534.19 | 27,387,628.54 |
| Fees payable | 21,016,130.22 | 16,410,510.42 |
| Others | 797,821.87 | 537,604.60 |
| Total | 55,878,486.28 | 44,335,743.56 |
22. Non-current liabilities due within one year
Unit: RMB
| Item | Closing balance | Opening balance |
| Lease liabilities due within one year | 197,019,114.42 | 177,712,848.98 |
| Total | 197,019,114.42 | 177,712,848.98 |
Other description:
23. Other current liabilities
Unit: RMB
| Item | Closing balance | Opening balance |
| Refunds payable | 314,200,407.66 | 211,040,964.42 |
| Output tax pending carryforward | 14,430,445.68 | 40,125,347.28 |
| Total | 328,630,853.34 | 251,166,311.70 |
Changes in short-term bonds payable:
Unit: RMB
| Name of bond | Par value | Date of issuance | Term of bond | Amount issued | Opening balance | Issuance in the period | Interest accrued at par value | Amortization of premiums and discounts | Repayment in the period | Balance at the end of the period | |
| Total | -- | -- | -- |
Other description:
— Refunds payable is the adjustment to the clothing selling income of franchise stores made by the Company based on the return andexchange policies and estimated return and exchange rate.— The closing balance of other current liabilities increased by RMB77,464,541.64 or 30.84% compared with the opening balance in2021, mainly owing to the increase in expected payments for returns and exchanges of franchise stores.
24. Bonds payable
(1) Bonds payable
Unit: RMB
| Item | Closing balance | Opening balance |
| Convertible bonds | 284,554,163.11 | 630,982,939.14 |
| Total | 284,554,163.11 | 630,982,939.14 |
(2) Changes in the increase and decrease of the bonds payable (excluding other financial instruments suchas preference shares and perpetual bonds that are divided into financial liabilities)
Unit: RMB
| Name of bond | Par value | Date of issuance | Term of bond | Amount issued | Opening balance | Issuance in the period | Interest accrued at par value | Amortization of premiums and discounts | Repayment in the period | Conversion to shares in the period | Closing balance |
| BYZZ | 689,000,000.00 | June 15, 2020 | 6 | 689,000,000.00 | 630,982,939.14 | 2,256,312.02 | -43,798,288.75 | 1,430,176.80 | 391,053,200.00 | 284,554,163.11 | |
| Total | -- | -- | -- | 689,000,000.00 | 630,982,939.14 | 2,256,312.02 | -43,798,288.75 | 1,430,176.80 | 391,053,200.00 | 284,554,163.11 |
(3) Conversion conditions and time
The China Securities Regulatory Commission issued the Reply on Approving the Public Listing of Convertible Bonds byBIEM.L.FDLKK Garment Co., Ltd. (CSRC Approval [2020] No. 638) in June 2020, according to which the Company issued 6.89
million convertible bonds to the general public (“BYZZ”). The par value of each bond is RMB100.00 and total offered amount isRMB689 million, with a term of six years.In accordance with relevant provisions of the Prospectus for the Public Offering of Convertible Bonds by BIEM.L.FDLKK GarmentCo., Ltd., the convertible bonds may be converted into shares of the Company from the first trading day after six months upon theend date of bond issuance (June 19, 2020) to the maturity date of the bond, namely from December 21, 2020 to June 14, 2026. Theinitial conversion price was RMB14.90/share.The Company implemented its 2020 profit distribution plan on July 7, 2021. Pursuant to relevant terms regarding share conversionprice of the convertible bonds, the conversion price of “BYZZ” was adjusted from RMB14.90/share to RMB14.60/share.
25. Lease liabilities
Unit: RMB
| Item | Closing balance | Opening balance |
| Lease liabilities | 217,323,756.45 | 298,677,940.84 |
| Total | 217,323,756.45 | 298,677,940.84 |
Other description
26. Deferred income
Unit: RMB
| Item | Opening balance | Increase in the current period | Decrease in the current period | Closing balance | Reason |
| Government grants | 30,000,000.00 | 30,000,000.00 | Related to asset | ||
| Total | 30,000,000.00 | 30,000,000.00 | -- |
Projects involving government grants:
Unit: RMB
| Liability item | Opening balance | Increased amount of grants in the current period | Amount included in non-operating revenue in the current period | Amount included in other income in the current period | Amount of offset costs in the current period | Other changes | Closing balance | Related to asset/income |
| Support funds for the construction of intelligent storage center | 30,000,000.00 | 30,000,000.00 | Related to asset |
27. Share capital
Unit: RMB
| Opening balance | Increase and decrease of this change (+ and -) | Closing balance | |||||
| Issuance of new shares | Bonus shares | Shares transferred from surplus reserve | Others | Subtotal | |||
| Total number of shares | 524,075,085.00 | 26,251,627.00 | 26,251,627.00 | 550,326,712.00 | |||
Other description:
— The increase under “others”: As stated in Note VII (24) of this financial report, the Company issued convertible bonds. As ofDecember 31, 2021, 26,257,002.00 shares had been converted from “BYZZ” convertible bonds, of which 26,251,627.00 shares wereconverted in 2021.
28. Other equity instruments
(1) Basic information on other financial instruments in issue at the end of the reporting period, such as thepreference shares and perpetual bondsFor basic information on other financial instruments in issue at the end of the reporting period such as the preference shares andperpetual bonds, please refer to Note VII (24) Bonds payable.
(2) Table of changes in other financial instruments in issue at the end of the reporting period, such as thepreference shares and perpetual bonds
Unit: RMB
| Financial instruments in issue | Beginning of the period | Increase in the current period | Decrease in the current period | End of the period | ||||
| Number | Book value | Number | Book value | Number | Book value | Number | Book value | |
| BYZZ | 6,889,198 | 63,661,135.54 | 3,910,532 | 36,136,681.38 | 2,978,666 | 27,524,454.16 | ||
| Total | 6,889,198 | 63,661,135.54 | 3,910,532 | 36,136,681.38 | 2,978,666 | 27,524,454.16 | ||
Description of increase/decrease of other equity instruments in the reporting period, reasons of change, and accounting basis:
— Other equity instruments decreased by RMB36,136,681.38 in the reporting period, owing to the conversion of convertible bondsinto shares. For details, please refer to “Note VII (27) Share capital”.
29. Capital reserve
Unit: RMB
| Item | Opening balance | Increase in the current period | Decrease in the current period | Closing balance |
| Capital premium (share premium) | 226,927,846.51 | 373,542,599.64 | 600,470,446.15 | |
| Total | 226,927,846.51 | 373,542,599.64 | 600,470,446.15 |
Other descriptions, including increase/decrease in the reporting period and reasons of change:
Capital reserve increased by RMB373,542,599.64 in the reporting period, owing to the conversion of convertible bonds into shares.
30. Other comprehensive income
Unit: RMB
| Item | Opening balance | Incurred in the current period | Closing balance | |||||
| Amount before income tax in the period | Less: Amount previously included in other comprehensive income and transferred to profit or loss in the period | Less: Amount previously included in other comprehensive income and transferred to retained earnings in the period | Less: Income tax expense | Amount attributable to the Parent Company after tax | Amount attributable to minority shareholders after tax | |||
| I. Other comprehensive income that cannot be reclassified into profit or loss | -6,249,160.64 | 5,313,931.80 | -148,618.89 | 5,406,986.92 | 55,563.77 | -842,173.72 | ||
| Changes in fair value of investments in other equity instruments | -6,249,160.64 | 5,313,931.80 | -148,618.89 | 5,406,986.92 | 55,563.77 | -842,173.72 | ||
| Total of other comprehensive income | -6,249,160.64 | 5,313,931.80 | -148,618.89 | 5,406,986.92 | 55,563.77 | -842,173.72 | ||
Other description, including adjustments arising from transferring the effective portion of gains and losses on cash flow hedges to theinitial recognition amount of the hedged item:
31. Surplus reserve
Unit: RMB
| Item | Opening balance | Increase in the current period | Decrease in the current period | Closing balance |
| Statutory surplus reserve | 194,828,010.62 | 63,282,325.31 | 258,110,335.93 | |
| Total | 194,828,010.62 | 63,282,325.31 | 258,110,335.93 |
Explanation of surplus reserve, including increase/decrease in the reporting period and reasons of change:
— The increase in the Company’s surplus reserve in the reporting period is due to the appropriation of the statutory surplus reserve at10% of the Parent Company’s net profit in the period.
32. Retained earnings
Unit: RMB
| Item | Current period | Last period |
| Retained earnings before adjustment at the end of the last period | 1,413,582,872.58 | 1,072,977,728.32 |
| Total adjustment of retained earnings at the beginning of the period (“+” for increase and “-” for decrease) | 51,814,315.93 | |
| Retained earnings at the beginning of the period after adjustment | 1,413,582,872.58 | 1,124,792,044.25 |
| Plus: Net profit attributable to owners of the parent company of the current period | 624,541,483.00 | 498,822,424.55 |
| Less: Appropriated statutory surplus reserve | 63,282,325.31 | 55,893,446.22 |
| Dividends on ordinary shares payable | 164,990,208.30 | 154,138,150.00 |
| Retained earnings at the end of the period | 1,809,851,821.97 | 1,413,582,872.58 |
Details on adjusting retained earnings at the beginning of the period:
(1) Due to retrospective adjustments according to the Accounting Standards for Business Enterprises and its related new provisions,retained earnings at the beginning of the period was impacted by RMBXX.
(2) Due to the changes in accounting policies, retained earnings at the beginning of the period were impacted by RMBXX.
(3) Due to the correction of material accounting errors, retained earnings at the beginning of the period were impacted by RMBXX.
(4) Due to the changes in the consolidated scope arising from business combinations under same control, retained earnings at thebeginning of the period was impacted by RMBXX.
(5) Other adjustments affected retained earnings at the beginning of the period by RMBXX.
33. Revenue and cost of revenue
Unit: RMB
| Item | Incurred in the current period | Incurred in the prior period | ||
| Revenue | Cost | Revenue | Cost | |
| Principal business | 2,719,943,987.32 | 634,160,601.71 | 2,303,301,051.46 | 601,546,395.40 |
| Other businesses | 45,269.82 | 25,160.38 | ||
| Total | 2,719,989,257.14 | 634,160,601.71 | 2,303,326,211.84 | 601,546,395.40 |
Whether lower of the audited net profits before and after deducting the non-recurring profit and loss is negative
□ Yes √ No
34. Tax and surcharges
Unit: RMB
| Item | Incurred in the current period | Incurred in the prior period |
| City construction and maintenance tax | 12,273,316.92 | 6,854,156.18 |
| Education surcharges | 5,319,074.54 | 2,939,830.36 |
| Local education surcharges | 3,546,047.89 | 1,959,772.09 |
| Other taxes and fees | 2,824,038.23 | 2,229,573.44 |
| Total | 23,962,477.58 | 13,983,332.07 |
Other description:
35. Selling expenses
Unit: RMB
| Item | Incurred in the current period | Incurred in the prior period |
| Store operating expenses | 359,724,699.13 | 461,267,036.64 |
| Employee benefits | 292,614,931.34 | 245,331,238.57 |
| Depreciation of right-of-use assets | 175,539,936.53 | |
| Decoration and renovation expenses | 84,303,737.40 | 76,410,689.85 |
| Advertising expenses | 78,889,887.30 | 62,254,284.32 |
| Office and business travel expenses | 20,281,804.02 | 13,647,638.74 |
| Transportation expenses | 10,068,692.80 | 8,614,867.40 |
| E-commerce service fees | 8,659,135.65 | 6,549,205.73 |
| Others | 10,969,661.97 | 11,293,498.01 |
| Total | 1,041,052,486.14 | 885,368,459.26 |
36. Administrative expenses
Unit: RMB
| Item | Incurred in the current period | Incurred in the prior period |
| Employee benefits | 74,442,596.47 | 51,016,526.18 |
| Depreciation and amortization | 26,494,225.47 | 22,794,914.22 |
| Agency fee | 13,936,114.88 | 13,580,832.39 |
| Depreciation of right-of-use assets | 12,445,016.24 | |
| Office and business travel expenses | 11,700,066.13 | 12,814,603.95 |
| Office premise usage fee | 9,838,670.93 | 27,080,769.82 |
| Others | 7,410,884.14 | 5,345,784.02 |
| Total | 156,267,574.26 | 132,633,430.58 |
37. R&D expenses
Unit: RMB
| Item | Incurred in the current period | Incurred in the prior period |
| Employee benefits | 54,175,698.63 | 41,907,397.53 |
| New product R&D | 22,525,478.10 | 17,127,163.13 |
| Depreciation and amortization | 3,769,157.59 | 1,747,718.17 |
| Office and business travel expenses | 2,616,395.96 | 3,888,847.71 |
| Others | 301,398.39 | 133,732.82 |
| Total | 83,388,128.67 | 64,804,859.36 |
38. Finance expenses
Unit: RMB
| Item | Incurred in the current period | Incurred in the prior period |
| Interest expense of convertible bonds | 18,670,744.11 | 15,998,242.73 |
| Interest expense of lease liabilities | 21,058,743.02 | |
| Less: Interest income | 18,147,338.76 | 6,842,458.41 |
| Others | 223,387.32 | 543,475.05 |
| Total | 21,805,535.69 | 9,699,259.37 |
Other description:
— Interest income in 2021 increased by RMB11,304,880.35 or 165.22% compared with 2020, owing to interests accrued by thepurchased large-denomination Certificate of Deposit.— Interest expense on lease liabilities in 2021 increased by RMB21,058,743.02 compared with 2020, owing to the Company’sadoption of the New Lease Standards.
39. Other income
Unit: RMB
| Sources of other income | Incurred in the current period | Incurred in the prior period |
| Government grants | 14,577,835.79 | 15,349,526.38 |
| Others | 203,782.61 | 147,175.44 |
| Total | 14,781,618.40 | 15,496,701.82 |
40. Return on investment
Unit: RMB
| Item | Incurred in the current period | Incurred in the prior period |
| Gain from debt restructuring | 104,009.33 | |
| Income from wealth management products | 38,711,860.90 | 24,501,459.48 |
| Total | 38,815,870.23 | 24,501,459.48 |
41. Income from changes in fair value
Unit: RMB
| Source of income from changes in fair value | Incurred in the current period | Incurred in the prior period |
| Financial assets held for trading - wealth management products | 3,424,832.00 | 425,333.33 |
| Total | 3,424,832.00 | 425,333.33 |
42. Credit impairment loss
Unit: RMB
| Item | Incurred in the current period | Incurred in the prior period |
| Bad debt loss | 314,860.76 | -5,259,711.60 |
| Total | 314,860.76 | -5,259,711.60 |
43. Asset impairment loss
Unit: RMB
| Item | Incurred in the current period | Incurred in the prior period |
| II. Impairment Loss of Inventories and Contract Performance Cost | -78,683,952.73 | -48,457,945.87 |
| Total | -78,683,952.73 | -48,457,945.87 |
44. Return on disposal of assets
Unit: RMB
| Source | Incurred in the current period | Incurred in the prior period |
| Profits/losses from the disposal of non-current asset | -253,775.79 | -2,728.63 |
| Total | -253,775.79 | -2,728.63 |
45. Non-operating revenue
Unit: RMB
| Item | Incurred in the current period | Incurred in the prior period | Amount recognized as profit or loss of the current period |
| Government grants | 4,313,900.00 | ||
| Others | 531,942.90 | 476,200.02 | 531,942.90 |
| Total | 531,942.90 | 4,790,100.02 | 531,942.90 |
Government grants recognized as profit and loss of the current period:
Unit: RMB
| Grants | Issuer | Reason | Nature and type | Whether the grant affected the profit and loss of the year | Whether a special grant | Amount incurred in the current period | Amount incurred in the last period | Related to asset/income |
| Reward for local contributions of headquarter enterprises | Panyu District Bureau of Development and Reform, Guangzhou | Reward | Grants received as a result of compliance with local government policies such as investment attraction and other local support policies | No | No | 4,313,900.00 | Related to income |
46. Non-operating expenses
Unit: RMB
| Item | Incurred in the current period | Incurred in the prior period | Amount recognized as profit or loss of the current period |
| External donations | 5,175,531.18 | 253,840.00 | 5,175,531.18 |
| Loss from retirement of non-current assets | 157,289.86 | 51,998.80 | 157,289.86 |
| Loss of deposit for early termination of lease | 101,400.00 | 950,297.51 | 101,400.00 |
| Others | 179,121.61 | 399,830.63 | 179,121.61 |
| Total | 5,613,342.65 | 1,655,966.94 | 5,613,342.65 |
47. Income tax expenses
(1) Table of income tax expenses
Unit: RMB
| Item | Incurred in the current period | Incurred in the prior period |
| Current income tax expense | 134,891,825.25 | 108,367,291.57 |
| Deferred income tax expense | -26,762,252.49 | -22,041,946.64 |
| Total | 108,129,572.76 | 86,325,344.93 |
(2) Adjustment process of accounting profits and income tax expenses
Unit: RMB
| Item | Incurred in the current period |
| Total profit | 732,670,506.21 |
| Income tax expenses calculated at the statutory/applicable tax rate | 109,900,575.95 |
| Impacts of different tax rates applied to subsidiaries | 6,099,398.29 |
| Impacts of adjustments to income taxes during the prior period | -197,758.56 |
| Impacts of non-deductible costs, expenses and losses | 1,512,686.15 |
| Impact of above-rate deduction of R&D expenses | -9,185,329.07 |
| Income tax expenses | 108,129,572.76 |
Other description
48. Other comprehensive income
Please refer to Note VII (30) for details.
49. Items of the cash flow statement
(1) Cash received related to other operating activities
Unit: RMB
| Item | Incurred in the current period | Incurred in the prior period |
| Government grants | 14,577,835.79 | 19,663,426.38 |
| Deposits for bank acceptance bills | 14,313,046.91 | |
| Interest income | 6,788,310.98 | 7,092,258.43 |
| Operation-related deposits | 18,438,232.59 | 12,845,131.44 |
| Others | 735,725.51 | 298,586.68 |
| Total | 40,540,104.87 | 54,212,449.84 |
Description of cash received related to other operating activities:
(2) Cash payments related to other operating activities
Unit: RMB
| Item | Incurred in the current period | Incurred in the prior period |
| Margins and deposits | 16,301,529.53 | 11,194,741.99 |
| Period expense for cash payment | 356,681,090.61 | 249,168,287.19 |
| Deposits for bank acceptance bills | 3,835,587.75 | |
| External donations | 5,175,531.18 | 253,840.00 |
| Total | 381,993,739.07 | 260,616,869.18 |
(3) Cash received related to other investing activities
Unit: RMB
| Item | Incurred in the current period | Incurred in the prior period |
| Structured deposits and wealth management products | 3,130,000,000.00 | 1,770,000,000.00 |
| Total | 3,130,000,000.00 | 1,770,000,000.00 |
(4) Cash payments related to other investing activities
Unit: RMB
| Item | Incurred in the current period | Incurred in the prior period |
| Structured deposits, time deposits and wealth management products | 3,110,000,000.00 | 2,740,000,000.00 |
| Security deposits | 29,000,000.00 | 695,324.10 |
| Total | 3,139,000,000.00 | 2,740,695,324.10 |
(5) Cash payments related to other financing activities
Unit: RMB
| Item | Incurred in the current period | Incurred in the prior period |
| Rental fees | 58,595,168.29 | |
| Service charge for dividend distribution | 275,573.01 | |
| Others | 1,391,573.94 | |
| Total | 58,595,168.29 | 1,667,146.95 |
Description of cash paid related to other financing activities:
50. Supplementary information to cash flow statement
(1) Supplementary information to cash flow statement
Unit: RMB
| Supplementary information | Amount of the current period | Amount of last period |
| 1 Reconciliation of net profit to cash flows from operating activities: | -- | -- |
| Net Profit | 624,540,933.45 | 498,802,372.48 |
| Plus: Provisions for asset impairment | 78,369,091.97 | 53,717,657.47 |
| Depreciation of fixed assets, oil and gas assets and productive biological assets | 23,446,859.64 | 19,595,615.37 |
| Depreciation of right-of-use assets | 187,984,952.77 | |
| Intangible asset amortization | 10,178,688.43 | 8,488,245.63 |
| Amortization of long-term prepaid expenses | 71,980,366.17 | 65,468,237.02 |
| Losses from disposal of fixed assets, intangible assets and other long-lived assets (“-” indicates income) | 253,775.79 | 2,728.63 |
| Losses from fixed assets write-off (“-” indicates income) | 157,289.86 | 51,998.80 |
| Losses from changes in fair value (“-” indicates income) | -3,424,832.00 | -425,333.33 |
| Finance expenses (“-” indicates income) | 39,729,487.13 | 16,273,815.74 |
| Investment losses (“-” indicates income) | -38,815,870.23 | -24,501,459.48 |
| Decrease in deferred tax assets (“-” indicates increase) | -27,363,238.95 | -22,900,322.13 |
| Increase in deferred tax liabilities | 600,986.46 | 858,375.49 |
| (“-” indicates decrease) | ||
| Decrease in inventories (“-” indicates increase) | -131,218,395.92 | -15,618,773.41 |
| Decrease in operating receivables (“-” indicates increase) | -17,729,808.30 | -96,113,948.24 |
| Increase in operating payables (“-” indicates decrease) | 78,833,351.80 | 133,150,389.16 |
| Others | ||
| Net cash flow from operating activities | 897,523,638.07 | 636,849,599.20 |
| 2 Significant investment and financing activities not involving cash: | -- | -- |
| Conversion of debt to capital | ||
| Convertible corporate bonds due within one year | ||
| Fixed assets acquired under finance lease | ||
| Right-of-use assets added in the period | 123,036,592.73 | |
| 3 Net changes in cash and cash equivalents: | -- | -- |
| Balance of cash at the end of the period | 1,058,018,706.05 | 569,284,546.79 |
| Less: Balance of cash at the beginning of the period | 569,284,546.79 | 451,617,760.46 |
| Plus: Balance of cash equivalents at the end of the period | ||
| Less: Balance of cash equivalents at the beginning of the period | ||
| Net increase in cash and cash equivalents | 488,734,159.26 | 117,666,786.33 |
(2) Composition of cash and cash equivalents
Unit: RMB
| Item | Closing balance | Opening balance |
| I. Cash | 1,058,018,706.05 | 569,284,546.79 |
| Including: Cash on hand | 142,548.00 | 135,833.35 |
| Bank deposits always available for payment | 1,057,876,158.05 | 569,148,713.44 |
| III. Balance of Cash and Cash Equivalents at | 1,058,018,706.05 | 569,284,546.79 |
Other description:
—The balance of cash and cash equivalents at the end of the period has deducted interests receivable from bank deposits atRMB11,359,027.78 and security deposits for bank acceptance bills at RMB13,334,484.75.
51. Assets with restricted right to use or ownership
Unit: RMB
the End of the PeriodItem
| Item | Book value at the end of the period | Reason for restriction |
| Monetary funds | 13,334,484.75 | Deposits for bank acceptance bills |
| Total | 13,334,484.75 | -- |
52. Government grants
(1) Basic information on government grants
Unit: RMB
| Category | Amount | Reporting items | Amount recognized as profit or loss for the current period |
| Award for innovation park | 5,994,749.00 | Other income | 5,994,749.00 |
| Financial support fund | 3,217,416.00 | Other income | 3,217,416.00 |
| Tax subsidy | 1,834,000.00 | Other income | 1,834,000.00 |
| Subsidy for industrial innovation capacity building (industrial design capacity improvement) | 987,300.00 | Other income | 987,300.00 |
| Subsidy for office space rental | 909,784.00 | Other income | 909,784.00 |
| Award for leading innovation team | 500,000.00 | Other income | 500,000.00 |
| Special fund for the development of medium, small and micro enterprises | 409,000.00 | Other income | 409,000.00 |
| Award for high-tech enterprise certification | 400,000.00 | Other income | 400,000.00 |
| Award for high-tech enterprise | 200,000.00 | Other income | 200,000.00 |
| Subsidy for job stabilization | 65,586.79 | Other income | 65,586.79 |
| Award for headquarter enterprises (award for mid-level and senior managers) | 60,000.00 | Other income | 60,000.00 |
| Total | 14,577,835.79 | - | 14,577,835.79 |
VIII. Changes in the Consolidated Scope
1. Disposal of subsidiaries
Whether there is situation that one disposal of investment in a subsidiary leads to a loss of control
□ Yes √ No
Whether there is situation that the disposal of investment in a subsidiary is achieved in stages through multiple transactions while thecontrol is lost in the reporting period
□ Yes √ No
2. Changes in the scope of consolidation due to other reasons
Newly established subsidiariesDuring the reporting period, one new subsidiary was added to the Company’s consolidation scope, i.e. Ningbo BIEM.L.FDLKKSmart Technology Co., Ltd., which is a wholly-owned subsidiary of the Company established in April 21, 2021.IX. Equities in Other Entities
1. Equities in subsidiaries
(1) Composition of the enterprise group
| Name of subsidiary | Main business address | Registered address | Principal businesses | Shareholding percentage | Obtaining method | |
| Direct | Indirect | |||||
| Guangzhou BIEM.L.FDLKK Business Consulting Co., Ltd. | Guangzhou | Guangzhou | Rental and business services | 100.00% | Investment and establishment | |
| Guangzhou BIEM.L.FDLKK Supply Chain Management Co., Ltd. | Guangzhou | Guangzhou | Rental and business services | 100.00% | Investment and establishment | |
| Ningbo BIEM.L.FDLKK Supply Chain Management Co., Ltd. | Ningbo | Ningbo | Supply chain management and business services | 100.00% | Investment and establishment | |
| Xuzhou BIEM.L.FDLKK Supply Chain Management Co., Ltd. | Xuzhou | Xuzhou | Supply chain management and business services | 100.00% | Investment and establishment | |
| Ningbo BIEM.L.FDLKK Smart Technology Co., Ltd. | Ningbo | Ningbo | Supply chain management and business services | 100.00% | Investment and establishment | |
| Guangzhou BIEM.L.FDLKK Ejam Equity Investment Partnership (Limited Partnership) | Guangzhou | Guangzhou | Finance industry | 99.01% | Investment and establishment |
Description of the difference between the percentage of shares held in a subsidiary and the percentage of voting rightsBasis for holding 50% or less than of the voting rights but controlling the investee, or holding 50% or more of the voting rights butnot controlling the investee:
(2) Important non-wholly-owned subsidiaries
Unit: RMB
| Name of subsidiary | Shareholding percentage of minority shareholders | Profit and loss attributable to minority shareholders in the period | Dividends declared to minority shareholders in the period | Closing balance of equity of minority shareholders |
| Guangzhou BIEM.L.FDLKK Ejam Equity Investment Partnership (Limited Partnership) | 0.99% | -549.55 | 967,735.13 |
(3) Main financial information of important non-wholly-owned subsidiaries
Unit: RMB
| Name of subsidiary | Closing balance | Opening balance | ||||||||||
| Current assets | Non-current assets | Total assets | Current liabilities | Non-current liabilities | Total liabilities | Current assets | Non-current assets | Total assets | Current liabilities | Non-current liabilities | Total liabilities | |
| Guangzhou BIEM.L.FDLKK Ejam Equity Investment Partnership (Limited Partnership) | 822,722.25 | 98,099,300.47 | 98,922,022.72 | 1,181,101.00 | 1,181,101.00 | 876,232.68 | 92,785,368.67 | 93,661,601.35 | 1,179,101.00 | 1,179,101.00 |
Unit: RMB
| Name of subsidiary | Incurred in the current period | Incurred in the prior period | ||||||
| Revenue | Net Profit | Total comprehensive income | Cash flows from operating activities | Revenue | Net Profit | Total comprehensive income | Cash flows from operating activities | |
| Guangzhou BIEM.L.FDLKK Ejam Equity Investment Partnership (Limited Partnership) | -55,510.43 | 5,258,421.37 | -53,510.43 | -2,025,461.62 | -8,638,663.32 | -6,461.62 | ||
Other description:
X. Risks Associated with Financial Instruments
The Company may face various risks related to financial instruments in the course of operations, mainly including credit risks,market risks and liquidity risks. The management of the Company is fully responsible for determining risk management objectivesand policies, and assumes ultimate responsibility for the risk management objectives and policies. The overall goal of riskmanagement is to develop risk management policies that minimize risks without unduly affecting the Company’s competitivenessand resilience. The goal and policies of the Company’s risk management is to strike a proper balance between risks and gains and tominimize the negative impact of risks on the business performance of the Company while maximizing the interests of shareholdersand other equity investors. Based on this risk management goal, the basic strategy of the Company’s risk management is to determineand analyze all kinds of risks faced by the Company, clarify the minimum of risk acceptance and conduct risk management, andmonitor risks of all kinds in a timely and reliable manner to control risks within the limits.
(I) Credit riskCredit risk refers to the risk of financial losses of one party caused by the failure of the other party to perform its obligations. Toreduce credit risk, the Company has established relevant internal control policies responsible for determining credit limits,conducting credit approvals, including external credit ratings and, in some cases, bank credit certificates (when such information isavailable), and performing other monitoring procedures to ensure that necessary action is taken to recover overdue claims. Therefore,the management of the Company believes that the credit risk assumed by the Company has been greatly reduced.The Company’s credit risk mainly arises from bank deposits, financial assets held for trading, accounts receivable, other receivables,etc. The credit risk of these financial assets originates from the default of the counterparty, and the maximum risk exposure is equalto the book value of these instruments.
1. Liquid funds of the Company are deposited in banks with high credit ratings, so the credit risk of liquid funds is low.
2. The Company has set aside bad debt reserves according to accounting policies on the balance sheet date.(II) Liquidity riskLiquidity risk refers to the risk of capital shortage when an enterprise fulfills its obligation to settle accounts by delivering cash orother financial assets. The Company has formulated an internal control system related to cash management, regularly prepares rollingfund budgets, and monitors short-term and long-term liquidity needs in real time. The goal is to use bank loans, commercial creditsand other means to maintain a balance between financing continuity and flexibility.XI. Disclosure of Fair Value
1. Closing fair values of assets and liabilities measured at fair value
Unit: RMB
| Item | Closing fair value | |||
| Fair value measurement with Level 1 inputs | Fair value measurement with Level 2 inputs | Fair value measurement with Level 3 inputs | Total | |
| I. Recurring Fair Value Measurement | -- | -- | -- | -- |
| (I) Financial assets held for trading | 1,338,986.96 | 633,424,832.00 | 634,763,818.96 | |
| 1. Financial assets measured at fair value through profit or loss | 1,338,986.96 | 633,424,832.00 | 634,763,818.96 | |
| (III) Investment in other equity instruments | 98,099,300.47 | 98,099,300.47 | ||
| Total recurring assets measured at fair value | 1,338,986.96 | 633,424,832.00 | 98,099,300.47 | 732,863,119.43 |
| II. Non-recurring Fair | -- | -- | -- | -- |
2. Basis for determining the market price of recurring and non-recurring fair value measurements withLevel 1 inputs
If there is an active market for a financial instrument, the Company establishes its fair value by using quoted price in the activemarket.
3. Qualitative and quantitative information on important parameters and valuation techniques used forrecurring and non-recurring fair value measurements with Level 2 inputsThe fair value of wealth management products of banks with recurring and non-recurring measurements is determined based on theexpected rate of return of the product.
4. Qualitative and quantitative information on important parameters and valuation techniques used forrecurring and non-recurring fair value measurements with Level 3 inputsIf there is no active market, the Company establishes fair value by using valuation techniques. Valuation models mainly include thediscounted cash flow model and market comparable company model. Important parameters of valuation techniques mainly includerisk-free interest rate, benchmark interest rate, exchange rate, credit spread, liquidity premium, EBIDA multiplier, etc.The fair value of equity investments in Shenzhen Youanmi Technology Co., Ltd.is measured using the latest financing price method.For equity investments in Fast Fashion (Guangzhou) Co., Ltd., considering that there have been no significant changes in its assets,liabilities and operations, the cost method is used to reasonably estimate the fair value.
5. Adjustment information and sensitivity analysis of unobservable parameters between the opening andclosing values of recurring fair value measurements with Level 3 inputsNone
6. For recurring fair value measurements with change of levels in the period, reasons for such change andpolicies for determining the time of change
There was no change of levels for recurring fair value measurements during the reporting period.
7. Changes in valuation techniques within the reporting period and reasons for such changesNone
8. Fair values of financial assets and financial liabilities not measured at fair valueFinancial assets and financial liabilities of the Company not measured at fair value mainly comprise monetary funds, accountsreceivable, other receivables, notes payable, accounts payable, other payables, etc. For such assets and liabilities, their carryingamount is very close to their fair value.
XII. Related Parties and Related Party Transactions
1. Information on the Parent Company of the Company
(I) Actual controller of the Company
| Name | Relationship with related party | Shareholding percentage in the Company (%) | Percentage of voting right in the Company (%) |
Xie Bingzheng
| Xie Bingzheng | Shareholder | 39.28 | 39.28 |
| Feng Lingling | Shareholder | 3.57 | 3.57 |
Xie Bingzheng and Feng Lingling, who are a couple, directly hold 42.85% of the Company’s shares, and Xie Bingzheng indirectlyholds 0.04% through Guangzhou Jinan Investment Co., Ltd.; Xie Bingzheng and Feng Lingling are the actual controllers of theCompany.
2. Information on subsidiaries of the Company
See “Note IX. 1. Equities in Other Entities” for detailed information on the subsidiaries of the Company.
3. Information on other related parties
| Name of other related parties | Relationship between other related parties and the Company |
| Hongzhou Xindu Trading Co., Ltd. | A company controlled by the relative of the Company’s actual controller |
| Hongzhou Gejiu Xuecheng Garment Co., Ltd. | A company controlled by the relative of the Company’s actual controller |
| Guangzhou Yixiang Garment Co., Ltd. | A company controlled by the relative of the Company’s actual controller |
4. Information on related party transactions
(1) Related party transactions for procurement and sale of goods, and provision and acceptance of laborservicesProcurement of goods/acceptance of labor services
Unit: RMB
| Related party | Content of related party transaction | Incurred in the current period | Approved transaction limit | Whether to outstrip the transaction limit | Incurred in the prior period |
| Guangzhou Yixiang Garment Co., Ltd. | Procurement of goods | 34,420,367.36 | 46,000,000.00 | No | 18,973,179.55 |
Table of sale of goods/provision of labor services
Unit: RMB
| Related party | Content of related party | Incurred in the current period | Incurred in the prior period |
| transaction | |||
| Hongzhou Xindu Trading Co., Ltd. | Garment | 1,287,126.22 | 9,780,908.58 |
| Hongzhou Gejiu Xuecheng Garment Co., Ltd. | Garment | 7,258,812.08 |
Explanation of the related party transactions for purchase and sale of goods, and provision and acceptance of labor services
(2) Remuneration for key managers
Unit: RMB
| Item | Incurred in the current period | Incurred in the prior period |
| Remuneration for key managers | 5,447,666.46 | 4,724,160.13 |
5. Receivables from and payables to related parties
(1) Receivables
Unit: RMB
| Project | Related party | Closing balance | Opening balance | ||
| Book balance | Impairment provision | Book balance | Impairment provision | ||
| Prepayments | Guangzhou Yixiang Garment Co., Ltd. | 642,690.33 | 2,307,459.87 | ||
(2) Payables
Unit: RMB
| Project | Related party | Book balance at the end of the period | Book balance at the beginning of the period |
| Accounts payable | Guangzhou Yixiang Garment Co., Ltd. | 908,712.66 | |
| Contract liabilities | Hongzhou Xindu Trading Co., Ltd. | 1,288,607.60 | |
| Contract liabilities | Hongzhou Gejiu Xuecheng Garment Co., Ltd. | 1,568,366.50 | |
| Other payables | Hongzhou Xindu Trading Co., Ltd. | 554,909.00 | |
| Other payables | Hongzhou Gejiu Xuecheng Garment Co., Ltd. | 206,668.66 |
XIII. Share-based Payment
1. Overall information on share-based payment
□ Applicable √ Not applicable
2. Equity-settled share-based payment
□ Applicable √ Not applicable
3. Cash-settled share-based payment
□ Applicable √ Not applicable
4. Revision and termination of share-based payment
Not applicable
5. Others
Not applicableXIV. Commitments and Contingencies
1. Significant commitments
Significant commitments on the balance sheet dateAs of December 31, 2021, significant capital expenditure commitments that the Company has signed but do not need to presenton the balance sheet are as follows:
Unit: RMB
| Item | December 31, 2021 |
| Properties and buildings | 123,245,923.28 |
Total
| Total | 123,245,923.28 |
2. Contingencies
(1) Significant contingent matters on the balance sheet date
The Company had no significant contingent matters that need to be disclosed as at December 31, 2021.
(2) Explanations are also necessary if the Company has no significant contingent matters to be disclosedThere are no significant contingent matters to be disclosed in the Company.XV. Events after Balance Sheet Date
1. Profit distribution
Unit: RMB
| Profits or dividends proposed to be distributed | 171,212,125.20 |
| Profits or dividends distributed after deliberation, approval and announcement | 171,212,125.20 |
2. Explanation on other events after the balance sheet date
(I) Profit distributionThe Company convened a Board meeting on April 15, 2022, which deliberated and approve the Proposal on 2020 Profit DistributionPlan. According to the proposal, the Company plans to distribute a cash dividend of RMB3.0 (tax inclusive) for every 10 shares to allshareholders based on a total share capital of 570,707,084 shares as at March 31, 2022, with a total amount of RMB171,212,125.20;no bonus shares will be issued and no capital reserve will be converted into share capital; the remaining undistributed profits will becarried forward to the next year. Where there are any changes to the Company’s total share capital after the announcement of theprofit distribution proposal and before the equity registration date for actual implementation, the Company will maintain the samedistribution ratio per share and adjusts the total distribution amount accordingly. The profit distribution proposal can be implementedonly after being approved by the general meeting of shareholders.(II) Explanation on other events after the balance sheet dateThe Company convened the 9th meeting of the Fourth Board of Directors on January 24, 2022, which deliberated and approved theProposal on Early Call of “BYZZ”. The Company decided to exercise the conditional call option and redeem all “BYZZ” that areregistered in the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited and not converted into sharesafter the closing of the market on the redemption registration date at a price of bond par value plus accrued interest of the currentperiod. As at the market closing on February 22, 2022, still 3,058 “BIEM convertible bonds” were not converted to shares, so theCompany redeemed 3,058 bonds. At a call price of RMB100.42 per bond (face value plus current accrued interest; the interest rate ofthe period was 0.6% and the accrued interest included tax; the call price after tax deduction was subject to the price approved byChina Securities Depository and Clearing Corporation Limited), the Company paid totally RMB307,084.36 for the redemption. Thetotal face value of the redeemed “BIEM convertible bonds” is RMB305,800.00, accounting for 0.04% of the total bonds issued. Uponcompletion, all the convertible bonds have been redeemed and the BIEM convertible bonds were delisted as they were no longerqualified for listing.
XVI. Other Significant Matters
1. Corrections to previous accounting errors
The Company convened the 10th meeting of the Fourth Board of Directors and the 7th meeting of the Fourth Board of Supervisorson March 9, 2022, which deliberated and approved the Proposal on Corrections to Previous Accounting Errors. The proposal agreedto make corrections to relevant account errors in accordance with relevant provisions of the Accounting Standards for BusinessEnterprises No. 28 - Changes in accounting policies and estimates, and correction of errors and the Rules No. 19 on the Preparationof Information Disclosure Documents by Companies That Offer Securities to the Public - Correction of Financial Information andRelevant Disclosure, which involves the 2020 consolidated financial statements and financial statements of the parent company.Huaxing Certified Public Accountants LLP engaged by the Company has issued a special explanation on the corrections to the 2002financial statements. For details, please refer to the Audit Report of the Special Explanation on Correction of Accounting Errors inPrevious Accounting Periods of BIEM.L.FDLKK Garment Co., Ltd. (HX Special Doc. [2022] No.22000460028), which waspublished on www.cninfo.com.cn on March 9, 2022.
2. Segment information
(1) Other descriptions
The Company has no distinguishable business segment or regional segment that independently assumes risks and awards differentfrom other segments.
3. Leases
Information disclosure of the Lessee
(1) Information of the lessee
Unit: RMB
| Item | Amount |
Interest expense of lease liabilities
| Interest expense of lease liabilities | 21,058,743.02 |
| Expenses of short-term leases included in relevant asset cost or profit or loss through the simplified treatment method | 1,933,629.00 |
| Expenses of low-value asset leases included in relevant asset cost or profit or loss through the simplified treatment method (except for the short-term lease expenses of low-value assets) | 2,645,168.54 |
| Variable lease payments that are not included in the measurement of lease liabilities but profit or loss | 282,671,218.34 |
Including: Proportion from leaseback transactions
| Including: Proportion from leaseback transactions |
Income from sublease of right-of-use assets
| Income from sublease of right-of-use assets | |
| Total cash outflow related to leases | 62,889,025.21 |
| Gain or loss from leaseback transactions | |
| Cash inflow from leaseback transactions |
Cash outflow from leaseback transactions
| Cash outflow from leaseback transactions | |
| Others |
4. Others
The Company had no other significant matters that need to be disclosed during the reporting period.
XVII. Notes to Major Items of Financial Statements of the Parent Company
1. Accounts receivable
(1) Accounts receivable disclosure by category
Unit: RMB
| Category | Closing balance | Opening balance | ||||||||
| Book balance | Impairment provision | Book value | Book balance | Impairment provision | Book value | |||||
| Amount | Percentage | Amount | Provision ratio | Amount | Percentage | Amount | Provision ratio | |||
| Accounts receivable for which bad debt reserve is set aside individually | 618,282.56 | 0.21% | 618,282.56 | 100.00% | 3,026,981.81 | 0.94% | 2,562,695.09 | 84.66% | 464,286.72 | |
| Including: | ||||||||||
| Accounts receivable for which bad debt reserve is set aside in portfolios | 295,013,683.59 | 99.79% | 15,296,626.45 | 5.19% | 279,717,057.14 | 318,875,601.30 | 99.06% | 18,278,511.03 | 5.73% | 300,597,090.27 |
| Including: | ||||||||||
| Clothing sales business | 295,013,683.59 | 99.79% | 15,296,626.45 | 5.19% | 279,717,057.14 | 318,875,601.30 | 99.06% | 18,278,511.03 | 5.73% | 300,597,090.27 |
| Total | 295,631,966.15 | 100.00% | 15,914,909.01 | 5.38% | 279,717,057.14 | 321,902,583.11 | 100.00% | 20,841,206.12 | 6.47% | 301,061,376.99 |
Bad debt reserve by item:
Unit: RMB
| Name | Closing balance | |||
| Book balance | Impairment provision | Ratio of provision | Reason for provision | |
| Institution 1 | 618,282.56 | 618,282.56 | 100.00% | It is expected that the amount cannot be recovered. |
| Total | 618,282.56 | 618,282.56 | -- | -- |
Bad debt reserve by portfolio:
Unit: RMB
| Name | Closing balance | ||
| Book balance | Impairment provision | Ratio of provision | |
| Within 1 year | 294,480,218.78 | 14,763,161.64 | 5.01% |
| 1-2 years | 190,299.54 | 190,299.54 | 100.00% |
| 2-3 years | |||
| Over 3 years | 343,165.27 | 343,165.27 | 100.00% |
| Total | 295,013,683.59 | 15,296,626.45 | -- |
Description of reason for the portfolio:
If the bad debt reserve of accounts receivable is set aside according to general model of expected credit loss, please refer to thedisclosure method of other receivables to disclose relevant information on bad debt reserve:
□ Applicable √ Not applicable
Disclose by aging
Unit: RMB
| Aging | Book balance |
| Within 1 year (inclusive) | 294,480,218.78 |
| 1 to 2 years | 808,582.10 |
| Over 3 years | 343,165.27 |
| 3 to 4 years | 2,173.75 |
| 4 to 5 years | 132,467.43 |
| Over 5 years | 208,524.09 |
| Total | 295,631,966.15 |
(2) Bad debt reserve that is set aside, recovered or transferred back in the reporting period
Bad debt reserve of the reporting period:
Unit: RMB
| Category | Opening balance | Amount of change in the reporting period | Closing balance | |||
| Provision | Recovery or reversal | Write-off | Others | |||
| Bad debt reserve for accounts | 20,841,206.12 | 2,224,051.58 | 2,702,245.53 | 15,914,909.01 | ||
| receivable | ||||||
| Total | 20,841,206.12 | 2,224,051.58 | 2,702,245.53 | 15,914,909.01 |
— Due to debt restructuring, the Company wrote off bad debt reserve for accounts receivable at an amount of RMB2,702,245.53 in2021.
(3) Accounts receivable actually written off in the reporting period
Unit: RMB
| Item | Write-off amount |
Write-offs of important accounts receivable:
Unit: RMB
| Name of institution | Nature of accounts receivable | Write-off amount | Write-off reason | Write-off procedures | Whether the amount is caused by related party transaction |
Description on the write-offs of accounts receivables:
As of December 31, 2021, the Company did not write off any accounts receivable.
(4) Top five debtors in closing balance of accounts receivable
Unit: RMB
| Name of institution | Balance of accounts receivable at the end of the period | Percentage in total balance of accounts receivable at the end of the period | Balance for bad debt reserve at the end of the period |
| Institution 1 | 17,159,920.18 | 5.80% | 858,111.72 |
| Institution 2 | 7,928,133.02 | 2.68% | 400,747.57 |
| Institution 3 | 7,847,238.43 | 2.65% | 392,361.92 |
| Institution 4 | 6,665,554.40 | 2.25% | 333,423.95 |
| Institution 5 | 5,171,664.81 | 1.75% | 258,583.24 |
| Total | 44,772,510.84 | 15.13% | -- |
(5) Amounts of assets and liabilities that are formed by the transfer and ongoing involvement of accountsreceivableAs of December 31, 2021, the Company had no assets and liabilities that were formed by the transfer of accounts receivable and itscontinuing involvement.
(6) Accounts receivable derecognized due to transfer of financial assets
As of December 31, 2021, no accounts receivable was derecognized due to transfer of financial assets.
2. Other receivables
Unit: RMB
| Item | Closing balance | Opening balance |
| Other receivables | 93,306,779.94 | 60,685,628.95 |
| Total | 93,306,779.94 | 60,685,628.95 |
(1) Other receivables
1) Classification of other receivables by nature
Unit: RMB
| Nature | Book balance at the end of the period | Book balance at the beginning of the period |
| Margins and deposits | 88,690,812.02 | 52,061,452.75 |
| Related-party amount within the consolidated scope | 4,945,158.86 | 8,308,572.82 |
| Employee reserve fund | 3,069,483.92 | 2,348,617.12 |
| Others | 1,251,936.78 | 723,673.43 |
| Total | 97,957,391.58 | 63,442,316.12 |
2) Bad debt reserve
Unit: RMB
| Bad debt reserve | Phase I | Phase II | Phase III | Total |
| 12-month ECL | Lifetime ECL (without credit impairment) | Lifetime ECL (with credit impairment) | ||
| Balance as at January 1, 2021 | 2,756,687.17 | 2,756,687.17 | ||
| Balance as at January 1, 2021 in the reporting period | —— | —— | —— | —— |
| Provision in the reporting period | 1,893,924.47 | 1,893,924.47 | ||
| Balance as at December 31, 2021 | 4,650,611.64 | 4,650,611.64 |
Description of changes in the book balance where there are significant changes in provision for the current period
□ Applicable √ Not applicable
Disclose by aging
Unit: RMB
| Aging | Book balance |
| Within 1 year (inclusive) | 97,957,391.58 |
| Total | 97,957,391.58 |
3) Bad debt reserve that is set aside, recovered or transferred back in the reporting periodBad debt reserve of the reporting period:
Unit: RMB
| Category | Opening balance | Amount of change in the reporting period | Closing balance | |||
| Provision | Recovery or reversal | Write-off | Others | |||
| Bad debt reserve by portfolio | 2,756,687.17 | 1,893,924.47 | 4,650,611.64 | |||
| Total | 2,756,687.17 | 1,893,924.47 | 4,650,611.64 | |||
4) Other receivables actually written off in the reporting period
Unit: RMB
| Item | Write-off amount |
Description of write-offs of important other receivables:
Unit: RMB
| Name of institution | Nature of other receivables | Write-off amount | Write-off reason | Write-off procedures | Whether the amount is caused by related party transaction |
Description on the write-offs of other receivables:
No other receivables were written off during the reporting period.
5) Top five debtors in closing balance of other accounts receivable
Unit: RMB
| Name of institution | Nature of the amount | Closing balance | Aging | Percentage in total balance of other receivables at the end of the period | Balance of bad debt reserve at the end of the period |
| Institution 1 | Margins and deposits | 29,000,000.00 | Within 1 year | 29.60% | 1,450,000.00 |
| Institution 2 | Margins and deposits | 7,441,978.00 | Within 1 year | 7.60% | 372,098.90 |
| Institution 3 | Margins and deposits | 5,560,610.00 | Within 1 year | 5.68% | 278,030.50 |
| Institution 4 | Margins and deposits | 4,288,619.00 | Within 1 year | 4.38% | 214,430.95 |
| Wholly-owned subsidiary | Related-party amount within the consolidated scope | 3,936,779.90 | Within 1 year | 4.02% | |
| Total | -- | 50,227,986.90 | -- | 51.28% | 2,314,560.35 |
6) Receivables involving government grants
As of December 31, 2021, the Company had no receivables involving government grants.
7) Other receivables derecognized due to the transfer of financial assets
As of December 31, 2021, no other receivable was derecognized due to transfer of financial assets.
8) Amount of assets and liabilities that are formed by the transfer of other receivables and the Company’scontinuing involvementAs of December 31, 2021, the Company had no assets and liabilities that were formed by the transfer of other receivables and itscontinuing involvement.
3. Long-term equity investments
Unit: RMB
| Item | Closing balance | Opening balance | ||||
| Book balance | Impairment provision | Book value | Book balance | Impairment provision | Book value | |
| Investment in subsidiaries | 111,000,000.00 | 111,000,000.00 | 111,000,000.00 | 111,000,000.00 | ||
| Total | 111,000,000.00 | 111,000,000.00 | 111,000,000.00 | 111,000,000.00 | ||
(1) Investment in subsidiaries
Unit: RMB
| Investee | Opening balance (book value) | Increase/decrease in the period | Closing balance (book value) | Closing balance of impairment provision | |||
| Increase in investment | Decrease in investment | Impairment Provision | Others | ||||
| Guangzhou BIEM.L.FDLK | 1,000,000.00 | 1,000,000.00 | |||||
| K Business Consulting Co., Ltd. | |||||||
| Guangzhou BIEM.L.FDLKK Supply Chain Management Co., Ltd. | 5,000,000.00 | 5,000,000.00 | |||||
| Guangzhou BIEM.L.FDLKK Ejam Equity Investment Partnership (Limited Partnership) | 100,000,000.00 | 100,000,000.00 | |||||
| Xuzhou BIEM.L.FDLKK Supply Chain Management Co., Ltd. | 5,000,000.00 | 5,000,000.00 | |||||
| Total | 111,000,000.00 | 111,000,000.00 |
4. Revenue and cost of revenue
Unit: RMB
| Item | Incurred in the current period | Incurred in the prior period | ||
| Revenue | Cost | Revenue | Cost | |
| Principal business | 2,719,943,987.32 | 908,931,832.35 | 2,303,301,051.46 | 750,466,115.63 |
| Other businesses | 45,269.82 | 25,160.38 | ||
| Total | 2,719,989,257.14 | 908,931,832.35 | 2,303,326,211.84 | 750,466,115.63 |
5. Return on investment
Unit: RMB
| Item | Incurred in the current period | Incurred in the prior period |
| Income from wealth management products | 38,711,860.90 | 24,501,459.48 |
| Gain from debt restructuring | 104,009.33 | |
| Total | 38,815,870.23 | 24,501,459.48 |
XVIII. Supplementary Information
1.List of non-recurring profits and losses of the reporting period
√ Applicable □ Not applicable
Unit: RMB
| Item | Amount | Description |
| Profits/losses from the disposal of non-current asset | -411,065.65 |
Governmental grants reckoned into currentprofits/losses (not including grants enjoyedin quota or ration according to nationalstandards, which are closely relevant to thecompany’s normal business)
| 14,577,835.79 | ||
| Gain or loss from debt restructuring | 104,009.33 | |
| Gain or loss from changes in fair value of financial assets and financial liabilities held for trading, and investment income from the disposal of financial assets and financial liabilities held for trading and available-for-sale financial assets, excluding the effective hedging business related to the normal operation of the Company | 3,424,832.00 | |
| Reversal of write-down for receivables whose impairment was tested individually | 1,944,412.53 | |
| Other non-operating revenue and expenses except for the aforementioned items | -4,924,109.89 | |
| Other profit and loss items that meet the definition of non-recurring profit and loss | 38,711,860.90 | |
| Less: Influence of income tax | 9,169,558.51 | |
| Total | 44,258,216.50 | -- |
Details of other profit and loss items that meet the definition of non-recurring profit and loss:
□ Applicable √ Not applicable
The Company has no other profit and loss items that qualified the definition of non-recurring profit and loss.Descriptions where the Company defines any non-recurring profit and loss items listed in the No. 1 Explanatory Announcement onInformation Disclosure of Companies Offering Securities to the Public—Non-recurring Profit and Loss as recurring profit and lossitems during the reporting period
□ Applicable √ Not applicable
2. Return on net assets and earnings per share
| Profit in the reporting period | Weighted average return on net assets | Earnings per share | |
| Basic earnings per share (RMB/share) | Diluted earnings per share (RMB/share) | ||
| Net profit attributable to the ordinary shareholders of the Company | 21.73% | 1.15 | 1.15 |
| Net profit attributable to the ordinary shareholders of the Company after excluding non-recurring profit and loss | 20.19% | 1.07 | 1.07 |
3. Difference in accounting data under domestic and international accounting standards
(1) Net profit and net asset differences under International Financial Reporting Standards (IFRS) andChinese Accounting Standards (CAS)
□ Applicable √ Not applicable
(2) Net profit and net asset differences under foreign accounting standards and Chinese AccountingStandards (CAS)
□ Applicable √ Not applicable
(3) Explanation of reasons for the differences between accounting data disclosed under domestic andoverseas accounting standards. If differences are adjusted based on data audited by overseas auditinstitutions, the name of the institution should be noted.
4. Others
BIEM.L.FDLKK Garment Co., Ltd.Chairman: Xie Bingzheng
April 15, 2022