Shang Gong Group Co., Ltd Semi-annual Report 2017 Important Notes 1. The Board of Directors, the Board of Supervisors, and all the directors, supervisors and senior managers guarantee that there are no false statement, vital misunderstandings or important omission in this semi-annual report, and hold both individual and joint legal liability for the authenticity, accuracy and integrity of its contents. 2. All the directors of Shang Gong Group Co., Ltd attended the meeting of the Board of Directors. 3. The semi-annual report has not been audited 4. Zhang Min, Chairman of the Company, Li Jiaming, the principal in charge of the accounting, and Zhao Lixin, Chief of Accounting Affairs, make the pledge for the authenticity, accuracy and integrity of the attached financial report. 5. Plan of Profit Distribution or Transfer of Reserves Deliberated by the Board During the report period, the Company did not distribute profit or convert capital reserve into share capital. 6. The Risk of Forward-looking Statements The Company’s future plan, development strategy and other forward-looking statements in this semi-annual report do not constitute a substantial commitment to the Company’s investors. 7. There was no occupation of fund of the Company occurred for non-operating use by holding shareholders and its related parties. 8. There was no external guarantee against the rules and regulations of the Company. 9. Major Risk Warning The Company has described in detail the risks faced by the Company in this semi-annual report. For details see “Discussion and Analysis on Business Operation” and other relevant chapters in this report. 10. The English version of this semi-annual report is for reference only. In case of discrepancy between the English version and the Chinese version, the Chinese shall prevail. 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. CONTENTS Chapter 1 Definition ............................................................................................................................................. 2 Chapter 2 Company Profile and Main Financial Index ........................................................................................ 2 Chapter 3 Summary of Company Business .......................................................................................................... 4 Chapter 4 Discussion and Analysis on Business Operation .................................................................................. 6 Chapter 5 Important Events ................................................................................................................................ 11 Chapter 6 Status of Shareholders and Share Capital Changes of Common Stock .............................................. 15 Chapter 7 Relevant Situation about Preferred Shares ......................................................................................... 17 Chapter 8 Situation about Directors, Supervisors and Senior Managers ............................................................ 17 Chapter 9 Corporate Bonds ................................................................................................................................. 19 Chapter 10 Financial Report ............................................................................................................................... 20 Chapter 11 For Reference ................................................................................................................................... 96 1 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Chapter 1 Definition As used in this report, the following terms have the following meanings unless the context requires otherwise: Definition of Common Terms ShangGong Group, SGG, the refer to Shang Gong Group Co., Ltd. Company PKFR refers to Shanghai Puke Flyingman Investment Co., Ltd State-owned Assets Supervision and Administration Commission of Shanghai Pudong SASAC refers to Pudong New Area People's Government ShangGong Europe, SGE refer to ShangGong (Europe) Holding Corp. GmbH DA AG refers to Dürkopp Adler AG PFAFF GmbH refers to PFAFF Industriesysteme und Maschinen GmbH KSL refers to PFAFF Industriesysteme und Maschinen GmbH Zweigniederlassung KSL STOLL KG refers to H. Stoll AG & Co. KG DAPSH refers to DAP (Shanghai) Co., Ltd. ShangGong GEMSY, SG refers to ShangGong GEMSY CO., LTD. GEMSY SG Butterfly refers to Shanghai Shanggong & Butterfly Sewing machine Co., Ltd. SHENSY refers to Shanghai Shensy Enterprise Development Co., Ltd. DAP Vietnam refers to DAP Vietnam Co., Ltd. CSRC refers to China Securities Regulatory Commission Report period refers to From January 1, 2016 to December 31, 2016 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 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 Company Name in English Shang Gong Group Co., Ltd Abbreviation of the Company Name in English ShangGong Group Legal Representative of the Company Zhang Min 2. Contact Information Secretary of Board of Directors Representative of Securities Affairs Name Zhou Yongqiang Shen Lijie No. 1566 New Jinqiao Road, Pudong New Area, No. 1566 New Jinqiao Road, Pudong New Area, Address Shanghai Shanghai Telephone 021-68407515 021-68407700-437 Fax 021-63302939 021-63302939 Email zyq@sgsbgroup.com shenlj@sgsbgroup.com 3. Basic Situation Introduction Room A-D, 12th Floor, Orient Mansion, No. 1500, Century Avenue, Registered Address of the Company China (Shanghai) Pilot Free Trade Zone Postal Code of Registered Address 200122 Office Address of the Company No. 1566 New Jinqiao Road, Pudong New Area, Shanghai 2 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Postal Code of Office Address 201206 Website http://www.sgsbgroup.com Email 600843@sgsbgroup.com 4. Information Disclosure and Place for Consulting Shanghai Securities News Newspaper Selected by the Company for Information Disclosure Hong Kong Commercial Daily Website Appointed by CSRC for Publishing Semi-annual Report http://www.sse.com.cn Lodging Address of Semi-annual Report of the Company Office of the Company 5. Company Stock Type Stock Exchange Stock Abbreviation Stock Code A Share Shanghai Stock Exchange SGSB 600843 B Share Shanghai Stock Exchange SGBG 900924 6. Main Accounting Data and Financial Index 6.1 Main Accounting Data Unit: Yuan, Currency: RMB From January 2017 to From January 2016 to Main Accounting Data Increase/Decrease (%) June 2017 June 2016 Operating income 1,532,562,601.12 1,359,342,529.45 12.74 Net profit attributable to shareholders of listed 125,980,892.71 101,164,717.70 24.53 company Net profit attributable to shareholders of listed 113,282,323.52 95,925,846.84 18.09 company after non-recurrent account profit/loss Net cash flow from operating activities -59,790,323.47 -45,943,085.71 N/A 30th June 2017 31st December 2016 Increase/Decrease (%) Net assets attributable to shareholders of listed 2,065,224,718.29 1,916,349,381.88 7.77 company Total assets 3,636,741,153.10 3,506,172,981.71 3.72 6.2 Main Financial Index From January 2017 to From January 2016 to Main Financial Index Increase/Decrease (%) June 2017 June 2016 Basic earnings per share (yuan/share) 0.2296 0.1844 24.51 Diluted earnings per share (yuan/share) 0.2296 0.1844 24.51 Basic EPS after non-recurrent account profit/loss 0.2065 0.1749 18.07 (yuan/share) Weighted rate of return on net assets (%) 6.3648 5.5425 Increase 0.82 percent Weighted rate of return on net assets after 5.7232 5.2555 Increase 0.47 percent non-recurrent account profit/loss (%) 7. Differences in Accounting Data between Domestic and Foreign Accounting Standards Not applicable. 8. Items and Amount of Non-recurring Profit and Loss Unit: Yuan, Currency: RMB Item Amount Profits and losses from disposal of non-current assets 9,747,624.59 Government subsidies recorded in the current profit and loss 2,642,975.59 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 2,403,933.60 liabilities, and investment income from disposal of trading financial assets, trading financial liabilities and available-for-sale financial assets 3 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Item Amount Other non-operating income and expenditure except the above-said items -301,892.86 Impact on minority interests -1,086,985.02 Impact on income tax -707,086.71 Total 12,698,569.19 Chapter 3 Summary of Company Business 1. The Company’s Main Business, Business Model in the Report Period and Industry Situation During the report period, the Company's main business is sewing equipment manufacturing industry. The Company’s business also involves knitting machine, office machinery, film materials, commerce and trade, and logistics services. The Company produced sewing machines including industrial sewing machines, household sewing machines and customized industrial machines for special purpose. The Company adheres to the globalization of business, implement unified management of sales, adheres to stratified professional multi-brand marketing strategy. The Company operates a gradient division of labour throughout the Eurasian production base, occupying the high-end global market for sewing equipment with leading technology. At the same time, the Company focused on creating R & D and marketing centres in Shanghai and deepening the production base in Jiangsu and Zhejiang in China. In recent years, through the implementation of mergers and acquisitions at home and abroad and the reorganization and integration of subsidiaries, synergies have gradually emerged, and 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. After 150 years of development, at present the world sewing machine industry development centre has been transferred to the Asian region like China and Japan, and gradually formed tripartite confrontation pattern between China, Germany and Japan. China Sewing Machinery Association statistics show that total operating income of the industry’s top 100 backbone machine manufacturers from January to June in 2016 is 9,246 million yuan, an increase of 16.55%; Total profit is 830 million yuan, an increase of 61.74%; Sewing machine output and sales grew by 25.36% and 20.40% respectively. In the first half of 2017, the sewing machinery industry in our country maintained a restorative growth, showing a market trend of "booming supply and demand". 2. Description of Major Changes in the Main Assets of the Company during the Report Period As of 30th June 2017, the amount of construction in progress is 33,559,198.84 yuan, comparing to the balance of 20,199,928.64 yuan as of 31st December 2016, increased by 66.14%. It is mainly due to the increase of expense in sewing equipment project and workshop reconstruction ng project of the Company's overseas subsidiaries. 4 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. The Company's overseas assets amounted to 1,901,371.50 yuan, accounting for 52.3% of the total assets. The Company's overseas assets mainly come from the overseas acquisitions and business growth of subsidiaries overseas. The Company acquired DA AG in Germany in 2005, acquired PFAFF GmbH and KSL in Germany 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 controlled German DA AG, one of the famous sewing machine manufacturing companies in the world with more than 150 years history, PFAFF GmbH, a famous sewing equipment manufacturer with 150 years history, and PFAFF KSL Branch, a company with the world's top sewing technology. In the report period, the Company continued to promote the integration of global resources, and further promote the integration of SGE. The Company's core competitiveness is further consolidated and enhanced, and the foundation for sustainable and healthy development of the Company is further consolidated. The core competence of the Company is mainly shown in the following aspects: (1) Strong Technological Research and Development Capability The Company highly attaches importance to the construction of technological research and development capabilities, which have become the important force driving the development of the Company. The Company has owned a powerful technological research and development team and had the complete and efficient scientific and technological innovation system, the leading sewing machine design plan and the first class assessment method for testing sewing machines in the world. The research and development of Industrial 4.0, which has been developed by the R & D team, has made preliminary achievements. ShangGong Technology Centre is the city level of research and development centre in Shanghai, and has the strong digestion and absorption and supporting development capability. (2) Advanced Technology Advantage The Company has the world’s high-end intelligent and 3D sewing technology, and the Company is a global leader in special sewing machine for medium or thick materials, garment automatic sewing unit, robot 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 emerging fields, such as automobile, environmental protection, aeronautics and astronautics and renewable energy, etc. In many fields, such as automobile airbags, filters protecting environment, light carbon fiber structure for plane, etc., the sewing application technology has the absolute competition advantage, and especially, it originally created the 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 Through overseas acquisition, 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 98 years’ history, Bee and Flyingman, and Shanggong brand with more than 50 years’ history. In recent years, the company is cultivating industrial machine brands, such as SG GEMSY, Mauser and so on. These brands have a high recognition and reputation in the sewing machine industry. The products of the Company focus on 5 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. smart, modularized and highly efficient automatic sewing unit and other sewing equipment with integrated machinery and electronics, covering various advanced technologies in the field of high-end sewing equipment, and the Company holds the leading position in the segmented market of sewing equipment. (4) Powerful 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. (5) Rich Internationalized Operation and Management Experience Since 2005, the Company has started to implement strategies of “GOING OUT”, and after conducting the internationalized operation of the main business, gradually cultured an operation and management team accumulating a great deal of experience in cross-border operation and management. Chapter 4 Discussion and Analysis on Business Operation 1. Discussion and Analysis of Operations China's economy continued steady expansion in the first half of 2017 with GDP up 6.9 percent year on year. The economy keeps growing at a rapid pace while manufacturing is moving towards the middle and high levels In the first half of 2017, China's sewing machinery industry maintained a high growth rate of recovery, the export decline continued to narrow; economic performance improved significantly, and the industry’s steady advancement situation was further consolidated. In the first half of 2017, domestic sewing industry market is in recovery, so the Company vigorously improved production capacity, promoted sales, grasped R&D, and continued to maintain a good momentum of development. The Company has accomplished more than 50% annual tasks in the first half of 2017, and greatly improved operating income, operating profit and other major financial indicators. During the report period, the Company continued to grow steadily and realized operating income of 1,532 million yuan, up 12.74% year on year; operating profit was 173 million yuan, an increase of 11.65% year on year; net profit attributable to shareholders of listed companies was 126 million yuan, an increase of 24.53% year on year; Net profit attributable to shareholders of listed companies after deducting non-recurring gains and losses increased by 18.09% year on year. Influenced by the seasonal demand of downstream garment industry and the supply-side reform, in the first half of 2017, the Company sewing equipment business at home and abroad is good. Industrial machine sales grew 39.6% year on year; the production subsidiaries increased production efficiency to overcome the difficulties of production capacity, the output growth of industrial machine is 23% year on year; household machine sales increased by 31.1%, of which the Butterfly traditional household sewing machine exports grew faster, up to 42.7%; multi-functional household sewing machine also realized 5.1% growth. The Company's operating income in the modern service sector grew by 8.3%, and operating profit decreased 6 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. by 38.5%. Business scale growth is mainly caused by logistics service business growth of SHENSY; operating profit basically reached half of the budget, but growth ability is slightly insufficient. In the report period, STOLL KG and Shanghai Fuji Xerox Co., Ltd., both invested by the Company, were in normal operation and good efficiency. This year is the first year after the Company fulfilled mixed ownership reform under the guidance of state-owned enterprise reform spirit since 18th CPC National Congress. According to the 13th Five-Year Plan and annual business plan, in the first half of 2017, the Company carried out the following key tasks: (1) Increase R & D investment, improve core competitiveness The Company continued to adhere to the innovation-driven development strategy, and increased R & D investment in researching the application of industrial 4.0 in sewing equipment to improve intelligence and network application level of sewing equipment. The Company won 2017 Texprocess Innovation Award for “QONDAC 4.0”, which was appreciated by the industry. In China, The Company strengthened the R & D team, improved the ability of independent innovation while accelerating the introduction and absorption of advanced technology in Germany. The Company updated some R & D software platform, product reliability test equipment, intelligent information data acquisition equipment and test equipment to further shorten the new product development Cycle and improve product quality. During the report period, the Company obtained more than ten invention patents. (2) Optimize the global allocation of resources, vigorously develop China Manufacturing In the first half of 2017, the Company continued to make great efforts to develop China manufacturing. With the help of the "Eurasian linkage" strategy, the Company fully tapped the technological advantages of DA AG and PFAFF GmbH, and promoted the development of the three major production bases in China. In the report period, Shanghai Nanxiang Base (DA Manufacturing as main body), Zhangjiagang Base (PFAFF Zhangjiagang as main body), and ShangGong GEMSY Taizhou Base have achieved good development. DA Manufacturing and PFAFF Zhangjiagang ceased to lose and began to turn out a profit; operating profit of ShangGong GEMSY increased by 1509% year on year. In order to promote the optimization of the Company’s global resources and realize the medium and long term goals of developing China manufacturing, some overseas advanced technologies and products are being transferred to China. (3) Continue to promote internal integration, improve operational efficiency In the first half of 2017, Companies continue to promote internal integration and accelerate the overall development. During the report period, SGE and its subsidiaries further implemented the integration and optimized the internal competition mechanism. Meanwhile, in order to enhance profitability of the parent company and further enhance operational efficiency of the Company, related work about absorbing DAPSH and ShangGong Butterfly was also steadily advancing. According to the needs of market-oriented development, some departments of the Company were set up and the functions of some departments were adjusted. In this way, the Company could enhance the sales and operation control ability of the parent company, and create favourable conditions for improving the overall operation efficiency and profitability. (5) Explore market mechanism, constantly improve corporate governance ability 7 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. After completing the reform of the mixed ownership system, the Company has changed from a state-owned enterprise to a listed company with no actual controller. Facing the new situation, development and challenge coexist, the Company continuously improved the governance ability, further standardize the operation of the Company, and optimize the organizational management framework. During the report period, the Company successfully completed the re-election of directors and supervisors, and hired the management team in April. Under the leadership of the new board of directors and senior management, the Company shall continue to deepen reform, and actively explore the market-oriented operation mechanism, promote the transition of operation system, and constantly perfect the effective ways for sustainable development. 2.1 Main Business Analysis 2.1.1 Analysis of Changes of Items in Financial Statement Unit: Yuan, Currency: RMB From 1st January 2017 From 1st January 2016 Variable Item Reason to 30th June 2017 to 30th June 2016 Proportion (%) Operating income 1,532,562,601.12 1,359,342,529.45 12.74 Note 1 Operating cost 1,088,801,959.30 954,500,289.41 14.07 Note 2 Selling expenses 141,412,181.17 124,035,260.82 14.01 Note 3 General and administration expenses 143,922,099.95 131,096,375.43 9.78 Note 4 Finance expenses -6,849,775.62 10,089,517.50 -167.89 Note 5 Net cash flow from operating activities -59,790,323.47 -45,943,085.71 -30.14 Note 6 Net cash flow from investing activities -43,334,008.59 -155,320,334.25 72.10 Note 7 Net cash flow from financing activities -20,766,385.53 35,222,499.79 -158.96 Note 8 Research and development expenditures 41,659,397.60 32,046,934.73 29.99 Note 9 Impact of exchange rate changes on cash and 22,569,433.51 15,358,918.84 46.95 Note 10 cash equivalents Note 1: Mainly caused by the increase of sewing equipment and logistics services revenue year on year. Note 2: Mainly caused by the corresponding increase of cost resulting from the year-on-year increase of operating income. Note 3: Mainly caused by the corresponding increase of selling expenses resulting from the year-on-year increase of operating income. Note 4: Mainly caused by the increase of research and development costs year on year. Note 5: Mainly caused by the increase of exchange gains year on year. Note 6: Mainly caused by the increase of tax paid, the decrease of refunds of taxes and the increase of cash paid to and for the employees. Note 7: Mainly caused by the decrease of investment in 26% equity of STOLL KG by SGE year on year. Note 8: Mainly caused by the increase of net repayment of bank borrowings year on year. Note 9: Mainly caused by the increase of expenditure of R&D project expensed by SGE year on year. Note 10: Mainly caused by euro exchange rate changes. 2.1.2 Others 2.1.2.1 A detailed Description of Significant Changes in the Composition of the Company's Profits or the Source of Profits Not applicable 2.1.2.2 Others Unit: Yuan, Currency: RMB 8 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Operating Gross Operating Gross Margin Income Industry Operating Income Operating Cost Margin Cost Increase/ Increase/ Decrease Increase/ (%) Decrease (%) (%) Decrease (%) Sewing Decrease 2.43 942,089,965.90 566,795,268.81 39.84 15.25 20.11 equipment percent Logistic Decrease 1.53 397,739,165.33 365,723,195.49 8.05 20.14 22.17 service percent Export trade 102,816,302.72 100,045,541.14 2.69 -14.69 -15.00 Increase 0.35 percent Office equipment 28,080,276.16 23,384,707.01 16.72 -23.08 -24.95 Increase 2.07 percent and film materials Decrease 14.24 Others 4,644,251.56 3,019,857.82 34.98 -46.86 -31.96 percent Decrease 1.43 Total 1,475,369,961.67 1,058,968,570.27 28.22 12.26 14.54 percent Operating Income Increase/ Decrease Region Operating Income (%) Domestic 874,719,970.00 14.24 Overseas 714,871,731.60 9.02 2.2 Explanation of Significant Changes in Profit Caused by Non-main Business Unit: Yuan, Currency: RMB From 1st January From 1st January Increase / Increase / Item 2017 to 30th June 2016 to 30th June Reason Decrease Decrease (%) 2017 2016 Taxes and surcharges 5,994,544.14 4,180,944.00 1,813,600.14 43.38 Note 1 Financial expense -6,849,775.62 10,089,517.50 -16,939,293.12 -167.89 Note 2 Assets impairment loss 4,522,446.97 -1,574,549.62 6,096,996.59 387.22 Note 3 Non-operating income 12,489,008.12 7,659,396.08 4,829,612.04 63.05 Note 4 Non-operating expense 400,300.80 3,300,707.74 -2,900,406.94 -87.87 Note 5 Net after tax of other consolidated 30,819,765.91 -21,624,435.26 52,444,201.17 242.52 Note 6 income Note 1: Mainly caused by implementing the " Value-added Tax Accounting Regulations " (Accounting [2016] No. 22). Note 2: Mainly caused by the increase of exchange gains year on year. Note 3: Mainly caused by the increase of provision for diminution in value of inventories and provision for bad debts of accounts receivable year on year. Note 4: Mainly caused by the increase of housing relocation compensation income year on year. Note 5: Mainly caused by the decrease of Loss on disposal of fixed assets year on year. Note 6: Mainly caused by the increase of profit and loss of fair value of available-for-sale financial assets and translation balance of foreign currency financial statements year on year. 2.3 Analysis on Assets and Liabilities Unit: Yuan, Currency: RMB Ratio of Ratio of Ending Ending Ending Balance Ending Balance Increase / Balance to Balance to Item (30th June (31st December Decrease Reason Total Assets Total Assets 2017) 2016) (%) ((30th June (31st December 2017) (%) 2016) (%) Mainly due to the Construction 33,559,198.84 0.92 20,199,928.64 0.58 66.14 increase of expense in in progress sewing equipment project 9 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. and workshop reconstruction ng project of the Company's overseas subsidiaries. Mainly due to enterprise Taxes and income tax unpaid as of surcharges 13,263,952.53 0.36 54,740,867.60 1.56 -75.77 31st December 2016 of payable subsidiaries overseas paid in current period Mainly due to the written-off of original Other current 437,625.10 0.01 808,706.39 0.02 -45.89 recorded interest by liabilities subsidiaries overseas and rental fees. 2.4 Analysis of Investment Situation 2.4.1 General Analysis Unit: 10,000 Yuan, Currency: RMB Long - term equity investment in the report period 20.43 Increase / Decrease -27,211.57 Long - term equity investment in same period last year 27,232 Increase / Decrease (%) -99.92% 2.4.2 Significant Equity Investment Not applicable. 2.4.3 Significant Non-Equity Investment Not applicable. 2.4.4 Financial Assets at Fair Value Unit: Yuan, Currency: RMB Accounting for the Profit or Changes in Initial Book Value at Stock Stock proportion Loss for the Owners' Equity Accounting Source of Investment of the the End of the code Abbreviation Report during the Item Shares Cost company's Period Period Report Period equity (%) Available Changjiang for sale 600757 Publishing & 72,085,722.82 0.85 76,930,048.98 -8,650,768.56 Note 1 financial Media assets Available for sale 900932 Lujia B Share 773,099.71 0.0067 2,452,704.58 79,538.23 160,344.63 Enforcement financial assets Available Shenwan & for sale 000166 200,000.00 0.0011 1,224,283.20 21,862.20 -142,104.30 Purchased Hongyuan financial assets Available Bank of for sale 601229 951,400.00 0.013 20,560,823.76 1,819,399.44 Purchased Shanghai financial assets Total 74,010,222.53 - 101,167,860.52 101,400.43 -6,813,128.79 - - Note 1: Shares of Changjiang Publishing & Media were transferred to the Company by bank to which interests of Changjiang Publishing & Media were compensated in the bankruptcy and restructuring. 2.5 Significant Assets and Equity Sale Not applicable. 10 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. 2.6 Analysis of Main Subsidiaries and Joint Stock Company Unit: 10,000 Yuan, Currency: RMB Registered Total Operating Operating Company Name Business Scope Net Assets Net Profit Capital Assets Income Profit Investment, asset ShangGong management, and the EUR 12.50 (Europe) Holding production, processing 192,948.20 82,665.81 72,253.26 14,455.03 10,292.05 million Corp. GmbH. and sale of industrial sewing equipment Shanghai Shensy Enterprise Road freight 17,882 38,666.97 24,654.33 39,773.92 682.85 681.85 Development Co., Ltd. ShangGong Production and sale of GEMSY CO., 21,600 27,686.28 21,852.10 13,887.96 333.47 309.73 sewing equipment LTD. DAP (Shanghai) Sale of sewing USD 60 23,198.04 9,300.58 17,556.28 634.77 516.12 Co., Ltd. equipment million 2.7 Structured Entities Controlled by the Company Not applicable. 3 Others 3.1 Possible Risks (1) Industrial and market risks Tailoring machine industry is a competitive industry, largely depending on its downstream industries such as the weaving, costume, leather, case and bags industries. Therefore, it develops along obvious periodicity and is highly affected by macro-economic environment. Along with increasing of the rate of tailoring machine production to company other industries, company development may be more and more affected by overall industrial fluctuation, which may lead to decreasing of product price, more and more fierce competition and decreasing of product gross profit rate, all will impact company business operation in the future. (2) Cross-country operation and integration risks By expanding of company overseas assets and business scope, the cross-country operation brings more strict requirements for company organization, operation mode, talents and employees skills. Also, during company production, operation and merger of overseas affiliates, more challenges may appear due to differences of enterprise culture, management concept, policies and company regulations. (3) Foreign exchange risks The book-keeping standard money for company consolidated statements is RMB, but that used for daily business operations of SGE and SGE holding subsidiaries is Euro dollar. Therefore, the change of RMB foreign exchange rate may have exchange risks for company future operations. Chapter 5 Important Events 1. Shareholder’s Meeting Session Holding Date Inquiry Index Disclosure Date of Resolutions th 2016 Annual Shareholders’ Meeting 27 April 2017 www.sse.com.cn 28th April 2017 11 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. 2. Profit Distribution or Capital Surplus Transferring and Increasing Proposal Not applicable. 3. Commitment Whether Whether Reason for Timely Future Plan if Commitment There is a Failure to Background Type Commitment Content and Fail to Fulfill Party Time Fulfill Strictly Commitment Limit Commitment Perform Shares of SGG held by PKFR Restricted will not be sold from 29th PKFR Yes Yes N/A N/A shares December 2016 to 28th December 2017. Shares of SGG held by PKFR Commitment in will not be less than shares the Statement Others PKFR held by Pudong SASAC Yes Yes N/A N/A of Changes in From 29th December 2016 to Equity 28th December 2017. From 29th December 2016 to 28th December 2017, PKFR Others PKFR or its concerned action will Yes Yes N/A N/A purchase shares of SGG by not less than 10 million yuan Commitment The Company will not Plan Related to The major asset restructuring Others Yes Yes N/A N/A Major Asset Company from 26th July 2016 to 25th Restructuring January 2017 4. Appointment and Dismiss of Certified Accountant’s Firm Not applicable. 5. Bankruptcy Not applicable. 6. Important Lawsuit and Arbitration (1) Lawsuit after report period Shanghai Pacific Industrial Co., Ltd. (hereinafter referred to as “PACIFIC Shanghai”) is a Sino-foreign joint venture established by the Company’s predecessor Shanghai Industrial Sewing Machine Corporation (hereinafter referred to as “SISMC”) and Pacific Business Exchange CO., Ltd. (hereinafter referred to as “PACIFIC Business”) on May 1993. SISMC invested USD 360,000 in equipment and plant, accounting for 48% of total shares; PACIFIC Business invested USD 390,000 in equipment and cash, accounting for 52% of total shares. After the establishment of PACIFIC Shanghai, SISMC has undergone restructuring, listing and several changes in business registration and stock ownership changes, so the name of SISMC has changed to Shang Gong Group Co., Ltd. now. However, PACIFIC Shanghai and PACIFIC Business refused to recognize the Company as the Chinese shareholders of PACIFIC Shanghai. Therefore, the Company filed a lawsuit, asking the court to confirm the Company's Chinese shareholder status. On 22nd August 2017, the Company received the civil judgment of Shanghai No.1 Intermediate People's Court. The judgment confirmed that 48% of PACIFIC Shanghai’s equity invested by SISMC amounting to USD 360,000 was owned by the Company. As the Company has been refused to exercise shareholder rights by PACIFIC Shanghai and PACIFIC Business for years, the Company does not know the financial position and operation of PACIFIC Shanghai. Except the 12 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. 48% of equity of PACIFIC Shanghai confirmed above, it is not clear how this issue would affect the Company. As of the date of this report, the outcome of the lawsuit has not yet been implemented. (2) Arbitration after report period The 22nd meeting of the 7th Board of Directors of the Company examined and approved the Proposal on Investing in STOLL KG through ShangGong Europe, and agreed that the wholly-owned subsidiary ShangGong Europe would invest in STOLL KG to become a 26% Minority shareholders. (See bulletin No. 2015-030 released on 29th August 2015 and bulletin No. 2016-002 released on 14th January 2016 for details). Accounting to the Contract signed on 29th August 2015 by ShangGong Europe, 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. ShangGong Europe has received the Application for Arbitration submitted by Michael Stoll, Corinna Stoll and other 10 limited partners of STOLL KG on 20th July 2017. ShangGong Europe 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 still in progress and has significant uncertainty. The Company has made a preliminary judgment that the matter has little impact on the Company's profit and loss. But it might affect the Company's investment costs for STOLL KG and will not have a significant impact on the Company. 7. Punishment on and Rectification of Listed Company and its Directors, Supervisors, Senior Managers, Controlling Shareholders, Actual Controller and Purchaser Not applicable. 8. Credit Status of the Company and its Controlling Shareholder and Actual Controller. Not applicable. 9. Company Stock Right Incentives, ESPO, and Other Employee Incentives Not applicable. 10. Major Related Party Transactions 10.1 Related Party Transactions Relevant to Daily Operations Summary of Issues Inquiry Index Shanghai SGSB Electronic Co., Ltd., one wholly-owned subsidiary of the The bulletin No. 2017-008 disclosed by the Company, sells products to Fiji Xerox of Shanghai Limited., and is its Company on 6th April 2016, published in permanent accessory supplier, and the above-said transaction constitutes the Shanghai Securities News and Hong Kong daily associated transaction. It is estimated that in 2017, the amount of products Commercial Daily and website of Shanghai that it will sell to Fiji Xerox is 30 million yuan, and in this report period, the Stock Exchange. sales amount was 12.1622 million yuan, and there was no major change. 11. Significant Contracts and Their Implementation 11.1 Trusteeship, Contracting and Lease Not applicable. 13 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. 11.2 Guarantee Unit: 10,000 Yuan, Currency: RMB Company external guarantee list (excluded those for subsidiaries) Guarantor Overdue amounts Expiration date Relations of Guarantee Overdue Relation If counter Guarantee the guarantor Amount date If guarantee Security party Start date Type guarantee for related to listed guaranteed (agreement is done available? party? company signoff date) Joint The Commerzbank 25 March 25 March SGG 7,000 liability No No 0 No No Company Shanghai Branch 2014 2014 guarantee Joint The Commerzbank 01 July SGG 6,430 30 June 2014 liability No No 0 No No Company Shanghai Branch 2014 guarantee Industrial & 19 Joint The Commercial Bank 19 September SGG 9,645 September liability No No 0 No No Company of China Shanghai 2016 2016 guarantee Hongkou Branch Joint The 28 August 28 August SGG Commerzbank 8,037 liability No No 0 No No Company 2015 2015 guarantee 21 Joint The 21 December 21 December SGG Commerzbank 5,845 December liability No No 0 No No Company 2015 2020 2015 guarantee Wholly Joint 07 January 07 January SGE owned Commerzbank 2,009 30 July 2017 liability No No 0 No No 2016 2016 subsidiary guarantee Wholly Joint 07 January 07 January SGE owned Commerzbank 2,009 30 July 2018 liability No No 0 No No 2016 2016 subsidiary guarantee Guarantee amounts spent during the report period (excluded guarantee to affiliate 0 company. Total balance of guarantee at the end of period (affiliate companies are not quailed.) 43,036 (A) Guarantee of company to affiliates Total guarantee amounts of subsidiaries in the report period 0 Total balance of guarantee to subsidiaries at the end of report period (B) 0 Company total guarantee amounts (including those to subsidiaries) Total guarantee amounts(A+B) 43,036 Ratio of total guarantee amounts to company net assets (%) 20.84 In which: Guarantee amounts provided to stockholders, actual controller and affiliated parties (C) Guarantee amounts directly or indirectly provided for liabilities of guarantor whose assets liabilities ratio is higher than 70%(D) Differences of total guarantee amounts exceeds 50% of the net assets(E) Total guarantee amounts of the above-mentioned three items (C+D+E) Note 1: On 25th March 2014, the Company's wholly-owned subsidiary, ShangGong (Europe) Holding Corp. GmbH, applied to the Bielefeld Branch of the Commerzbank for a current fund loan of not more than the equivalent of 58 million yuan in euro, the Shanghai Branch of the Commerzbank issued a financing guarantee letter for the funds, and the Company issued a corporate letter of guarantee for payment of 70 million yuan as counter guarantee for the abovementioned financing guarantee letter. Note 2: On 30th June 2014, the Company's wholly owned subsidiary, ShangGong (Europe) Holding Corp. GmbH, applied to the Bielefeld Branch of the Commerzbank for a current fund loan of 8 million euro, the Shanghai Branch of the Commerzbank issued a financing guarantee letter for the funds, and the Company issued an unconditionally irrecoverable corporate letter of guarantee for payment of 8.8 million euro as counter guarantee for the abovementioned financing guarantee letter. Note 3: On 19th September 2016, the Company's wholly owned subsidiary, ShangGong (Europe) Holding Corp. GmbH, applied to the Bielefeld Branch of the Commerzbank for a short-term credit loan of 12 million euro, 14 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. the Shanghai Branch of the Commerzbank issued a financing guarantee letter for the funds, and the Company issued an unconditionally irrecoverable corporate letter of guarantee for payment of 13.20 million euro. Note 4: On 28th August 2015, the Company's wholly owned subsidiary, PFAFF GmbH, applied to the Kaiserslautern Branch of the Commerzbank for a loan of 10.00 million euro, the Shanghai Branch of the Commerzbank issued a financing guarantee letter for the funds, and the Company issued an unconditionally irrecoverable corporate letter of guarantee for payment of 11.00 million euro as counter guarantee for the abovementioned financing guarantee letter. Note 5: On 21st December 2015, the Company's wholly owned subsidiary, ShangGong (Europe) Holding Corp. GmbH., applied to the Frankfurt Branch of the Commerzbank for a limit loan of 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. 12 Poverty Alleviation of Listed Companies Not applicable. 13. Convertible Corporate Bonds Not applicable. 14. Other Important Issues 14.1 Changes in Principal Accounting Policies and Accounting Estimates Implement the "Accounting Standards for Business Enterprises No. 16 - Government Subsidies ". Ministry of Finance on 10th May 2017 revised the "Accounting Standards for Business Enterprises No. 16 - Government Subsidies", which was implemented since 12th June 2017. The main impact of implementing the standard is as follows: The Content and Reasons of Accounting Policy Changes Item and Amount Affected Ministry of Finance on 10th May 2017 issued the "Accounting Standards for Business Enterprises No. 16 - Government Subsidies" (Accounting [2017] No. 15). According to the revised "Accounting Standards for Business Enterprises The change has no significant impact on the No. 16 - Government Subsidies", government subsidies related to the daily Company's financial position, operating results activities of enterprises shall be included in other income or related expenses in and cash flow. accordance with the essence of economic business; government grants unrelated to the daily activities of enterprises shall be included in non-operating income and expense. Chapter 6 Status of Shareholders and Share Capital Changes of Common Stock 1. Share Capital Changes of Common Stock 1.1 Share Capital Changes of Common Stock During the report period, the total number of shares of the Company's common stock and equity structure remain unchanged. 15 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. 1.2 Change of Non-Tradable Shares Not applicable. 2. Securities Issuance and Listing 2.1 Securities Issuance during the Report Period Not applicable. 2.2 Total Share and Shareholder Change and Asset and Liability Structure Change Not applicable. 2.3 Employee Shareholding Status No internal employee share in the report period. 3. Shareholder and Actual Controller 3.1 Total Number of Shareholders Total number of shareholder at the end of report period 65,514 (A Share: 37,705; B Share: 27,809) 3.2 Shareholding Status of Top 10 Shareholders and Top 10 Unrestricted Shareholders Unit: Share Top 10 Shareholders Increase Total Shares Pledged or or Shares Frozen Holding Decrease Held at the Restricted Shareholder Name of Shareholder Percentage in the End of Share Status (%) Status Amount Report Report Period Period Domestic Shanghai Puke Flyingman 789,457 60,789,457 11.08 0 Pledged 60,000,000 Non-state-owned Investment Co., Ltd. Legal Person State-owned Assets Supervision and Administration Commission 0 45,395,358 8.27 0 / State of Shanghai Pudong New Area People's Government China Great Wall Asset State-owned 0 22,200,000 4.05 0 / Management Co., Ltd. Legal Person SHANGHAI INTERNATIONAL State-owned GROUP Asset Management Co., 0 10,968,033 2.00 0 / Legal Person Ltd. GREAT WALL GUORONG State-owned INVESTMENT AND 0 4,770,654 0.87 0 / Legal Person MANAGEMENT CO., LTD. SCBHK A/C KG Foreign Legal -29,699 4,740,955 0.86 0 / INVESTMENTS ASIA LIMITED Person SCBHK A/C BBH S/A VANGUARD EMERGING Foreign Legal 0 3,678,113 0.67 0 / MARKETS STOCK INDEX Person FUND GUOTAI JUNAN Foreign Legal SECURITIES(HONGKONG) -9,479 3,125,690 0.57 0 / Person LIMITED ISHARES CORE MSCI Foreign Legal 1,373,100 3,076,300 0.56 0 / EMERGING MARKETS ETF Person VANGUARD TOTAL Foreign Legal INTERNATIONAL STOCK 0 2,999,096 0.55 0 / Person INDEX FUND Top 10 Unrestricted Shareholders Name Unrestricted Shares Share Type and Amount 16 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Type Amount Shanghai Puke Flyingman Investment Co., Ltd. 60,789,457 A Share 60,789,457 State-owned Assets Supervision and Administration Commission of Shanghai Pudong New Area People's 45,395,358 A Share 45,395,358 Government China Great Wall Asset Management Co., Ltd. 22,200,000 A Share 22,200,000 SHANGHAI INTERNATIONAL GROUP Asset 10,968,033 A Share 10,968,033 Management Co., Ltd. GREAT WALL GUORONG INVESTMENT AND 4,770,654 A Share 4,770,654 MANAGEMENT CO., LTD. SCBHK A/C KG INVESTMENTS ASIA LIMITED 4,740,955 B Share 4,740,955 SCBHK A/C BBH S/A VANGUARD EMERGING 3,678,113 B Share 3,678,113 MARKETS STOCK INDEX FUND GUOTAI JUNAN SECURITIES(HONGKONG) 3,125,690 B Share 3,125,690 LIMITED ISHARES CORE MSCI EMERGING MARKETS ETF 3,076,300 B Share 3,076,300 VANGUARD TOTAL INTERNATIONAL STOCK 2,999,096 B Share 2,999,096 INDEX FUND GREAT WALL GUORONG INVESTMENT AND MANAGEMENT CO., LTD. is the wholly-owned subsidiary of Notes on Shareholder Relationship and Consistent Actions China Great Wall Asset Management Corporation. The Company does not know the relationship and consistent of other shareholders The Number of Restricted Shares Held by Top Ten Shareholders and the Conditions for Sale Not applicable. 4. Change of Controlling Shareholder and Actual Controller Not applicable. Chapter 7 Relevant Situation about Preferred Shares Not applicable. Chapter 8 Situation about Directors, Supervisors and Senior Managers 1. Changes in Shareholding 1.1 Changes in Shareholding Unit: Share Shares held at the Shares held at the End Change in Name Title Reason Beginning of Report Period of Report Period Current Period Increase holdings in Zhang Min Director 100,000 170,000 70,000 secondary market Zhang Min, Chairman of the board and General Manager of the Company, purchased 10,000 A shares and 60,000 B shares of the Company in secondary market on 24th May 2017 and 25th May 2017. 1.2 Equity Incentive Granted to Directors, Supervisors, and Senior Managers in the Report Period Not applicable. 17 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. 2. Change of Directors, Supervisors and Senior Managers Name Title Change Zhang Min Chairman, CEO Outgoing Li Jiaming Director, deputy general manager Outgoing Fang Haixiang Director, deputy general manager Outgoing Sun Gang Director Outgoing Bao Qi Director Outgoing Lu Yujie Director Outgoing Zhang Ming Independent director Outgoing Su Yong Independent director Outgoing He Ye Independent director Outgoing Qiao Junhai Supervisory Board Chairman Outgoing Ding Binhui Supervisor Outgoing Zhuge Huiling Supervisor Outgoing Chen Guoling Supervisor Outgoing Xu Yuping Supervisor Outgoing Zheng Ying Deputy general manager Outgoing Li Xiaofeng Deputy general manager Outgoing Zhang Jianguo Secretary of the Board Outgoing Zhang Min Chairman Election Zhu Xudong Director Election Yin Qiang Director Election Huang Yingjian Director Election Li Wenhao Director Election Lu Yujie Director Election Xi Lifeng Independent director Election Rui Meng Independent director Election Chen Zhen Independent director Election Qiao Junhai Supervisory Board Chairman Election Chen Mengzhao Supervisor Election Zhang Jianguo Supervisor Election Zhang Min General manager Appointment Li Jiaming Executive deputy general manager Appointment Fang Haixiang Deputy general manager Appointment Zheng Ying Deputy general manager Appointment Li Xiaofeng Deputy general manager Appointment Zhou Yongqiang Secretary of the Board Appointment Note: The term of office of the 7th Board of Directors of the Company expires. Zhang Min, Zhu Xudong, Yin Qiang, Huang Yingjian, Li Wenhao, Lu Yujie, Xi Lifeng, Rui Meng and Chen Zhen were elected as director of the 8th Board of Directors in 2016 Annual Shareholders’ Meeting on 27th April 2017. Zhang Ming, Su Yong, He Ye, Li Jiaming, Fang Haixiang, Sun Gang, Bao Qi, the directors of the 7th Board of Directors, are no longer as the Company's 8th Board of Directors candidates due to the term of office expires, work changes and other reasons. The term of office of the 7th Supervisory Board of the Company expires. Qiao Junhai and Chen Mengzhao were elected as supervisor of the 8th Supervisory Board in 2016 Annual Shareholders’ Meeting on 27th April 18 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. 2017. Zhang Jianguo was elected as supervisor in the 6th Meeting of the Second Staff Representative Meeting. Ding Binhui, Zhuge Huiling, Chen Guoling and Xu Yuping, the supervisors of the 7th Supervisory Board were no longer the supervisors of the Company. The Company held the first meeting of the 8th Board of Directors on 27th April2017 to appoint Mr. Zhang Min as the general manager of the Company and appointed Li Jiaming as executive deputy general manager of the Company (acting as the chief financial officer), appointed Fang Haixiang, Zheng Ying and Li Xiaofeng as Chapter 9 Corporate Bonds Not applicable. 19 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Chapter 10 Financial Report Shang Gong Group Co., Ltd. Consolidated Statement of Financial Position As of 30th June 2017 Unit: Yuan, Currency: RMB Item Note Ending Balance Beginning Balance Current assets: Cash and cash equivalents 652,081,404.95 763,655,704.57 Deposit reservation for balance Lending funds Financial assets at fair value whose fluctuation 4,000.00 is attributed to profit or loss for current period Derivative financial assets Notes receivable 75,104,968.57 78,841,448.05 Accounts receivable 503,459,446.04 389,252,678.87 Prepayment 29,322,580.80 33,709,357.11 Premiums receivable Reinsurance accounts receivable Provision of cession receivable Interest receivable Dividends receivable Other receivables 59,598,335.06 50,885,073.48 Redemptory monetary capital for sale Inventories 728,145,775.11 663,766,440.95 Classified as assets held for sale Non-current assets maturing within one year Other current assets 365,637,487.25 357,418,547.35 Total current assets 2,413,349,997.78 2,337,533,250.38 Non-current assets: Loans and payments on behalf Available-for-sale financial assets 130,406,117.76 137,219,246.11 Held-to-maturity investments Long-term receivables Long-term equity investments 281,155,293.64 253,586,574.99 Investment properties 106,017,913.45 107,616,254.96 Fixed assets 369,228,415.28 354,223,210.04 Construction in progress 33,559,198.84 20,199,928.64 Project materials Disposal of fixed assets Productive biological assets Oil and gas assets Intangible assets 153,676,528.99 155,237,899.69 Development expenditures 14,276,195.28 12,529,345.90 Goodwill 71,992,459.44 67,878,923.12 Long-term deferred expenses 1,005,022.99 1,084,797.97 Deferred income tax assets 62,074,009.65 59,063,549.91 Other non-current assets Total non-current assets 1,223,391,155.32 1,168,639,731.33 Total assets 3,636,741,153.10 3,506,172,981.71 Current liabilities: Short-term loans 366,068,180.62 351,368,604.62 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 20 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Item Note Ending Balance Beginning Balance Accounts payable 172,418,174.68 174,828,356.05 Receipt in advance 30,490,939.49 36,548,091.83 Financial assets sold for repurchase Handling charges and commissions payable Employee benefits payable 80,155,399.79 80,928,692.78 Taxes and surcharges payable 13,263,952.53 54,740,867.60 Interest payable 2,275,506.76 2,090,565.59 Dividends payable 1,032,818.86 1,032,818.86 Other payables 184,013,438.72 193,117,136.53 Reinsurance accounts payable Provision for insurance contracts Acting trading securities Acting underwriting securities Classified as liabilities held for sale Non-current liabilities maturing within one year Other current liabilities 437,625.10 808,706.39 Total current liabilities 850,156,036.55 895,463,840.25 Non-current liabilities: Long-term loans 62,541,333.67 68,624,863.27 Bonds payable Including: preference shares Perpetual bond Long-term payables 39,413,895.74 37,338,461.61 Long-term employee benefits payable 262,861,416.92 255,686,948.92 Special payables Estimated liabilities Deferred income 3,600,000.00 3,600,000.00 Deferred income tax liabilities 44,897,458.99 36,604,917.60 Other non-current liabilities 520,000.00 520,000.00 Total non-current liabilities 413,834,105.32 402,375,191.40 Total liabilities 1,263,990,141.87 1,297,839,031.65 Owners' equity Share capital 548,589,600.00 548,589,600.00 Other equity instruments Including: preference shares Perpetual bond Capital reserves 968,189,730.95 971,603,120.27 Less: treasury stock Other comprehensive income -76,836,213.13 -103,144,046.15 Special reserves Surplus reserves 4,546,242.52 4,546,242.52 General risk reserves Undistributed profits 620,735,357.95 494,754,465.24 Total owners' equity attributable to the parent 2,065,224,718.29 1,916,349,381.88 company Minority equity 307,526,292.94 291,984,568.18 Total owners' equity 2,372,751,011.23 2,208,333,950.06 Liabilities and owners' equity 3,636,741,153.10 3,506,172,981.71 Legal representative: Zhang Min Financial director: Li Jiaming Financial manager: Zhao Lixin Shang Gong Group Co., Ltd. Statement of Financial Position As of 30th June 2017 Unit: Yuan, Currency: RMB Item Note Ending Balance Beginning Balance Current assets: Cash and cash equivalents 137,077,334.98 119,210,234.41 Financial assets at fair value whose fluctuation 4,000.00 is attributed to profit or loss for current period 21 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Item Note Ending Balance Beginning Balance Derivative financial assets Notes receivable 230,000.00 150,000.00 Accounts receivable 10,004,594.03 3,401,851.42 Prepayment 1,128,702.61 531,129.23 Interest receivable Dividends receivable Other receivables 87,362,654.66 78,393,221.55 Inventories 8,220,046.89 2,329,420.55 Classified as assets held for sale Non-current assets maturing within one year Other current assets 301,596,847.21 301,893,339.18 Total current assets 545,620,180.38 505,913,196.34 Non-current assets: Available-for-sale financial assets 130,406,110.01 137,219,238.80 Held-to-maturity investments Long-term receivables 132,939,535.85 123,602,509.87 Long-term equity investments 587,099,753.21 629,485,100.90 Investment properties 83,450,702.31 86,205,621.96 Fixed assets 11,486,168.35 11,768,787.39 Construction in progress 4,879,161.20 4,045,139.74 Project materials Disposal of fixed assets Productive biological assets Oil and gas assets Intangible assets 12,666,953.08 12,859,594.30 Development expenditures Goodwill Long-term deferred expenses 360,299.01 Deferred income tax assets 500.00 Other non-current assets Total non-current assets 963,289,183.02 1,005,185,992.96 Total assets 1,508,909,363.40 1,511,099,189.30 Current liabilities: Short-term loans 348,148.62 348,148.62 Financial liabilities at fair value whose fluctuation is attributed to profit or loss for current period Derivative financial liabilities Notes payable Accounts payable 10,637,034.84 4,014,190.85 Receipt in advance 3,128,057.71 2,694,254.66 Employee benefits payable 2,655,673.70 4,000,000.00 Taxes and surcharges payable 324,064.65 588,400.56 Interest payable Dividends payable 1,032,818.86 1,032,818.86 Other payables 80,682,835.72 108,821,954.19 Classified as liabilities held for sale Non-current liabilities maturing within one year Other current liabilities Total current liabilities 98,808,634.10 121,499,767.74 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 Special payables Provisions Deferred income 1,260,000.00 1,260,000.00 Deferred income tax liabilities 1,197,067.41 1,197,067.41 Other non-current liabilities 520,000.00 520,000.00 22 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Item Note Ending Balance Beginning Balance Total non-current liabilities 6,041,364.91 6,041,364.91 Total liabilities 104,849,999.01 127,541,132.65 Owners' equity: Share capital 548,589,600.00 548,589,600.00 Other equity instruments Including: preference shares Perpetual bond Capital reserves 1,008,928,711.28 1,003,282,687.73 Less: treasury stock Other comprehensive income 27,157,637.99 33,970,766.78 Special reserves Surplus reserves 4,546,242.52 4,546,242.52 Undistributed profits -185,162,827.40 -206,831,240.38 Total owners' equity 1,404,059,364.39 1,383,558,056.65 Liabilities and owners' equity 1,508,909,363.40 1,511,099,189.30 Legal representative: Zhang Min Financial director: Li Jiaming Financial manager: Zhao Lixin Shang Gong Group Co., Ltd. Consolidated Statement of Comprehensive Incomes From 1st January 2017 to 30th June 2017 Unit: Yuan, Currency: RMB Same Period in Item Note Current Period Previous Year 1. Incomes 1,532,562,601.12 1,359,342,529.45 Including: operating income 1,532,562,601.12 1,359,342,529.45 Interest income Premiums earned Income from handling charges and commissions 2. Costs 1,377,803,455.91 1,222,327,837.54 Including: Cost of sales 1,088,801,959.30 954,500,289.41 Interest expenses Handling charges and commissions expenses Surrender value Net amount of compensation payout Net amount withdrawn for insurance contract reserves Policy dividend payment Reinsurance costs taxes and surcharges 5,994,544.14 4,180,944.00 Selling expenses 141,412,181.17 124,035,260.82 General and administrative expenses 143,922,099.95 131,096,375.43 Financial expenses -6,849,775.62 10,089,517.50 Losses from asset impairment 4,522,446.97 -1,574,549.62 Plus: gains from changes in fair value ("-" for losses) Investment income ("-" for losses) 18,495,885.65 18,165,848.81 Including: income from investment in associates 11,737,352.98 11,338,598.93 and joint ventures Foreign exchange gains ("-" for losses) Other gains 3. Operating profits ("-" for losses) 173,255,030.86 155,180,540.72 Plus: non-operating income 12,489,008.12 7,659,396.08 Including: gains from disposal of non-current assets 9,842,841.68 2,540,561.45 Less: non-operating expenses 400,300.80 3,300,707.74 Including: losses from disposal of non-current assets 95,217.09 3,098,496.16 4. Total profits ("-" for total losses) 185,343,738.18 159,539,229.06 Less: income tax expenses 46,499,111.30 45,381,401.63 5. Net profit ("-" for net loss) 138,844,626.88 114,157,827.43 Net profit attributable to owners of the parent company 125,980,892.71 101,164,717.70 Non-controlling interests 12,863,734.17 12,993,109.73 23 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. 6. Net of tax of other comprehensive income 30,819,765.91 -21,624,435.26 Net of tax of other comprehensive income attributable to 26,307,833.02 -23,500,674.67 owners of the parent company (1) Other comprehensive income can't be reclassified to gains and losses later a. Changes in net liabilities or assets due to the remeasurement and redefinition of the benefit plan b. The shares in other comprehensive income of the investee that can't be reclassified to gains and losses under the equity method (2) Other comprehensive income to be reclassified to 26,307,833.02 -23,500,674.67 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 -6,813,128.79 -28,030,165.55 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 33,120,961.81 4,529,490.88 f. Others Net of tax of other comprehensive income attributable to 4,511,932.89 1,876,239.41 non-controlling shareholders 7. Total comprehensive incomes 169,664,392.79 92,533,392.17 Total comprehensive income attributable to owners of 152,288,725.73 77,664,043.03 the parent company Total comprehensive income attributable to 17,375,667.06 14,869,349.14 non-controlling shareholders 8. Earnings per share (1) Basic earnings per share 0.2296 0.1844 (2) Diluted earnings per share 0.2296 0.1844 Legal representative: Zhang Min Financial director: Li Jiaming Financial manager: Zhao Lixin Shang Gong Group Co., Ltd. Statement of Comprehensive Incomes From 1st January 2017 to 30th June 2017 Unit: Yuan, Currency: RMB Same Period in Item Note Current Period Previous Year 1. Operating income 46,385,796.09 18,604,456.82 Less: Operating cost 23,996,317.49 8,113,595.28 tax and surcharges 1,891,943.39 2,072,413.03 Selling expenses 2,643,464.25 258,334.34 General and Administration expenses 20,078,331.44 12,210,527.32 Finance expenses -8,681,598.18 -4,016,794.71 Impairment losses on assets 177,256.58 1,512,395.93 Plus: gains from changes in fair value ("-" for losses) Investment income ("-" for losses) 6,106,969.93 6,827,249.88 Including: Investment income in associates and joint ventures Other income 2. Operating profits ("-" for losses) 12,387,051.05 5,281,235.51 Plus: Non-operating income 9,481,361.93 1,451,036.51 Including: gains from disposal of non-current assets 9,449,919.98 165,136.00 Less: non-operating expenses 200,000.00 210,456.25 Including: losses from disposal of non-current assets 10,456.25 24 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Same Period in Item Note Current Period Previous Year 3. Total profits ("-" for total losses) 21,668,412.98 6,521,815.77 Less: income tax expenses 4. Net profit ("-" for net loss) 21,668,412.98 6,521,815.77 4. Net of tax of other comprehensive income -6,813,128.79 -28,030,165.55 (1) Other comprehensive income can't be reclassified to gains and losses later a. Changes in net liabilities or assets due to the remeasurement and redefinition of the benefit plan b. The shares in other comprehensive income of the investee that can't be reclassified to gains and losses under the equity method (2) Other comprehensive income to be reclassified to gains -6,813,128.79 -28,030,165.55 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 -6,813,128.79 -28,030,165.55 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 f. Others 6. Total comprehensive incomes 14,855,284.19 -21,508,349.78 7. Earnings per share: (1) Basic earnings per share (2) Diluted earnings per share Legal representative: Zhang Min Financial director: Li Jiaming Financial manager: Zhao Lixin Shang Gong Group Co., Ltd. Consolidated Statement of Cash Flows From 1st January 2017 to 30th June 2017 Unit: Yuan, Currency: RMB Same Period in Item Note Current Period Previous Year 1. Cash flows from operating activities: Cash received from sale of goods and provision of 1,558,790,106.65 1,437,839,370.97 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 25 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Same Period in Item Note Current Period Previous Year 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 23,417,955.22 30,980,782.69 Cash received from other operating activities 21,723,964.87 25,698,235.62 Sub-total of cash inflows from operating activities 1,603,932,026.74 1,494,518,389.28 Cash paid for goods purchased and services received 1,106,016,865.34 1,045,794,957.00 Net increase in loans and advances to customers Net increase in deposits in central bank and other banks and financial institutions Cash paid for original insurance contract claims Cash paid for interests, handling charges and commissions Cash paid for policy dividends Cash paid to and on behalf of employees 323,950,873.52 299,241,866.26 Cash paid for taxes and surcharges 101,258,510.93 76,973,192.74 Cash paid for other operating activities 132,496,100.42 118,451,458.99 Sub-total of cash outflows from operating activities 1,663,722,350.21 1,540,461,474.99 Net cash flows from operating activities -59,790,323.47 -45,943,085.71 2. Cash flows from investing activities: Cash inflow from divestment 606,327,427.90 615,261,697.25 Cash inflow from investment incomes 801,400.43 Cash gain from disposal of fixed assets, intangible assets, and 10,661,268.33 852,535.50 other long-term investment Cash inflow from disposal of subsidiaries and other operating 1,115,552.60 units Cash received from other investing activities Sub-total of cash inflows from investing activities 617,790,096.66 617,229,785.35 Cash paid for acquisition of fixed assets, intangible assets 41,015,907.75 45,556,680.50 and other long-term assets Cash paid for investments 620,108,197.50 726,993,439.10 Net increase in pledge loans Net cash paid to acquire subsidiaries and other business units Cash paid for other investing activities Sub-total of cash outflows from investing activities 661,124,105.25 772,550,119.60 Net cash flows from investing activities -43,334,008.59 -155,320,334.25 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 330,195,595.00 206,901,370.20 Cash received from bonds issuance Cash received from other financing activities 429,112.68 355,261.67 Sub-total of cash inflows from financing activities 330,624,707.68 207,256,631.87 Cash paid for debt repayments 341,839,165.55 166,820,569.00 Cash paid for distribution of dividends and profits or 9,551,927.66 5,213,563.08 payment of interest Including: dividends and profits paid to non-controlling 1,833,942.30 1,814,250.00 shareholders by subsidiaries Cash paid for other financing activities Sub-total of cash outflows from financing activities 351,391,093.21 172,034,132.08 Net cash flows from financing activities -20,766,385.53 35,222,499.79 4. Effect of fluctuation in exchange rate on cash and cash 22,569,433.51 15,358,918.84 equivalents 5. Net increase in cash and cash equivalents -101,321,284.08 -150,682,001.33 Plus: beginning balance of cash and cash equivalents 750,357,929.63 744,700,658.82 6. Ending balance of cash and cash equivalents 649,036,645.55 594,018,657.49 Legal representative: Zhang Min Financial director: Li Jiaming Financial manager: Zhao Lixin 26 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Shang Gong Group Co., Ltd. Statement of Cash Flows st From 1 January 2017 to 30th June 2017 Unit: Yuan, Currency: RMB Same Period in Item Note Current Period Previous Year 1. Cash flows from operating activities: Cash received from sale of goods and provision of 50,038,010.69 17,776,248.12 services Refunds of taxes and surcharges 29,728.60 25,900.51 Cash received from other operating activities 11,242,643.33 16,236,047.04 Sub-total of cash inflows from operating activities 61,310,382.62 34,038,195.67 Cash paid for goods purchased and services received 25,174,592.83 4,648,663.54 Cash paid to and on behalf of employees 14,056,014.14 12,105,236.53 Cash paid for taxes and surcharges 3,224,645.83 2,270,830.52 Cash paid for other operating activities 35,520,905.54 36,846,820.39 Sub-total of cash outflows from operating activities 77,976,158.34 55,871,550.98 Net cash flows from operating activities -16,665,775.72 -21,833,355.31 2. Cash flows from investing activities: Cash inflow from divestment 526,075,598.49 615,261,697.25 Cash inflow from investment incomes 10,692,049.83 Cash gain from disposal of fixed assets, intangible 9,901,416.00 assets, and other long-term investment Cash inflow from disposal of subsidiaries and other 1,115,552.60 operating units Cash received from other investing activities 10,303,934.17 Sub-total of cash inflows from investing activities 556,972,998.49 616,377,249.85 Cash paid for acquisition of fixed assets, intangible 2,231,017.10 5,814,046.20 assets and other long-term assets Cash paid for investments 520,211,083.00 593,452,430.00 Net cash paid to acquire subsidiaries and other business units Cash paid for other investing activities Sub-total of cash outflows from investing activities 522,442,100.10 599,266,476.20 Net cash flows from investing activities 34,530,898.39 17,110,773.65 3. Cash flows from financing activities Cash received from investors Cash received from loans Cash received from bonds issuance Cash received from other financing activities Sub-total of cash inflows from financing activities Cash paid for debt repayments Cash paid for distribution of dividends and profits or payment of interest Cash paid for other financing activities Sub-total of cash outflows from financing activities Net cash flows from financing activities 4. Effect of fluctuation in exchange rate on cash and cash 1,977.90 3,017.94 equivalents 5. Net increase in cash and cash equivalents 17,867,100.57 -4,719,563.72 Plus: beginning balance of cash and cash equivalents 119,210,234.41 114,839,269.51 6. Ending balance of cash and cash equivalents 137,077,334.98 110,119,705.79 Legal representative: Zhang Min Financial director: Li Jiaming Financial manager: Zhao Lixin 27 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Shang Gong Group Co., Ltd. Consolidated Statement of Changes in Equity From 1st January 2017 to 30th June 2017 Unit: Yuan, Currency: RMB Current period Owners' equity attributable to the parent company Item Other equity instruments Less: Other General Total owners' Capital Special Surplus Undistributed Minority equity Share capital preference perpetual treasury comprehensive risk equity Others reserves reserves reserves profits shares bonds stock income reserves 1. Previous year ending balance 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 brought forward Plus: accounting policy changes 0.00 Correction of 0.00 previous-period accounting errors Business combination involving entities under common 0.00 control Others 0.00 2. Beginning balance of current year 548,589,600.00 971,603,120.27 -103,144,046.15 4,546,242.52 494,754,465.24 291,984,568.18 2,208,333,950.06 3. Increase/ (decrease) for the -3,413,389.32 26,307,833.02 125,980,892.71 15,541,724.76 164,417,061.17 current year ("-" for losses) (1) Total comprehensive incomes 26,307,833.02 125,980,892.71 17,375,667.06 169,664,392.79 (2) Investment/ (divestment) -3,413,389.32 0.00 0.00 0.00 -3,413,389.32 a. Common shares from 0.00 shareholders b. Investment capital from the 0.00 holders of other equity instruments c. Amount of the share-based payment included in the owners' 0.00 equity d. Others -3,413,389.32 -3,413,389.32 (3) Distribution of profits -1,833,942.30 -1,833,942.30 a. Surplus reserves 0.00 b. General risk reserves 0.00 c. Distribution to owners or -1,833,942.30 -1,833,942.30 shareholders d. Others 0.00 (4) Internal transfer of owners' 0.00 equity a. Capital reserve turn to stock 0.00 equity b. Surplus reserve turn to stock 0.00 equity c. Surplus reserve to recover loss 0.00 d. Others 0.00 (5) Special reserves 0.00 28 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. a. Appropriation for current year 0.00 b. Use in current year 0.00 (6) Others 0.00 4. Ending balance of the current 548,589,600.00 968,189,730.95 -76,836,213.13 4,546,242.52 620,735,357.95 307,526,292.94 2,372,751,011.23 year Same Period in Previous Year Owners' equity attributable to the parent company Item Other equity instruments Less: Other General Total owners' Special Surplus Undistributed Minority equity Share capital Capital reserves treasury comprehensive risk equity preference perpetual reserves reserves profits Others stock income reserves shares bonds 1. Previous year ending 548,589,600.00 956,286,021.43 -85,270,897.86 4,546,242.52 350,523,121.40 275,858,665.32 2,050,532,752.81 balance brought forward Plus: accounting policy 0.00 changes Correction of previous-period accounting 0.00 errors Business combination involving 0.00 entities under common control Others 0.00 2. Beginning balance of 548,589,600.00 0.00 0.00 0.00 956,286,021.43 0.00 -85,270,897.86 0.00 4,546,242.52 0.00 350,523,121.40 275,858,665.32 2,050,532,752.81 current year 3. Increase/ (decrease) for the current year ("-" for 0.00 0.00 0.00 0.00 11,871,558.22 0.00 -23,500,674.67 0.00 0.00 0.00 101,164,717.70 13,055,099.14 102,590,700.39 losses) (1) Total comprehensive -23,500,674.67 101,164,717.70 14,869,349.14 92,533,392.17 incomes (2) Investment/ 0.00 0.00 0.00 0.00 11,871,558.22 0.00 0.00 0.00 0.00 0.00 0.00 0.00 11,871,558.22 (divestment) a. Common shares from 0.00 shareholders b. Investment capital from the holders of other equity 0.00 instruments c. Amount of the share-based payment 0.00 included in the owners' equity d. Others 11,871,558.22 11,871,558.22 (3) Distribution of profits -1,814,250.00 -1,814,250.00 a. Surplus reserves 0.00 b. General risk reserves 0.00 c. Distribution to owners -1,814,250.00 -1,814,250.00 or shareholders 29 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. d. Others 0.00 (4) Internal transfer of 0.00 owners' equity a. Capital reserve turn to 0.00 stock equity b. Surplus reserve turn to 0.00 stock equity c. Surplus reserve to 0.00 recover loss d. Others 0.00 (5) Special reserves 0.00 a. Appropriation for current 0.00 year b. Use in current year 0.00 (6) Others 0.00 4. Ending balance of the 548,589,600.00 0.00 0.00 0.00 968,157,579.65 0.00 -108,771,572.53 0.00 4,546,242.52 0.00 451,687,839.10 288,913,764.46 2,153,123,453.20 current year Legal representative: Zhang Min Financial director: Li Jiaming Accounting department: Zhao Lixin Shang Gong Group Co., Ltd. Separate Statement of Changes in Equity From 1st January 2017 to 30th June 2017 Unit: Yuan, Currency: RMB Current period Other equity instruments Less: Other Item 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 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 forward Plus: accounting policy changes 0.00 Correction of previous-period 0.00 accounting errors Others 0.00 2. Beginning balance of current year 548,589,600.00 0.00 0.00 0.00 1,003,282,687.73 0.00 33,970,766.78 0.00 4,546,242.52 -206,831,240.38 1,383,558,056.65 3. Increase/(decrease) for the current year 0.00 0.00 0.00 0.00 5,646,023.55 0.00 -6,813,128.79 0.00 0.00 21,668,412.98 20,501,307.74 ("-" for losses) (1) Total comprehensive incomes -6,813,128.79 21,668,412.98 14,855,284.19 (2) Investment/ (divestment) 5,646,023.55 5,646,023.55 a. Common shares from shareholders 0.00 b. Investment capital from the holders of 0.00 other equity instruments c. Amount of the share-based payment 0.00 30 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. included in the owners' equity d. Others 5,646,023.55 5,646,023.55 (3) Distribution of profits 0.00 a. Surplus reserves 0.00 b. Distribution to owners or shareholders 0.00 c. Others 0.00 (4) Internal transfer of owners' equity 0.00 a. Capital reserve turn to stock equity 0.00 b. Surplus reserve turn to stock equity 0.00 c. Surplus reserve to recover loss 0.00 d. Others 0.00 (5) Special reserves 0.00 a. Appropriation for current year 0.00 b. Use in current year 0.00 (6) Others 0.00 4. Ending balance of the current year 548,589,600.00 0.00 0.00 0.00 1,008,928,711.28 0.00 27,157,637.99 0.00 4,546,242.52 -185,162,827.40 1,404,059,364.39 Same Period in Previous Year Other equity instruments Less: Other Item 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 548,589,600.00 1,003,282,687.73 45,068,484.49 4,546,242.52 -232,193,721.81 1,369,293,292.93 forward Plus: accounting policy changes 0.00 Correction of previous-period 0.00 accounting errors Others 0.00 2. Beginning balance of current year 548,589,600.00 0.00 0.00 0.00 1,003,282,687.73 0.00 45,068,484.49 0.00 4,546,242.52 -232,193,721.81 1,369,293,292.93 3. Increase/(decrease) for the current year 0.00 0.00 0.00 0.00 0.00 0.00 -28,030,165.55 0.00 0.00 6,521,815.77 -21,508,349.78 ("-" for losses) (1) Total comprehensive incomes -28,030,165.55 6,521,815.77 -21,508,349.78 (2) Investment/ (divestment) 0.00 a. Common shares from shareholders 0.00 b. Investment capital from the holders of 0.00 other equity instruments c. Amount of the share-based payment 0.00 included in the owners' equity d. Others 0.00 (3) Distribution of profits 0.00 a. Surplus reserves 0.00 b. Distribution to owners or shareholders 0.00 c. Others 0.00 (4) Internal transfer of owners' equity 0.00 a. Capital reserve turn to stock equity 0.00 b. Surplus reserve turn to stock equity 0.00 c. Surplus reserve to recover loss 0.00 d. Others 0.00 31 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. (5) Special reserves 0.00 a. Appropriation for current year 0.00 b. Use in current year 0.00 (6) Others 0.00 4. Ending balance of the current year 548,589,600.00 0.00 0.00 0.00 1,003,282,687.73 0.00 17,038,318.94 0.00 4,546,242.52 -225,671,906.04 1,347,784,943.15 Legal representative: Zhang Min Financial director: Li Jiaming Accounting department: Zhao Lixin 32 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. (Amounts are expressed in RMB Yuan unless otherwise stated) 1. Company Basic Information 1.1 Company Profile Shang Gong Group Co., Ltd., 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 RMB 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 May 22, 2006, it was decided on the General Meeting on equity division reform by the Company that: the non-tradable equity stockholders pay partially their shares to all the tradable equity shareholders at a ratio of 10 to 6 as consideration of getting tradable rights. After the above consideration of share donation, the total number of shares remains unchanged, but consequently the equity structure has changed. As at December 31, 2013, there were 448,886,777 shares in total. On February 28, 2014, 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 March 26, 2014. On December 29, 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 June 30, 2017, 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 2nd meeting of the 8th board of directors, the financial statements were approved for disclosure by all directors of the Company on August 29, 2017. 1.2 Scope of the Consolidated Financial Statements 33 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. As at June 30, 2017, subsidiaries within the scope of the consolidated financial statements of the Company are as follows: Subsidiaries 1. ShangGong (Europe) Holding Corp. GmbH 2. DAP (Shanghai) Co., Ltd. 3. Shanghai SMPIC IMPORT & EXPORT CO., LTD. 4. Shanghai SGSB Electronics Co., Ltd. 5. Shanghai SGSB Asset Management Co., Ltd. 6. Shanghai Sewing Construction Property Co., Ltd. 7. Dürkopp Adler Sewing Equipment (Suzhou) Co., Ltd. 8. DAP VIETNAM CO., LTD. 9. ShangGong GEMSY CO., LTD. 10. Shanghai Shensy Enterprise Development Co., Ltd. 11. Shanghai ShangGong Financial Leasing Co., Ltd. 12. Shanghai Butterfly Import & Export Co., Ltd. 13. Shanghai ShangGong Import & Export Co., Ltd. See “Note 6 Changes in the scope of consolidation" and “Note 7 Equity in other subjects" for details of the scope of consolidated financial statements in the current year and the changes thereof. 2. Preparation Basis of Financial Statements 2.1 Preparation Basis The Company prepares the financial statements based on going concern, according to the transactions and events actually occurred and in accordance with the Accounting Standards for Business Enterprises - Basic Standard and various specific accounting standards, application guidance and interpretations for accounting standards for business enterprises and other relevant provisions (hereinafter collectively referred to as "Accounting Standards for Business Enterprises") promulgated by the Ministry of Finance and disclosure provisions of the Rules for the Information Disclosure and Compilation of Companies Publicly Issuing Securities No. 15 - General Rules on Financial Reports of the China Securities Regulatory Commission. 2.2 Going Concern The Company has going-concern ability within 12 months as of the end of the report period and has no matters or situations that may lead to serious doubts about the Company's going-concern ability. 3. Principal Accounting Policies and Accounting Estimates The following disclosure has covered the Company's specific accounting policies and accounting estimates prepared according to the actual production and operation characteristics. 3.1 Statement on Compliance with Accounting Standards for Business Enterprises The financial statements prepared by the Company meet the requirements of the Accounting Standards for Business Enterprises and truly and completely reflect the Company’s financial position, operating results, cash flows and other related information in the reporting period. 3.2 Accounting Period The accounting year is from January 1 to December 31 in calendar year. 3.3 Operating Cycle The Company's operating cycle is 12 months. 34 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. 3.4 Functional Currency The Company adopts RMB as its functional currency. 3.5 Accounting Treatment Methods of Business Combinations under Common Control and not under Common Control Business combinations under common control: Assets and liabilities acquired from business combinations by the Company are measured at book value of assets and liabilities (including goodwill formed from the purchase of the acquiree by the ultimate controller) in the consolidated financial statements of the ultimate controller. Stock premium in the capital reserve should be adjusted according to the difference between the book value of net asset acquired from the combinations and that of consideration (or total face value of the shares issued) paid. In case the stock premium in the capital reserve is not enough, the retained earnings need to be adjusted. Business combinations not under common control: Assets paid for consideration and liabilities incurred or borne by the Company on the acquisition date shall be measured at their fair values. The difference between the fair value and the book value should be included in the current profit and loss. The Company shall recognize the difference of the combination costs in excess of the fair value of the identifiable net assets acquired from the acquiree as goodwill. The Company shall include the difference of the combination costs in short of the fair value of the identifiable net assets acquired from the acquiree in the current profit and loss after review. Intermediary service charges such as audit fee, legal service fee, appraisal and consultancy fee paid for business combinations and other directly relevant expenses are included in the current profit and loss when incurred; the transaction costs for the issuance of equity securities shall be used to offset equities. 3.6 Preparation Methods of Consolidated Financial Statements 3.6.1 Scope of Consolidation The scope of consolidation of the Company's consolidated financial statements is recognized based on the control. All subsidiaries (including the divisible part of the investee controlled by the Company) should be included in the consolidated financial statements. 3.6.2 Consolidation Procedure The Company prepares consolidated financial statements based on its own financial statements and financial statements of its subsidiaries according to other relevant materials. When the Company prepares its consolidated financial statements, it shall regard the whole enterprise group as an accounting entity to reflect the overall financial position, operating results and cash flows of the enterprise group according to the requirements for recognition, measurement and presentation of the relevant Accounting Standards for Business Enterprises and the uniform accounting policies. Accounting policies and accounting periods adopted by all subsidiaries included in the consolidation scope of the consolidated financial statements should be consistent with those of the Company. If accounting policies and accounting periods adopted by all subsidiaries are inconsistent with those of the Company, in the preparation of the consolidated financial statements, necessary adjustments shall be made according to the accounting policies and accounting periods of the Company. For the subsidiaries acquired through business combination not under common control, adjustments to their financial statements shall be made based on the fair values of net identifiable assets on the acquisition date. For the subsidiaries acquired through business 35 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. combination not under common control, adjustments to their financial statements shall be made based on the fair values of their assets and liabilities (including goodwill from acquisition of the subsidiaries by the ultimate controller) in the financial statements of the ultimate controller. The share of owner's equity, net profits and losses in the current year and comprehensive income in the current year of subsidiaries attributable to minority shareholders should separately presented under the item of owner's equity of the Consolidated Balance Sheet, the item of net profit of the Consolidated Income Statement and the item of total comprehensive income. The difference formed by the loss in the current year shared by minority shareholders of the subsidiaries in excess of the share of minority shareholders in the owner's equity at the beginning of the year of the subsidiaries should be used to offset the minority equity. (1) Increase in subsidiaries or business In the reporting period, if the Company increased subsidiaries or business from business combinations under common control, then the beginning amount of the Consolidated Balance Sheet should be adjusted; the incomes, expenses and profits from the combinations of the subsidiaries and business from the beginning of the current year to the end of the reporting period shall be included in the Consolidated Income Statement; cash flows from the combinations of the subsidiaries and business from the beginning of the current year to the end of the reporting period shall be included in the Consolidated Cash Flow Statement. At the same time, the Company should adjust the relevant items of the comparative statements and deem that the reporting entity already exists when the ultimate controller starts its control. Where the Company can control the investee under common control from additional investments, it should deem that parties involved in the combination have make adjustments at the current state when the ultimate controller starts its control. Equity investments held before the Company controls the acquiree, the relevant profit and loss recognized during the period from the later of the date when the Company obtains the original equity and the date when the acquirer and the acquiree are under common control, other comprehensive income and changes in other net assets shall be used to offset the retained earnings at the beginning of the year or the current profit and loss in the period of the comparative statements. In the reporting period, if the Company increased subsidiaries or business from business combinations not under common control, then the beginning amount of the Consolidated Balance Sheet should not be adjusted; the incomes, expenses and profits from the subsidiaries and business from the acquisition date to the end of the reporting period shall be included in the Consolidated Income Statement; cash flows from the subsidiaries and business from the acquisition date to the end of the reporting period shall be included in the Consolidated Cash Flow Statement. Where the Company can control the investee not under common control from additional investments, it shall re-measure equity of the acquiree held before the acquisition date at the fair value of such equity on the acquisition date and include the difference of the fair value and book value in the investment income in the current year. Where equity of the acquiree held before the acquisition date involves in other comprehensive income accounted for under equity method and other changes in owner's equity other than net profit and loss, other comprehensive income and profit distribution, the relevant other comprehensive income and other changes in owner's equity shall be transferred to investment income in the current year which the acquisition date falls in, except for other comprehensive income from changes arising from re-measurement of net liabilities or net assets of defined benefit plan. 36 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. (2) Disposal of subsidiaries or business a. General treatment methods In the reporting period, if the Company disposed subsidiaries or business, then the incomes, expenses and profits from the subsidiaries and business from the beginning of the year to the disposal date shall be included in the Consolidated Income Statement; cash flows from the combinations of the subsidiaries and business from the beginning of the year to the disposal date shall be included in the Consolidated Cash Flow Statement. When the Company losses the control over the original subsidiary due to disposal of partial equity investments or other reasons, the remaining equity investments after the disposal will be re-measured at the fair value at the date of loss of the control. The difference of total amount of the consideration from disposal of equities plus the fair value of the remaining equities less the shares calculated at the original shareholding ratio in net assets of the original subsidiary which are continuously calculated as of the acquisition date is included in the investment income of the period at the loss of control. Other comprehensive income associated with the original equity investments of the subsidiary and other changes in owner's equity other than net profit and loss, other comprehensive income and profit distribution are transferred into investment income in the current year when the control is lost, except for other comprehensive income from changes arising from re-measurement of net liabilities or net assets of defined benefit plan. b. Disposal of subsidiary by stages Where the Company disposes the equity investments in subsidiary through multiple transactions and by stages until it loses the control, if the effect of the disposal on the terms and conditions of all transactions of equity investments in subsidiary and economic effect meet one or more of the following circumstance, it usually indicates that the multiple transactions should be accounted for as a package deal: i. These transactions are concluded at the same time or under the consideration of mutual effect; ii. These transactions as a whole can reach a complete business results; iii. The occurrence of a transaction depends on the occurrence of at least one other transaction; ⅳ. A single transaction is uneconomical but it is economical when considered together with other transactions. Where various transactions of disposal of equity investments in subsidiaries until loss of the control belong to a package deal, accounting treatment shall be made by the Company on the transactions as a transaction to dispose subsidiaries and lose the control; however, the difference between each disposal cost and net asset share in the subsidiaries corresponding to each disposal of investments before loss of the control should be recognized as other comprehensive income in the consolidated financial statements and should be transferred into the current profit or loss at the loss of the control. Where various transactions of disposal of equity investments in subsidiaries until loss of the control do not belong to a package deal, before the loss of the control, accounting treatment shall be made according to the relevant policies for partial disposal of equity investments in the subsidiary without losing control; at the loss of the control, accounting treatment shall be made according to general treatment methods for disposal of subsidiaries. 37 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. (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. 3.7 Cash and Cash Equivalents In preparing the cash flow statement, cash on hand and the unrestricted deposits of the Company are recognized as cash. Short-term (maturing within three months as of the acquisition date) and highly liquid investments held by the Company that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value are recognized as cash equivalents. 3.8 Foreign Currency Transactions and Translation of Foreign Currency Statements 3.8.1 Foreign Currency Transactions Foreign currency transactions are, on initial recognition, translated to RMB at the spot exchange rates at the dates of the transactions. The balance of foreign currency monetary items is adjusted and translated into functional currency at balance sheet date using the spot exchange rate. Regarding the year-end differences of translation in foreign currency, except those special borrowing accounts under the acquisition, building or production of assets to be capitalized are capitalized and accounted into related assets cost, all the other differences are accounted into current profits and losses. The foreign currency non-monetary items at historical cost are translated using the spot exchange rate. And the foreign currency non-monetary items at fair value are adjusted and translated into measurement currency at adoption date of fair value using the spot exchange rate. The difference of translation between different currencies is accounted into current profits and losses or capital reserves. 3.8.2 Translation of Foreign Currency Statements The assets and liabilities of foreign operation are translated to RMB at the spot exchange rate at the balance sheet date. The equity items, excluding “Retained earning”, are translated to RMB at the spot exchange rates at the transaction dates. The income and expenses of foreign operation are translated to RMB at the spot exchange rates or the rates that approximate the spot exchange rates at the transaction dates. The resulting exchange differences are recognized in a separate component of equity. 38 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Upon entire/partial disposal of a foreign operation, the entire/partial cumulative amount of the exchange differences recognized in equity which relates to that foreign operation is transferred to profit or loss in the period in which the disposal occurs. 3.9 Financial Instruments Financial instruments include financial assets, financial liabilities and equity instruments. 3.9.1 Classification of Financial Instruments At the initial recognition, financial assets and financial liabilities are classified as: financial assets or financial liabilities measured at fair value through current profit and loss, including financial assets or financial liabilities held for trading, and financial assets or financial liabilities that are directly to be measured at fair value through current profit and loss, held-to-maturity investments, accounts receivable, available-for-sale financial assets and other financial liabilities, etc. 3.9.2 Recognition Basis and Measurement Method of Financial Instruments (1) Financial assets (financial liabilities) measured at fair value through current profit and loss Financial assets (financial liabilities) are initially recorded at fair values when acquired (deducting cash dividends that have been declared but not distributed and bond interest that has matured but not been drawn). Relevant transaction expenses are included in the current profit and loss. The interest or cash dividends to be received during the holding period is or are recognized as investment income. Change in fair values is included in the current profit and loss at the end of the period. Upon the disposal, difference between the fair value and the initial book-entry value is recognized as investment income; meanwhile, adjustment is made to gains or losses from changes in fair values. (2) Held-to-maturity investments Held-to-maturity investments are initially recorded at the sum of fair values (less the bond interest that has matured but not been drawn) and relevant transaction expenses when acquired. During the period of holding the investment, the interest income is calculated and recognized according to the amortized costs and effective interest rate, and included in the investment income. The effective interest rates are determined upon acquisition and remain unchanged during the expected remaining period, or a shorter period if applicable. Difference between the proceeds and the book value of the investment is recognized as investment income upon disposal. (3) Receivables For 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. 39 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. The difference between the amount received and the book value of accounts receivable is included in the current profit and loss upon the recovery or disposal. (4) Available-for-sale financial assets Available-for-sale financial assets are initially recorded at the sum of fair values (deducting cash dividends that have been declared but not distributed and bond interest that have matured but not been drawn) and relevant transaction costs when acquired. The interest or cash dividends to be received during the holding period is or are recognized as investment income. Available-for-sale financial assets are measured at fair value at the end of the year and the changes in fair value are included in other comprehensive income. However, equity instrument investments that have no quoted price in the active market and of which fair values cannot be measured reliably and derivative financial assets that relate to such equity instruments and that shall be settled through the delivery of such equity instruments shall be measured at cost. Difference between the proceeds and the book value of the financial assets is recognized as investment income upon disposal; meanwhile, amount of disposal corresponding to the accumulated change in fair value which is originally and directly included in other comprehensive income shall be transferred out and recognized as the current profit and loss. (5) Other financial liabilities Other financial liabilities are initially recognized at fair values plus related transaction costs. The subsequent measurement is based on amortized costs. 3.9.3 Recognition and Measurement of Transfer of Financial Assets Upon occurrence of transfer of a financial asset, the Company shall de-recognize the transfer of the financial asset if nearly all the risks and rewards associated with the ownership of the financial assets have been transferred to the transferee; and shall not de-recognize the transfer of the financial asset if nearly all the risks and rewards associated with the ownership of the financial assets are retained. The principle of substance over form is adopted to determine whether a financial asset meets the above de-recognition conditions for the financial asset. The transfer of a financial asset of the Company is classified into the entire transfer and the partial transfer of financial asset. If the entire transfer of financial asset satisfies the criteria for de-recognition, the difference between the amounts of the following two items shall be included in the current profit and loss: (1) The book value of the transferred financial asset; (2) The sum of the consideration received from the transfer and the accumulated amount of the changes in fair value originally and directly included in shareholders’ equity (the situation where the financial asset transferred is an available-for-sale financial asset is involved in). If the partial transfer of financial asset satisfies the criteria for de-recognition, the entire book value of the transferred financial asset shall be split into the derecognized part and recognized part according to their 40 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. respective fair value and the difference between the amounts of the following two items shall be included in the current profit and loss: (1) The book value of derecognized part; (2) The sum of the consideration for the derecognized part and the portion of de-recognition corresponding to the accumulated amount of the changes in fair value originally and directly included in owners' equity (the situation where the financial asset transferred is an available-for-sale financial asset is involved in). If the transfer of financial assets does not meet the de-recognition criteria, the financial assets shall continue to be recognized and the consideration received will be recognized as a financial liability. 3.9.4 Derecognition Criteria of Financial Liabilities A financial liability shall be wholly or partly derecognized if its present obligations are wholly or partly dissolved. Where the Company enters into an agreement with a creditor so as to substitute the existing financial liabilities with any new financial liability, and the new financial liability is substantially different from the contractual stipulations regarding the existing financial liability, it shall derecognize the existing financial liability, and shall at the same time recognize new financial liability. Where substantial revisions are made to some or all of the contractual stipulations of the existing financial liability, the Company shall derecognize the existing financial liability wholly or partly, and at the same time recognize the financial liability with revised contractual stipulations as a new financial liability. Upon whole or partial derecognition of financial liabilities, the difference between the book value of the financial liabilities derecognized and the consideration paid (including non-cash assets surrendered or new financial liabilities assumed) shall be included in the current profit and loss. Where the Company redeems part of its financial liabilities, it shall, on the redemption date, allocate the entire book value of financial liabilities according to the comparative fair value of the part that continues to be recognized and de-recognized part. The difference between the book value allocated to the derecognized part and the considerations paid (including non-cash assets surrendered and the new financial liabilities assumed) shall be included in the current profit and loss. 3.9.5 Determination Method of Fair Value of Financial Assets and Financial Liabilities Where there is an active market for financial instruments, the fair values shall be determined according to quoted prices in active markets. Where there is no active market, the fair values shall be determined using reasonable valuation techniques. At the time of valuation, the Company adopted valuation techniques applicable in the current situation and supported by enough available data and other information, select input values consistent with the features of assets or liabilities considered by market participants in the transaction related to the assets or liabilities, and give priority to using the relevant observable input values. Only when it is unable or impracticable to obtain the relevant observable input values, unobservable input values can be used. 3.9.6 Test Method and Accounting Treatment of Depreciation of Financial Assets (excluding Receivables) 41 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Except for the financial assets measured at fair values through current profit and loss, the book value of financial assets on the balance sheet date should be checked. If there is objective evidence that a financial asset is impaired, provision for impairment shall be made. (1) Provision for impairment of available-for-sale financial assets: If the fair value of available-for-sale financial assets has significantly declined at the end of the period, or it is expected that the trend of decrease in value is non-temporary after considering of various relevant factors, the impairment shall be recognized, and accumulated losses from decreases in fair value originally and directly included in owners' equity shall be all transferred out and recognized as impairment loss. For available-for-sale debt instruments whose impairment losses have been recognized, if their fair values rise in the subsequent accounting period and such rise is objectively related to the matters occurring after the recognition of impairment loss, the previously recognized impairment loss shall be reversed and recorded into the current profit and loss. Impairment losses on available-for-sale equity instruments should not be reversed through profit and loss. Criteria of the Company for "serious" decline of fair value of investments in available-for-sale equity instruments: In general, for highly liquid equity investments that are actively traded in the market, over 50% of the decline is considered to be a serious fall. Criteria for "non-temporary" decline of fair value: In general, if a continuous decline lasts for more than six months, it is considered as "non-temporary decline." (2) Provision for impairment of held-to-maturity investments: Measurement of provision for impairment loss on held-to-maturity investments is treated in accordance with the measurement method of impairment loss on accounts receivable. 3.10 Provision for Bad Debts of Receivables 3.10.1 Receivables that are Individually Significant but with Provision for Bad Debts Made on an Individual Basis Assessment basis or standard of amount individually significant: Top five biggest balance accounts. Method of provision for bad debts of receivables that are individually significant: An impairment test shall be separately made and provision for bad debts shall be made according to the difference between the present value of estimated future cash flows lower than the book value and should be included in the current profit and loss. For short-term receivables, the difference between expected future cash flows and the present value is too small to discount the expected future cash flows when recognizing the relevant impairment losses. 3.10.2 Provision for Bad Debts of Receivables Made on Credit Risk Characteristics Portfolio Basis Methods of provision for bad debts made on credit risk characteristics portfolio basis Balances of receivables other than accounts receivable subject to provisions for bad debts on an Portfolio individual basis and other receivables Methods of provision for bad debts made on the basis of portfolio Portfolio Aging analysis method 42 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Provision for bad debts made at aging analysis method in the portfolio: Proportion of Provision for Accounts Proportion of Provision for Other Aging Receivable (%) Receivables (%) 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 3.10.3 Receivables that are Individually Insignificant but with Provision for Bad Debts Made on an Individual Basis Reason for bad debt provision provided on an individual basis: Receivables of a particular object. Method of provision for bad debts: An impairment test should be separately made. When there is objective evidence suggesting that receivables are impaired, provision for bad debts shall be made at the difference of present value of estimated future cash flows in short of their book values and should be included in the current profit and loss. 3.11 Inventories 3.11.1 Classification of Inventories Inventories are classified into Materials in transit, raw materials, revolving materials, stock commodities, goods in progress, dispatched goods, material procurement, consigned processing materials, labor cost and others. 3.11.2 Measurement Method of Dispatched Inventories Inventories are measured with weighted average method when dispatched. The percentage matches method of the labor cost and labor revenue. One-off amortization method is adopted for low-cost consumables when they are consumed. 3.11.3 Recognition Basis for Net Realizable Values of Inventories of Different Categories In normal operation process, for merchandise inventories for direct sale, including finished goods, stock commodities and materials for sale, their net realizable values are determined at the estimated selling prices minus the estimated selling expenses and relevant taxes and surcharges; in normal operation process, for material inventories that need further processing, their net realizable values are determined at the estimated selling prices of finished goods minus estimated costs to completion, estimated selling expenses and relevant taxes and surcharges; for inventories held to execute sales contract or service contract, their net realizable values are calculated on the basis of contract price. If the quantities of inventories specified in sales contracts are less than the quantities held by the Company, the net realizable value of the excess portion of inventories shall be based on general selling prices. At the end of the period, provisions for inventory depreciation reserve are made on an individual basis. For inventories with large quantity and low unit price, the provisions for inventory depreciation reserve are made on a category basis. For inventories related to the product portfolios manufactured and sold in the same area, and of which the final usage or purpose is identical or similar thereto, and which is difficult to separate from other items for measurement purposes, the provisions for inventory depreciation reserve shall be made on a portfolio basis. 43 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Except that there is clear evidence that the market price is abnormal on the balance sheet date, the net realizable value of inventory items shall be recognized at the market price on the balance sheet date. Net realizable value of inventory items at the end of the year is recognized at the market price on the balance sheet date. 3.11.4 Inventory System Perpetual inventory system is adopted. 3.12 Long-term Equity Investments 3.12.1 Criteria for Judgment of Common Control and Significant Influence The term “common control” refers to the joint control, according to the relevant provisions, over an arrangement, of which the relevant activities should be agreed and decided by the participants that share the control. Where the Company and other investors exert common joint control over the investee and the Company is entitled to net assets of the investee, the investee is the joint venture of the Company. Significant influence refers to the power to participate in making decisions on the financial and operating policies of an enterprise, but not the power to control, or jointly control, the formulation of such policies with other parties. Where the Company is able to exert significant influence over the investee, the investee is its associate. 3.12.2 Recognition of Initial Investment Costs (1) Long-term equity investments acquired from business combination Business combination under common control: if the Company makes payment in cash, transfers non-cash assets or bears debts and issues equity securities as the consideration for the business combination, the book value of the owner's equity of the acquiree in the consolidated financial statements of the ultimate controller is recognized as the initial cost of the long-term equity investment on the combination date. In case the Company can exercise control over the investee under common control for additional investment or other reasons, the initial investment cost of long-term equity investments is recognized at the share of book value of net asset of the acquiree after the combination in the consolidated financial statements of the ultimate controller on the combination date. The stock premium should be adjusted at the difference between the initial investment cost of long-term equity investments on the combination date and the book value of long-term equity investments before the combination plus the book value of consideration paid for additional shares; if there is no sufficient stock premium for write-downs, the retained earnings are adjusted. Business combination not under common control: The Company recognizes the combination cost determined on the combination date as the initial cost of long-term equity investments. Where the Company can exercise control over the investee not under common control for additional investments or other reasons, the initial investment cost changed to be accounted for under the cost method should be recognized at the book value of originally held equity investments plus costs of additional investments. (2) Long-term equity investment acquired by other means For a long-term equity investment acquired through making payments in cash, its initial cost is the actually paid purchase cost. 44 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. For a long-term equity investment acquired from issuance of equity securities, its initial cost is the fair value of the issued equity securities. If the exchange of non-monetary assets has commercial substance and the fair values of assets traded out and traded in can be measured reliably, the initial cost of long-term equity investment traded in with non-monetary assets are determined based on the fair values of the assets traded out and the relevant taxes and surcharges payable unless there is any conclusive evidence that the fair values of the assets traded in are more reliable; if the exchange of non-monetary assets does not meet the above criteria, the book value of the assets traded out and the relevant taxes and surcharges payable are recognized as the initial cost of long-term equity investment traded in. For a long-term equity investment acquired from debt restructuring, its initial cost is determined based on the fair value. 3.12.3 Subsequent Measurement and Recognition of Gains and Losses (1) Long-term equity investment accounted for under the cost method Long-term equity investments in subsidiaries are accounted for under the cost method. Except for the actual price paid for acquisition of investment or the cash dividends or profits contained in the consideration which have been declared but not yet distributed, the Company recognizes the investment income in the current year at the cash dividends or profits declared by the investee. (2) Long-term equity investments accounted for under the equity method Long-term equity investments in associates and joint ventures are accounted for under the equity method. If the cost of initial investment is in excess of the proportion of the fair value of the net identifiable assets in the investee when the investment is made, the difference will not be adjusted to the initial cost of the long-term equity investments; if the cost of initial investment is in short of the proportion of the fair value of the net identifiable assets in the investee when the investment is made, the difference will be included in the current profit and loss. The Company shall recognize the investment income and other comprehensive income at the shares of net profit and loss and other comprehensive income realized by the investee which the Company shall enjoy or bear and adjust the book value of long-term equity investments at the same time; the Company shall calculate the shares according to profits or cash dividends declared by the investee and correspondingly reduce the book value of long-term equity investments; the book value of long-term equity investments shall be adjusted according to the investee's other changes in owner's equity other than net profit and loss, other comprehensive income and profit distribution, which should be included in owner's equity. The share of the investee's net profit or loss should be recognized after adjustments are made to net profit of the investee based on the fair value of identifiable net assets of the investee upon acquisition of investments and according to accounting policies and accounting period of the Company. When holding the investment, the investee should prepare the consolidated financial statements, it shall account for the investment income based on the net profit, other comprehensive income and the changes in other owner's equity attributable to the investee. 45 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. When the Company recognizes its share of loss incurred to the investee, treatment shall be done in following sequence: firstly, the book value of the long-term equity investment shall be reduced. Secondly, where the book value thereof is insufficient to cover the share of losses, investment losses are recognized to the extent of book value of other long-term equities which form net investment in the investee in substance and the book value of long term receivables shall be reduced. Finally, after all the above treatments, if the Company is still responsible for any additional liability in accordance with the provisions stipulated in the investment contracts or agreements, provisions are recognized and included into current investment loss according to the obligations estimated to undertake. (3) Disposal of long-term equity investments For disposal of long-term equity investment, the difference between its book value and the actual price shall be included in the current profit and loss. For long-term equity investments accounted for under the equity method, when the Company disposes such investments, accounting treatment should be made to the part that is originally included in other comprehensive income according to the corresponding proportion by using the same basis for the investee to directly dispose the relevant assets or liabilities. Owner's equity recognized at the changes in the investee's other owner's equity other than net profit or loss, other comprehensive income and profit distribution shall be transferred to the current profit and loss according to the proportion, except for other comprehensive income from changes arising from re-measurement of net liabilities or net assets of defined benefit plan. In case the joint control or significant influence over the investee is lost for disposing part of equity investments or other reasons, the remaining equity will be changed to be accounted for according to the recognition and measurement principles of financial instruments. The difference between the fair value and the book value on the date of the loss of joint control or significant influence should be included in the current profit and loss. For other comprehensive income recognized from accounting of the original equity investments under the equity method, accounting treatment should be made by using the same basis for the investee to directly dispose the relevant assets or liabilities when the equity method is no longer adopted. Owner's equity recognized from the investee's changes in other owner's equity other than net profit or loss, other comprehensive income and profit distribution should all transferred to the current profit and loss when the equity method confirmed is no longer adopted. In case the control over the investee is lost for disposing part of equity investments or other reasons, when the Company prepares the individual financial statements, where the remaining equity after the disposal can exercise joint control or significant effect on the investee, then such equity will be changed to be accounted for under the equity method and the remaining equity is deemed to have been adjusted under the equity method on acquisition; where the remaining equity after the disposal cannot exercise joint control or significant effect on the investee, then accounting treatment shall be changed to be made according to the relevant provisions on the recognition and measurement principles of financial instruments. The difference between the fair value and the book value on the date of the loss of joint control or significant influence should be included in the current profit and loss. In case the disposed equity is acquired from additional investments or other reasons, when the Company prepares the individual financial statements, where the remaining equity after the disposal is accounted for under the cost method or the equity method, other comprehensive income and other owner's equity recognized 46 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. from the accounting of equity investments held before the acquisition date under the equity method shall be transferred according to the proportion; where accounting treatment of the remaining equity after the disposal is changed to be made according to the recognition and measurement principles of financial instruments, all of other comprehensive income and other owner's equity shall be transferred. 3.13 Investment Property Investment properties are properties to earn rentals or for capital appreciation or both. Examples include land leased out under operating leases, land held for long-term capital appreciation, buildings leased out under operating leases, (including buildings that have been constructed or developed for future lease out under operating leases, and buildings that are being constructed or developed for future lease out under operating leases). The Company adopts the cost model to measure all current investment properties. The Company adopts the same depreciation policy for the investment property measured at cost model - building for renting as that for the Company’s fixed assets and the same amortization policy of land use right for renting as that for the Company’s intangible assets. 3.14 Fixed Assets 3.14.1 Recognition Criteria for Fixed Assets Fixed assets refer to tangible assets held for the purpose of producing commodities, providing services, renting or business management with useful lives exceeding one accounting year. Fixed assets will only be recognized when all the following criteria are satisfied: (1) It is probable that the economic benefits relating to the fixed assets will flow into the Company; and (2) The costs of the fixed asset can be measured reliably. 3.14.2 Depreciation Method Depreciation of fixed assets is provided on a category basis using the straight-line method. The depreciation rates are determined according to the categories, estimated useful lives and estimated net residual rates of fixed assets. If the components of a fixed asset have different useful lives or cause economic benefit for the Company in different ways, different depreciation rate or method shall be adopted for depreciation on an individual component basis. Depreciation of fixed assets, depreciation period, residual rate and annual depreciation rates are as follows: Category Depreciation Life (years) Residual Rate (%) Annual Depreciation Rate (%) Buildings and constructions 5-50 0-10 2.00-25.00 Machinery equipment 3-15 0-10 6.00-33.33 Transportation equipment 3-14 0-10 6.43-33.33 Electronic equipment 3-14 0-10 6.43-33.33 Renovations of fixed assets 5-15 0 6.67-20.00 Other equipment 3-14 0-10 6.43-33.33 3.15 Construction in Progress The book values of the construction in progress are stated at total expenditures incurred before reaching working condition for their intended use. For construction in progress that has reached working condition for intended use but relevant budgets for the completion of projects have not been completed, the estimated values 47 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. of project budgets, prices, or actual costs should be included in the costs of relevant fixed assets, and depreciation should be provided according to relevant policies of the Company when working condition is reached. After the completion of budgets needed for the completion of projects, the estimated values should be substituted by actual costs, but depreciation already provided is not adjusted. 3.16 Borrowing Costs 3.16.1 Recognition Criteria for Capitalization of Borrowing Costs Borrowing costs include the interest on borrowings, the amortization of discount or premium, auxiliary expenses, exchange differences incurred by foreign currency borrowings, etc. The borrowing costs incurred to the Company and directly attributable to the acquisition and construction or production of assets eligible for capitalization should be capitalized and recorded into asset costs; other borrowing costs should be recognized as costs according to the amount incurred and be included into current profit and loss. Assets eligible for capitalization refer to fixed assets, investment property, inventories and other assets which may reach their intended use or sale status only after long-time acquisition and construction or production activities. Borrowing costs may be capitalized only when all the following conditions are met at the same time: (1) The asset disbursements have already incurred, which shall include the cash paid, non-cash assets transferred or interest bearing debts undertaken for the acquisition and construction or production activities for preparing assets eligible for capitalization; (2) The borrowing costs has already incurred; and (3) Purchase, construction or manufacturing activities that are necessary to prepare the asset for its intended use or sale have already started. 3.16.2 Capitalization Period of Borrowing Costs Capitalization period refers to the period from commencement of capitalization of borrowing costs to its cessation; period of suspension for capitalization is excluded. When the qualified asset under acquisition and construction or production is ready for the intended use or sale, the capitalization of the borrowing costs shall be ceased. When some projects among the acquired and constructed or produced assets eligible for capitalization are completed and can be used separately, the capitalization of borrowing costs of such projects should be ceased. Where construction for each part of assets purchased, constructed or manufactured has been completed separately but can be used or sold only after the entire assets have been completed, capitalization of attributable borrowing costs should cease at the completion of the entire assets. 3.16.3 Period of Capitalization Suspension If the acquisition and construction or production activities of assets eligible for capitalization are interrupted abnormally and this condition lasts for more than three months, the capitalization of borrowing costs should be suspended; if the interruption is necessary for the acquisition and construction or production to prepare the 48 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. assets for their intended use or sale, the capitalization of borrowing costs should continue. The borrowing costs incurred during interruption are recognized in the current profit and loss, and the capitalization of borrowing costs continues after the restart of the acquisition and construction or production activities of the assets. 3.16.4 Capitalization Rate and Measurement of Capitalized Amounts of Borrowing Costs As for special borrowings borrowed for acquiring and constructing or producing assets eligible for capitalization, the to-be-capitalized amount shall be determined at interest expense of special borrowing actually incurred in the current period less the interest income of the borrowings unused and deposited in bank or return on temporary investment. As for general borrowings used for acquiring and constructing or producing assets eligible for capitalization, the to-be-capitalized amount should be calculated by multiplying the weighted average of asset disbursements of the part of accumulated asset disbursements exceeding special borrowings by the capitalization rate of used general borrowings. The capitalization rate is calculated by using the weighted average interest rate of general borrowings. 3.17 Intangible Assets 3.17.1 Measurement of Intangible Assets (1) The Company initially measures intangible assets at cost on acquisition The costs of external purchase of intangible assets comprise their purchase prices, related taxes and surcharges and any other directly attributable expenditure incurred to prepare the asset for its intended use. If payments for the purchase of intangible assets are extended beyond the normal credit terms with financing nature, the costs of intangible assets are determined on the basis of present values of the purchase prices. For intangible assets obtained from debtors in settlement of his liabilities in case of debt restructuring, they should be initially stated at their fair values. Differences between the book values and the fair values of the intangible assets are charged to profit or loss for the current period. If the exchange of non-monetary assets has commercial substance, and the fair values of these assets can be measured reliably, the book-entry values of intangible assets traded in are based on the fair values of the intangible assets traded out unless there is any conclusive evidence that the fair values of the assets traded in are more reliable. If the exchange of non-monetary assets does not meet the above criteria, the costs of the intangible assets traded in should be the book values of the assets traded out and relevant taxes and surcharges paid, and no profit or loss shall be recognized. (2) Subsequent measurement The useful lives of the intangible assets are analyzed and determined on their acquisition. As for intangible assets with limited useful life, straight-line amortization method is adopted in the period when the intangible assets generate economic benefit for enterprise; if the period when the intangible assets generate economic benefit for enterprise cannot be forecasted, the intangible assets shall be deemed as those with indefinite useful life and shall not be amortized. 3.17.2 Estimate of the Useful Life of the Intangible Assets with Finite Useful Lives Item Estimated Useful Lives 49 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Land use right 50 years Right to use trade mark 10 years Patent and non-patent technology 4-8 years Computer software 3-10 years The useful lives and amortization methods of intangible assets with limited useful lives are reviewed at each year end. Upon review, the useful lives and amortization method of the intangible assets as at the end of the year were not different from those estimated before. 3.17.3 Specific Criteria Divided the Research Stage and Development Stage Expenditure internal research and development project is divided into research expenditures and development expenditures. Research stage: the planned investigation and research activities to acquire and understand new scientific or technological knowledge. Development stage: before commercial production and use, the research findings or other knowledge are applied in some plan or design to produce new or substantially improved materials, devices, products, etc. 3.17.4 Specific Criteria to Fulfill for Development Costs to be Capitalized If it can be reliably estimated that future economic benefits will flow to the entity, and that the purchase and production costs can be reliably measured, the development cost should be capitalized. The measurement of production cost of internally generated intangible assets is based on direct cost, indirect cost and amortization. If it can be clearly defined that newly developed products or methods are technically feasible, and that they are intended for private use or sale, the development cost should be capitalized. The capitalized development cost should be amortized within a 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. 3.18 Impairment of Long-term Assets The Company will conduct the impairment test if any evidence suggests that the long assets, such as the long-term equity investment and the investment property, fixed assets, construction in progress and intangible assets, are impaired on the balance sheet date. If impairment test results indicate that the recoverable amounts of the assets are lower than their carrying amounts, the provision for impairment is made based on the differences which are recognized as impairment losses. The recoverable amounts of intangible assets are the higher of their fair values less costs to sell and the present values of the future cash flows expected to be derived from the assets. The provision for assets impairment is calculated and recognized by the individual asset. If it is difficult to estimate the intangible amount of an individual asset, the Company shall estimate the recoverable amount of the asset portfolio that the individual asset belongs to. The asset portfolio is the minimum asset group that can independently generate the cash inflow. At least the impairment test is conducted at the year-end in respect of the goodwill. The Company conducts an impairment test for the goodwill. The book value of goodwill arising from business combinations is amortized to relevant asset groups with a reasonable method since the date of acquisition; or 50 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. amortized to relevant combination of asset groups if it is difficult to be amortized to relevant asset groups. The book value of goodwill is amortized to relevant asset groups or combinations of asset groups according to the proportion of the fair value of such asset groups or combinations of asset groups in the total fair value of relevant asset groups or combinations of asset groups. Where the fair value cannot be reliably measured, it should be amortized according to proportion of the book value of each asset group or combination of asset group in the total book value of relevant asset groups or combinations of asset groups. When making an impairment test on the relevant asset groups or combination of asset groups containing goodwill, if any indication shows that the asset groups or combinations of asset groups related to the goodwill may be impaired, the Company shall first conduct an impairment test on the asset groups or combinations of asset groups not containing goodwill, calculate the recoverable amount and compare it with the relevant book value to recognize the corresponding impairment loss. Then the Company shall conduct an impairment test on the asset groups or combinations of asset groups containing goodwill, and compare the book value of these asset groups or combinations of asset groups (including the book value of the goodwill apportioned thereto) with the recoverable amount. Where the recoverable amount of the relevant asset groups or combinations of asset groups is lower than the book value thereof, the Company shall recognize the impairment loss of the goodwill. The above impairment loss is not reversed in the future accounting period once recognized. 3.19 Employee Compensation 3.19.1 Accounting Treatment of Short-term Remuneration During the accounting period in which employees provide service to the Company, the short-term remuneration actually incurred is recognized as liabilities and charged to the current profit or loss or the relevant assets cost. The medical insurance premium, work-related injury insurance premium and the housing provident fund paid by the Company for its employees, together with the labor union expenditures and employee education are used to calculate and determine the relevant employee compensation amount based on the prescribed accrual basis and accrual proportion. The non-monetary benefits for employees that can be measured reliably are measured at fair value. 3.19.2 Accounting Treatment of Benefits Paid after Departure (1) Defined withdrawal plan The basic endowment insurance premium and unemployment insurance premium paid by the Company for its employees in accordance with relevant provisions of the local government are recognized as liabilities and charged to the current profit or loss or the relevant assets cost, with the payable amount calculated based on the local prescribed payment base and percentage, during the accounting period in which the employees provide services to the Company. In addition to the basic endowment insurance, the Company also builds the enterprise annuity payment system (supplementary pension insurance) in accordance with relevant national policies for enterprise annuity system. The Company pays a certain percentage of the total employee compensation to the local social institution, and record the relevant expenditures into the current profit or loss or the relevant assets cost. 51 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. (2) Defined benefit plan The Company attributes the welfare obligation arising from the defined benefit plan to the period during which the employees provide services, in accordance with the formula determined under the estimated accumulated welfare unit method, and records the same into the current profit or loss or the relevant asset cost. A net liability or net asset in relation to the defined benefit plan is recognized at the present value of the obligation under the defined benefit plan less the deficit or surplus arising out of the fair value of the assets in relation to the defined benefit plan. Where the defined benefit plan has any surplus, the Company will determine the net assets in relation to the defined benefit plan at the lower of the surplus of the defined benefit plan or the asset cap. The obligations under the defined benefit plan, including the estimated payment obligation within 12 months following the annual report period during which the employees provide service, are discounted to the present value at the market return of the national debt of which the term and currency match those of the obligation under the defined benefit plan on the balance sheet date, or of the high-quality corporate debt in an active market. The service cost incurred by the defined benefit plan, together with the net interest on the net liability or net asset in relation to the defined benefit plan, are charged to the current profit or loss or the relevant asset cost; the change arising from the re-measurement of the net liability or net asset in relation to the defined benefit plan are recorded into other comprehensive income and are not reversed to the profit or loss in the subsequent accounting period. The gains or losses on the settlement in respect of the defined benefit plan are recognized at the difference between the present value and the settlement price of the obligation under the defined benefit plan on the settlement date. 3.19.3 Accounting Treatment of Dismissal Welfare Where the Company cannot unilaterally withdraw the dismissal welfare offered in view of the cancellation of the labor relation plan or the layoff proposal, or recognizes the cost or expenses as to the restructuring involving the payment of dismissal welfare (whichever is earlier), the employee compensation arising from the dismissal welfare should be recognized as the liabilities and charged to the current profit or loss. 3.20 Estimated Liabilities 3.20.1 Recognition Criteria for Estimated Liabilities The Company should recognize an obligation in relation to contingencies as an estimated liability, such as the litigation, debt guarantee, loss-making contract or restructuring, when all the following conditions are satisfied: (1) 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. 3.20.2 Measurement of Estimated Liabilities 52 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. The estimated liabilities of the Company are initially measured as the best estimate of expenses required for the performance of relevant present obligations. The risks, uncertainties, time value of money, and other factors relating to the contingencies. If the time value of money is significant, the best estimates shall be determined after discount of relevant future cash outflows. The best estimates shall be treated as follows in different circumstances: If there is continuous range (or interval) for the necessary expenses, and probabilities of occurrence of all the outcomes within this range are equal, the best estimate shall be determined at the average amount of upper and lower limits within the range. Given the fact that there is no continuous range (or interval) for the necessary expenses, or probabilities of occurrence of all the outcomes within this range are unequal despite such a range exists, in case that the contingency involves a single item, the best estimate shall be determined at the most likely outcome; if the contingency involves two or more items, the best estimate should be determined according to all the possible outcomes with their relevant probabilities. When all or part of the expenses necessary for the settlement of an estimated liabilities are expected to be compensated by a third party or other parties, the compensation shall be separately recognized as an asset only when it is virtually certain that the compensation will be received. The amount recognized for the compensation shall not exceed the book value of the estimated liabilities. 3.21 Revenues 3.21.1 Timing for Recognition of Revenues from Sales of Goods Revenues from sales of goods are recognized when the Company has transferred to the buyer the significant risks and rewards of ownership of the goods; the Company retains neither continuous management rights associated with ownership of the goods sold nor effective control over the goods sold; the relevant amount of revenue can be measured reliably; it is highly likely that the economic benefits associated with the transaction will flow into the Company; and the relevant amount of cost incurred or to be incurred can be measured reliably. 3.21.2 Recognition of the Revenues from Transfer of Assets Use Right When the economic benefit related to the transaction is probably to flow into the Company and the relevant revenue can be reliably measured, the revenue from transfer of the assets use right is determined as follows: (1) measured based on the length of time for which the Company's monetary funds is used by others and the applicable interest rate; or (2) amount of royalties revenues, which shall be measured according to the period and method of charging as stipulated in the relevant agreements or contracts. 3.21.3 Measurement Principles and Methods of Completion Stage where Revenues from Rendering of Labor are Recognized under Percentage-of-completion Method The Company provides confirmation of the written income of the customer when the service income is confirmed and issued the settlement certificate. 53 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. If the outcome of transactions can be estimated reliably at the balance sheet date, revenues from rendering of labor services are recognized under the percentage-of-completion method. The percentage of completion is determined by measurement of completed work as a percentage of total estimated costs. Revenues from rendering of labor services are determined by prices stated in the contracts or agreements, whether already received or to be received, unless such relevant prices are unfair. The current revenue from the rendering of labor services is recognized at the amount of multiplying the total revenue from the rendering of labor services by completion progress and deducting the accumulated revenue from the rendering of labor services recognized in previous accounting periods on the balance sheet date; meanwhile, the current cost of labor services is carried forward by the amount of multiplying the total costs of the rendering of labor services by completion progress and deducting the accumulated revenue from the rendering of labor services recognized in previous accounting periods. When the outcome of transactions involving the rendering of services cannot be estimated reliably, revenues shall be recognized and measured at the balance sheet date as follows: (1) if the service costs incurred are expected to be fully recoverable, the amounts equal to the labor costs incurred shall be recognized as revenues and the equivalent amounts of labor costs shall be carried forward; (2) if the service costs incurred are not expected to be fully recoverable, the labor costs incurred shall be included in the current profit and loss, with no revenue from the rending of labor services not recognized. 3.22 Government Subsidies 3.22.1 Types Government grants refer to the monetary or non-monetary assets obtained by the Company from the government for free. Government subsidies are classified into government subsidies related to assets and government subsidies related to income. Government grants relating to purchase or construction of long-term assets, such as fixed assets and intangible assets, etc., shall be recognized as deferred income and amortized over the useful lives of assets constructed or purchased and charged to non-operating income by stage. Government subsidies related to income refer to those other than the government subsidies related to assets. The Company divides the government subsidies into those related to assets according to the following specific standards: the government subsidies acquired by the Company to acquire, construct or otherwise form the long-term assets; The Company divides the government subsidies into those related to income according to the following specific standards: the government subsidies other than those related to assets; If the targets of subsidies are not specified in the government documents, the basis for the Company to determine the classification of the subsidies related to assets or income is: Whether such government subsidies are used to acquire, construct or otherwise form the long-term assets 3.22.2 Accounting Treatment Government subsidies relating to assets shall be recognized as deferred income and amortized over the useful lives of assets constructed or purchased and charged to current profit and loss by stage; 54 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. If government subsidies related to income are used to compensate the Company’s relevant expenses or losses in future periods, such government subsidies should be recognized as deferred income on acquisition and be included into the current profit and loss in the period of recognizing relevant expenses; if government subsidies related to income are used to compensate the enterprise’s relevant expenses or losses incurred, such government subsidies are directly included into the current profit and loss on acquisition. 3.23 Deferred Income Tax Assets and Deferred Income Tax Liabilities Deferred income tax assets shall be recognized for deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilized. Deferred income tax assets should be recognized for deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilized. Taxable temporary differences are recognized as deferred income tax liabilities except in special circumstances. Special circumstances in which deferred income tax assets or deferred income tax liabilities shall not be recognized include: the initial recognition of goodwill; other transactions or events excluding business combinations, which affect neither accounting profits nor the taxable income (or deductible losses) when occurred. If the Company has the legal right of netting and intends to settle in net amount or to obtain assets and discharge liabilities simultaneously, the income tax assets and income tax liabilities of the Company for the current period shall be presented based on the net amount after offset. When the Company has the legal rights to balance income tax assets and income tax liabilities for the current period with net settlement, and deferred income tax assets and deferred income tax liabilities are related to the income tax which are imposed on the same taxpaying subject by the same tax collection authority or on different tax paying subjects, but, in each important future period in connection with the reverse of deferred income tax assets and liabilities, the involved tax paying subject intends to balance income tax assets and liabilities for the current period with net settlement at the time of obtaining assets and discharging liabilities, deferred income tax assets and deferred income tax liabilities shall be presented based on the net amount after offset. 3.24 Lease 3.24.1 Accounting Treatment of Operating Lease (1) Lease fees paid by the Company for leased asset shall be amortized at straight-line method over the whole lease period (including rent-free period) and shall be included in the current expenses. Initial direct costs relating to lease transactions incurred by the Company shall be recognized as the current expenses. If the expense related to the lease which shall be paid by the Company is assumed by the lessor of the asset, then such expenses shall be deducted from total lease fees, and the balances shall be amortized over the lease term s and charged to the current expenses. (2) The lease fees received for the assets acquired under lease shall be recognized as current expenses over the lease terms (including rent-free periods) on a straight-line basis. The initial direct costs related to lease transactions paid by the Company, included in the current expenses; if a larger amount is to be capitalized, 55 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. according to confirm the same basis throughout the period of the lease installments related to the lease income is recognized in profit gains. If expenses relating to leases which should be borne by the lessee of the assets are paid by the Company, they shall be deducted from the total lease income and the balances shall be amortized over the lease terms by the Company. 3.25 Discontinued Operation Discontinued operation is the component that meets any of the following conditions, is disposed or classified as the held-for-sale one and can be separately distinguished at the time of preparation of financial statements: (1) such component represents an independent primary business or a major business area; (2) such component is part of the disposition plan for an independent primary business or a major business area; (3) such component is a subsidiary acquired for just re-sale. 3.26 Adjustment for Changes in Principal Accounting Policies and Accounting Estimates 3.26.1 Adjustment for Changes in Accounting Policies Implement the "Accounting Standards for Business Enterprises No. 16 - Government Subsidies ". Ministry of Finance on 10th May 2017 revised the "Accounting Standards for Business Enterprises No. 16 - Government Subsidies", which was implemented since 12th June 2017. The main impact of implementing the standard is as follows: The Content and Reasons of Accounting Policy Changes Item and Amount Affected in the Report Ministry of Finance on 10th May 2017 issued the "Accounting Standards for Business Enterprises No. 16 - Government Subsidies" (Accounting [2017] No. 15). According to the revised "Accounting Standards for Business Enterprises The change has no significant impact on the No. 16 - Government Subsidies", government subsidies related to the daily Company's financial position, operating results activities of enterprises shall be included in other income or related expenses in and cash flow. accordance with the essence of economic business; government grants unrelated to the daily activities of enterprises shall be included in non-operating income and expense. 3.26.2 Adjustment for Changes in Principal Accounting Estimates There were no changes in the accounting estimates in the current repor period. 4. Tax Tax Type Basis of Tax Assessment Tax Rate The output tax is calculated based on the revenue from sales of goods 3%, 5%, 6%, 7%, and the provision of taxable labor services according to tax law, and Value-added tax (VAT) 11%, 13%, 17%, value added tax payable should be the balance of the output tax for 19% the period after deducting the deductible input tax for the period. Levied based on the taxable income (reclassified to VAT from 1st May Business tax 5% 2016) Enterprise income tax (EIT) Levied based on the taxable income 16%-38%, 25% Urban maintenance and Levied based on the actual payment of business tax and VAT. 1%, 5%, 7% construction tax Education surtax and local Levied based on the actual payment of business tax and VAT. 2%, 3% education sutax Note: The EIT rate applicable to ShangGong Europe, a subsidiary of the Company, and its subsidiaries in the 56 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. scope of consolidation varies in a range from16% to 38%; and the VAT rate is 19%. 5. Notes to Items of Consolidated Financial Statements 5.1 Cash and Cash Equivalents Item Ending Balance Beginning Balance Cash on hand 948,951.52 1,137,409.87 Bank deposit 650,110,309.40 751,831,391.58 Other monetary funds 1,022,144.03 10,686,903.12 Total 652,081,404.95 763,655,704.57 Including: total amount of cash and 342,712,838.67 463,089,363.62 cash equivalents offshore Details of cash and cash equivalents restricted for use due to mortgage, pledge or freezing are follows: Item Ending Balance Beginning Balance Other guaranteed deposit (Note) 3,044,759.40 3,319,935.24 Deposit held for foreign exchange inspection 9,977,839.70 Total 3,044,759.40 13,297,774.94 Note: This item consists of the guaranteed deposit pledged by ShangGong Europe to Commerzbank Germany, amounting to 328,737.00 euro (equivalent to 2,544,759.40 yuan); and the guarantees for crackdown on counterfeit goods amounting to 500,000.00 yuan by the Company’s subsidiary Shanghai Butterfly Import & Export Co., Ltd. 5.2 Financial assets at fair value whose fluctuation is attributed to profit and loss for current period Item Ending Balance Beginning Balance Trading financial assets 4,000.00 Of which: Debt instrument investment Equity instrument investment 4,000.00 Derivative financial asset Others Financial assets measured at fair value and the changes are recorded into current period profit or loss Of which: Debt instrument investment Equity instrument investment Other financial asset Total 4,000.00 5.3 Derivative Financial Assets Not applicable. 5.4 Notes Receivable 5.4.1 Presentation of Notes Receivable by Category Item Ending Balance Beginning Balance Bank acceptance bills 51,827,634.80 51,427,934.60 Commercial acceptance bills 23,277,333.77 27,413,513.45 Total 75,104,968.57 78,841,448.05 5.4.2 Notes Receivable Pledged as at the End of Period Not applicable. 57 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. 5.4.3 The Notes Receivable that Have Been Endorsed or Discounted at the End of the Period and Have not yet Expired at the Balance Sheet Date Item Ending Balance Beginning Balance Bank acceptance bills 3,603,975.02 Commercial acceptance bills Total 3,603,975.02 5.4.4 Notes Receivable Transferred to Accounts Receivable Due to the Issuer's Performance Failure Not applicable. 5.5 Accounts Receivable 5.5.1 Disclosure of Accounts Receivable by Category Ending Balance Beginning Balance Type Book Balance Provision for Bad Debt Book Balance Provision for Bad Debt Book Value Book Value Amount % Amount % Amount % Amount % Accounts receivable with significant individual amount and provision for 99,045,728.99 16.01 19,490,244.00 19.68 79,555,484.99 69,228,371.46 13.86 18,376,602.00 26.54 50,851,769.46 bad debt is accrued separately Accounts receivable with provision for bad debt accrued by credit risk 153,744,026.84 24.85 77,357,351.62 50.32 76,386,675.22 124,946,418.14 25.02 73,206,008.31 58.59 51,740,409.83 characteristics of a portfolio Accounts receivable with insignificant individual amount but provision for 365,802,521.52 59.14 18,285,235.69 5.00 347,517,285.83 305,199,419.71 61.12 18,538,920.13 6.07 286,660,499.58 bad debt is accrued separately Total 618,592,277.35 100.00 115,132,831.31 18.61 503,459,446.04 499,374,209.31 100.00 110,121,530.44 22.05 389,252,678.87 Accounts receivable with significant individual amount and provision for bad debt is accrued separately at the end of the period Accounts Ending Balance Receivable (By Provision for Bad Proportion of Accounts Receivable Reason for Provision Unit) Debt Provision Unimpaired according to the No.1 Client 54,433,586.34 separate test Impaired according to the No.2 Client 19,490,244.00 19,490,244.00 100.00% separate test Unimpaired according to the No.3 Client 13,205,318.40 separate test Unimpaired according to the No.4 Client 11,916,580.25 separate test Total 99,045,728.99 19,490,244.00 19.68% / 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 75,911,948.96 3,795,597.44 5.00% 1-2 years 4,060,177.41 812,035.48 20.00% 2-3 years 2,044,363.55 1,022,181.78 50.00% Over 3 years 71,727,536.92 71,727,536.92 100.00% Total 153,744,026.84 77,357,351.62 50.32% Accounts receivable with insignificant individual amount but provision for bad debt is accrued separately Ending Balance Accounts Receivable (By Unit) Accounts Provision for Bad Proportion of Reason for Provision Receivable Debt Provision Other insignificant accounts Impaired according to 2,020,198.55 2,020,198.55 100.00% receivable (Note 1) the separate test Other insignificant accounts Impaired according to 28,297,066.02 6,936,762.57 24.51% receivable (Note 2) the separate test 58 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Ending Balance Accounts Receivable (By Unit) Accounts Provision for Bad Proportion of Reason for Provision Receivable Debt Provision Other insignificant accounts Impaired according to 235,073,310.29 8,850,090.77 3.76% receivable (Note 3) the separate test Other insignificant accounts Unimpaired according 99,922,376.74 receivable (Note 4) to the separate test Other insignificant accounts Impaired according to 478,183.80 478,183.80 100.00% receivable (Note 5) the separate test Other insignificant accounts Unimpaired according 11,386.12 receivable (Note 6) to the separate test Total 365,802,521.52 18,285,235.69 5.00% Note 1: It mainly represents the accounts receivable due from Shang Gong Group Co., Ltd. Shanghai Butterfly Sewing Machines Branch, and the provision for impairment is accrued based on the separate test. Note 2: It mainly represents the accounts receivable due from the subsidiary, DAP (Shanghai) Co., Ltd., and the provision for impairment is accrued based on the separate test. Note 3: It mainly represents the accounts receivable due from the subsidiary, ShangGong Europe, and the provision for impairment is accrued based on the separate test. Note 4: It mainly represents the accounts receivable due from the subsidiary, Shanghai Shensy Enterprise Development Co., Ltd, and is unimpaired based on the separate test. Note 5: It mainly represents the accounts receivable due from the subsidiary, Shanghai SMPIC Import & Export Co., Ltd., and the provision for impairment is accrued based on the separate test. Note 6: It mainly represents the accounts receivable due from the subsidiary, DAP Vietnam Co., Ltd., and is unimpaired based on the separate test. 5.5.2 The Accrual, Reversal or Recovery of the Provision for Bad Debts in the Current Period The provision for bad debts accrued in the current period is 5,439,823.58 yuan. The amount reversed or recovered of the provision for bad debts in the current period is 1,292,372.99 yuan. 5.5.3 Actual Write-off of Accounts Receivable in the Current Period Item Write-off Amount The actual write-off of accounts receivable 779,410.85 The actual write-off of accounts receivable is due to the long aging of accounts receivable. All of them are unrecoverable due to deregistration/cancellation of the client companies. 5.5.5 Top Five Accounts Receivable in Terms of their Ending Balance Ending Balance Company Name Proportion in Total Accounts Receivable Accounts Receivable Provision for Bad Debt Ratio (%) No.1 Client 54,433,586.34 8.80 No.2 Client 19,490,244.00 3.15 19,490,244.00 No.3 Client 13,205,318.40 2.13 No.4 Client 11,916,580.25 1.93 No.5 Client 11,530,775.39 1.86 11,530,775.39 Total 110,576,504.38 17.87 31,021,019.39 59 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. See Note 10.6 for details of accounts receivable due from related parties. 5.6 Prepayment 5.6.1 Presentation of Prepayments by Aging Ending Balance Beginning Balance Aging Book Balance Proportion (%) Book Balance Proportion (%) Within 1 year 22,034,496.71 75.15 24,955,584.89 74.03 1-2 years 6,430,368.02 21.93 7,892,719.27 23.41 2-3 years 836,031.51 2.85 839,461.69 2.49 Over 3 years 21,684.56 0.07 21,591.26 0.07 Total 29,322,580.80 100.00 33,709,357.11 100.00 5.6.2 Top Five Prepayments to Suppliers in Terms of their Ending Balance Supplier Ending Balance Proportion in Total Ending Balance of Advances to Suppliers (%) No.1 Supplier 6,147,650.83 20.97 No.2 Supplier 2,782,768.25 9.49 No.3 Supplier 2,683,907.54 9.15 No.4 Supplier 1,921,764.84 6.55 No.5 Supplier 744,800.00 2.54 Total 14,280,891.46 48.70 5.7 Interest Receivable Not applicable. 5.8 Dividends Receivable Not applicable. 5.9 Other Receivables 5.9.1 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 33,135,960.97 37.02 12,951,956.70 39.09 20,184,004.27 32,993,470.54 41.20 12,600,914.20 38.19 20,392,556.34 amount and provision for bad debt is accrued separately Other receivables with provision for bad debt 25,424,207.21 28.40 16,497,784.81 64.89 8,926,422.40 19,082,416.29 23.83 16,077,736.42 84.25 3,004,679.87 accrued by credit risk characteristics of a portfolio 60 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Other receivables with insignificant individual 30,946,536.46 34.58 458,628.07 1.48 30,487,908.39 28,014,947.49 34.97 527,110.22 1.88 27,487,837.27 amount but provision for bad debt is accrued separately Total 89,506,704.64 100.00 29,908,369.58 33.41 59,598,335.06 80,090,834.32 100.00 29,205,760.84 36.47 50,885,073.48 Other receivables with significant individual amount and provision for bad debt is accrued separately at the end of period Ending Balance Other Receivables (By Unit) Provision for Bad Proportion of Other Receivables Reason for Provision Debt Provision Impaired according to the No.1 Client 12,951,956.70 12,951,956.70 100.00 separate test Export tax refund receivable Unimpaired according to the 8,604,004.27 (Note) separate test Unimpaired according to the No.3 Client 5,080,000.00 separate test Unimpaired according to the No.4 Client 3,500,000.00 separate test Unimpaired according to the No.5 Client 3,000,000.00 separate test Total 33,135,960.97 12,951,956.70 39.09 / Note: It mainly represents the export tax refund receivable arising from the export sale by the subsidiary, and is unimpaired according to the separate impairment test. Other receivables with provision for bad debt accrued using the aging analysis method in the portfolio: Ending Balance Aging Other Receivables Provision for Bad Debt Proportion of Provision Within 1 year 8,869,703.38 443,485.17 5.00% 1-2 years 509,050.29 101,810.06 20.00% 2-3 years 185,927.93 92,963.97 50.00% Over 3 years 15,859,525.61 15,859,525.61 100.00% Total 25,424,207.21 16,497,784.81 64.89% Other receivables with insignificant individual amount but provision for bad debt is accrued separately at the end of period Content of Other Book Balance Provision for Bad Debt Proportion of Provision (%) Reason for Provision Receivables Other insignificant other Unimpaired according to 3,114,512.43 receivables (Note 1) the separate test Other insignificant other Impaired according to the 290,980.00 16,525.00 5.68% receivables (Note 2) separate test Other insignificant other Unimpaired according to 4,025,194.72 receivables (Note 3) the separate test Other insignificant other Unimpaired according to 23,515,849.31 442,103.07 1.88% receivables (Note 4) the separate test Total 30,946,523.46 458,628.07 1.48% / Note 1: It mainly represents the other receivables due from the subsidiary DAPSH, which is unimpaired based on the separate test. 61 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Note 2: It mainly represents the other receivables due from SGG Butterfly Branch, and the provision for impairment is accrued based on the separate test. Note 3: It mainly represents the other receivables due from the subsidiary SGE, which is unimpaired based on the separate test. Note 4: It mainly represents the other receivables due from the subsidiary SHENSY, which is unimpaired based on the separate test. 5.9.2 The Accrual, Reversal or Recovery of the Provision for Bad Debts in the Current Period The provision for bad debts accrued in the current period is 907,334.66 yuan. The amount reversed or recovered of the provision for bad debts in the current period is 707,460.98yuan. 5.9.3 Actual Write-off of Other Receivables in the Current Period Not applicable. 5.9.4 Top Five Other Receivables in Terms of their Ending Balance Proportion in the Provision for Bad Ending Balance of Company Name Nature Ending Balance Aging Debt Total Other Ending Balance Receivable (%) From within 1 No.1 Client Current accounts 12,951,956.70 year to over 3 14.47 12,951,956.70 years Export tax refund No.2 Client 8,604,004.27 Within 1year 9.61 receivable No.3 Client Current accounts 5,080,000.00 Within 1year 5.68 No.4 Client Current accounts 3,500,000.00 Within 1year 3.91 No.5 Client Current accounts 3,000,000.00 Within 1year 3.35 Total / 33,135,960.97 37.02 12,951,956.70 5.10 Inventories 5.10.1 Classification of Inventories Ending Balance Beginning Balance Item Provision for Provision for Book Balance Book Value Book Balance Book Value Impairment Impairment Raw 281,255,243.96 44,534,439.68 236,720,804.28 244,335,565.64 41,630,636.86 202,704,928.78 materials Goods in 166,512,345.19 29,223,611.68 137,288,733.51 136,310,148.14 27,492,514.68 108,817,633.46 progress Finished 292,698,261.02 39,893,324.12 252,804,936.90 267,450,476.53 39,117,293.46 228,333,183.07 goods Revolving 666,088.02 666,088.02 1,221,161.27 1,221,161.27 materials Consigned processing 776,122.66 776,122.66 603,268.15 603,268.15 materials Goods 9,038,718.26 9,038,718.26 7,972,002.36 7,972,002.36 shipped Material 23,730.56 23,730.56 32,250.55 32,250.55 purchase Labor costs 90,826,640.92 90,826,640.92 114,082,013.31 114,082,013.31 Total 841,797,150.59 113,651,375.48 728,145,775.11 772,006,885.95 108,240,445.00 663,766,440.95 5.10.2 Inventory Valuation Allowance 62 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Increase Decrease Beginning Item Reversal or Ending Balance Balance Provision Others Others write-off Raw materials 41,630,636.86 299,829.07 2,603,973.75 44,534,439.68 Goods in progress 27,492,514.68 1,731,097.00 29,223,611.68 Finished goods 39,117,293.46 30,948.91 1,704,349.94 907,286.63 51,981.56 39,893,324.12 Total 108,240,445.00 330,777.98 6,039,420.69 907,286.63 51,981.56 113,651,375.48 5.11 Assets Classified as Held for Sale Not applicable 5.12 Non-Current Assets Maturing within One Year Not applicable 5.13 Other Current Assets Item Ending Balance Beginning Balance Held-to-maturity investments 20,437,857.87 10,288,261.77 Input tax to be credited 7,415,580.99 11,164,758.87 Rentals and insurance fees 4,343,382.90 1,529,650.89 Overpaid enterprise income tax 999,195.60 1,946,694.20 Financial products 50,000,000.00 Structured deposit 332,000,000.00 282,000,000.00 Unamortized expense 441,469.89 489,181.62 Total 365,637,487.25 357,418,547.35 5.14 Available-for-sale Financial Assets 5.14.1 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 132,104,249.67 1,698,131.91 130,406,117.76 138,917,378.02 1,698,131.91 137,219,246.11 instruments Including: Measured at 101,167,860.52 101,167,860.52 107,980,989.31 107,980,989.31 fair value Measured at cost 30,936,389.15 1,698,131.91 29,238,257.24 30,936,388.71 1,698,131.91 29,238,256.80 Total 132,104,249.67 1,698,131.91 130,406,117.76 138,917,378.02 1,698,131.91 137,219,246.11 5.14.2 Available-for-sale Financial Assets Measured at Fair Value as at 30th June 2017 Classification of available-for-sale Available-for-sale Equity Available-for-sale Debt Total Financial Assets Instruments Instruments Cost of equity instruments 74,010,222.53 74,010,222.53 Fair value 101,167,860.52 101,167,860.52 Accumulated changes in fair value 27,157,637.99 27,157,637.99 included in other comprehensive income Accrued provision for impairment 5.14.3 Available-for-sale Financial Assets Measured at Cost as at 30th June 2017 Investee Book Balance Provision for Impairment Shareholding Cash 63 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. As at 1st Ratio in Dividend As at 1st As at 30th As at 30th Increase Decrease January Increase Decrease Investee (%) in Report January 2017 June 2017 June 2017 2017 Period Shanghai Fuji Xerox 29,140,749.49 29,140,749.49 15.92 Co., Ltd. Shanghai Hirose Precision 30.00 700,000.00 Industrial Co., Ltd. (Note 1) Changshu Qixing 90.00 Elec-plating Co., Ltd. Shanghai Huazhijie Plastic Co., 736,283.66 736,283.66 736,283.66 736,283.66 23.04 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 90,000.00 90,000.00 0.0993 Machinery Co., Ltd. Shanghai Baoding 7,500.00 7,500.00 0.008 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. Pfaff Industrial 7.31 0.44 7.75 49.00 Iberica S.A.U. Total 30,936,388.71 0.44 30,936,389.15 1,698,131.91 1,698,131.91 700,000.00 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. 64 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group 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. 5.14.4 Changes in Available-for-sale Financial Assets for This Year Available-for-sale Available-for-sale Classification of Available-for-sale Financial Assets Total Equity Instruments Debt Instruments Balance of provision for impairment accrued as at 1 st January 2017 1,698,131.91 1,698,131.91 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 accrued as at 30th June 2017 1,698,131.91 1,698,131.91 5.15 Held-to-maturity Investments Not applicable. 5.16 Long-term Receivables Not applicable. 5.17 Long-term Equity Investment Provision Change in current period of Beginning Other Other Declared Ending Impairment Investees Decrease Return on Balance Increase in Comprehensive Changes Cash Increase in Balance Balance at in Investment under Other Investment Income in Dividends Investment 30th June Investment Equity Method Adjustment Equity or Profit 2017 1.Joint venture 2.Joint operation H. Stoll AG & Co. KG Subtotal 253,586,574.99 11,737,352.98 15,831,365.67 281,155,293.64 Total 253,586,574.99 11,737,352.98 15,831,365.67 281,155,293.64 1.Joint 253,586,574.99 11,737,352.98 15,831,365.67 281,155,293.64 venture Note: The Company’s wholly-owned subsidiary, ShangGong (Europe) Holding Corp. GmbH acquired 26% shares of H. Stoll AG & Co. KG, a German company, and became the limited partner at 1st January 2016. The fixed amount and floating amount of share transfer is 32,250,000.90 euro in total, and shall pay in three installments. The first installment payment amounts to 22,990,000.90 euro, and was fully paid in June 2016. The second installment payment is 2,750,000.00 euro, which was paid in the report period. 5.18 Investment Properties 5.18.1 Investment Property Measured at Cost Buildings and Leased Land Use Investment Real Item Total Constructions Rights Estate Decoration 1. Original book value (1) Beginning balance 172,331,514.28 50,523,752.24 2,583,492.92 225,438,759.44 (2) Increase in current period 2,953,441.47 2,953,441.47 - Outsourcing - Transfer in from inventories, fixed assets or construction in progress 65 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. - Increase from enterprise merger - Exchange rate fluctuation 2,953,441.47 2,953,441.47 (3) Decrease in current period - Disposal - Others (4) Ending balance 175,284,955.75 50,523,752.24 2,583,492.92 228,392,200.91 2. Accumulated depreciation and accumulated amortization (1) Beginning balance 94,985,462.61 15,079,319.07 516,698.76 110,581,480.44 (2) Increase in current period 3,560,967.45 552,001.62 4,112,969.07 - Amortization or accrual 2,269,029.81 552,001.62 2,821,031.43 - Exchange rate fluctuation 1,291,937.64 1,291,937.64 (3) Decrease in current period - Disposal - Others (4) Ending balance 98,546,430.06 15,631,320.69 516,698.76 114,694,449.51 3. Provision for impairment (1) Beginning balance 7,241,024.04 7,241,024.04 (2) Increase in current period 438,813.91 438,813.91 - Accrual - Exchange rate fluctuation 438,813.91 438,813.91 (3) Decrease in current period - Disposal - Others (4) Ending balance 7,679,837.95 7,679,837.95 4. Book value (1) Book value at the end of the period 69,058,687.74 34,892,431.55 2,066,794.16 106,017,913.45 (2) Book value at the beginning of the 70,105,027.63 35,444,433.17 2,066,794.16 107,616,254.96 period 5.19 Fixed Assets 5.19.1 Fixed Assets Buildings and Machinery Transportation Electronic Other Item Total Constructions Equipment Equipment Equipment Equipment 1. Original book value (1) Beginning 419,547,363.36 338,719,085.29 14,586,332.79 4,075,854.93 241,454,532.04 1,018,383,168.41 balance (2) Increase in 20,448,658.56 33,169,619.91 910,752.13 322,616.39 23,329,274.10 78,180,921.09 current period - Purchase 186,376.25 10,913,154.90 910,752.13 312,731.48 6,355,499.86 18,678,514.62 - Transfer in from construction 1,906,401.60 1,906,401.60 in progress - Increase from enterprise merger - Exchange rate 20,262,282.31 20,350,063.41 9,884.91 16,973,774.24 57,596,004.87 fluctuation (3) Decrease in 1,386,639.30 2,032,703.48 1,232,333.80 4,912.00 3,237,020.10 7,893,608.68 current period - Disposal or scrap 1,386,639.30 2,032,703.48 1,232,333.80 4,912.00 3,237,020.10 7,893,608.68 (4) Ending 438,609,382.62 369,856,001.72 14,264,751.12 4,393,559.32 261,546,786.04 1,088,670,480.82 balance 66 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. 2. Accumulated depreciation (1) Beginning 206,652,824.34 228,815,751.75 9,545,181.19 2,738,212.77 206,574,025.26 654,325,995.31 balance (2) Increase in 17,255,088.07 24,368,868.49 561,110.30 290,456.08 20,536,560.14 63,012,083.08 current period - Accrual 4,591,867.62 8,320,840.08 561,110.30 290,456.08 5,826,103.93 19,590,378.01 - Exchange rate 12,663,220.45 16,048,028.41 14,710,456.21 43,421,705.07 fluctuation (3) Decrease in 1,386,639.30 2,182,514.45 1,138,632.98 4,541.79 3,017,647.39 7,729,975.91 current period - Disposal or scrap 1,386,639.30 2,182,514.45 1,138,632.98 4,541.79 3,017,647.39 7,729,975.91 (4) Ending 222,521,273.11 251,002,105.79 8,967,658.51 3,024,127.06 224,092,938.01 709,608,102.48 balance 3. Provision for impairment (1) Beginning 4,913,777.92 4,832,793.00 48,170.70 37,818.61 1,402.83 9,833,963.06 balance (2) Increase in current period - Accrual (3) Decrease in current period - Disposal or scrap (4) Ending 4,913,777.92 4,832,793.00 48,170.70 37,818.61 1,402.83 9,833,963.06 balance 4. Book value (1) Book value at 211,174,331.59 114,021,102.93 5,248,921.91 1,331,613.65 37,452,445.20 369,228,415.28 the end of the period (2) Book value at the beginning of the 207,980,761.10 105,070,540.54 4,992,980.90 1,299,823.55 34,879,103.95 354,223,210.04 period Note: among the above balance of fixed assets at the end of the period, the buildings and constructions of 131,486,806.05 yuan (Including 13,035,336.00 euro which is equivalent to 101,018,639.90 yuan) are used to obtain a loan from banks; see the Note 11.1 Commitments and Contingencies for information on mortgage loans and credit extension. 5.19.2 Idle Fixed Assets Not applicable. 5.19.3 Fixed Assets without Certificate of Title Reason for Failure in Completing the Formalities Item Book Value for Obtaining Certificates of Title Buildings and constructions (Note 1) 1,830,787.00 Self-built housing, the certificates are in the process Buildings and constructions (Note 2) 274,973.02 Self-built housing, the certificates are in the process Total 2,105,760.02 Note 1: Self-built housing for the Company’s subsidiary Shanghai SGSB Asset Management Co., Ltd. Note 2: Self-built housing, for the Company. 5.20 Construction in Progress 5.20.1 Construction in Progress Ending Balance Beginning Balance Item Provision for Provision for Book Balance Book Value Book Balance Book Value Impairment Impairment Sewing Equipment 7,088,631.24 7,088,631.24 2,036,361.68 2,036,361.68 Engineering 67 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. ERP project 2,492,439.78 2,492,439.78 2,130,376.16 2,130,376.16 Household multifunctional sewing 416,692.54 416,692.54 407,258.58 407,258.58 machine Zhangjiagang 1,970,028.88 1,970,028.88 1,207,505.00 1,207,505.00 manufacture base project Modern logistics 1,139,656.57 1,139,656.57 258,490.56 258,490.56 management center Nanxiang factory 300,000.00 300,000.00 reconstruction Mold development 139,000.00 139,000.00 139,000.00 139,000.00 Exhaust project 298,345.06 298,345.06 298,345.06 298,345.06 DFT factory 19,723,659.70 19,723,659.70 13,422,591.60 13,422,591.60 reconstruction Kingdee QR code 177,670.93 177,670.93 system project DARO workshop 113,074.14 113,074.14 reconstruction Total 33,559,198.84 33,559,198.84 20,199,928.64 20,199,928.64 5. 20.2 Changes in Major Construction in Progress for Current Period Interest capitalization rate in 2016(%) investment in project in budget (%) Accumulated amount of interest Proportion of the accumulated Including: amount of interest Construction in progress capitalization in 2016 Amount capitalization Transferred Other Budget Beginning Increase in in Fixed decreases Ending Source of Item Fund balance current period Assets for in current balance the Current period Period Sewing Self-owned Equipment 2,036,361.68 6,958,671.16 1,906,401.60 7,088,631.24 fund Engineering Raised ERP project 2,130,376.16 362,063.62 2,492,439.78 fund Household Raised multifunctional fund/ 407,258.58 9,433.96 416,692.54 sewing Self-owned machine fund Zhangjiagang Self-owned manufacture 1,207,505.00 829,842.94 67,319.06 1,970,028.88 fund base project Modern logistics Self-owned 258,490.56 881,166.01 1,139,656.57 management fund center Nanxiang Self-owned factory 300,000.00 59,096.00 359,096.00 fund reconstruction Mold Self-owned 139,000.00 139,000.00 development fund Exhaust Self-owned 298,345.06 298,345.06 project fund DFT factory Self-owned 13,422,591.60 6,301,068.10 19,723,659.70 reconstruction fund Kingdee QR Self-owned code system 177,670.93 177,670.93 fund project DARO Self-owned workshop 113,074.14 113,074.14 fund reconstruction Total 20,199,928.64 15,692,086.86 1,906,401.60 426,415.06 33,559,198.84 5.21 Project Materials 68 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Not applicable 5.22 Disposal of Fixed Assets Not applicable 5.23 Productive Biological Assets Not applicable 5.24 Oil and Gas Assets Not applicable 5.25 Intangible Assets 5.25.1 Intangible Assets Patent and Land Use Trademark Computer Item Non-patent Others Total Right Use Right Software Technology 1. Original book value (1) Beginning 105,595,420.23 117,954,603.75 20,161,268.51 5,795,753.76 3,185,554.27 252,692,600.52 balance (2) Increase in 620,000.00 10,503,853.13 11,123,853.13 current period - Purchase 620,000.00 5,986,405.15 6,606,405.15 - Exchange rate 4,517,447.98 4,517,447.98 fluctuation (3) Decrease in 745,505.00 745,505.00 current period - Disposal 745,505.00 745,505.00 (4) Ending balance 106,215,420.23 127,712,951.88 20,161,268.51 5,795,753.76 3,185,554.27 263,070,948.65 2. Accumulated amortization (1) Beginning 8,099,502.56 61,149,940.94 20,161,268.51 5,795,753.76 2,248,235.06 97,454,700.83 balance (2) Increase in 1,372,029.09 11,137,935.43 175,259.31 12,685,223.83 current period - Accrual 1,372,029.09 9,915,216.50 175,259.31 11,462,504.90 - Exchange rate 1,222,718.93 1,222,718.93 fluctuation (3) Decrease in 745,505.00 745,505.00 current period - Disposal 745,505.00 745,505.00 (4) Ending balance 9,471,531.65 71,542,371.37 20,161,268.51 5,795,753.76 2,423,494.37 109,394,419.66 3. Provision for impairment (1) Beginning balance (2) Increase in current period - Accrual (3) Decrease in current period - Disposal (4) Ending balance 4. Book value (1) Book value at 96,743,888.58 56,170,580.51 762,059.90 153,676,528.99 the end of the period (2) Book value at 97,495,917.67 56,804,662.81 937,319.21 155,237,899.69 the beginning of the 69 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. period 5.26 Development Expenditures Increase in current period Decrease in current period Beginning Internal Recognized as Transferred to Item Ending Balance Balance Development Others Intangible Current Profits Expenditure Assets and Losses Sewing 8,255,718.33 1,357,584.76 9,613,303.09 equipment WeChat platform 887,322.98 106,245.76 993,568.74 Freight platform 3,282,264.10 283,018.86 3,565,282.96 Paper Shredder 104,040.49 104,040.49 Total 12,529,345.90 1,746,849.38 14,276,195.28 Note: The development expenditures of sewing equipment represent the development costs of ShangGong Europe. The development expenditures of WeChat platform and Freight platform represent the development costs of SHENSY. The development expenditures of paper shredder represent the development costs of Shanghai SMPIC Import & Export Co., Ltd. 5.27 Goodwill 5.27.1 Book Value of Goodwill Name of investee or Decrease in Increase in Current Period goodwill formation Beginning Balance Current Period Ending Balance events Acquisition Exchange Rate Fluctuation Disposal PFAFF GmbH 67,878,923.12 4,113,536.32 71,992,459.44 Beisler 21,289,092.48 1,290,142.08 22,579,234.56 Total 89,168,015.60 5,403,678.40 94,571,694.00 5.27.2 Provision for Impairment of Goodwill Name of investee or Decrease in Increase in Current Period goodwill formation Beginning Balance Current Period Ending Balance events Accrual Exchange Rate Fluctuation Disposal Beisler 21,289,092.48 1,290,142.08 22,579,234.56 Total 21,289,092.48 1,290,142.08 22,579,234.56 5.28 Long-term Deferred Expenses Beginning Increase in Amortization in Other Decreases in Item Ending Balance Balance Current Period Current Period Current Period Enterprise Mailbox 19,800.00 3,850.00 15,950.00 rental expense Online brand 340,545.43 23,473.66 317,071.77 registration fee Landscape 183,451.50 24,460.20 158,991.30 engineering Leasehold 136,916.67 73,037.55 57,243.31 152,710.91 improvements Tooling cost 404,084.37 43,785.36 360,299.01 Total 1,084,797.97 73,037.55 152,812.53 1,005,022.99 Note: In current period, the amortized amount of long-term deferred expenses is 152,812.53 yuan, and it is recorded in general and administrative expenses. 5.29 Deferred Income Tax Assets and Deferred Income Tax Liabilities 5.29.1 Deferred Income Tax Assets 70 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Ending balance Beginning balance Item Deductible Temporary Deferred Income Deductible Temporary Deferred Income Differences Tax Assets Differences Tax Assets Provision for asset impairment 19,972,751.03 16,211,080.71 Unrealized profits of internal 7,805,980.74 7,876,034.19 transactions Pension (Europe) 33,745,277.88 34,426,435.01 Deductible losses Deferred income 550,000.00 550,000.00 Total 62,074,009.65 59,063,549.91 5.29.2 Deferred Income Tax Liabilities Ending Balance Beginning Balance Item Taxable Temporary Deferred Income Tax Taxable Temporary Deferred Income Tax Differences Liabilities Differences Liabilities Appreciation of assets evaluation due to business 43,528,015.28 35,407,850.19 combinations not under common control Changes in fair value of available-for-sale financial assets Others 1,369,443.71 1,197,067.41 Total 44,897,458.99 36,604,917.60 Appreciation of assets evaluation due to business combinations not under common control is formed mainly due to the acquisition of subsidiaries overseas by ShangGong Europe. 5.30 Other Non-current Assets Not applicable. 5.31 Short-term Loans Item Ending Balance Beginning Balance Mortgage loans 20,303,952.00 19,143,816.00 Guaranteed loans 345,416,080.00 331,876,640.00 Credit loans 348,148.62 348,148.62 Total 366,068,180.62 351,368,604.62 Note 1: DA AG borrowed 71,063,832.00 yuan (9,170,000.00 euros) from German Commerzbank with fixed assets with book value of 101,018,639.90 yuan (13,035,336.00 euros) as collateral. As at 30th June 2017, 50,759,880.00 yuan (6,550,000.00 euros) was repaid. The ending balance is 20,303,952.00 yuan (2,620,000.00euros), which belongs to short-term loans. Note 2: The guaranteed loans which the Company's wholly-owned subsidiary ShangGong (Europe) Corp. GmbH to borrow money from the Bielefeld Branch of Commerzbank; and the Company’s wholly-owned subsidiary PFAFF GmbH. to borrow the money from Kaiserslautern Branch of Commerzbank, guarantees related to the above matters refer to Note "X. commitments and matter" and "(b) Contingencies" and "Note 1, 2, 3, 4”. Note 3: Except the guaranteed loans above; other guaranteed loans are as follows: the Company’s wholly-owned subsidiary Shanghai Shensy Enterprise Development Co., Ltd borrowed 40,730,000.00 yuan from China Construction Bank Shanghai Baoshan Baogang Branch, 30,000,000.00 yuan from Bank of 71 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Communications Shanghai Branch of Baoshan and 5,000,000.00 yuan from SPD Bank Branch of Waigaoqiao Free Trade Zone. The guarantee company is Shanghai Shensy Kaile Internet of Things Co., Ltd. 5.32 Financial Liabilities at Fair Value whose Fluctuation is Attributed to Profit or Loss for Current Period Not applicable. 5.33 Notes Payable Not applicable. 5.34 Accounts Payable 5.34.1. Presentation of Accounts Payable Item Ending Balance Beginning Balance Payables to suppliers 172,418,174.68 174,828,356.05 Total 172,418,174.68 174,828,356.05 5.34.2 Important Accounts Payable Aged Over 1 Year Not applicable. 5.35 Receipt in Advance 5.35.1 Presentation of Advances from Customers Item Ending Balance Beginning Balance Advances on sales 30,490,939.49 36,548,091.83 Total 30,490,939.49 36,548,091.83 5.35.2 Important Receipt in Advance Aged Over 1 Year Not applicable. 5.36 Employee Compensation Payable 5.36.1 Presentation of Employee Compensation Payable Increase in Current Decrease in Current Item Beginning Balance Ending Balance Period Period Short-term remuneration 60,808,833.07 299,610,929.92 302,749,741.11 57,670,021.88 Post-employment benefits - 449,954.11 7,534,787.91 6,361,287.31 1,623,454.71 defined benefit plans Defined benefit plan maturing 19,669,905.60 10,116,503.00 8,924,485.40 20,861,923.20 within one year Total 80,928,692.78 317,262,220.83 318,035,513.82 80,155,399.79 5.36.2 Presentation of Short-term Remuneration Increase in Current Decrease in Current Item Beginning Balance Ending Balance Period Period (1) Salary, bonus, allowance and 60,360,450.15 247,862,512.61 251,622,238.57 56,600,724.19 subsidy (2) Employee welfare 529.00 45,764,078.01 45,763,678.01 929.00 (3) Social insurance expenses 282,251.12 3,982,736.85 3,441,604.80 823,383.17 - medical insurance premium 226,607.73 3,385,590.73 2,910,105.63 702,092.83 - Work-related injury insurance 28,898.48 316,828.78 289,521.99 56,205.27 premium - Maternity insurance premium 16,241.91 279,792.34 241,452.18 54,582.07 72 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. - Other 10,503.00 525.00 525.00 10,503.00 (4) Housing provident funds 165,602.80 1,469,935.50 1,411,660.70 223,877.60 (5) Labor union expenditures and 531,666.95 510,559.03 21,107.92 employee education expenses (6) Short-term paid absences (7) short-term profit-sharing plan Total 60,808,833.07 299,610,929.92 302,749,741.11 57,670,021.88 5.36.3 Presentation of Defined Benefit Plans Increase in Current Decrease in Current Item Beginning Balance Ending Balance Period Period Basic endowment insurance 424,019.08 6,854,115.53 5,726,310.60 1,551,824.01 premium Unemployment insurance premium 25,935.03 340,672.38 294,976.71 71,630.70 Payment of annuity 340,000.00 340,000.00 Total 449,954.11 7,534,787.91 6,361,287.31 1,623,454.71 5.37 Taxes and Surcharges Payable Item Ending Balance Beginning Balance Value-added tax 627,982.87 5,721,081.61 Consumption tax Business tax Enterprise income tax 8,101,944.34 41,900,219.50 Individual income tax 4,370,499.70 6,172,515.51 Educational surtax 58,416.73 227,392.77 Urban maintenance and construction tax 84,029.32 301,166.34 Property tax 264,414.62 River management fee 402.17 29,199.23 Use tax of land 121,189.92 Stamp tax 20,677.40 3,688.10 Total 13,263,952.53 54,740,867.60 5.38 Interest Payable Item Ending Balance Beginning Balance Term interest on long-term borrowings 441,316.11 due in installments Short-term loan interest payable 2,275,506.76 1,649,249.48 Total 2,275,506.76 2,090,565.59 5.39 Dividends Payable Item Ending Balance Beginning Balance Common stock dividend 1,032,818.86 1,032,818.86 Dividends of preferred stock / perpetual debt classified as equity instruments Total 1,032,818.86 1,032,818.86 Reason of unpaid dividends payable for more than 1 years: it is unable to pay because the age is too long. 5.40 Other Payables 5.40.1 Presentation of Other Payables by Nature of Accounts Item Ending Balance Beginning Balance 73 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Other payables 184,013,438.72 193,117,136.53 Total 184,013,438.72 193,117,136.53 5.40.2 Important Other Payables Aged Over 1 Year Not applicable. 5.41 Classified as Liabilities Held for Sale Not applicable. 5.42 Non-current liabilities maturing within one year Not applicable. 5.43 Other Current Liabilities Item Ending Balance Beginning Balance Short-term bonds payable Interest and rentals 437,625.10 808,706.39 Total 437,625.10 808,706.39 5.44 Long-term Loans Item Ending Balance Beginning Balance Mortgage loans 61,051,348.80 67,134,878.40 Credit loans 1,489,984.87 1,489,984.87 Total 62,541,333.67 68,624,863.27 th Note: The amount of mortgage loans at 30 June 2017 is 61,051,348.80 yuan (7,878,000.00 euros). See Note "X. commitments and matter" and "(b) Contingencies" and "Note 5”for explanation about the relevant matters of the mortgage loan above. 5.45 Bonds Payable Not applicable. 5.46 Long-term Payables Item Ending Balance Beginning Balance STOLL stock equity transfer fee 33,831,447.47 35,881,669.86 Others 3,507,014.14 3,532,225.88 Total 37,338,461.61 39,413,895.74 5.47 Long-term Employee Compensation Payable 5.47.1 Presentation of Long-term Employee Compensation Payable Item Ending Balance Beginning Balance 1. Post-employment benefits - net liability of 258,722,068.75 251,784,116.62 defined benefit plan 2. Dismissal welfare 3. Other long-term benefits 4,139,348.17 3,902,832.30 Total 262,861,416.92 255,686,948.92 Defined benefit plan of ShangGong (Europe) Holding Corp. GmbH, is based on supporting commitment. The base of measuring supporting liability is on actuarial and hypothesis, not only consider known and possessed right to draw defined benefit plan, but the increase of future payroll and defined benefit plan. 74 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. 5.47.2 Changes in Defined Benefit Plan Liabilities Not applicable. 5.48 Special Payable Not applicable. 5.49 Estimated Liabilities Not applicable. 5.50 Deferred Income Increase in Current Decrease in Item Beginning Balance Ending Balance Reason Period Current Period Government subsidies 3,600,000.00 3,600,000.00 Total 3,600,000.00 3,600,000.00 / The item of the government subsidies: Subsidies Subsidies Included in Beginning Ending Asset-related / Item Increased in Current Other Change Balance Balance Income-related Current periOd Non-operating Income Subsidies for new product 1,260,000.00 1,260,000.00 Asset-related development funds guiding funds of developing 2,200,000.00 2,200,000.00 Asset-related service industry Taizhou science and Technology 140,000.00 140,000.00 Asset-related Bureau R & D expenditure subsidy Total 3,600,000.00 3,600,000.00 5.51Other 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 5.52 Share Capital Change in Current Period Item Beginning Balance Ending Balance Issuance of New Shares Others Sub-total Total shares 548,589,600.00 548,589,600.00 5.53 Other Equity Instruments Not applicable. 5.34 Capital Reserves Increase in Current Decrease in Current Item Beginning Balance Ending Balance Period Period Stock premium 851,345,853.61 851,345,853.61 75 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Other capital reserves 120,257,266.66 3,413,389.32 116,843,877.34 Total 971,603,120.27 3,413,389.32 968,189,730.95 5.55 Treasury Stock Not applicable. 5.56 Other Comprehensive Income Change in Current Period Less: recognized as other Beginning Accrual before comprehensive Less: Item Attributable to Attributable to Ending Balance Income tax for income for Income Balance the Current previous years Tax Owners of the Minority Parent Company Shareholders Period and transferred Expenses in the profit or loss for the current year 1. Other comprehensive income that cannot be reclassified in the loss -49,169,970.79 -49,169,970.79 and gain in the future Including: change in re-measurement of the net liabilities and net assets under defined benefit -49,169,970.79 -49,169,970.79 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 reclassified in the loss and -53,974,075.36 26,307,833.02 26,307,833.02 4,511,932.89 -27,666,242.34 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 available-for-sale 33,970,766.78 -6,813,128.79 -6,813,128.79 27,157,637.99 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 differences -87,944,842.14 33,120,961.81 33,120,961.81 4,511,932.89 -54,823,880.33 Total other comprehensive income -103,144,046.15 26,307,833.02 26,307,833.02 4,511,932.89 -76,836,213.13 5.57 Special Reserve Not applicable. 5.58 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 5.59 Retained Earnings From 1st January 2017 to 30th From 1st January 2016 to 30th Item June 2017 June 2016 Adjustments to retained earnings as at 31st December 2016 494,754,465.24 350,523,121.40 Adjustments to total retained earnings as at 1st January 2017 ("+" for increase, "-" for decrease) Adjusted retained earnings as at 1st January 2017 494,754,465.24 350,523,121.40 Plus: net profit attributable to owners of the parent company for 125,980,892.71 101,164,717.70 current period Less: withdrawal of statutory surplus reserves Withdrawal of discretionary surplus reserves 76 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Withdrawal of general risk reserves in current period Ordinary share dividends payable Ordinary share dividend transferred to share capital (paid-in capital) Other transfer-out 620,735,357.95 451,687,839.10 5.60 Operating Income and Operating Costs From 1st January 2017 to 30th June 2017 From 1st January 2016 to 30th June 2016 Item Income Cost Income Cost Primary business 1,475,369,961.67 1,058,968,570.27 1,314,252,118.76 924,558,225.41 Other businesses 57,192,639.45 29,833,389.03 45,090,410.69 29,942,064.00 Total 1,532,562,601.12 1,088,801,959.30 1,359,342,529.45 954,500,289.41 5.61 Taxes and Surcharges Item From 1st January 2017 to 30th June 2017 From 1st January 2016 to 30th June 2016 Consumption tax Business tax 822,711.29 Urban maintenance and construction 1,544,451.83 1,061,926.25 tax Educational surtax 1,127,628.59 798,583.35 Resource tax Property tax 2,099,054.97 land use tax 563,526.02 Vehicle and vessel tax 659,882.73 1,497,723.11 Stamp tax Total 5,994,544.14 4,180,944.00 5.62 Selling Expenses From 1st January 2017 to 30th June From 1st January 2016 to 30th June Item 2017 2016 Employee compensation 61,279,120.79 54,152,469.93 Fix and after-sale service charges 10,393,706.68 9,471,495.27 Office expenses 1,112,551.87 1,925,818.50 Travelling expenses 9,321,861.67 7,777,406.50 Transportation cost 10,512,550.73 10,013,901.46 Advertising expense 2,899,425.63 2,588,996.06 Commission 12,103,473.04 12,983,415.23 Leasing and storage charges 5,401,842.88 2,988,594.08 Insurance premium 706,961.69 626,283.69 Packing expenses 16,537.58 20,789.73 Conference fees 1,088,991.90 1,097,735.43 Depreciation costs 1,009,487.88 885,340.61 Exhibition fees 3,241,152.99 1,543,023.79 Water and electricity 34,480.83 22,560.95 Handling charges 15,411.34 13,392.08 Sample printed matter and product loss 5,033,980.47 4,975,397.89 Others 17,240,643.20 12,948,639.62 Total 141,412,181.17 124,035,260.82 77 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. 5.63 General and Administrative Expenses From 1st January 2017 to 30th June From 1st January 2016 to 30th Item 2017 June 2016 Employee compensation 63,094,127.39 60,728,834.32 Office expenses 3,083,576.02 3,503,878.91 Water and electricity 609,344.98 467,566.82 Entertainment expenses 2,626,271.81 1,775,131.30 Property insurance premium 1,192,827.02 1,132,959.90 Conference fees 741,776.34 441,720.48 Travelling expenses 4,188,197.13 4,103,270.72 Depreciation costs 3,479,775.53 4,339,234.24 Repair charges 432,790.41 377,155.90 Transportation cost 2,360,059.15 1,268,999.53 Rental fees 3,455,833.49 1,718,338.58 Costs of board meetings and supervisors' meetings 1,217,959.56 264,294.69 Agency fees and advisory expenses 5,537,470.16 5,695,258.76 Litigation cost 390,851.06 29,171.75 New product development expenses 45,322,190.06 35,847,223.71 Taxes and surcharges 1,231,380.14 Amortization of intangible assets 1,221,487.14 1,036,624.09 Others 4,967,562.70 7,135,331.59 Total 143,922,099.95 131,096,375.43 5.64 Financial Expenses From 1st January 2017 to 30th June From 1st January 2016 to 30th Item 2017 June 2016 Interest expenses 6,091,395.25 6,802,996.00 Interest income -487,251.03 -920,275.58 Gains and losses on exchange -13,178,688.63 2,500,640.84 Others 724,768.79 1,706,156.24 Total -6,849,775.62 10,089,517.50 5.65 Losses from Asset Impairment Item From 1st January 2017 to 30th June 2017 From 1st January 2016 to 30th June 2016 Losses from bad debts 4,347,324.27 2,105,606.54 Losses from inventory impairment 175,122.70 -3,680,156.16 Total 4,522,446.97 -1,574,549.62 5.66 Gains from Changes in Fair Value Not applicable. 5.67 Investment Income From 1st January 2017 to 30th June Item From 1st January 2016 to 30th June 2016 2017 Long-term equity investments measured under 11,737,352.98 11,338,598.93 equity method 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 78 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. of holding Investment income obtained from the disposal of financial assets at fair value and their 9,509.24 changes are included in the current profits and losses Investment income of the held-to-maturity investment during the holding period Investment income derived from 1,001,400.43 897,305.05 available-for-sale financial assets Investment income from disposal of 715,552.60 available-for-sale financial assets After the loss of control, the residual equity is measured at fair value Others 5,747,623.00 5,214,392.23 Total 18,495,885.65 18,165,848.81 5.68 Non-operating Income From 1st January 2017 to 30th From 1st January 2016 to 30th Amount included in current Item June 2017 June 2016 non-recurring gains and losses Total gains from disposal of 9,842,841.68 2,540,561.45 9,842,841.68 non-current assets Including: gains from 412,921.70 2,540,561.45 412,921.70 disposal of fixed assets Gains on 9,429,919.98 9,429,919.98 disposal of intangible assets Gains from debt restructuring Gains from exchange of non-monetary assets/Gains from transaction of non-currency assets Donation accepted Government subsidies 2,642,975.59 4,973,690.84 2,642,975.59 Penalty revenue 4,799.00 Others 3,190.85 140,344.79 3,190.85 Total 12,489,008.12 7,659,396.08 12,489,008.12 Government subsidies included in current profit and loss From 1st January 2017 to 30th From 1st January 2016 to 30th Item Asset-related /Income-related June 2017 June 2016 Financial support fund 1,380,000.00 Income-related Workers' vocational 27,570.22 14,117.78 Income-related training financial subsidies Replacing business tax with value-added tax(VAT) 25,900.51 Income-related special subsidies Special funds of Shanghai industrial transformation, 500,000.00 Income-related upgrading and development Shanghai old public housing management fee 102,594.49 73,672.55 Income-related subsidies Science and technology 1,100,000.00 Income-related development subsidies Exhibition subsidy 80,000.00 Income-related Development Zone subsidy 2,510,000.00 1,800,000.00 Income-related Other 2,810.88 Income-related Total 2,642,975.59 4,973,690.84 / 79 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. 5.69 Non-operating Expenses Amount Included in Current From 1st January 2017 to 30th From 1st January 2016 to 30th Item Non- recurring Gains and June 2017 June 2016 Losses Total losses from disposal 95,217.09 3,098,496.16 95,217.09 of non-current assets Including: losses from 95,217.09 3,098,496.16 95,217.09 disposal of fixed assets Losses from disposal of intangible assets Losses from debt restructuring Losses from exchange of non-monetary assets Donations made 200,000.00 200,000.00 200,000.00 Amercement and overdue 102,210.07 2,211.58 102,210.07 fine outlay Extraordinary losses Others 2,873.64 2,873.64 Total 400,300.80 3,300,707.74 400,300.80 5.70 Income Tax Expenses Item From 1st January 2017 to 30th June 2017 From 1st January 2016 to 30th June 2016 Current income tax expenses 41,432,540.20 43,949,360.97 Deferred income tax expenses 5,066,571.10 1,432,040.66 Total 46,499,111.30 45,381,401.63 5.71 Other Comprehensive Income See notes for details. 5.72 Items of the Statement of Cash Flows 5.72.1 Cash Received from Other Operating Activities From 1st January 2017 to 30th June From 1st January 2016 to 30th June Item 2017 2016 Current accounts and advances withdrawn 12,540,492.70 18,027,242.83 Special subsidies and grants 2,642,975.59 4,973,690.84 Interest income 853,706.23 1,353,725.70 Non-operating income: 278,981.82 751,209.40 Other income 5,407,808.53 592,366.85 Total 21,723,964.87 25,698,235.62 5.72.2 Cash Paid for Other Operating Activities From 1st January 2017 to 30th June From 1st January 2016 to 30th June Item 2017 2016 Current accounts paid 6,762,109.04 16,128,438.76 Selling expenses 58,958,164.15 50,284,745.90 General and administrative expenses 59,104,891.27 44,224,118.91 Non-operating expenses 296,919.37 272,798.76 Others 7,374,016.59 7,541,356.66 Total 132,496,100.42 118,451,458.99 5.72.3 Cash Received from Other Investing Activities Not applicable. 80 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. 5.72.4 Cash Paid from Other Investing Activities Not applicable. 5.72.5 Cash Received from Other Financing Activities From 1st January 2017 to 30th June From 1st January 2016 to 30th June Item 2017 2016 Bank deposit, security deposit and other 429,112.68 355,261.67 pledge, mortgage Total 429,112.68 355,261.67 5.72.6 Cash Paid from Other Financing Activities Not applicable. 5.73 Supplementary Information to the Statement of Cash Flows 5.73.1 Supplementary Information to the Statement of Cash Flows From 1st January 2017 to 30th From 1st January 2016 to 30th Item June 2017 June 2016 1. Net profit adjusted to cash flows from operating activities Net profit 138,844,626.88 114,157,827.43 Plus: Provision for assets impairment 4,522,446.97 -1,574,549.62 Depreciation of fixed assets and others 22,411,409.44 20,962,740.78 Amortization of intangible assets 11,462,504.90 6,533,622.83 Amortization of long-term deferred expenses 152,812.53 34,600.20 Losses on disposal of fixed assets, intangible assets and -9,747,624.59 547,478.46 other long-term assets ("-" for gains) Losses on write-off of fixed assets (“-” for gains) 10,456.25 Losses from changes in fair value ("-" for gains) Financial expenses (“-” for income) -7,087,293.38 9,303,636.84 Investments losses ("-" for gains) -18,495,885.65 -18,165,848.81 Decreases in the deferred income tax assets (“-” for -3,010,459.74 -1,774,380.54 increases) Increases in the deferred income tax liabilities (“-” for 8,292,541.39 5,023,538.91 decreases) Decreases in inventories (“-” for increases) -69,790,264.64 -87,875,939.34 Decreases in operating payables (“-” for increases) -83,128,510.00 -129,324,032.36 Increases in operating payables (“-” for decreases) -54,216,627.58 36,197,763.26 Others Net cash flows from operating activities -59,790,323.47 -45,943,085.71 2. Significant investment and financing activities involving no cash receipts and payments Conversion of debt into capital Convertible corporate bonds maturing within one year Fixed assets acquired under financial lease 3. Net change in cash and cash equivalents: Balance of cash as at 30th June 2017 649,036,645.55 594,018,657.49 st Less: balance as at 1 January 2017 of cash 750,357,929.63 744,700,658.82 th Plus: balance as at 30 June 2017 of cash equivalents Less: balance as at 1st January 2017 of cash equivalents Net increase in cash and cash equivalents -101,321,284.08 -150,682,001.33 5.74.2 Net Cash Paid to Acquire Subsidiaries for the Current Period 81 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Not applicable. 5.74.3 Net Cash Received from Disposal of Subsidiaries in Current Period Not applicable. 5.74.4 Breakdowns of Cash and Cash Equivalents From 1st January 2017 to From 1st January 2016 to Item 30th June 2017 30th June 2016 1. Cash 649,036,645.55 750,357,929.63 Including: cash on hand 948,951.52 1,137,409.87 Unrestricted bank deposit 647,565,550.00 749,011,456.34 Other unrestricted monetary funds 522,144.03 209,063.42 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 30th June 2017 649,036,645.55 750,357,929.63 Including: cash and cash equivalents restricted for use by the parent company or subsidiaries within the group Note: Cash and cash equivalents restricted for use were not included in cash and cash equivalents 5.75 Monetary Items in Foreign Currency 5.75.1 Monetary Items in Foreign Currency Ending Balance of Foreign Ending Balance of Item Exchange Rate Currency Conversion into RMB Monetary funds Including: USD 6,531,223.38 6.7744 44,245,119.69 EUR 44,992,532.82 7.7496 348,674,132.34 HKD 467,169.47 0.8679 405,456.38 SGD 71,223.10 4.9135 349,954.70 JPY 251,231.05 0.060485 15,195.71 VND 8,312,993,000.00 0.00003 249,389.79 5.75.2 Description of Overseas Operating Entities The domicile of primary operation of the Company's subsidiary, ShangGong (Europe) Holding Corp. GmbH is in Germany, with Euro as functional currency for it is the applicable currency for the operation region. 5.76 Government Subsidy Amount Recognized in Current Type Amount Item Profits and Losses Income-related 27,570.22 Non-operating Income 27,570.22 Income-related 102,594.49 Non-operating Income 102,594.49 Income-related 2,510,000.00 Non-operating Income 2,510,000.00 Income-related 2,810.88 Non-operating Income 2,810.88 6. Change in the Scope of Consolidation 6.1 Business Combinations not under Common Control Not applicable. 82 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. 6.2 Business Combinations under Common Control Not applicable. 6.3 Other Changes in the Scope of Consolidation (1) The Company absorbed a wholly-owned subsidiary of Shanghai Shanggong Butterfly Sewing Machine Co., Ltd. as a branch. Shanghai Butterfly Import & Export Co., Ltd. and Shanghai ShangGong Import & Export Co., Ltd. are correspondingly transferred in to subsidiaries to the Company, which are included in the scope of consolidation. (2) The Company set up DAP Vietnam Co., Ltd. with USD 30,000.00,accounting for 100.00% of it quity. The Company controls DAP Vietnam, so DAP Vietnam was included in the consolidation scope since the date of its establishment. 7. Equity in Other Entities 7.1 Equity in Subsidiaries 7.1.1 The Composition of Enterprise Groups Domicile of Shareholding Registered Ratio (%) Name of Subsidiary Primary Business Nature Acquisition method Place Operation Direct Indirect ShangGong (Europe) Production and sales Germany Germany 100.00 Investment Holding Corp. GmbH of sewing machines DAP (Shanghai) Co., Sales of sewing Shanghai Shanghai 100.00 Investment Ltd. machines Sales, import and Shanghai SMPIC Imp. Shanghai Shanghai export of office 100.00 Investment & Exp. Co., Ltd. equipment Production and sales Shanghai SGSB Shanghai Shanghai of electronic 100.00 Investment Electronics Co., Ltd. equipment Shanghai SGSB Asset Asset and property Shanghai Shanghai 100.00 Investment Management Co., Ltd. management Shanghai Fengjian Business combination Shanghai Shanghai Property Management 100.00 Property Co., Ltd. under common control Dürkopp Adler Sewing Business combination Production and sales Machines (Suzhou) Co., Suzhou Suzhou 51.00 49.00 not under common of sewing machines Ltd. control ShangGong GEMSY Production and sales Taizhou Taizhou 60.00 Investment CO., LTD. of sewing machines Shanghai Shensy Business combination Enterprise Development Shanghai Shanghai Logistics, etc. 40.03 not under common Co., Ltd. control Shanghai ShangGong Financial Leasing Co., Shanghai Shanghai Financial Leasing 51.00 49.00 Investment Ltd. Shanghai Butterfly Import and export of Business combination Import & Export Co., Shanghai Shanghai 100 sewing machines under common control Ltd. Shanghai ShangGong Import and export of Import & Export Co., Shanghai Shanghai 100 Investment sewing machines Ltd. Sales of sewing DAP Vietnam Co., Ltd. Vietnam Vietnam 100 Investment machines 7.1.2 Important Non-wholly Owned Subsidiary Profit and loss Other The dividend The minority Minority Name of attributable to comprehensive declared to minority shareholders shareholders subsidiary minority income shareholders in the Equity balance at Shareholding% shareholders for the attributable to current period the end of period 83 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. current period minority shareholders in this period Dürkopp Adler 6.00 7,535,738.84 4,511,932.89 1,833,942.30 72,456,776.33 AG ShangGong GEMSY CO., 40.00 1,238,925.83 87,408,415.81 LTD. Shanghai Shensy Enterprise 59.97 4,089,069.50 147,661,100.80 Development Co., Ltd. 7.2 Equity in Joint Operation and Joint Venture 7.2.1 Important Joint Operation and Joint Venture Domicile of Shareholding Ratio (%) Accounting Measurement for Name of Joint Operation Registered Primary Business Nature Investment in Joint Operation and Joint Venture Place Direct Indirect Operation and Joint Venture Computerized flat Reutlingen, Reutlingen, H. Stoll AG & Co. KG knitting machine 26.00 Equity method Germany Germany manufacturing 7.2.2 The Main Financial Information of Joint Operation and Joint Venture Unit: 10,000 Yuan, Currency: RMB H. Stoll AG & Co. KG Ending balance / Current period Beginning balance / Last period Current assets 173,978.52 146,192.99 Non-current assets 27,046.10 25,725.05 Total assets 201,024.62 171,918.04 Current liabilities 61,609.32 49,572.98 Non-current liabilities 39,522.96 27,952.89 Total liabilities 101,132.28 77,525.87 The book value of equity investments in joint 28,115.53 25,358.66 operation and joint venture The fair value of the equity investment in the joint 108,918.28 105,190.11 venture Operating profits 5,218.54 6,501.41 8. Risks Associated with Financial Instruments Not applicable. 9. Disclose of Fair Value 9.1 The Fair Value as at 30th June 2017 of Assets and Liabilities Measured at Fair Value Fair value as at 30th June 2017 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 84 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. 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 101,167,860.52 101,167,860.52 a. Investment in debt instruments b. Investments in equity instruments 101,167,860.52 101,167,860.52 c. Others (3) Investment property A. Use right of leased land B. Leased buildings C. Land use right held for transfer upon appreciation Total amount of assets measured at fair value based on going 101,167,860.52 101,167,860.52 concern (4) Financial liabilities held for trading Including: issued bonds held for trading Derivative financial liabilities Others (5) Designated financial liabilities measured at fair value through current profit and loss Total amount of liabilities measured at fair value based on going concern 2. Measurement at fair value based on going concern (1) Assets held for trading Total amount of assets measured at fair value not based on going concern Total amount of liabilities measured at fair value not based on going concern 9.2 Basis for Determination of Market Price for Measurement of Fair Value of the First Level Based on Going Concern and not Based on Going Concern. The fair value as at 30th June 2017 of available-for-sale financial assets was determined on the basis of the closing price of Shenzhen Stock Exchange and Shanghai Stock Exchange on 30th June 2017. 9.3 Others The input value used for measuring fair value is divided into three levels: - The input value of the first level is the unadjusted quotation of similar assets and liabilities that can be obtained in an active market on the measurement date. - The input value of second level is the directly and indirectly observable input value of the relevant assets or liabilities other than the input value of the first level. - The input value of the third level is the unobservable input value of the relevant assets or liabilities. The level of the result of measurement of fair value is the lowest level that the input value which is significantly meaningful for the overall measurement of fair value belongs to. 85 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. 10. Related Party and Related Party Transaction 10.1 The Parent Company of the Company Shanghai Puke Flyingman Investment Co., Ltd. held A shares accounted for 11.08% of the total share capital of the Company, which is the largest shareholder of the Company; Shanghai Pudong New Area State-owned Assets Supervision and Administration Commission 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. 10.2 The Subsidiaries of the Company See the Note 7 Equity in Other Entities for the details of subsidiaries of the Company 10.3 The Joint Operation and Joint Ventures of the Company See the Note 7 Equity in Other Entities for the details of joint operation and joint ventures of the Company 10.4 Other Related Parties of the Company Name of Other Related Parties Relationship with the Company Shanghai Hirose Precision Industrial Co., Ltd. Investee Shanghai Fuji Xerox Co., Ltd. Investee Shanghai Kaile Investment Management Co., Ltd. Controlled by subsidiary’s minority shareholders Zhejiang GEMSY Electromechanical Co., Ltd. Controlled by subsidiary’s minority shareholders Stoll Electronics Co., Ltd. Other related company 10.5 Related Party Transactions 10.5.1 Purchase and Sale of Goods, Rendering and Receipt of services Table of purchase of goods / receipt of services Content of Related From 1st January 2017 to 30th From 1st January 2016 to 30th Related Party Transaction June 2017 June 2016 Zhejiang GEMSY Purchase of fixed assets 15,114,920.79 Electromechanical Co., Ltd. Stoll Electronics Co., Ltd. Receiving of service 6,436,020.33 64,963.20 Table of sales of goods/rendering of services Content of Related From 1st January 2017 to 30th From 1st January 2016 to 30th Related Party Transaction June 2017 June 2016 Shanghai Fuji Xerox Co., Ltd. Sales of goods 12,162,227.27 15,430,242.95 Zhejiang GEMSY Sales of goods 140,583.32 Electromechanical Co., Ltd. Stoll Electronics Co., Ltd. Sales of goods 293,594.29 39,230.64 10.5.2 Leasing The Company acted as lessor Unit: 10,000 Yuan, Currency: RMB Name of leasee Type of leased asset Rental recognized in current period Rental recognized in last period Shanghai Hirose Precision Industrial Machinery equipment 25.00 25.00 Co., Ltd. 10.5.3 Other Related Transactions Not applicable. 86 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. 10.6 Accounts Due from/to the Related Parties 10.6.1 Accounts Receivable Ending Balance Beginning Balance Item Related Party Provision for Bad Book Balance Book Balance Provision for Bad Debts Debts Accounts Shanghai Fuji 1,798,113.75 89,905.69 2,986,768.97 149,338.45 receivable Xerox Co., Ltd. Accounts Zhejiang GEMSY receivable Electromechanical 112,831.24 5,641.56 Co., Ltd. Zhejiang GEMSY Other receivables Electromechanical 299,000.00 14,950.00 Co., Ltd. Zhejiang GEMSY Prepayment Electromechanical 6,147,650.83 6,874,421.03 Co., Ltd. 10.6.2 Accounts Payable Item Related Party Ending Balance Beginning Balance Account payables Stoll Electronics Co., Ltd. 965,239.42 750,113.09 11. Commitments or Contingencies 11.1 Major Commitment Events Mortgage loans and credit extension Amount of Mortgages/Collaterals Estimated Use Borrower Borrowing Bank deposits of EUR 328.40 Guaranty ShangGong (Europe) Holding Corp. GmbH thousands Fixed assets of EUR 13,035.30 Surety margin of EUR 2,620,000.00 ShangGong (Europe) Holding Corp. GmbH thousands credit line Fixed assets of EUR 30,468.20 Guaranty EUR 7,878,000.00 ShangGong (Europe) Holding Corp. GmbH thousands 500 thousand shares of DA AG Guaranty ShangGong (Europe) Holding Corp. GmbH Note: ShangGong (Europe) Holding Corp. GmbH uses its holding of 500 thousand shares of DA AG as collateral to obtain two pieces of 2,750,000 euro bank letter (the guarantee period is from 7th January 2016 to 30th July 2017 and from 7th January 2016 to 30th July 2018, respectively), issued by German Commerzbank. ShangGong (Europe) holding Corp. GmbH guarantees that it will pay the consideration of share purchase to the seller of H. Stoll AG & Co. KG. 10. 2 Contingencies 10.2.1 The Contingent Liabilities Arising from the Provision of Debt Guarantees by the Company for its Subsidiary, ShangGong (Europe) Holding Corp. GmbH as at 30th June 2017 Whether the Commencement Date of Expiration Date Guarantee has Guarantee Guarantee Amount Guarantee of Guarantee been Fulfilled Note or not The equivalent of Shanghai Branch of the Commerzbank RMB 58.00 million in 25th March 2014 No Note 1 EUR Shanghai Branch of the Commerzbank EUR 8.00 million 1st July 2014 No Note 2 th Shanghai Branch of the Commerzbank EUR 12.00 million 19 September 2016 No Note 3 th Shanghai Branch of the Commerzbank EUR 10.00 million 28 August 2015 No Note 4 Industrial and Commercial bank st 21st December Shanghai Hongkou Branch EUR 7.878 million 21 December 2015 No Note 5 2020 Note 1: On 25th March 2014, the Company's wholly-owned subsidiary, ShangGong (Europe) Holding Corp. GmbH, applied to the Bielefeld Branch of the Commerzbank for a current fund loan of not more than the 87 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. equivalent of 58 million yuan in euro, the Shanghai Branch of the Commerzbank issued a financing guarantee letter for the funds, and the Company issued a corporate letter of guarantee for payment of 70 million yuan as counter guarantee for the abovementioned financing guarantee letter. Note 2: on 30th June 2014, the Company's wholly owned subsidiary, ShangGong (Europe) Holding Corp. GmbH, applied to the Bielefeld Branch of the Commerzbank for a current fund loan of 8 million euro, the Shanghai Branch of the Commerzbank issued a financing guarantee letter for the funds, and the Company issued an unconditionally irrecoverable corporate letter of guarantee for payment of 8.8 million euro as counter guarantee for the abovementioned financing guarantee letter. Note 3: on 19th September 2016, the Company's wholly owned subsidiary, ShangGong (Europe) Holding Corp. GmbH, applied to the Bielefeld Branch of the Commerzbank for a short-term credit loan of 12 million euro, the Shanghai Branch of the Commerzbank issued a financing guarantee letter for the funds, and the Company issued an unconditionally irrecoverable corporate letter of guarantee for payment of 13.20 million euro. Note 4: on 28th August 2015, the Company's wholly owned subsidiary, PFAFF GmbH, applied to the Kaiserslautern Branch of the Commerzbank for a loan of 10.00 million euro, the Shanghai Branch of the Commerzbank issued a financing guarantee letter for the funds, and the Company issued an unconditionally irrecoverable corporate letter of guarantee for payment of 11.00 million euro as counter guarantee for the abovementioned financing guarantee letter. Note 5: on 21st December 2015, the Company's wholly owned subsidiary, ShangGong (Europe) Holding Corp. GmbH., applied to the Frankfurt Branch of the Commerzbank for a limit loan of 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. As of 30th June 2017, there is no outflow of economic benefits arising from the above contingencies. 11.2.2 The Agreement to Increase Capital to Shanghai Shensy Enterprise Development Co., Ltd. According to our new capital increase agreement with Shanghai Shensy Enterprise Development Co., Ltd., by June 30, 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 our company and another shareholder, Zhang Ping, to repurchase all or some of the shares that Shanghai Pudong New Industrial Investment Co., Ltd. holds in cash, within 3 months after it requests in writing. And we should assist it in the approval process of state-owned Assets Supervision and Administration Commission, commercial registration, etc. Per the agreement, our company and Zhang Ping will assume 50% of the above mentioned amount, respectively, and our company bears unconditional joint responsibility to repurchase the shares that Shanghai Pudong New Industrial Investment Co., Ltd. holds. If Shanghai Pudong New Industrial Investment Co., Ltd. has not listed in A shares market by 30th June 2018, it has 6 months (e.g. before 31st 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 30th June 2017, it is uncertain that Shensy will complete IPO in the A share market by 30th June 2018. 88 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. 12. Post Balance Sheet Events 12.1 The Merger of DAP (Shanghai) Co., Ltd. According to the decision of the Company’s 2016 Annual Shareholderss Meeting on 27th April 2017, the Company will merge its holding subsidiary, DAP (Shanghai) Co., Ltd., and after the merger, DAPSH’s status of independent legal entity will be cancelled by the Industrial and Commercial Administrations. As of the date of this report, the above merger events are in process. 12.2 The Merger of Dürkopp Adler Sewing Machines Suzhou Co., Ltd. According to the decision of the Company’s 32th Meeting of the 7th Board of Directors on 18th September 2016, the Company’s subsidiary, PFAFF Industrial Sewing Machines (Zhangjiagang) Co., Ltd. will merge the Company’s holding subsidiary, Dürkopp Adler Sewing Machines Suzhou Co., Ltd. (hereinafter referred to as DA Suzhou), and after the merger, DA Suzhou’s status of independent legal entity will be cancelled by the Industrial and Commercial Administrations. As of the date of this report, the above merger events are in process. 12.3 Lawsuit after report period Shanghai Pacific Industrial Co., Ltd. (hereinafter referred to as “PACIFIC Shanghai”) is a Sino-foreign joint venture established by the Company’s predecessor Shanghai Industrial Sewing Machine Corporation (hereinafter referred to as “SISMC”) and Pacific Business Exchange CO., Ltd. (hereinafter referred to as “PACIFIC Business”) on May 1993. SISMC invested USD 360,000 in equipment and plant, accounting for 48% of total shares; PACIFIC Business invested USD 390,000 in equipment and cash, accounting for 52% of total shares. After the establishment of PACIFIC Shanghai, SISMC has undergone restructuring, listing and several changes in business registration and stock ownership changes, so the name of SISMC has changed to Shang Gong Group Co., Ltd. now. However, PACIFIC Shanghai and PACIFIC Business refused to recognize the Company as the Chinese shareholders of PACIFIC Shanghai. Therefore, the Company filed a lawsuit, asking the court to confirm the Company's Chinese shareholder status. On 22nd August 2017, the Company received the civil judgment of Shanghai No.1 Intermediate People's Court. The judgment confirmed that 48% of PACIFIC Shanghai’s equity invested by SISMC amounting to USD 360,000 was owned by the Company. As the Company has been refused to exercise shareholder rights by PACIFIC Shanghai and PACIFIC Business for years, the Company does not know the financial position and operation of PACIFIC Shanghai. Except the 48% of equity of PACIFIC Shanghai confirmed above, it is not clear how this issue would affect the Company. As of the date of this report, the outcome of the lawsuit has not yet been implemented. 12.4 Arbitration after report period The 22nd meeting of the 7th Board of Directors of the Company examined and approved the Proposal on Investing in STOLL KG through ShangGong Europe, and agreed that the wholly-owned subsidiary ShangGong Europe would invest in STOLL KG to become a 26% Minority shareholders. (See bulletin No. 2015-030 released on 29th August 2015 and bulletin No. 2016-002 released on 14th January 2016 for details). Accounting to the Contract signed on 29th August 2015 by ShangGong Europe, 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 89 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. a difference of approximately 4.26 million euro in the calculation of the price adjustment. ShangGong Europe has received the Application for Arbitration submitted by Michael Stoll, Corinna Stoll and other 10 limited partners of STOLL KG on 20th July 2017. ShangGong Europe 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. 13. Other Significant Events On 13th December 2016, the resolution of the 34th meeting of the 7th Board of Directors approved that the Company's joint venture H. Stoll AG & Co. KG, intend to sign a loan agreement with a syndicate consisted of six financial institutions which include Deutsche Bank's German Business Branch, Commerzbank, Baden-Württemberg State banks. This agreement allows H. Stoll AG & Co. KG to have access to credit line of 60 million euros in total. The subsidiary of the Company, ShangGong (Europe) Holdings Corp. GmbH, as a limited partner of H. Stoll AG & Co. KG signed a contract with the syndicates. According to the contract, if H. Stoll AG & Co. KG did not meet the key financial indicators agreed in the syndicated loan agreement, the income of H. Stoll AG & Co. KG would be used to repay the syndicated loan prior to being allocated to ShangGong (Europe) Holdings Corp. GmbH. The board of directors of the Company has authorized the management of the subsidiary, ShangGong (Europe) Holdings Corp. GmbH to sign the relevant agreement and to handle the relevant procedures. 14. Notes to Mains Items of the Financial Statements of the Parent Company 14.1 Accounts Receivable 14.1.1 Disclosure of Classification of Accounts Receivable Ending Balance Beginning Balance Type Book Balance Provision for Bad Debts Book Balance Provision for Bad Debts Proportion Proportion Book Value Proportion Proportion Book Value Amount Amount Amount Amount (%) (%) (%) (%) Accounts receivable with significant single amount and provision for bad debt made on an individual basis Accounts receivable with provision for bad debt made on a portfolio 69,634,149.41 97.18 59,629,555.38 85.63 10,004,594.03 59,365,318.22 100.00 55,963,466.80 94.27 3,401,851.42 with similar risk credit characteristics basis Accounts receivables with insignificant single amount 2,020,198.55 2.82 2,020,198.55 100.00 0.00 and provision for bad debt made on an individual basis Total 71,654,347.96 100.00 61,649,753.93 86.04 10,004,594.03 59,365,318.22 100.00 55,963,466.80 94.27 3,401,851.42 Accounts receivable with provision for bad debt made using the aging analysis method among the portfolios: Ending Balance Aging Accounts Receivable Provision for Bad Debts Provision Ratio Within 1 year 10,169,676.43 508,483.83 5% 1 to 2 years 91,634.09 18,326.82 20% 90 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. 2 to 3 years 540,188.32 270,094.16 50% Over 3 years 58,832,650.57 58,832,650.57 100% Total 69,634,149.41 59,629,555.38 14.1.2 Accounts Receivables Accrued, Reversed or Recovered in Current Period The provision for bad debts for the current year amounted to 83,231.30 yuan; there is no provision for bad debts recovered or reversed in the current year. 14.1.3 Accounts Receivable Actually Written off in Current Period The write-off of receivables amounted to 779,410.85 yuan, representing those receivables with long ageing. All of them are unrecoverable due to deregistration/cancellation of the customers. 14.1.4 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 16.09 11,530,775.39 Customer B 7,480,189.67 10.44 7,480,189.67 Customer C 4,679,327.49 6.53 4,679,327.49 Customer D 1,687,149.74 2.35 1,687,149.74 Customer E 1,286,880.42 1.80 1,286,880.42 Total 26,664,322.71 37.21 26,664,322.71 14.2 Other Receivables 14.2.1 Disclosure of Classification of Other Receivables Ending Balance Beginning Balance Type Book Balance Provision for Bad Debts Book Balance Provision for Bad Debts Proportion Proportion Book Value Proportion Proportion Book Value Amount Amount Amount Amount (%) (%) (%) (%) Other receivables with significant single amount 59,302,243.32 35.63 59,302,243.32 100.00 58,951,200.82 37.63 58,951,200.82 100.00 and provision for bad debt made on an individual basis Other receivables with provision for bad debt made on a portfolio 106,878,151.93 64.20 19,789,952.27 18.52 87,088,199.66 97,725,812.44 62.37 19,332,590.89 19.78 78,393,221.55 with similar risk credit characteristics basis Other receivables with insignificant single amount 290,980.00 0.17 16,525.00 5.68 274,455.00 and provision for bad debt made on an individual basis Total 166,471,375.25 100.00 79,108,720.59 47.52 87,362,654.66 156,677,013.26 100.00 78,283,791.71 49.97 78,393,221.55 Other receivables with significant single amount and provision for bad debts made on an individual basis as at 30th June 2017 Other Receivables Ending Balance (By Entity) Other Receivables Provision for Bad Debts Proportion of Provision Reason for Provision 91 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Customer A 46,350,286.62 46,350,286.62 100.00% Not expected to recover Customer B 12,951,956.70 12,951,956.70 100.00% Not expected to recover Total 59,302,243.32 59,302,243.32 100.00% Other receivables with provision for bad debts made using the aging analysis method among those portfolios Ending Balance Aging Other Receivables Provision for Bad Debts Proportion of Provision Within 1 year 91,586,456.35 4,579,322.82 5.00% 1 to 2 years 95,486.10 19,097.22 20.00% 2 to 3 years 9,354.50 4,677.25 50.00% Over 3 years 15,186,854.98 15,186,854.98 100.00% Total 106,878,151.93 19,789,952.27 18.52% 14.2.2 Provision for Bad Debts Provided, Reversed or Recovered in Current Period The provision for bad debts provided in the current period amounted to 755,368.25 yuan; there was 661,342.97 yuan provision for bad debts recovered or reversed in the current period. 14.2.3 Other Receivables Actually Written off in Current Period. Not applicable. 14.2.4 Top Five Other Receivables by the Ending Balance of the Borrowers Company Proportion in Total Ending Balance of Nature of Fund Ending Balance Aging Name Other Receivable (%) Provision for Bad Debts Within 1 year or Customer A Current accounts 47,429,654.75 28.49 46,404,255.03 over 3 years Customer B Current accounts 40,279,132.65 Within 1 year 24.20 2,013,956.63 Customer C Current accounts 28,000,000.00 Within 1 year 16.82 1,400,000.00 Within 1 year Customer D Current accounts 12,951,956.70 7.78 12,951,956.70 or over 3 years Customer E Current accounts 11,572,940.88 Within 1 year 6.95 578,647.04 Total 140,233,684.98 84.24 63,348,815.40 14.3 Long-term Equity Investments Ending Balance Beginning Balance Item Provision for Provision for Book Balance Book Value Book Balance Book Value Impairment Impairment Investments 595,732,377.30 8,632,624.09 587,099,753.21 638,117,724.99 8,632,624.09 629,485,100.90 in subsidiaries Investments in associates and joint ventures Total 595,732,377.30 8,632,624.09 587,099,753.21 638,117,724.99 8,632,624.09 629,485,100.90 Among which, details on investments in subsidiaries Provision for Ending Impairment Increase in Current Decrease in Balance of Investee Beginning Balance Ending Balance Provided in Period Current Period Provision for Current Impairment Period ShangGong (Europe) Holding Corp. 142,370,693.64 142,370,693.64 GmbH Shanghai Shanggong 79,000,000.00 79,000,000.00 92 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Butterfly Sewing Machines Co., Ltd (Note 1) DAP (Shanghai) Co., 59,425,828.73 59,425,828.73 Ltd. Shanghai SMPIC 20,000,000.00 20,000,000.00 Electronics Co., Ltd. Duerkopp Adler Sewing Machines 15,685,694.98 15,685,694.98 3,132,624.09 Suzhou Co., Ltd Shanghai SMPIC Imp. & Exp. Co., 12,000,000.00 12,000,000.00 Ltd. Shanghai SGSB Asset Management 60,000,000.00 60,000,000.00 5,000,000.00 Co., Ltd. Shanghai Fengjian 500,000.00 500,000.00 500,000.00 Property Co., Ltd. ShangGong GEMSY 129,600,000.00 129,600,000.00 CO., LTD. Shanghai Shensy Enterprise 86,083,077.64 86,083,077.64 Development Co., Ltd. Shanghai ShangGong Financial Leasing 33,452,430.00 33,452,430.00 Co.,Ltd. DAP Vietnam Co., 204,273.00 204,273.00 Ltd. (Note 2) Shanghai Butterfly Import & Export Co., 22,579,133.04 22,579,133.04 Ltd. (Note 1) Shanghai ShangGong Import & Export Co., 13,831,246.27 13,831,246.27 Ltd. (Note 1) Total 638,117,724.99 36,614,652.31 79,000,000 595,732,377.30 8,632,624.09 Note 1: The Company absorbed a wholly-owned subsidiary of Shanghai Shanggong Butterfly Sewing Machine Co., Ltd. as a branch. Shanghai Butterfly Import & Export Co., Ltd. and Shanghai ShangGong Import & Export Co., Ltd. are correspondingly transferred in to subsidiaries to the Company. Note 2: The Company set up DAP Vietnam Co., Ltd. with USD 30,000.00, accounting for 100.00% of its equity. 14.4 Operating Income and Operating Costs From 1st January 2017 to 30th June 2017 From 1st January 2016 to 30th June 2016 Item Income Cost Income Cost Primary business 22,930,783.21 17,955,581.70 3,959,485.46 3,370,976.73 Other businesses 23,455,012.88 6,040,735.79 14,644,971.36 4,742,618.55 Total 46,385,796.09 23,996,317.49 18,604,456.82 8,113,595.28 14.5 Investment Income From 1st January 2017 to 30th From 1st January 2016 to 30th Item June 2017 June 2016 Long-term equity investment measured at cost method 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 9,509.24 measured at fair value through current profit and loss 93 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Investment income from holding of available-for-sale financial assets Investment income from holding of available-for-sale 1,001,400.43 897,305.05 financial assets Investment income from disposal of available-for-sale 715,552.60 financial assets Gains from re-measurement of residual equity at fair value after the loss of control right Others 5,096,060.26 5,214,392.23 Total 6,106,969.93 6,827,249.88 Note: "Others" mainly refer to the gains of 980,616.42 yuan from financing product and gains of 4,115,443.84 yuan from structured deposits among other current assets. 15. Supplementary Information 15.1 Extraordinary Profit or Loss for Current Period Item Amount Note Profits or losses from disposal of non-current assets 9,747,624.59 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 2,642,975.59 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 losses from fair value changes in held-for-trading financial assets and held-for-trading financial 2,403,933.60 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 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 -301,892.86 Other profits or losses which can be deemed as non-recurring profits or losses Income tax effects -707,086.71 Minority interest effects -1,086,985.02 Total 12,698,569.19 15.2 Yield Rate of Net Assets and Earnings per Share Profit for Current Period Yield Rate of Net Earnings Per Share (RMB/Share) 94 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Weighted Average Basic Earnings Per Share Diluted Earnings Per Share Assets (%) Net profit attributable to ordinary 6.3648 0.2296 0.2296 shareholders of the Company Net profit attributable to ordinary shareholders of the Company after 5.7232 0.2065 0.2065 deducting non-recurring gains and losses 95 上工申贝(集团)股份有限公司 Semi-annual Report Shang Gong Group Co., Ltd. Chapter 11 For Reference 1. Financial Statements signed by the legal representative, chief accountant and accounting manager and sealed by the Company. 2. Semi-annual report signed by legal representative and sealed by the accounting firm. 3. Original documentation and announcements about the Company, published in the newspaper appointed by CSRC within the report year. Shang Gong Group Co., Ltd. Chairman of Board of Directors: Zhang Min 29th August 2017 IF THIS ENGLISH VERSION OF THIS ANNUAL REPORT INVOLVES ANY DIFFERENCES FROM THE CHINESE VERSION, THE LATTER SHALL BE EFFECTIVE. 96