意见反馈 手机随时随地看行情

公司公告

上工申贝:2018年年度报告(英文版)2019-04-30  

						Shang Gong Group Co., Ltd.
   Annual Report 2018
                上工申贝(集团)股份有限公司
                                                                                         Annual Report 2018
                Shang Gong Group Co., Ltd



                                       IMPORTANT NOTES
     1. The board of directors, the board of supervisors, directors, supervisors and senior executives of
the Company undertake that the content of the annual report is true, accurate and complete, and
contains no false records, misleading statements, or major omissions, and will assume joint and several
legal liabilities arising therefrom.
     2. All the directors of Shang Gong Group Co., Ltd. attended the meeting of the board of directors.
     3. BDO China Shu Lun Pan Certified Public Accountants LLP. provided a standard unqualified
opinion audit report for the Company.
     4. Zhang Min, Chairman of the Company, Zhang Jianrong, the principal in charge of the
accounting, and Zhao Lixin, Chief of Accounting Affairs, declare and guarantee the veracity, accuracy
and integrity of the financial report in the annual report.
     5. Plan of profit distribution or transfer of reserves deliberated by the board
     Audited by BDO China Shu Lun Pan Certified Public Accountants LLP., the Company achieved the
consolidated net profit of 158,449,643.95 yuan in 2018, of which, the net profit attributable to parent
company owners is 140,828,047.20 yuan.
     According to the provisions in the Articles of Association, before withdrawing the legal accumulation
fund, the Company should first cover the deficit with the profit of the year. As the profit of the year failed to
make up the deficit of previous years, the Company did not draw the legal accumulation fund. The
current-period net profit of the parent company is 32,898,977.07 yuan; the undistributed profits at the
beginning of 2018 are -143,892,809.85 yuan; thus the practical profit available for distribution is
-110,993,832.78 yuan at the end of 2018. As the parent company’s profit available for distribution is negative,
the profit distribution cannot be made in 2018, neither the transferring of capital reserves into share capital.
     6. Warning statement of forward-looking statements
     The Company’s future plan, development strategy and other forward-looking statements in the report do
not constitute any material commitment of the Company to investors. Investors and relevant persons shall be
sufficiently mindful of risks, and undertake the difference in plans, predictions and commitments.
     7. There was no occupation of fund of the Company occurred for non-operating use by holding
shareholder and its related parties.
     8. There was no external guarantee against the rules and regulations of the Company.
     9. Major risk waring
     The Company has described in detail the risks faced by the Company in this report. For details see
―Discussion and Analysis on Business Operation‖ and other relevant chapters in this report.
    10. This report is prepared in both Chinese and English. In the case of any inconsistent
understanding between the Chinese version and the English version, the Chinese version shall prevail.




                                                       2 / 121
                      上工申贝(集团)股份有限公司
                                                                                                                                  Annual Report 2018
                      Shang Gong Group Co., Ltd




                                                     TABLE OF CONTENTS

Chapter 1         Definition .............................................................................................................................. 4
Chapter 2         Company Profile and Main Financial Index ......................................................................... 4
Chapter 3         Summary of Company Business ........................................................................................... 6
Chapter 4         Discussion and Analysis on the Business Operation ............................................................ 9
Chapter 5         Important Matters ............................................................................................................... 21
Chapter 6         Changes in Common Shares and Shareholders .................................................................. 26
Chapter 7         Preferred Stock ................................................................................................................... 27
Chapter 8         Directors, Supervisors, Senior Management and Employees ............................................. 28
Chapter 9         Corporate Governance ........................................................................................................ 33
Chapter 10 Corporate Bond................................................................................................................... 36
Chapter 11 Financial Report .................................................................................................................. 37
Chapter 12 Documents for Reference ..................................................................................................121




                                                                               3 / 121
                       上工申贝(集团)股份有限公司
                                                                                                                 Annual Report 2018
                       Shang Gong Group Co., Ltd



                                                    Chapter 1 Definition
    1. As used in this report, the following terms have the following meanings unless the context
requires otherwises:
Definition of common terms
ShangGong Group, SGG, the Company                refer to    Shang Gong Group Co., Ltd.
PKFR                                             refers to   Shanghai Puke Flyingman Investment Co., Ltd
                                                             State-owned Assets Supervision and Administration Commission of Shanghai
Pudong SASAC                                     refers to
                                                             Pudong New Aear People’s Government
                                                             Dürkopp Adler AG. In July 2018, DAP Industrial AG completed the acquisition of
DA AG                                            refers to   all minority shareholders' equity of DA AG, and absorbed DA AG, and changed its
                                                             name to Dürkopp Adler AG after the merger was completed.
PFAFF GmbH                                       refers to   PFAFF Industriesystemeund Maschinen GmbH
KSL                                              refers to   PFAFF Industriesystemeund Maschinen GmbH Zweigniederlassung KSL
Stoll KG, STOLL                                  refers to   H. Stoll AG & Co. KG
DAP Branch                                       refers to   Shang Gong Group Co., Ltd. Industrial Sewing Machine Branch
Butterfly Branch                                 refers to   Shang Gong Group Co., Ltd. Shanghai Butterfly Sewing Machine Branch
Richpeace, SG Richpeace                          refers to   TIANJIN RICHPEACE AI CO., LIMITED
SGGEMSY                                          refers to   Zhejiang ShangGong GEMSY CO., LTD.
PIZ                                              refers to   PFAFF Industrial Sewing Machine (Zhangjiagang) Co., Ltd.
SHENSY                                           refers to   Shanghai Shensy Enterprise Development Co., Ltd.
SG Zhejiang                                      refers to   ShangGong Sewing Machine (Zhejiang) Co., Ltd.
Report period, reporting period                  refers to   From 1st January 2018 to 31st December 2018
Yuan, RMB                                        refer to    The lawful currency of the People’s Republic of China
Euro, EUR                                        refer to    The lawful currency of the European Union

        2. In this report, the unit of the amount is expressed in RMB Yuan unless otherwise specified.



                             Chapter 2 Company Profile and Main Financial Index
        1. Company information
Company name in Chinese                                          上工申贝(集团)股份有限公司
Abbreviation of the Company name in Chinese                      上工申贝
Compay name in English                                           Shang Gong Group Co., Ltd.
Abbreviation of the Company name in English                      ShangGong Group
Legal representative                                             Zhang Min

        2. Contact information
                                    Secretary of Board of Directors                              Representative of Securities Affairs
Name                 Zhao Lixin                                                     Shen Lijie
Office address       No. 1566 New Jinqiao Road, Pudong New Aear, Shanghai           No. 1566 New Jinqiao Road, Pudong New Aear, Shanghai
Tel                  021-68407700                                                   021-68407515
Fax                  021-63302939                                                   021-63302939
Email                zlx@sgsbgroup.com                                              shenlj@sgsbgroup.com

        3. Basic situation introduction
                                                                 Room A-D, 12th Floor, Orient Mansion, No. 1500 Century Avenue, China
Registered address
                                                                 (Shanghai) Pilot Free Trade Zone
Postal code of registered address                                200122



                                                                       4 / 121
                          上工申贝(集团)股份有限公司
                                                                                                                       Annual Report 2018
                          Shang Gong Group Co., Ltd

Office address                                                       No. 1566 New Jinqiao Road, Pudong New Aear, Shanghai
Postal code of office address                                        201206
Company website                                                      http://www.sgsbgroup.com/
Email                                                                600843@sgsbgroup.com

        4. Place for information disclosure and consulting
                                                                                          Shanghai Securities News, Hong Kong Commercial
The name of the information disclosure media selected by the company
                                                                                          Daily
The website that publishes the annual report designated by China
                                                                 http://www.sse.com.cn
Securities Regulatory Commission
Lodging address of annual report of the Company                  Office of the Company

        5. Corporate stock
                 Type                             Stock exchange                      Stock abbreviation                         Stock code
                A Share                     Shanghai Stock Exchange                           SGSB                                 600843
                B Share                     Shanghai Stock Exchange                           SGBG                                 900924

        6. Other information
                                        Name                                   BDO China Shu Lun Pan Certified Public Accountants LLP.
Accounting firm appointed                                                      Sixth Floor, New Huangpu Financial Plaza, No. 61 East
                                        Address
by the Company (Domestic)                                                      Nanjing Road, Shanghai
                                        Signing accountant's name              Li Ping, Zhang Yongmei

        7. Main accounting data and financial index
        7.1 Main accounting data
                                                                                                                  Unit: Yuan, Currency: RMB
                                                                                                           Year-on-year
               Main accounting data                       2018                     2017                                                      2016
                                                                                                       increase/decrease (%)
Operaing income                                      3,200,527,741.09         3,064,971,500.79                              4.42     2,759,855,136.98
Net profit attributable to shareholders of
                                                       140,828,047.20          197,487,226.27                             -28.69       144,231,343.84
listed company
Net profit attributable to shareholders of
listed company after deduction of                      124,656,582.51          154,753,519.99                             -19.45       117,425,853.16
non-recurrent account profits and losses
Net cash flow from operating activities                 79,553,871.30           117,335,869.17                            -32.20          99,056,912.42
                                                      31st December           31st December                Year-on-year               31st December
                                                           2018                    2017                increase/decrease (%)               2016
Net assets attributable to shareholders of
                                                     2,212,858,250.06         2,145,214,676.69                              3.15     1,916,349,381.88
listed company
Total assets                                         4,144,127,162.05         3,703,515,071.60                             11.90     3,506,172,981.71

        7.2 Main financial index
                          Main financial index                           2018         2017           Year-on-year increase/decrease (%)          2016
Basic earnings per share (yuan/share)                                     0.2567      0.3600                                        -28.69          0.2629
Diluted earning per share (yuan/share)                                    0.2567      0.3600                                        -28.69          0.2629
Basic earnings per share after deduction of non-recurrent profits
                                                                          0.2272      0.2821                                        -19.46          0.2141
and losses (yuan/share)
Weighted average return on net assets (%)                                 6.3561      9.8004                 Decrease 3.44 percent point            7.8098
Weighted average return on net assets after deduction of
                                                                          5.6262      7.6797                 Decrease 2.05 percent point            6.3584
non-recurrent profits and losses (%)

        8. Accounting data differences between domestic and foreign accounting standards
        Not applicable.
        9. Main accounting data of each quarter in report period
                                                              The first quarter      The second quarter      The third quarter      The forth quarter
                                                              (from January to         (from April to         (from July to         (from October to
                                                                  March)                   June)               September)              December)
Operaing income                                                    701,350,250.94         793,444,162.33        798,251,068.15         907,482,259.67
Net profit attributable to shareholders of listed company           45,491,262.77          54,670,083.73         34,854,917.67              5,811,783.03


                                                                           5 / 121
                      上工申贝(集团)股份有限公司
                                                                                                                   Annual Report 2018
                      Shang Gong Group Co., Ltd

Net profit attributable to shareholders of listed company
                                                                   39,609,986.99         49,760,628.20       29,755,246.40           5,530,720.92
after non-recurrent account profit/loss
Net cash flow from operating activities                           -21,967,006.01         -35,736,148.74      22,598,770.01         114,658,256.04

      10. Items and amount of non-recurring profit and loss
                                Item                                               2018                    2017                     2016
Profits and losses from disposal of non-current assets                             -1,285,095.62           23,550,480.53             3,529,785.81
Government subsidies recorded in the current profit and loss                        9,897,636.07           11,861,884.98            11,190,319.23
Except effective hedging business relevant to the normal business
of the Company, gains and losses from changes in fair value
arising from trading financial assets and trading financial
                                                                               12,601,058.35               10,553,231.30             4,708,383.25
liabilities, and investment income from disposal of trading
financial assets, trading financial liabilities and available-for-sale
financial assets
Profits and losses from external entrusted loans                                     603,626.80
Other non-operating income and expenditure except the
                                                                                   4,659,776.73             5,690,312.52            17,172,464.17
above-said items
Impact on minority interests                                                   -4,268,282.88               -5,345,419.70            -6,050,593.20
Impact on income tax                                                           -6,037,254.76               -3,576,783.35            -3,744,868.58
                                Total                                          16,171,464.69               42,733,706.28            26,805,490.68

      11. Items for adopting fair value measurement
                                                                                                                                    Influence on
                  Item                              Opening balance                      Ending balance           Current change
                                                                                                                                    current profit
Trading financial assets                                               0.00                                 0.00          0.00    45,148.42
Available-for-sale financial assets                           89,721,694.56                        86,406,778.33 -3,314,916.23 1,664,198.76
                 Total                                        89,721,694.56                        86,406,778.33 -3,314,916.23 1,709,347.18



                                 Chapter 3 Summary of Company Business
     1. The Company’s main business, business model in the report period and industry situation
     During the reporting period, the Company's main business is the sewing equipment manufacturing
industry and intelligent equipment manufacturing industry. The Company’s business also involved flat knitting
machines, office machinery, logistics services and trade. The Company's sewing equipment includes industrial
sewing machines, household sewing machines and custom-made industrial machines for special purposes.
     The Company adheres to globalization of business, and implements unified management of sales of
sewing equipment. The Company adopts a gradient-based specialized multi-brand marketing strategy, and
conducts gradient division management on production sites throughout Europe and Asia. The Company pays
attention to collaborative research and development, and seizes the global high-end market of sewing
equipment with leading technology. At the same time, the Company is cultivating the business model of
―Shanghai Manufacturing‖, which means R&D and marketing in Shanghai while production in Jiangsu,
Zhejiang and other provinces.
     In recent years, through the implementation of mergers and acquisitions at home and abroad and the
reorganization and integration within the Company, with the business philosophy of ―market orientation and
benefit first‖ to manage subsidiaries in a unified manner, the synergy effect has gradually emerged and the
international business model has achieved good results.
     China’s sewing machinery manufacturing industry is a branch of light industry in China. It has
established the most complete industrial system in the world, and is capable of manufacturing a full range of
sewing machinery products, including household and industrial sewing machine, embroidery machine and
cutting machine, and the related controller, motor ability and spare parts, which satisfies all kinds of social
needs. However, compared with the advanced in the world, there is still a large gap for China’s sewing
machinery manufacturing industry in independent innovation ability, industrial structure, technology, product
and brand quality and other aspects. The whole industry is big but not strong. The development of the world
sewing machinery industry started in the middle of the nineteenth Century in Europe and the United States.


                                                                          6 / 121
                上工申贝(集团)股份有限公司
                                                                                      Annual Report 2018
                Shang Gong Group Co., Ltd

After 100 years of development, at present the world sewing machine industry development center has been
transferred to the Asian region like China and Japan, and gradually formed tripartite confrontation pattern
between China, Germany and Japan.
     In 2018, the industry's production and sales maintained a double-digit growth rate, the operation quality
was good, showing the remarkable characteristics of ―stable and good, and call back from the top‖. According
to the China Sewing Machinery Association, in terms of production, from January to December in 2018, the
top 100 backbone machine manufacturers in the industry produced 7.54 million sewing machines, a
year-on-year increase of 15.2%. Production volume of industrial sewing machines was 5.44 million units, an
increase of 21.5%, of which the volume of flatbed lockstitch was 3.16 million units, an increase of 24.2%;
volume of special machine was 360,000 units, an increase of 15%; volume of automatic sewing equipment
was 30,000 units, an increase of 38.6 %. Production volume of industrial sewing machines was 1.65 million
units, an increase of 3.7%. The overall production of the industry has reached new heights and the product
structure has been upgraded. In terms of sales, from January to December in 2018, the top 100backbone
machine manufacturers in the industry sold 7.14 million sewing machines, a year-on-year increase of 10.5%.
Among them, 5.06 million units were industrial machines, an increase of 15.2% year-on-year, and 1.62 million
units were household machines, an increase of 0.4%. In terms of domestic sales, the domestic market was first
raised and then suppressed in 2018. In the first half of the year, the downstream industry's consumer demand
represented by clothing, leather, home textiles and other industries upgraded and accelerated the construction
of smart factories, and promoted the continuous growth of China's sewing machinery domestic market.
However, since the third quarter, the impact of Sino-US trade friction has gradually emerged. The willingness
to increase investment in the industry has declined, and the cyclical demand in the domestic market has
gradually saturated, and industry sales have declined month by month. In terms of export trade, in the context
of the overall recovery of the international economy and the release of downstream market demand, the export
trade of domestic enterprises has reached a new high. According to the data of the General Administration of
Customs, the export volume of the industry in 2018 reached 2.45 billion US dollars, an increase of 5.3%.
Among them, the export of industrial sewing machines reached 1.22 billion US dollars, an increase of 19.2%.
In terms of operating efficiency, in 2018 the sales revenue of the top 100 backbone machine manufaturers in
the industry reached 21.6 billion yuan, a year-on-year increase of 9.7%. However, as the market gradually
became saturated, market competition became increasingly fierce, and investment in product promotion, new
product development, production and other inputs increased, operating and management expenses increased
substantially, thus the growth rate of industry efficiency was lowered. In 2018, the total profit of top 100
backbone machine manufaturers in the industry reached 1.58 billion yuan, a year-on-year increase of only
3.3%.
     2. Description of major changes in main assets of the Company during the reporting period
     For details of major changes in the Company's major assets in the report period, please refer to ―(3)
Analysis of assets and liabilities‖ in ―Chapter 4 Disscussion and Analysis on Business Operation‖.
     The Company’s overseas assets amounted to 1,953.5446 million yuan, accounting for 47.12% of the total
assets.
     The Company’s overseas assets mainly come from the Company’s previous overseas acquisitions and the
business growth of overseas subsidiaries. The Company’s wholly-owned subsidiary SGE acquired DA AG in
2005, acquired PFAFF GmbH and KSL in 2013, and invested in STOLL KG in 2016.
     3. Core competitiveness analysis in the report period
     The Company is the first listed company with the longest history in the domestic sewing equipment
industry, and has more than 50-year experience in sewing equipment production. The Company’s "Butterfly"
household sewing machine originated in 1919 and has a history of nearly 100 years.The Company controlled


                                                      7 / 121
                上工申贝(集团)股份有限公司
                                                                                       Annual Report 2018
                Shang Gong Group Co., Ltd

DA AG and PFAFF GmbH, both are famous sewing machine manufacturing companies in the world with more
than 150 years’ history, as well as PFAFF KSL Branch, which possesses the world's top sewing technology.
During the reporting period, the Company continued to promote the integration of global resources, promote
the further integration of European subsidiaries, accelerate the construction of European and domestic
manufacturing bases, implement mergers and acquisitions at the appropriate time in China, and expand the
main business. Furthermore, based on the existing business, the Company continue to expand business in
aviation manufacturing and structural parts on the basis of customers of aviation companies such as COMAC,
Hafei and AVIC. During the reporting period, the Company's core competitiveness was further consolidated
and enhanced, further consolidating the foundation of the Company's sustainable and healthy development.The
core competence of the Company is mainly shown in the following aspects:
     (1) Strong technological research and development capability
     The Company always adheres to the guidance of science and technology and develop through innovation,
attaches much importance to the construction of technological research and development capabilities, which
have become the important force driving the development of the Company. The Company has owned a
powerful technological research and development team, has advanced testing methods and has strong
continuous development capabilities of product and application technology. The R&D team's research and
development of Industry 4.0 on sewing equipment has achieved initial results. The Company's technology
center was identified as a Shanghai-Municipal-level R&D center, SGGEMSY was identified as a
Zhejiang-Province-level R&D center, and Richpeace was recognized as a Tianjin-Municipal-level R&D center.
     (2) Advanced technology advantage
     The Company has the world’s high-end intelligent and 3D sewing technology of flexible material, and the
Company is a global leader in special sewing machine for medium or heavy materials, garment automatic
sewing unit, robot-control automatic sewing technology and textile material welding technology and other
fields. The products are not only applied in the traditional market for sewing machine industry but also applied
in some fields, such as automobile, environmental protection, aeronautics and astronautics and renewable
energy, etc. Especially, the Company has a leaing position in sewing technology for light carbon fiber, 3D
sewing automation and QONDAC 4.0 Intelligent Industrial Sewing Network Online Production Monitoring
System.
     (3) Multiple brand and product advantage
     The Company owns some internationally well-known brands, such as DA, PFAFF Industrial, KSL,
Beisler, and etc., and some famous domestic brands, such as Butterfly with 100 years’ history, Bee, Flyingman,
and Shanggong with over 50 years’ history. In recent years, the Company is cultivating industrial machine
brands, such as SGGEMSY, Mauser and so on. The Company has a full range of high-end sewing equipment
product chain, these brands of the Company has a high recognition and reputation in the industry. The
Company has a group of customers with great value and stability in the field of high-end automotive
accessories manufacturing and luxury goods manufacting.
     (4) Global resource integration capability
     The Company utilizes and develops the basis and advantages of its respective domestic and foreign
subsidiaries, implements globalization layout and integration in the production base, sales network,
procurement of raw materials, technology R&D and other aspects, implements resource sharing, has
complementary advantages and develops collaboratively. The Company not only has a wide sales network and
business base in China, but also has established a relatively complete marketing channel and service network
in the world. The Company has established three sewing machine R&D and production bases in Shanghai,
Zhejiang and Zhangjiagang; the Company also has five R&D and manufacturing bases in Germany, Czech
Republic and Romania.


                                                       8 / 121
                上工申贝(集团)股份有限公司
                                                                                       Annual Report 2018
                Shang Gong Group Co., Ltd

     (5) Internationalized operation and management experience
     Since 2005, the Company has begun to implement an overseas merger and acquisition strategy for
international operations. In recent years, the Company has increased the pace of overseas acquisitions and
mergers, and the proportion of overseas businesses has grown. The Company's multi-year international
operation and management has gradually cultivated a management team with an international perspective and
multinational operating capabilities, and has accumulated rich international management experience.



          Chapter 4 Discussion and Analysis on the Business Operation
      1. Discussion and analysis on the business operation
      In 2018, affected by the US tariff policy and other retaliatory measures by other economies, trade
protection sentiment rose, international trade friction increased, investors' confidence in the economic outlook
declined, and manufacturing and trade growth slowed. In 2018, China's economic operation has been steady
but with change. The external environment is complex and severe, and the economy is facing downward
pressure. Judging from the economic situation of the industry, in 2018, the production and sales of China's
sewing machinery industry maintained a double-digit growth rate, the operation quality was good, and the
concentration continued to increase, showing the remarkable characteristics of ―stable and good, and call back
from the top‖.
      2018 is a relatively difficult year for SGG. In the face of complex and severe market environment, the
Company has reached a critical period when it is urgent to change again. On the one hand, the Company faces
enormous cyclical pressures on corporate growth, increasing human labor costs, and the technical advantages
of some products are being challenged. The market base of conventional products has not yet been established,
and China's intelligent manufacturing base is still under construction. On the other hand, the automobile
industry is accelerating its decline. The downstream markets such as garment and luggage are accelerating the
transfer to Southeast Asia and other regions. External factors such as low-cost competition among domestic
peers have had a negative impact on the Company. In 2018, the Company faced challenges and overcome
difficulties, and achieved remarkable results.
      The Company mainly carried out the following works:
      (1) Deepening the reform and integration, and promoting acquisitions and mergers
      In 2018, 49% shares of PKFR, the Company's largest shareholder, were transferred to the Shendie Equity
Investment Partnership, which was indirectly held by the management, and initially realized the Company's
management participation.
      The Company further promoted internal integration in 2018. In Europe, the Company overcame the
difficulties and steadily promoted the squeeze-out of 6% of the minority shareholders of DA AG, completed
the legal procedures in July 2018, and ended the listing status in Frankfurt, Berlin and Düsseldorf Stock
Exchange. In addition, in 2018, the Company launched the integrated integration of PFAFF GmbH and KSL
Branch, adjusted its organization, and promoted production integration and product transfer in an orderly
manner. The integration promoted the transformation of PFAFF GmbH into KSL technology and products, and
realized the rapid development of the Company's intelligent equipment R&D and manufacturing. Through
asset restructuring and business integration of European subsidiaries, the Company is able to take full
advantage of the technology, production, procurement, sales, capital and human resources of DA AG and its
subsidiaries, PFAFF GmbH and KSL Branch, and to enhance profitability. In China, the import and export
business of the Company's subsidiary Butterfly Import and Export, Shanggong Import and Export and SMPIC
Import and Export has been steadily advanced, and the transfer of personnel and business has been basically
completed. At the same time, the Company completed the transfer of business from the domestic sales

                                                       9 / 121
                上工申贝(集团)股份有限公司
                                                                                      Annual Report 2018
                Shang Gong Group Co., Ltd

subsidiary, SG Butterfly and DAP Shanghai, to the parent company in 2018. Throught the integration, the
effect of the parent company's materialized operation has gradually emerged. The rising cost of human
resources has been digested, and the operating profit of the parent company has increased significantly, which
is conducive to solving the problem that the undistributed profit of the parent company is negative and cannot
be distributed.
      In 2018, the Company seized the opportunity to invest in mergers and acquisitions and invested 130
million yuan to acquire a 65% stake in Tianjin Richpeace Computer Machinery Co., Ltd. The acquisition will
help solve the problem of the Company's relatively weak ability to undertake German KSL product technology
in domestic software development and automatic sewing solution technology, thereby enhancing the
Company's market share in the domestic high-end special sewing equipment field, which will help improve the
overall performance of the Company. Richpeace's automated cutting and embroidering equipment
complements the Company's product range. Its automatic patterning machine and other automation solutions
are also an effective extension of the Company's existing business.
      (2) Adhere to the professional multi-brand strategy and increase the market share of products
      In 2018, DA AG further promoted the integration of the marketing network, established DAP Russia, and
completed the reorganization of the welding machine marketing network.
      In China, the Company has established branches or offices in Guangdong, Fujian and Wuhan, and
organized exhibitions and exhibitions of various themes in industrial clusters, including 12 garment machine
exhibitions and 22 heavy material machine exhibitions. In 2018, the Company achieved the goal of a
substantial increase in sales revenue in the sofa and luggage industry. The sales of DA and PFAFF basic
products also achieved breakthroughs. The Company has improved the visit mechanism of major customers,
established a saleperson/technician daily report system, and continued to strengthen maintenance and technical
training. In addition, the Company has also established and improved the evaluation and elimination
mechanism of dealers, vigorously expanded the construction of dealer networks, and realized the contractual
management of all dealers.
      (3) Maintaining product technology leadership and strengthening production and manufacturing
capabilities
      DA AG completed the development of a new generation of M-Type as planned, and realized the
production of the new DAC-Compact electronic control series. The QONDAC Network system was
commercialized in May 2018.
      In 2018, DAMSH completed five R&D projects, such as keyhole fastening machine and semi-automatic
wire-cutting machine. The project of automatic wire-cutting machine and single-cut wire-cutting machine is
under development.
      PIZ completed the trial production of automatic feeding shoe machine, short shearing shoe machine and
PFAFF welding machine and extended version of Powerline; Mauser 591 has started mass production; the cost
of three machines such as DA 1767 have been reduced. The trial production of 11 types of parts such as the
needle bar swing frame and the column was completed, and the mass production capability was obtained.
      SGGEMSY strives to expand production capacity in 2018, and the volume of self-produced machines has
increased by 21% year-on-year. At the same time, the integration and improvement of products have been
continuously promoted. Mauser 8125 sewing machine and Mauser EX overlock sewing machine have begun
to produce in small batches. The automatic sewing machine, the 8802E single-stop sewing machine and the
program-controlled tying machine have been prototyped.
      In Europe, the Company invested 13.33 million euros in 2018 to build a European intelligent product
research and development center and a trial production base in Bensheim, Germany, which is expected to be
completed by the end of 2019. This investment is conducive to meeting the rising demand for automation and


                                                     10 / 121
                     上工申贝(集团)股份有限公司
                                                                                      Annual Report 2018
                     Shang Gong Group Co., Ltd

intelligent upgrading of sewing machinery; it can expand the production capacity of KSL Branch, solve the
problem of limited production sites, achieve capacity balance and meet market demand. This project is
conducive to enhancing the Company's research and development capabilities and improving the trial
production level of new products; it is also conducive to the Company's continued integration and promotes
the Company's globalization strategy.
      In China, the Company invested 154 million yuan to build an intelligent manufacturing base in Huangyan
District, Taizhou, Zhejiang Province. The investment in the construction of Taizhou Huangyan Intelligent
Manufacturing Base is conducive to better grafting German DA and PFAFF product technology based on the
Company's existing industry, developing multi-brand and intelligent product manufacturing, and creating the
largest sewing machine production base in China.
      (4) Continue to do a good job in internal control management and continuously improve operational
efficiency
      In 2018, the Company completed the revision of the Company's ISO 9001:2015 quality management
system. Combined with the new standards, such as performance appraisal and risk prevention, based on the
Company's new organizational structure, the Company has sort out the related processes of quality control.
      In 2018, the Company will do a good job in the implementation and management of the Group's annual
budget, do a good job in fund arrangement and fund pooling within the Group, and expand financing channels.
In addition, the Company continued to build the internal control system of the Company and its subsidiaries,
and rectified the 2017 internal control re-evaluation test and defects. Nine internal audit engineering audits
were also completed.
     2. Main Operating Condition
     During the reporting period, the Company achieved operating income of 3.2 billion yuan, a year-on-year
increase of 4.42%, mainly due to the year-on-year increase of 11.31% in sewing equipment and intelligent
manufacturing equipment. Operating profit was 200 million yuan, down 30.92% year-on-year, mainly due to
the loss of Stoll in current period and the year-on-year reduction of housing relocation compensation income.
The net profit attributable to shareholders of listed companies was 141 million yuan, a year-on-year decrease
of 28.59%. The net profit attributable to shareholders of listed companies after deducting non-recurring gains
and losses decreased by 19.45% year-on-year.


      1)     Main Business Analysis
      A.     Analysis of Changes of Items in Income Statement and Cash Flow Statement
                                                                                            Increase/Decrease
                   Item                         2018                     2017
                                                                                                 (%)
Operating income                                3,200,527,741.09         3,064,971,500.79                  4.42
Operating cost                                  2,322,152,730.89         2,245,537,329.26                 3.41
Selling expenses                                    322,696,906.11         284,810,887.21                13.30
General and administration expenses                 230,502,679.98         207,021,408.70                11.34
R & D expenses                                       97,647,657.57          84,350,255.40                15.76
Finance expenses                                     16,859,739.48          -5,263,527.90                 N/A
Net cash flow from operating activities              79,553,871.30         117,335,869.17               -32.20
Net cash flow from investing activities             -352,612,604.58       -119,869,574.99                 N/A
Net cash flow from financing activities             113,452,905.75         -60,325,135.90                 N/A


     B. Income and Cost Analysis
     During the reporting period, the Company achieved operating income of 3.2 billion yuan, a year-on-year
increase of 4.42%, mainly due to the year-on-year increase of 11.31% in sewing equipment and intelligent

                                                           11 / 121
                     上工申贝(集团)股份有限公司
                                                                                                                           Annual Report 2018
                     Shang Gong Group Co., Ltd

manufacturing equipment. The main reason is that the Company is committed to the development of intelligent
manufacturing. In 2018, SGG acquired 65% of stake in Richpeace and incorpoarted it in the scope of
consolidation.
      a)       Main Business by Industry/Region
                                                                Main Business by Industry
                                                                      Gross           Operating          Operating cost
                                                                                                                             Gross margin increase/
   Industry        Operating income           Operating cost          margin       income increase/        increase/
                                                                                                                                 decrease (%)
                                                                       (%)           decrease (%)        decrease (%)
Sewing
equipment &
                    2,159,131,523.78          1,399,795,850.60           35.17                 11.31              14.42    Decrease 1.76 percent point
intelligent
equipment
Logistic
                         761,681,126.67        695,390,097.46             8.70                 -0.94              -2.71       Increase 1.66 percent point
service
Export trade              95,223,904.21            93,291,211.22          2.03               -51.97              -52.16        Increase 0.4 percent point
Office
equipment
                          46,474,027.84            39,231,617.54         15.58               -17.62              -20.80       Increase 3.38 percent point
and film
materials
Others                    12,168,911.64             7,764,028.10         36.20                 19.45              -6.69      Increase 17.87 percent point
    Total           3,074,679,494.14          2,235,472,804.92           27.29                  3.41               2.03       Increase 0.98 percent point
                                                                  Main Business by Region
                                                                      Gross           Operating          Operating cost
                                                                                                                             Gross margin increase/
   Industry        Operating income           Operating cost          margin       income increase/        increase/
                                                                                                                                 decrease (%)
                                                                       (%)           decrease (%)        decrease (%)
Domestic            1,734,368,475.06          1,477,335,063.27           14.82                  9.00               4.02     Increase 4.08 percent point
Overseas            1,500,442,605.74           918,269,328.31            38.80                  1.23               5.47    Decrease 2.46 percent point

      b)       Analysis of Production and Sales
                                                                                       Increase/Decrease                             Increase/Decrease
                                                                                                                Increase/Decrease
                                    Product            Sales                           in production over                             in inventory over
         Major Product                                                Inventory                                  in sales over the
                                     output           volume                            the previous year                             the previous year
                                                                                                               previous year(%)
                                                                                             (%)                                         (%)
Industrial sewing equipment
                                      193,344           187,215           37,964                       3.4%                  3.5%                 19.3%
(domestic)
Industrial sewing equipment
                                          45,053         45,063                135                 76.1%                    76.1%                  -7.4%
(domestic, OEM)
Industrial sewing equipment
                                          29,837         32,419                                        -2.9%               -11.6%
(overseas)
Industrial sewing equipment
                                      268,234           264,697           35,517                   10.3%                     8.9%                 11.1%
(Total)
Household sewing machine
                                      293,523           293,341                677                 40.9%                    39.4%                 36.8%
 (OEM)
Multi-functional household
                                          85,604         87,091           18,976                  -14.0%                    -6.4%                  -7.3%
 sewing machine(OEM)
Household sewing machine
                                      379,127           380,432           19,653                   23.1%                    25.4%                  -6.2%
(Total)
      c)       Cost Analysis
                                                                Current                                      Previous
                                                                 period                                       period
 Industry        Cost item                 2018                                         2017                                  Change (%)          Notes
                                                               proportion                                   proportion
                                                                  (%)                                          (%)
                Material            941,826,785.27                   42.13         774,957,920.33                 35.37                 21.53
Sewing
                Labor               341,566,272.60                   15.28         296,611,105.46                 13.54                 15.16
equipment
                Depreciation         44,765,110.83                     2.00         38,158,659.16                   1.74                17.31
&
                Manufacture
intelligent                           71,637,681.90                    3.20          113,687,326.29                 5.19               -36.99
                cost
equipment
                Total              1,399,795,850.60                   62.62       1,223,415,011.24                 55.84                14.42
Logistic        Logistics
service
                                    695,390,097.46                    31.11        714,752,388.59                  32.62                -2.71
                cost
Export
trade
                                      93,291,211.22                    4.17        195,004,666.92                   8.90               -52.16
Office          Material              26,314,943.38                    1.18           37,664,031.50                 1.72               -30.13


                                                                           12 / 121
                         上工申贝(集团)股份有限公司
                                                                                                                Annual Report 2018
                         Shang Gong Group Co., Ltd

equipment           Labor              9,983,697.47            0.45         7,587,657.23                 0.35               31.58
and film            Depreciation         264,644.22            0.01           338,835.76                 0.02              -21.90
materials
                    Manufacture
                                       2,668,332.47            0.12         3,943,876.00                 0.37              -32.34
                    cost
                    Total          39,231,617.54               1.75        49,534,400.49                 2.26              -20.80
Others                              7,764,028.10               0.35         8,320,443.37                 0.38               -6.69
     d) Main Consumers and Main Suppliers
     The sales of the top five customers were 357.62 million yuan, accounting for 11.17% of the total annual
sales; the purchase amount of the top five suppliers was 149.95 million yuan, accounting for 7.72% of the total
annual purchase.
        C.      Expense
             Item                        2018                            2017                              Increase/Decrease (%)
Selling expenses                           322,696,906.11                   284,810,887.21                                             13.30
General                 and
administration                             230,502,679.98                   207,021,408.70                                             11.34
expenses
R & D expenses                              97,647,657.57                       84,350,255.40                                          15.76
Finance expenses                            16,859,739.48                       -5,263,527.90                                           N/A
Income tas expenses                         45,789,835.67                       82,928,869.66                                         -44.78
     Note 1: Financial expenses increased by RMB 22.12 million year-on-year, mainly due to the year-on-year
decrease in interest income and the increase in exchange losses.
     Note 2: Income tax expenses decreased by 44.58% year-on-year, mainly due to the year-on-year decrease
in net profit of DA AG with high income tax rate.
        D.      Investment in R & D
R & D investment capitalized in 2018                                                                                        97,647,657.57
R & D investment expensing in 2018                                                                                            6,768,028.94
Total                                                                                                                      104,415,686.51
Total R &D investment in proportion in operating income                                                                                3.26
Proportion of R & D investment capitalized (%)                                                                                         6.48

        E.      Cash Flow

                            Item                              2018                         2017                 Increase/Decrease (%)
Net cash flow from operating activities                      79,553,871.30               117,335,869.17                               -32.20
Net cash flow from investing activities                     -352,612,604.58             -119,869,574.99                                 N/A
Net cash flow from financing activities                     113,452,905.75                -60,325,135.90                                N/A
Impact of exchange rate changes on cash and
                                                               4,033,729.47                26,314,632.54                                N/A
cash equivalents
      Note 1: Mainly due to the year-on-year decrease in the sales-to-revenue ratio, the increase in cash paid to
employees and the year-on-year increase in cash paid for employees and the year-on-year decrease in taxes
paid.
      Note 2: Mainly due to the increase in the purchase of Richpeace's 65% equity and the purchase and
construction of fixed assets and the year-on-year decrease in the receipt of housing relocation compensation
income.
      Note 3: Mainly due to the increase in bank loans.
      Note 4: Mainly due to the impact of changes in the exchange rate of the euro.
        2) Explanation of major changes in profits caused by non-core business
         (1) Detailed description of major changes in the company's profit composition or source of profit
                     Item                        2018                  2017                     Increase/Decrease (%)              Reason


                                                                     13 / 121
                          上工申贝(集团)股份有限公司
                                                                                                               Annual Report 2018
                          Shang Gong Group Co., Ltd

Finance expense                                  16,859,739.48           -5,263,527.90                                    N/A        Note 1
Investment income                                12,758,268.06          45,607,259.29                                   -72.03       Note 2
Asset disposal income                                443,708.05         23,963,103.89                                   -98.15       Note 3
Income tax expense                               45,958,015.67          82,928,869.66                                   -44.58       Note 4
Net   after    tax   for             other
                                                 -3,215,557.02          36,930,889.17                                 -108.71        Note 5
comprehensive income
      Note 1: Mainly due to the year-on-year decrease in interest income and the increase in exchange loss
year-on-year.
      Note 2: Mainly due to the decrease in investment income of the joint venture Stoll.
      Note 3: Mainly due to the compensation for housing relocation in 2017.
      Note 4: Mainly due to the year-on-year decrease in the net profit of the DA Group with high income tax
rate.
      Note 5: Mainly due to the decrease in the net assets of the European subsidiaries' re-measurement of the
defined benefit plan and the translation of the foreign currency statement.
      3) Analysis of Assets and Liabilities
                                                 Ending
                                                                                     Ending balance
                                                balance to
                          Ending balance of                     Ending balance of     to total assets
         Item                                 total assets of                                           Change(%)              Notes
                           current period                        previous period        of current
                                              current period
                                                                                      period(%)
                                                  (%)
                                                                                                                         Mainly due to the
                                                                                                                         transfer of intangible
                                                                                                                         assets by the transfer
Prepayments                   39,695,762.85             0.96        64,393,627.71               1.74           -38.35
                                                                                                                         of land transferred by
                                                                                                                         SG Zhejiang in the
                                                                                                                         previous year.
                                                                                                                         Mainly due to the
                                                                                                                         dividends distributed
                                                                                                                         by Stoll KG and the
                                                                                                                         increase in the current
                                                                                                                         development of the
Other receivables            120,422,496.29             2.91        58,966,056.94               1.59          104.22     welding business of
                                                                                                                         the           domestic
                                                                                                                         subsidiary DAMSH
                                                                                                                         and the increase in the
                                                                                                                         export tax rebate in
                                                                                                                         the current period.
                                                                                                                         Due to the company's
                                                                                                                         reduction     of     the
                                                                                                                         purchase              of
Other           current
                             249,326,335.31             6.02       366,533,356.84               9.90           -31.98    bank-guaranteed
assets
                                                                                                                         wealth management
                                                                                                                         products in the current
                                                                                                                         period.
                                                                                                                         Due to the financing
                                                                                                                         lease receivable from
Long-term                                                                                                                the           domestic
                              31,427,418.92             0.76                  0.00              0.00
receivables                                                                                                              subsidiary ShangGong
                                                                                                                         SMPIC           Finance
                                                                                                                         Leasing Co., Ltd.
                                                                                                                         Mainly due to the
                                                                                                                         expenditures          of
                                                                                                                         construction projects
                                                                                                                         such as production,
                                                                                                                         R&D       bases      and
Construction         in
                             119,166,627.75             2.88        12,665,274.09               0.34          840.89     modern         logistics
progress
                                                                                                                         management centers
                                                                                                                         increased by domestic
                                                                                                                         and              foreign
                                                                                                                         subsidiaries during the
                                                                                                                         current period.
                                                                                                                         Mainly due to the
                                                                                                                         acquisition of 65%
                                                                                                                         equity of Tianjin
Intangible assets            270,072,349.34             6.52       149,988,157.46               4.05           80.06     Richpeace in the
                                                                                                                         current period, which
                                                                                                                         was included in the
                                                                                                                         scope of consolidation


                                                                        14 / 121
                     上工申贝(集团)股份有限公司
                                                                                                          Annual Report 2018
                     Shang Gong Group Co., Ltd

                                            Ending
                                                                                Ending balance
                                           balance to
                     Ending balance of                     Ending balance of     to total assets
      Item                               total assets of                                           Change(%)              Notes
                      current period                        previous period        of current
                                         current period
                                                                                 period(%)
                                             (%)
                                                                                                                   and increased land use
                                                                                                                   rights.
                                                                                                                   Mainly due to the
                                                                                                                   overseas subsidiaries'
Development                                                                                                        carryover               of
                          6,798,312.48             0.16        16,683,772.84               0.45           -59.25
expenditure                                                                                                        capitalized         R&D
                                                                                                                   expenditures            to
                                                                                                                   intangible assets
                                                                                                                   Mainly due to the
                                                                                                                   company’s premium
Goodwill                140,074,270.28             3.38        72,482,033.43               1.96           93.25
                                                                                                                   acquisition of 65%
                                                                                                                   equity of Richpeace
                                                                                                                   Mainly due to the
                                                                                                                   increase     in      fixed
Long-term                                                                                                          assets improvement
                          3,875,409.77             0.09          1,631,013.88              0.04          137.61
prepaid expenses                                                                                                   expenses of domestic
                                                                                                                   subsidiaries in the
                                                                                                                   current period
                                                                                                                   Mainly due to the
                                                                                                                   company's overseas
                                                                                                                   subsidiary DA AG
short-term loan         206,614,015.12             4.99       330,389,201.62               8.92           -37.46
                                                                                                                   reduced the short-term
                                                                                                                   bank loans in the
                                                                                                                   current period
                                                                                                                   Mainly due to the
                                                                                                                   increase     in      bank
                                                                                                                   acceptance bills of
Notes payable and                                                                                                  SGGEMSY                and
                        318,803,039.91             7.69       206,343,320.56               5.57           54.50
accounts payable                                                                                                   Richpeace              was
                                                                                                                   include       in       the
                                                                                                                   consolidation scope in
                                                                                                                   the current period.
                                                                                                                   Mainly due to the
                                                                                                                   acquisition of 65%
Advance receipt          75,412,987.77             1.82        38,326,094.65               1.03           96.77
                                                                                                                   equity of Richpeace in
                                                                                                                   the current period.
                                                                                                                   Mainly due to the
                                                                                                                   inclusion of unpaid
                                                                                                                   corporate income tax
                                                                                                                   and value-added tax at
Taxes payable            21,208,862.17             0.51        14,074,587.91               0.38           50.69    the end of the period
                                                                                                                   in which Richpeace
                                                                                                                   was included in the
                                                                                                                   the       scope         of
                                                                                                                   consolidation.
                                                                                                                   Mainly due to the
                                                                                                                   increase of Tianjin
Other payables          254,827,223.50             6.15       195,761,119.66               5.29           30.17
                                                                                                                   Baoying’s      minority
                                                                                                                   shareholders’ loans
                                                                                                                   Mainly due to the
                                                                                                                   technology
                                                                                                                   development         funds
Non-current
                                                                                                                   received      by       the
liabilities    due        4,173,297.07             0.10          1,260,000.00              0.03          231.21
                                                                                                                   company        in      the
within one year
                                                                                                                   current period and the
                                                                                                                   financing leases due
                                                                                                                   within one year.
                                                                                                                   Mainly due to the
                                                                                                                   increase     in      bank
                                                                                                                   borrowings for more
Long term loan          340,477,650.27             8.22        62,956,504.27               1.70          440.81
                                                                                                                   than one year of the
                                                                                                                   company's overseas
                                                                                                                   subsidiary DA AG.
                                                                                                                   The        development
                                                                                                                   service          industry
                                                                                                                   guidance fund project
Deferred income                   0.00             0.00          2,340,000.00              0.06          -100.00
                                                                                                                   received by SHENSY
                                                                                                                   will be accepted by
                                                                                                                   the government in

                                                                   15 / 121
                       上工申贝(集团)股份有限公司
                                                                                                                        Annual Report 2018
                       Shang Gong Group Co., Ltd

                                                  Ending
                                                                                        Ending balance
                                                 balance to
                       Ending balance of                          Ending balance of      to total assets
      Item                                     total assets of                                             Change(%)                    Notes
                        current period                             previous period         of current
                                               current period
                                                                                         period(%)
                                                   (%)
                                                                                                                                2018, so it is adjusted
                                                                                                                                to the subject of
                                                                                                                                ―other     non-current
                                                                                                                                liabilities due within
                                                                                                                                one year‖.
                                                                                                                                Mainly due to the
                                                                                                                                income tax liabilities
                                                                                                                                arising     from     the
                                                                                                                                taxable       temporary
Deferred income                                                                                                                 differences      arising
                             70,805,236.44                 1.71       52,863,141.42                1.43                 33.94
tax liabilities                                                                                                                 from the increase in
                                                                                                                                the identifiable assets
                                                                                                                                calculated            by
                                                                                                                                Richpeace on the date
                                                                                                                                of purchase.


      Not applicable.
      4) Industry Business Information Analysis
      See Chapter 3 for details.
      5)       Investment Analysis
      A.       General Analysis
                                                                                                                            Unit: 10,000 Yuan
Long-term equity investment in 2018                                                                                                         28,351.59
Increase/Decrease                                                                                                                           27,331.59
Long-term equity investment in 2017                                                                                                             1,020
Increase/Decrease (%)                                                                                                                      2,679.57%


      a)       Significant equity investment
                                                                                          Cumulative
                                            Total      Shareholding    Investment in                       Sources of         Other
   Name               Business                                                            investment                                         Lawsuit
                                           Amount          ratio           2018                              funds         shareholders
                                                                                            amount
Richpeace        Automation special       RMB          65%            RMB               RMB                Self-owned     Shenzhen         No
                 equipment,               15,613,780                  12,881,300,300    12,881,300,300     funds          Yingning
                 high-tech content                                                                                        Venture
                 (light,     machine,                                                                                     Capital Co.,
                 electricity                                                                                              Ltd., Tianjin
                 integration) special                                                                                     Tongshang
                 sewing equipment                                                                                         Software
                 manufacturing;                                                                                           Co., Ltd.
                 high-end       textile
                 and          apparel
                 software     design,
                 development;
                 computer       textile
                 machinery
                 manufacturing and
                 software
                 development,
                 production, sales
                 and           related
                 technical products
                 consulting
                 services;     Import
                 and            export
                 business; ordinary
                 freight.
Sequeeze-out                              20 million   /              20.35   million   20.517 million     Self-owned                      Yes
of     5.99%                              euro                        euros             euros              funds                           The
minority                                                                                                                                   Squeeze-out
shareholders                                                                                                                               is
of DA AG                                                                                                                                   completed.
                                                                                                                                           Lawsuit on
                                                                                                                                           the Purchase
                                                                                                                                           price is in
                                                                                                                                           progress.


                                                                          16 / 121
                    上工申贝(集团)股份有限公司
                                                                                                                  Annual Report 2018
                    Shang Gong Group Co., Ltd




        b)   Major non-equity investment
                                                                Actual                 Cumulative
                                                              investment                  actual            Sources of               Project
             Item                  Total amount
                                                            amount for the             investment             funds                 progress
                                                             current year                amount
Investment     in      the
                                                                 RMB 28.61                                  Self-owned                Under
construction of Taizhou             394 million yuan                                RMB 65 million
                                                                   million                                     funds               construction
Manufacturing Base
Investment     in      the
construction    of     the
European       intelligent                                    271.34 million           271.34 million       Self-owned                Under
                                  13.39 million euros
product research and                                                  euros                    euros           funds               construction
development center and
manufacturing base


        c)   Financial assets measured at fair value
                                               Proportion                                         Changes in
                                                 of the     Book value as                        owner's equity
Securities                        Initial                                     Profi/loss in                        Accounting         Source of
              Abbreviation                                  of December                            during the
  code                       investment cost   company's                         2018                                 item             Shares
                                                              31, 2018                             reporting
                                               equity(%)
                                                                                                     period
                                                                                                                                    The
                                                                                                                                    transferee’s
              Changjiang
                                                                                                                                    interest in the
600757        Publising &     72,085,722.82          0.85    67,146,441.68     1,029,853.40       -4,428,369.62
                                                                                                                                    bankruptcy
              Media
                                                                                                                  Available         and
                                                                                                                  for       sale    reorganization
              Lujia    B                                                                                         financial
900932                           773,099.71        0.0067     1,975,180.91      100,135.76         -157,523.95                      Enforcement
              Share                                                                                               assets
              Shenwan &
000166                           200,000.00        0.0011      889,791.54        10,931.10         -284,208.60                      Purchased
              Hongyuan
              Bank     of
601229                           951,400.00         0.013    16,395,364.20      523,278.50        1,555,185.94                      Purchased
              Shanghai
Total                         74,010,222.53             -    86,406,778.33     1,664,198.76       -3,314,916.23         -                  -


        6) Major assets and equity sales
        Not applicable.

         7) Analysis of Major Subsidiaries
                                                                                                                      Unit: 10,000 Yuan
                                                             Registered       Total            Net      Operating      Operating           Net
   Name                      Business Scope
                                                              capital         assets          assets     income         profit            profit
                Production, processing and sale of
                machines, machines and related parts
                                                                  12.5
DA AG           and software, in particular sewing                            191,230         87,448       147,620          12,681             8,954
                                                                 million
                machines and conveyors and other
                industrial products
SHENSY          Transportation of goods                          17,882        47,658         26,092        76,294           1,912             1,419
                Manufacturing and sales of various
SGGEMSY                                                          21,600        36,061         21,413        35,556             143              320
                sewing equipment
                Automatic special equipment, high-tech
                content (light, machine, electricity
Richpeace       integration) special sewing equipment             5,000        21,225           4,961        9,541           2,191             1,913
                manufacturing; high-end textile and
                apparel software design, development


        3. Discussion and Analysis of the Company's Future Development
        1) Industry Pattern and Trend
        From the perspective of the external environment, there are still many opportunities in the industry. First,

                                                                   17 / 121
                上工申贝(集团)股份有限公司
                                                                                       Annual Report 2018
                Shang Gong Group Co., Ltd

the demand for replacement of the international sewing equipment market will continue to be released. Second,
the national ―One Belt, One Road‖ policy strategy will be further promoted. Exports to the countries in the
―Belt and Road‖ accounted for 62.3% of the total in the industry, which has increased by about nine percentage
points in the past five years. It is expected that the future growth will remain huge. Third, the government has
actively introduced various policies to reduce burdens for manufacturing enterprises and promote the
high-quality development of manufacturing industries. Fourth, the upgrading of consumer demand for
downstream industries represented by garment, leather, home textiles and other industries and the acceleration
of the construction of smart factories in China will provide a broader space for development and growth in
innovation and intelligent transformation of products, service expansion, value extension, and structural
upgrading in the sewing machinery industry. At the same time, the unstable global economic situation has also
brought challenges to the industry. First, the impact of Sino-US trade disputes will continue to be uncertain,
downstream enterprises will continue to wait and see, and many manufacturing enterprises will shift to
Southeast Asia. Second, the emerging US dollar will continue to raise interest rates. The market currency crisis
and sluggish demand pose challenges to industry exports.
      From the perspective of the internal environment of the industry, the industry has gradually entered a new
round of industry growth cycle from automation to intelligence. The combination of strong and strong
industries and complementary advantages has become an important development option for enterprises. The
integration of new technologies, new models, new formats, and sewing machinery industries such as Internet
of Things, big data, and intelligent manufacturing will strongly promote industry transformation and upgrading.
"Automation" + "Big Data" + "Artificial Intelligence" may become the core competitiveness of the future.
However, the challenges and operational pressures faced by enterprises are still unabated. First, under the
impetus of environmental protection and supply-side reform, the cost of enterprises will rise irreversibly.
Second, the adverse effects of the staged overcapacity caused by the rapid downturn of the market in the
second half of 2018 will soon appear, and a new round of market and price competition will have an adverse
impact on the industry. Third, in the process of transformation, the shortage of talents is more prominent, and
enterprises lack effective talent support.
      2) Company Development Strategy
      In 2019, the Company will continue to adhere to the Market-oriented, Benefit-first business philosophy,
comprehensively promote institutional adjustment, mechanism reform, achieve rapid response to the market,
and strive to create a market-oriented enterprise oriented to customer demand. The Company will adhere to
technological innovation, increase investment in research and development, accelerate product technology
upgrades, consolidate product technology advantages, and continue to maintain its leading position in the
global sewing equipment industry. Meanwhile, the Company will continue to do a good job in internal control
management, reduce costs and increase efficiency, and complete the business objectives set by the Board of
Directors.
      Main tasks of SGG in 2019:
      1. Vigorously promote institutional reform and explore the diversified development of manufacturing
industry
      In 2019, the Company will further deepen the mechanism reform and continue to promote the operator's
shareholding operation. The Company will seize market opportunities, conduct financing investments in a
timely manner, and explore and promote the moderate diversification of manufacturing products.
      In 2019, the Company will vigorously promote the comprehensive reform of the customer-oriented
organization. The enterprises and departments of SGG will adjust the system based on the rapid response to the
market, and allocate the salary of the cadre and employees based on the economic benefits.
      In Europe, the Company will accelerate the full integration of DA Group with PFAFF and KSL, and


                                                      18 / 121
                上工申贝(集团)股份有限公司
                                                                                          Annual Report 2018
                Shang Gong Group Co., Ltd

achieve break-even of PFAFF by reducing costs. In China, the Company will steadily advance the follow-up
work of SMPIC Electronics Co., Ltd., and integrate DAMSH, SMPIC Electronics and the Group’s
Manufacturing Branch to promote the development of robot application technology and intelligent
manufacturing equipment business.
      In addition, according to the decision of the Board, the Company will also make a follow-up capital
increase for Richpeace and promote the cooperation between Richpeace and PFAFF/KSL.
      2. Adhere to market orientation and actively expand sales
      The Company will always adhere to the Market-oriented, Benefit-first business philosophy, continue to
implement a professional multi-brand marketing strategy, and strive to expand the market. The Company and
its subsidiaries will work together to actively carry out the exhibitions of the two major exhibitions of CISMA
and Texprocess in 2019, and vigorously promote the company's brands.
      DA Group will further increase the revenue of DAC electronic control business, actively promote Qondac
system, and plan to launch M-Type Delta machine at Texprocess in 2019.
      In China, the Company will continue to integrate the domestic DAP sales platform, and integrate DAP
Shanghai, DAP Taizhou and Richpeace’s domestic branches, and implement localized management of sales
and maintenance personnel. For the basic products of the DA, Pfaff and Mauser brands, the Company will
strive to increase sales significantly; in the field of heavy material machine sales, it will gradually form a
classified sales comparable to the sales of automotive products. In 2019, try to realize the significant increase
of sales in heavy/medium material machine applid for luggages and sofas. The sales of KSL automatic
equipment products are also striving to achieve substantial growth; further improve the evaluation and
elimination mechanism of dealers and vigorously expanding the dealer network; in addition, promote sales of
the full series of the Mauser brand which is also identified as an important marketing strategy task.
      In Southeast Asia, the Company will strengthen the coordinated sales of its subordinate DAP Singapore,
Richpeace and SGGEMSY in Southeast Asia, integrate customer resources, and make full use of SGG's
marketing platform to tap market potential and expand market share. In the Vietnamese market, the Company
will consolidate the dealer network and do contract management. According to the customer country, choose
different agents; at the same time, strengthen the training of local sales staff, rapidly expand the sales of local
Vietnamese companies, and significantly increase the sales of the PFAFF brand in the Vietnamese market. In
the Thai market, the Company will set up a sales and service team as soon as possible, taking the automotive
industry as a breakthrough point, focusing on serving large customers, and vigorously promoting basic
products such as DA, PFAFF, Masuer and Richpeace, resulting in a large increase in sales. In addition, the
Company will actively expand its market in the Indonesian market, the Myanmar market and the Cambodian
market.
      In 2019, the Company's production companies will share sales responsibilities and achieve budgetary
targets with sales organizations, and organize efforts to assist sales organizations to meet customer
requirements for product price, functional performance, quality improvement and maintenance services, and
jointly control sales expenses. .
      In 2019, the Company's household sewing machine will make full use of the "Butterfly" brand's
centennial celebration, promoting the "Butterfly" brand, and striving to achieve a substantial increase in
domestic sewing machine sales in China. Continue to improve the "Sewn Embroidery Home" network
platform, actively promote the network platform, and strive to achieve a full coverage of the country. In
addition, SGG will continue to build the industrial sewing machine network sales platform, realize the
breakthrough of the standard industrial sewing machine online sales, and expand the online sales range of
industrial sewing machine parts. In addition, the Company will focus on the development of major markets
such as India, Russia, Algeria, Sri Lanka and Brazil, and deploy a network of distribution agents.


                                                        19 / 121
                上工申贝(集团)股份有限公司
                                                                                         Annual Report 2018
                Shang Gong Group Co., Ltd

      3. Consolidate product technology advantages and steadily promote intelligent manufacturing
      In 2019, the Company will continue to build the Bensheim trial base in Germany and enhanced KSL
production capacity. SG Zhejiang will continue to promote the construction of the Taizhou intelligent
manufacturing base, and with the assistance of SGGemsy, do a good job in equipment selection and site layout
of the base, and strive to complete the integration and commissioning of the Taizhou factory by the end of
2019.
      In terms of research and development, the Company will continue to do research and development of
embroidery electrical control, integrated flat seam electrical control (automatic), integrated overlock electrical
control and automatic feeding shoe electrical control (improved); Development and trial production of L-Type
sewing machine; advancement of M-Type 3 development as planned; and together with Shanghai Jiaotong
University to further promote the design-manufacturing-service integrated cloud platform development for
apparel customization.
      In 2019, the Company completed the trial production of the sleeve card machine and the improvement of
the forklift machine, completed the manufacture of the DA 806 and PFAFF 3588 templates and other
important parts and accessories of the sewing unit; optimize the cost, focus on the rectification of existing
product quality problems and after-sales service; do a good job of item management of intelligent equipment to
ensure that the gross profit margin reaches 15% or more. PFAFF welding machine and short-cutting shoe
machine must have mass production capacity in China; the Company will strengthen supply chain
management, reorganize the supplier system, and strive to reduce the cost of Mauser machine raw materials
and parts by 10% under the premise of ensuring quality. In addition, accelerate the trial production and mass
production of key components, and try to sell some third-party products in addition to the Company's internal
support.
      4. Improve operational efficiency and manage risk
      In 2019, the Company will continue to build the internal control system of the parent company and its
subsidiaries, and continue to complete the rectification of the internal control re-evaluation test and defects in
2018, as well as the combing, supervision and improvement of the internal control standardization of the group
system in 2019 and the independent testing of the Internal Control Evaluation Work Programme for 2019.
      Richpeace should further improve the system construction, establish a suitable internal control
management system on the premise of meeting the requirements of internal control, implement comprehensive
management, advocate full participation, establish internal control system that restricts each other and connects
each other, and improves Enterprise management level and anti-risk ability; at the same time, self-diagnosis of
the status quo of internal institutions, analysis of the division of functions, past performance, cooperation
ability, personnel composition, cost and other aspects of various agencies, judging the implementation of
separation of main and auxiliary, streamlining and simple administration, collaborative production The
feasibility of other aspects, and do a good job of reform and adjustment.
      Actively explore the establishment of an efficient financial management and control system, do a good
job in the preparation of comprehensive budget management in 2019, do a good job in financial risk early
warning, realize early warning management of major financial risks, prevent financial risks; actively explore
and establish a "fund pool" of the group company Improve capital gains and strengthen fund supervision.
Continue to do a good job of maintaining stability, further tap effective assets, and properly handle historical
issues. Continue to implement the safety production responsibility system and continue to do a good job in
safety production and environmental protection.
      3) Business plan
      Operating income: 3.7 billion yuan; operating profit: 290 million yuan; ROE: not less than 8%.



                                                       20 / 121
                上工申贝(集团)股份有限公司
                                                                                        Annual Report 2018
                Shang Gong Group Co., Ltd

     4) Possible risks
     (1) Industrial and market risk
     The sewing equipment industry is an industry full of market competition, with obvious periodicity, and
has strong dependence on downstream textile and garment, leather bags and other industries, and is greatly
affected by the macroeconomic environment. Due to the large proportion of the Company's sewing equipment
industry, the Company is more likely to be affected by the overall industry fluctuations. The Company may
face increased competition in the industry, lower gross profit margins and lower product prices.
     (2) Transnational operations and integration risk
     With the expansion of the Company's overseas assets and business scale, transnational operations put
forward higher requirements for the Company's organizational structure, business model, management team
and staff. In the process of production, operation and the integration of overseas subsidiaries, the Company
will face challenges arising from differences in domestic and international policy systems, corporate culture
and management concepts.
     (3) Risk of exchange rate fluctuations
     The bookkeeping base currency of the Company's consolidated statements is RMB. Domestic product
exports are mostly settled in US dollars. The daily operations of the Company's subsidiary DAP AG and its
holding subsidiaries are mainly settled in foreign currencies such as the Euro. Fluctuations in the RMB
exchange rate will bring certain exchanges on the future operation of the Company, resulting in asset
depreciation risk.



                                 Chapter 5 Important Matters
     1. Common stock profit distribution plan or capital reserve fund transfer plan
     According to the documentary spirit of the China Securities Regulatory Commission's "Guidelines for the
Supervision of Listed Companies No. 3 - Cash dividends of listed companies" and the relevant documents of
the Shanghai Stock Exchange on the "Guidelines for Cash Dividends of Listed Companies of the Shanghai
Stock Exchange", combined with the actual situation of the company, The company has formulated a clear
cash dividend policy and its decision-making and adjustment mechanism in the Articles of Association. During
the reporting period, the company implemented the dividend policy in strict accordance with the relevant
dividend regulations formulated by the Company's Articles of Association.
     During the reporting period, the 2017 annual profit distribution plan reviewed and approved by the
Company's 2017 Annual General Meeting of Shareholders was implemented without the implementation of
cash dividend distribution, non-shareholding or transfer of share capital.
     Audited by BDO China Shu Lun Pan Certified Public Accountants LLP., the Company achieved the
consolidated net profit of 158,449,643.95 yuan in 2018, of which, the net profit attributable to parent company
owners is 140,828,047.20 yuan.
     According to the provisions in the Articles of Association, before withdrawing the legal accumulation
fund, the Company should first cover the deficit with the profit of the year. As the profit of the year failed to
make up the deficit of previous years, the Company did not draw the legal accumulation fund. The
current-period net profit of the parent company is 32,898,977.07 yuan; the undistributed profits at the
beginning of 2018 are -143,892,809.85 yuan; thus the practical profit available for distribution is
-110,993,832.78 yuan at the end of 2018. As the parent company’s profit available for distribution is negative,
the profit distribution cannot be made in 2018, neither the transferring of capital reserves into share capital.




                                                       21 / 121
                     上工申贝(集团)股份有限公司
                                                                                                          Annual Report 2018
                     Shang Gong Group Co., Ltd

       2. Commitment
       PKFR promised that its shareholding ratio will not be reduced to less than the shareholding ratio of
Pudong SASAC within 36 months from the date of stock delivery. The commitment period is from December
29, 2016 to December 28, 2019. It is being strictly implemented.

       3. The situation of funds being occupied and the progress of debts during the reporting period
       Not applicable.
    4. Explanation of “non-standard opinion audit report”
    Not applicable.
    5. Analysis of the Reasons and Impacts of Changes in Accounting Policies, Changes in
Accounting Estimates, or Major Accounting Errors
     The Content and reasons of accounting policy changes                              Item and amount affected
                                                                The ―receivable notes‖ and ―accounts receivable‖ are combined into
                                                                ―receivable notes and accounts receivable‖. The current amount is
                                                                617,760,694.90 yuan, and the previous period amount is
                                                                526,096,919.07 yuan;
(1) The ―receivable notes‖ and ―accounts receivable‖ in     The ―Accounts payable‖ and ―Accounts payable‖ are combined into
the balance sheet are combined as ―receivable notes and        ―Accounts payable and accounts payable‖. The current amount is
accounts receivable‖; ―payable notes‖ and ―accounts         318,803,039.91 yuan, and the previous amount is 206,343,320.56
payable‖ are combined as ―payable‖ "Notes and accounts       yuan;
payable"; "interest receivable" and "dividends                  Increasing the amount of ―other receivables‖ for the current period
receivable" are included in "other receivables"; "interest      of 27,041,989.94 yuan, and increasing the amount of the previous
payable" and "dividend payable" are included in "other          period by 21,645.73 yuan;
payables"; ―Asset Clearance‖ is included in ―Fixed           Increasing the amount of ―other payables‖ for the current period was
Assets‖; ―Engineering Materials‖ is included in              1,838,717.63 yuan, and the amount of the previous period was
―Construction in Construction‖; ―Special Payables‖ is       2,143,371.92 yuan;
included in ―Long-term Payables‖. The comparison data         The amount of the ―fixed assets‖ in the current period and the
is adjusted accordingly.。                                      amount in the previous period have not been increased;
                                                                The current amount of the ―construction in progress‖ and the amount
                                                                of the previous period have not been increased;
                                                                The amount of the ―long-term payables‖ for the current period and
                                                                the amount of the previous period have not been increased.
(2) Add ―R&D Expenses‖ item in the income statement,
reclassify the R&D expenses in the original
                                                                The amount of ―administrative expenses‖ was reduced to
―Management Expenses‖ to ―R&D Expenses‖ separately;
                                                                97,647,657.57 yuan, and the previous amount was 84,350,255.40
add ―Including: Interest‖ under the financial expenses in
                                                                yuan, which was reclassified to ―R&D expenses‖.
the income statement.: Fees and interest income items.
The comparison data is adjusted accordingly.
In the table of changes in owner's equity, the item
―Setting the benefit of the change in the defined benefit
                                                                N/A
plan to carry forward the retained income‖ is added. The
comparison data is adjusted accordingly.

       6.     Appointment of Accounting Firms
                                                                                                                  Unit: 10,000 Yuan
Name                                                        BDO China Shu Lun Pan Certified Public Accountants LLP.
Payment                                                                                                                            100
Audit Years                                                                                                                        12



                                                                             Name                                        Payment
Internal control audit accounting firm         BDO China Shu Lun Pan Certified Public Accountants LLP.                             45

       7. Risk of Suspension of Listing
       Not applicable.
       8. The Situation and Reasons for the Termination of Listing
       Not applicable.

                                                                  22 / 121
                     上工申贝(集团)股份有限公司
                                                                                                                          Annual Report 2018
                     Shang Gong Group Co., Ltd

     9. Bankruptcy
     Not applicable.
      10. Major lawsuits and arbitrations
      According to the capital increase agreement signed by DAP AG, a subsidiary of the Company, on August
29, 2015, the calculation of the 26% share price of the capital increase is based on the net assets in the 2014
audited consolidated statement of Stoll. It is agreed that the share price will be adjusted according to the net
assets in the 2015 audited consolidated statement of Stoll and the relevant terms of the agreement. Due to the
dispute between the two parties on the calculation of Stoll's 2015 net asset value and the relevant provisions in
the agreement, there are differences in the calculation of the equity price adjustment. On July 20, 2017, DAP
AG received an arbitration application from 12 Stoll shareholders including Michael Stoll and Corinna Stoll,
except for DAP AG. The Company will settle the dispute through arbitration in accordance with the German
legal procedures in accordance with the terms of the agreement.
      As of December 31, 2018, DAP AG absorbed and merged DA AG. and changed its name to DA AG. The
arbitration is still in progress and will be resolved together with the company's disposal of 26% equity of Stoll.
   11. Penalties and rectification of listed companies and their directors, supervisors, senior
management personnel, controlling shareholders, actual controllers and purchaser
   Not applicable.
     12. Explanation of the integrity of the company and its controlling shareholders and actual
controllers during the reporting period
     Not applicable.
     13. The Company's Equity Incentive Plan, Employee Stock Ownership Plan or Other Employee
Incentives
     Not applicable.
     14. Major related party transactions
     Shanghai SGSB Electronic Co., Ltd., a wholly-owned subsidiary of the Company, sells products to Fiji
Xerox of Shanghai Limited., and is its permanent accessory supplier. The above-said transaction constitutes
the daily associated transaction. It is estimated that in 2018, the amount of products that it will sell to Fiji
Xerox is 20 million yuan, and in the report period, the sales amount was 17.43 million yuan, decreased by
12.85%. It is mainly due to the year-on-year decrease in the sales volume of Shanghai Fuji Xerox Co., Ltd. and
the adjustment of production models.
     15. Significant contracts and their implementation
     1) Trusteeship, contracting and lease
     Not applicable.
     2) Guarantee
                                                                                                    Unit: 10,000 Yuan, Currency: RMB
                                                        Guarantee
             Relations of
                                           guarantee




                                                                                                                                                 Guarantee
                                                                                                                                    available?
                                            Amount




                                                                                                                                    If counter
                                                                                                                                    guarantee




                                                           date
                                                                                                                Overdue



                                                                                                                          Overdue
                                                                                                                          amounts




                                                                                                                                                             Relation




                                                                                                        If
            the guarantor                                                    Expiration                                                             for
Guarantor                 Security party               (agreement Start date               Type guarantee
                                               d




               to listed                                                       date                                                               related
                                                         signoff                                      is done
              company                                                                                                                             party?
                                                           date
                        Commerzbank                                                         Joint
  SGG       The Company Shanghai            7,000      2014/3/25 2014/3/25 2018/11/15 liability        Yes      No              0      No          No
                        Branch                                                            guarantee
                        Commerzbank                                                         Joint
  SGG       The Company Shanghai            6,866      2014/6/30 2014/7/1 2018/11/15 liability         Yes      No              0      No          No
                        Branch                                                            guarantee
                        Commerzbank                                                         Joint
  SGG       The Company Shanghai           10,299      2016/9/19 2016/9/19 2018/11/15 liability        Yes      No              0      No          No
                        Branch                                                            guarantee
                        Commerzbank                                                         Joint
  SGG       The Company Shanghai            8,583      2015/8/28 2015/8/28 2018/11/15 liability        Yes      No              0      No          No
                        Branch                                                            guarantee



                                                                        23 / 121
                      上工申贝(集团)股份有限公司
                                                                                                                         Annual Report 2018
                      Shang Gong Group Co., Ltd

                           Industrial &
                           Commercial
                                                                                            Joint
                           Bank of China
  SGG       The Company                      6,278 2015/12/21 2015/1221 2020/12/21 liability       No    No                  0     No         No
                           Shanghai                                                      guarantee
                           Hongkou
                           Branch
                                                                                            Joint
            Wholly-owned
 DA AG                     Commerzbank 2,146 2016/1/7 2016/1/7 2018/7/30 liability                 Yes   No                  0     No         No
              subsidiary                                                                 guarantee
Guarantee amounts spent during the report period (excluded guarantee to affiliate company.                                                         -34,858
Total balance of guarantee at the end of period (affiliate companies are not quailed.)(A)                                                          6,278
                                                         Guarantee of company to affiliates
Total guarantee amounts of subsidiaries in the report period                                                                                        6,000
Total balance of guarantee to subsidiaries at the end of report period (B)                                                                          6,000
                                       Company total guarantee amounts (including those to subsidiaries)
Total guarantee amounts(A+B)                                                                                                                     12,278
Ratio of total guarantee amounts to company net assets (%)                                                                                           5.55
                                                                                                                                                In which:
Guarantee amounts provided to stockholders, actual controller and affiliated parties (C)                                                                0
Guarantee amounts directly or indirectly provided for liabilities of guarantor whose assets
                                                                                                                                                    6,000
liabilities ratio is higher than 70%(D)
Differences of total guarantee amounts exceeds 50% of the net assets(E)                                                                               0
Total guarantee amounts of the above-mentioned three items (C+D+E)                                                                                6,000
     On 21st December 2015, the Company's wholly owned subsidiary DAP AG applied to the Frankfurt
Branch of ICBC for a limit loan of 7.878 million euro so as to pay the acquisition fee to Stoll KG. ICBC
Shanghai Hongkou Branch issued a financing guarantee letter for the funds, and the Company issued an
unconditionally irrecoverable corporate letter of guarantee for self-using fix assets where No.603 Dapu Road
as counter guarantee for the abovementioned financing guarantee letter.
     On November 20, 2018, Tianjin Richpeace Computer Machinery Co., Ltd., a subsidiary of the Company,
applied to the Shanghai Branch of China Minsheng Bank Co., Ltd. for a comprehensive credit of 60 million
yuan. The company provides the highest comprehensive credit guarantee. Tianjin Tongshang Software Co., Ltd.
and Shenzhen Yingning Venture Capital Co., Ltd., minority shareholders of Richpeace, respectively provided
15% and 20% of the shares of Richpeace to provide 15% and 20% guarantee fro the company's guarantee
responsibility.
      3)     Cash asset management
      A.     Entrusted financing
                                                                                                 Unit: 100 million yuan, Currency: RMB
           Type                   Resource                    Total amount                 Amount unexpired                      Amount overdue
Structured deposits       Idle raised funds                                  1.11                             1.1                                         0
Structured deposits       Idle self-owned funds                              2.22                             0.7                                         0
      With the review and approval of the 35th meeting of the Seventh Board of Directors on 31st March 2017,
it is resolved that idle raised funds of 110 million yuan and self-owned funds of 222 million yuan were
managed in purchasing RMB financial products of the bank with principal guaranteed. With the review and
approval of the 4th meeting of the Eighth Board of Directors on 12 April 2018, it is resolved that idle raised
funds of 110 million yuan and self-owned funds of 222 million yuan were managed in purchasing RMB
financial products of the bank with principal guaranteed.
                                                                          Unit: 10,000 yuan, Currency: RMB
                                                        Starting    Ending        Fund         Method of determining     Annualized rate of   Gains actually
    Name of partner         Product name       Amount
                                                          date       date       resource               gains                  return            obtained
                        Wenjin    No.      2                                                 Floating    gains    with
BOS Fumin Branch                                8,000    2017/7/6    2018/1/4 Self-owned                                             4.20%            167.54
                        SD21706M041B                                                         guaranteed principal
                        Wenjin    No.      2                                                 Floating    gains    with
BOS Fumin Branch                                2,500    2017/8/1   2018/1/30 Self-owned                                             4.35%             54.23
                        SD21706M051B                                                         guaranteed principal
                        Wenjin    No.      2                                                 Floating    gains    with
BOS Fumin Branch                                2,500    2017/8/1   2018/1/30 Raised                                                 4.35%             54.23
                        SD21706M051B                                                         guaranteed principal
                        Wenjin    No.      2                                                 Floating    gains    with
BOS Fumin Branch                                6,500 2017/11/28    2018/5/29 Raised                                                 4.30%            139.37
                        SD21706M091B                                                         guaranteed principal
                        Wenjin    No.      2                                                 Floating    gains    with
BOS Fumin Branch                                1,500 2017/11/28    2018/5/29 Self-owned                                             4.30%             32.16
                        SD21706M091B                                                         guaranteed principal
                        Wenjin    No.      2                                                 Floating    gains    with
BOS Fumin Branch                                2,000   2017/12/7    2018/3/8 Raised                                                 4.40%             21.94
                        SD21703M114B                                                         guaranteed principal


                                                                        24 / 121
                         上工申贝(集团)股份有限公司
                                                                                                                                   Annual Report 2018
                         Shang Gong Group Co., Ltd

                        Wenjin   No.       2                                                        Floating    gains      with
BOS Fumin Branch                                       10,200   2017/12/7     2018/6/7 Self-owned                                          4.30%        218.70
                        SD21706M094B                                                                guaranteed principal
                        Wenjin   No.       2                                                        Floating    gains      with
BOS Fumin Branch                                        7,000    2018/1/9    2018/4/10 Self-owned                                          4.55%         79.41
                        SD21803M004B                                                                guaranteed principal
Shanghai         Pudong JG903     Structured                                                        Floating    gains      with
                                                        1,000    2018/1/9     2018/7/9 Self-owned                                          4.60%         23.00
Development Bank        deposit                                                                     guaranteed principal
                        Wenjin   No.       2                                                        Floating    gains      with
BOS Fumin Branch                                        2,500    2018/2/1     2018/8/2 Self-owned                                          4.60%         57.34
                        SD21806M012A                                                                guaranteed principal
                        Wenjin   No.       2                                                        Floating    gains      with
BOS Fumin Branch                                        2,500    2018/2/1     2018/8/2 Raised                                              4.60%         57.34
                        SD21806M012A                                                                guaranteed principal
                        Wenjin   No.       2                                                        Floating    gains      with
BOS Fumin Branch                                        2,000   2018/4/17    2018/7/17 Raised                                              4.60%         22.94
                        SD21803M048B                                                                guaranteed principal
                        Wenjin   No.       2                                                        Floating    gains      with
BOS Fumin Branch                                        7,000   2018/4/17   2018/10/16 Self-owned                                          4.60%        160.56
                        SD21806M037B                                                                guaranteed principal
                        Wenjin   No.       2                                                        Floating    gains      with
BOS Fumin Branch                                        6,000   2018/6/12    2018/9/11 Self-owned                                          4.55%         68.06
                        SD21803M078C                                                                guaranteed principal
                        Wenjin   No.       2                                                        Floating    gains      with
BOS Fumin Branch                                        6,500   2018/6/19    2018/7/24 Raised                                              4.20%         26.18
                        SD21801M088A                                                                guaranteed principal
                                                                                                    Floating    gains      with
China Merchants Bank       BBSJ 8688                    2,000   2018/6/15    2018/8/14 Self-owned                                    3.15%—3.90%        10.73
                                                                                                    guaranteed principal
                                                                                                    Floating    gains      with
China Merchants Bank       BBSJ 8688                    1,500   2018/7/10    2018/8/14 Self-owned                                    3.15%—3.70%         4.60
                                                                                                    guaranteed principal
                           Wenjin   No.           2                                                 Floating    gains      with
BOS Fumin Branch                                        8,500   2018/7/26   2018/10/25 Raised                                              4.20%         89.01
                           SD21803M105B                                                             guaranteed principal
                           Yuntong Wealth        91                                                 Floating    gains      with
Bank of Communications                                  2,500    2018/8/6    2018/11/5 Raised                                              4.30%         26.80
                           Days                                                                     guaranteed principal
                           Wenjin   No.           2                                                 Floating    gains      with
BOS Fumin Branch                                        4,000 2018/10/16    2018/11/20 Self-owned                                          3.60%         13.81
                           SD21801M137A                                                             guaranteed principal
                           Wenjin   No.           2                                                 Floating    gains      with
BOS Fumin Branch                                        8,500   2018/11/8    2019/2/14 Raised                                              4.00%
                           SD21803M158B                                                             guaranteed principal
                           Wenjin   No.           2                                                 Floating    gains      with
BOS Fumin Branch                                        2,500 2018/11/20     2019/2/19 Raised                                              4.00%
                           SD21803M162A                                                             guaranteed principal
                                                                                                    Floating    gains      with
PING AN BANK               Structured deposits          1,500 2018/11/20     2019/2/19 Self-owned                                          4.10%
                                                                                                    guaranteed principal
                           Wenjin     No.      2                                                    Floating    gains      with
BOS Fumin Branch                                        4,000   2018/12/6     2019/3/7 Self-owned                                          4.00%
                           SD21803M170A                                                             guaranteed principal
                           Structured   deposits                                                    Floating    gains      with
PING AN BANK                                            1,500   2018/12/4     2019/1/4 Self-owned                                          3.80%
                           92Days                                                                   guaranteed principal

       B.     Entrusted loan
                                                                                                                Unit: 10,000 yuan, Currency: RMB
                                                                                                                                          Actual
                                            Starting                                   Fund         Investment       Annualized rate
Trustee     Type         Amount                                 Ending date                                                               gain or     Note
                                              date                                   resource         targets          of return
                                                                                                                                           loss
                                                                                                                                                     Principal
 BOS                                                                                                                                                    and
Fumin       Others        5,300            2018/5/22            2018/11/22          Self-owned      Richpeace               4.7%          125.08      interest
Branch                                                                                                                                               are fully
                                                                                                                                                    recovered
       16. Other Major Issues
       Not applicable.
       17. Implementation of Social Responsibility
       1) Poverty alleviation work of listed companies
       Not applicable.
     2) Social responsibility work situation
     The Company always regards the operation according to law as the basic principle of the Company's
operation, and pays attention to the simultaneous and win-win situation of the economic and social benefits of
the enterprise. In 2018, the Company earnestly abides by the requirements of national laws, regulations and
policies, always operates according to law, actively pays taxes, strictly controls product quality, develops jobs,
actively participates in Pudong New Area charity donations and volunteers for the people, and supports local
economic development. There have been no cases of social responsibility such as social and economic
development and environmental protection.
     3) Environmental information
     The company and its Subsidiaries are not key pollutant discharge units announced by the environmental
protection department. During the reporting period, the Company and its subsidiaries strictly implemented the
national laws and regulations on environmental protection, formulated strict environmental practices, and
adopted corresponding measures for pollution sources.

                                                                                 25 / 121
                    上工申贝(集团)股份有限公司
                                                                                                            Annual Report 2018
                    Shang Gong Group Co., Ltd

      18. Convertible Corporate Bonds
      Not applicable.




                       Chapter 6 Changes in Common Shares and Shareholders
     1. Changes in common stock capital
     Not applicable.
     2. Securities issuance and listing
     Not applicable.
     3. Shareholders and actual controllers
     1) Total number of shareholders
     As of the end of the reporting period, the company had a total of 57,633 ordinary shareholders, including
31,036 shareholders of A shares and 26,597 shareholders of B shares.
     As of the end of January last year, the total number of common shareholders of the company was 55,234,
including 28,805 A-share shareholders and 26,429 B-share shareholders.
     2) The shareholdings of the top ten shareholders as of the end of the reporting period
                                                                                                  Unit: Share
                                           Top Ten Unrestricted Shareholders' Shareholdings
                                                                                     Amount of       Pledge or freeze
                                                        Amount of
                                                                                     shares held
                                          Changer in  shares held at Proportion                                              Nature of
                Name                                                                    under
                                            2018      the end of the      (%)                      Type         Amount      shareholders
                                                                                      restricted
                                                           period
                                                                                     conditions
                                                                                                                            Domestic
Shanghai Puke Flyingman Investment
                                             -789,457      60,000,000        10.94             0   Pledge      60,000,000   non-state
Co., Ltd.
                                                                                                                            legal person
State-owned Assets Supervision and
Administration Commission of Shanghai               0      45,395,358         8.27             0     /                      State
Pudong New Aear People’s Government
China GreatWall Asset Management Co.,                                                                                       State-owned
                                                    0      22,200,000         4.05             0     /
Ltd.                                                                                                                        legal person
Shanghai International Group Asset                                                                                          State-owned
                                                    0      10,968,033         2.00             0     /
Management Co., Ltd.                                                                                                        legal person
SCBHK A/C KG INVESTMENTS ASIA                                                                                               Foreign legal
                                              520,985       5,430,440         0.99             0     /
LIMITED                                                                                                                     person
ISHARES CORE MSCI EMERGING                                                                                                  Foreign legal
                                            1,427,060       4,989,260         0.91             0     /
MARKETS ETF                                                                                                                 person
GreatWall      Guorong      Investment                                                                                      State-owned
                                                    0       4,770,654         0.87             0     /
Management Co., Ltd.                                                                                                        legal person
VANGUARD EMERGING MARKETS                                                                                                   Foreign legal
                                                    0       3,678,113         0.67             0     /
STOCK INDEX FUND                                                                                                            person
                                                                                                                            Domestic
Zeng Weili                                  3,487,900       3,487,900         0.64             0     /                      natural
                                                                                                                            persons
                                                                                                                            Domestic
Chen Yan                                    3,263,500       3,263,500         0.59             0     /                      natural
                                                                                                                            persons
                                            Top Ten Unrestricted Shareholders' Shareholdings
                                                              Number of shares held in                      Type & Amount
                          Name
                                                               unrestricted conditions              Type                    Amount
Shanghai Puke Flyingman Investment Co., Ltd.                                 60,000,000            A Share                    60,000,000
State-owned Assets Supervision and Administration
Commission of Shanghai Pudong New Aear People’s                             45,395,358            A Share                    45,395,358
Government
China GreatWall Asset Management Co., Ltd.                                   22,200,000            A Share                    22,200,000
Shanghai International Group Asset Management Co., Ltd.                      10,968,033            A Share                    10,968,033
SCBHK A/C KG INVESTMENTS ASIA LIMITED                                          5,430,440           B Share                     5,430,440


                                                                  26 / 121
                   上工申贝(集团)股份有限公司
                                                                                                            Annual Report 2018
                   Shang Gong Group Co., Ltd

ISHARES CORE MSCI EMERGING MARKETS ETF                                        4,989,260             Share                     4,989,260
GreatWall Guorong Investment Management Co., Ltd.                             4,770,654            A Share                    4,770,654
VANGUARD EMERGING MARKETS STOCK INDEX
                                                                              3,678,113             Share                     3,678,113
FUND
Zeng Weili                                                                    3,487,900            A Share                    3,487,900
Chen Yan                                                                             3,263,500            A Share            3,263,500
Note: PKFR is a wholly-owned subsidiary of Shanghai Pudong Technology Investment Co., Ltd., which has a relationship. Shanghai Pudong
Technology Investment Co., Ltd. directly holds 789,457 A shares of the company, and PKFR holds 60,000,000 A sharesof the company.
GreatWall Guorong Investment Management Co., Ltd. is a wholly-owned subsidiary of China GreatWall Asset Management Co., Ltd., and there
is a relationship; the Company is not aware of any relationship or concerted action among other shareholders.
      The top ten shareholders with restricted sales and restricted sales: Not applicable.
      4. The Situation of Controlling Shareholders and Actual Controllers
      As the Company's largest shareholder PKFR and the second largest shareholder Pudong SASAC holds a
relatively low proportion of shares of the Company, and the shareholding ratio is relatively close, no more than
30%, no shareholder can form a separate control over the Company, the Company is a listed company with no
controlling shareholder and no actual controller.
      5. Other corporate shareholders holding more than 10% of shares
                                                   Date of                                     Registered
       Name            Legal representative                          Organization Code                              Main business
                                                establishment                                   capital
Shanghai        Puke                                                                                          Industrial     investment,
                                                                                             7.235 million
Flyingman Investment       Zhu Xudong            2016/6/16       91310115MA1K3D9W81                           investment management,
                                                                                                 yuan
Co., Ltd.                                                                                                     investment consulting
      6. Explanation of the restrictions on shareholding reduction
      Not applicable.



                                              Chapter 7 Preferred Stock

Not applicable.




                                                                 27 / 121
                     上工申贝(集团)股份有限公司
                                                                                                          Annual Report 2018
                     Shang Gong Group Co., Ltd

       Chapter 8 Directors, Supervisors, Senior Management and Employees
   1. Share change and compensation
   1) Share change and compensation of current and former directors, supervisors and senior
managers
                                                                                       Unit: Share
                                                                    Shares                                       Pre Tax
                                                                              Shares
                                                                    Held at                                   Compensation Compensation
                                                                             Held at
                                                                      the            Increase/ Reason for     Payable in the Payable by
  Name          Title)      Gender   Age Starting Date Ending Date           the End
                                                                   Beginning         Decrease the Change      Report Period   Related
                                                                              of the
                                                                     of the                                   (Unit: 10,000    Parties
                                                                               Year
                                                                     Year                                         yuan)
Zhang        Chairman                     2004/7/30     2020/4/26
                            Male     56                             170,000 170,000                                105.92      No
Min          President                    2017/4/27     2020/4/26
Zhu
             Director       Male     54    2017/4/27   2020/4/26                                                               Yes
Xudong
Yin Qiang    Director       Male     40    2017/4/27   2020/4/26                                                               Yes
Huang
             Director       Female   42    2017/4/27   2020/4/26                                                               Yes
Yingjian
Lu Yujie     Director       Male     49    2009/6/30   2020/4/26                                                               Yes
Li Chen      Director       Male     35    2018/6/20   2020/4/26                                                               No
             Independent
Xi Lifeng                   Male     52    2017/4/27   2020/4/26                                                       12      No
             director
             Independent
Rui Meng                    Male     51    2017/4/27   2020/4/26                                                       12      Yes
             director
Chen         Independent
                            Male     44    2017/4/27   2020/4/26                                                       12      Yes
Zhen         director
             Chairman
Qiao         of       the
                            Male     61    2014/4/28   2020/4/26                                                               No
Junhai       Supervisory
             Board
Chen
             Supervisor     Male     41    2017/4/27   2020/4/26                                                               Yes
Mengzhao
Zhang
             Supervisor     Male     59    2017/4/27   2020/4/26                                                    64.30      No
Jianguo
             Vice
Li Jiaming   president      Male     58    2008/4/18   2020/4/26                                                    80.17      No
             (Chief)
Fang         Vice
                            Male     52    2008/4/18   2020/4/26                                                               No
Haixiang     president
Li           Vice
                            Male     44   2012/12/27   2020/4/26                                                    78.44      No
Xiaofeng     president
Xia          Vice
                            Male     54   2018/10/29   2020/4/26       54,900    54,900                             11.51      No
Guoqiang     president
Zhang
             CFO            Male     46   2018/10/29   2020/4/26                                                     8.20      No
Jianrong
Zhao         Secretary of
                            Male     52    2019/1/30   2020/4/26                                                               No
Lixin        the board
Li
             Director       Male     36    2017/4/27    2018/4/4                                                               No
Wenhao
                                                                                                   Purchase
Zheng        Vice                                                                                   in the
                            Female   54   2008/10/27   2018/2/26       21,500    23,500   2,000                                No
Ying         president                                                                            secondary
                                                                                                    marked
Zhou         Secretary of
                            Male     56    2017/4/27   2018/10/30                                                   50.02      No
Yongqiang    the Board
  Total           /           /       /        /           /          246,400   248,400   2,000       /            434.56       /

  Name                                                         Main work experience

               He has a bachelor degree in engineering from Shanghai Jiao Tong University, an EMBA from China Europe
               International Business School, a professor-level senior engineer. He has won the title ―China's Light Industry
               Model Worker‖, ―Shanghai Labor Model Worker‖, ―National Model Worker‖, ―National Outstanding
Zhang Min
               Entrepreneur‖ from 2015 to 2016, and ――2018 Shanghai Outstanding Entrepreneur‖. He took part in the work in
               July 1983. He used to be the engineer of the introduction office., the deputy section chief of the quality control
               department, the chief section of the supply section, the director of the full quality office, the chief of the financial
               section, the head of the investment and development section, and general manager of Shanghai Refrigerator
               Compressor Co., Ltd. Assistant; General Manager of Shanghai Zanussi Electric Machinery Co., Ltd.; Deputy Party
               Secretary, Vice Chairman and General Manager, Chairman of Shanghai SMPIC Office Machinery Co., Ltd.;

                                                                    28 / 121
                   上工申贝(集团)股份有限公司
                                                                                                                Annual Report 2018
                   Shang Gong Group Co., Ltd

              Chairman and CEO of ShangGong Group Co., Ltd. Since April 2017, he has served as chairman of the eighth
              Board of Directors and the General Manager of SGG. Now he is concurrently the vice chairman of China National
              Light Industry Council and vice chairman of the China Sewing Machinery Association.
              He has a doctor degree from Tongji University, a EMBA from China Europe International Business School, senior engineer. He
              used to be Assistant Engineer of Aeronautics and Aircraft Design Institute of Ministry of Transportation, Chief Staff Officer and
              Assistant to the Director of Urban Construction Bureau of Pudong New Area, Deputy Director and Chief Engineer of Pudong
              New Area Municipal Construction Construction Administration, General Manager of Pudong New Area Construction and
              Management Co., Ltd., Deputy Director of the Planning and Development Bureau of Pudong New Area, Secretary of Science and
Zhu Xudong    Technology Bureau of Pudong New Area, Secretary of the Party Group (Director of Intellectual Property Office and Director of
              the Information Commission), Director of Science and Technology Committee of Pudong New Area, Party Secretary and First
              Vice-President and Party Secretary of the Pudong New Area Science and Technology Association. He is currently the chairman
              and president of Shanghai Pudong Science and Technology Investment Co., Ltd., and serves as the board chairman of Shanghai
              Wanye Enterprise Co., Ltd. and the director of Shanghai Xinmei Real Estate Co., Ltd. Since April 2017, he has served as a
              director of the eighth Board of Directors of the Company.
              He holds a master's degree in financial investment from the School of Management of the University of Rotterdam in
              Netherlands, and is a first-tier financial analyst. He used to be a programmer in the financial software development department of
              the Shanghai Institute of Computing Technology; a staff member of the Investment Banking Department and the Investment
              Finance Department of Pudong Development Group Finance Co., Ltd.; a director of the Office of Pudong Public Rental Housing
Yin Qiang
              Company; an assistant to the director of office of Pudong Development Group Co., Ltd.; assistant director (Presiding) of Pudong
              SASAC. He is currently the general manager of the investment management department of Shanghai Pudong Investment
              Holdings Co., Ltd. and chairman of Shanghai Shine-link International Logistics Co., Ltd.. Since April 2017, he has served as a
              director of the eighth Board of Directors of the Company.
              She graduated from the University of Braunschweig in Germany with a master's degree and is an economist. She used to be a
              project consultant of Desun Trading & Consulting GmbH, a researcher at Fuka Economic Forecasting Institute, investment staff
Huang         and employee director of Shanghai Digital Industry (Group) Co., Ltd., assistant director of the property rights section of Pudong
Yingjian      SASAC; Deputy Manager of the Equity Management Department of Shanghai Pudong Investment Holding (Group) Co., Ltd.
              (Presiding), Legal Representative of Shanghai Pudong Asset Management Co., Ltd., Director of Shanghai Digital Industry Group
              Co., Ltd. Since April 2017,s he has served as a director of the eighth Board of Directors of the Company.
              Fudan University Master of Business Administration, Senior Economist. Previously worked at Shanghai Metro Corporation; once
              served as head of the investment bank of Shanghai International Trust & Investment Corporation; project manager of Financial
              Advisory Department, manager of Investment Banking Department and financial manager of Shanghai International Group Asset
Lu Yujie
              Management Co., Ltd.; operations director, financial director, and investment director of asset management of hanghai
              International Group Asset Management Co., Ltd. Currently he is deputy general manager of Shanghai International Group Asset
              Management Co., Ltd. Since April 2017, he has served as a director of the eighth Board of Directors of the Company.
Li Chen
              He is a senior professor in Shanghai Jiao Tong University. He received his Ph.D. from Shanghai Jiaotong University in 1995.
              Since September 1995, he has taught at Shanghai Jiao Tong University and served as vice president and dean of School of
              Mechanical and Power Engineering of Shanghai Jiao Tong University. Currently He serves as Vice President of Shanghai Jiao
              Tong University and Dean of Gas Turbine Research Institute, Executive Deputy Dean of China Institute of Quality Development,
Xi Lifeng
              and Deputy Director of the Machinery Engineering Professional Steering Committee of the Ministry of Education, founded
              Fellow of International Engineering Asset Management Society, Standing Director of China Quality Association, and deputy
              chief editor of "Industrial Engineering and Management" journal. Since April 2017, he has served as an independent director of
              the 8th Board of Directors of the Company.
              He holds a Ph.D. in Finance from University of Houston. He is also professionally designated as Certified Financial Analyst
              (CFA) and Financial Risk Manager (FRM). He used to be a tenured Professor at Chinese University of Hong Kong. He was the
              Programme Director of Executive Master of Professional Accountancy which is a joint programme between the CUHK and
              Shanghai National Institute of Accounting. He was a deputy director of the Center for Institutions and Governance and a senior
              research fellow of Institute of Economics and Finance. He also serves as an independent director for COSCO Shipping Energy
              Transportation Co., Ltd. and Shanghai Winner Information Technology Co., Inc. He is a Member of American Finance
Rui Meng
              Association, Financial Management Association, American Accounting Association, Hong Kong Securities Institute. He was a
              former member of the Panel of Examiners of the Securities Industry Examination of the Hong Kong Stock Exchange and a
              former member of the Advisory Board of the Business Valuation Forum in Hong Kong. He was a visiting financial economist at
              Shanghai Stock Exchange, research fellow at Hong Kong Institute for Monetary Research and research fellow at Asian
              Development Bank Institute. He was also a vice president of Hong Kong Financial Engineering Association. Since April 2017, he
              has served as an independent director of the eighth Board of Directors of the Company.
              Bachelor of law. Chinese practicing lawyers. Since 1999, He has worked as a lawyer and partner in Llinks Law Offices. Since
Chen Zhen
              April 2017, he has served as an independent director of the 8th Board of Directors of the Company.
              Serve in the army from December 1976 to April 2005, former deputy commander. Former director and secretary of party
              committee of Shanghai Nanhui District Sports Bureau, vice secretary and secretary-general of Nanhui District Politics and Law
              Committee, director of Nanhui District Comprehensive Management of Public. Former Party Committee Secretary of Pudong
Qiao Junhai
              New Area Politics and Law Committee, vice director of Comprehensive Management of Social Security Committee Office,
              member of Pudong New Area Commission for Discipline Inspection. From April 28, 2014, he served as the Supervisory Board
              Chairman of the Company.
              Bachelor of Engineering, Bachelor of Law, Lawyer. He used to be a layer at Shanghai Allbright Law Offices and Shanghai
Chen          HIWAYS Law Firm. He joined Shanghai Pudong Science & Technology Investment Co., Ltd. in 2011 and has served as Senior
Mengzhao      Legal Manager of the Legal Department, Deputy General Manager of the Legal Department and Legal Director. He has also
              served as Director of Shanghai Wanye Enterprise Co., Ltd.; currently he serves as Partner of Shanghai Pudong Science &


                                                                     29 / 121
                      上工申贝(集团)股份有限公司
                                                                                                                  Annual Report 2018
                      Shang Gong Group Co., Ltd

                 Technology Investment Co., Ltd., and Director & General Manager of Shanghai Xinmei Real Estate Co., Ltd. Since April 2017,
                 he has served as a supervisor of the Company's8th Supervisory Board.
                 University degree, senior engineer. He once served at Shanghai Washing Machine Third Factory and was the Chief of the
                 Production Unit and Technical Unit; Deputy Chief of the Technical Department and the Workshop Director of Shanghai Washing
                 Machine Factory; Director of the Enterprise Management Department, the Director of the Technology Development Department
Zhang            and the Deputy General Manager of Shanghai Shui Xian Electric Appliance Co., Ltd.; Chief engineer and deputy general
Jianguo          manager of Shanghai SMPIC Office Machinery Co., Ltd., party secretary and deputy general manager of Shanghai Fuji Xerox
                 Co., Ltd., secretary of the board of directors of ShangGong Group Co., Ltd. Now he is the deputy party secretary of the Company
                 and the chairman of the labor union. Since April 2017, he has served as the supervisor of the 8th Supervisory Board of the
                 Company.
                 He holds a bachelor's degree in science from Fudan University and is a professor-level senior engineer. Former R&D Director,
                 Deputy General Manager of Shanghai SMPIC Office Equipment Co., Ltd., Site Manager of SMPIC Photosensitive Materials
Li Jiaming
                 Factory, General Manager and Party Secretary of Shanghai Machinery Co., Ltd.; Director and deputy general manager of
                 ShangGong Group Co., Ltd.. Since April 2008, he served as deputy general manager of the Company.
Fang             Master of engineering, senior engineer. Former deputy general manager and chief engineer of Shanghai Xiechang Feiren Co.,
Haixiang         Ltd.; former director of the Company. Since April 2017, he served as deputy general manager of the Company.
                 EMBA from China Europe International Business School, MBA from Shanghai University of Finance and Economics, Senior
                 Economist. Former general manager Assistant of the Company, general manager of Shanghai Import & Export Co., general
Li Xiaofeng
                 manager of Shanghai Shanggong Butterfly Sewing Machine Co., Ltd., currently general manager of DAPSH. Since December
                 2012, he served as the Company’s deputy general manager.
                 Shanghai University of Technology (now Shanghai University) undergraduate degree, senior engineer. He used to
                 be the technical technician and deputy section chief of Shanghai Jiangwan Machinery Factory, the marketing
                 manager of Venus Needle Shanghai Co., Ltd. (Taiwan-funded), and the marketing director of Jinmingdun Water
                 Heater Co., Ltd. (China-Canada Cooperation), Singer (Shanghai) Sewing Machine Co., Ltd. Engineering
Xia
                 Manufacturing Manager, Product Manager, China Sales Director, Global Industrial Products Purchasing Manager;
Guoqiang
                 joined Shang Gong Group Co., Ltd. in February 2012, and served as Manager of Shanghai Purchasing Center of
                 DA AG, Germany. Deputy General Manager of DAMSH, General Manager of Pfaff Industrial Sewing Machine
                 (Taicang) Co., Ltd., General Manager of SGGEMSY, Assistant to President of SGG. Director of Manufacturing
                 Management; from October 2019 to present, served as Vice President of the Company.
                 Master of Zhongnan University of Economics and Law, China Certified Public Accountant, China Registered Asset
                 Appraiser. He used to be a trader of Wuhan Stock Exchange, the financial director of the Hong Kong and Macao
Zhang            Securities Hankou business department, the financial supervisor of Huawei Technologies Co., Ltd. (Wuhan); the
Jianrong         assistant director of the financial direction of Shanghai Mingyuan Industrial Group Co., Ltd., the head of the audit
                 department, and the assistant to the chairman; Guangwei Holdings General Manager of Risk Control Department.
                 From October 2018 to present, he served as the Company's CFO.
                 Undergraduate degree, accountant title. He used to be a financial officer of Shanghai Shenbei Office Machinery
                 Co., Ltd., manager of the financial department of Shanghai Shenbei Real Estate Development Co., Ltd., manager
Zhao Lixin       of the finance department of Shanghai Suoying Real Estate Co., Ltd., and deputy manager of the finance
                 department, Finance Director, and Assistant to the President of SGG. Since January 2019, he has served as
                 Secretary of the Board of Directors and Director of the Finance Department.
    Note 1: During the reporting period, Mr. Fang Haixiang, the Company's vice president, worked in
Germany and received remuneration from overseas subsidiaries. He did not receive remuneration from the
company headquarters.
    Note 2: The Company's ninth meeting of the eighth board of directors held on January 30, 2019,
appointed Mr. Zhao Lixin as the company's board secretary.
    2) Equity incentives granted to directors and senior managers during the reporting period
    Not applicable.
      2.      Current and former director, supervisor and senior manager’s employment
      1)      Employment with shareholders
          Name                          Shareholder                               Title                   Starting date          Ending date
                                                                     Director,              Legal
Zhu Xudong                PKFR                                                                        June 2016
                                                                     Representative
Zhang Min                 PKFR                                       Director                         October 2018
Huang Yingjian            Pudong SASAC                               Assistant Director               Feburary 2013
                          Shanghai International Group Asset
Lu Yujie                                                             Deputy general manager           May 2015
                          Management Co., Ltd.
                          GreatWall Guorong Investment
Li Chen                                                              Manager (Senior)                 July 2015
                          Management Co., Ltd.
Chen Mengzhao             PKFR                                       Supervisor                       June 2016
      2)      Employment with other institutions

                                                                      30 / 121
                     上工申贝(集团)股份有限公司
                                                                                                               Annual Report 2018
                     Shang Gong Group Co., Ltd

Name                   Company name                                 Title                      Starting date         Ending date
                       China Sewing Machinery Association           Deputy Director            26 September 2011
                       China Light Industry Federation              Deputy Director            21 June 2016
                       Ningbo Meishan Bonded Port Area              Executive      Director,
                       Shangshen Investment Management Co.,         Manager,          Legal    23 March 2018
Zhang Min
                       Ltd.                                         Representative
                       Ningbo Meishan Bonded Port Area              Chairman,          legal
                                                                                               17 April 2018
                       Gongbei Investment Management Co., Ltd.      representative
                       Ningbo Meishan Bonded Port Area
                                                                    Delegated representative   28 April 2018
                       Shendie Equity Investment Partnership
                       Shanghai Pudong Technology Investment        Founding        Partner,
                                                                                               January 2018
                       Co., Ltd.                                    Chairman, President
Zhu Xudong             Shanghai Wanye Enterprise Co., Ltd.          Director                   18 December 2015      14 January 2022
                       Shanghai Xinmei Real Estate Co., Ltd.        Director                   16 November 2016
                       Shanghai Pudong Investment Holdings          General Manager of
                                                                                               January 2018
                       Co., Ltd.                                    Investment Management
Yin Qiang
                       Shanghai Changlian International Logistics
                                                                    Chairman                   June 2016
                       Co., Ltd.
                                                                    Deputy Manager of
                       Shanghai Pudong Investment Holdings
                                                                    Equity    Management       January 2016
                       Co., Ltd.
                                                                    Department (presiding)
Huang Yingjian         Shanghai Digital Industry (Group) Co.,
                                                                    Director                   August 2014
                       Ltd.
                       Shanghai Pudong Asset Management Co.,
                                                                    Legal representative       February 2016
                       Ltd.
                       Shanghai International Group Asset
                                                                    Executive director         March 2009
                       Management Co., Ltd.
                       Gimpo Industrial Investment Fund
                                                                    Director                   December 2015
                       Management Co., Ltd.
Lu Yujie               Shanghai Baoding Investment Co., Ltd.        Director                   June 2014
                       Longjiang Bank Co., Ltd.                     Director                   July 2015
                       Tonglian Payment Network Service Co.,
                                                                    Supervisor                 August 2014
                       Ltd.
                       Luoyang Axis Technology Co., Ltd.            Director                   11 July 2018
Li Chen
                       Space Intelligence Co., Ltd.                 Director                   15 May 2018
                       COSCO Shipping Energy Transportation
                                                                    Independent director       June 2015
                       Co., Ltd.
                       Shanghai Huina Information Technology
                                                                    Independent director       December 2015
Rui Meng               Co., Ltd.
                       Midea Group Co., Ltd.                        Independent director       December 2015         26 September 2018
                       China Education Group Holdings Limited       Independent director       December 2017
                       KONE Law Firm                                Lawyer, partner            January 1999
                       China Longgong Holdings Co., Ltd.            Independent director       October 2014
Chen Zhen
                       Ashridge Technology (Shanghai) Co., Ltd.     Independent director       May 2014
                       Chengdu Nibilu Technology Co., Ltd.          Independent director       July 2014
                       Shanghai Pudong Technology Investment
                                                                    Partner                    January 2018
                       Co., Ltd.
                       Shanghai Wanye Enterprise Co., Ltd.          Director                   18 December 2015      15 January 2019
Chen Mengzhao
                       Shanghai Xinmei Real Estate Co., Ltd.        Director                   November 2016
                       Shanghai Xinmei Real Estate Co., Ltd.        General manager            25 May 2018
                       Shanghai Fuji Xerox Co., Ltd.                Vice Chairman              June 2014
Li Jiaming             Ningbo Meishan Bonded Port Area
                                                                    Director                   April 2018
                       Gongbei Investment Management Co., Ltd.
                       Ningbo Meishan Bonded Port Area
Li Xiaofeng                                                         Director                   April 2018
                       Gongbei Investment Management Co., Ltd.
       3.     Compensation for director, supervisor and senior managers
Decision making procedure for director, supervisor and       Apply the regulation on Officers’ Salary in Senior Management Personnel
officer compensation                                         Remuneration Management Regulation
                                                             Implement according to Senior Management Personnel Remuneration Management
Basis for director, supervisor and officer compensation
                                                             Regulation and other corporate internal control system
Director, supervisor and officer compensation payable        Compensation will be paid according to KPI, according to independent director


                                                                     31 / 121
                        上工申贝(集团)股份有限公司
                                                                                                                  Annual Report 2018
                        Shang Gong Group Co., Ltd

                                                               compensation standard and procedure approved by the shareholder general meeting.
Total compensation at end of reporting period for director,
                                                               RMB 4.3456 million yuan, before tax
supervisor and officer
        4.     Change of directors, supervisors and senior managers of the Company
                 Name                               Title                                 Change                             Reason
             Zheng Ying                         Vice President                           Outgoing                          Resignation
             Li Wenhao                            Director                               Outgoing                          Resignation
              Li Chen                             Director                               Election                            Election
          Xia Guoqiang                          Vice President                      Appointment                            Appointment
         Zhang Jianrong                             CFO                             Appointment                            Appointment
        Zhou Yongqiang                     Secretary of the board                        Outgoing                          Resignation
        5. Punishment by the securities regulatory authorities in last three years
        Not applicable.
        6.     Staff condition of parent company and major subsidiaries
        1)     Staff condition
Population of serving staff in parent company                                                                                              194
Population of serving staff in major subsidiary companies                                                                                 3,885
Total population of serving staff                                                                                                         4,079
                                                              Professional composition
                        Type of professional composition                                      Population of professional composition
Production Staff                                                                                                                          2,432
Sales Personnel                                                                                                                            486
Technician                                                                                                                                 534
Financial Staff                                                                                                                            154
Administrative Staff                                                                                                                       473
                                        Total                                                                                             4,079
                                                                       Education
                             Type of educational degree                                                       Population
Postgraduate, undergraduate and above                                                                                                      814
Junior college                                                                                                                            2,078
Junior college and below                                                                                                                  1,187
Total                                                                                                                                     4,079
        2)     Compensation policy
     In the report period, the Company has formulated the Employee Performance Assessment and Salary
Management Method in the Department. The staff salary is implemented strictly according to stipulated
policies.
     3) Training plan
      The Company will do a good job in budget implementation of training costs according to the annual
training plan, especially for the special training of the enterprises, so as to have an after-the-fact evaluation and
focus on the training effect. The Company urges all enterprises to improve the continuing education of all
kinds of professional and technical personnel and management personnel, establish training files, and link the
training effectiveness with performance. At the same time, it is one of the basis for promotion of positions and
forms a positive learning atmosphere. It reflects the concept of common development between the company
and its employees.
      In order to get closer to the market, the Company continued to arrange the training of young cadres in
2018, and exercised in practice by exercising at the grassroots level. In the second half of 2018, the Company


                                                                        32 / 121
                上工申贝(集团)股份有限公司
                                                                                       Annual Report 2018
                Shang Gong Group Co., Ltd

concentrated on training and evaluation of sales management and financial management for young cadres, and
continuously improved the quality and management level of young cadres. In 2018, the Company organized
and completed 30 continuing financial trainings for financial auditing professionals in the group's corporate
finance personnel; organized and completed 12 ―labor management personnel continuing education in the
2018 annual labor management cadres organized by the Shanghai Light Industry Labor Branch‖. Training with
33 person labor contracts and individual tax deductions; organize personnel to participate in special trainings
such as brand management, equity incentives, and new accounting standards. Through training, we
continuously improve the comprehensive quality of professionals.
     4) Outsourcing
     Not applicable.



                              Chapter 9 Corporate Governance
    1.    Description of Corporate Governance
     In the report period, the Company has continuously improved the corporate governance structure and
regulated operation in strict accordance with laws and regulations including the Corporate Law, Securities Law
and Code of Corporate Governance for Listed Companies, and the requirement of China Securities Regulatory
Commission, Shanghai Stock Exchange and other regulators. The Company has formed the legal governance
structure with distinct rights and liabilities, each performing its own functions, effective balance, scientific
decisions and coordinating operation. The corporate governcet complies with the requirement of relevant laws
and regulations, and there is no rectification within a limited time required by any supervision department. The
shareholders’ meeting, board of directors and board of supervisors fulfill their own duties and operate in a
standard way to practically guarantee the interest of vast investors and the Company.
     (1) Shareholders and shareholders’ meeting
     The Company holds shareholders’ meeting in strict accordance with the laws and regulations including
the Corporate Law, Listing Rule of Shanghai Stock Exchange, and the requirement of the Articles of
Association and Procedure Rules of Shareholders’ Meeting to ensure that all the shareholders can enjoy equal
status and rights. Meanwhile, lawyers are invited to attend the shareholders’ meeting and confirm and witness
the convention procedure, deliberation matters and attendees’ identities. The meeting minutes should be
complete to guarantee the legitimacy and effectiveness of the shareholders’ meeting.
     (2) Controlling shareholders and the Company
     The Company possesses independent business and management abilities. Both the Company and
controlling shareholders can realize ―five independences‖ in terms of staff, asset, finance, organization and
business. The board of directors, board of supervisions and internal organizations can operate independently.
The Company’s major decisions are made by the shareholders meeting according to the law. The controlling
shareholders exercise shareholders’ rights by law without the behavior of interfering with the Company’s
decision and operating activities directly or indirectly exceeding the shareholders’ meeting. The Company has
no related transaction with controlling shareholders.
     (3) Directors and board of directors
     The Company has formulated the Procedure Rules of the Board of Directors according to the stipulation
of the Corporate Law and Articles of Association. The directors’ qualification and electoral procedure comply
with the stipulation of relevant laws and regulations. All the directors strictly abide by the directors’
declaration and promise that they have made, fulfill the rights and obligations endowed by the Articles of
Association earnestly, and perform their duties loyally, diligently and sincerely.
     The Company’s independent directors shouldn’t be less than 1/3 of total directors. During the report


                                                      33 / 121
                上工申贝(集团)股份有限公司
                                                                                         Annual Report 2018
                Shang Gong Group Co., Ltd

period, they have attended the board meeting carefully, delivered their professional opinions on major issues
including periodic reports, related party transactions and external securities, and played a positive role in the
scientific decisions of the board of directors and the healthy development of the company.
      (4) Supervisors and board of supervisors
      The Company elects supervisors in strict accordance with the selection procedure of the Corporate Law
and Articles of Association. The Company’s board of supervisors consists of five supervisors, including two
staff representatives. Population and staff composition comply with the requirement of laws and regulations.
All the supervisors can carefully fulfill the obligations according to the Procedure Rule of the Board of
Supervisors. Driven by the responsibility for all the shareholders, especially minority shareholders, supervisors
fulfill responsibilities carefully, according to the Procedure Rules of the Board of Supervisors, supervise the
Company’s finance, the legitimacy and compliance of directors and senior executives in fulfilling their duties.
      (5) Information disclosure and transparency
      The Company appoints the secretary of the board to be responsible for the Company’s information
disclosure, receiving investors’ visit and consultation, and designates Shanghai Securities News and Hong
Kong Commercial Daily to disclose the Company’s information. The Company strictly abides relevant
stipulations of information disclosure, effectively prevents selective information disclosure and occurrence of
insider trading, and makes everything in a just, impartial and open way. The Company can disclose relevant
information truly, accurately, completely and timely according to relevant stipulations of laws, regulations and
the Articles of Association to ensure that all the shareholders have the equal opportunity to gain information.
      (6) About investors’ relation and related interest parties
      The Company further enhances the channel to communicate with investors, fully respects and maintains
the legitimate interest of related interest parties realizes the balance of the interest of shareholders, staff and
society, commonly promotes the sustainable and healthy development of the company according to the
Investor Relations Management. A specially-assigned person in the Company’s board office is responsible for
receiving investors’ incoming calls, letters, visits and questions, and replies them by instant answers, relying
letters or emails.
      In order to regulate the Company’s insider information management, enhance the privacy of inside
information and maintain information disclosure fairness, the Company formulates and strictly executes the
Inside Information and Insiders Management System according to laws and regulations of the Corporate Law,
Securities Law, Administrative Measures on Information Disclosure by Listed Companies, Stock Listing Rule
of Shanghai Stock Exchange, relevant stipulations of the Articles of Association and the actual condition of the
company. The Company’s inside information management will be under the centralized leadership and
management of the board of directors to guarantee that the information insiders files are true, accurate and
complete. The chairman will become the major person in charge. The secretary of the board organizes the
implementation and is responsible for registering and filling information insiders. The board of supervisors
supervises the management system implementation of information insiders.
      During the report period, the Company has strictly implemented the registration management system of
inside information and normalized information transfer process. During the regular report and temporary
announcement disclosure period, the company has strictly controlled insiders range for private information,
organized to fill in the Information Insider Registration Form, and truly and completely recorded the list of all
the information insiders before the information above were public, and the time when insiders knew the inside
information, etc.
      During the report period, the Company’s directors, supervisors, senior executives and other relevant staff
have strictly abided by the management system of information insiders. No information insider has been
discovered to utilize inside information to buy and sell Company’s stocks, and no information insider has been


                                                       34 / 121
                    上工申贝(集团)股份有限公司
                                                                                                               Annual Report 2018
                    Shang Gong Group Co., Ltd

investigated by the supervision department for being suspected of being involved in inside information trade.
     During the report period, the Company has revised the Articles of Association, Rules for the Shareholders'
Meetings, and various regulations and systems to further perfect the corporate governance and normalize
operation.
     There is no significant difference between the Company’s corporate governance and the requirements of
relevant provisions released by CSRC.
     2.     Brief Introduction of Shareholder’S Meeting
                                                                   Inquiry index of designated website for     Disclosure date for publishing
            Name of meeting                     Date of meeting
                                                                            publishing resolutions                      resolutions
 The 2017 Annual Shareholders’ Meeting           2018/6/20                    www.sse.com.cn                           2018/6/21
First Extraordinary General Meeting of
                                                  2018/9/18                    www.sse.com.cn                           2018/9/18
Shareholders in 2018
     3.     Directors' performance of duties
      1)    Attendance of Directors in Board Meeting and Shareholders Meeting
                                                              Attendance in Board Meeting
                 Whether                                                                                 Whether two times    Attendance in
   Name        Independent                                      By                                                            Shareholders’
                                Scheduled        Personal                                                 in a row did not
                 Director                                  Telecommuni-        By Proxy     Absent                              Meeting
                                 Meeting        Attendance                                               personally attend
                                                               cation
                                                                                                            the meeting
Zhang Min          No                       5             5             3             0              0          No                             2
Zhu
Xudong
                   No                       5             5             5             0              0          No                             0
Yin Qiang          No                       5             5             3             0              0          No                             1
Huang
Yingjian
                   No                       5             5             3             0              0          No                             2
Lu Yujie           No                       5             5             3             0              0          No                             0
Li Chen            No                       3             3             3             0              0          No                             0
Xi Lifeng          No                       5             5             5             0              0          No                             0
Rui Meng           No                       5             5             3             0              0          No                             1
Chen Zhen          No                       5             5             4             0              0          No                             2
Li Wenhao          No                       0             0             0             0              0          No                             0


Number of Board Meetings Held During the Year                                                                                                  5
Including on-site meeting                                                                                                                      0
meetings by telecommunication                                                                                                                  3
On-site with telecommunication meeting                                                                                                         2
      2) Independent directors’ objection against significant events of the Company
      Not applicable.
    4.    Important opinions and recommendations of special committees under the board in report
period
     Not applicable.
    5.    Explanation by supervisory board on the risks of the Company
     Not applicable.
    6.    Explanation on structural independence of the Company on business, personnel, assets,
organization and finance from the holding shareholder
     Not applicable.
    7.    Appraisal and incentive system for senior managers
     According to the requirements of the Company's marketization and centralized management, through the
project consultation of PricewaterhouseCoopers Management Consulting (Shanghai) Co., Ltd., the Company
revised and improved the compensation performance optimization plan of the executive team. On the basis of

                                                                    35 / 121
                上工申贝(集团)股份有限公司
                                                                                       Annual Report 2018
                Shang Gong Group Co., Ltd

the salary incentive design plan of the middle management staff of SGG, the program design is further carried
out in the medium and long-term incentives, and the incentive projects are basically completed.
      In 2018, senior executive compensation is linked to the completion of the Company's business objectives,
the performance of individual in charge of work, and the completion of key tasks. The Remuneration and
Appraisal Committee of the Board of Directors determines the evaluation of senior management personnel
based on the completion of the company's business indicators in 2018 and the completion of the duties of the
senior executives.
     8.    Self-evaluation report of internal control
      There were not factors which have influence on evaluation conclusion of effectiveness of internal control
from the benchmark date of self-evaluation report of internal control to issuance date of self-evaluation report
of internal control. For details of self-evaluation report of internal control, please see the complete report
released in the website of Shanghai Stock Exchange.
     9.    Internal control audit report
      Appointed by the Company, BDO conducted an audit on the effectiveness of internal control of financial
statements, and issued a standard audit report for internal control without reserved opinions. For details of
audit report for internal control, please see the complete report released in the website of Shanghai Stock
Exchange.



                                  Chapter 10 Corporate Bond
     Not applicable.




                                                      36 / 121
                   上工申贝(集团)股份有限公司
                                                                                                       Annual Report 2018
                   Shang Gong Group Co., Ltd



                                        Chapter 11 Financial Report
    1. Audit Report
                                                                                     XinKuaiShiBaoZi[2019]No. ZA11614

To all the shareholders of Shang Gong Group Co., Ltd.:

     1. Audit Opinion
     We have audited the financial statements of Shang Gong Group Co., Ltd. (hereinafter referred to as ―the
Company‖), including the consolidated statement of financial position and statement of financial position as of
31st December 2018, consolidated statement of comprehensive income and statement of comprehensive
income, consolidated statement of cash flows and statement of cash flows, consolidated statement of changes
in equity and statement of changes in equity and notes to the financial statements for the Year 2018.
     In our opinion, the accompanying financial statements are prepared in all material respects in accordance
with the Accounting Standards for Business Enterprises and fairly reflect the consolidated financial position
and the parent company’s financial position as of 31st December 2018 and the consolidated and the parent
company’s operating results and cash flows for the Year 2018.
     2. Basis of Forming Audit Opinion
     We performed the audit in accordance with the Chinese Certified Public Accountants Auditing Standards.
The ―CPA's Responsibility for Auditing Financial Statements‖ section of the audit report further elaborated our
responsibilities under these guidelines. According to the Code of Ethics of Chinese Certified Public
Accountants, we are independent of the Company and perform other professional ethics duties. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for issuing an audit
opinion.
     3. Key Audit Matters
     The key audit matters are the matters that we believe are most important for the audit of the current
financial statements based on professional judgment. The response to these matters is based on the audit of the
financial statements as a whole and the formation of an audit opinion. We do not comment on these matters
separately. We confirm that the following matters are key audit matters that need to be communicated in the
audit report.
                       Key audit matter                                         How is this matter handled in the audit
      (1) Impairment of inventory
As of December 31, 2018, the book balance of your company's               ①Understand and evaluate the design and operation
inventory was 1,036,353,124.60 yuan, the inventory                  effectiveness of key internal controls related to the provision
depreciation reserve amount was 139,375,239.77 yuan, and the        of inventory impairment by your Company's management.
inventory depreciation loss occurred in the current period was            ②Carry out the inventory monitoring process, check the
9,068,644.01 yuan. Your company's inventories are measured at       quantity and status of the inventory. Carry out a major
the lower of cost and net realisable value. The net realizable      inspection of the long-age inventory, and analyze the
value of the completed product is determined by the estimated       adequacy of the depreciation reserve for the inventory with
selling price of the inventory minus the estimated sales            indications of impairment.
expenses and related taxes; The net realizable value of                   ③ Check the changes in the inventory depreciation
inventory which needs to be processed, in the normal                reserve provision of the Company in previous years and
production and operation process, is determined by the              analyze the rationality of inventory depreciation reserve
estimated selling price of the finished product produced minus      changes.
the estimated cost, estimated selling expenses, and related taxes
                                                                          ④Acquire the Company's inventory depreciation reserve
and fees that will be incurred when the finished product is
                                                                    calculation table, review the net realizable value of inventory
completed. The service cost is determined by the settlement
                                                                    and the amount of provision for impairment of inventory, and
unit price and the carrier amount confirmed by both parties of
                                                                    check the estimated selling price, settlement unit price, and
the service. Determining the net realisable value of inventory
                                                                    sales expense when the management determines the net
involves the use of significant accounting estimates and
                                                                    realizable value with the actual amount incurred. In this way
judgments by the management, and the provision for inventory
                                                                    to assess whether management's judgment in determining the
devaluation reserve is of importance for the consolidated

                                                                37 / 121
                   上工申贝(集团)股份有限公司
                                                                                                      Annual Report 2018
                   Shang Gong Group Co., Ltd

financial statements. Therefore, we recognize the provision for net realizable value of inventory is reasonable.
inventory devaluation reserve as a key audit matter.
      For details of the relevant accounting policies for
inventory depreciation provision, please refer to Note V. (12).
For details of the provision for inventory depreciation, please
refer to Note VII. (VII).
       (2) Impairment of goodwill
      As of December 31, 2018, the book value of the goodwill            ① Understand the historical performance and
of the company was 173,308,163.56 yuan, the impairment development plan of the acquired subsidiary, as well as the
provision of goodwill was 33,233,893.28 yuan, and the development trend of the industry.
impairment loss of goodwill occurred during the period was               ② Understand and evaluate how the Company's
10,370,000.00 yuan. The management of the Company management utilizes the work of assessment experts. Assess
conducts impairment test on goodwill at the end of each year the rationality of the valuation method chosen by the
and adjusts the book value of goodwill based on the results of management and the key assumptions adopted.
the impairment test. Goodwill impairment testing involves                ③Review the rationality of the estimated cash flow and
management using significant accounting estimates and the discount rate adopted, and compare and analyze the
judgments, primarily including estimates of estimated future historical data of the relevant subsidiaries.
cash flows and discount rates for subsidiaries. The provision for
                                                                         ④Review the calculation accuracy of the impairment test
goodwill impairment provision is of importance to the
                                                                   of goodwill.
consolidated financial statements, so we recognise the provision
for impairment of goodwill as a key audit matter.
      For details of the accounting policies for impairment of
goodwill, please refer to Note V. (22). For details of the
provision for impairment of goodwill, please refer to Note VII
(22).
       (3) Confirmation of sales related to sales of sewing equipment and intelligent manufacturing equipment
      In 2018, your company's annual sales revenue totaled               ①Understand and evaluate the design and operational
3,200,527,741.09 yuan, of which the sales of sewing equipment effectiveness of key internal controls related to your
and intelligent manufacturing equipment confirmed a total of company's management and sales of product revenue.
2,159,131,523.78 yuan.                                                   ②Implement an analytical review procedure to analyze
      Your company has confirmed the realization of sales performance indicators such as gross profit margin and
revenue when transferring the main risks and rewards of turnover rate, and pay attention to whether there are abnormal
ownership of the goods to the purchaser. For domestic sales, fluctuations.
your company recognizes revenue primarily when the product               ③ Select important customer, implement letter
is handed over or the product is fully accepted. For export sales, procedures.
your company recognizes revenue primarily when the risk
                                                                         ④ Select important sales orders to perform detailed
transfer conditions agreed in the applicable international trade
                                                                   testing, obtain various internal and external documents for the
terms are met.
                                                                   sales process, and verify whether the sales revenue actually
      Since sales of sewing equipment revenue is one of your
company's key performance indicators, and there is inherent occurs.。
risk that management will manipulate revenue recognition in              ⑤Perform a cut-off test on the revenues recognized near
order to achieve specific goals or expectations, we identify your the balance sheet date to verify that the sales revenue is
company's revenue recognition as a key audit matter.               included in the correct period.
      For the relevant accounting policies on revenue
recognition, please refer to Note V. (28); for the confirmation of
income, please refer to Note VII (52).

     4. Other information
     The management of the Company (hereinafter referred to as ―management‖) is responsible for other
information. Other information includes information contained in the Annual Report 2017, but exclude
financial statements and our audit report.
     Our audit opinion on financial statements does not contain any other information, nor do we publish any
form of forensic conclusion on other information.
     In combination with our audit of financial statements, our responsibility is to read other information. In
the process, it is important to consider whether other information is in significant disagreement with the
financial statements or what we know in the process of auditing, or if there seems to be a material
misstatement.
     Based on the work we have performed, if we determine that there is a material misstatement of other
information, we should report that fact. In this regard, we have nothing to report.
     5. Responsibility of the management and the governance for financial statements

                                                               38 / 121
                 上工申贝(集团)股份有限公司
                                                                                            Annual Report 2018
                 Shang Gong Group Co., Ltd

     The management is responsible for preparing financial statements in accordance with the requirements of
the Accounting Standards for Business Enterprises to enable them to achieve fair reflection. And design,
implement and maintain necessary internal controls so that there are no material misstatements due to fraud or
errors in the financial statements.
     In preparing the financial statements, the management is responsible for assessing the Company's
continuing operations capabilities, disclosing issues related to going-concern (if applicable), and applying the
going-concern assumption unless the plan is to liquidate, terminate operations or have no other realistic
options.
     The governance layer is responsible for overseeing the Company's financial reporting process.
     6. Auditors’ responsibilities
     Our objective is to obtain reasonable assurance as to whether the entire financial statements are free from
material misstatement due to fraud or error and to issue an audit report containing audit opinion. Reasonable
assurance is a high level of assurance, but it does not guarantee that an audit performed in accordance with
auditing standards can always be discovered when a material misstatement exists. Misstatement may be caused
by fraud or mistakes, and if a reasonable expectation of misstatement alone or aggregated may affect the
economic decision made by users of financial statements based on the financial statements, the misstatement is
generally considered to be material.
     In the process of auditing in accordance with auditing standards, we use professional judgment and
maintain professional suspicion. At the same time, we also perform the following tasks:
     (1) Identify and assess risks of material misstatement of financial statements due to fraud or errors, design
and implement audit procedures to address these risks, and obtain adequate and appropriate audit evidence as a
basis for issuing audit opinions. Since fraud may involve collusion, falsification, intentional omissions,
misrepresentation or override of internal controls, the risk of failing to detect a material misstatement due to
fraud is higher than the risk of failing to detect a material misstatement due to an error.
     (2) Understand the internal control related to auditing to design appropriate auditing procedures, but the
purpose is not to express opinions on the effectiveness of internal control.
     (3) Evaluate the appropriateness of accounting policies used by the management and the reasonableness
of accounting estimates and related disclosures.
     (4) Conclusions are reached on the appropriateness of management's use of going-concern. At the same
time, according to the audit evidence obtained, reach conclusions on whether there are significant uncertainties
in the matters or circumstances that have major doubts about the Company's ability to continue to operate. If
we conclude that there are significant uncertainties, the auditing standards require us to request the users of the
report to pay attention to the relevant disclosures in the financial statements in the audit report; if the disclosure
is insufficient, we should publish non-unqualified opinions. Our conclusions are based on the information
available as of the date of the audit report. However, future events or circumstances may prevent the Company
from continuing to operate.
     (5) Evaluate the overall presentation, structure, and content (including disclosures) of the financial
statements and evaluate whether the financial statements fairly reflect the relevant transactions and events.
     (6) Obtain sufficient and appropriate audit evidence on the financial information of entities or business
activities in the Company to express an opinion on the financial statements. We are responsible for directing,
supervising and executing group audits and assume full responsibility for audit opinions.
     We communicate with the governance on planned audit scope, timing, and major audit findings, including
communication of the internal control deficiencies that we identified during the audit.
     We also provide a statement to the governance on compliance with ethical requirements related to
independence, and communicate with the governance on all relationships and other matters that may


                                                         39 / 121
                     上工申贝(集团)股份有限公司
                                                                                                          Annual Report 2018
                     Shang Gong Group Co., Ltd

reasonably be considered to affect our independence, as well as related preventive measures (if applicable).
     From matters communicated with the governance, we determine which items are most important for the
audit of financial statements for current period and thus constitute the key audit matters. We describe these
matters in our audit report, unless laws and regulations prohibit the public disclosure of these matters, or in
rare cases, if it is reasonably expected that the negative consequences of communicating something in the audit
report will outweigh the benefits in the public interest, we determine that the matter should not be
communicated in the audit report.



BDO China Shu Lun Pan                                    Certified Public Accountant of China: Li Ping (Project Partner)
Certified Public Accountants LLP                         Certified Public Accountant of China: Zhang Yongmei



   Shanghai  China                                                      12th April 2019

    2. Financial Statement
                                               Shang Gong Group Co., Ltd.
                                        Consolidated Statement of Financial Position
                                                 As of 31st December 2018
                                                                                                  Unit: Yuan, Currency: RMB
                        Item                                   Note              Ending Balance               Beginning Balance
Current assets:
   Cash and cash equivalents                                                           595,034,146.11                723,337,878.53
   Deposit reservation for balance
   Lending funds
   Financial assets at fair value whose fluctuation is
attributed to profit or loss for current period
   Derivative financial assets
   Notes receivable and Accounts receivable                                            617,760,694.90                526,096,919.07
   Including: Notes receivable                                                          81,482,151.15                 61,337,538.87
           Accounts receivable                                                         536,278,543.75                464,759,380.20
   Prepayment                                                                           39,695,762.85                 64,393,627.71
   Premiums receivable
   Reinsurance accounts receivable
   Provision of cession receivable
   Other receivables                                                                   120,422,496.29                 58,966,056.94
   Including: Interest receivable                                                                                         21,645.73
           Dividends receivable                                                           27,041,989.94
   Redemptory monetary capital for sale
   Inventories                                                                         896,977,884.83                705,141,821.59
   Assets held for sale
   Non-current assets maturing within one year
   Other current assets                                                                249,326,335.31                366,533,356.84
      Total current assets                                                           2,519,217,320.29              2,444,469,660.68
Non-current assets:
   Loans and payments on behalf
   Available-for-sale financial assets                                                 117,733,027.78                118,959,944.05
   Held-to-maturity investments
   Long-term receivables                                                                31,427,418.92
   Long-term equity investments                                                        248,368,207.89                275,799,606.70
   Investment properties                                                               145,386,135.12                149,502,332.46
   Fixed assets                                                                        473,157,221.59                397,788,367.78
   Construction in progress                                                            119,166,627.75                 12,665,274.09


                                                                  40 / 121
                       上工申贝(集团)股份有限公司
                                                                                                  Annual Report 2018
                       Shang Gong Group Co., Ltd

                            Item                              Note         Ending Balance             Beginning Balance
   Productive biological assets
   Oil and gas assets
   Intangible assets                                                            270,072,349.34               149,988,157.46
   Development expenditures                                                       6,798,312.48                16,683,772.84
   Goodwill                                                                     140,074,270.28                72,482,033.43
   Long-term deferred expenses                                                    3,875,409.77                 1,631,013.88
   Deferred income tax assets                                                    68,850,860.84                63,544,908.23
   Other non-current assets
      Total non-current assets                                                 1,624,909,841.76            1,259,045,410.92
         Total assets                                                          4,144,127,162.05            3,703,515,071.60
Current liabilities:
   Short-term loans                                                             206,614,015.12               330,389,201.62
   Borrowings from central bank
   Deposits from customers and interbank
   Borrowings from banks and other financial
institutions
   Financial liabilities at fair value whose fluctuation is
attributed to profit or loss for current period
   Derivative financial liabilities
   Notes payable and accounts payable                                           318,803,039.91               206,343,320.56
   Receipt in advance                                                            75,412,987.77                38,326,094.65
   Financial assets sold for repurchase
   Handling charges and commissions payable
   Employee benefits payable                                                    101,169,469.49                91,112,179.00
   Taxes and surcharges payable                                                  21,208,862.17                14,074,587.91
   Other payables                                                               254,827,223.50               195,761,119.66
   Including: Interest payable                                                      805,898.77                 1,110,553.06
           Dividends payable                                                      1,032,818.86                 1,032,818.86
   Reinsurance accounts payable
   Provision for insurance contracts
   Acting trading securities
   Acting underwriting securities
   Liabilities held for sale
   Non-current liabilities maturing within one year                               4,173,297.07                 1,260,000.00
   Other current liabilities                                                         47,083.80                    48,330.03
      Total current liabilities                                                 982,255,978.83               877,314,833.43
Non-current liabilities:
   Long-term loans                                                              340,477,650.27                62,956,504.27
   Bonds payable
   Including: preference shares
                  Perpetual bond
   Long-term payables                                                             3,403,296.49                 3,121,893.11
   Long-term employee benefits payable                                          234,036,612.41               247,420,777.32
   Estimated liabilities                                                            672,720.00                   546,461.91
   Deferred income                                                                                             2,340,000.00
   Deferred income tax liabilities                                                70,805,236.44               52,863,141.42
   Other non-current liabilities                                                     520,000.00                  520,000.00
      Total non-current liabilities                                              649,915,515.61              369,768,778.03
         Total liabilities                                                     1,632,171,494.44            1,247,083,611.46
Owners' equity
   Share capital                                                                548,589,600.00               548,589,600.00
   Other equity instruments
   Including: preference shares
                  Perpetual bond
   Capital reserves                                                             916,215,448.24               972,000,595.56
   Less: treasury stock
   Other comprehensive income                                                    -75,701,094.41              -72,163,452.90



                                                                41 / 121
                    上工申贝(集团)股份有限公司
                                                                                                          Annual Report 2018
                    Shang Gong Group Co., Ltd

                         Item                                  Note             Ending Balance                Beginning Balance
  Special reserves
  Surplus reserves                                                                         4,546,242.52                4,546,242.52
  General risk reserves
  Undistributed profits                                                                  819,208,053.71              692,241,691.51
  Total owners' equity attributable to the parent
                                                                                     2,212,858,250.06              2,145,214,676.69
company
  Minority equity                                                                      299,097,417.55                311,216,783.45
    Total owners' equity                                                             2,511,955,667.61              2,456,431,460.14
       Liabilities and owners' equity                                                4,144,127,162.05              3,703,515,071.60
    Legal representative: Zhang Min                Financial director: Zhang Jianrong          Financial manager: Zhao Lixin



                                                   Shang Gong Group Co., Ltd.
                                                  Statement of Financial Position
                                                     As of 31st December 2018
                                                                                                   Unit: Yuan, Currency: RMB
                     Item                               Note                Ending Balance                  Beginning Balance
Current assets:
   Cash and cash equivalents                                                       125,257,400.64                    137,028,156.51
   Financial assets at fair value whose
fluctuation is attributed to profit or loss for
current period
   Derivative financial assets
   Notes receivable and Accounts receivable                                         49,567,114.47                     55,466,452.06
   Including: Notes receivable                                                       8,713,253.21                        18,619,880
           Accounts receivable                                                      40,853,861.26                     36,846,572.06
   Prepayment                                                                        1,013,250.66                      3,488,722.53
   Other receivables                                                               154,756,949.21                    107,954,125.03
   Including: Interest receivable
           Dividends receivable                                                      1,050,356.92
   Inventories                                                                     116,010,332.72                    114,386,355.60
   Assets held for sale
   Non-current assets maturing within one year
   Other current assets                                                            182,331,726.62                    310,981,332.13
      Total current assets                                                         628,936,774.32                    729,305,143.86
Non-current assets:
   Available-for-sale financial assets                                             117,733,027.78                    118,959,944.05
   Held-to-maturity investments
   Long-term receivables                                                           132,003,607.99                    135,720,449.62
   Long-term equity investments                                                    795,948,021.03                    639,310,221.03
   Investment properties                                                            82,357,348.39                     88,389,027.77
   Fixed assets                                                                      5,108,388.24                      8,036,379.04
   Construction in progress                                                          2,804,766.05                      2,871,501.40
   Productive biological assets
   Oil and gas assets
   Intangible assets                                                                10,991,616.43                     11,541,893.86
   Development expenditures
   Goodwill
   Long-term deferred expenses                                                          1,600,982.68                   1,496,482.78
   Deferred income tax assets                                                             940,809.20                     587,977.83
   Other non-current assets
      Total non-current assets                                                   1,149,488,567.79                  1,006,913,877.38
        Total assets                                                             1,778,425,342.11                  1,736,219,021.24
Current liabilities:
   Short-term loans                                                                     9,348,148.62                     348,148.62
   Financial liabilities at fair value whose
fluctuation is attributed to profit or loss for


                                                                 42 / 121
                    上工申贝(集团)股份有限公司
                                                                                                    Annual Report 2018
                    Shang Gong Group Co., Ltd

                    Item                             Note                Ending Balance                Beginning Balance
current period
  Derivative financial liabilities
  Notes payable and Accounts payable                                             95,996,884.11                  123,067,605.01
  Receipt in advance                                                             19,890,459.82                   14,500,867.77
  Employee benefits payable                                                       9,208,635.04                    9,133,348.57
  Taxes and surcharges payable                                                    4,352,572.60                      579,085.22
  Other payables                                                                174,326,023.74                  154,311,408.71
  Including: Interest payable                                                       805,898.77                    1,110,553.06
          Dividends payable                                                       1,032,818.86                    1,032,818.86
  Liabilities held for sale
  Non-current liabilities maturing within one
                                                                                     2,700,000.00                 1,260,000.00
year
  Other current liabilities
     Total current liabilities                                                  315,822,723.93                  303,200,463.90
Non-current liabilities:
  Long-term loans                                                                    1,489,984.87                 1,489,984.87
  Bonds payable
  Including: preference shares
                 Perpetual bond
  Long-term payables                                                                 1,574,312.63                 1,574,312.63
  Long-term employee benefits payable
  Estimated liabilities
  Deferred income
  Deferred income tax liabilities                                                 1,197,067.41                    1,197,067.41
  Other non-current liabilities                                                     520,000.00                      520,000.00
     Total non-current liabilities                                                4,781,364.91                    4,781,364.91
       Total liabilities                                                        320,604,088.84                  307,981,828.81
Owners' equity:
  Share capital                                                                 548,589,600.00                  548,589,600.00
  Other equity instruments
  Including: preference shares
                 Perpetual bond
  Capital reserves                                                            1,003,282,687.73                1,003,282,687.73
  Less: treasury stock
  Other comprehensive income                                                     12,396,555.80                   15,711,472.03
  Special reserves
  Surplus reserves                                                                4,546,242.52                    4,546,242.52
  Undistributed profits                                                        -110,993,832.78                 -143,892,809.85
     Total owners' equity                                                     1,457,821,253.27                1,428,237,192.43
       Liabilities and owners' equity                                         1,778,425,342.11                1,736,219,021.24
    Legal representative: Zhang Min             Financial director: Zhang Jianrong          Financial manager: Zhao Lixin




                                                             43 / 121
                      上工申贝(集团)股份有限公司
                                                                                                Annual Report 2018
                      Shang Gong Group Co., Ltd


                                                Shang Gong Group Co., Ltd.
                                      Consolidated Statement of Comprehensive Incomes
                                        From 1st January 2018 to 31st December 2018
                                                                                         Unit: Yuan, Currency: RMB
                            Item                                 Note        2018                       2017
1. Incomes                                                                   3,200,527,741.09           3,064,971,500.79
Including: operating income                                                  3,200,527,741.09           3,064,971,500.79
             Interest income
             Premiums earned
           Income from handling charges and commissions
2. Costs                                                                     3,023,493,792.82           2,856,099,579.43
Including: Cost of sales                                                     2,322,152,730.89           2,245,537,329.26
             Interest expenses
            Handling charges and commissions expenses
             Surrender value
             Net amount of compensation payout
             Net amount withdrawn for insurance contract
reserves
             Policy dividend payment
             Reinsurance costs
             taxes and surcharges                                              13,033,211.21              13,445,563.98
             Selling expenses                                                 322,696,906.11             284,810,887.21
             General and administrative expenses                              230,502,679.98             207,021,408.70
        R & D expenses                                                         97,647,657.57              84,350,255.40
        Financial expenses                                                     16,859,739.48              -5,263,527.90
        Including: Interest expense                                            14,154,020.93              13,537,239.17
                 Interest income                                                4,431,325.55              12,388,093.76
        Losses from asset impairment                                           20,600,867.58              26,197,662.78
       Plus: gains from changes in fair value ("-" for losses)                 10,190,505.23              11,713,174.75
             Investment income ("-" for losses)                                12,758,268.06              45,607,259.29
               Including: income from investment in
                                                                               -12,972,718.90             17,990,723.92
               associates and joint ventures
        Fair gains from changes in fair value ("-" for
losses)
             Gains on disposal of assets                                          443,708.05              23,963,103.89
             Foreign exchange gains ("-" for losses)
3. Operating profits ("-" for losses)                                         200,426,429.61             290,155,459.29
     Plus: non-operating income                                                 7,878,704.50               9,192,748.08
     Less: non-operating expenses                                               4,065,654.49               3,766,348.69
4. Total profits ("-" for total losses)                                       204,239,479.62             295,581,858.68
     Less: income tax expenses                                                 45,789,835.67              82,928,869.66
5. Net profit ("-" for net loss)                                              158,449,643.95             212,652,989.02
     (1) Classified by operating sustainability
           a. Net profit from continuing operations ("-" for
                                                                              158,449,643.95             212,652,989.02
           losses)
           b. Net profit from discontinued operations ("-" for
           losses)
     (2) Classified by ownership
           a. Non-controlling interests                                       140,828,047.20             197,487,226.27
           b. Net profit attributable to owners of the parent
                                                                               17,621,596.75              15,165,762.75
           company
6. Net of tax of other comprehensive income                                     -3,215,557.02             36,930,889.17
     Net of tax of other comprehensive income attributable
                                                                                -3,537,641.51             30,980,593.25
to owners of the parent company
       (1) Other comprehensive income can't be reclassified
                                                                                 -195,235.00                5,682,076.80
to gains and losses later
        a. Changes in net liabilities or assets due to the
                                                                                 -195,235.00                5,682,076.80
remeasurement and redefinition of the benefit plan
        b. The shares in other comprehensive income of the
investee that can't be reclassified to gains and losses under
the equity method


                                                                  44 / 121
                     上工申贝(集团)股份有限公司
                                                                                                            Annual Report 2018
                     Shang Gong Group Co., Ltd

                             Item                                 Note                2018                          2017
       (2) Other comprehensive income to be reclassified to
                                                                                            -3,342,406.51             25,298,516.45
gains and losses later
        a. The shares in other comprehensive income of the
investee that can be reclassified to gains and losses under
the equity method
        b. Gains and losses from changes in fair value of
                                                                                            -3,314,916.23             -18,259,294.75
available-for-sale financial assets
        c. Gains and losses from the reclassification of the
held-to-maturity investment to held-for-sale financial assets
        d. The effective portion of the gains and losses from
cash flow hedging
        e. Translation differences of financial statements                                     -27,490.28             43,557,811.20
        f. Others
     Net of tax of other comprehensive income attributable
                                                                                              322,084.49               5,950,295.92
to non-controlling shareholders
7. Total comprehensive incomes                                                             155,234,086.93            249,583,878.19
     Total comprehensive income attributable to owners of
                                                                                           137,290,405.69            228,467,819.52
the parent company
     Total comprehensive income attributable to
                                                                                            17,943,681.24             21,116,058.67
non-controlling shareholders
8. Earnings per share
     (1) Basic earnings per share (yuan/share)                                                    0.2567                     0.3600
     (2) Diluted earnings per share (yuan/share)                                                  0.2567                     0.3600
     Legal representative: Zhang Min                  Financial director: Zhang Jianrong         Financial manager: Zhao Lixin


                                                Shang Gong Group Co., Ltd.
                                            Statement of Comprehensive Incomes
                                         From 1st January 2018 to 31st December 2018
                                                                                                     Unit: Yuan, Currency: RMB
                           Item                                   Note                2018                          2017
1. Operating income                                                                    367,960,667.27                207,618,193.06
       Less: Operating cost                                                            259,199,202.19                139,483,153.60
               tax and surcharges                                                         4,684,246.76                  4,092,703.92
               Selling expenses                                                         46,138,151.55                  24,026,800.66
               General and Administration expenses                                      50,965,593.67                  47,523,439.27
        R & D expenses                                                                    4,057,999.93                    145,292.60
        Finance expenses                                                                 -4,544,544.30                -20,567,218.74
        Including: Interest expense                                                         684,673.61                    343,483.78
                Interest income                                                           5,048,704.81                 13,899,856.76
        Impairment losses on assets                                                       1,261,403.29                  6,083,598.81
   Plus: Other income                                                                       524,968.70                  1,873,821.10
               Investment income ("-" for losses)                                       27,172,011.05                  30,708,465.14
               Including: Investment income in associates
               and joint ventures
        gains from changes in fair value ("-" for losses)
        Gain on disposal of assets ("-" for losses)                                             -4,246.42             21,997,891.55
2. Operating profits ("-" for losses)                                                       33,891,347.51             61,410,600.73
       Plus: Non-operating income                                                            3,419,360.11              1,196,634.66
       Less: Non-operating expenses                                                            763,346.00                256,782.69
3. Total profits ("-" for total losses)                                                     36,547,361.62             62,350,452.70
       Less: income tax expenses                                                             3,648,384.55               -587,977.83
4. Net profit ("-" for net loss)                                                            32,898,977.07             62,938,430.53
       a. Net profit from continuing operations ("-" for
                                                                                            32,898,977.07             62,938,430.53
       losses)
       b. Net profit from discontinued operations ("-" for
       losses)
5. Net of tax of other comprehensive income                                                 -3,314,916.23             -18,259,294.75
     Net of tax of other comprehensive income attributable
to owners of the parent company
       (1) Other comprehensive income can't be reclassified
to gains and losses later


                                                                   45 / 121
                      上工申贝(集团)股份有限公司
                                                                                                            Annual Report 2018
                      Shang Gong Group Co., Ltd

                             Item                                      Note            2018                         2017
        a. Changes in net liabilities or assets due to the
remeasurement and redefinition of the benefit plan
        b. The shares in other comprehensive income of the
investee that can't be reclassified to gains and losses under                               -3,314,916.23             -18,259,294.75
the equity method
       (2) Other comprehensive income to be reclassified to
gains and losses later
        a. The shares in other comprehensive income of the
investee that can be reclassified to gains and losses under                                 -3,314,916.23             -18,259,294.75
the equity method
        b. Gains and losses from changes in fair value of
available-for-sale financial assets
        c. Gains and losses from the reclassification of the
held-to-maturity investment to held-for-sale financial assets
        d. The effective portion of the gains and losses from
cash flow hedging
        e. Translation differences of financial statements
6. Total comprehensive incomes                                                              29,584,060.84             44,679,135.78
7. Earnings per share
     (1) Basic earnings per share (yuan/share)
     (2) Diluted earnings per share (yuan/share)
     Legal representative: Zhang Min                   Financial director: Zhang Jianrong        Financial manager: Zhao Lixin


                                                Shang Gong Group Co., Ltd.
                                            Consolidated Statement of Cash Flows
                                         From 1st January 2018 to 31st December 2018
                                                                                                     Unit: Yuan, Currency: RMB
                         Item                                   Note                2018                           2017
1. Cash flows from operating activities:
      Cash received from sale of goods and
                                                                                     3,236,145,513.33               3,164,760,853.53
provision of services
      Net increase in customer bank deposits and
placement from banks and other financial
institutions
      Net increase in borrowings from central bank
      Net increase in loans from other financial
institutions
      Premiums received from original insurance
contracts
      Net cash received from reinsurance business
      Net increase in deposits and investments from
policyholders
      Net increase from disposal of financial assets
at fair value whose fluctuation is attributed to
profit or loss for current period
      Cash received from interest, handling charges
and commissions
      Net increase in loans from banks and other
financial institutions
      Net capital increase in repurchase business
      Refunds of taxes and surcharges                                                   76,064,162.93                 43,906,468.45
      Cash received from other operating activities                                     52,723,527.37                 50,445,946.85
         Sub-total of cash inflows from operating
                                                                                     3,364,933,203.63               3,259,113,268.83
activities
      Cash paid for goods purchased and services
                                                                                     2,123,866,868.13               2,017,747,474.86
received
      Net increase in loans and advances to
customers
      Net increase in deposits in central bank and
other banks and financial institutions
      Cash paid for original insurance contract
claims
      Cash paid for interests, handling charges and
commissions
      Cash paid for policy dividends


                                                                        46 / 121
                      上工申贝(集团)股份有限公司
                                                                                                              Annual Report 2018
                      Shang Gong Group Co., Ltd

                        Item                                  Note                   2018                            2017
     Cash paid to and on behalf of employees                                            723,853,477.52                 658,533,406.62
     Cash paid for taxes and surcharges                                                 125,411,834.31                 185,158,629.33
     Cash paid for other operating activities                                           312,247,152.37                 280,337,888.85
        Sub-total of cash outflows from operating
                                                                                      3,285,379,332.33                3,141,777,399.66
activities
           Net cash flows from operating
                                                                                         79,553,871.30                 117,335,869.17
activities
2. Cash flows from investing activities:
     Cash inflow from divestment                                                        874,980,665.96                1,012,030,235.06
Cash inflow from investment incomes                                                      12,600,885.09                   16,326,012.85
Cash gain from disposal of fixed assets, intangible
                                                                                              848,621.30                36,421,255.81
assets, and other long-term investment
Cash inflow from disposal of subsidiaries and
other operating units
     Cash received from other investing activities                                          393,810.60
Sub-total of cash inflows from investing activities                                     888,823,982.95                1,064,777,503.72
Cash paid for acquisition of fixed assets, intangible
                                                                                        225,273,247.86                 158,264,625.96
assets and other long-term assets
Cash paid for investments                                                               921,981,573.80                1,005,380,152.75
     Net increase in pledge loans
Net cash paid to acquire subsidiaries and other
                                                                                         94,181,765.87                  21,002,300.00
business units
Cash paid for other investing activities
Sub-total of cash outflows from investing activities                                  1,241,436,587.53                1,184,647,078.71
Net cash flows from investing activities                                               -352,612,604.58                 -119,869,574.99
3. Cash flows from financing activities
Cash received from investors
Including: cash received by subsidiaries from
investments by non-controlling shareholders
Cash received from loans                                                                624,144,720.00                 224,230,000.00
     Cash received from bonds issuance
Cash received from other financing activities                                                                            3,897,697.51
Sub-total of cash inflows from financing activities                                     624,144,720.00                 228,127,697.51
Cash paid for debt repayments                                                           487,840,810.20                 273,539,464.00
Cash paid for distribution of dividends and profits
                                                                                         21,685,176.55                  14,913,369.41
or payment of interest
Including: dividends and profits paid to
non-controlling shareholders by subsidiaries
Cash paid for other financing activities                                                     1,165,827.50
Sub-total of cash outflows from financing
                                                                                        510,691,814.25                 288,452,833.41
activities
Net cash flows from financing activities                                                113,452,905.75                  -60,325,135.90
4. Effect of fluctuation in exchange rate on cash
                                                                                             4,033,729.47               26,314,632.54
and cash equivalents
5. Net increase in cash and cash equivalents                                           -155,572,098.06                  -36,544,209.18
Plus: beginning balance of cash and cash
                                                                                        713,813,720.45                 750,357,929.63
equivalents
6. Ending balance of cash and cash equivalents                                          558,241,622.39                 713,813,720.45
     Legal representative: Zhang Min                    Financial director: Zhang Jianrong          Financial manager: Zhao Lixin


                                                 Shang Gong Group Co., Ltd.
                                                    Statement of Cash Flows
                                          From 1st January 2018 to 31st December 2018
                                                                                                       Unit: Yuan, Currency: RMB
                           Item                                      Note                    2018                     2017
1. Cash flows from operating activities:
      Cash received from sale of goods and provision of
                                                                                             387,054,926.14            229,795,360.70
      services
      Refunds of taxes and surcharges                                                          1,536,599.94
      Cash received from other operating activities                                           78,486,350.81             63,397,907.63
      Sub-total of cash inflows from operating activities                                    467,077,876.89            293,193,268.33


                                                                      47 / 121
                     上工申贝(集团)股份有限公司
                                                                                                            Annual Report 2018
                     Shang Gong Group Co., Ltd

      Cash paid for goods purchased and services
                                                                                           282,896,673.53            156,824,506.55
      received
      Cash paid to and on behalf of employees                                               51,443,489.27             36,908,166.30
      Cash paid for taxes and surcharges                                                     7,870,185.99              7,411,003.59
      Cash paid for other operating activities                                             159,293,598.74            117,490,277.69
Sub-total of cash outflows from operating activities                                       501,503,947.53            318,633,954.13
Net cash flows from operating activities                                                   -34,426,070.64            -25,440,685.80
2. Cash flows from investing activities:
      Cash inflow from divestment                                                          865,342,851.82            932,849,014.15
      Cash inflow from investment incomes                                                   14,210,229.53             21,090,100.93
      Cash gain from disposal of fixed assets, intangible
                                                                                                32,017.27             23,855,652.27
      assets, and other long-term investment
      Cash inflow from disposal of subsidiaries and
      other operating units
      Cash received from other investing activities
Sub-total of cash inflows from investing activities                                        879,585,098.62            977,794,767.35
      Cash paid for acquisition of fixed assets, intangible
                                                                                             3,101,244.10              4,925,918.01
      assets and other long-term assets
      Cash paid for investments                                                            862,354,965.00            929,584,425.75
      Net cash paid to acquire subsidiaries and other
      business units
      Cash paid for other investing activities
Sub-total of cash outflows from investing activities                                       865,456,209.10            934,510,343.76
Net cash flows from investing activities                                                    14,128,889.52             43,284,423.59
3. Cash flows from financing activities
      Cash received from investors
      Cash received from loans                                                               9,000,000.00
      Cash received from bonds issuance
      Cash received from other financing activities
      Sub-total of cash inflows from financing activities                                    9,000,000.00
      Cash paid for debt repayments
      Cash paid for distribution of dividends and profits
                                                                                                41,325.00
      or payment of interest
      Cash paid for other financing activities
Sub-total of cash outflows from financing activities                                            41,325.00
Net cash flows from financing activities                                                     8,958,675.00
4. Effect of fluctuation in exchange rate on cash and
                                                                                              -432,249.75                -25,815.69
cash equivalents
5. Net increase in cash and cash equivalents                                               -11,770,755.87             17,817,922.10
      Plus: beginning balance of cash and cash
                                                                                           137,028,156.51            119,210,234.41
      equivalents
6. Ending balance of cash and cash equivalents                                             125,257,400.64            137,028,156.51
    Legal representative: Zhang Min                   Financial director: Zhang Jianrong         Financial manager: Zhao Lixin




                                                                   48 / 121
                            上工申贝(集团)股份有限公司
                                                                                                                                                                                                           Annual Report 2018
                            Shang Gong Group Co., Ltd


                                                                                            Shang Gong Group Co., Ltd.
                                                                                    Consolidated Statement of Changes in Equity
                                                                                    From 1st January 2018 to 31st December 2018
                                                                                                                                                                                                     Unit: Yuan, Currency: RMB
                                                                                                                                       2018
                                                                                           Owners' equity attributable to the parent company
                Item
                                                         Other equity instruments                             Less:           Other                                      General                       Minority equity   Total owners' equity
                                                                                                                                                Special    Surplus                  Undistributed
                                    Share capital    Preference   Perpetual             Capital reserves    treasury      comprehensive                                    risk
                                                                               Others                                                          reserves    reserves                   profits
                                                       shares      bonds                                      stock          income                                      reserves
1. Previous year ending balance
                                    548,589,600.00                                       972,000,595.56                    -72,163,452.90                 4,546,242.52              692,241,691.51      311,216,783.45     2,456,431,460.14
brought forward
   Plus:     accounting    policy
changes
         Correction            of
previous-period        accounting
errors
         Business    combination
involving entities under common
control
       Others
2. Beginning balance of current
                                    548,589,600.00                                       972,000,595.56                    -72,163,452.90                 4,546,242.52              692,241,691.51      311,216,783.45     2,456,431,460.14
year
3. Increase/ (decrease) for the
                                                                                         -55,785,147.32                      -3,537,641.51                                          126,966,362.20      -12,119,365.90        55,524,207.47
current year ("-" for losses)
 (1)     Total     comprehensive
                                                                                                                             -3,537,641.51                                          140,828,047.20       17,943,681.24       155,234,086.93
incomes
 (2) Investment/ (divestment)                                                            -55,785,147.32                                                                             -13,861,685.00      -30,063,047.14        -99,709,879.46
 a. Common shares from
shareholders
 b. Investment capital from the
holders    of   other     equity
instruments
 c. Amount of the share-based
payment included in the owners'
equity
 d. Others                                                                               -55,785,147.32                                                                             -13,861,685.00      -30,063,047.14        -99,709,879.46
 (3) Distribution of profits
 a. Surplus reserves
 b. General risk reserves
 c. Distribution to owners or
shareholders
 d. Others
 (4) Internal transfer of owners'
equity
 a. Capital reserve turn to stock




                                                                                                                       49 / 121
                          上工申贝(集团)股份有限公司
                                                                                                                                                                                                                 Annual Report 2018
                          Shang Gong Group Co., Ltd

equity
 b. Surplus reserve turn to stock
equity
 c. Surplus reserve to recover
loss
 d. Defined benefit plans change
amount to carry forward retained
earnings
 e. Others
 (5) Special reserves
 a. Appropriation for current
year
 b. Use in current year
 (6) Others
4. Ending balance of the current
                                         548,589,600.00                                        916,215,448.24                     -75,701,094.41               4,546,242.52                819,208,053.71     299,097,417.55      2,511,955,667.61
year




                                                                                                                                           2017
                                                                                             Owners' equity attributable to the parent company
             Item
                                                          Other equity instruments                                Less:         Other                                         General                       Minority equity    Total owners' equity
                                                                                                                                                    Special   Surplus                    Undistributed
                                    Share capital    Preference    Perpetual             Capital reserves       treasury    comprehensive                                       risk
                                                                                Others                                                             reserves   reserves                     profits
                                                       shares       bonds                                         stock        income                                         reserves
1. Previous year ending
                                    548,589,600.00                                        971,603,120.27                     -103,144,046.15                  4,546,242.52               494,754,465.24      291,984,568.18       2,208,333,950.06
balance brought forward
  Plus: accounting policy
changes
        Correction      of
previous-period
accounting errors
        Business
combination      involving
entities under common
control
         Others
2. Beginning balance of
                                    548,589,600.00                                        971,603,120.27                     -103,144,046.15                  4,546,242.52               494,754,465.24      291,984,568.18       2,208,333,950.06
current year
3. Increase/ (decrease) for
the current year ("-" for                                                                      397,475.29                       30,980,593.25                                            197,487,226.27        19,232,215.27        248,097,510.08
losses)
  (1) Total comprehensive
                                                                                                                                30,980,593.25                                            197,487,226.27        21,116,058.67        249,583,878.19
incomes
  (2)          Investment/
                                                                                               397,475.29                                                                                                                               397,475.29
(divestment)
  a. Common shares from
shareholders
  b. Investment capital
from the holders of other
equity instruments




                                                                                                                            50 / 121
                                上工申贝(集团)股份有限公司
                                                                                                                                                                                                          Annual Report 2018
                                Shang Gong Group Co., Ltd

 c. Amount of the
share-based    payment
included in the owners'
equity
 d. Others                                                                                 397,475.29                                                                                                                            397,475.29
 (3)    Distribution      of
                                                                                                                                                                                                        -1,883,843.40         -1,883,843.40
profits
 a. Surplus reserves
 b. General risk reserves
 c. Distribution to owners
                                                                                                                                                                                                        -1,883,843.40         -1,883,843.40
or shareholders
 d. Others
 (4) Internal transfer of
owners' equity
 a. Capital reserve turn to
stock equity
 b. Surplus reserve turn to
stock equity
 c. Surplus reserve to
recover loss
 d. Defined benefit plans
change amount to carry
forward retained earnings
 e. Others
 (5) Special reserves
 a. Appropriation         for
current year
 b. Use in current year
 (6) Others
4. Ending balance of the
                                    548,589,600.00                                     972,000,595.56                  -72,163,452.90                    4,546,242.52              692,241,691.51     311,216,783.45       2,456,431,460.14
current year
                                                Legal representative: Zhang Min                    Financial director: Zhang Jianrong                     Financial manager: Zhao Lixin


                                                                                             Shang Gong Group Co., Ltd.
                                                                                            Statement of Changes in Equity
                                                                                      From 1st January 2018 to 31st December 2018
                                                                                                                                                                                                    Unit: Yuan, Currency: RMB
                                                                                                                                               2018

                            Item                                             Other equity instruments                                 Less:               Other
                                                                                                                                                                         Special     Surplus         Undistributed
                                                        Share capital    Preference    Perpetual             Capital reserves       treasury          comprehensive                                                     Total owners' equity
                                                                                                    Others                                                              reserves     reserves          profits
                                                                           shares       bonds                                         stock              income
1. Previous year ending balance brought forward         548,589,600.00                                        1,003,282,687.73                         15,711,472.03                4,546,242.52     -143,892,809.85       1,428,237,192.43
  Plus: accounting policy changes




                                                                                                                    51 / 121
                           上工申贝(集团)股份有限公司
                                                                                                                                                                                                   Annual Report 2018
                           Shang Gong Group Co., Ltd

         Correction of previous-period accounting
errors
         Others
2. Beginning balance of current year                    548,589,600.00                                       1,003,282,687.73                      15,711,472.03               4,546,242.52   -143,892,809.85      1,428,237,192.43
3. Increase/(decrease) for the current year ("-" for
                                                                                                                                                    -3,314,916.23                               32,898,977.07         29,584,060.84
losses)
 (1) Total comprehensive incomes                                                                                                                    -3,314,916.23                               32,898,977.07         29,584,060.84
 (2) Investment/ (divestment)
 a. Common shares from shareholders
 b. Investment capital from the holders of other
equity instruments
 c. Amount of the share-based payment included in
the owners' equity
 d. Others
 (3) Distribution of profits
 a. Surplus reserves
 b. Distribution to owners or shareholders
 c. Others
 (4) Internal transfer of owners' equity
 a. Capital reserve turn to stock equity
 b. Surplus reserve turn to stock equity
 c. Surplus reserve to recover loss
 d. Defined benefit plans change amount to carry
forward retained earnings
 e. Others
 (5) Special reserves
 a. Appropriation for current year
 b. Use in current year
 (6) Others
4. Ending balance of the current year                   548,589,600.00                                       1,003,282,687.73                      12,396,555.80               4,546,242.52   -110,993,832.78      1,457,821,253.27


                                                                                                                                           2017

                          Item                                               Other equity instruments                             Less:               Other
                                                                                                                                                                     Special   Surplus        Undistributed
                                                       Share capital     Preference   Perpetual             Capital reserves    treasury          comprehensive                                                 Total owners' equity
                                                                                                   Others                                                           reserves   reserves         profits
                                                                           shares      bonds                                      stock              income
1. Previous year ending balance brought forward        548,589,600.00                                        1,003,282,687.73                       33,970,766.78              4,546,242.52   -206,831,240.38      1,383,558,056.65
  Plus: accounting policy changes
         Correction of previous-period accounting
errors
         Others




                                                                                                                   52 / 121
                           上工申贝(集团)股份有限公司
                                                                                                                                                              Annual Report 2018
                           Shang Gong Group Co., Ltd

2. Beginning balance of current year                   548,589,600.00                     1,003,282,687.73           33,970,766.78         4,546,242.52   -206,831,240.38   1,383,558,056.65
3. Increase/(decrease) for the current year ("-" for
                                                                                                                     -18,259,294.75                        62,938,430.53      44,679,135.78
losses)
 (1) Total comprehensive incomes                                                                                     -18,259,294.75                        62,938,430.53      44,679,135.78
 (2) Investment/ (divestment)
 a. Common shares from shareholders
 b. Investment capital from the holders of other
equity instruments
 c. Amount of the share-based payment included in
the owners' equity
 d. Others
 (3) Distribution of profits
 a. Surplus reserves
 b. Distribution to owners or shareholders
 c. Others
 (4) Internal transfer of owners' equity
 a. Capital reserve turn to stock equity
 b. Surplus reserve turn to stock equity
 c. Surplus reserve to recover loss
 d. Defined benefit plans change amount to carry
forward retained earnings
 e. Others
 (5) Special reserves
 a. Appropriation for current year
 b. Use in current year
 (6) Others
4. Ending balance of the current year                  548,589,600.00                     1,003,282,687.73           15,711,472.03         4,546,242.52   -143,892,809.85   1,428,237,192.43

                                              Legal representative: Zhang Min   Financial director: Zhang Jianrong      Financial manager: Zhao Lixin




                                                                                                53 / 121
                  上工申贝(集团)股份有限公司
                                                                                        Annual Report 2018
                  Shang Gong Group Co., Ltd

    3. Company basic information
     1) Company profile
     Shang Gong Group Co., Ltd.( hereinafter referred to as "Company" or "the Company"), a joint stock
limited company with publicly issued A & B shares on the Shanghai Stock Exchange, is the first listed
company in the sewing machinery industry of China. The Company was incorporated in April 1994. The
registration number has changed to 91310000132210544K (Unified social credit code) in 2016. The
organizational form of the Company is a joint stock limited company (a Sino-foreign joint venture and a listed
company) and the registered capital amounts to 548,589,600.00 yuan. The registered address is Room A-D,
12th Floor, Orient Mansion, No. 1500, Century Avenue, China (Shanghai) Pilot Free Trade Zone and the head
office is located in No. 1566 New Jinqiao Road, Pudong New Area, Shanghai. The legal representative is Mr.
Zhang Min.
     On 22nd May 2006, it was decided on the General Meeting on equity division reform by the Company that:
the non-tradable equity stockholders pay partially their shares to all the tradable equity shareholders at a ratio
of 10 to 6 as consideration of getting tradable rights. After the above consideration of share donation, the total
number of shares remains unchanged, but consequently the equity structure has changed. As at 31st December
2013, there were 448,886,777 shares in total.
     On 28th February 2014, CSRC approved the non-public offering of A shares of the Company under the
Official Reply to the Approval of Non-public Offering of Shares of Shang Gong Group Co., Ltd. ([2014] No.
237). The number of shares issued was 99,702,823.00 and the total number of share capital after the issue was
548,589,600.00. The Company handled equity registration and escrow formalities with the CSDC Shanghai
Branch; the corresponding registered capital was changed to RMB 548,589,600.00 yuan and had been verified
by the Verification Report (PCPAR [2014] No.111126) issued by BDO CHINA Shu Lun Pan Certified Public
Accountants LLP on 26th March 2014.
     On 29th December 2016, Pudong SASAC, the original controlling shareholder and actual controller of the
Company, had sold 60.00 million A shares of the Company to Shanghai Puke Flyman Investment Co., Ltd.
which is the wholly-owned subsidiary of Shanghai Pudong Science and Technology Investment Co., Ltd.
China Securities Depository and Clearing Co., Ltd. has issued a "transfer registration confirmation" on the
same day.
     After the transfer, PKFR held A shares accounted for 10.94% of the total share capital of the Company,
which is the largest shareholder of the Company; Pudong SASAC held A shares accounted for 8.27%, which is
the second largest shareholder of the Company. After the completion of the equity transfer, the Company has
changed to a listed company with no controlling shareholder and no actual controller.
     As of 31st December 2018, the Company’s total share capital was 548,589,600.00, including 548,589,600
shares with no restrictive terms, accounting for 100.00% of the total number of shares.
     The Company belongs to special equipment manufacturing industry; main operating activities of the
Company are: production and sales of sewing equipment.
     According to the resolution of the 11th meeting of the 8th board of directors, the financial statements were
approved for disclosure by all directors of the Company on 12th April 2019.
     2) Scope of the consolidated financial statements
     As of 31st December 2018, the subsidiaries within the consolidated financial statements of the Company
are as follows:
   Name of subsidiary
   1. Shanghai Shanggong & Butterfly Sewing Machine Co., Ltd.
   2. DAP (Shanghai) Co., Ltd.
   3. Shanghai SMPIC IMPORT & EXPORT CO., LTD.



                                                                54 / 121
                  上工申贝(集团)股份有限公司
                                                                                       Annual Report 2018
                  Shang Gong Group Co., Ltd

   4. Shanghai SGSB Electronics Co., Ltd.
   5. Shanghai SGSB Asset Management Co., Ltd.
   6. Shanghai Sewing Construction Property Co., Ltd.
   7. Dürkopp Adler Aktiengesellschaft(Note 2)
   8.Zhejiang ShangGong GEMSY Co., Ltd.
   9.Shanghai Shensy Enterprise Development Co., Ltd.
   10.Shanghai ShangGong Financial Leasing Co., Ltd.
   11. PFAFF Industrial Sewing Machine (Zhangjiagang) Co., Ltd.
   12.DAP (Vietnam) Co., Ltd.
   13.ShangGong Sewing Equipment (Zhejiang) Co., Ltd.
   14.Dürkopp Adler Manufacturing(Shanghai) Co.,Ltd.
   15.Tianjin Richpeace(Note 1)
     Note 1: The company's subsidiary DAP Trading (Shanghai) Co., Ltd. was renamed as DAP Industrial
(Shanghai) Co., Ltd. in January 2019, and its subsidiary T Tianjin Richpeace was renamed as Tianjin
Richpeace Computer & Machinery Co.,Ltd in February 2019.
     Note 2: DAP Industrial Co., Ltd., a subsidiary of the Company, absorbed the Dürkopp Adler
Aktiengesellschaft, a third-tier subsidiary of the Company in 2018 and changed its name to Dürkopp Adler
Aktiengesellschaft.
     See ―Note 8 Changes in the scope of consolidation" and ―Note 9 Equity in other subjects" for details of
the scope of consolidated financial statements in the current year and the changes thereof.
     4. Preparation basis of financial statements
     1) Preparation basis of financial statements
     The Company prepares the financial statements based on going concern, according to the transactions and
events actually occurred and in accordance with the Accounting Standards for Business Enterprises – Basic
Standard and various specific accounting standards, application guidance and interpretations for accounting
standards for business enterprises and other relevant provisions (hereinafter collectively referred to as
―Accounting Standards for Business Enterprises‖) promulgated by the Ministry of Finance and disclosure
provisions of the Rules for the Information Disclosure and Compilation of Companies Publicly Issuing
Securities No. 15 – General Rules on Financial Reports of the China Securities Regulatory Commission.
     2) Going concern
     The Company has going-concern ability within 12 months as of the end of the report period and has no
matters or situations that may lead to serious doubts about the Company’s going-concern ability.
     5. Principal accounting policies and accounting estimates
     Specific accounting policies and accounting estimates:
     The following disclosure has covered the Company’s specific accounting policies and accounting
estimates prepared according to the actual production and operation characteristics.
     1) Statement on compliance with Accounting Standards for Business Enterprises
     The financial statements prepared by the Company meet the requirements of the Accounting Standards for
Business Enterprises and truly and completely reflect the Company’s financial position, operating results, cash
flows and other related information in the report period.
     2) Accounting period
     The accounting year is from 1st Januaryto 31st December in calendar year.
     3) Operating cycle
     The Company’s operating cycle is 12 months.
     4) Functional currency
     The Company adopts RMB as its functional currency.

                                                                  55 / 121
                 上工申贝(集团)股份有限公司
                                                                                           Annual Report 2018
                 Shang Gong Group Co., Ltd

      5) Accounting treatment methods of business combinations under common control and not under
common control
      Business combinations under common control: Assets and liabilities acquired from business combinations
by the Company are measured at book value of assets and liabilities (including goodwill formed from the
purchase of the cquire by the ultimate controller) in the consolidated financial statements of the ultimate
controller. Stock premium in the capital reserve should be adjusted according to the difference between the
book value of net asset acquired from the combinations and that of consideration (or total face value of the
shares issued) paid. In case the stock premium in the capital reserve is not enough, the retained earnings need
to be adjusted.
      Business combinations not under common control: Assets paid for consideration and liabilities incurred or
borne by the Company on the acquisition date shall be measured at their fair values. The difference between
the fair value and the book value should be included in the current profit and loss. The Company shall
recognize the difference of the combination costs in excess of the fair value of the identifiable net assets
acquired from the cquire as goodwill. The Company shall include the difference of the combination costs in
short of the fair value of the identifiable net assets acquired from the cquire in the current profit and loss after
review.
      Intermediary service charges such as audit fee, legal service fee, appraisal and consultancy fee paid for
business combinations and other directly relevant expenses are included in the current profit and loss when
incurred; the transaction costs for the issuance of equity securities shall be used to offset equities.
      6) Preparation methods of consolidated financial statements
      1. Scope of consolidation
      The scope of consolidation of the Company’s consolidated financial statements is recognized based on the
control. All subsidiaries (including the divisible part of the investee controlled by the Company) should be
included in the consolidated financial statements.
      2. Consolidation procedure
      The Company prepares consolidated financial statements based on its own financial statements and
financial statements of its subsidiaries according to other relevant materials. When the Company prepares its
consolidated financial statements, it shall regard the whole enterprise group as an accounting entity to reflect
the overall financial position, operating results and cash flows of the enterprise group according to the
requirements for recognition, measurement and presentation of the relevant Accounting Standards for Business
Enterprises and the uniform accounting policies.
      Accounting policies and accounting periods adopted by all subsidiaries included in the consolidation
scope of the consolidated financial statements should be consistent with those of the Company. If accounting
policies and accounting periods adopted by all subsidiaries are inconsistent with those of the Company, in the
preparation of the consolidated financial statements, necessary adjustments shall be made according to the
accounting policies and accounting periods of the Company. For the subsidiaries acquired through business
combination not under common control, adjustments to their financial statements shall be made based on the
fair values of net identifiable assets on the acquisition date. For the subsidiaries acquired through business
combination not under common control, adjustments to their financial statements shall be made based on the
fair values of their assets and liabilities (including goodwill from acquisition of the subsidiaries by the ultimate
controller) in the financial statements of the ultimate controller.
      The share of owner’s equity, net profits and losses in the current year and comprehensive income in the
current year of subsidiaries attributable to minority shareholders should separately presented under the item of
owner’s equity of the Consolidated Balance Sheet, the item of net profit of the Consolidated Income Statement
and the item of total comprehensive income. The difference formed by the loss in the current year shared by


                                                        56 / 121
                 上工申贝(集团)股份有限公司
                                                                                           Annual Report 2018
                 Shang Gong Group Co., Ltd

minority shareholders of the subsidiaries in excess of the share of minority shareholders in the owner’s equity
at the beginning of the year of the subsidiaries should be used to offset the minority equity.
     (1)Increase in subsidiaries or business
      In the report period, if the Company increased subsidiaries or business from business combinations under
common control, then the beginning amount of the Consolidated Balance Sheet should be adjusted; the
incomes, expenses and profits from the combinations of the subsidiaries and business from the beginning of
the current year to the end of the reporting period shall be included in the Consolidated Income Statement;
cash flows from the combinations of the subsidiaries and business from the beginning of the current year to the
end of the reporting period shall be included in the Consolidated Cash Flow Statement. At the same time, the
Company should adjust the relevant items of the comparative statements and deem that the reporting entity
already exists when the ultimate controller starts its control.
      Where the Company can control the investee under common control from additional investments, it
should deem that parties involved in the combination have make adjustments at the current state when the
ultimate controller starts its control. Equity investments held before the Company controls the cquire, the
relevant profit and loss recognized during the period from the later of the date when the Company obtains the
original equity and the date when the acquirer and the cquire are under common control, other
comprehensive income and changes in other net assets shall be used to offset the retained earnings at the
beginning of the year or the current profit and loss in the period of the comparative statements.
      In the report period, if the Company increased subsidiaries or business from business combinations not
under common control, then the beginning amount of the Consolidated Balance Sheet should not be adjusted;
the incomes, expenses and profits from the subsidiaries and business from the acquisition date to the end of the
report period shall be included in the Consolidated Income Statement; cash flows from the subsidiaries and
business from the acquisition date to the end of the reporting period shall be included in the Consolidated Cash
Flow Statement.
      Where the Company can control the investee not under common control from additional investments, it
shall re-measure equity of the cquire held before the acquisition date at the fair value of such equity on the
acquisition date and include the difference of the fair value and book value in the investment income in the
current year. Where equity of the cquire held before the acquisition date involves in other comprehensive
income accounted for under equity method and other changes in owner’s equity other than net profit and loss,
other comprehensive income and profit distribution, the relevant other comprehensive income and other
changes in owner’s equity shall be transferred to investment income in the current year which the acquisition
date falls in, except for other comprehensive income from changes arising from re-measurement of net
liabilities or net assets of defined benefit plan.
     (2)Disposal of subsidiaries or business
     ①General treatment methods
      In the reporting period, if the Company disposed subsidiaries or business, then the incomes, expenses and
profits from the subsidiaries and business from the beginning of the year to the disposal date shall be included
in the Consolidated Income Statement; cash flows from the combinations of the subsidiaries and business from
the beginning of the year to the disposal date shall be included in the Consolidated Cash Flow Statement.
      When the Company losses the control over the original subsidiary due to disposal of partial equity
investments or other reasons, the remaining equity investments after the disposal will be re-measured at the
fair value at the date of loss of the control. The difference of total amount of the consideration from disposal of
equities plus the fair value of the remaining equities less the shares calculated at the original shareholding ratio
in net assets of the original subsidiary which are continuously calculated as of the acquisition date is included
in the investment income of the period at the loss of control. Other comprehensive income associated with the

                                                        57 / 121
                上工申贝(集团)股份有限公司
                                                                                          Annual Report 2018
                Shang Gong Group Co., Ltd

original equity investments of the subsidiary and other changes in owner’s equity other than net profit and loss,
other comprehensive income and profit distribution are transferred into investment income in the current year
when the control is lost, except for other comprehensive income from changes arising from re-measurement of
net liabilities or net assets of defined benefit plan.
      If other investors increase their shareholdings due to the increase in capital of their subsidiaries and lose
control, they shall be accounted for in accordance with the above principles.
     ②Disposal of subsidiary by stages
     Where the Company disposes the equity investments in subsidiary through multiple transactions and by
stages until it loses the control, if the effect of the disposal on the terms and conditions of all transactions of
equity investments in subsidiary and economic effect meet one or more of the following circumstance, it
usually indicates that the multiple transactions should be accounted for as a package deal:
     i. These transactions are concluded at the same time or under the consideration of mutual effect;
     ii. These transactions as a whole can reach a complete business results;
     iii. The occurrence of a transaction depends on the occurrence of at least one other transaction;
     ⅳ. A single transaction is uneconomical but it is economical when considered together with other
transactions.
     Where various transactions of disposal of equity investments in subsidiaries until loss of the control
belong to a package deal, accounting treatment shall be made by the Company on the transactions as a
transaction to dispose subsidiaries and lose the control; however, the difference between each disposal cost and
net asset share in the subsidiaries corresponding to each disposal of investments before loss of the control
should be recognized as other comprehensive income in the consolidated financial statements and should be
transferred into the current profit or loss at the loss of the control.
     Where various transactions of disposal of equity investments in subsidiaries until loss of the control do
not belong to a package deal, before the loss of the control, accounting treatment shall be made according to
the relevant policies for partial disposal of equity investments in the subsidiary without losing control; at the
loss of the control, accounting treatment shall be made according to general treatment methods for disposal of
subsidiaries.
     (3)Purchase of minority interest of subsidiaries
     The difference between long-term equity investments newly acquired by the Company through purchase
of minority interest and the subsidiary’s identifiable net assets attributable to the Company calculated
continuously from the acquisition date (or the combination date) in accordance with the newly increased
shareholding ratio shall be charged against stock premium within capital reserves in the consolidated balance
sheet; when stock premium within capital reserves is insufficient to offset, the retained earnings shall be
adjusted.
     (4)Partial disposal of equity investments in the subsidiary without losing control
     The difference between the proceeds from partial disposal of equity investments in the subsidiary and the
share of identifiable net assets of the subsidiary attributable to the Company which are calculated continuously
from the acquisition date (or the combination date) and which are corresponding to the disposal of long-term
equity investments without losing control shall be charged against stock premium within capital reserves in the
consolidated balance sheet; when stock premium within capital reserves is insufficient to offset, the retained
earnings shall be adjusted.
     7) Classification of joint venture arrangements and accounting methods for joint operation
     Not applicable.
     8) Determination of cash and cash equivalents
     Cash equivalents refer to short-term (usually due within three months from the date of purchase), highly

                                                        58 / 121
                 上工申贝(集团)股份有限公司
                                                                                           Annual Report 2018
                 Shang Gong Group Co., Ltd

liquid investments that are readily convertible into known amounts of cash and which are subject to an
insignificant risk of changes in value.
      9) Foreign currency transactions and translation of foreign currency statements
      1. Foreign currency transactions
      Foreign currency transactions are, on initial recognition, translated to RMB at the spot exchange rates at
the dates of the transactions.
      The balance of foreign currency monetary items is adjusted and translated into functional currency at
balance sheet date using the spot exchange rate. Regarding the year-end differences of translation in foreign
currency, except those special borrowing accounts under the acquisition, building or production of assets to be
capitalized are capitalized and accounted into related assets cost, all the other differences are accounted into
current profits and losses. The foreign currency non-monetary items at historical cost are translated using the
spot exchange rate. And the foreign currency non-monetary items at fair value are adjusted and translated into
measurement currency at adoption date of fair value using the spot exchange rate. The difference of translation
between different currencies is accounted into current profits and losses or capital reserves.
      2. Translation of foreign currency statements
      The assets and liabilities of foreign operation are translated to RMB at the spot exchange rate at the
balance sheet date. The equity items, excluding ―Retained earning‖, are translated to RMB at the spot
exchange rates at the transaction dates. The income and expenses of foreign operation are translated to RMB at
the spot exchange rates or the rates that approximate the spot exchange rates at the transaction dates. The
resulting exchange differences are recognized in a separate component of equity.
      Upon entire/partial disposal of a foreign operation, the entire/partial cumulative amount of the exchange
differences recognized in equity which relates to that foreign operation is transferred to profit or loss in the
period in which the disposal occurs.
      10) Financial instruments
      Financial instruments include financial assets, financial liabilities and equity instruments.
      1. Classification of financial instruments
      At the initial recognition, financial assets and financial liabilities are classified as: financial assets or
financial liabilities measured at fair value through current profit and loss, including financial assets or financial
liabilities held for trading, and financial assets or financial liabilities that are directly to be measured at fair
value through current profit and loss, held-to-maturity investments, accounts receivable, available-for-sale
financial assets and other financial liabilities, etc.
      2. Recognition basis and measurement method of financial instruments
      (1) Financial assets (financial liabilities) measured at fair value through current profit and loss
      Financial assets (financial liabilities) are initially recorded at fair values when acquired (deducting cash
dividends that have been declared but not distributed and bond interest that has matured but not been drawn).
Relevant transaction expenses are included in the current profit and loss.
      The interest or cash dividends to be received during the holding period are recognized as investment
income. Change in fair values is included in the current profit and loss at the end of the period.
      Upon the disposal, difference between the fair value and the initial book-entry value is recognized as
investment income; meanwhile, adjustment is made to gains or losses from changes in fair values.
      (2) Held-to-maturity investments
      Held-to-maturity investments are initially recorded at the sum of fair values (less the bond interest that
has matured but not been drawn) and relevant transaction expenses when acquired.
      During the period of holding the investment, the interest income is calculated and recognized according to
the amortized costs and effective interest rate, and included in the investment income. The effective interest


                                                         59 / 121
                 上工申贝(集团)股份有限公司
                                                                                              Annual Report 2018
                 Shang Gong Group Co., Ltd

rates are determined upon acquisition and remain unchanged during the expected remaining period, or a
shorter period if applicable.
      Difference between the proceeds and the book value of the investment is recognized as investment
income upon disposal.
      (3) Receivables
      For creditor’s rights receivable arising from external sales of goods or rendering of service by the
Company and creditor’s rights of other enterprises (excluding creditor’s right quoted in the active market) held
by the Company, including accounts receivable, other receivables, the initial recognition amount shall be the
contract price or agreement price receivable from the purchasing party; for those with financing nature, they
are initially recognized at their present values.
      The difference between the amount received and the book value of accounts receivable is included in the
current profit and loss upon the recovery or disposal.
      (4) Available-for-sale financial assets
      Available-for-sale financial assets are initially recorded at the sum of fair values (deducting cash
dividends that have been declared but not distributed and bond interest that have matured but not been drawn)
and relevant transaction costs when acquired.
      The interest or cash dividends to be received during the holding period is or are recognized as investment
income. Available-for-sale financial assets are measured at fair value at the end of the year and the changes in
fair value are included in other comprehensive income. However, equity instrument investments that have no
quoted price in the active market and of which fair values cannot be measured reliably and derivative financial
assets that relate to such equity instruments and that shall be settled through the delivery of such equity
instruments shall be measured at cost.
      Difference between the proceeds and the book value of the financial assets is recognized as investment
income upon disposal; meanwhile, amount of disposal corresponding to the accumulated change in fair value
which is originally and directly included in other comprehensive income shall be transferred out and
recognized as the current profit and loss.
      (5) Other financial liabilities
      Other financial liabilities are initially recognized at fair values plus related transaction costs. The
subsequent measurement is based on amortized costs.
      3. Recognition and measurement of transfer of financial assets
      Upon occurrence of transfer of a financial asset, the Company shall de-recognize the transfer of the
financial asset if nearly all the risks and rewards associated with the ownership of the financial assets have
been transferred to the transferee; and shall not de-recognize the transfer of the financial asset if nearly all the
risks and rewards associated with the ownership of the financial assets are retained.
      The principle of substance over form is adopted to determine whether a financial asset meets the above
de-recognition conditions for the financial asset. The transfer of a financial asset of the Company is classified
into the entire transfer and the partial transfer of financial asset. If the entire transfer of financial asset satisfies
the criteria for de-recognition, the difference between the amounts of the following two items shall be included
in the current profit and loss:
      (1) The book value of the transferred financial asset;
      (2) The sum of the consideration received from the transfer and the accumulated amount of the changes in
fair value originally and directly included in shareholders’ equity (the situation where the financial asset
transferred is an available-for-sale financial asset is involved in).
      If the partial transfer of financial asset satisfies the criteria for de-recognition, the entire book value of the
transferred financial asset shall be split into the derecognized part and recognized part according to their


                                                          60 / 121
                 上工申贝(集团)股份有限公司
                                                                                             Annual Report 2018
                 Shang Gong Group Co., Ltd

respective fair value and the difference between the amounts of the following two items shall be included in
current profit and loss:
      (1) The book value of derecognized part;
      (2) The sum of the consideration for the derecognized part and the portion of de-recognition
corresponding to the accumulated amount of the changes in fair value originally and directly included in
owners’ equity (the situation where the financial asset transferred is an available-for-sale financial asset is
involved in).
      If the transfer of financial assets does not meet the de-recognition criteria, the financial assets shall
continue to be recognized and the consideration received will be recognized as a financial liability.
      4. Derecognition criteria of financial liabilities
      A financial liability shall be wholly or partly derecognized if its present obligations are wholly or partly
dissolved. Where the Company enters into an agreement with a creditor so as to substitute the existing
financial liabilities with any new financial liability, and the new financial liability is substantially different
from the contractual stipulations regarding the existing financial liability, it shall derecognize the existing
financial liability, and shall at the same time recognize new financial liability.
      Where substantial revisions are made to some or all of the contractual stipulations of the existing financial
liability, the Company shall derecognize the existing financial liability wholly or partly, and at the same time
recognize the financial liability with revised contractual stipulations as a new financial liability.
      Upon whole or partial derecognition of financial liabilities, the difference between the book value of the
financial liabilities derecognized and the consideration paid (including non-cash assets surrendered or new
financial liabilities assumed) shall be included in the current profit and loss.
      Where the Company redeems part of its financial liabilities, it shall, on the redemption date, allocate the
entire book value of financial liabilities according to the comparative fair value of the part that continues to be
recognized and de-recognized part. The difference between the book value allocated to the derecognized part
and the considerations paid (including non-cash assets surrendered and the new financial liabilities assumed)
shall be included in the current profit and loss.
      5. Determination method of fair value of financial assets and financial liabilities
      Where there is an active market for financial instruments, the fair values shall be determined according to
quoted prices in active markets. Where there is no active market, the fair values shall be determined using
reasonable valuation techniques. At the time of valuation, the Company adopted valuation techniques
applicable in the current situation and supported by enough available data and other information, select input
values consistent with the features of assets or liabilities considered by market participants in the transaction
related to the assets or liabilities, and give priority to using the relevant observable input values. Only when it
is unable or impracticable to obtain the relevant observable input values, unobservable input values can be
used.
      6. Test method and accounting treatment of depreciation of financial assets (excluding receivables)
      Except for the financial assets measured at fair values through current profit and loss, the book value of
financial assets on the balance sheet date should be checked. If there is objective evidence that a financial asset
is impaired, provision for impairment shall be made.
       (1)Provision for impairment of available-for-sale financial assets:
       If the fair value of available-for-sale financial assets has significantly declined at the end of the period, or
it is expected that the trend of decrease in value is non-temporary after considering of various relevant factors,
the impairment shall be recognized, and accumulated losses from decreases in fair value originally and directly
included in owners’ equity shall be all transferred out and recognized as impairment loss.
       For available-for-sale debt instruments whose impairment losses have been recognized, if their fair values


                                                          61 / 121
                     上工申贝(集团)股份有限公司
                                                                                                              Annual Report 2018
                     Shang Gong Group Co., Ltd

rise in the subsequent accounting period and such rise is objectively related to the matters occurring after the
recognition of impairment loss, the previously recognized impairment loss shall be reversed and recorded into
the current profit and loss.
      Impairment losses on available-for-sale equity instruments should not be reversed through profit and loss.
      Criteria of the Company for ―serious‖ decline of fair value of investments in available-for-sale equity
instruments: In general, for highly liquid equity investments that are actively traded in the market, over 50% of
the decline is considered to be a serious fall. Criteria for ―non-temporary‖ decline of fair value: In general, if a
continuous decline lasts for more than six months, it is considered as ―non-temporary decline.‖
      (2)Provision for impairment of held-to-maturity investments:
     Measurement of provision for impairment loss on held-to-maturity investments is treated in accordance
with the measurement method of impairment loss on accounts receivable.
      11) Receivables
    1. Receivables that are individually significant but with provision for bad debts made on an individual
basis

Assessment basis or standard of amount
                                             Top five biggest balance accounts.
individually significant
                                             An impairment test shall be separately made. Provision for bad debts shall be accrued based on
                                             the difference between the present value of estimated future cash flow and its book value. And
Method of provision for bad debts of
                                             it shall be recorded into the current profit and loss. If the difference between expected future
receivables individually significant
                                             cash flow of short-term receivables and its present value is very small, it does not discount its
                                             expected future cash flows when determining the relevant impairment losses.
     2. Provision for bad debts of receivables made on credit risk characteristics portfolio basis
Methods of provision for bad debts made on credit risk characteristics portfolio basis
                  Balances of receivables other than accounts receivable subject to provisions for bad debts on an individual
Portfolio1
                  basis and other receivables
Portfolio2        Amount due from government agencies and institutions
Portfolio3           Security deposit
Portfolio4           Employee reserve and employee collection and payment
                     Balances of receivables other than accounts receivable subject to provisions for bad debts on an individual
Portfolio5
                     basis and other receivables
      Provision for bad debts made at aging analysis method in the portfolio:
                                               Proportion of Provision for Accounts          Proportion of Provision for Other Receivables
                  Aging
                                                         Receivable (%)                                           (%)
Within 1 year (including 1 year)                                                       5                                                    5
1 to 2 years                                                                           20                                                  20
2 to 3 years                                                                           50                                                  50
Over 3 years                                                                          100                                                100
     The receivables of the overseas subsidiaries of the Company were all tested separately and provision for
bad debts was made separately.
    3. Receivables that are individually insignificant but with provision for bad debts made on an individual
basis
Reason for bad debt provision provided
                                         Receivables of a particular object
on an individual basis
                                         An impairment test shall be separately made. If there is objective evidence that it has been
Method of provision for bad debts        impaired, provision for bad debts is made based on the difference between the present value of
                                         expected future cash flows and its book value, which is included in the current profit or loss.
     12) Inventories
     1. Classification of inventories
     Inventories are classified into Materials in transit, raw materials, revolving materials, stock commodities,
goods in progress, dispatched goods, material procurement, consigned processing materials, labor cost and
others.

                                                                  62 / 121
                上工申贝(集团)股份有限公司
                                                                                          Annual Report 2018
                Shang Gong Group Co., Ltd

      2. Measurement method of dispatched inventories
      Inventories are measured with weighted average method when dispatched. The percentage matches
method of the labor cost and labor revenue. One-off amortization method is adopted for low-cost consumables
when they are consumed.
      3. Recognition basis for net realizable values of inventories of different categories
      In normal operation process, for merchandise inventories for direct sale, including finished goods, stock
commodities and materials for sale, their net realizable values are determined at the estimated selling prices
minus the estimated selling expenses and relevant taxes and surcharges; in normal operation process, for
material inventories that need further processing, their net realizable values are determined at the estimated
selling prices of finished goods minus estimated costs to completion, estimated selling expenses and relevant
taxes and surcharges; for inventories held to execute sales contract or service contract, their net realizable
values are calculated on the basis of contract price. If the quantities of inventories specified in sales contracts
are less than the quantities held by the Company, the net realizable value of the excess portion of inventories
shall be based on general selling prices.
      At the end of the period, provisions for inventory depreciation reserve are made on an individual basis.
For inventories with large quantity and low unit price, the provisions for inventory depreciation reserve are
made on a category basis. For inventories related to the product portfolios manufactured and sold in the same
area, and of which the final usage or purpose is identical or similar thereto, and which is difficult to separate
from other items for measurement purposes, the provisions for inventory depreciation reserve shall be made on
a portfolio basis.
      Except that there is clear evidence that the market price is abnormal on the balance sheet date, the net
realizable value of inventory items shall be recognized at the market price on the balance sheet date.
      Net realizable value of inventory items at the end of the year is recognized at the market price on the
balance sheet date.
      4. Inventory system
      Perpetual inventory system is adopted.
      13) Assets held for sale
      Not applicable.
      14) Long-term equity investments
      1、 Criteria for judgment of common control and significant influence
      The term ―common control‖ refers to the sharing of control over an arrangement in accordance with the
relevant agreement, and related activities of the arrangement must be unanimously agreed by the parties that
share the right of control. Where the Company and other investors exert common joint control over the
investee and have rights over the net assets of the investee, the investee is a joint venture of the Company.
      Significant influence refers to the power to participate in making decisions on the financial and operating
policies of an enterprise, but not the power to control, or jointly control, the formulation of such policies with
other parties. Where the Company is able to exert significant influence over the investee, the investee is its
associate.
     2、 Recognition of initial investment costs
     (1)Long-term equity investments acquired from business combination
     Business combination under common control: if the Company makes payment in cash, transfers non-cash
assets or bears debts and issues equity securities as the consideration for the business combination, the book
value of the owner’s equity of the cquire in the consolidated financial statements of the ultimate controller is
recognized as the initial cost of the long-term equity investment on the combination date. In case the Company
can exercise control over the investee under common control for additional investment or other reasons, the


                                                        63 / 121
                 上工申贝(集团)股份有限公司
                                                                                           Annual Report 2018
                 Shang Gong Group Co., Ltd

initial investment cost of long-term equity investments is recognized at the share of book value of net asset of
the cquire after the combination in the consolidated financial statements of the ultimate controller on the
combination date. The stock premium should be adjusted at the difference between the initial investment cost
of long-term equity investments on the combination date and the book value of long-term equity investments
before the combination plus the book value of consideration paid for additional shares; if there is no sufficient
stock premium for write-downs, the retained earnings are adjusted.
      Business combination not under common control: The Company recognizes the combination cost
determined on the combination date as the initial cost of long-term equity investments. Where the Company
can exercise control over the investee not under common control for additional investments or other reasons,
the initial investment cost changed to be accounted for under the cost method should be recognized at the book
value of originally held equity investments plus costs of additional investments.
     (2)Long-term equity investment acquired by other means
     For a long-term equity investment acquired through making payments in cash, its initial cost is the
actually paid purchase cost.
     For a long-term equity investment acquired from issuance of equity securities, its initial cost is the fair
value of the issued equity securities.
     If the exchange of non-monetary assets has commercial substance and the fair values of assets traded out
and traded in can be measured reliably, the initial cost of long-term equity investment traded in with
non-monetary assets are determined based on the fair values of the assets traded out and the relevant taxes and
surcharges payable unless there is any conclusive evidence that the fair values of the assets traded in are more
reliable; if the exchange of non-monetary assets does not meet the above criteria, the book value of the assets
traded out and the relevant taxes and surcharges payable are recognized as the initial cost of long-term equity
investment traded in.
     For a long-term equity investment acquired from debt restructuring, its initial cost is determined based on
the fair value.
     3、 Subsequent measurement and recognition of gains and losses
     (1)Long-term equity investment accounted for under the cost method
     Long-term equity investments in subsidiaries are accounted for under the cost method. Except for the
actual price paid for acquisition of investment or the cash dividends or profits contained in the consideration
which have been declared but not yet distributed, the Company recognizes the investment income in the
current year at the cash dividends or profits declared by the investee.
     (2)Long-term equity investments accounted for under the equity method
      Long-term equity investments in associates and joint ventures are accounted for under the equity method.
If the cost of initial investment is in excess of the proportion of the fair value of the net identifiable assets in
the investee when the investment is made, the difference will not be adjusted to the initial cost of the long-term
equity investments; if the cost of initial investment is in short of the proportion of the fair value of the net
identifiable assets in the investee when the investment is made, the difference will be included in the current
profit and loss.
      The Company shall recognize the investment income and other comprehensive income at the shares of net
profit and loss and other comprehensive income realized by the investee which the Company shall enjoy or
bear and adjust the book value of long-term equity investments at the same time; the Company shall calculate
the shares according to profits or cash dividends declared by the investee and correspondingly reduce the book
value of long-term equity investments; the book value of long-term equity investments shall be adjusted
according to the investee’s other changes in owner’s equity other than net profit and loss, other comprehensive
income and profit distribution, which should be included in owner’s equity.

                                                        64 / 121
                上工申贝(集团)股份有限公司
                                                                                         Annual Report 2018
                Shang Gong Group Co., Ltd

     The share of the investee’s net profit or loss should be recognized after adjustments are made to net profit
of the investee based on the fair value of identifiable net assets of the investee upon acquisition of investments
and according to accounting policies and accounting period of the Company. When holding the investment, the
investee should prepare the consolidated financial statements, it shall account for the investment income based
on the net profit, other comprehensive income and the changes in other owner’s equity attributable to the
investee.
     When the Company recognizes its share of loss incurred to the investee, treatment shall be done in
following sequence: firstly, the book value of the long-term equity investment shall be reduced. Secondly,
where the book value thereof is insufficient to cover the share of losses, investment losses are recognized to
the extent of book value of other long-term equities which form net investment in the investee in substance and
the book value of long term receivables shall be reduced. Finally, after all the above treatments, if the
Company is still responsible for any additional liability in accordance with the provisions stipulated in the
investment contracts or agreements, provisions are recognized and included into current investment loss
according to the obligations estimated to undertake.
     (3)Disposal of long-term equity investments
     For disposal of long-term equity investment, the difference between its book value and the actual price
shall be included in the current profit and loss.
     For long-term equity investments accounted for under the equity method, when the Company disposes
such investments, accounting treatment should be made to the part that is originally included in other
comprehensive income according to the corresponding proportion by using the same basis for the investee to
directly dispose the relevant assets or liabilities. Owner’s equity recognized at the changes in the investee’s
other owner’s equity other than net profit or loss, other comprehensive income and profit distribution shall be
transferred to the current profit and loss according to the proportion, except for other comprehensive income
from changes arising from re-measurement of net liabilities or net assets of defined benefit plan.
     In case the joint control or significant influence over the investee is lost for disposing part of equity
investments or other reasons, the remaining equity will be changed to be accounted for according to the
recognition and measurement principles of financial instruments. The difference between the fair value and the
book value on the date of the loss of joint control or significant influence should be included in the current
profit and loss. For other comprehensive income recognized from accounting of the original equity
investments under the equity method, accounting treatment should be made by using the same basis for the
investee to directly dispose the relevant assets or liabilities when the equity method is no longer adopted.
Owner’s equity recognized from the investee’s changes in other owner’s equity other than net profit or loss,
other comprehensive income and profit distribution should all transferred to the current profit and loss when
the equity method confirmed is no longer adopted.
     In case the control over the investee is lost for disposing part of equity investments or other reasons, when
the Company prepares the individual financial statements, where the remaining equity after the disposal can
exercise joint control or significant effect on the investee, then such equity will be changed to be accounted for
under the equity method and the remaining equity is deemed to have been adjusted under the equity method on
acquisition; where the remaining equity after the disposal cannot exercise joint control or significant effect on
the investee, then accounting treatment shall be changed to be made according to the relevant provisions on the
recognition and measurement principles of financial instruments. The difference between the fair value and the
book value on the date of the loss of joint control or significant influence should be included in the current
profit and loss.
     In case the disposed equity is acquired from additional investments or other reasons, when the Company
prepares the individual financial statements, where the remaining equity after the disposal is accounted for


                                                       65 / 121
                       上工申贝(集团)股份有限公司
                                                                                                     Annual Report 2018
                       Shang Gong Group Co., Ltd

under the cost method or the equity method, other comprehensive income and other owner’s equity recognized
from the accounting of equity investments held before the acquisition date under the equity method shall be
transferred according to the proportion; where accounting treatment of the remaining equity after the disposal
is changed to be made according to the recognition and measurement principles of financial instruments, all of
other comprehensive income and other owner’s equity shall be transferred.
     15) Investment property
     If using the cost measurement model:
     Investment properties are properties to earn rentals or for capital appreciation or both. Examples include
land leased out under operating leases, land held for long-term capital appreciation, buildings leased out under
operating leases, (including buildings that have been constructed or developed for future lease out under
operating leases, and buildings that are being constructed or developed for future lease out under operating
leases).
     The Company adopts the cost model to measure all current investment properties. The Company adopts
the same depreciation policy for the investment property measured at cost model – building for renting as that
for the Company’s fixed assets and the same amortization policy of land use right for renting as that for the
Company’s intangible assets.
     16) Fixed assets
     A. Recognition criteria for fixed assets
     Fixed assets refer to tangible assets held for the purpose of producing commodities, providing services,
renting or business management with useful lives exceeding one accounting year. Fixed assets will only be
recognized when all the following criteria are satisfied:
     (1) It is probable that the economic benefits relating to the fixed assets will flow into the Company; and
     (2) The costs of the fixed asset can be measured reliably.
      B. Depreciation method
                                                                                                         Annual Depreciation Rate
       Category               Depreciation Method    Depreciation Life (years)   Residual Rate (%)
                                                                                                                  (%)
Buildings              and
constructions
                              Straight-line method                       5-50                  0-10%             2.00%-25.00%
Machinery equipment           Straight-line method                       3-15                  0-10%             6.00%-33.33%
Transportation
equipment
                              Straight-line method                       3-14                  0-10%             6.43%-33.33%
Electronic equipment          Straight-line method                       3-14                  0-10%             6.43%-33.33%
Renovations      of   fixed
assets
                              Straight-line method                       5-15                        0           6.67%-20.00%
Other equipment               Straight-line method                       3-14                  0-10%             6.43%-33.33%

     C. Identification basis and pricing method of financing lease fixed assets
     If one of the following conditions is stipulated in the terms of the lease agreement signed between the
Company and the lessor, it is recognized as a leased asset under finance:
     (1) The ownership of the leased assets after the lease expires belongs to the Company;
     (2) The Company has the option to purchase assets. The purchase price is much lower than the fair value
of the assets when the option is exercised;
     (3) The lease period accounts for the majority of the useful life of the leased asset;
     (4) The present value of the minimum lease payment on the lease start date is not significantly different
from the fair value of the asset.
     At the beginning of the lease, the Company uses the lower of the fair value of the leased asset and the
present value of the minimum lease payments as the entry value of the leased asset, and uses the minimum
lease payment as the entry value of long-term payables. The difference is as unrecognized financing fee.



                                                                66 / 121
                上工申贝(集团)股份有限公司
                                                                                         Annual Report 2018
                Shang Gong Group Co., Ltd

      17) Construction in progress
      The book values of the construction in progress are stated at total expenditures incurred before reaching
working condition for their intended use. For construction in progress that has reached working condition for
intended use but relevant budgets for the completion of projects have not been completed, the estimated values
of project budgets, prices, or actual costs should be included in the costs of relevant fixed assets, and
depreciation should be provided according to relevant policies of the Company when working condition is
reached. After the completion of budgets needed for the completion of projects, the estimated values should be
substituted by actual costs, but depreciation already provided is not adjusted.
      18) Borrowing costs
      A. Recognition criteria for capitalization of borrowing costs
      Borrowing costs include the interest on borrowings, the amortization of discount or premium, auxiliary
expenses, exchange differences incurred by foreign currency borrowings, etc.
      The borrowing costs incurred to the Company and directly attributable to the acquisition and construction
or production of assets eligible for capitalization should be capitalized and recorded into asset costs; other
borrowing costs should be recognized as costs according to the amount incurred and be included into current
profit and loss.
      Assets eligible for capitalization refer to fixed assets, investment property, inventories and other assets
which may reach their intended use or sale status only after long-time acquisition and construction or
production activities.
      Borrowing costs may be capitalized only when all the following conditions are met at the same time:
      (1) The asset disbursements have already incurred, which shall include the cash paid, non-cash assets
transferred or interest bearing debts undertaken for the acquisition and construction or production activities for
preparing assets eligible for capitalization;
      (2) The borrowing costs has already incurred; and
      (3) Purchase, construction or manufacturing activities that are necessary to prepare the asset for its
intended use or sale have already started.
      B. Capitalization period of borrowing costs
      Capitalization period refers to the period from commencement of capitalization of borrowing costs to its
cessation; period of suspension for capitalization is excluded.
      When the qualified asset under acquisition and construction or production is ready for the intended use or
sale, the capitalization of the borrowing costs shall be ceased.
      When some projects among the acquired and constructed or produced assets eligible for capitalization are
completed and can be used separately, the capitalization of borrowing costs of such projects should be ceased.
      Where construction for each part of assets purchased, constructed or manufactured has been completed
separately but can be used or sold only after the entire assets have been completed, capitalization of
attributable borrowing costs should cease at the completion of the entire assets.
      C. Period of capitalization suspension
      If the acquisition and construction or production activities of assets eligible for capitalization are
interrupted abnormally and this condition lasts for more than three months, the capitalization of borrowing
costs should be suspended; if the interruption is necessary for the acquisition and construction or production to
prepare the assets for their intended use or sale, the capitalization of borrowing costs should continue. The
borrowing costs incurred during interruption are recognized in the current profit and loss, and the capitalization
of borrowing costs continues after the restart of the acquisition and construction or production activities of the
assets.
      D. Capitalization rate and measurement of capitalized amounts of borrowing costs


                                                       67 / 121
                     上工申贝(集团)股份有限公司
                                                                                         Annual Report 2018
                     Shang Gong Group Co., Ltd

     As for special borrowings borrowed for acquiring and constructing or producing assets eligible for
capitalization, the to-be-capitalized amount shall be determined at interest expense of special borrowing
actually incurred in the current period less the interest income of the borrowings unused and deposited in bank
or return on temporary investment.
     As for general borrowings used for acquiring and constructing or producing assets eligible for
capitalization, the to-be-capitalized amount should be calculated by multiplying the weighted average of asset
disbursements of the part of accumulated asset disbursements exceeding special borrowings by the
capitalization rate of used general borrowings. The capitalization rate is calculated by using the weighted
average interest rate of general borrowings.
      19) Biological assets
       Not applicable.
      20) Oil and gas assets
       Not applicable.
      21) Intangible assets
      A. Valuation method, service life, impairment test
       (1) Measurement of intangible assets
     ① The Company initially measures intangible assets at cost on acquisition
     The costs of external purchase of intangible assets comprise their purchase prices, related taxes and
surcharges and any other directly attributable expenditure incurred to prepare the asset for its intended use. If
payments for the purchase of intangible assets are extended beyond the normal credit terms with financing
nature, the costs of intangible assets are determined on the basis of present values of the purchase prices.
     For intangible assets obtained from debtors in settlement of his liabilities in case of debt restructuring,
they should be initially stated at their fair values. Differences between the book values and the fair values of
the intangible assets are charged to profit or loss for the current period.
     If the exchange of non-monetary assets has commercial substance, and the fair values of these assets can
be measured reliably, the book-entry values of intangible assets traded in are based on the fair values of the
intangible assets traded out unless there is any conclusive evidence that the fair values of the assets traded in
are more reliable. If the exchange of non-monetary assets does not meet the above criteria, the costs of the
intangible assets traded in should be the book values of the assets traded out and relevant taxes and surcharges
paid, and no profit or loss shall be recognized.
      ② Subsequent measurement
     The useful lives of the intangible assets are analyzed and determined on their acquisition.
     As for intangible assets with limited useful life, straight-line amortization method is adopted in the period
when the intangible assets generate economic benefit for enterprise; if the period when the intangible assets
generate economic benefit for enterprise cannot be forecasted, the intangible assets shall be deemed as those
with indefinite useful life and shall not be amortized.
     (2) Estimate of the useful life of the intangible assets with finite useful lives :
                                   Item                                           Estimated Useful Lives
Land use right                                                                                               50 years
Right to use trade mark                                                                                      10 years
Patent and non-patent technology                                                                            4-8 years
Computer software                                                                                          3-10 years
     The useful lives and amortization methods of intangible assets with limited useful lives are reviewed at
each year end.
     Upon review, the useful lives and amortization method of the intangible assets as at the end of the year are

                                                       68 / 121
                上工申贝(集团)股份有限公司
                                                                                          Annual Report 2018
                Shang Gong Group Co., Ltd

not different from those estimated before.
     (3) Specific criteria divided the research stage and development stage
     Expenditure internal research and development project is divided into research expenditures and
development expenditures.
     Research stage: the planned investigation and research activities to acquire and understand new scientific
or technological knowledge.
     Development stage: before commercial production and use, the research findings or other knowledge are
applied in some plan or design to produce new or substantially improved materials, devices, products, etc.
      B. Internal research and development expenditure accounting policy
      Specific criteria divided the research stage and development stage:
      If it can be reliably estimated that future economic benefits will flow to the entity, and that the purchase
and production costs can be reliably measured, the development cost should be capitalized. The measurement
of production cost of internally generated intangible assets is based on direct cost, indirect cost and
amortization.
      If it can be clearly defined that newly developed products or methods are technically feasible, and that
they are intended for private use or sale, the development cost should be capitalized. The capitalized
development cost should be amortized within a product’s expected 5 to 8 years’ life cycle, using a straight-line
method. If the value in use cannot be recognized, impairment and amortization should be carried out. Research
cost and the development cost which cannot be capitalized should be expense when it occurs.
      22) Impairment of long-term assets
      The Company will conduct the impairment test if any evidence suggests that the long-term assets, such as
the long-term equity investment and the investment property, fixed assets, construction in progress and
intangible assets, are impaired on the balance sheet date. If impairment test results indicate that the recoverable
amounts of the assets are lower than their carrying amounts, the provision for impairment is made based on the
differences which are recognized as impairment losses. The recoverable amount is the higher of the fair value
of the asset minus the disposal expenses and the present value of the estimated future cash flow of the asset.
The provision for assets impairment is calculated and recognized by the individual asset. If it is difficult to
estimate the recoverable amount of an individual asset, the Company shall estimate the recoverable amount of
the asset portfolio that the individual asset belongs to. The asset portfolio is the minimum asset group that can
independently generate the cash inflow.
      Goodwill is tested for impairment at least at the end of each year.
      The Company conducts an impairment test for the goodwill. The book value of goodwill arising from
business combinations is amortized to relevant asset groups with a reasonable method since the date of
acquisition; or amortized to relevant combination of asset groups if it is difficult to be amortized to relevant
asset groups. The book value of goodwill is amortized to relevant asset groups or combinations of asset groups
according to the proportion of the fair value of such asset groups or combinations of asset groups in the total
fair value of relevant asset groups or combinations of asset groups. Where the fair value cannot be reliably
measured, it should be amortized according to proportion of the book value of each asset group or combination
of asset group in the total book value of relevant asset groups or combinations of asset groups.
      When making an impairment test on the relevant asset groups or combination of asset groups containing
goodwill, if any indication shows that the asset groups or combinations of asset groups related to the goodwill
may be impaired, the Company shall first conduct an impairment test on the asset groups or combinations of
asset groups not containing goodwill, calculate the recoverable amount and compare it with the relevant book
value to recognize the corresponding impairment loss. Then the Company shall conduct an impairment test on
the asset groups or combinations of asset groups containing goodwill, and compare the book value of these


                                                        69 / 121
                 上工申贝(集团)股份有限公司
                                                                                           Annual Report 2018
                 Shang Gong Group Co., Ltd

asset groups or combinations of asset groups (including the book value of the goodwill apportioned thereto)
with the recoverable amount. Where the recoverable amount of the relevant asset groups or combinations of
asset groups is lower than the book value thereof, the Company shall recognize the impairment loss of the
goodwill. The above impairment loss is not reversed in the future accounting period once recognized.
      23) Long-term Deferred Expenses
      Not applicable
      24) Employee compensation
      1. Accounting treatment of short-term remuneration
      During the accounting period in which employees provide service to the Company, the short-term
remuneration actually incurred is recognized as liabilities and charged to the current profit or loss or the
relevant assets cost.
      The medical insurance premium, work-related injury insurance premium and the housing provident fund
paid by the Company for its employees, together with the labor union expenditures and employee education
are used to calculate and determine the relevant employee compensation amount based on the prescribed
accrual basis and accrual proportion.
      The non-monetary benefits for employees that can be measured reliably are measured at fair value.
      2. Accounting treatment of benefits paid after departure
      (1) Defined withdrawal plan
      The basic endowment insurance premium and unemployment insurance premium paid by the Company
for its employees in accordance with relevant provisions of the local government are recognized as liabilities
and charged to the current profit or loss or the relevant assets cost, with the payable amount calculated based
on the local prescribed payment base and percentage, during the accounting period in which the employees
provide services to the Company.
      In addition to the basic endowment insurance, the Company also builds the enterprise annuity payment
system (supplementary pension insurance) in accordance with relevant national policies for enterprise annuity
system. The Company pays a certain percentage of the total employee compensation to the local social
institution, and record the relevant expenditures into the current profit or loss or the relevant assets cost.
      (2) Defined benefit plan
      The Company attributes the welfare obligation arising from the defined benefit plan to the period during
which the employees provide services, in accordance with the formula determined under the estimated
accumulated welfare unit method, and records the same into the current profit or loss or the relevant asset cost.
      A net liability or net asset in relation to the defined benefit plan is recognized at the present value of the
obligation under the defined benefit plan less the deficit or surplus arising out of the fair value of the assets in
relation to the defined benefit plan. Where the defined benefit plan has any surplus, the Company will
determine the net assets in relation to the defined benefit plan at the lower of the surplus of the defined benefit
plan or the asset cap.
      The obligations under the defined benefit plan, including the estimated payment obligation within 12
months following the annual report period during which the employees provide service, are discounted to the
present value at the market return of the national debt of which the term and currency match those of the
obligation under the defined benefit plan on the balance sheet date, or of the high-quality corporate debt in an
active market.
      The service cost incurred by the defined benefit plan, together with the net interest on the net liability or
net asset in relation to the defined benefit plan, are charged to the current profit or loss or the relevant asset
cost; the change arising from the re-measurement of the net liability or net asset in relation to the defined
benefit plan are recorded into other comprehensive income and are not reversed to the profit or loss in the
subsequent accounting period.
      The gains or losses on the settlement in respect of the defined benefit plan are recognized at the difference


                                                        70 / 121
                 上工申贝(集团)股份有限公司
                                                                                           Annual Report 2018
                 Shang Gong Group Co., Ltd

between the present value and the settlement price of the obligation under the defined benefit plan on the
settlement date.
      3. Accounting treatment of dismissal welfare
      Where the Company cannot unilaterally withdraw the dismissal welfare offered in view of the
cancellation of the labor relation plan or the layoff proposal, or recognizes the cost or expenses as to the
restructuring involving the payment of dismissal welfare (whichever is earlier), the employee compensation
arising from the dismissal welfare should be recognized as the liabilities and charged to the current profit or
loss.
      25) Estimated liabilities
      1. Recognition criteria for estimated liabilities
      The Company should recognize an obligation in relation to contingencies as an estimated liability, such as
the litigation, debt guarantee, loss-making contract or restructuring, when all the following conditions are
satisfied:
      (1) The obligation is a present obligation of the Company;
      (2) The performance of such obligation is likely to result in outflow of economic benefits from the
Company;
      (3) The amount of the obligation can be measured reliably.
      2. Measurement of estimated liabilities
      The estimated liabilities of the Company are initially measured as the best estimate of expenses required
for the performance of relevant present obligations.
      The risks, uncertainties, time value of money, and other factors relating to the contingencies. If the time
value of money is significant, the best estimates shall be determined after discount of relevant future cash
outflows.
      The best estimates shall be treated as follows in different circumstances:
      If there is continuous range (or interval) for the necessary expenses, and probabilities of occurrence of all
the outcomes within this range are equal, the best estimate shall be determined at the average amount of upper
and lower limits within the range.
      Given the fact that there is no continuous range (or interval) for the necessary expenses, or probabilities of
occurrence of all the outcomes within this range are unequal despite such a range exists, in case that the
contingency involves a single item, the best estimate shall be determined at the most likely outcome; if the
contingency involves two or more items, the best estimate should be determined according to all the possible
outcomes with their relevant probabilities.
      When all or part of the expenses necessary for the settlement of an estimated liabilities are expected to be
compensated by a third party or other parties, the compensation shall be separately recognized as an asset only
when it is virtually certain that the compensation will be received. The amount recognized for the
compensation shall not exceed the book value of the estimated liabilities.
      26) Share payment
      Not applicable.
      27) Other financial instruments such as preferred shares and perpetual bonds
      Not applicable.
      28) Incomes
      1. Specific criteria for determining the timing of income recognition for sales of goods
      The Company will confirm that the sales income of the goods is realized when the Company has
transferred the major risks and rewards of ownership of the goods to the purchaser; the Company does not
retain the right to continue management linked to ownership, nor does it have effective control over the
products sold; the amount of income can be measured reliably; the related costs incurred or to be incurred can

                                                        71 / 121
                上工申贝(集团)股份有限公司
                                                                                          Annual Report 2018
                Shang Gong Group Co., Ltd

be reliably measured.
      The specific judgment criteria are as follows:
      (1) Domestic sales: After the delivery of the goods, the Company confirms the sales income. According to
the delivery method agreed in the sales order, the detailed standards for income recognition are:
      When the customer goes directly to the warehouse of the Company to pick up goods, based on the
outbound documents confirmed by the parties in various ways, the income is confirmed when the goods leave
the warehouse.
      When the customer appoints a carrier, based on the logistics document issued by the carrier, income is
recognized when the goods are delivered to the carrier.
      When the Company appoints a carrier, based on the logistics receipts signed and confirmed by the
customer, income is recognized when the customer actually signs the receipt.
      When the Company sells through the e-commerce platform, income is recognized when the electronic
order received by the customer to confirm the receipt or the e-commerce receipt period expires.
      If an unconditional return period or acceptance period has been agreed upon, the income recognition will
be delayed to the expiry of unconditional return periodor acceptance period.
      For sales on behalf of distributors, the income is recognized when the dealership list with the final
customer confirmation is received.
      (2) International sales: If choose to apply international trade terms, sale income is recognized according to
the time point of risk transfer agreed in the specific applicable international trade terms. If an unconditional
return period or acceptance period is agreed upon, the income recognition will be extended to the
unconditional return period or the acceptance period after meeting the applicable trade term risk transfer point.
If no international trade terms have been selected, the Company will recognize income after obtaining various
types of risk transfer documents according to the agreed delivery method and the time of risk transfer.
      (3) Sales of specialized sewing machine: As the customer has deeply customized the machine, according
to the relevant agreement in the contract signed by both parties, the specific delivery obligations under each
technical clause are distinguished, and the corresponding income is confirmed according to the completion of
the customer demand and the relevant confirmation documents.
      2. Recognition of income from transfer of assets use right
      When the economic benefit related to the transaction is probably to flow into the Company and the
relevant income can be reliably measured, the income from transfer of the assets use right is determined as
follows:
      (1) Interest income is measured based on the length of time for which the Company’s monetary funds is
used by others and the applicable interest rate;
      (2) Royalty income is measured according to the period and method of charging as stipulated in the
relevant agreements or contracts.
      3. Measurement principles and methods of completion stage where revenues from rendering of
labor are recognized under percentage-of-completion method
      The Company confirmed the income from the labor service when obtain the written settlement
confirmation from the customer and issue the settlement certificate.
      If the outcome of transactions can be estimated reliably at the balance sheet date, income from rendering
of labor service is recognized under the percentage-of-completion method. The percentage of completion is
determined by measurement of completed work as a percentage of total estimated costs.
      Income from rendering of labor service is determined by prices stated in the contracts or agreements,
whether already received or to be received, unless such relevant prices are unfair. The current income from the
rendering of labor service is recognized at the amount of multiplying the total income from the rendering of


                                                        72 / 121
                上工申贝(集团)股份有限公司
                                                                                         Annual Report 2018
                Shang Gong Group Co., Ltd

labor service by completion progress and deducting the accumulated income from the rendering of labor
service recognized in previous accounting periods on the balance sheet date; meanwhile, the current cost of
labor service is carried forward by the amount of multiplying the total costs of the rendering of labor service
by completion progress and deducting the accumulated cost from the rendering of labor services recognized in
previous accounting periods.
     When the outcome of transactions involving the rendering of services cannot be estimated reliably,
income is recognized and measured at the balance sheet date as follows:
     (1) If the service costs incurred are expected to be fully recoverable, the amounts equal to the labor costs
incurred shall be recognized as incomes and the equivalent amounts of labor costs shall be carried forward;
     (2) If the service costs incurred are not expected to be fully recoverable, the labor costs incurred shall be
included in the current profit and loss, with no income from the rending of labor services not recognized.
     The Company’s income from logistics service and sewing equipment maintenance services is recognized
when related services have been provided, service costs have actually occurred, and service settlement
documents confirmed by the service recipient have been obtained.
     29) Government grants
     1. Types
     Government grants refer to the monetary or non-monetary assets obtained by the Company from the
government for free. Government grants are classified into government grants related to assets and government
grants related to income.
     Government grants related to assets refer to government grants obtained by the Company that are used to
purchase, construct or form long-term assets, including financial allocations for purchases of fixed assets or
intangible assets, and financial discounts for special loans for fixed assets. Government grants related to
income refer to government grants other than those related to assets.
     The Company’s specific criteria for classifying government grants as related to assets are: government
grants obtained by the Company that are used to purchase, construct or form long-term assets.
     The Company’s specific criteria for classifying government grants as related to income are: government
grants other than those related to assets.
     If the government documents do not clearly specify the target of the grant, the judgment basis of
classifying the government grant as related to the assets or related to the income is whether it is used to
purchase or construct or form long-term assets.
     2. Accounting treatment
     Government grants related to assets: write down the carrying amount of the related assets or recognize
them as deferred income. If it is recognized as deferred income, it shall be recorded into current profits and
losses in a reasonable and systematic way within the useful life of the relevant assets (related to the Company’s
daily activities, included in other income; unrelated to the Company’s daily activities, included in
non-operating income).
     Government grants related to income: grants used to compensate for the related costs or losses of the
Company in the future period, shall be recognized as deferred income, and shall be recorded in the current
profits and losses (related to the Company’s daily activities, included in other income; unrelated to the
Company’s daily activities, included in non-operating income), or be used to reduce the related costs, expenses
or losses during the period for confirming the relevant costs, expenses or losses.
     30) Deferred income tax assets and deferred income tax liabilities
     Deferred income tax assets shall be recognized for deductible temporary differences to the extent that it is
probable that taxable profit will be available against which the deductible temporary differences can be utilized.
Deferred income tax assets should be recognized for deductible temporary differences to the extent that it is


                                                       73 / 121
                 上工申贝(集团)股份有限公司
                                                                                            Annual Report 2018
                 Shang Gong Group Co., Ltd

probable that taxable profit will be available against which the deductible temporary differences can be
utilized.
      Taxable temporary differences are recognized as deferred income tax liabilities except in special
circumstances.
      Special circumstances in which deferred income tax assets or deferred income tax liabilities shall not be
recognized include: the initial recognition of goodwill; other transactions or events excluding business
combinations, which affect neither accounting profits nor the taxable income (or deductible losses) when
occurred.
      If the Company has the legal right of netting and intends to settle in net amount or to obtain assets and
discharge liabilities simultaneously, the income tax assets and income tax liabilities of the Company for the
current period shall be presented based on the net amount after offset.
      When the Company has the legal rights to balance income tax assets and income tax liabilities for the
current period with net settlement, and deferred income tax assets and deferred income tax liabilities are
related to the income tax which are imposed on the same taxpaying subject by the same tax collection authority
or on different tax paying subjects, but, in each important future period in connection with the reverse of
deferred income tax assets and liabilities, the involved tax paying subject intends to balance income tax assets
and liabilities for the current period with net settlement at the time of obtaining assets and discharging
liabilities, deferred income tax assets and deferred income tax liabilities shall be presented based on the net
amount after offset.
      31) Lease
      1. Accounting treatment of operating lease
      (1) Lease fees paid by the Company for leased asset shall be amortized at straight-line method over the
whole lease period (including rent-free period) and shall be included in the current expenses. Initial direct costs
relating to lease transactions incurred by the Company shall be recognized as the current expenses.
      If the expense related to the lease which shall be paid by the Company is assumed by the lessor of the
asset, then such expenses shall be deducted from total lease fees, and the balances shall be amortized over the
lease term s and charged to the current expenses.
      (2) The lease fees received for the assets acquired under lease shall be recognized as current expenses
over the lease terms (including rent-free periods) on a straight-line basis. The initial direct costs related to lease
transactions paid by the Company, included in the current expenses; if a larger amount is to be capitalized,
according to confirm the same basis throughout the period of the lease installments related to the lease income
is recognized in profit gains.
      If expenses relating to leases which should be borne by the lessee of the assets are paid by the Company,
they shall be deducted from the total lease income and the balances shall be amortized over the lease terms by
the Company.
      2. Accounting treatment of financial lease
      (1) Assets rented in by financial lease: At the beginning of the lease, the Company uses the lower of the
fair value of the leased assets and the present value of the minimum lease payments as the entry value of the
leased assets, and uses the minimum lease payment as the entry value of the long-term payables. The
difference is used as unrecognized financing expenses. The Company adopts the actual interest rate method to
amortize the unrecognized financing expenses during the asset lease period and count it into financial expenses.
The initial direct costs incurred by the company are included in the value of the leased assets.
      (2) Assets rented out by financial lease: At the lease beginning date, the Company recognizes the financial
lease receivables, difference between the sum of unguaranteed residual value and its current value as
unrealized financing income. It is recognized as lease income in each period during which rent is received in
the future. The initial direct costs incurred by the Company in relation to the lease transaction are included in

                                                         74 / 121
                     上工申贝(集团)股份有限公司
                                                                                                                Annual Report 2018
                     Shang Gong Group Co., Ltd

the initial measurement of the financial lease receivable, and the amount of income recognized in the lease
period is reduced.
     32) Other important accounting policies and accounting estimates
     Not applicable.
     33) Adjustment for changes in principal accounting policies and accounting estimates
     1. Adjustment for changes in accounting policies
                                                             Approval
The Content and reasons of accounting policy changes                                               Item and amount affected
                                                             procedure
                                                          The    Eleventh     The ―receivable notes‖ and ―accounts receivable‖ are
                                                          Session of the      combined into ―receivable notes and accounts receivable‖.
                                                          Eighth Board of     The current amount is 617,760,694.90 yuan, and the
                                                          Directors
                                                                              previous period amount is 526,096,919.07 yuan;
(1) The ―receivable notes‖ and ―accounts
receivable‖ in the balance sheet are combined as                             The ―Accounts payable‖ and ―Accounts payable‖ are
―receivable notes and accounts receivable‖;                                 combined into ―Accounts payable and accounts payable‖.
                                                                              The current amount is 318,803,039.91 yuan, and the
―payable notes‖ and ―accounts payable‖ are
                                                                              previous amount is 206,343,320.56 yuan;
combined as ―payable‖ ―Notes and accounts
payable‖; ―interest receivable‖ and ―dividends                            Increasing the amount of ―other receivables‖ for the
receivable‖ are included in ―other receivables‖;                           current period of 27,041,989.94 yuan, and increasing the
                                                                              amount of the previous period by 21,645.73 yuan;
―interest payable‖ and ―dividend payable‖ are
                                                                              Increasing the amount of ―other payables‖ for the current
included in ―other payables‖; ―Asset Clearance‖
is included in ―Fixed Assets‖; ―Engineering                                period was 1,838,717.63 yuan, and the amount of the
Materials‖ is included in ―Construction in                                  previous period was 2,143,371.92 yuan;
                                                                              The amount of the ―fixed assets‖ in the current period and
Construction‖; ―Special Payables‖ is included in
                                                                              the amount in the previous period have not been increased;
―Long-term Payables‖. The comparison data is
                                                                              The current amount of the ―construction in progress‖ and
adjusted accordingly.。
                                                                              the amount of the previous period have not been increased;
                                                                              The amount of the ―long-term payables‖ for the current
                                                                              period and the amount of the previous period have not
                                                                              been increased.
(2) Add ―R&D Expenses‖ item in the income               The    Eleventh
statement, reclassify the R&D expenses in the             Session of the
                                                          Eighth Board of     The amount of ―administrative expenses‖ was reduced to
original ―Management Expenses‖ to ―R&D
                                                          Directors           97,647,657.57 yuan, and the previous amount was
Expenses‖ separately; add ―Including: Interest‖
                                                                              84,350,255.40 yuan, which was reclassified to ―R&D
under the financial expenses in the income
                                                                              expenses‖.
statement.: Fees and interest income items. The
comparison data is adjusted accordingly.
In the table of changes in owner’s equity, the           The    Eleventh
item ―Setting the benefit of the change in the           Session of the
defined benefit plan to carry forward the retained        Eighth Board of     N/A
                                                          Directors
income‖ is added. The comparison data is
adjusted accordingly.
      2. Adjustment for changes in principal accounting estimates
      Not applicable.
      6. Tax
      1)       Major taxes and tax rates
   Tax type                                    Basis of tax assessment                                                 Tax rate
                   Calculated based on the income from sales of goods and the provision of taxable
Value-added        labor services according to tax law, and value added tax payable should be the      3%、5%、6%、7%、11%、10%、
tax (VAT)          balance of the output tax for the period after deducting the deductible input tax   16%、17%、19%
                   for the period.
consumption
tax
Business tax
Urban
maintenance
and                Levied based on the actual payment of business tax and VAT.                         1%、5%、7%
construction
tax
Enterprise
income       tax   Levied based on the taxable income                                                  16%-38%、15%、25%
(EIT)
Education          Levied based on the actual payment of VAT.                                          3%、2%、1%


                                                                      75 / 121
                     上工申贝(集团)股份有限公司
                                                                                                Annual Report 2018
                     Shang Gong Group Co., Ltd

surtax and local
education sutax
        Note: The VAT rate applicable to DAAG and its subsidiaries is 19% or 7%.
        If there are different corporate income tax rate taxpayers, see the disclosure statement
                           Tax subject name                                         Income tax rate(%)
Dürkopp Adler AG                                                                                                     16-38
DAP (Vietnam) Co., Ltd.                                                                                                  20
Zhejiang ShangGong GEMSY Co., Ltd.                                                                                       15
Dürkopp Adler Manufacturing(Shanghai) Co.,Ltd.                                                                          15
SG Richpeace                                                                                                             15

     2) Tax incentives
     The company’s subsidiary Zhejiang ShangGong GEMSY Co., Ltd.,, Dürkopp Adler
Manufacturing(Shanghai) Co.,Ltd.,, Tianjin Richpeace are state-level high-tech enterprises, enjoying corporate
income tax at 15%.
     The Company and all subsidiaries in Mainland China are entitled to a tax benefit of 75% deduction for
research and development expenses.
     Shanghai ShangGong Financial Leasing Co., Ltd.,, a subsidiary of the Company, provides tangible
movable property financing leasing services and tangible movable property financing after-sales leaseback
services, and enjoys the tax incentives for the portion of the VAT that exceeds 3% of the actual tax burden.
     The company’s three-tier subsidiary Shenzhen Yingruiheng Technology Co., Ltd. and Tianjin Yingrui’an
Technology Co., Ltd. sell their own software products developed and produced, and enjoy the tax rebate of the
part of the VAT actual tax burden of more than 3%.
        7. Notes to items of consolidated financial statements
        1) Cash and cash equivalents
                        Item                              Ending Balance                         Beginning Balance
Cash on hand                                                               743,089.39                           707,925.98
Bank deposit                                                          556,653,249.22                        712,794,196.15
Other monetary funds                                                   37,637,807.50                          9,835,756.40
Total                                                                 595,034,146.11                        723,337,878.53
        Including: total amount of cash and cash
                equivalents offshore                                  261,229,432.22                        373,357,927.57
        Details of cash and cash equivalents restricted for use due to mortgage, pledge or freezing are follows:
                            Item                              Ending Balance                      Beginning Balance
Bank Acceptance Deposit Guarantee                                          35,374,936.26                        6,539,032.60
Security deposit                                                               712,626.09                         400,000.00
Deposit held for foreign exchange inspection                                   320,825.64                       2,585,125.48
Other guaranteed deposit                                                       384,135.73
                           Total                                           36,792,523.72                        9,524,158.08
     Note 1: The balance of December 31, 2018 is the monetary fund that SGGEMSY and Richpeace, which
are subsidiaries of the Company, cannot withdraw at any time due to the opening of bank acceptance bills. .
     Note 2: The balance of December 31, 2018 is the electricity security deposit of Richpeace, a subsidiary of
the Company, and the counterfeit deposit of Shanghai Butterfly Import & Export Co., Ltd., a third-level
subsidiary of the Company.
     Note 3: The balance of December 31, 2018 is the foreign exchange supervisor of the company’s
subsidiary DAPSH and the company’s third-level subsidiary Shanghai Butterfly Import and Export Co., Ltd.
The department has reviewed and has not transferred to the retained funds in the general trade account.
     Note 4: The balance of December 31, 2018 is that the bank account information of Shanghai Shanggong

                                                          76 / 121
                           上工申贝(集团)股份有限公司
                                                                                                                                Annual Report 2018
                           Shang Gong Group Co., Ltd

Import & Export Co., Ltd., a third-level subsidiary of the Company, has not been completed yet. The bank
temporarily freezes the retained funds in the account.
     2) Financial assets at fair value whose fluctuation is attributed to profit and loss for current
period
     Not applicable.
         3) Derivative financial assets
         Not applicable.
         4)        Notes receivable and accounts receivable
                           Item                                           Ending Balance                                      Beginning Balance
Notes receivable                                                                            81,482,151.15                                          61,337,538.87
Accounts receivable                                                                        536,278,543.75                                         464,759,380.20
                           Total                                                           617,760,694.90                                         526,096,919.07
         Notes receivable
         A. Presentation of notes receivable by category
                         Item                                            Ending Balance                                       Beginning Balance
Bank acceptance bills                                                                      71,718,740.15                                           47,405,556.75
Commercial acceptance bills                                                                  9,763,411.00                                          13,931,982.12
                         Total                                                             81,482,151.15                                           61,337,538.87

         B.        Notes receivable pledged as at the end of period
                                      Item                                                                    Ending Balance
Bank acceptance bills                                                                                                                               2,380,000.00
                                      Total                                                                                                         2,380,000.00

     C. Notes receivable endorsed or discounted at the end of the period and have not yet expired at the
balance sheet date
                        Item                                     Closing confirmed amount                             Closing unconfirmed amount
Bank acceptance bills                                                                  16,562,902.94
                        Total                                                          16,562,902.94

         D. Notes receivable transferred to accounts receivable due to the issuer’s performance failure
         Not applicable.
         Accounts receivable
         A. Disclosure of accounts receivable by category
                                              Ending Balance                                                          Beginning Balance
     Type              Book balance            Provision for bad debt                          Book balance              Provision for bad debt
                                                                          Book Value                                                                  Book Value
                      Amount           %          Amount           %                          Amount          %            Amount            %
Accounts
receivable
with
significant
individual
                      43,578,964.20    6.71      19,784,571.25   45.40     23,794,392.95      79,818,629.27   13.64        19,622,784.50   24.58      60,195,844.77
amount and
provision for
bad debt is
accrued
separately
Accounts
receivable
with
provision for
bad        debt      209,297,564.65   32.21      73,592,992.61   35.16    135,704,572.04     119,721,460.79   20.46        72,220,264.69   60.32      47,501,196.10
accrued       by
credit      risk
characteristics
of a portfolio




                                                                               77 / 121
                         上工申贝(集团)股份有限公司
                                                                                                                                 Annual Report 2018
                         Shang Gong Group Co., Ltd

Accounts
receivable
with
insignificant
individual         396,860,846.20
                                     61.08     20,081,267.44      5.06      376,779,578.76      385,572,745.19     65.90    28,510,405.86      7.39       357,062,339.33
amount but
provision for
bad debt is
accrued
separately
     Total         649,737,375.05   100.00    113,458,831.30     17.46      536,278,543.75      585,112,835.25    100.00   120,353,455.05     20.57       464,759,380.20
     Accounts receivable with significant individual amount and provision for bad debt is accrued separately at
the end of the period
  Accounts receivable (By
                                                                                             Ending Balance
          entity)                                                                                        Proportion of provision
                                       Accounts receivable                Provision for bad debt                                            Reason for provision
                                                                                                                  (%)
                                                                                                                                      Impaired according to the
No.2 Client                                  19,735,959.50                         19,735,959.50                           100.00     separate test
                                                                                                                                      Impaired according to the
No.3 Client                                  12,315,321.00                              48,611.75                            0.39     separate test
                                                                                                                                      Unimpaired according to
No.5 Client                                   11,527,683.70                                                                           the separate test
                Total                        43,578,964.20                         19,784,571.25                            45.40                     /
       Accounts receivable with provision for bad debt accrued using the aging analysis method in the portfolio
                                                                                              Ending Balance
                Aging
                                              Accounts receivable                            Provision for bad debt              Proportion of provision (%)
Within 1 year                                             77,476,546.06                                    3,873,827.29                                           5.00
1-2 years                                                      4,362,501.88                                  872,500.38                                          20.00
2-3 years                                                      3,349,564.89                                1,674,782.46                                          50.00
Over 3 years                                              67,171,882.48                                  67,171,882.48                                         100.00
                Total                                    152,360,495.31                                  73,592,992.61                                           48.30
       Accounts receivable with provision for bad debt accrued using other methods in the portfolio
                                                                                                                                            Proportion of provision
                           Name                                          Accounts receivable               Provision for bad debt
                                                                                                                                                     (%)
Receivables guaranteed by financial institutions                                  56,937,069.34
                           Total                                                  56,937,069.34

       Accounts receivable with insignificant individual amount but provision for bad debt is accrued separately
                                                                                               Ending Balance
  Accounts Receivable (By
          Entity)                                                    Provision for Bad            Proportion of
                                      Accounts Receivable                                                                       Reason for Provision
                                                                           Debt                     Provision
Other insignificant     accounts
                                              24,356,242.98                   7,295,176.66                  29.95     Impaired according to the separate test
receivable (Note 1)
Other insignificant     accounts
                                              11,616,479.63                   6,335,462.38                  54.54     Impaired according to the separate test
receivable (Note 2)
Other insignificant     accounts
                                               7,831,016.87                       7,590.41                   0.10     Impaired according to the separate test
receivable (Note 3)
Other insignificant     accounts
                                                   11,610.00                     11,610.00                 100.00     Impaired according to the separate test
receivable (Note 4)
Other insignificant     accounts
                                             238,883,440.57                   6,296,805.05                   2.64     Impaired according to the separate test
receivable (Note 5)
Other insignificant     accounts
                                                 169,198.40                         216.55                   0.13     Impaired according to the separate test
receivable (Note 6)
Other insignificant     accounts
                                             113,495,813.28                    134,300.00                    0.12     Impaired according to the separate test
receivable (Note 7)
Other insignificant     accounts
                                                 306,725.49                         106.39                   0.03     Impaired according to the separate test
receivable (Note 8)
Other insignificant     accounts
                                                 190,318.98                                                           Unimpaired according to separate test
receivable (Note 9)
                Total                        396,860,846.20                 20,081,267.44                    5.06
    Note 1: Mainly for the accounts receivable of the parent company of SGG, the impairment provision is
made according to the individual amount test.
    Note 2: Mainly for the accounts receivable of the subsidiary Shanghai Shanggong Butterfly Sewing

                                                                                 78 / 121
                          上工申贝(集团)股份有限公司
                                                                                                                    Annual Report 2018
                          Shang Gong Group Co., Ltd

Machine Co., Ltd., the impairment provision is made according to the individual amount test.
     Note 3: Mainly for the accounts receivable of the subsidiary DAPSH, the impairment provision is made
according to the individual amount test.
     Note 4: Mainly for the subsidiary of Shanghai SGSB Electronics Co., Ltd., the accounts receivable are
accrued for impairment according to the individual amount test.
     Note 5: Mainly for the accounts receivable of the subsidiary DA AG, the impairment provision is made
according to the individual amount test.
     Note 6: Mainly for the subsidiary of SGGEMSY, the accounts receivable are accrued for impairment
according to the individual amount.
     Note 7: Mainly for the subsidiary of Shanghai Shensy Enterprise Development Co., Ltd., the accounts
receivable are depreciated according to the individual amount test.
     Note 8: Mainly for the accounts receivable of the subsidiary PFAFF Industrial Sewing Machine
(Zhangjiagang) Co., Ltd., the impairment provision is made according to the individual amount test.
     Note 9: Mainly due to the accounts receivable of the subsidiary DAP Vietnam Co., Ltd., no impairment
occurred according to the individual amount test.
     B. The accrual, reversal or recovery of the provision for bad debts in the current period
     The provision for bad debts accrued in the current period is 7,764,954.65 yuan. The amount reversed or
recovered of the provision for bad debts in the current period is 7,097,708.43 yuan.
      C.       Accounts receivable actually write-off in the current period
                                Item                                                                    Amount
Accounts receivable actually write-off                                                                                            8,644,485.21
      Note: Due to the liquidation and cancellation of Shanghai SMPIC Photosensitive Material Factory, the
Company’s President’s Office Meeting agreed to write off the accounts receivable totaling RMB 3,436,227.61;
the Company’s President’s Office Meeting agreed to write off the accounts receivable of the industrial sewing
machine branch that have been determined to be uncollectible and have been fully withdrawn for bad debts
totaling RMB 2,582,333.45.
      D.       Top five accounts receivable in terms of their ending balance

                                                                                  Ending Balance
      Company name                                                       Proportion in total accounts receivable ratio
                                           Accounts receivable                                                           Provision for bad debt
                                                                                              (%)
No.1 Client                                            22,361,217.60                                              3.44
No.2 Client                                            19,735,959.50                                              3.04         19,735,959.50
No.3 Client                                            12,315,321.00                                              1.90              48,611.75
No.4 Client                                            11,530,775.39                                              1.77         11,530,775.39
No.5 Client                                            11,527,683.70                                              1.77
               Total                                   77,470,957.19                                             11.92         31,315,346.64
      5)       Prepayment
      A.       Presentation of prepayments by aging
                                              Ending Balance                                              Beginning Balance
      Aging
                                 Amount                           %                            Amount                           %
Within 1 year                          33,268,163.01                        83.81                  58,228,035.05                          90.43
1-2 years                                257,817.83                          0.65                        9,442.01                          0.01
2-3 years                                 15,583.50                          0.04                   6,153,752.47                           9.56
Over 3 years                            6,154,198.51                        15.50                        2,398.18
       Total                           39,695,762.85                      100.00                   64,393,627.71                        100.00

      B.       Top five prepayments to suppliers in terms of their ending balance
               Supplier                        Ending Balance               Proportion in Total Ending Balance of Advances to Suppliers (%)
No.1 Supplier                                            6,147,650.83                                                                    15.49

                                                                       79 / 121
                        上工申贝(集团)股份有限公司
                                                                                                                         Annual Report 2018
                        Shang Gong Group Co., Ltd

No.2 Supplier                                                3,913,507.58                                                                          9.86
No.3 Supplier                                                2,874,815.44                                                                          7.24
No.4 Supplier                                                1,948,300.55                                                                          4.91
No.5 Supplier                                                1,469,583.19                                                                          3.70
               Total                                       16,353,857.59                                                                          41.20

        6)    Other receivables
                        Item                                             Ending Balance                              Beginning Balance
Interest receivable                                                                                                                          21,645.73
Dividends receivable                                                                    27,041,989.94
Other receivables                                                                       93,380,506.35                                     58,944,411.21
Total                                                                                  120,422,496.29                                     58,966,056.94

        A.    Interest receivable

                       Item                                       Ending Balance                                   Beginning Balance
Fixed deposit                                                                                                                                21,645.73
                      Total                                                                                                                  21,645.73

        B.    Dividends receivable
                     Company Name                                          Ending Balance                               Beginning Balance
H. Stoll AG & Co. KG                                                                     27,041,989.94
                          Total                                                          27,041,989.94
        Other receivables
        C. Disclosure of other receivables by category
                                             Ending Balance                                                   Beginning Balance
      Type               Book Balance           Provision for Bad Debt                       Book Balance        Provision for Bad Debt
                                                                          Book Value                                                        Book Value
                        Amount        %            Amount         %                         Amount        %         Amount         %
Other
receivables with
significant
individual
                      32,015,520.86     24.82
amount        and                               15,933,916.53 49.77 16,081,604.33 30,666,334.88          33.51 13,304,781.50 43.39 17,361,553.38
provision      for
bad debt is
accrued
separately
Other
receivables with
provision      for
bad          debt
                      87,820,109.01     68.08 16,921,209.59 19.27 70,898,899.42 24,977,450.21            27.29 16,622,435.95 66.55          8,355,014.26
accrued         by
credit        risk
characteristics
of a portfolio
Other
receivables with
insignificant
individual
amount         but     9,165,563.42      7.10    2,765,560.82 30.17       6,400,002.60 35,869,414.39     39.20    2,641,570.82    7.36 33,227,843.57
provision      for
bad debt is
accrued
separately
      Total          129,001,193.29 100.00 35,620,686.94 27.61 93,380,506.35 91,513,199.48 100.00 32,568,788.27 35.59 58,944,411.21
     Other receivables with significant individual amount and provision for bad debt is accrued separately at
the end of period
                                                                                    Ending Balance
 Other Receivables (By
                                      Other receivables       Provision for bad debt       Proportion of provision(%)         Reason for Provision
        Entity)
No.1 Client                              18,028,004.56                   1,946,400.23                            10.80     Impaired according to the


                                                                            80 / 121
                        上工申贝(集团)股份有限公司
                                                                                                                          Annual Report 2018
                        Shang Gong Group Co., Ltd

                                                                                                                            separate test
                                                                                                                            Impaired according to the
No.3 Client                            13,987,516.30                    13,987,516.30                            100.00     separate test
            Total                      32,015,520.86                    15,933,916.53                             49.77                     /
      Other receivables with provision for bad debt accrued using the aging analysis method in the portfolio:
                                                                                          Ending Balance
                Aging
                                                    Other receivables                   Provision for bad debt            Proportion of provision(%)
Within 1 year                                                 5,922,821.39                            296,141.06                                   5.00
1-2 years                                                     1,404,446.92                            280,889.38                                 20.00
2-3 years                                                       285,469.04                            142,734.52                                 50.00
Over 3 years                                                 16,201,444.63                        16,201,444.63                                 100.00
                Total                                        23,814,181.98                        16,921,209.59                                  71.06
      Other receivables with provision for bad debt accrued using other method in the portfolio:
                                                                                                                                Proportion of provision
                       Name                                       Receivables                      Provision for bad debt
                                                                                                                                         (%)
Receivables from government agencies
                                                                            17,823,075.77
and institutions
Deposit in security                                                         44,239,906.50
Employee Standby Fund and Employee
                                                                               1,942,944.76
Collection and Payment
                    Total                                                   64,005,927.03
     Other receivable with insignificant individual amount but provision for bad debt is accrued separately at
the end of period
Other receivables (By                                                              Ending Balance
       entity)                  Other receivables     Provision for bad debt     Proportion of provision (%)              Reason for provision
Other insignificant     other
receivables (Note 1)
                                  4,529,575.94                   17,725.00                              0.39     Impaired according to the separate test
Other insignificant     other
receivables (Note 2)
                                  1,780,485.31               1,780,485.31                             100.00     Impaired according to the separate test
Other insignificant     other
receivables (Note 3)
                                    674,943.00                                                                   Unimpaired according to separate test
Other insignificant     other
receivables (Note 4)
                                      50,000.00                  50,000.00                            100.00     Impaired according to the separate test
Other insignificant     other
receivables (Note 5)
                                  1,194,446.34                                                                   Unimpaired according to separate test
Other insignificant     other
receivables (Note 6)
                                    917,350.51                 917,350.51                             100.00     Impaired according to the separate test
Other insignificant     other
receivables (Note 7)
                                      18,762.32                                                                  Unimpaired according to separate test

            Total                 9,165,563.42               2,765,560.82                              30.17
     Note 1: Mainly for other receivables of the parent company of SGG, the impairment provision is made
according to the individual amount test.
     Note 2: Mainly for the other receivables of the subsidiary Shanghai Shanggong Butterfly Sewing
Machine Co., Ltd., the impairment provision is made according to the individual amount test.
     Note 3: Mainly for the other receivables of the subsidiary DAPSH, no impairment occurred according to
the individual amount test.
     Note 4: Mainly for the other receivables of the subsidiary Shanghai SGSB Electronics Co., Ltd., the
impairment provision is made according to the individual amount test.
     Note 5: Mainly for other receivables of the subsidiary DA AG, no impairment occurred according to the
individual amount test.
     Note 6: Mainly for the other receivables of the subsidiary Shanghai Shensy Enterprise Development Co.,
Ltd., the impairment provision is made according to the individual amount test.
     Note 7: Mainly for the other receivables of the subsidiary DAP Vietnam Co., Ltd., no impairment was
found according to the individual amount test.

                                                                            81 / 121
                      上工申贝(集团)股份有限公司
                                                                                                                       Annual Report 2018
                      Shang Gong Group Co., Ltd

     D. The accrual, reversal or recovery of the provision for bad debts in the current period
     The provision for bad debts accrued in the current period is 3,958,712.82 yuan. The amount reversed or
recovered of the provision for bad debts in the current period is 3,823,650.77 yuan.
      E.       Other receivables actually write-off in the current period
                                 Item                                                                        Amount
Other receivables actually write-off                                                                                                      534,288.45

      F.       Top five other receivables in terms of their ending balance
                                                                                               Proportion in the ending
                                                                                                                              Provision for bad debt
   Company name                 Nature             Ending balance                Aging          balance of total other
                                                                                                                                 ending balance
                                                                                                   receivable (%)
No.1 Client               Current accounts        18,028,004.56         Within 1year                              13.98                  1,946,400.23
Export tax refund         Export         tax
                                                  17,823,075.77         Within 1year                              13.82
receivable                rebate
                                                                        From within 1year
No.3 Client               Current accounts        13,987,516.30         to over 3 years
                                                                                                                  10.84                13,987,516.30
No.4 Client               Security deposit          4,000,000.00        Within 1year                               3.10
No.5 Client               Security deposit          3,500,000.00        Within 1year                               2.71
       Total                       /              57,338,596.63                                                   44.45                15,933,916.53

      G. Receivables involving government grants
      Not applicable.
      H. Other receivables derecognized due to the transfer of financial assets
      Not applicable.
      I. Amount of assets and liabilities transferred from other receivables and continue to be involved
      Not applicable
      7) Inventories
        A. Classification of inventories
                                                 Ending Balance                                               Beginning Balance
            Item                                   Provision for                                                 Provision for
                            Book balance                                   Book value       Book balance                                  Book value
                                                    impairment                                                    impairment
Raw materials               344,109,150.92            57,005,053.46      287,104,097.46    285,435,138.31             52,813,472.76     232,621,665.55
Goods in progress           243,900,021.71            39,753,513.85      204,146,507.86    153,406,126.71             28,555,276.42     124,850,850.29
Finished goods              301,330,071.32            40,953,279.20      260,376,792.12    283,033,493.86             39,909,017.40     243,124,476.46
Revolving materials           1,847,268.54             1,158,016.41           689,252.13      1,427,640.89                                1,427,640.89
Consigned processing
                              1,312,325.29                                 1,312,325.29       3,273,904.32                                3,273,904.32
materials
Dispatched goods             32,403,336.09                                32,403,336.09     20,569,892.77                                20,569,892.77
Semi finished product        10,818,745.22                 505,376.85     10,313,368.37
Labor cost                  100,632,205.51                               100,632,205.51     79,273,391.31                                79,273,391.31
           Total          1,036,353,124.60           139,375,239.77      896,977,884.83    826,419,588.17         121,277,766.58        705,141,821.59
     Note 1: For details of the restricted inventory, please refer to ―VII. (70) Assets with limited ownership or
use rights‖ in this note.
     Note 2: The Company’s semi finished products include intelligent equipment projects that have not yet
been assembled.
        B. Inventory depreciation reserve
                                                 Increase in current period                  Decrease in current period
    Item           Beginning Balance                                                       Reversal or                                Ending Balance
                                               Provision                Others                                  Others
                                                                                            write-off
Raw
                        52,813,472.76          1,165,070.61             8,084,531.48        4,693,127.87         364,893.52              57,005,053.46
materials



                                                                          82 / 121
                      上工申贝(集团)股份有限公司
                                                                                                                            Annual Report 2018
                      Shang Gong Group Co., Ltd

                                                   Increase in current period                    Decrease in current period
    Item           Beginning Balance                                                           Reversal or                                Ending Balance
                                                 Provision                Others                                     Others
                                                                                                write-off
Goods      in
                       28,555,276.42              8,478,272.88           3,556,023.51             248,353.85             587,705.11             39,753,513.85
progress
Finished
                       39,909,017.40              3,127,872.07                805,549.73        2,464,395.94             424,764.06             40,953,279.20
goods
Revolving
                                                  1,065,536.74                167,479.18           74,999.51                                     1,158,016.41
materials
Semi
finished                                                                      985,271.08          479,894.23                                          505,376.85
product
     Total            121,277,766.58             13,836,752.30          13,598,854.98           7,960,771.40        1,377,362.69               139,375,239.77

       C. Explanation of the amount of capitalization of borrowing costs in the ending balance of inventory
      Not applicable.
      8) Assets held for sale
      Not applicable.
      9) Non-current assets maturing within one year
      Not applicable.
      10) Other current assets
                        Item                                             Ending Balance                                    Beginning Balance
Unamortized expense                                                                            565,112.42                                         400,169.64
Input tax to be credited                                                                    15,243,281.57                                     31,638,470.24
Rentals and insurance fees                                                                   2,580,239.87                                       1,592,432.66
Overpaid enterprise income tax                                                              50,937,701.45                                         902,284.30
Structured deposit                                                                         180,000,000.00                                 332,000,000.00
                       Total                                                               249,326,335.31                                 366,533,356.84
      11) Available-for-sale financial assets
       A. Available-for-sale financial assets
                                                     Ending Balance                                                Beginning Balance
           Item                                       Provision for                                                  Provision for
                                  Book Balance                                 Book Value         Book Balance                                  Book Value
                                                       Impairment                                                     Impairment
Available for sale debt
instruments
Available for sale equity
                                  119,431,159.69         1,698,131.91         117,733,027.78      120,658,075.96         1,698,131.91          118,959,944.05
instruments
Including:
                                   86,406,778.33                               86,406,778.33       89,721,694.56                                89,721,694.56
   Measured at fair value
   Measured at cost                33,024,381.36         1,698,131.91          31,326,249.45       30,936,381.40         1,698,131.91           29,238,249.49
          Total                   119,431,159.69         1,698,131.91         117,733,027.78      120,658,075.96         1,698,131.91          118,959,944.05

         B. Available-for-sale financial assets measured at fair value as at the end of report period
  Classification of available-for-sale Financial          Available-for-sale Equity            Available-for-sale Debt
                                                                                                                                              Total
                      Assets                                    Instruments                         Instruments
Cost of equity instruments                                             74,010,222.53                                                            74,010,222.53
Fair value                                                             86,406,778.33                                                            86,406,778.33
Accumulated changes in fair value included in
                                                                        12,396,555.80                                                           12,396,555.80
other comprehensive income
Accrued provision for impairment

         C. Available-for-sale financial assets measured atcost at the end of report period
                                      Book balance                                       Provision for impairment            Shareholding
                                                                                                                                           Cash dividend
  Investee         Beginning                                                     Beginning                    Ending            ratio in
                                         +           -       Ending balance                     +       -                                 in report period
                    balance                                                       balance                     balance        investee (%)
Shanghai
Fuji Xerox        29,140,749.49                              29,140,749.49                                                            15.92      9,949,000.00
Co., Ltd.
Shanghai
                                                                                                                                      30.00           900,000.00
Hirose


                                                                               83 / 121
                      上工申贝(集团)股份有限公司
                                                                                                Annual Report 2018
                      Shang Gong Group Co., Ltd

Precision
Industrial
Co.,       Ltd.
(Note 1)
Changshu
Qixing
                                                                                                    90.00
Elec-plating
Co., Ltd.
Shanghai
Huazhijie
                    736,283.66                     736,283.66       736,283.66    736,283.66        23.04
Plastic Co.,
Ltd. (Note 2)
Shanghai
Xingguang
Underwear
                    308,033.99                     308,033.99       308,033.99    308,033.99        14.30
Factory
(South
Africa)
Wuxi
Shanggong
Sewing
                    153,814.26                     153,814.26       153,814.26    153,814.26        80.00
Machines
Co.,       Ltd.
(Note 3)
China Perfect
Machinery            90,000.00                      90,000.00                                       0.099      10,227.55
Co., Ltd.
Shanghai
Baoding
                       7,500.00                       7,500.00                                      0.008        2,875.50
Investment
Co., Ltd.
Shanghai
Shanggong
Jiarong
Sewing              500,000.00                     500,000.00       500,000.00    500,000.00        12.50
Machine
Trade      Co.,
Ltd.
Shanghai
Pacific
Industrial                        2,087,999.96    2,087,999.96                                      48.00
Co.,     Ltd.
(Note 4)
    Total         30,936,381.40   2,087,999.96   33,024,381.36    1,698,131.91   1,698,131.91               10,862,103.05
     Note 1: Shang Gong Group Co., Ltd. holds 30% shares of Shanghai Hirose Precision Industrial Co., Ltd.
According to the articles of association, the Company obtains guaranteed minimum revenue each year. In
addition, the Company does not participate in the decision-making process of daily operations, and does not
have significant influence on the invested enterprise. Therefore, it adopts cost accounting to measure its
revenue from its shares of Shanghai Hirose Precision Industrial Co., Ltd.
     Note 2: Shang Gong Group Co., Ltd. holds 23.04% shares of Shanghai Huazhijie Plastic Co., Ltd.
According to the articles of association, Shang Gong Group Co., Ltd. does not have facto control over the
invested enterprise. In addition, the Company does not participate in the decision-making process of daily
operations, and does not have significant influence on the invested enterprise. Therefore, it adopts cost
accounting to measure its revenue from its shares of Shanghai Huazhijie Plastic Co., Ltd.
     Note 3: Shang Gong Group Co., Ltd. holds 80.00% shares of Wuxi Shanggong Sewing Machines Co., Ltd.
According to the articles of association, Shang Gong Group Co., Ltd. does not have facto control over the
invested enterprise. In addition, the Company does not participate in the decision-making process of daily
operations, and does not have significant influence on the invested enterprise. Therefore, it adopts cost
accounting to measure its revenue from its shares of Wuxi Shanggong Sewing Machines Co., Ltd.
     Note 4: The Company holds 48% equity of Shanghai Pacific Industrial Co., Ltd. Since the Company does
not participate in the business activities of the invested entity, it does not have a significant impact on the
invested entity, so it is accounted for by the cost method.




                                                                 84 / 121
                         上工申贝(集团)股份有限公司
                                                                                                                               Annual Report 2018
                         Shang Gong Group Co., Ltd

        D.      Changes in the impairment of available-for-sale financial assets during the reporting period
     Classification of Available-for-sale              Available-for-sale Equity               Available-for-sale Debt
                                                                                                                                                Total
               Financial Assets                              Instruments                            Instruments
 Balance of provision for impairment
                                                                        1,698,131.91                                                                  1,698,131.91
 accrued as at 1st January 2018
 Provision in Report Period
 Including:  transfer-in        from      other
 comprehensive income
 Decrease in Report Period
 Including: reversal due to the subsequent
 increase in fair value
 Balance of provision for impairment
                                                                        1,698,131.91                                                                  1,698,131.91
 accrued as at 31st December 2018

        12) Held-to-maturity investments
        Not applicable.
        13) Long-term receivables
                                                    Ending Balance                                         Beginning Balance
                                                                                                                                                         Discount
                Item                                 Provision for                                           Provision for
                                      Book balance                          Book value        Book balance                   Book value                    Rate
                                                       bad debt                                                bad debt
Financing lease                       31,427,418.92                         31,427,418.92
     Of     which:       unrealized
                                        5,591,540.26                         5,591,540.26
financing income
              Total                    31,427,418.92                        31,427,418.92                                                                       /

         14) Long-term equity investment
                                                                   Change in current period
                                                                    Other                                                                             Ending Balance
                 Beginning                   Return on                                    Declared Cash                               Ending
                             Decrea




                                                                              Equity

                                                                              Chang
                             Increa




                                                                                                                    Increa
                             Invest

                             Invest




                                                                                                                    Invest
                                                                              Other
                              ment

                              mentin




                                                                                                                     ment
 Investees                                                                                                                                            of Provision of
                              se

                              se in




                                                                               es in




                                                                                                                     se in
                                                                Comprehensive
                  Balance                 Investment under                                 Dividends or    Other                      Balance
                                                                   Income                                                                              Impairment
                                           Equity Method                                      Profit
                                                                 Adjustment
 H.    Stoll
 AG & Co.      275,799,606.70               -12,972,718.90                                 27,041,989.94           12,583,310.03   248,368,207.89
 KG
    Total      275,799,606.70               -12,972,718.90                                 27,041,989.94           12,583,310.03   248,368,207.89

        15) Investment properties
         A. Investment property measured at cost
                                                       Buildings and                                           Investment Real Estate
                       Item                                                    Leased Land Use Rights                                                   Total
                                                       Constructions                                                 Decoration
 1. Original book value
     (1) Beginning balance                              226,181,075.92                      50,523,752.24                  2,583,492.92             279,288,321.08
     (2) Increase in current period                       2,837,434.34                                                                                2,837,434.34
     ① Outsourcing                                       2,315,430.07                                                                                2,315,430.07
     ② Transfer in from inventories, fixed
 assets or construction in progress
     ③ Increase from business combination
     ④ Exchange rate fluctuation                             522,004.27                                                                                522,004.27
     (3) Decrease in current period
     ① Disposal
      4.Ending Balance                                  229,018,510.26                      50,523,752.24                  2,583,492.92             282,125,755.42
 2.     Accumulated       depreciation  and
 accumulated amortization
      (1) Beginning balance                             105,181,671.01                      16,183,322.31                    688,931.76             122,053,925.08
      (2) Increase in current period                      5,632,800.53                       1,104,003.24                    172,233.00               6,909,036.77
     ①Amortization or accrual                            5,501,506.05                       1,104,003.24                    172,233.00               6,777,742.29
     ②Exchange rate fluctuation                            131,294.48                                                                                  131,294.48
      (3) Decrease in current period
     ①Disposal
      (4) Ending balance                                110,814,471.54                      17,287,325.55                    861,164.76             128,962,961.85
 3. Provision for impairment
      (1) Beginning balance                                  7,732,063.54                                                                             7,732,063.54
      (2) Increase in current period                            44,594.91                                                                                44,594.91
     ①Accrual
     ②Exchange rate fluctuation                               44,594.91                                                                                 44,594.91
      (3) Decrease in current period
      ①Disposal


                                                                               85 / 121
                              上工申贝(集团)股份有限公司
                                                                                                                                   Annual Report 2018
                              Shang Gong Group Co., Ltd

     ②Others
     (4) Ending balance                                     7,776,658.45                                                                               7,776,658.45
4. Book value
    (1) Book value at the end of the period               110,427,380.27                     33,236,426.69                    1,722,328.16           145,386,135.12
    (2) Book value at the beginning of the
                                                          113,267,341.37                     34,340,429.93                    1,894,561.16           149,502,332.46
period
      Note: For details of the restricted circumstances such as investment real estate mortgage, please refer to
―VII. (70) Assets with limited ownership or use rights and 14. (II) Contingencies‖.
      16) Fixed assets
        A. Classification
                               Item                                         Ending Balance                                        Beginning Balance
Fixed assets                                                                               473,157,221.59                                           397,788,367.78
Liquidation of Fixed Assets
                              Total                                                        473,157,221.59                                           397,788,367.78

           B. Fixed assets
                                        Buildings and            Machinery              Transportation         Electronic              Other
                Item                                                                                                                                       Total
                                        Constructions            Equipment               Equipment             Equipment             Equipment
1. Original book value
    (1) Beginning balance                 449,191,194.52         391,885,505.83            14,935,691.94         3,916,967.73      280,602,586.17     1,140,531,946.19
    (2) Increase in current period         82,762,170.09          39,282,629.74             6,758,433.32         4,868,116.16       24,903,764.72       158,575,114.03
        ① Purchase                        18,043,421.67          27,554,064.83             2,334,223.77           549,580.01       23,394,982.59        71,876,272.87
        ②         Transfer     from
                                                                        94,167.60                                     61,327.34        439,448.80          594,943.74
construction in progress
        ③ Increase from business
                                            63,267,378.54         11,360,584.66             4,424,209.55         4,255,522.28          249,313.00       83,557,008.03
combination
        ④Exchange rate fluctuation          1,451,369.88              273,812.65                                      1,686.53        820,020.33         2,546,889.39
       (3) Decrease in current
                                             2,043,450.90         11,831,012.24               806,064.83         1,425,971.50        4,726,217.31       20,832,716.78
period
        ①Disposal or scrap                  2,042,503.40         11,803,269.44               806,064.83         1,425,971.50        4,669,628.27       20,747,437.44
        ②         Exchange      rate
                                                   947.50               27,742.80                                                       56,589.04           85,279.34
fluctuation
     (4) .Ending Balance                  529,909,913.71         419,337,123.33            20,888,060.43         7,359,112.39      300,780,133.58     1,278,274,343.44
2. Accumulated depreciation
     (1) Beginning balance                226,646,410.27         261,274,240.20             7,965,828.54         2,667,327.07      231,928,699.23      730,482,505.31
     (2) Increase in current period        32,423,745.25          22,170,957.15             3,574,444.67         4,277,096.69       16,441,556.94       78,887,800.70
        ①Accrual                          10,569,402.64          18,457,620.31             1,731,248.03         1,429,545.36       15,734,314.41       47,922,130.75
②Increase in the business scope of        20,882,854.70           3,472,088.48             1,843,196.64         2,846,896.08          226,884.23       29,271,920.13
consolidation
③Exchange rate fluctuation                   971,487.91             241,248.36                                        655.25          480,358.30        1,693,749.82
     (3) Decrease in current period         1,638,098.62           8,936,083.34               591,460.24         1,275,229.13        4,298,915.65       16,739,786.98
        ①Disposal or scrap                 1,637,605.92           8,914,366.64               591,460.24         1,275,229.13        4,280,913.15       16,699,575.08
        ②Exchange rate fluctuation               492.70              21,716.70                                                         18,002.50           40,211.90
     (4) Ending balance                   257,432,056.90         274,509,114.01            10,948,812.97         5,669,194.63      244,071,340.52      792,630,519.03
3. Provision for impairment
     (1) Beginning balance                   4,913,777.92          7,232,165.07                  75,908.67            37,818.61          1,402.83       12,261,073.10
     (2) Increase in current period                                  409,415.30                                                                            409,415.30
        ①Accrual                                                    409,415.30                                                                            409,415.30
     (3) Decrease in current period                                  156,147.61                  27,737.97                                                 183,885.58
        ① Disposal or scrap                                         156,147.61                  27,737.97                                                 183,885.58
     (4) Ending balance                      4,913,777.92          7,485,432.76                  48,170.70            37,818.61          1,402.83       12,486,602.82
4. Book value
    (1) Book value at the end of the
                                          267,564,078.89         137,342,576.56             9,891,076.76         1,652,099.15       56,707,390.23      473,157,221.59
period
     (2) Book value at the
                                          217,631,006.33         123,379,100.56             6,893,954.73         1,211,822.05       48,672,484.11      397,788,367.78
beginning of the period
    Note: For details of the restrictions on fixed assets mortgage, please refer to ―VII. (70) Assets with limited
ownership or use rights and 14. (II) Contingencies‖.
           C. Idle fixed assets
                                                                           Accumulated
                  Item                        Book value                                                 Impairment                  Book value               Note
                                                                           depreciation
Machinery and equipment                            1,060,570.30                     758,706.83                295,393.48                     6,500.00
                  Total                            1,060,570.30                     758,706.82                295,393.48                     6,500.00

        D. Fixed assets leased through finance leases
                       Item                       Book value                    Accumulated depreciation                    Impairment               Book value
Machinery and equipment                                 5,834,516.29                                     634,265.41                                    5,200,250.88
Transportation Equipment                                5,905,280.88                                  1,230,693.18                                     4,674,587.70


                                                                                86 / 121
                         上工申贝(集团)股份有限公司
                                                                                                                                       Annual Report 2018
                         Shang Gong Group Co., Ltd

                 Total                                  11,739,797.17                                     1,864,958.59                               9,874,838.58

      E.      Fixed assets leased out through operating leases
                                   Item                                                                          Ending Book Value
Machinery and equipment                                                                                                                              120,960.00
Electronic equipment                                                                                                                                 175,960.00
Total                                                                                                                                                296,920.00

        F. Fixed assets without certificate of title
               Item                           Book value               Reason for failure in completing the formalities for obtaining certificates of title
Buildings and constructions                   1,793,232.40       Self-built housing, the certificates are in the process
      Note: Self-built housing for the Company’s subsidiary Shanghai SGSB Asset Management Co., Ltd.
      17) Construction in progress
                                                              Ending Balance                                                    Beginning Balance
              Item                                               Provision for                                                     Provision for
                                          Book balance                                Book value            Book balance                            Book value
                                                                  impairment                                                        impairment
Household multifunctional
                                             1,304,367.87                              1,304,367.87            1,025,599.74                          1,025,599.74
sewing machine
Software       development
                                             1,589,858.17                              1,589,858.17              186,166.68                           186,166.68
project
Sewing           Equipment
                                          14,361,655.65                              14,361,655.65             4,347,153.83                          4,347,153.83
Engineering
Bensheim base project                        7,140,762.85                              7,140,762.85
Modern            logistics
                                          54,755,378.01                              54,755,378.01             4,858,082.75                          4,858,082.75
management center
Taizhou      manufacturing
                                          28,259,697.79                              28,259,697.79
project
Construction Project                         6,269,885.19                              6,269,885.19            2,248,271.09                          2,248,271.09
Equipment project                            1,657,178.48                              1,657,178.48
Production          process
                                             3,827,843.74                              3,827,843.74
improvement project
              Total                          119,166,627.75                          119,166,627.75          12,665,274.09                          12,665,274.09
      A.      Changes in major construction in progress for current period
                                                                                                                       Proportion of the
                                                                                                                                      Construct
                                                                                                                                      capitaliza


                                                                                                                                      capitaliza



                                                                                                                                      Including
                                                               Transferr




                                                                                                                                      Accumul
                                                                                                                                       2017(%)

                                                                                                                                       :tion rate
                                                                                                                                        progress
                                                               Amount
                                                                Current




                                                                                                                                         amount




                                                                                                                                         Interest
                                                                                                                          accumulated
                                                                                                                                         interest


                                                                                                                                         interest
                       Budget




                                                                for the
                                                                Period


                                                                Assets




                                                                                                                                          tionof in



                                                                                                                                          amount
                                                                                                                                           ion in
                                                                 Fixed




                                                                                                                                            2017
                                                                 ed in




                                 Beginning      Increase in current                Other decreases                                                      Source of
                                                                                                                                            ated
                                                                                                                                            tion




                                                                                                                                             of


      Item                                                                                            Ending balance     investment in
                                  balance             period                      in current period                                                       Fund
                                                                                                                       project in budget
                                                                                                                              (%)
Household                                                                                                                                             Self-owned
multifunctional                 1,025,599.74         278,768.13                                        1,304,367.87
sewing machine
Software                                                                                                                                              Self-owned/
development                      186,166.68        1,616,797.82       61,327.34      151,778.99        1,589,858.17                                   raised
project
Sewing                                                                                                                                                Self-owned
Equipment                       4,347,153.83      10,548,118.22 533,616.40                            14,361,655.65
Engineering
Bensheim base                                                                                                                                         Self-owned
                                                   7,140,762.85                                        7,140,762.85
project
Modern logistics                                                                                                                                      Self-owned
management                      4,858,082.75      49,897,295.26                                       54,755,378.01
center
Taizhou                                                                                                                                               Self-owned
manufacturing                                     28,259,697.79                                       28,259,697.79
project
Construction                                                                                                                                          Self-owned
                                2,248,271.09       5,913,209.58                    1,891,595.48        6,269,885.19
Project
Equipment                                                                                                                                             Self-owned/
                                                   1,657,178.48                                        1,657,178.48                                   raised
project
Production                                                                                                                                            Self-owned
process
                                                   3,827,843.74                                        3,827,843.74
improvement
project

                                                                                    87 / 121
                           上工申贝(集团)股份有限公司
                                                                                                                                Annual Report 2018
                           Shang Gong Group Co., Ltd

        Total                12,665,274.09 109,139,671.87 594,943.74           2,043,374.47 119,166,627.75              /           /                  /          /
        Note 1: The software development project was transferred to intangible assets after partial acceptance this
year.
    Note 2: The construction project will be transferred to the long-term deferred expenses after partial
completion and acceptance this year.
    18) Productive biological assets
    Not applicable.
    19) Oil and gas assets
    Not applicable.
        20) Intangible assets
        A. Intangible assets
                                                   Land Use        Trademark Use      Patent and Non-patent          Computer
                    Item                                                                                                                  Others               Total
                                                    Right              Right               Technology                Software
1. Original book value
    (1) Beginning balance                        101,054,020.23      20,161,268.51             134,827,412.78        5,273,690.04       6,187,223.90       267,503,615.46
    (2) Increase in current period                67,917,887.04      12,000,000.00              64,365,166.81        3,755,633.37          35,685.00       148,074,372.22
        ① Purchase                               37,499,895.00                                 24,271,951.35          351,724.20                           62,123,570.55
        ② R&D
        ② Increase from business conbination     30,417,992.04      12,000,000.00              28,400,000.00          304,957.26                           71,122,949.30
        ③Exchange rate fluctuation                                                                722,690.06                             35,685.00            758,375.06
        ② Transfer from construction in
                                                                                                10,970,525.40        3,098,951.91                           14,069,477.31
progress/ development expenditure
     (3) Decrease in current period                                                                973,065.20                                                  973,065.20
        ① Disposal                                                                                968,365.60                                                  968,365.60
        ②Exchange rate fluctuation                                                                  4,699.60                                                    4,699.60
     (4) .Ending Balance                         168,971,907.27      32,161,268.51             198,219,514.39        9,029,323.41       6,222,908.90       414,604,922.48
2. Accumulated amortization
     (1) Beginning balance                         9,445,749.34      20,161,268.51              79,996,390.86        1,724,825.39       6,187,223.90       117,515,458.00
     (2) Increase in current period                5,300,467.94         400,000.00              20,821,229.67        1,432,797.73          35,685.00        27,990,180.34
        ① Accrual                                 3,673,475.90         400,000.00              20,414,779.18        1,258,980.16                           25,747,235.24
        ② increase of scope of consolidation      1,626,992.04                                                        173,817.57                            1,800,809.61
        ③ Exchange rate fluctuation                                                               406,450.49                             35,685.00            442,135.49
     (3) Decrease in current period                                                                973,065.20                                                  973,065.20
        ① Disposal                                                                                968,365.60                                                  968,365.60
        ② Exchange rate fluctuation                                                                 4,699.60                                                    4,699.60
     4.Ending Balance                             14,746,217.28      20,561,268.51              99,844,555.33        3,157,623.12       6,222,908.90       144,532,573.14
3. Provision for impairment
     (1) Beginning balance
     (2) Increase in current period
        ① Accrual
     (3) Decrease in current period
        ① Disposal
     (4) Ending balance
4. Book value
    (1) Book value at the end of the period      154,225,689.99      11,600,000.00              98,374,959.06        5,871,700.29                          270,072,349.34
    (2) Book value at the beginning of the
                                                  91,608,270.89                                 54,831,021.92        3,548,864.65                          149,988,157.46
period
     For details of the intangible assets mortgage, please refer to ―VII. (70) Assets with limited ownership or
use rights‖ in this note.
        21) Development Expenditures
                                                Increase in current period                    Decrease in current period
                           Beginning                                                                                                                         Ending
      Item                                       Internal Development         Recognized as Intangible          Transferred to Current Profits
                            Balance                                                                                                                          Balance
                                                      Expenditure                     Assets                             and Losses
Sewing
                           11,968,675.38                      5,732,180.04                 10,970,525.40                            535,790.98             6,194,539.04
equipment
WeChat
                            1,099,814.50                                                    1,099,814.50
platform
Freight
                            3,615,282.96                      1,035,848.90                  4,047,358.42                                                    603,773.44
platform
      Total                16,683,772.84                      6,768,028.94                 16,117,698.32                            535,790.98             6,798,312.48
     Note: The development expenditures of sewing equipment represent the development costs of DAP AG.
The development expenditures of WeChat platform and Freight platform represent the development costs of
SHENSY. During the year, Shanghai Shensy Enterprise Development Co., Ltd. transferred the developed
WeChat platform and freight platform to intangible assets, and the government subsidies related to it received
is used to offset the book value of intangible assets. For details, please refer to ―Note 73‖. Government

                                                                                88 / 121
                    上工申贝(集团)股份有限公司
                                                                                                        Annual Report 2018
                    Shang Gong Group Co., Ltd

subsidies, (1) Basic information on government subsidies.‖
      22) Goodwill
      A. Book value of goodwill
                                               Increase in Current Period          Decrease in Current Period
   Name of investee or       Beginning
                                                               Exchange Rate                                       Ending Balance
goodwill formation events     Balance        Acquisition                           Disposal
                                                                Fluctuation
PFAFF GmbH                   72,482,033.43                         418,042.31                                        72,900,075.74
Beisler                      22,732,781.28                         131,112.00                                        22,863,893.28
Richpeace                                    77,544,194.54                                                           77,544,194.54
            Total            95,214,814.71   77,544,194.54         549,154.31                                       173,308,163.56
      B.     Provision for impairment of goodwill
                                               Increase in Current Period           Decrease in Current Period
    Name of investee or       Beginning
                                                              Exchange Rate                                         Ending Balance
 goodwill formation events     Balance       Acquisition                           Disposal
                                                                Fluctuation
Beisler                      22,732,781.28                         131,112.00                                        22,863,893.28
PFAFF GmbH                                   10,370,000.00                                                           10,370,000.00
        Total                22,732,781.28   10,370,000.00         131,112.00                                        33,233,893.28
     C. Information about the asset group or asset group combination in which the goodwill is located
     The company’s goodwill belongs to the sewing equipment and intelligent manufacturing equipment
division. After the acquisition, the company re-planned the product portfolio of each subsidiary, and each
subsidiary independently produced and operated according to the product portfolio planned by the company.
Therefore, all the assets of each subsidiary constitute the smallest cash-generating unit. Based on this, the
Company separately treats each subsidiary as a separate asset group, and distributes the goodwill formed by
the acquisition to the corresponding asset group for impairment test.
     The company acquired PFAFF and KSL in March 2013. In March 2015, PFAFF absorbed and merged
with KSL. After the merger was completed, KSL became a subsidiary of PFAFF. However, KSL’s product
portfolio and various business activities remain unchanged and independent of PFAFF. The Company still
conducts the goodwill impairment test of PFAFF and KSL as different asset groups, and the results of the
goodwill impairment test are disclosed according to the independent legal entity.
     D. The Company confirms the impairment loss of goodwill against the recoverable amount and book
value of the asset group including goodwill. The recoverable amount is determined based on the present value
of the estimated future cash flow of the asset group. The management of the Company prepares the cash flow
forecast for the next five years based on the most recent financial budget, and estimates the cash flow for the
following years, which is discounted accordingly. The key parameters used by the Company in conducting
goodwill impairment testing are as follows:
                                                   Operating income growth       Gross profit margin
                                                                                                            Discount Rate(%)
                                                          rate(%)                    (%)
PFAFF                                                      0.00 or 4.00-13.00             25.00-28.00                        10.24
KSL                                                         0.00 or 7.00-33.00            22.00-25.00                        10.25
Richpeace                                                   0.00 or 5.00-10.00                  40.00                        14.70
      The management of the Company determines the above parameters based on the historical situation
before the budget period and the forecast of market development. The Company assumes that the operating
income growth rate will be 0.00% in the next five years (after 2024 and after the period).
      According to PFAFF’s signed irrevocable sales orders, the company’s estimated operating income growth
rate for the year 2019 is 13.00%, and the expected operating income growth rate for the period 2020-2023 is
4.00%-5.00%.
      As KSL’s production site in Bensheim, Germany, is scheduled to be completed in 2019, the company’s
estimated operating revenue growth rate for the 2019 is 33.00% based on the capacity of the new production


                                                                89 / 121
                      上工申贝(集团)股份有限公司
                                                                                                                  Annual Report 2018
                      Shang Gong Group Co., Ltd

base and KSL’s irrevocable sales orders. The projected revenue growth rate for the period from 2020 to 2023 is
7.00%-25.00%.
     E. Impact of goodwill impairment test
     Based on the above assumptions, the results of the Company’s goodwill impairment test this year are as
follows:
                                                                                          Unit: RMB 10,000
                                                                Asset group               Book value of asset
                                                                                                                    Goodwill impairment loss
                                                            recoverable amount                  group
PFAFF                                                                  11,763.00                   11,838.00                             75.00
KSL                                                                      10,661.00                   11,623.00                          962.00
Richpeace                                                                31,570.00                   29,849.67                            N/A
      23) Long-term deferred expenses
                              Beginning          Increase in Current       Amortization in          Other Decreases in
        Item
                                                       Period              Current Period            Current Period
                                                                                                                            Ending Balance
                               Balance
Enterprise     Mailbox
rental expense
                                   142,249.20            63,786.66                  53,395.04                                      152,640.82
Online           brand
registration fee
                                   486,727.12            59,433.96                 112,061.15                                      434,099.93
Landscape
engineering
                                   134,531.10                                       48,920.40                                       85,610.70
Leasehold
improvements
                                   123,916.71         2,737,816.86                248,418.88                                     2,613,314.69
Tooling cost                       743,589.75                                     153,846.12                                       589,743.63
        Total                 1,631,013.88            2,861,037.48                616,641.59                                     3,875,409.77
      24) Deferred income tax assets / deferred income tax liabilities
      A. Deferred income tax assets
                                                      Ending Balance                                          Beginning Balance
               Item                     Deductible temporary      Deferred income tax            Deductible temporary       Deferred income tax
                                            differences                  assets                      differences                   assets
Unrealized profits from internal
                                                                           9,942,558.47                                           11,066,767.51
transactions
Receivables                                                                2,812,242.21                                            1,885,764.75
Inventories                                                               23,969,903.97                                           19,654,766.53
Long-term assets                                                             850,120.55                                              353,743.29
Pension (Europe)                                                          32,606,465.72                                           34,005,022.74
Deferred income                                                                                                                      550,000.00
Estimated liabilities                                                        168,180.00                                              136,615.48
Other liabilities                                                          3,171,305.91                                            3,796,682.43
Offset amount                                                             -4,669,915.99                                           -7,904,454.50
               Total                                                      68,850,860.84                                           63,544,908.23
      B.       Deferred income tax liabilities
                                                               Ending Balance                                  Beginning Balance
                      Item                            Taxable
                                                                         Deferred income tax       Taxable temporary      Deferred income tax
                                                     temporary
                                                                              liabilities             differences              liabilities
                                                     differences
Receivables                                                                       5,426,063.85                                   6,146,045.08
Inventories                                                                                                                        446,228.60
Long-term assets                                                              65,007,499.07                                     49,472,348.52
Other liabilities                                                                 5,041,589.51                                   4,702,973.72
Offset amount                                                                 -4,669,915.99                                     -7,904,454.50
                      Total                                                   70,805,236.44                                     52,863,141.42
      25) Other non-current assets
      Not applicable.



                                                                       90 / 121
                       上工申贝(集团)股份有限公司
                                                                                                           Annual Report 2018
                       Shang Gong Group Co., Ltd

      26) Short-term loans
               Item                           Ending Balance                     Beginning Balance                     Note
Mortgage loans                                         15,000,000.00                           10,221,013.00           Note 1
Guaranteed loans                                      157,900,000.00                         319,820,040.00            Note 2
Credit loans                                           33,714,015.12                              348,148.62
               Total                                  206,614,015.12                         330,389,201.62
      Note 1: Richpeace, a subsidiary of the Company, secured the fixed assets with a book value of RMB
8,596,802.43 and intangible assets with a book value of RMB 5,389,231.47 as collateral to guarantee the
company and its third-tier subsidiary Tianjin Richpeace Times Trading Co., Ltd. to borrow RMB 9,000,000.00
and RMB 6,000,000.00 from Tianjin Baodi Pufa Village Bank respectively. At the same time, natural persons
Feng Hui and Zhou Jiao (a member of the management team of Richpeace) provided joint liability guarantee
for the aforementioned loans.
      Note 2: Please refer to ―IV. Commitments and Contingencies, (II) Contingencies, Note 2, Note 5‖ for
details of the guarantees related to guarantee loans.
      27) Financial liabilities measured at fair value through profit or loss for the current period
      Not applicable.
      28) Derivative financial liabilities
      Not applicable.
      29) Notes payable and accounts payable
                        Item                                   Ending Balance                             Beginning Balance
Notes payable                                                                71,109,160.21                             12,311,525.18
Accounts payable                                                            247,693,879.70                            194,031,795.38
                        Total                                               318,803,039.91                            206,343,320.56
      Notes payable
               Type                                Ending Balance                                     Beginning Balance
Bank acceptance bill                                                 71,109,160.21                                     12,311,525.18
               Total                                                 71,109,160.21                                     12,311,525.18
      Accounts payable
                    Item                              Ending Balance                                  Beginning Balance
Payable to suppliers                                               247,693,879.70                                     194,031,795.38
                    Total                                          247,693,879.70                                     194,031,795.38
      30) Receipt in advance
                    Item                                Ending Balance                                  Beginning Balance
Advances on sales                                                       75,412,987.77                                  38,326,094.65
                Total                                                   75,412,987.77                                  38,326,094.65
      31) Employee compensation payable
      A. Employee compensation payable
                                                 Beginning          Increase in current      Decrease in current
                       Item
                                                                          period                   period
                                                                                                                    Ending Balance
                                                  Balance
Short-term remuneration                          70,429,400.35         693,036,304.70           682,047,283.36         81,418,421.69
Post-employment benefits – defined benefit
plans
                                                    591,856.15          23,126,011.64            22,761,103.49              956,764.30
Dismissal welfare                                                             29,000.00               29,000.00
Defined benefit plan maturing within one
year
                                                 20,090,922.50          18,812,566.00            20,109,205.00         18,794,283.50
                     Total                       91,112,179.00         735,003,882.34           724,946,591.85        101,169,469.49




                                                                 91 / 121
                      上工申贝(集团)股份有限公司
                                                                                                                 Annual Report 2018
                      Shang Gong Group Co., Ltd

        B.   Short-term remuneration
                                                                        Increase in Current      Decrease in Current
                  Item                         Beginning Balance                                                         Ending Balance
                                                                              Period                   Period
 (1) Salary, bonus, allowance and
                                                     69,704,983.42           548,154,927.92           556,054,510.90          61,805,400.44
subsidy
 (2) Employee welfare                                     8,639.56           126,526,718.28           107,780,559.91          18,754,797.93
 (3) Social insurance expenses                         490,969.52             10,844,170.72            10,837,600.28               497,539.96
Including: medical insurance premium                   342,596.18               8,990,949.83             8,981,683.24              351,862.77
    Work-related      injury      insurance
                                                        37,465.61                  651,488.90             650,774.99                38,179.52
premium
    Maternity insurance premium                         20,885.53                  801,099.48             794,330.57                27,654.44
    Other                                               90,022.20                  400,632.51             410,811.48                79,843.23
 (4) Housing provident funds                           160,871.34               5,806,497.60             5,644,623.94              322,745.00
 (5) Labor union expenditures and
                                                        63,936.51               1,703,990.18             1,729,988.33               37,938.36
employee education expenses
 (6) Short-term paid absences
 (7) short-term profit-sharing plan
                  Total                              70,429,400.35           693,036,304.70           682,047,283.36          81,418,421.69
        C.   Defined contribution plan
                                                                        Increase in current      Decrease in current
                  Item                        Beginning Balance               period                   period
                                                                                                                         Ending Balance
Basic endowment insurance premium                     574,972.14            21,331,979.76             20,972,734.19               934,217.71
Unemployment insurance premium                         16,884.01                605,417.45               599,754.87                22,546.59
Payment of annuity                                                            1,188,614.43             1,188,614.43
                  Total                               591,856.15            23,126,011.64             22,761,103.49               956,764.30
        32) Taxes and surcharges payable
                     Item                                       Ending Balance                                Beginning Balance
Value-added tax                                                              6,825,857.95                                    4,454,097.17
Enterprise income tax                                                         8,221,152.27                                   3,646,204.96
Individual income tax                                                        4,696,274.54                                    5,613,216.71
Urban maintenance and construction tax                                         524,568.34                                       186,230.26
Educational surtax                                                             417,462.59                                       168,142.01
Use tax of land                                                                473,407.84
Stamp tax                                                                       10,922.70                                           6,696.80
Others                                                                          39,215.94
                     Total                                                   21,208,862.17                                  14,074,587.91
        33) Other payables
                          Item                                       Ending Balance                            Beginning Balance
Interest Payable                                                                      805,898.77                             1,110,553.06
Dividends payable                                                                    1,032,818.86                            1,032,818.86
Other payables                                                                     252,988,505.87                          193,617,747.74
Total                                                                              254,827,223.50                          195,761,119.66
        Interest Payable
                          Item                                       Ending Balance                           Beginning Balance
Term interest on long-term borrowings due in
installments
                                                                                   478,320.87                                     471,243.32
Short-term loan interest payable                                                   327,577.90                                     639,309.74
                          Total                                                     805,898.77                               1,110,553.06
        Dividends payable
                     Item                                     Ending Balance                                 Beginning Balance
Light Industrial Holding Group Co., Ltd                                             959,269.79                                959,269.79


                                                                        92 / 121
                        上工申贝(集团)股份有限公司
                                                                                                Annual Report 2018
                        Shang Gong Group Co., Ltd

Privately-owned corporate shares                                              73,549.07                           73,549.07
                       Total                                               1,032,818.86                      1,032,818.86
        Other payables
                       Item                               Ending Balance                      Beginning Balance
Other payables                                                        252,988,505.87                       193,617,747.74
                       Total                                          252,988,505.87                       193,617,747.74
        34) Liabilities held for sale
        Not applicable.
        35) Non-current liabilities maturing within 1 year
                       Item                               Ending Balance                      Beginning Balance
Long-term payable due within one year                                      1,473,297.07
Deferred income due within one year                                        2,700,000.00                      1,260,000.00
                       Total                                               4,173,297.07                      1,260,000.00
        36) Other current liabilities
                   Item                                   Ending Balance                      Beginning Balance
Short-term bond payable
Interest and rentals                                                         47,083.80                             48,330.03
                   Total                                                     47,083.80                             48,330.03
        37) Long-term loans
                        Item                                Ending Balance                     Beginning Balance
Mortgage loans                                                         61,821,029.40                        61,466,519.40
Credit loans                                                          278,656,620.87                         1,489,984.87
                        Total                                         340,477,650.27                        62,956,504.27
     Note: For the description of the related mortgages in the closing balance of the mortgage loan of RMB
61,821,029.40 (7,878,000.00), please refer to ―14. Commitments and Contingencies, (2) Contingencies, Note
1‖.
        38) Bonds payable
        Not applicable.
        39) Long-term payables
                          Item                                Ending Balance                   Beginning Balance
Long-term payables                                                            3,403,296.49                    3,121,893.11
Total                                                                         3,403,296.49                    3,121,893.11


                         Item                               Beginning Balance                   Ending Balance
Financing lease payments                                                     1,853,818.94                         960,531.14
Less: unconfirmed financing charges                                            213,538.77                          79,007.64
other                                                                        1,763,016.32                    2,240,369.61
Total                                                                        3,403,296.49                     3,121,893.11
        40) Long-term employee compensation payable
        A. Long-term employee compensation payable
                               Item                              Ending Balance                 Beginning Balance
1. Post-employment benefits – net liability of defined
benefit plan
                                                                             234,036,612.41                243,516,774.09
2. Dismissal welfare
3. Other long-term benefits                                                                                  3,904,003.23
                               Total                                         234,036,612.41                247,420,777.32


                                                                 93 / 121
                        上工申贝(集团)股份有限公司
                                                                                                               Annual Report 2018
                        Shang Gong Group Co., Ltd

      B. Changes of defined benefit plan liabilities
      Presenet value of liabilities of defined benefit plan:

                            Item                                          2018                                         2017
1. Beginning Balance                                                             263,607,696.59                               271,454,022.22
2. Cost of defined benefit plan included in
                                                                                    5,380,676.60                                    4,971,817.2
current profit and loss
1) Current service cost                                                             1,093,316.00                                   1,038,659.20
2) Previous service cost
3) Settlement gains (loss is indicated by ―-―)
4) Net interest                                                                     4,287,360.60                                   3,933,158.00
3. Cost of defined benefit plan included in other
                                                                                      203,044.40                                  -8,798,054.40
comprehensive income
1) Actuarial gains (loss is indicated by ―-―)                                       203,044.40                                  -8,798,054.40
4. Other change                                                                  -16,360,521.68                                   -4,020,088.43
1) The consideration paid at the time of
settlement
2) Paid benefits                                                                 -19,992,064.00                               -21,872,940.80
3) Exchange rate fluctuation                                                        3,631,542.32                                  17,852,852.37
5. Ending Balance                                                                252,830,895.91                               263,607,696.59
     Defined benefit plan of DA AG is based on supporting commitment.
     The base of measuring supporting liability is on actuarial and hypothesis, not only consider known and
possessed right to draw defined benefit plan, but the increase of future payroll and defined benefit plan. By the
end of 2018, the weighted average period of defined benefit plan liability is 10.36 year. (10.28 year by the end
of 2017). Assumed payment of defined benefit plan in 2019 is the same as in 2018.
      ① Significant actuarial assumptions:
    The method used to calculate pension obligations is actuarial. The computation basis includes life
expectancy, developed rate, changes in pension, and developed payroll trends.
    In 2018, actuarial assumptions are below, compared with 2017
                   Item                                        2018                                                2017
Actuaria rate                                                 3.21%                                               1.70%
Rate of payroll increase                                      2.00%                                               2.00%
Rate of pension increase                                      1.50%                                               1.50%
      ② Sensitivity analysis
    On 31st December 2018, sensitivity analysis was executed based on rational judgment possible changes in
assumptions. Other assumptions remain unchanged.
                     Item                    PV of defined benefit plan liability increase      PV of defined benefit plan liability decrease
Discount rate (changed by 0.5%)                                               13,127,601.40                                       -11,971,810.20
Increase in payroll (changed by 0.5%)                                            413,898.20                                          -390,470.00
Increase in pension (changed by 0.5%)                                         11,308,011.20                                       -10,448,977.20
Life expectancy (changed by 1 year)                                           21,577,372.20                          —
      The sensitivity analysis above may not reflect the actual change of present value of defined benefit plan.
      41) Estimated liabilities
                Item                     Beginning Balance                       Ending Balance                           Reason
                                                                                                            Expected              compensation
Pending litigation                                      546,461.91                            672,720.00    expenses
                Total                                   546,461.91                            672,720.00                      /



                                                                      94 / 121
                       上工申贝(集团)股份有限公司
                                                                                                                                         Annual Report 2018
                       Shang Gong Group Co., Ltd

        42) Deferred income
                                 Beginning
         Item                                                   +                                  -                  Ending Balance                        Reason
                                  Balance
Government grants                 2,340,000.00                                             2,340,000.00
         Total                    2,340,000.00                                             2,340,000.00                                                         /
        Projects that involve government grants:
                                                            Subsidies
                                        Subsidies          Included in
                    Beginning                                                                                  Ending            Asset-related /
    Item                               Increased in          Current               Other Change                                                                 Item
                     Balance                                                                                   Balance           Income-related
                                      Current period      Non-operating
                                                             Income
Guiding
funds      of
developing         2,200,000.00                                                                            -2,200,000.00                                    Asset-related
service
industry
Taizhou
science and
Technology
Bureau R &
                    140,000.00                                  140,000.00                                                                              Income-related
D expenditure
subsidy
Total              2,340,000.00                                 140,000.00                                 -2,200,000.00
     Other changes (reduction) of the logistics project development fund are the completion of the
development project of the Shanghai Shensy Enterprise Development Co., Ltd. of this year, which is
transferred to intangible assets, and the related deferred income offsets the book value of intangible assets.
     43) Other non-current liabilities
                         Item                                             Ending Balance                                             Beginning Balance
Other long-term loan                                                                                   520,000.00                                              520,000.00
                         Total                                                                         520,000.00                                              520,000.00
        44) Share capital
                         Beginning                                      Change in Current Period(+/-)
                                                                                                                                                      Ending Balance
                          Balance                       Issuance of New Shares                                     Others           Sub-total
     Total           548,589,600.00                                                                                                                    548,589,600.00
        45) Other equity instruments
        Not applicable.
        46) Capital reserves
                                                                                                            Decrease in Current
           Item                  Beginning Balance              Increase in Current Period
                                                                                                                  Period
                                                                                                                                                 Ending Balance
Stock premium                           851,345,853.61                                                                                                 851,345,853.61
Other capital reserves                  120,654,741.95                                                                55,785,147.32                         64,869,594.63
           Total                        972,000,595.56                                                                55,785,147.32                    916,215,448.24
     The reduction of capital reserve is the acquisition of minority shareholders’ equity by the Company’s
premium, and the premium partially offsets the capital reserve. For details, please refer to ―Note IX. Interests
in other entities, (2) Changes in the share of owners’ equity in subsidiaries and control of transactions of
subsidiaries, 2. Transactions on minority shareholders and ownership of owners’ equity Impact‖.
        47) Treasury stock
        Not applicable.
        48) Other Comprehensive Income
                                                                                       Change in Current Period
                                                                     Less: recognized as other
                                 Beginning     Accrual before                                             Less:                                                     Ending
           Item                                                     comprehensive income for                           Attributable to    Attributable to
                                  Balance      Income tax for                                            Income                                                     Balance
                                                                         previous years and                            Owners of the         Minority
                                                 the Current                                               Tax
                                                                    transferred in the profit or                      Parent Company      Shareholders
                                                   Period                                               Expenses
                                                                      loss for the current year


                                                                                95 / 121
                             上工申贝(集团)股份有限公司
                                                                                                                                           Annual Report 2018
                             Shang Gong Group Co., Ltd

1. Other comprehensive
income that cannot be
                                      -43,487,893.99         -203,044.40                                 -7,809.40        -195,235.00                     -43,683,128.99
reclassified in the loss and
gain in the future
Including:        change       in
re-measurement of the net
                                      -43,487,893.99         -203,044.40                                 -7,809.40        -195,235.00                     -43,683,128.99
liabilities and net assets
under defined benefit plan
A        share      in      other
comprehensive income of
investee that cannot be
reclassified     in the losses
and gains under the equity
method
2. Other comprehensive
income       that     will     be
                                      -28,675,558.91       -3,342,406.51                                                 -3,342,406.51                    -32,017,965.42
reclassified in the loss and
gain in the future
Including: a share in other
comprehensive income of
investee      that     will    be
reclassified in the loss and
gain under the equity method
Losses and gains on the
change in fair value of
                                       15,711,472.03       -3,314,916.23                                                 -3,314,916.23                    12,396,555.80
available-for-sale      financial
assets
Held-to-maturity investments
reclassified as losses and
gains on available-for-sale
financial assets
Effective portion of losses
and gains on cash flow
hedges
Foreign currency translation
                                      -44,387,030.94          -27,490.28                                                      -27,490.28                  -44,414,521.22
differences
Total other comprehensive
                                      -72,163,452.90       -3,545,450.91                                 -7,809.40       -3,537,641.51                    -75,701,094.41
income

         49) Special reserve
         Not applicable.
         50) Surplus reserves
             Item                          Beginning Balance               Increase in current period    Decrease in current period               Ending Balance
Statutory               surplus
reserves
                                                       2,273,121.26                                                                                     2,273,121.26
Discretionary           surplus
reserves
                                                       2,273,121.26                                                                                     2,273,121.26
             Total                                     4,546,242.52                                                                                     4,546,242.52
         51) Undistributed profits
                                    Item                                              Reporting period                            Same period of the previous year
Adjustments to undistributed profits as at December
31, 2017
                                                                                                   692,241,691.51                                     494,754,465.24
Adjustments to total undistributed profits as at
January 1, 2018 (―+‖ for increase, ―-― for decrease)
Adjusted undistributed profits as at January 1, 2018                                               692,241,691.51                                    494,754,465.24
Plus: net profit attributable to owners of the parent
company for current period
                                                                                                   140,828,047.20                                    197,487,226.27
Less: withdrawal of statutory surplus reserves
      Withdrawal of discretionary surplus reserves
      Withdrawal of general risk reserves
      Ordinary share dividends payable
     Ordinary share dividend transferred to share
capital (paid-in capital)
     Other                                                                                          13,861,685.00
undistributed profits as at December 31, 2018                                                      819,208,053.71                                    692,241,691.51
     Note: Other reductions are the acquisition of minority shareholders’ equity premiums by DA AG, a
subsidiary of the Company, which offsets retained earnings.
         52) Operating income and operating costs
                                                                 2018                                                                      2017
             Item
                                              Income                                Cost                             Income                            Cost


                                                                                       96 / 121
                      上工申贝(集团)股份有限公司
                                                                                                      Annual Report 2018
                      Shang Gong Group Co., Ltd

 Main business                      3,074,679,494.14   2,235,472,804.92                2,973,395,095.35            2,191,026,910.61
 Other businesses                    125,848,246.95      86,679,925.97                    91,576,405.44                  54,510,418.65
         Total                      3,200,527,741.09   2,322,152,730.89                3,064,971,500.79            2,245,537,329.26
      53) Taxes and surcharges

                  Item                                   2018                                             2017
Urban maintenance and construction tax                                  2,026,701.31                                      3,841,225.33
Educational surtax                                                      1,653,067.87                                      2,851,563.83
Property tax                                                            3,875,635.78                                      4,557,720.89
land use tax                                                            3,408,292.34                                      1,206,499.65
Vehicle and vessel tax                                                    174,043.92                                         29,173.45
Stamp tax                                                                 976,763.08                                       794,782.50
Other                                                                     918,706.91                                       164,598.33
                     Total                                             13,033,211.21                                     13,445,563.98
      54) Selling expenses
                         Item                                   2018                                       2017
Employee compensation                                                    144,738,512.88                                 127,100,318.51
Fix and after-sale service charges                                        27,142,860.46                                  16,883,164.44
Office expenses                                                            1,352,509.32                                   1,636,944.60
Travelling expenses                                                       22,650,014.98                                  19,339,407.84
Transportation cost                                                       28,614,220.14                                  23,818,035.11
Advertising expense                                                        3,966,999.44                                   5,448,163.62
Commission                                                                34,776,854.93                                  32,259,945.51
Leasing and storage charges                                                9,760,134.13                                   9,715,517.43
Insurance premium                                                          1,875,695.42                                   1,305,233.66
Conference fees                                                              127,812.64                                   1,420,907.90
Depreciation costs                                                         2,996,905.44                                   2,137,262.39
Exhibition fees                                                            2,961,522.90                                   6,697,223.82
Sample printed matter and product loss                                    12,726,208.62                                  11,978,393.15
Entertainment expenses                                                     1,706,092.80                                     594,503.68
E-commerce service fee                                                     1,180,310.00                                     226,972.23
Other                                                                     26,120,252.01                                  24,248,893.32
                        Total                                            322,696,906.11                                 284,810,887.21
      55) General and administrative expenses
                            Item                                         2018                                    2017
Employee compensation                                                           150,462,688.99                          142,665,436.43
Office expenses                                                                   9,359,090.03                            9,234,901.56
Water and electricity                                                             1,636,587.92                            1,134,181.97
Entertainment expenses                                                            8,293,683.75                            5,630,236.43
Property insurance premium                                                        2,065,233.87                            1,892,141.80
Conference fees                                                                     606,887.82                            1,248,356.45
Travelling expenses                                                              10,611,440.65                            9,345,153.24
Depreciation costs                                                               14,177,905.04                           10,418,234.14
Repair charges                                                                      637,038.59                            1,682,156.57
Transportation cost                                                               1,445,861.81                            1,624,137.32
Rental fees                                                                      10,724,657.60                            4,955,542.72
Costs of board meetings and supervisors’ meetings                                  547,472.11                              523,146.21
Agency fees and advisory expenses                                                17,843,739.89                           13,263,611.48
Litigation cost                                                                     234,967.57                              738,687.57
Other                                                                             1,855,424.34                            2,665,484.81
                            Total                                               230,502,679.98                          207,021,408.70
      56) R &D expenses
                             Item                                       2018                                 2017
Employee compensation                                                           67,347,677.92                       48,564,093.48



                                                           97 / 121
                        上工申贝(集团)股份有限公司
                                                                                           Annual Report 2018
                        Shang Gong Group Co., Ltd

Material consumption                                                       24,860,961.88              29,796,060.27
Depreciation and amortization expenses                                      2,583,510.19                3,198,130.60
Others                                                                      2,855,507.58                2,791,971.05
                             Total                                         97,647,657.57              84,350,255.40
      57) Financial expenses
                                Item                                2018                         2017
Interest expenses                                                          14,154,020.93              13,537,239.17
Less: Interest income                                                      -4,431,325.55              -12,388,093.76
Gains and losses on exchange                                                4,834,141.46               -6,945,484.64
Others                                                                      2,302,902.64                 532,811.33
                             Total                                         16,859,739.48               -5,263,527.90
      58) Losses from asset impairment
                         Item                           2018                                 2017
Losses from bad debts                                              752,808.27                         14,232,260.76
Losses from inventory impairment                                  9,068,644.01                          9,538,291.98
Fixed asset impairment loss                                        409,415.30                           2,427,110.04
Goodwill impairment loss                                       10,370,000.00
                         Total                                 20,600,867.58                          26,197,662.78
      59) Other gains
                     Item                              2018                                   2017
Financial support fund                                              7,858,472.82                        10,730,000.00
VAT refund                                                            293,707.16                           809,353.65
Special subsidies for employee education
                                                                     194,940.70                            31,010.22
funds
Special funds for economic development                               234,000.00                           140,000.00
Trademarks and intellectual property, science
                                                                    1,080,800.00
and technology project related subsidies
Special subsidies for financing leases                               278,600.00
Special subsidies for sewing equipment
                                                                     140,000.00
research and development projects
Others                                                                109,984.55                             2,810.88
                     Total                                         10,190,505.23                        11,713,174.75
      60) Investment income
                         Item                             2018                                 2017
Long-term equity investments measured under
equity method
                                                                    -12,972,718.90                    17,990,723.92
Investment income from disposal of long-term
equity investment
investment income of a financial asset at its fair
value and whose changes are included in the current
profits and losses during the period of holding
Investment income obtained from the disposal of
financial assets at fair value and their changes are                       45,148.42                      16,690.26
included in the current profits and losses
Investment income of the held-to-maturity
investment during the holding period
Investment income derived from available-for-sale
financial assets
Investment       income       from     disposal   of
available-for-sale financial assets
                                                                    12,526,301.81                     16,249,837.40
After the loss of control, the residual equity is
measured at fair value
                                                                                                               -7.64
Others
                         Item                                       13,159,536.73                     11,350,015.35
                         Total                                      12,758,268.06                     45,607,259.29




                                                       98 / 121
                       上工申贝(集团)股份有限公司
                                                                                                                Annual Report 2018
                       Shang Gong Group Co., Ltd

      61) Gains from changes in fair value
      Not applicable.
      62) Gains on disposal of assets
                      Item                                            2018                                           2017
Fixed assets                                                                     -104,177.97                                  23,963,103.89
Intangible assets                                                                 547,886.02
                      Total                                                       443,708.05                                  23,963,103.89
      63) Non-operating income
      Non-operating income
                                                                                                               Amount included in current
            Item                               2018                                    2017
                                                                                                              non-recurring gains and losses
Government grants                                           838.00                             148,710.23                               838.00
Unpayable payables                                    3,150,715.12                                                               3,150,715.12
Export trade rebate                                   2,103,953.87                            2,131,628.81                       1,222,714.92
Litigation gains                                      1,874,114.87                                                               1,874,114.87
Others                                                  749,082.64                            6,912,409.04                         749,082.64
              Total                                   7,878,704.50                            9,192,748.08                       6,997,465.55
      Government grants included in current profit and loss
           Item                           Reporting period              Same period of the previous year       Asset-related /Income-related
Shanghai old public housing
                                                                                                85,710.23
management fee subsidies
Other                                                        838.00                             63,000.00    Income-related
Total                                                        838.00                            148,710.23
      64) Non-operating expenses
                                                                                               Amount included in current non-recurring gains
                    Item                            2018                      2017
                                                                                                                and losses
Fixed asset disposal loss                           1,728,803.67                412,623.36                                       1,728,803.67
Donations made                                        683,000.00                200,000.00                                         683,000.00
Amercement and overdue fine outlay                    624,345.07              2,547,131.17                                         624,345.07
Others                                              1,029,505.75                606,594.16                                       1,029,505.75
                   Total                            4,065,654.49              3,766,348.69                                       4,065,654.49
      65) Income tax expenses
                     Item                                              2018                                           2017
Current income tax expenses                                                       41,000,022.97                                 75,912,541.36
Deferred income tax expenses                                                       4,789,812.70                                  7,016,328.30
                     Total                                                        45,789,835.67                                 82,928,869.66

      66) Other comprehensive income
      See notes for details.
      67) Items of the statement of cash flows
      A. Cash received from other operating activities
                        Item                                             2018                                          2017
Current accounts and advances withdrawn                                              36,267,444.87                              16,478,636.33
Special subsidies and grants                                                          7,942,196.52                              11,074,399.76
Interest income                                                                       4,472,642.90                              12,937,203.19
Non-operating income:                                                                 2,449,391.77                               6,570,902.72
Other                                                                                 1,591,851.31                               3,384,804.85
                        Total                                                        52,723,527.37                              50,445,946.85
      B.    Cash paid for other operating activities
                           Item                                          2018                                         2017
Current accounts paid                                                                57,318,220.58                              55,241,626.14
Selling expenses                                                                  159,093,616.25                               121,033,239.46
General and administrative expenses                                                  91,441,901.13                              97,509,435.48
Non-operating expenses                                                                 752,722.87                                2,744,339.67


                                                                      99 / 121
                       上工申贝(集团)股份有限公司
                                                                                                     Annual Report 2018
                       Shang Gong Group Co., Ltd

Others                                                                      3,640,691.54                              3,809,248.10
                         Total                                            312,247,152.37                            280,337,888.85
       C.     Cash received from other investing activities
                        Item                                       2018                                     2017
Received financial lease security deposit                                         393,810.60
                        Total                                                     393,810.60
       D. Cash paid from other investing activities
       Not applicable.
       E. Cash received from other financing activities
                         Item                                      2018                                     2017
Bank deposit, security deposit and other pledge,
mortgage
                                                                                                                     2,947,447.51
Cash received from financing leas                                                                                      950,250.00
                    Total                                                                                            3,897,697.51
       F.     Cash paid from other financing activities
                         Item                                      2018                                     2017
Bank deposit, security deposit and other pledge,
mortgage
Cash paid for finance lease                                                 1,165,827.50
                    Total                                                   1,165,827.50
       68) Supplementary information to the statement of cash flows
       A. Supplementary information to the statement of cash flows
                Supplementary Information                     Reporting period                 Same period of the previous year
1. Net profit adjusted to cash flows from operating
activities
Net profit                                                                 158,449,643.95                           212,652,989.02
Plus: Provision for assets impairment                                       20,600,867.58                            26,197,662.78
        Depreciation of fixed assets and others                             54,699,873.04                            61,400,632.56
        Amortization of intangible assets                                   25,747,235.24                            23,812,401.29
        Amortization of long-term deferred expenses                            616,641.59                               250,014.86
        Losses on disposal of fixed assets, intangible
                                                                                 -443,708.05                        -23,963,103.89
assets and other long-term assets (―-― for gains)
        Losses on write-off of fixed assets (―-‖ for
                                                                             1,728,803.67                               412,623.36
gains)
        Losses from changes in fair value (―-― for gains)
        Financial expenses (―-‖ for income)                               10,120,291.46                            -8,200,943.06
        Investments losses (―-― for gains)                               -12,758,268.06                           -45,607,259.29
        Decreases in the deferred income tax assets (―-‖
                                                                             -6,704,509.63                            -4,481,358.32
for increases)
        Increases in the deferred income tax liabilities
                                                                             3,573,154.30                            11,498,815.79
(―-‖ for decreases)
        Decreases in inventories (―-‖ for increases)                    -103,695,100.04                           -53,078,397.74
        Decreases in operating payables (―-‖ for
                                                                           -89,099,505.47                           -76,119,802.22
increases)
        Increases in operating payables (―-‖ for
                                                                            18,592,566.59                             -7,438,405.97
decreases)
        Others                                                              -1,874,114.87
Net cash flows from operating activities                                    79,553,871.30                           117,335,869.17
2. Significant investment and financing activities
involving no cash receipts and payments
Conversion of debt into capital
Convertible corporate bonds maturing within one
year
Fixed assets acquired under financial lease
3. Net change in cash and cash equivalents:
Ending balance of cash                                                     558,241,622.39                           713,813,720.45
        Less: beginning balance of cash                                    713,813,720.45                           750,357,929.63
        Plus: ending balance of cash equivalents
        Less: beginning balance of cash equivalents



                                                              100 / 121
                          上工申贝(集团)股份有限公司
                                                                                                             Annual Report 2018
                          Shang Gong Group Co., Ltd

             Supplementary Information                              Reporting period                   Same period of the previous year
Net increase in cash and cash equivalents                                        -155,572,098.06                             -36,544,209.18
     Note: The other item is that the company obtained 48% equity of Shanghai Pacific Industrial Co., Ltd.
through litigation in February 2018. The company included it in the available-for-sale financial assets and
recognized the non-operating income according to the equity investment cost amount.
     B. Net cash paid to acquire subsidiaries during the current period
                                                                                                                Amount
Cash or cash equivalents paid by the business combination in the current period                                           109,310,300.00
Among them: Richpeace                                                                                                     109,310,300.00
Less: the cash and cash equivalents held by the company on the date of purchase                                            15,128,534.13
Among them: Richpeace                                                                                                      15,128,534.13
Plus: Cash or cash equivalents paid in the current period for business combinations
in the previous period
Obtain the net cash paid by the subsidiary                                                                                 94,181,765.87
     Note: On the purchase date, Richpeace opened a bank acceptance bill, and the bank acceptance bill
deposit amounted to 15,000,000.00 yuan, which was included in the total amount of monetary funds but not
included in the cash and cash equivalents on the purchase date.
     C. Net cash received from disposal of subsidiaries during the current period
     Not applicable.
     D. Composition of cash and cash equivalents
                         Item                                       Ending Balance                            Beginning Balance
1. Cash                                                                          558,241,622.39                             713,813,720.45
Including: cash on hand                                                              743,089.39                                 707,925.98
      Unrestricted bank deposit                                                  556,269,113.49                             712,794,196.15
      Other unrestricted monetary funds                                            1,229,419.51                                 311,598.32
      Deposit in central bank available for payment
      Deposits with banks and other financial
institutions
      Loans from banks and other financial
institutions
2. Cash equivalents
Including: bond investments maturing within three
months
3. Balance of cash and cash equivalents as at 31
                                                                                  558,241,622.39                            713,813,720.45
December 2018
Including: cash and cash equivalents restricted for
use by the parent company or subsidiaries within the
group
      69) Notes of items in Statement of Changes in Equity
      Not applicable.
      70) Assets with restricted ownership or use rights
                   Item                        Book value at the end of period                            Restricted reasons
Monetary funds                                                        36,792,523.72    Various types of deposits and other restricted funds
Notes receivable                                                        2,380,000.00   Bill pledge business
Inventary                                                               2,398,160.00   Purchasing business with ownership retention
                                                                                       Bank loan and ownership purchase business is
Fixed assets                                                          14,875,120.33
                                                                                       mortgaged
Intangible assets                                                      5,389,231.47    Bank loan is mortgaged
Investment property                                                   27,257,000.00    Financing guarantee
                 Total                                                89,092,035.52                             /

      71) Monetary items in foreign currency
      A. Monetary items in foreign currency
                                                 Ending balance of foreign                                    Ending balance of conversion
                     Item                                currency
                                                                                       Exchange rate
                                                                                                                       into RMB
Monetary funds                                                                                                             19,314,581.64


                                                                    101 / 121
                     上工申贝(集团)股份有限公司
                                                                                                                    Annual Report 2018
                     Shang Gong Group Co., Ltd

Including: USD                                                 1,774,848.24                            6.8632                      12,181,111.39
           EUR                                                   895,835.74                            7.8473                       7,029,891.91
          JPY                                                          1.00                            0.0619                               0.06
外币核算 - Indonesian currency                             2,193,373,789.00                          0.000047                         103,578.28

     B. Description of overseas operating entities
     The domicile of primary operation of the Company’s subsidiary, DA AG, is in Germany, with Euro as
functional currency for it is the applicable currency for the operation region.
     The domicile of primary operation of the Company’s subsidiary, DAP Vietnam Co., Ltd., is in Vietnam,
with VND as functional currency for it is the applicable currency for the operation region.
        72) Hedging
        Not applicable.
        73) Government grants
                                                                                                                         Amount recognized in
                    Type                              Amount                               Item
                                                                                                                        current profits and losses
Development of service industry guidance
                                                      2,200,000.00    Reversing the value of intangible assets                          220,000.00
funds
Financial support funds                               7,858,472.82    Other income                                                    7,858,472.82
VAT refund                                              293,707.16    Other income                                                      293,707.16
Special funds for economic development                  234,000.00    Other income                                                      234,000.00
Employee education subsidy                              194,940.70    Other income                                                      194,940.70
Trademarks and intellectual property,
science and technology project related                1,080,800.00    Other income                                                    1,080,800.00
subsidies
Special subsidies for financing leases                  278,600.00    Other income                                                      278,600.00
Sewing equipment special subsidy                        140,000.00    Other income                                                      140,000.00
Other                                                   110,822.55    Other income / Non-operating income                               110,822.55
        8. Change in the scope of consolidation
        1) Business combinations not under common control
        A. Business combinations not under common control in 2018
                                                                                             Basis for                            Net profit of the
 Name of       When the                         Shareholding      Equity                    determining    Revenue from the      purchaser from the
                                 Equity                                        Purchase
   the         equity is                            ratio       acquisition                     the         purchaser to the     date of purchase to
                             acquisition cost                                    date
 Acquiree      acquired                             (%)           method                     purchase      end of the period       the end of the
                                                                                                date                                   period
                                                               Business
                                                               combinations                    Equity
SG
               2018/8/31     136,637,800.00           65.00    not     under   2018/8/31      transfer           95,414,392.86        19,133,660.04
Richpeace
                                                               common                        completed
                                                               control
        B.   Merger costs and goodwill
Purchase cost                                                                                             SG Richpeace
--Cash                                                                                                                           136,637,800.00
-- Fair value of non-cash assets
Total purchase cost                                                                                                              136,637,800.00
Less: the fair value share of the identifiable net assets acquired                                                                 59,093,605.46
Goodwill                                                                                                                           77,544,194.54
        C.   The identifiable assets and liabilities of the purchased party on the purchase date
                                                                                            SG Richpeace
                                                         Fair value at the date of purchase             Book value at the date of purchase
Assets:                                                                           300,978,046.76                                 228,798,958.38
Money funds                                                                        30,128,534.13                                   30,128,534.13
Receivables                                                                        35,094,545.97                                   35,094,545.97
Inventory                                                                          96,850,024.33                                   96,850,024.33
Fixed assets                                                                       54,285,087.90                                   47,665,430.23

                                                                      102 / 121
                     上工申贝(集团)股份有限公司
                                                                                                                 Annual Report 2018
                     Shang Gong Group Co., Ltd

Intangible assets                                                                69,322,139.69                                       3,762,708.98
Prepayments                                                                    12,867,504.34                                      12,867,504.34
Construction in progress                                                          166,848.13                                         166,848.13
Long-term deferred expenses                                                       483,686.63                                         483,686.63
Deferred income tax assets                                                      1,710,937.76                                       1,710,937.76
Other current assets                                                               68,737.88                                          68,737.88
Liabilities:                                                                  210,064,807.59                                     199,237,944.33
Loan                                                                           68,000,000.00                                      68,000,000.00
Payables                                                                       91,583,641.64                                      91,583,641.64
Deferred income tax liabilities                                                10,826,863.26
Receipt in advance                                                               35,765,085.52                                    35,765,085.52
Employee compensation payable                                                       712,514.48                                       712,514.48
Long-term payables                                                                3,176,702.69                                     3,176,702.69
Net assets                                                                       90,913,239.17                                    29,561,014.05
Less: minority shareholders' equity
Net assets acquired                                                              90,913,239.17                                    29,561,014.05
      Method for determining the fair value of identifiable assets and liabilities:
    Yinxin Assets Appraisal Co., Ltd. issued the Yinxin Caibao (2018) Shanghai No. 249 Asset Appraisal
Report to determine the fair value of each identifiable asset on the purchase date.
      2) Business combinations under common control
      Not applicable.
      3) Reverse purchase
      Not applicable.
      4) Disposal of subsidiaries
      Not applicable.
      5) Changes in consolidation scope with other reasons
      Not applicable.
      9. Equity in other entities
      1) Equity in subsidiaries
      A. Composition of enterprise groups
                                                                           Shareholding Ratio
   Name of          Major Places        Registered                                (%)
                                                      Business Nature                                           Acquisition method
  Subsidiary        of Business           Place
                                                                           Direct      Indirect
Shanghai           Shanghai,          Shanghai,
Shanggong          China              China
                                                     Production  and
Butterfly
                                                     sales of sewing        100.00                Investment
Sewing
                                                     machines
Machine Co.,
Ltd.
DAP (Shanghai)     Shanghai,          Shanghai,      Sales of sewing
                                                                            100.00                Investment
Co., Ltd.          China              China          machines
Shanghai           Shanghai,          Shanghai,      Sales, import and
SMPIC Imp. &       China              China          export of office       100.00                Investment
Exp. Co., Ltd.                                       equipment
Shanghai SGSB      Shanghai,          Shanghai,      Production      and
Electronics Co.,   China              China          sales of electronic    100.00                Investment
Ltd.                                                 equipment
Shanghai SGSB      Shanghai,          Shanghai,
Asset              China              China          Asset and property
                                                                            100.00                Investment
Management                                           management
Co., Ltd.
Shanghai           Shanghai,          Shanghai,
Fengjian           China              China          Property
                                                                            100.00                Business combinations under common control
Property    Co.,                                     Management
Ltd.
                                                                                                  In 2018, the company's second-level subsidiary,
                                                     Production  and
Duerkopp Adler     Bielefeld,         Bielefeld,                                                  DAP Industrial AG, merged with the third-tier
                                                     sales of sewing        100.00
AG                 Germany            Germany                                                     subsidiary DA AG and changed its name to DA
                                                     machines
                                                                                                  AG.
Zhejiang           Taizhou,           Taizhou,       Production     and      60.00                Investment


                                                                     103 / 121
                    上工申贝(集团)股份有限公司
                                                                                                            Annual Report 2018
                    Shang Gong Group Co., Ltd

ShangGong         Zhejiang,        Zhejiang,        sales of    sewing
GEMSY CO.,        China            China            machines
LTD.
Shanghai          Shanghai,        Shanghai,
Shensy            China            China
                                                                                             Business combinations not under common
Enterprise                                          Logistics, etc.          40.03
                                                                                             control
Development
Co., Ltd.
Shanghai          Shanghai,        Shanghai,
ShangGong         China            China
Financial                                           Financial Leasing        51.00   49.00   Investment
Leasing    Co.,
Ltd.
                                                                                             The company directly holds 30.25% of the shares
PFAFF                                                                                        of PFAFF Sewing Machine (Zhangjiagang) Co.,
Industrial                                                                                   Ltd., and indirectly holds the remaining 69.75%
                                                    Production and
Sewing            Zhangjiagang,    Zhangjiagang,                                             equity through other subsidiaries. Since the
                                                    sales of sewing          30.25   69.75
Machine           Jiangsu, China   Jiangsu, China                                            company directly manages the business activities
(Zhangjiagang)                                      machines                                 of PFAFF Industrial Sewing Machine
Co., Ltd.                                                                                    (Zhangjiagang) Co., Ltd., this company is
                                                                                             included in the direct scope of the company.
DAP Vietnam       Ho Chi Minh,     Ho Chi Minh,     Sales of sewing
                                                                            100.00           Investment
Co., Ltd.         Vietnam          Vietnam          machines
ShangGong
Sewing            Taizhou,         Taizhou,         Production and
Equipment         Zhejiang,        Zhejiang,        sales of sewing         100.00           Investment
(Zhejiang) Co.,   China            China            machines
Ltd.
                                                                                             During the reporting period, the Company
                                                                                             invested in and increased the capital of DAMSH,
Dürkopp Adler
                                                                                             with a shareholding ratio of 51. The chairman,
Industrial                                          Production and
                  Shanghai,        Shanghai,                                                 general manager and chief financial officer are
Manufacturing                                       sales of sewing          51.00   49.00
                  China            China                                                     all dispatched by the Company to directly
(Shanghai) Co.,                                     machines                                 manage the business. DAMSH is included in the
Ltd.
                                                                                             direct consolidation scope of the Company from
                                                                                             the date of completion of the capital increase.
TIANJIN                                             Production       and
RICHPEACE         Tianjing,        Tianjing,        sales of sewing                          Business combinations not under common
                                                                             65.00
AI     CO.,       China            China            and      intelligent                     control
LIMITED                                             equipment




                                                                      104 / 121
                         上工申贝(集团)股份有限公司
                                                                                                                                                                                                                                    Annual Report 2018
                         Shang Gong Group Co., Ltd

      B.     Important non-wholly owned subsidiary
                                                                           Minority                                                                              Other comprehensive income attributable to
                                                                                                           Profit and loss attributable to minority                                                                             Balance of minority shareholders'
                   Name of subsidiary                                    shareholders                                                                               minority shareholders in this period
                                                                                                             shareholders for the current period                                                                                 equity at the end of the period
                                                                        Shareholding%
Zhejiang ShangGong GEMSY CO., LTD.                                                     40.00%                                             1,278,618.68                                                                                                 85,650,027.87
Shanghai Shensy Enterprise Development Co., Ltd.                                       59.97%                                             8,510,494.83                                                                                                156,283,940.73
TIANJIN RICHPEACE AI CO., LIMITED                                                      35.00%                                             5,924,205.24                                                                                                 38,065,923.44

      C.     Main financial data of important non-wholly owned subsidiary
                                                                              Ending Balance                                                                                                       Beginning Balance
    Name of subsidiary                             Non-current                                Current             Non-current                                               Non-current                            Current             Non-current
                                Current assets                        Total assets                                                 Total liabilities   Current assets                        Total assets                                               Total liabilities
                                                     assets                                  liabilities           liabilities                                                assets                              liabilities           liabilities
Zhejiang       ShangGong
                                262,049,874.07    98,559,165.52     360,609,039.59        146,483,969.92                           146,483,969.92      180,972,291.99     102,795,535.43    283,767,827.42       72,699,304.44           140,000.00      72,839,304.44
GEMSY CO., LTD.
Shanghai Shensy Enterprise
                                382,809,588.75    93,768,523.55     476,578,112.30        213,777,562.28          1,878,628.16     215,656,190.44      319,865,459.20       46,144,064.50   366,009,523.70   115,076,875.63            4,201,979.88    119,278,855.51
Development Co., Ltd.
TIANJIN RICHPEACE AI
                                154,392,606.55    57,857,955.80     212,250,562.35        161,027,646.24          1,608,000.62     162,635,646.86
CO., LIMITED




                                                                                                   2018                                                                                                      2017
           Name of subsidiary                                                                              Total comprehensive         Cash flow from                                                               Total comprehensive            Cash flow from
                                                 Operating income               Net profit                                                                       Operating income              Net profit
                                                                                                                  income              operating activities                                                                 income                 operating activities
Zhejiang ShangGong GEMSY CO., LTD.                   355,562,212.96                   3,196,546.69                 3,196,546.69              25,134,868.84              279,057,289.37           -4,495,201.96                  -4,495,201.96            -3,638,394.34
Shanghai Shensy Enterprise Development
                                                     762,944,769.75                  14,191,253.67               14,191,253.67              -41,275,319.88              768,874,679.88            7,005,860.61                  7,005,860.61             78,188,474.68
Co., Ltd.
TIANJIN RICHPEACE AI CO., LIMITED                     95,414,392.86                  19,133,660.04               20,053,901.44               15,063,349.86

      D. Major restrictions on the use of group assets and liquidation of group debt
      Not applicable.
      E. Financial support or other support provided to structured entities included in the scope of consolidated financial statements
      Not applicable.




                                                                                                                                  105 / 121
                      上工申贝(集团)股份有限公司
                                                                                                                        Annual Report 2018
                      Shang Gong Group Co., Ltd

     2) Transaction that changes the shareholding ratio in subsidiaries but still controls the subsidiaries
     A. Desciption
     The company's wholly-owned subsidiary DAP Industrial AG acquired all minority shareholders'rights
and interests of DA AG, a third-class subsidiary, in this year, and absorbed and merged DA AG and renamed
DA AG after the merger was completed.
     B. Impact of the transaction on minority shareholders' equity and Total owners' equity attributable to
the parent company
                                                                                                                                   DA AG
Purchase cost/disposal consideration
-- Cash                                                                                                                          131,529,513.17
-- Fair value of non-cash assets
Total purchase cost/disposal consideration                                                                                       131,529,513.17
Less: Net assets of subsidiaries calculated according to the proportion of acquired/disposed equity                               61,882,680.85
Difference                                                                                                                        69,646,832.32
Among them: adjusting the capital reserve                                                                                         55,785,147.32
        Adjust surplus reserve
        Adjust undistributed profit                                                                                               13,861,685.00

       3)      Equity in joint operation and joint venture
       A.      Important joint operation and joint venture
                                                                                                      Shareholding      Accounting Measurement
  Name of Joint             Domicile of
                                             Registered                                                Ratio (%)         for Investment in Joint
  Operation and               Primary                                Business Nature
                                               Place                                                                       Operation and Joint
  Joint Venture              Operation                                                          Direct       Indirect
                                                                                                                                 Venture
H. Stoll AG & Co.         Reutlingen,      Reutlingen,       Computerized flat knitting
                                                                                                               26.00    Equity method
KG                        Germany          Germany           machine manufacturing
       B.      Main financial information of joint operation and joint venture
                                                                                                  Unit: 10,000 Yuan, Currency: RMB
                                                           Ending Balance/ 2018                              Beginning Balance/ 2017
                                                          H. Stoll AG & Co. KG                                H. Stoll AG & Co. KG
Current assets                                                                    144,632.52                                        168,299.51
Non-current assets                                                                 27,409.88                                            26,033.15
Total assets                                                                       172,042.4                                        194,332.66


Current liabilities                                                                42,576.15                                            57,559.13
Non-current liabilities                                                            34,124.11                                            33,250.28
Total liabilities                                                                  76,700.26                                            90,809.41


Operating income                                                                  137,588.47                                        195,797.19
Net profit                                                                          -4,989.50                                            8,659.06
Other comprehensive income
Total comprehensive income                                                          -4,989.50                                            8,659.06


Dividends received from associates
                                                                                     2,704.20
during the year
       C.      Description of major restrictions on the ability of a joint venture or an associate to transfer funds to
the company
       Not applicable.
       D.      Excessive losses incurred by joint ventures or associates
       Not applicable.


                                                                      106 / 121
                 上工申贝(集团)股份有限公司
                                                                                           Annual Report 2018
                 Shang Gong Group Co., Ltd

     E.   Unconfirmed commitments related to investment in joint ventures
     Not applicable.
     F.   Contingent liabilities related to investments in joint ventures or associates
     Not applicable.

     4) Important common management
     Not applicable.

     5) Equity in structured entities not included in the scope of consolidated financial statements
     Not applicable.
     10. Risks related to financial instruments
      The Company faces various financial risks in the course of its operations: credit risk, market risk and
liquidity risk. The Board of Directors of the Company is fully responsible for the determination of risk
management objectives and policies, and assumes ultimate responsibility for risk management objectives and
policies. The Board of Directors reviews the effectiveness of the implemented procedures and the rationality
of risk management objectives and policies through monthly reports submitted by the heads of functional
departments and subsidiaries. The Company's internal audit department will audit the risk management
policies and procedures and report the findings to the audit committee.
      The overall goal of the Company's risk management is to formulate a risk management policy that
minimizes risks without excessively affecting the Company's competitiveness and resilience.
      10.1 Credit risk
      Credit risk refers to the risk that one party to a financial instrument fails to perform its obligations and
causes financial losses to the other. The Company's credit risk is mainly related to accounts receivable.
      (1) Accounts Receivable
      The accounts receivable of the Company are mainly exposed to the credit risk of customers caused by
credit sales. Before opening up new customers and signing new framework contracts, the Company will
evaluate new customers' credit risks, including external credit ratings and, in some cases, bank credit
certificates (when this information is available).
      For the sewing machine business and export trading business, the Company sets a credit limit for each
customer, which is the maximum amount that does not require additional approval. For sales that exceed the
credit limit, the Company only sells it on the premise of additional approval. Otherwise, it must demand that
it pay the corresponding amount in advance. For customers who have not completed payment in a timely
manner on the previous credit sale, the Company will no longer accept new product orders before recovering
accounts receivable.
      For the logistics business, the Company only deals with customers that have been approved and have a
good reputation and have a certain scale. After the credit period expires, the Company will perform various
forms of collection for customers who have not paid on time. Due to the high dispersion of customers in the
logistics business, there is no significant concentration of credit risk.
      As of the end of the report period, the top five customers' accounts receivable of the Company
accounted for 15.62% of the ending balance, and the Company did not have significant credit risk.
      (2) Other Receivables
      The Company's other receivables mainly include export tax refund receivables, various types of deposits
and deposits. The Company manages and monitors this type of payments together with related economic
activities to ensure that the Company does not have significant bad debt risks.
      10.2 Market risk
      The market risk of financial instruments refers to the risk that the fair value or future cash flow of

                                                      107 / 121
                      上工申贝(集团)股份有限公司
                                                                                                                      Annual Report 2018
                      Shang Gong Group Co., Ltd

financial instruments fluctuates due to changes in market prices, including exchange rate risk, interest rate
risk and other price risks.
      (1) Interest Rate Risk
      Interest rate risk refers to the risk that the fair value or future cash flow of a financial instrument will
fluctuate due to changes in market interest rates. The interest rate risk that the Company may face is mainly
derived from bank loans that carry interest at floating rates.
      As of 31 December 2018, the Company’s short-term bank loans with Euribor as benchmark interest rate
totaled 3.105 million euros, and long-term loans with Euribor as benchmark interest rate totaled 43.198
million euros. Supposing that other variables remain unchanged, a 50% benchmark change in interest rates
would have no significant impact on the Company's current profit or loss and shareholders' equity.
      (2) Exchange Rate Risk
      Exchange rate risk refers to the risk of loss due to exchange rate changes. The foreign exchange risk of
the Company mainly includes the risk associated with the monetary assets and liabilities formed by the
Company and its subsidiaries and overseas customers through the settlement of non-standard currencies, as
well as the risk of translation differences in foreign currency statements. The former risk affects the current
period profit and loss, and the latter risk affects owner's equity (other comprehensive income).
      See Note 7.77 for details of monetary items in foreign currency as of 31 December 2018.
      Exchange rate risk sensitivity analysis:
      With the other variables unchanged, the pre-tax impact of reasonable changes in exchange rates on the
current profit or loss and owner's equity is as follows:
                                                                            2018                                             2017
        Item             Exchange rate changes         Impact on current           Impact on owner's    Impact on current        Impact on owner's
                                                       profits and losses               equity          profits and losses            equity
Foreign currency
                        10% appreciation       of
statement                                                    9,134,416.91               90,779,097.87        18,052,832.71           91,994,946.53
                        RMB
conversion
Foreign currency
                        10% depreciation       of
statement                                                    -9,134,416.91             -90,779,097.87        -18,052,832.71         -91,994,946.53
                        RMB
conversion
Foreign Currency        10% appreciation       of
                                                             8,591,797.27                8,591,797.27         6,211,726.82            6,211,726.82
Items                   RMB
Foreign Currency        10% depreciation       of
                                                             -8,591,797.27              -8,591,797.27         -6,211,726.82           -6,211,726.82
Items                   RMB
     (3) Other Price Risks
     The Company holds equity investments in other listed companies. The management of the Company
believes that the market price risks faced by these investment activities are acceptable. The listed company’s
equity investment held by the Company is listed as follows:
                                      Item                                                  Ending Balance              Beginning Balance
Available-for-sale financial assets and trading financial assets                                  86,406,778.33                     89,721,694.56
                                      Total                                                       86,406,778.33                     89,721,694.56
     If all other variables remain unchanged, if the value of the equity instrument increases or decreases by
20%, the Company will increase or decrease the other comprehensive income by 17,281,355.67 yuan (31st
December 2017: Others Comprehensive income of 17,944,757.88 yuan). The management of the Company
believes that 20% reasonably reflects the reasonable range of possible changes in the value of equity
instruments in the next year.
     10.3 Liquidity risk
     Liquidity risk refers to the risk of shortage of funds when performing obligations settled by way of
delivery of cash or other financial assets. The Company's policy is to ensure that it has sufficient cash to
repay the debts due. Liquidity risk is centrally controlled by the Company's financial department. By
monitoring cash balances, marketable securities that can be realised at any time, and rolling forecasts of cash


                                                                       108 / 121
                       上工申贝(集团)股份有限公司
                                                                                                                Annual Report 2018
                       Shang Gong Group Co., Ltd

flows for the next 12 months, the financial department ensures that the Company has sufficient funds to
repay debts under all reasonably foreseen circumstances.
      The Company's external sources of funds mainly include bank loans. As of 31 December 2018, the
Company's unused bank loan quota was 8 million euros (is equivalent to 62.78 million yuan at the end of the
period) and 420.86 million yuan. The Company's own funds are relatively abundant and liquidity risk is
relatively small.
       11. Disclose of fair value
       1) The fair value at end of current period of assets and liabilities measured at fair value
                                                                   Fair value at the end of reporting period
                Item                                               Measured at the fair
                                         Measured at the fair                              Measured at the fair
                                                                   value of the second                                  Total
                                        value of the first level                          value of the third level
                                                                          level
1. Measurement at fair value
based on going concern
 (1) Financial assets measured at
fair value through current profit and
loss
A. Financial assets held for trading
a. Investment in debt instruments
b. Investments in equity instruments
c. Derivative financial assets
B. Financial assets designated to be
measured at fair value through
current profit and loss
a. Investment in debt instruments
b. investments in equity instruments
 (2) Available-for-sale financial
assets
                                                86,406,778.33                                                         86,406,778.33
a. Investment in debt instruments
b. Investments in equity instruments            86,406,778.33                                                         86,406,778.33
c. Others
 (3) Investment property
A. Use right of leased land
B. Leased buildings
C. Land use right held for transfer
upon appreciation
 (4) Biological assets
A. Consumable biological assets
B. Productive biological assets
Total amount of assets measured
at fair value based on going                    86,406,778.33                                                         86,406,778.33
concern
  (5) Financial liabilities held for
trading
Including: issued bonds held for
trading
Derivative financial liabilities
Others
 (6) Designated financial liabilities
measured at fair value through
current profit and loss
Total amount of liabilities
measured at fair value based on
going concern
2. Measurement at fair value
based on going concern
 (1) Assets held for sale


                                                                   109 / 121
                       上工申贝(集团)股份有限公司
                                                                                                                    Annual Report 2018
                       Shang Gong Group Co., Ltd

                                                                    Fair value at the end of reporting period
                Item                                                Measured at the fair
                                      Measured at the fair                                     Measured at the fair
                                                                    value of the second                                         Total
                                     value of the first level                                 value of the third level
                                                                           level
Total amount of assets measured
at fair value not based on going
concern
Total amount of liabilities
measured at fair value not based
on going concern
      The input values used for fair value measurement are divided into three levels:
      The first level of input is an unadjusted quote for the same asset or liability that can be obtained on the
measurement date in an active market.
      The second level input value is an input value that is directly or indirectly observable for related assets
or liabilities other than the first level input value.
      The third level input value is the unobservable input value of the relevant asset or liability.
      The level to which the fair value measurement result belongs is determined by the lowest level to which
the input value of the fair value measurement is significant.
     2) Basis for determination of market price for measurement of fair value of the first level based
on going concern and not based on going concern
     The fair value at end of reporting period of available-for-sale financial assets was determined on the
basis of the closing price of Shenzhen Stock Exchange and Shanghai Stock Exchange on the last trading day
in 2018.。
      12. Related party and related party transaction
      1) The parent company of the Company
      The Company is a listed company with no controlling shareholder and no actual controller.
      2) The subsidiaries of the Company
      See the Note 9 Equity in Other Entities for the details.
      3) The joint operation and joint ventures of the Company
      See the Note 9 Equity in Other Entities for the details.
      4)     Other related parties
                Name of Other Related Parties                                          Relationship with the Company
Shanghai Hirose Precision Industrial Co., Ltd.                  Other related party
Shanghai Fuji Xerox Co., Ltd.                                   Other related party
Shanghai Kaile Investment Management Co., Ltd.                  Other related party
Zhejiang GEMSY Electromechanical Co., Ltd.                      Other related party
Shenzhen Yingning Venture Capital Co., Ltd.                     Other related party
Tianjin Tongshang Software Co., Ltd.                            Other related party
Stoll Electronics Co., Ltd.                                     Other related party
      5) Related transactions
      A. Related transactions for purchase and sale of goods, receiving and rendering of services
      Table of purchase of goods / receipt of services
            Related Party            Content of Related Transaction                    2018                              2017
                                    Purchase of goods / Receiving of
Stoll Electronics Co., Ltd.
                                    service
                                                                                           18,531,706.20                   19,673,427.20
      Table of sales of goods /rendering of services
            Related Party           Content of Related Transaction                     2018                              2017
Shanghai Fuji Xerox Co., Ltd.       Sales of goods                                         17,427,907.76                    21,610,693.53
Zhejiang Gemsy Mechanical and
                                    Sales of goods                                                                                317,000.00
Electrical Co., Ltd.
Stoll Electronics Co., Ltd.         Sales of goods                                             722,873.75                         664,436.40


                                                                    110 / 121
                      上工申贝(集团)股份有限公司
                                                                                                                          Annual Report 2018
                      Shang Gong Group Co., Ltd

      B. Associated trusteeship/contracting and entrusted management/outsourcing
      Not applicable.
      C. Related lease
      The Company acted as lessor:
                 Name of leasee                     Type of leased asset     Rental recognized in report period    Rental recognized in last period
Shanghai Hirose Precision Industrial Co., Ltd. Machinery equipment                                  250,000.00                          250,000.00
      D. Related guarantees
      Not applicable.
      E. Related party funds lending
      Not applicable.
      F. Related party assets transfer and debt reorganization
      Not applicable.
      G. Compensation for key managers
                                                                                                                  Unit: RMB 10,000 YUAN
                  Item                                                         2018                                            2017
Compensation for key managers                                                                        434.55                                   638.57
     Note: In 2018, the Company's key management personnel include 10 directors, supervisors, presidents,
vice presidents and board secretary (17 in 2017).
      6)     Receivables and payables from related parties
      A.     Receivables
                                                                                 Ending Balance                          Beginning Balance
      Item                           Related party                                             Provision for                          Provision for
                                                                           Book balance                           Book balance
                                                                                                 bad debts                              bad debts
Accounts
receivable
                     Shanghai Fuji Xerox Co., Ltd.                          1,688,554.30           84,427.72        2,365,537.24        118,276.86
Accounts
receivable
                     Stoll Electronics Co., Ltd.                               57,950.27
                     Zhejiang Gemsy Mechanical and Electrical
Prepayment           Co., Ltd.
                                                                            6,147,650.83                            6,147,650.83
                     Zhejiang Gemsy Mechanical and Electrical
Other receivables
                     Co., Ltd.
                                                                              697,279.69         367,679.69           617,279.69
      B.     Payables
         Item                                      Related party                                 Ending Balance               Beginning Balance
Account payables            Stoll Electronics Co., Ltd.                                                   1,696,195.46                  1,630,680.70
Other payables              Shenzhen Yingning Venture Capital Co., Ltd.                                 35,116,900.00
Other payables              Tianjin Tongshang Software Co., Ltd.                                        24,810,600.00
Other payables              H. Stoll AG & Co. KG                                                        23,675,820.92
      7) Related party commitments
      Not applicable.
     13. Share payment
     Not applicable.
     14. Commitments and contingencies
     1) Important commitments
     Not applicable.
     2) Contingencies
     A. Important contingent events at the balance sheet date
     (1) Contingent liabilities formed by debt guarantees provided by the Company for its subsidiary DA AG
as of 31 December 2018
                Guarantee                    Guarantee      Commencement Date             Expiration Date of      Whether the Guarantee has       No


                                                                       111 / 121
                 上工申贝(集团)股份有限公司
                                                                                             Annual Report 2018
                 Shang Gong Group Co., Ltd

                                    Amount        of Guarantee       Guarantee           been Fulfilled or not   te
Industrial and Commercial   bank   EUR 7.878                        21st December                                No
                                               21st December 2015                   No
Shanghai Hongkou Branch            million                               2020                                    te
     Note 5: on 21st December 2015, the Company's wholly owned subsidiary, DAP Industrial AG, applied
to the Frankfurt Branch of ICBC for a loan of no more than 7.878 million euro so as to pay the acquisition
fee to Stoll KG. ICBC Shanghai Hongkou Branch issued a financing guarantee letter for the funds, and the
Company issued an unconditionally irrecoverable corporate letter of guarantee for self-using fix assets where
No.603 Dapu Road as counter guarantee for the abovementioned financing guarantee letter.
     In 2018, DAP Industrial AG merged and merged with DA AG and changed its name to DA AG. The
name of the financing guarantee was changed to DA AG. The financing guarantee provided by Industrial and
Commercial Bank of China Shanghai Hongkou Sbranch AND the counter guarantee provided by the
company continues to be valid.
     As of 31 December 2018, there is no outflow of economic benefits arising from the above
contingencies.
     (2) As of December 31, 2018, contingent liability from providing guarantee by SGG for SG Richpeace
     On November 22, 2018, SG Richpeace, a subsidiary of the Company, signed a ―Comprehensive Credit
Contract‖ with China Minsheng Bank Shanghai Branch. The company fulfills the repayment obligations
under the credit contract and provides a guarantee of up to RMB 60 million for SG Richpeace. The other
minority shareholders of SG Richpeace provided counter-guarantee for 35% of the Company's guarantee
with 35% stake of SG Richpeace.
     As of 31 December 2018, there is no outflow of economic benefits arising from the above
contingencies.
     (3) The Agreement to Increase Capital to Shanghai Shensy Enterprise Development Co., Ltd.
     According to the capital increase agreement of Shanghai Shensy Enterprise Development Co., Ltd., by
30 June 2018, if SHENSY has not realized IPO and listed independently in A shares market, the persons
acting in concert, Shanghai Pudong New Industrial Investment Co., Ltd., will be entitled to require the
Company and another shareholder, Zhang Ping, to repurchase all or some of the shares that Shanghai Pudong
New Industrial Investment Co., Ltd. holds in cash, within 3 months after it requests in writing. And assist it
in the approval process of State-owned Assets Supervision and Administration Commission, commercial
registration, etc. Per the agreement, the Company and Zhang Ping will respectively assume 50% of the above
mentioned amount, and the Company bears unconditional joint responsibility to repurchase the shares that
Shanghai Pudong New Industrial Investment Co., Ltd. holds.
     If Shanghai Pudong New Industrial Investment Co., Ltd. has not listed in A shares market by 30 June
2018, it has 6 months (e.g. before 31 December 2018) to request our company and Zhang Ping to repurchase
the shares which it holds in Shanghai Shensy Enterprise Development Co., Ltd.. If not, our company and
Zhang Ping will not assume the above mentioned repurchase responsibility.
     As of 30 June 2018, SHENSY has failed to complete its IPO and be listed on the A-shares independently.
The company has negotiated with Shanghai Pudong New Industrial Investment Co., Ltd. on repurchase
matters. The repurchase matters still need to complete the approval and listing of the state assets, so the


                                                        112 / 121
                 上工申贝(集团)股份有限公司
                                                                                                Annual Report 2018
                 Shang Gong Group Co., Ltd

parties have not signed a follow-up repurchase agreement on the repurchase. There is considerable
uncertainty in the share repurchase. Before the completion of the repurchase, Shanghai Pudong New
Industrial Investment Co., Ltd. will still maintain a concerted relationship with the company.
     (4) Arbitration on investment of 26% equity in H. Stoll AG & Co. KG
     Accounting to the Contract signed on 29th August 2015 by SGE, the calculation of share price is based
on the net assets of STOLL's audited consolidated statement in 2014, and the parties agreed that share price
will be adjusted according to the net assets of STOLL's audited consolidated statement in 2015 and related
clauses in the Contract. Now the parties have disputes on the calculation of net assets of STOLL's audited
consolidated statement in 2015 and the understanding of the relevant terms of the Contract, resulting in a
difference of approximately 4.26 million euro in the calculation of the price adjustment. SGE has received
the Application for Arbitration submitted by Michael Stoll, Corinna Stoll and other 10 limited partners of
STOLL KG on 20 July 2017. SGE will, in accordance with the terms of the contract, settle the dispute by
arbitration in accordance with German legal procedures.
     As of the date of this report, the arbitration is in process and with great uncertainty.
     (5) Shanghai Shensy Enterprise Development Co., Ltd., a second-level subsidiary of the Company,
borrowed 40,000,000.00 yuan from Bank of Communications Shanghai Baoshan Branch, borrowed RMB
54,900,000.00 from China Construction Bank Shanghai Baosteel Baoshan Branch, and borrowed RMB
10,000,000.00 from Shanghai Bank Fumin Branch. The third-level subsidiary Shanghai Shensy Kaile
Internet of Things Co., Ltd. provides joint liability guarantee.
     As of 31 December 2018, there is no outflow of economic benefits arising from the above guarantee.
     (6) Labor Arbitration and Pending Litigation with the Staff of Li Fuquan
     The family members of Li Fuquan, a employee of the company's subsidiary Shanghai Shensy Enterprise
Development Co., Ltd. Harbin Branch, submitted to the labor arbitration for work injury compensation. The
case has been terminated by the Labor and Personnel Dispute Arbitration Committee of the Harbin Foreign
Trade Zone, which was held on March 22, 2019. According to the HWLRZZ (2019) No. 2 Arbitral Report,
SHENSY Harbin Branch is required to paid Li Fuquan's family members various types of work-related
injury compensation totaled 702,720.00 yuan .
     Shanghai Shensy Enterprise Development Co., Ltd. Harbin Branch will apply to the Harbin
Intermediate People's Court for revocation of the above ruling, and has deducted the corresponding estimated
liabilities according to the amount of the arbitral award after deducting the prepaid compensation.
     (7) As of December 31, 2018, Shanghai Shensy Enterprise Development Co., Ltd., a second-tier
subsidiary of the Japanese company, provided contingent liabilities for the debt guarantee provided by the
third-level subsidiary Mudanjiang Kailehui Logistics Co., Ltd.
     The company's third-level subsidiary Mudanjiang Kailehui Logistics Co., Ltd. and ProLogis Financial
Leasing (Shanghai) Co., Ltd. signed a financing sale and leaseback contract. Shanghai Shensy Enterprise
Development Co., Ltd., a second-level subsidiary of the Company, is jointly and severally liable for all
payment obligations under the financing sale and leaseback contract.



                                                       113 / 121
                 上工申贝(集团)股份有限公司
                                                                                          Annual Report 2018
                 Shang Gong Group Co., Ltd

     As of December 31, 2018, Shanghai Shensy Enterprise Development Co., Ltd. has not yet experienced
the outflow of economic benefits due to the above guarantees, and the amount of financing leases that have
not yet been settled amounts to 383,176.52 yuan.


     15. Post balance sheet event
     1)   Important non-adjusting events
     ① Capital increase in SG Richpeace
     According to the agreement of the equity purchase agreement signed by the Company and other
shareholders of SG Richpeace in 2018, the completion of the equity delivery of SG Richpeace and the
settlement of all acquisitions After the related parties' remittances, all shareholders jointly increased the
capital of RMB 3,000 million in Richpeace, of which the company increased the capital by RMB 19.5 billion,
and the other shareholders increased the capital by RMB 10,500,000. As of the date of issuance of the
financial statements, all shareholders have completed the payment of all the capital increase, and Richpeace
has completed all the registration procedures related to the capital increase.
     ② Capital increase in Shanghai ShangGong Financial Leasing Co., Ltd.
      The Company and its subsidiary DA AG plans to jointly increase capital with Oriental Hengxin Capital
Holding Group Co., Ltd. to Shanghai ShangGong Financial Leasing Co., Ltd.; the Company will increase its
capital by USD 2.10 million, DA AG will increase its capital by USD 2.6 million, and Oriental Hengxin
Capital Holdings Group Co., Ltd.will increased its capital by USD 15.53 million. Upon completion of the
capital increase, Oriental Hengxin Capital Holdings Group Co., Ltd. will hold a 51.00% stake in Shanghai
ShangGong Financial Leasing Co., Ltd. The Company will lose control of Shanghai ShangGong Financial
Leasing Co., Ltd. and will no longer include Shanghai ShangGong Financial Leasing Co., Ltd. in the scope
of consolidation of the Company. As of the date of issuance of the financial statements, the capital increase
has not yet completed the required government filing or approval work and registration procedures, and the
capital increase of each shareholder has not been paid in place.
     ③ Equity incentive plan
     The Company plans to implement equity incentives to the company's directors, senior management and
other key personnel in business and management positions, in the form of stock options. At the time of
exercise, the Company will issue RMB A shares of common stock to the incentive object. The equity
incentive plan is valid for five years. The exercise period is 36 months after the grant of equity, and the lock
option period is 12 months after the stock option grant. The stock option is valid to meet the performance
requirements announced by the company. The equity incentive plan is to be awarded 13,204,200.00 stock
options, with a total of 318 people granted for the first time, and the exercise price is RMB 7.90/share.
     The equity incentive plan was approved by the 10th meeting of the 8th Board of Directors of the
Company on February 28, 2019, and was approved by the company's first extraordinary shareholders
meeting in 2019 on March 18, 2019. As of the date of issuance of the financial statements, the equity
incentive plan has not yet reached the exercise period.


                                                      114 / 121
                       上工申贝(集团)股份有限公司
                                                                                                                Annual Report 2018
                       Shang Gong Group Co., Ltd

       2)       Profit distribution
       According to the resolution of the Company’s 11th Meeting of the 8th Board of Directors on 12 April
2019, no dividends of 2018 will be distributed, neither the transferring of capital reserves into share capital.
       3)       Sales return
       Not applicable.
       4)       Others
       Not applicable.


       16. Other significant events
       1)       Correction of previous accounting errors
       Not applicable.
       2)       Debt reorganization
       Not applicable.
       3)       Asset replacement
       Not applicable.
       4)       Annuity plan
       Not applicable.
       5)       Discontinued operations
       Not applicable.
       6)       Division information
       A.       Basis for determining the report division
       According to the Company's development strategy, four report divisions are identified according to the
nature of the business: sewing equipment & intelligent equipment, logistics services, export trade and other
business segments. Each of the Company's reporting segments offers different products and services.


       B.       Report division’s financial information
                                 Sewing
                                                   Logistics       Export trade      Other business     Offset between
            Item                equipment                                                                                      Total
                                                service division     division          segments            divisions
                                 division
1. Operating income          2,730,956,602.44   762,944,769.75     101,416,874.14    107,956,220.41     502,746,725.65    3,200,527,741.09
Including:      External
                             2,250,341,508.42   762,944,769.75     101,171,704.50     86,069,758.42                       3,200,527,741.09
transaction income
Inter-segment
                              480,615,094.02                 -        245,169.64      21,886,461.99     502,746,725.65                 -
transaction income
2. Investment income
from associates and            -10,161,995.93                -                  -                -         2,810,722.97     -12,972,718.90
joint ventures
asset impairment losses        17,016,440.98        180,207.75        -768,073.82        974,523.30       -3,197,769.37     20,600,867.58
4. Depreciation        and
                               67,079,259.92      2,874,029.43        220,020.85      10,890,439.67                         81,063,749.87
amortization
5. Total profit               169,325,209.15     19,388,903.30       1,583,616.03     15,036,463.72        1,094,712.58    204,239,479.62
6. Income tax expenses         36,355,827.94      5,197,649.63                  -       4,905,207.25        668,849.15      45,789,835.67
7. Net profit                 132,969,381.21     14,191,253.67       1,583,616.03     10,131,256.47         425,863.43     158,449,643.95
8. Total assets              3,266,086,230.29   476,578,112.30      22,456,759.09   1,737,974,683.76   1,358,968,623.39   4,144,127,162.05
9. Total liabilities         1,848,822,323.49   215,656,190.44      15,074,207.66    169,713,658.31     617,094,885.46    1,632,171,494.44


                                                                    115 / 121
                          上工申贝(集团)股份有限公司
                                                                                                                                        Annual Report 2018
                          Shang Gong Group Co., Ltd

10. Other important
non-cash items


        17. Notes to mains items of the financial statements of the parent company
        1) Notes receivable and Accounts receivable
                          Item                                                 Ending Balance                                     Beginning Balance
Notes receivable                                                                                  8,713,253.21                                         18,619,880.00
Accounts receivable                                                                              40,853,861.26                                         36,846,572.06
                         Total                                                                   49,567,114.47                                         55,466,452.06
        Notes receivable
        A. Disclosure of classification of notes receivable

                        Item                                              Ending Balance                                          Beginning Balance
Bank Acceptance Bill                                                                             8,713,253.21                                          18,619,880.00
                       Total                                                                     8,713,253.21                                          18,619,880.00
     B. Notes receivable that the company has endorsed or discounted and has not yet expired on the
balance sheet date
                                                           Amount confirmed at the end of the                       Amount not confirmed at the end of the
                       Item
                                                                   reporting period                                           reporting period
Bank Acceptance Bill                                                              1,100,000.00
                       Total                                                                  1,100,000.00
        Accounts receivable
        A. Disclosure of classification of accounts receivable
                                                 Ending Balance                                                           Beginning Balance
                         Book balance              Provision for bad debts                            Book balance            Provision for bad debts
      Type
                                   Proportion                     Proportion     Book value                     Proportion                   Proportion     Book value
                       Amount                        Amount                                         Amount                     Amount
                                      (%)                             (%)                                          (%)                           (%)
Accounts
receivable with
significant single
amount and             15,224,682.99     14.25     10,457,069.39      68.68       4,767,613.60     15,115,630.80      13.88     5,561,028.32        36.79    9,554,602.48
provision for bad
debt made on an
individual basis
Accounts
receivable with
provision for bad
debt made on a
                       64,602,975.75     60.47     46,768,063.44      72.39      17,834,912.31     80,650,765.60      74.09   61,342,035.96         76.06   19,308,729.64
portfolio with
similar risk credit
characteristics
basis
Accounts
receivables with
insignificant
single amount
                       27,011,365.22     25.28      8,760,029.87      32.43      18,251,335.35     13,092,694.77      12.03     5,109,454.83        39.03    7,983,239.94
and provision for
bad debt made on
an individual
basis
       Total          106,839,023.96    100.00     65,985,162.70      61.76      40,853,861.26    108,859,091.17     100.00   72,012,519.11         66.15   36,846,572.06


     Accounts receivable with significant single amount and provision for bad debts made on an individual
basis at the end of report period
                                                                                          Ending Balance
Accounts receivable
    (By entity)                                                                                    Provision ratio
                               Accounts receivable            Provision for bad debts                                                Reason for provision
                                                                                                        (%)
Customer C                              5,570,630.90                           5,529,005.67                    99.25      Impaired according to the separate test
Customer D                              4,974,724.60                            248,736.23                         5.00   Impaired according to the separate test
Customer E                              4,679,327.49                           4,679,327.49                   100.00      Impaired according to the separate test
          Total                        15,224,682.99                       10,457,069.39                       68.68                            /

        Accounts receivable with provision for bad debt made using the aging analysis method among the

                                                                                   116 / 121
                        上工申贝(集团)股份有限公司
                                                                                                                     Annual Report 2018
                        Shang Gong Group Co., Ltd

portfolios:
                                                                                    Ending Balance
                  Aging
                                                Accounts receivable              Provision for bad debts                 Provision ratio
Within 1 year                                                18,688,560.79                       934,428.03                                  5.00
1 to 2 years                                                    96,464.02                         19,292.80                                 20.00
2 to 3 years                                                      7,216.67                         3,608.34                                 50.00
Over 3 years                                                 45,810,734.27                    45,810,734.27                                100.00
                   Total                                     64,602,975.75                    46,768,063.44                                 72.39
     B. Bad debt provision recovered or reversed in report period
     The amount of provision for bad debts was 49,948.84 yuan in current period; the amount of bad debt
provision recovered or reversed in the current period was 279,811.08 yuan.
      C.       Accounts receivable actually written off in current period
                                Item                                                           Write-off amount
Accounts receivable actually written off                                                                                         6,018,561.06
     Note: Due to the liquidation and cancellation of Shanghai SMPIC Photosensitive Material Factory, the
Company's President's Office Meeting agreed to write off the accounts receivable totaling RMB
3,436,227.61; the Company's President's Office Meeting agreed to write off the accounts receivable of the
industrial sewing machine branch that have been determined to be uncollectible and have been fully
withdrawn for bad debts totaling RMB 2,582,333.45.
      D.       Top five accounts receivable by the ending balance of the borrowers
                                                                                Ending Balance
        Company name
                                       Accounts receivable        Proportion in total accounts receivable (%)         Provision for bad debts
Customer A                                   11,530,775.39                                             10.79                   11,530,775.39
Customer B                                    7,480,189.67                                                 7.00                  7,480,189.67
Customer C                                    5,570,630.90                                                 5.21                  5,529,005.67
Customer D                                    4,974,724.60                                                 4.66                    248,736.23
Customer E                                    4,679,327.49                                                 4.38                  4,679,327.49
                Total                        34,235,648.05                                             32.04                   29,468,034.45
      E. Receivables derecognized due to transfer of financial assets
      Not applicable.
      F. Transfer of accounts receivable and continued involvement in the formation of assets, liabilities
      Not applicable.
      2)       Other receivables
                        Item                                    Ending Balance                                Beginning Balance
Interest receivable
Dividends receivable                                                            1,050,356.92
Other receivables                                                             153,706,592.29                                  107,954,125.03
                        Total                                                 154,756,949.21                                  107,954,125.03
      Interest receivable
      Not applicable.
      Dividends receivable
                  Investee                                         Ending Balance                                 Beginning Balance
Shanghai ShangGong Butterfly                Sewin
                                                                                 1,050,356.92
Machine Co., Ltd.
                    Total                                                        1,050,356.92
      Other receivables

                                                                    117 / 121
                             上工申贝(集团)股份有限公司
                                                                                                                                     Annual Report 2018
                             Shang Gong Group Co., Ltd

        A.      Disclosure of classification of other receivables
                                               Ending Balance                                                       Beginning Balance
     Type                Book balance            Provision for bad debts                           Book balance           Provision for bad debts
                        Amount        %            Amount            %
                                                                              Book Value          Amount        %           Amount            %
                                                                                                                                                    Book Value
Other
receivables with
significant
single amount
and     provision
                      60,016,216.10    25.37 60,016,216.10 100.00                              61,325,622.45 32.26 61,325,622.45 100.00
for bad debt
made on an
individual basis
Other
receivables with
provision      for
bad debt made
on a portfolio       172,013,467.01    72.71 22,818,725.66         13.27 149,194,741.35 125,819,372.64 66.20 20,769,399.12 16.51 105,049,973.52
with similar risk
credit
characteristics
basis
Other
receivables with
insignificant
single amount
and     provision
                       4,529,575.94     1.92       17,725.00         0.39     4,511,850.94       2,925,886.51    1.54        21,735.00       0.74    2,904,151.51
for bad debt
made on an
individual basis
     Total           236,559,259.05 100.00 82,852,666.76           35.02 153,706,592.29 190,070,881.60 100.00 82,116,756.57 43.20 107,954,125.03
     Other receivables with significant single amount and provision for bad debts made on an individual
basis at the end of report period
                                                                                                 Ending Balance
    Other receivables (By entity)                                            Provision for bad       Proportion of provision
                                                Other receivables                                                                       Reason for provision
                                                                                   debts                      (%)
                                                                                                                                   Impaired according to the
Customer C                                         46,028,699.80                46,028,699.80                           100.00 separate test
                                                                                                                                   Impaired according to the
Customer E                                         13,987,516.30                13,987,516.30                           100.00 separate test
                     Total                         60,016,216.10                60,016,216.10                           100.00               /
     Other receivables with provision for bad debts made using the aging analysis method among those
portfolios
                                                                                                         Ending Balance
                              Aging                                                                                                     Proportion of Provision
                                                                           Other Receivables          Provision for Bad Debts
                                                                                                                                                 (%)
Within 1 year                                                                  153,677,376.65                    7,683,868.82                               5.00
1 to 2 years                                                                       902,835.50                       180,567.10                             20.00
2 to 3 years                                                                       185,896.00                        92,948.00                             50.00
Over 3 years                                                                    14,861,341.74                   14,861,341.74                             100.00
                               Total                                           169,627,449.89                   22,818,725.66                              13.45
        Other receivables with provision for bad debts made using other methods among those portfolios
                                                                                                                                                Proportion of
                          Name                                              Amound                       Provision for bad debts
                                                                                                                                                provision (%)
Receivables from government agencies
                                                                                   1,547,836.20
and institutions
Cash pledge and security deposit                                                     181,200.00
Employee Standby Fund and Employee
                                                                                     656,980.92
Collection and Payment
                  Total                                                            2,386,017.12
     B. Other receivables classified by nature of payment
     Not applicable.
     C. Withdrawal, recovery or reversal of provision for bad debt
     The provision for bad debts in current period was 1,275,590.18 yuan, and the amount of provision for
bad debt recovered or reversed this period was 0 yuan.

                                                                                 118 / 121
                       上工申贝(集团)股份有限公司
                                                                                                                      Annual Report 2018
                       Shang Gong Group Co., Ltd

      D.       Other receivables actually written off in current period
                                 Item                                                              Write off amount
Other receivables actually written off                                                                                              534,288.45
      E.       Top five other receivables by the ending balance of the borrowers
                                                                                                                               Ending balance of
                                                                                                   Proportion in total other
   Company name             Nature of fund        Ending balance                 Aging                                         provision for bad
                                                                                                       receivable (%)
                                                                                                                                     debts
Customer A               Current accounts         65,851,054.68      Within 1 year                                    27.84       3,292,552.73
Customer B               Current accounts         51,500,000.00      Within 1 year                                    21.77       2,575,000.00
                                                                     From within 1 year to
Customer C               Current accounts         46,028,699.80      over 3 years
                                                                                                                      19.46      46,028,699.80
Customer D               Current accounts         20,544,256.86      Within 1 year                                      8.68      1,027,212.84
                                                                     From within 1 year to
Customer E               Current accounts         13,987,516.30      over 3 years
                                                                                                                        5.91     13,987,516.30
       Total                      /               197,911,527.64                  /                                   83.66      66,910,981.67
      F. Receivables involving government grants
      Not applicable.
      G. Other receivables derecognized due to the transfer of financial assets
      Not applicable.
      H. Transfer of other receivables and continued involvement in the formation of assets, liabilities
      Not applicable.
      3) Long-term equity investments
                                            Ending Balance                                              Beginning Balance
       Item                                   Provision for                                                  Provision for
                         Book balance                               Book value           Book balance                            Book value
                                               impairment                                                     impairment
Investment        in
subsidiaries
                        801,448,021.03        5,500,000.00         795,948,021.03        644,810,221.03      5,500,000.00      639,310,221.03
       Total            801,448,021.03        5,500,000.00         795,948,021.03        644,810,221.03      5,500,000.00      639,310,221.03
      A.       Investment in subsidiaries
                                                                                                              Provision for
                                                                           Decrease
                                                                                                               impairment      Ending balance of
                                      Beginning          Increase in          in
           Name                                                                           Ending balance       provided in       provision for
                                       balance          current period      current
                                                                                                                 current          impairment
                                                                            period
                                                                                                                 period
DAP (Shanghai) Co., Ltd.              59,046,675.86                                          59,046,675.86
Shanghai Shanggong
Butterfly Sewing Machines             79,000,000.00                                          79,000,000.00
Co., Ltd
Duerkopp Adler AG                  142,370,693.64                                          142,370,693.64
Shanghai SMPIC Imp. &
                                      12,000,000.00                                          12,000,000.00
Exp. Co., Ltd.
Shanghai     SGSB      Asset
                                      60,000,000.00                                          60,000,000.00                          5,000,000.00
Management Co., Ltd.
Shanghai SGSB Electronics
                                      20,000,000.00                                          20,000,000.00
Co., Ltd
Shanghai Fengjian Property
                                         500,000.00                                            500,000.00                            500,000.00
Co., Ltd.
Shanghai Shensy Enterprise
                                      86,083,077.64                                          86,083,077.64
Development Co., Ltd.
Zhejiang         ShangGong
                                   129,600,000.00                                          129,600,000.00
GEMSY CO., LTD.
Shanghai         ShangGong
                                      33,452,430.00                                          33,452,430.00
Financial Leasing Co.,Ltd.
PFAFF Industrial Sewing
Machine       (Zhangjiagang)          12,553,070.89                                          12,553,070.89
Co., Ltd.
DAP Vietnam Co., Ltd.                    204,273.00                                            204,273.00
ShangGong            Sewing
Equipment (Zhejiang) Co.,             10,000,000.00                                          10,000,000.00
Ltd.
Dürkopp Adler Industrial
                                                         20,000,000.00                       20,000,000.00
Manufacturing (Shanghai)

                                                                       119 / 121
                      上工申贝(集团)股份有限公司
                                                                                                                      Annual Report 2018
                      Shang Gong Group Co., Ltd

Co., Ltd.
TIANJIN RICHPEACE AI
                                                          136,637,800.00                   136,637,800.00
CO., LIMITED
          Total                      644,810,221.03       156,637,800.00                   801,448,021.03                           5,500,000.00
      B. Investment in associates and joint ventures
      Not applicable.
      4)     Operating income and operating costs
                                                                      2018                                             2017
                   Item
                                                         Income                     Cost                     Income                  Cost
Main Business                                           325,847,704.74           244,390,700.79           167,723,172.35      124,224,886.12
Other Business                                           42,112,962.53             14,808,501.40            39,895,020.71        15,258,267.48
                  Total                                 367,960,667.27           259,199,202.19           207,618,193.06      139,483,153.60
      5)     Investment income
                             Item                                                  2018                                     2017
Long-term equity investment measured at cost method                                        1,050,356.92                            4,000,000.00
Long-term equity investment measured at equity method
Investment income from disposal of long-term equity
investments
Investment income from holding of financial assets measured
at fair value through current profit and loss
Investment income from disposal of financial assets measured
at fair value through current profit and loss
                                                                                              45,148.42                              16,690.26
Investment income from holding of available-for-sale
financial assets
Investment income from holding of available-for-sale
financial assets
                                                                                         12,526,301.81                           16,249,837.40
Investment income from disposal of available-for-sale
financial assets
Gains from re-measurement of residual equity at fair value
after the loss of control right
Others
Long-term equity investment measured at cost method                                      13,550,203.90                           10,441,937.48
                             Total                                                       27,172,011.05                           30,708,465.14
      18. Supplementary information
      1) Extraordinary profit or loss for current period
                                              Item                                                            Amount                   Note
Profits or losses from disposal of non-current assets                                                            -1,285,095.62
Tax returns, deduction and exemption approved beyond the authority or without official
approval documents
Government grants included in current profits and losses (except for government grants closely
                                                                                                                  9,897,636.07
related to the enterprise business, obtained by quota or quantity at unified state standards)
Payment for use of state funds received from non-financial institutions recorded in current
profits and losses
Gains from the difference between the investment costs of acquisition of subsidiaries,
associates and joint ventures and share in the net fair value of the identifiable assets of the
investee when investing
Gains or losses from non-monetary asset exchange
Gains or losses from entrusting the investments or management of asset
Impairment provision for force majeure such as natural calamities
Gains or losses from debt restructuring
Restructure expenses, such as the compensation for employee relocation and integration costs
Gains or losses from transactions with obvious unfair transaction price
Year-to-date net profits or losses of subsidiaries arising from business combinations under
common control
Profits or losses arising from contingencies not related to the company’s normal business
Except for effective hedging business related to the normal business of the company, profits or
                                                                                                                 12,601,058.35
losses from fair value changes in held-for-trading financial assets and held-for-trading financial


                                                                       120 / 121
                      上工申贝(集团)股份有限公司
                                                                                                                Annual Report 2018
                      Shang Gong Group Co., Ltd

liabilities, and investment income from disposal of held-for-trading financial assets,
held-for-trading financial liabilities and available-for-sale financial assets
Reversal of the impairment provision for receivables subject to separate impairment test
Profits or losses from entrusted loans                                                                          603,626.80
Profits or losses from fair value changes in investment property subsequently calculated with
the fair value mode
Impacts of one-time adjusting the current profits or losses in accordance with requirements of
tax and accounting laws and regulations on the current profits and losses
Custodian income from entrusted management
Other non-operating income and expenditure except for the above items                                         4,659,776.73
Other profits or losses which can be deemed as non-recurring profits or losses
Income tax effects                                                                                           -6,037,254.76
Minority interest effects                                                                                    -4,268,282.88
                                             Total                                                           16,171,464.69
      2)     Return on equity and earnings per share
                                                Weighted average return                            Earnings per share
           Profit in Report Period
                                                    on equity (%)                Basic earnings per share      Diluted earnings per share
Net profit attributable to common
shareholders of the company
                                                                  6.3561                            0.2567                          0.2567
Net profit attributable to common
shareholders of the company after                                 5.6262                            0.2272                          0.2272
deducting non-recurring gains and losses
      3) Differences in accounting data under domestic and overseas accounting standards
      Not applicable.



                                         Chapter 12 Documents for Reference

     1. Financial Statements signed by the legal representative, chief accountant and
accounting manager and sealed by the Company.
     2. Audit report signed by certified public attantants and sealed by the accounting
firm.
     3. Original documentation and announcements published by the Company in the
newspaper appointed by CSRC within the report period.


                                                                                                      Shang Gong Group Co., Ltd.
                                                                                     Chairman of Board of Directors: Zhang Min
                                                                                                                        April 12, 2019




                                                                     121 / 121