中国派对文化(01532) - 2020 - 年度财报

Financial Highlights The company's revenue decreased by 19.2% to RMB 255.3 million in FY2020, with gross profit down 22.9%; loss for the year narrowed by 5.2% to RMB 68.4 million, with gross margin at 25.2% and net loss margin at 26.8% FY2020 Key Financial Data Comparison | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | Change Percentage | | :--- | :--- | :--- | :--- | | Revenue | 255,252 | 316,064 | (19.2%) | | Gross Profit | 64,284 | 83,401 | (22.9%) | | Loss for the year attributable to equity holders of the Company | (68,437) | (72,205) | (5.2%) | | Gross Profit Margin | 25.2% | 26.4% | (1.2%) | | Net Loss Margin | (26.8%) | (22.8%) | (4.0%) | Corporate Information This section outlines the company's board members, committee compositions, registered office, principal place of business, share registrar, legal counsel, auditor, stock code, and website - The Board of Directors includes Executive Directors Ms. Chen Sheng (Chairperson), Mr. Xu Chengwu (Chief Executive Officer), Mr. Ma Zhijun, and Independent Non-executive Directors Mr. Zheng Jinmin, Mr. Chen Wenhua, and Ms. Peng Xu[17] - Mr. Zheng Jinmin chairs the Audit Committee, Mr. Chen Wenhua chairs the Remuneration Committee, and Ms. Peng Xu chairs the Nomination Committee[17] - The company's registered office is in the Cayman Islands, with its China headquarters and principal place of business located in Yichun Economic and Technological Development Zone, Jiangxi Province[19] Chairman's Statement The Chairman's Statement reviews the Group's FY2020 performance, noting revenue and gross profit declines due to COVID-19, but a narrowed loss for the year; future plans include business diversification, M&A, and industry integration to expand revenue streams - In FY2020, both CMS and OBM business revenues decreased by 19.2% to RMB 255.3 million, primarily due to weak demand and lower product prices in key markets, impacted by COVID-19 lockdowns and travel restrictions[23][24][25] - The Group's loss for the year narrowed by 5.2% to RMB 68.4 million, maintaining a healthy financial position with net current assets of RMB 32.6 million[25] - Future outlook includes diversifying business and expanding revenue streams through collaborations with other IP owners, upstream and downstream industry partnerships, and M&A and industry integration[33][35] Directors' Business Review and Management Discussion and Analysis This section details the Group's FY2020 operating results, financial position, key risks, business strategies, compliance, stakeholder relations, investment activities, and human resources; revenue and gross profit declined due to COVID-19, but cost control and leasing growth narrowed losses, with future focus on diversification and integration Key Performance Indicators In FY2020, Group revenue decreased by 19.2%, gross profit by 22.9%, and operating loss increased by 6.6%, while loss attributable to equity holders decreased by 5.2%; net current assets grew significantly by 238.6%, but bank balances and cash decreased by 37.9% FY2020 Key Performance Indicators Comparison | Performance Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | Change Percentage | | :--- | :--- | :--- | :--- | | Revenue | 255,252 | 316,064 | (19.2%) | | Gross Profit | 64,284 | 83,401 | (22.9%) | | Operating Loss | (74,487) | (69,845) | 6.6% | | Loss for the year attributable to equity holders of the Company | (68,437) | (72,205) | (5.2%) | | Bank Balances and Cash | 48,908 | 78,761 | (37.9%) | | Net Current Assets | 32,646 | 9,642 | 238.6% | | Loss Per Share (Basic) | (7.62) cents | (8.04) cents | (5.2%) | Business Review The Group designs, develops, produces, sells, and markets cosplay products and lingerie, exporting to over 20 countries; in 2020, CMS and OBM revenues declined due to COVID-19, but leasing revenue grew, leading to the establishment of a 'Party Culture Industrial Base' in Yiwu and property leases to enhance efficiency and collaboration Product and Service Lines The Group's business is categorized into Contract Manufacturing Services (CMS) and Original Brand Manufacturing (OBM); in 2020, CMS accounted for 65.6% of revenue and OBM for 34.4%, with apparel and others at 70.4% and wigs at 29.6% by product type FY2020 Revenue by Business Segment | Business Segment | 2020 Revenue (RMB thousand) | Percentage of Total | 2019 Revenue (RMB thousand) | Percentage of Total | Revenue Decrease (Approximate Percentage) | | :--- | :--- | :--- | :--- | :--- | :--- | | CMS Business | 167,408 | 65.6% | 199,770 | 63.2% | (16.2%) | | OBM Business | 87,844 | 34.4% | 116,294 | 36.8% | (24.5%) | | Total | 255,252 | 100.0% | 316,064 | 100.0% | (19.2%) | FY2020 Revenue by Product Category | Product Category | 2020 Revenue (RMB thousand) | Percentage of Total | 2019 Revenue (RMB thousand) | Percentage of Total | Revenue Decrease (Approximate Percentage) | | :--- | :--- | :--- | :--- | :--- | :--- | | Wigs | 75,548 | 29.6% | 110,954 | 35.1% | (31.9%) | | Apparel and Others | 179,704 | 70.4% | 205,110 | 64.9% | (12.4%) | | Total | 255,252 | 100.0% | 316,064 | 100.0% | (19.2%) | - CMS business revenue decreased by 16.2%, primarily due to weak demand for cosplay costumes and wigs caused by COVID-19, partially offset by increased demand for lingerie[95][96] - OBM business revenue decreased by 24.5%, mainly due to weak product demand and lower selling prices caused by COVID-19, significantly impacting sales performance[99][102] Leasing Business and Industrial Park The Group established a 'Party Culture Industrial Base' in Yiwu in late 2019 and leased Feifeng Road property in September 2020 to integrate cultural product design, influencer marketing, creative design, R&D, and supply chain; some Yichun production facilities were subleased due to trade uncertainties, generating approximately RMB 5.424 million in total property leasing revenue in 2020, a 108% year-on-year increase - The Group established a 'Party Culture Industrial Base' and e-commerce operations, service, and experience centers in Yiwu, with a total construction area of 50,579 square meters, of which approximately 83.3% has been leased/subleased to related industry companies[53][56] - In September 2020, the Group leased approximately 27,600 square meters of Feifeng Road property to further strengthen cooperation with upstream and downstream industry companies[53][56] Total Property Leasing Revenue | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | Change Percentage | | :--- | :--- | :--- | :--- | | Total Property Leasing Revenue | 5,424 | 2,607 | 108.0% | Principal Risks and Uncertainties The Group faces principal risks from global economic conditions, foreign currency fluctuations, and changes in movie and anime character popularity; COVID-19 severely disrupted global economic activity, leading to weak product demand and uncertain recovery, while RMB appreciation against the USD could impact profit margins, and character popularity directly affects product sales - Global economic and macroeconomic conditions: The COVID-19 pandemic adversely affected global economic activity, leading to weak product demand and lower selling prices, particularly in major markets like the US and UK[24][61][62][65] - Foreign currency exchange rate fluctuations: Most revenue is denominated in USD, and RMB appreciation against the USD could adversely impact profit margins, with exchange rate volatility also affecting costs and profitability[63][66] - Changes in movie and anime character popularity: Some cosplay products rely on popular anime characters, and their market demand and revenue are affected by changes in character popularity; a decline could lead to fewer orders and lower-than-expected revenue[69][70][72] Business Strategies The Group will pursue business expansion and revenue diversification by enhancing R&D, expanding OBM business in China to grow its customer base, collaborating with other IP owners, and strengthening partnerships with upstream and downstream industry companies to improve production efficiency - Strengthen research and development capabilities[74] - Expand OBM business in the China market to broaden the customer base[74] - Seek cooperation with other intellectual property owners to engage in different businesses[74] - Seek cooperation with upstream and downstream industry companies to further enhance production efficiency[74] Law and Regulation The Group is committed to complying with laws and regulations regarding workplace quality, product safety, and environmental protection; in 2020, no significant non-compliance or violations were found, and the Group obtained multiple certifications including ISO9001, ISO14001, and OHSAS 18001 Workplace Quality The Group is committed to providing equal opportunities and a safe working environment for employees, complying with all occupational health and safety legislation, with no significant non-compliance found in 2020 - The Group is committed to promoting equal opportunities for all employees in all aspects, including recruitment, compensation and benefits, training, promotion, transfer, and dismissal[77][81] - The Group is committed to full compliance with all occupational health and safety legislation and providing a safe working environment for its employees[78][81] Product Safety The Group prioritizes product quality and safety, with all products meeting international environmental and safety standards, including US ASTM, European EN71, and REACH, and holding ISO9001, ISO14001, and OHSAS 18001 certifications; no significant non-compliance was found in 2020 - All products are safe and fully comply with international environmental and safety standards, including US ASTM, European EN71 and REACH standards, and safety production standardization certificates[79][82] - The Group has obtained multiple certifications, including ISO9001:2008, ISO14001:2004, and OHSAS 18001:2007[79][82] Environmental Protection The Group is committed to protecting and maintaining the environment, adhering to high environmental standards, and complying with relevant laws and regulations in manufacturing and material disposal processes; no significant non-compliance or violations were found in 2020 - The Group is committed to protecting and maintaining the environment and complying with high environmental standards to fulfill relevant legal or regulatory requirements in manufacturing and material disposal processes[85][89] - In 2020, the Group found no significant non-compliance or violations of relevant standards, rules, and regulations regarding air and greenhouse gas emissions, discharges to water and land, or the generation of hazardous or non-hazardous wastewater[86][89] Relationship with Suppliers and Customers The Group collaborates with over 70 suppliers, ensuring diverse raw material sources without long-term purchase agreements; it maintains long-term customer relationships, with the top five clients averaging over seven years of cooperation, indicating high customer loyalty - The Group procures raw materials from over 70 suppliers, ensuring diverse sources of supply, so the loss of a single supplier would not significantly impact operations[87][90] - The Group maintains long-term business partnerships with customers in over 20 countries and regions globally; as of December 31, 2020, the top five customers had an average cooperation period of over seven years[88][91] Financial Review This section analyzes the Group's FY2020 financial performance; revenue and gross profit declined due to the pandemic, but other income significantly increased from government grants and leasing growth; cost of sales and selling expenses decreased, while administrative and other operating expenses rose due to exchange losses and depreciation; asset impairment losses and income tax credits both increased substantially, with financial resources and liquidity remaining healthy despite a reduction in bank balances and cash Revenue and Gross Profit Total revenue for FY2020 decreased by 19.2% to RMB 255.3 million, with gross margin falling from 26.4% to 25.2%; CMS revenue declined by 16.2% and OBM revenue by 24.5%, primarily due to weak demand and rising production costs impacted by the pandemic FY2020 Revenue and Gross Margin by Business and Product Category | Business Segment | Product Category | 2020 Revenue (RMB thousand) | 2020 Gross Margin | 2019 Revenue (RMB thousand) | 2019 Gross Margin | Revenue Change Percentage | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | CMS Business | Cosplay Costumes | 58,202 | 21.8% | 89,438 | 26.5% | (34.9%) | | | Cosplay Wigs | 57,332 | 25.5% | 76,731 | 26.2% | (25.3%) | | | Lingerie | 45,136 | 24.3% | 33,575 | 27.8% | 34.4% | | | Others | 6,738 | 24.4% | 26 | 25.0% | 25,815.4% | | | Subtotal | 167,408 | 23.8% | 199,770 | 26.6% | (16.2%) | | OBM Business | Cosplay Costumes | 49,184 | 31.7% | 59,123 | 28.8% | (16.8%) | | | Cosplay Wigs | 18,216 | 24.6% | 34,223 | 21.3% | (46.8%) | | | Lingerie | 19,256 | 21.0% | 22,948 | 26.1% | (16.1%) | | | Others | 1,188 | 23.4% | — | — | Not Applicable | | | Subtotal | 87,844 | 27.8% | 116,294 | 26.4% | (24.5%) | | Total | | 255,252 | 25.2% | 316,064 | 26.4% | (19.2%) | - Gross margin decreased from 26.4% in 2019 to 25.2% in 2020, primarily due to increased production costs (including procurement and transportation) and lower product selling prices caused by the pandemic[49][50][101][104] Cost of Sales and Other Income Cost of sales decreased by approximately RMB 41.7 million year-on-year to RMB 191.0 million; other income significantly increased by approximately RMB 9.1 million to RMB 14.4 million, primarily driven by government grants, net investment in leases income, and property leasing revenue Cost of Sales and Other Income Comparison | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | Change (RMB thousand) | | :--- | :--- | :--- | :--- | | Cost of Sales | 191,000 (approx) | 232,700 (approx) | (41,700) | | Other Income | 14,400 (approx) | 5,300 (approx) | 9,100 | | Government Grants | 3,100 (approx) | - | 3,100 | | Net Investment in Leases Income | 2,800 (approx) | - | 2,800 | | Property Leasing Income | 5,400 (approx) | 2,607 (approx) | 2,793 | | Net Exchange Gain | - | 2,080 (approx) | (2,080) | - The increase in other income was mainly due to government grants of approximately RMB 3.1 million, recognition of net investment in leases income of approximately RMB 2.8 million, and property and machinery leasing income of approximately RMB 5.4 million[107][112] Expenses and Impairment Losses Selling expenses decreased by approximately RMB 2.6 million due to lower transportation and staff costs; administrative and other operating expenses increased by approximately RMB 17.9 million due to higher exchange losses and depreciation; impairment losses on property, plant, and equipment significantly rose to RMB 55.4 million, and investment property impairment losses were RMB 20.0 million, mainly impacted by sustained revenue decline and changes in property use Key Expenses and Impairment Losses Comparison | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | Change (RMB thousand) | | :--- | :--- | :--- | :--- | | Selling Expenses | 5,600 (approx) | 8,200 (approx) | (2,600) | | Administrative and Other Operating Expenses | 76,100 (approx) | 58,200 (approx) | 17,900 | | Impairment Losses on Property, Plant and Equipment | 55,400 (approx) | 12,900 (approx) | 42,500 | | Impairment Losses on Investment Properties | 20,000 (approx) | 18,700 (approx) | 1,300 | - Impairment losses on property, plant, and equipment increased to RMB 55.4 million, primarily due to a decline in recoverable amounts caused by sustained revenue decrease[110][115] - Impairment losses on investment properties amounted to RMB 20.0 million, mainly attributable to the reclassification of new Yichun factory premises to investment properties for leasing purposes, where their fair value was below carrying amount[118][121][122][123] Finance Costs and Income Tax Finance costs remained at approximately RMB 6.7 million; income tax credit significantly increased by approximately RMB 8.5 million to RMB 12.8 million, primarily due to deferred tax recognized on asset impairment losses Finance Costs and Income Tax Credit Comparison | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | Change (RMB thousand) | | :--- | :--- | :--- | :--- | | Finance Costs | 6,700 (approx) | 6,700 (approx) | 0 | | Income Tax Credit | 12,800 (approx) | 4,300 (approx) | 8,500 | - The increase in income tax credit was mainly due to the recognition of deferred tax of approximately RMB 12.7 million on asset impairment losses during the year[126][131] Financial Resources and Liquidity As of December 31, 2020, total bank balances and cash were approximately RMB 48.9 million, a year-on-year decrease of approximately RMB 29.9 million, mainly due to reduced borrowings and capital expenditure; the current ratio was 131.7% and the gearing ratio was 25.4%, indicating the Group maintained a healthy liquidity position Financial Resources and Liquidity Indicators Comparison | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | Change (RMB thousand) | | :--- | :--- | :--- | :--- | | Bank Balances and Cash | 48,908 | 78,761 | (29,853) | | Total Borrowings | 81,400 (approx) | 94,700 (approx) | (13,300) | | Current Ratio | 131.7% | 106.8% | 24.9% | | Gearing Ratio | 25.4% | 23.2% | 2.2% | - The decrease in bank balances and cash was mainly due to a reduction in borrowings of approximately RMB 13.3 million and capital expenditure of approximately RMB 14.3 million[127][132] Investment Review The Group subscribed to CSG convertible bonds in 2018, but due to project funding delays, license transfer delays, and issuer default, the bond's fair value recorded a significant loss in 2019, with a recovery in 2020; given ongoing defaults and the pandemic's impact on tourism, the Group sold the bond for RMB 8.34 million in March 2021 to mitigate losses and exit the investment - In 2018, the Group subscribed to CSG convertible bonds with a principal amount of HKD 70 million (approximately RMB 56.7 million), bearing an annual coupon of 6% and maturing on March 15, 2022[149][153] - In 2019, a fair value loss of approximately RMB 60.5 million on financial assets at fair value through profit or loss was recorded due to project funding delays, license transfer delays, and the issuer's failure to pay interest[150][154] CSG Convertible Bond Fair Value Movement | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Fair Value Gain/(Loss) | 3,913 | (60,524) | | Fair Value (End of Period) | 5,557 | 1,969 | - On March 15, 2021, the Group sold the CSG convertible bonds for HKD 10 million (approximately RMB 8.34 million), aiming to mitigate losses, exit the investment, and generate immediate available funds[158][160][140][143] Human Resources As of December 31, 2020, the Group's headcount was approximately 556, a decrease of 358 from 2019, mainly due to normal staff turnover and recruitment difficulties caused by COVID-19; total staff costs for the year were approximately RMB 56.0 million Staff Headcount and Costs Comparison | Indicator | 2020 | 2019 | | :--- | :--- | :--- | | Staff Headcount | 556 | 914 | | Staff Headcount Decrease | 358 | - | | Total Staff Costs (RMB million) | 56.0 | 77.5 | - The decrease in headcount was primarily due to normal staff turnover and increased difficulty in recruiting workers from other provinces following COVID-19 outbreaks, quarantine, lockdowns, and travel restrictions[141][147] Events after the reporting date Subsequent to the reporting period, on March 15, 2021, the Group sold the CSG convertible bonds for a cash consideration of HKD 10 million (approximately RMB 8.34 million) - On March 15, 2021, the Group entered into a sale and purchase agreement with an independent third party to dispose of the CSG convertible bonds for a cash consideration of HKD 10 million (approximately RMB 8.34 million)[140][146] Corporate Governance Report This report details the company's FY2020 corporate governance practices, including board structure, committee operations, director training, shareholder communication, risk management, and internal controls; the company is committed to high governance standards to protect shareholder interests and enhance corporate value and accountability Compliance with Corporate Governance Code The company largely complied with the Corporate Governance Code in FY2020, but deviated from provision A.2.1 from January 1 to October 9, 2020, when the Chairman and CEO roles were combined; since October 9, 2020, these roles have been separated, and the company fully complies with the code - From January 1 to October 9, 2020, Mr. Lam San Fuk served as both Chairman and Chief Executive Officer, deviating from Corporate Governance Code provision A.2.1[163][167] - Effective October 9, 2020, Ms. Chen Sheng was re-designated as Executive Director and Chairperson, and Mr. Xu Chengwu was appointed Chief Executive Officer, bringing the company into compliance with all applicable Corporate Governance Code provisions[164][168] The Board of Directors The Board of Directors is responsible for the company's leadership and control, formulating overall strategy and reviewing operational and financial performance; it comprises six directors, including three executive and three independent non-executive directors, who actively engage in continuous professional development and hold regular meetings Chairman and Chief Executive Officer From January 1 to October 9, 2020, Mr. Lam San Fuk held both Chairman and CEO roles; effective October 9, 2020, Ms. Chen Sheng became Chairman and Mr. Xu Chengwu became CEO, achieving separation of these roles - From January 1 to October 9, 2020, Mr. Lam San Fuk served as both Chairman and Chief Executive Officer, which the Board believed ensured consistent leadership and efficient strategic planning for the Group[178][179] - Effective October 9, 2020, Ms. Chen Sheng was re-designated as Executive Director and Chairperson, and Mr. Xu Chengwu was appointed Chief Executive Officer, achieving the separation of the Chairman and Chief Executive Officer roles[178][179] Independent Non-executive Directors As of December 31, 2020, the Board consistently met Listing Rules requirements for the number of Independent Non-executive Directors, who come from diverse backgrounds, provide independent judgment and advice, and have confirmed their independence - The Board has consistently complied with the Listing Rules requirement to appoint at least three Independent Non-executive Directors, comprising one-third of the Board's membership[180][183] - Independent Non-executive Directors come from diverse backgrounds and industries, with one member possessing appropriate professional expertise in accounting and related financial management[180][183] - The company has received annual confirmations of independence from each Independent Non-executive Director and considers them all to meet the independence guidelines[181][183] Directors' Continuous Training and Development All Directors engage in continuous professional development by attending seminars relevant to their directorial duties, enhancing and updating their knowledge and skills to ensure informed and pertinent contributions to the Board - All Directors participate in continuous professional development, enhancing and updating their knowledge and skills by attending seminars relevant to their duties as Directors of the company[190][193] Board Meetings and General Meeting One Annual General Meeting and seven Board meetings were held in FY2020; all Directors had the opportunity to include matters on the agenda and sufficient time to review relevant documents, with Board meeting minutes maintained by the company secretary for their inspection - For the year ended December 31, 2020, one Annual General Meeting and seven Board meetings were held[196][199] - All Directors have the right to access Board papers and related information, unlimited access to the advice and services of the company secretary, and may seek independent professional advice when necessary[197][200] Board Committees The Board has established Audit, Remuneration, and Nomination Committees to oversee specific aspects of company affairs; each committee has clear terms of reference and sufficient resources to fulfill its responsibilities Nomination Committee The Nomination Committee, comprising two Independent Non-executive Directors and one Executive Director, reviews Board structure, identifies qualified director candidates, assesses INED independence, and recommends director appointments and succession plans; it held 3 meetings in 2020 - The Nomination Committee comprises Ms. Peng Xu (Chairperson), Mr. Chen Wenhua (Independent Non-executive Director), and Ms. Chen Sheng (Executive Director)[203][207] - Functions include: reviewing and monitoring the Board's structure, size, and composition; identifying individuals suitably qualified to become Board members; assessing the independence of Independent Non-executive Directors; and making recommendations to the Board on director appointments or re-appointments and succession planning for directors, particularly the Chairman and Chief Executive Officer[204][207] - In FY2020, the Nomination Committee held 3 meetings to review director appointments and retirements, Board size, diversity, and composition[205][210] Board Diversity Policy The company adopted a Board Diversity Policy on January 1, 2019, to ensure a balanced Board in terms of skills, experience, and diverse perspectives, considering gender, age, cultural and educational background, and professional experience; as of this annual report date, the Board comprises six directors, two of whom are female - The company adopted a Board Diversity Policy on January 1, 2019, aiming to ensure a balanced Board in terms of skills, experience, and diverse perspectives relevant to the company's business needs[212][213] - Candidate selection will be based on the Board Nomination Policy and consider a range of diversity aspects, including but not limited to gender, age, cultural and educational background, professional or other experience, race, skills and knowledge, and length of service[212][213] - As of the date of this annual report, the Board comprises six directors, two of whom are female[214] Board Nomination Policy The company adopted a Board Nomination Policy, outlining criteria and procedures for selecting director candidates, including reputation for integrity, business experience, time commitment, diversity (e.g., race, gender, age, educational background), professional qualifications, number of existing directorships, and independence - Selection criteria include: reputation for integrity, achievements and experience in the Group's businesses, time commitment and relevant interests, diversity in various aspects (including but not limited to race, gender, age, educational background, professional experience, skills and knowledge, and length of service), professional qualifications, number of existing directorships and other commitments that may require the candidate's attention, independence requirements, and the Board Diversity Policy[220][222] - Nomination procedures include: the Nomination Committee identifying potential candidates; the company secretary providing candidate curriculum vitae details; the Nomination Committee making recommendations to the Board; the Nomination Committee ensuring candidates will enhance Board diversity, with particular attention to gender balance; for the appointment of Independent Non-executive Directors, obtaining all relevant information to assess independence; and the Board deliberating and deciding on appointments based on recommendations[224][225] Remuneration Committee The Remuneration Committee, comprising an Independent Non-executive Director (Chairman), an Executive Director, and another Independent Non-executive Director, advises the Board on remuneration policies and structures for directors and senior management; it held 3 meetings in 2020 - The Remuneration Committee comprises Mr. Chen Wenhua (Chairman, Independent Non-executive Director), Mr. Xu Chengwu (Executive Director), and Ms. Peng Xu (Independent Non-executive Director)[229][232] - Its function is to make recommendations to the Board on the company's policies and structures for the remuneration of all Directors and senior management, and on establishing formal and transparent procedures for developing remuneration policies[230][232] - In FY2020, the Remuneration Committee held 3 meetings to review the remuneration structure for Executive Directors and senior management and remuneration proposals for 2019/2020[231][233] Audit Committee The Audit Committee, composed of three Independent Non-executive Directors, advises on the appointment, remuneration, and terms of engagement of external auditors, reviews the Group's interim and annual reports, and oversees the company's financial reporting system, risk management, and internal control procedures; it held 4 meetings in 2020 - The Audit Committee comprises Mr. Zheng Jinmin (Chairman), Mr. Chen Wenhua, and Ms. Peng Xu (all Independent Non-executive Directors)[237][241] - Key responsibilities include: advising the Board on the appointment, re-appointment, and removal of external auditors; approving the remuneration and terms of engagement of external auditors; reviewing the Group's interim and annual reports and accounts; and overseeing the company's financial reporting system, risk management, and internal control procedures[238][241] - In FY2020, the Audit Committee held 4 meetings, reviewed the Group's annual and interim results, and concluded that the consolidated financial statements and results were prepared in accordance with applicable accounting standards and Listing Rules[244][245][250] Company Secretary Mr. Chong Man Hung has served as Company Secretary since May 21, 2015, possessing over 18 years of audit and finance experience, and completed at least 15 hours of professional training in FY2020 - Mr. Chong Man Hung was appointed Company Secretary on May 21, 2015, and possesses over 18 years of experience in the auditing and finance industries[247][333][334][335][336] - In FY2020, Mr. Chong completed no less than 15 hours of relevant professional training, complying with Listing Rules requirements[247][252] Corporate Governance Functions The Board is responsible for corporate governance functions, having reviewed the company's governance policies and practices, training and continuous professional development for directors and senior management, compliance with laws, regulations, and codes, and the disclosure of the corporate governance report - The Board has reviewed the company's corporate governance policies and practices, training and continuous professional development for directors and senior management, policies and practices regarding compliance with laws and regulations, adherence to standard codes, compliance with the Corporate Governance Code, and the disclosures in this Corporate Governance Report[249][253] Dividend Policy The company has adopted a dividend policy, allowing the Board discretion to declare and distribute dividends, subject to the Articles of Association and applicable laws, considering financial position, cash flow, business strategy, earnings, capital requirements, and shareholder interests; the policy does not constitute a legally binding commitment - The company has adopted a dividend policy, allowing the Board discretion to declare and distribute dividends to shareholders, subject to the Articles of Association and applicable laws and regulations[255][259] - When considering dividend payments, the Board will take into account factors such as financial position, cash flow, business conditions and strategies, earnings, capital requirements, shareholder interests, economic environment, and restrictions on dividend payments[256][259] - The dividend policy does not constitute a legally binding commitment that the company will pay dividends at any specific amount, nor does it compel the company to declare dividends at any time[257][259] Auditors' Remuneration In FY2020, the company paid total remuneration of HKD 1,200 thousand to its auditor, Grant Thornton Hong Kong Limited, with HKD 1,020 thousand for audit services and HKD 180 thousand for non-audit services FY2020 Auditors' Remuneration | Service Nature | Amount (HKD thousand) | | :--- | :--- | | Audit Services | 1,020 | | Non-Audit Services | 180 | | Total | 1,200 | Directors' Responsibilities for the Financial Statements The Board confirms its responsibility to prepare consolidated financial statements that truly and fairly reflect the Group's financial position, performance, and cash flows, and to take reasonable steps to safeguard assets and prevent fraud; the Board believes the Group has sufficient resources to continue as a going concern - The Board confirms its responsibility to prepare consolidated financial statements for each financial year that truly and fairly reflect the state of affairs of the Group and the company, as well as the Group's results and cash flows for that year[262][266] - Directors are responsible for taking all reasonably necessary actions to safeguard the Group's assets and to prevent and detect fraud and other irregularities[263][267] - The Directors believe the Group has sufficient resources to continue operations for the foreseeable future, thus the going concern basis is appropriate for preparing the consolidated financial statements[263][267] Risk Management and Internal Control The Board is responsible for assessing and determining the nature and extent of risks the Group is willing to undertake to achieve its strategic objectives, and for maintaining appropriate and effective risk management and internal control systems; the Group has established continuous risk identification, assessment, and management procedures, with annual internal control reviews conducted by independent qualified accountants - The Board confirms its full responsibility for assessing and determining the nature and extent of risks the Group is willing to undertake to achieve its strategic objectives, and for maintaining appropriate and effective risk management and internal control systems[264][268] - The Group has established a continuous process to identify, assess, and manage its significant risks, with each business unit responsible for identifying, assessing, and monitoring risks relevant to its own unit[265][268] - The Group does not have an internal audit function; instead, an independent qualified accountant conducts an annual review of internal control and risk management systems, with no significant deficiencies found in the 2020 review[272][274] Business Activities in Sanctioned Countries The Group effectively monitors and assesses sanction risks, assigning senior staff to review business transaction documents from sanctioned countries or individuals and cross-referencing them against restricted party and country lists maintained by the US, EU, Australia, or UN; in FY2020, no Group products were sold to any sanctioned countries or individuals - The Board has effectively monitored and assessed the sanction risks to our business, including assigning senior staff to review and approve all relevant business transaction documents from customers or potential customers in sanctioned countries and sanctioned individuals[279][283] - Designated staff conduct cross-checks against various restricted party and country lists maintained by the US, EU, Australia, or the United Nations[279][283] - In FY2020, the Group's products were not sold to any sanctioned countries or sanctioned individuals[280][284] Non-Competition Undertaking The controlling shareholders have provided a non-competition undertaking to the company and confirmed compliance with its terms; the Board believes the controlling shareholders have adhered to the undertaking - Controlling shareholders Master Professional Holdings Limited and Mr. Chan Sing Pat have provided a deed of non-competition undertaking with the company as beneficiary[281][285] - The controlling shareholders have confirmed compliance with the terms of the non-competition undertaking, and the Board believes they have adhered to it[287][292] Communication with Shareholders and Investors The company values effective communication with shareholders, disseminating information through channels like Annual General Meetings and its website, and encouraging shareholder participation; all resolutions at general meetings are voted on, with results published on the website - The company believes effective communication with shareholders is crucial for enhancing investor relations and ensuring investors understand the Group's business performance and strategies[288][293] - Board members, committee members, and external auditors attend the company's Annual General Meeting to answer shareholder questions[289][293] - The company maintains a website for publishing corporate announcements, financial information, and other data, allowing shareholders and investors to submit written inquiries directly to the company[290][294] Shareholders' Rights Shareholders have the right to requisition an extraordinary general meeting in accordance with the Articles of Association, with clear procedures for nominating director candidates; shareholders may submit written inquiries to the Board - Shareholders holding not less than one-tenth of the company's paid-up capital with voting rights may requisition an extraordinary general meeting[299][302] - Nominations for director candidates require written notice, submitted no earlier than the day after the dispatch of the notice of the general meeting, and no later than seven days before the meeting, with the period being at least seven days[300][303] - Shareholders may send written inquiries to the company's principal place of business in Hong Kong, providing their full name, contact details, and identification[301][304][306][307] Directors and Senior Management This section introduces the Group's Executive Directors, Independent Non-executive Directors, and senior management, detailing their backgrounds, ages, appointments, and key responsibilities; Board members possess extensive experience in compliance, finance, accounting, and law Executive Directors Ms. Chen Sheng (48) has served as Chairperson and Executive Director since October 9, 2020, with over 25 years of compliance experience; Mr. Ma Zhijun (44) joined the Group in 2017, bringing over 19 years of commercial banking, fixed income, and M&A experience; Mr. Xu Chengwu (51) was appointed Executive Director on April 3, 2020, and CEO on October 9, 2020, with over 25 years of finance and tax experience - Ms. Chen Sheng (age 48) was re-designated as Executive Director and Chairperson on October 9, 2020, possessing over 25 years of compliance experience[310][311][315] - Mr. Xu Chengwu (age 51) was appointed Executive Director on April 3, 2020, and Chief Executive Officer on October 9, 2020, with over 25 years of finance and tax experience[313][314][316][317] - Mr. Ma Zhijun (age 44) joined the Group in 2017 and was appointed Executive Director, bringing over 19 years of experience in commercial banking, fixed income markets, and mergers and acquisitions[312][315] Independent Non-executive Directors Mr. Chen Wenhua (53) has over 25 years of education industry experience and chairs the Remuneration Committee; Mr. Zheng Jinmin (49) has over 20 years of accounting experience and chairs the Audit Committee; Ms. Peng Xu (48) has over 18 years of legal industry experience and chairs the Nomination Committee - Mr. Chen Wenhua (age 53) possesses over 25 years of experience in the education industry and serves as Chairman of the Remuneration Committee[319][320][325][326][327] - Mr. Zheng Jinmin (age 49) was appointed Independent Non-executive Director on June 14, 2019, is a Certified Public Accountant in China, has over 20 years of accounting experience, and serves as Chairman of the Audit Committee[321][322][328][329] - Ms. Peng Xu (age 48) was appointed Independent Non-executive Director on August 7, 2015, is a practicing lawyer in China, has over 18 years of legal industry experience, and serves as Chairman of the Nomination Committee[323][324][329][330] Senior Management Mr. Chong Man Hung (42) has served as Company Secretary since May 21, 2015, is a member of the Hong Kong Institute of Certified Public Accountants, possesses over 18 years of audit and finance experience, and is responsible for the Group's company secretarial matters - Mr. Chong Man Hung (age 42) joined the Group as Company Secretary on May 21, 2015, and is a member of the Hong Kong Institute of Certified Public Accountants[333][335][336] - Mr. Chong possesses over 18 years of experience in the auditing and finance industries and is responsible for the Group's company secretarial matters[334][336] Report of the Directors The Report of the Directors presents the Group's audited financial statements for FY2020, outlining principal activities, results, dividend policy, share capital changes, short-term borrowings, reserves, post-reporting date events, related party transactions, directors' remuneration, and major customers and suppliers; the report confirms the Group's compliance with relevant laws and regulations and maintenance of sufficient public float Principal Activities and Results The company is an investment holding company, with subsidiaries primarily engaged in the design, development, production, sale, and marketing of cosplay products and lingerie, as well as property leasing; the Group recorded a loss in FY2020, and the Board does not recommend paying any dividends - The company is an investment holding company, and its subsidiaries are principally engaged in the design, development, production, sale, and marketing of cosplay products (including cosplay costumes and wigs) and lingerie, as well as property leasing[339][347] - The Directors do not recommend the payment of any dividend for the year ended December 31, 2020[340][349] Financial Information Summary A summary of the Group's results, assets, liabilities, and non-controlling interests for the past five financial years is presented on page 152; details of movements in property, plant, and equipment, right-of-use assets, and investment properties are provided in Notes 16, 14, and 15 to the consolidated financial statements, respectively - A summary of the Group's results, assets, liabilities, and non-controlling interests for the past five financial years is set out on page 152[342][351] - Details of movements in property, plant, and equipment and right-of-use assets are set out in Notes 16 and 14 to the consolidated financial statements, respectively[343][352] - Details of movements in investment properties are set out in Note 15 to the consolidated financial statements[344][353] Share Capital and Reserves Details of share capital movements are in Note 29 to the consolidated financial statements; details of reserve movements are in the consolidated statement of changes in equity and Note 30; as of December 31, 2020, the company's distributable reserves were approximately RMB 152.9 million - Details of the company's share capital movements during the year are set out in Note 29 to the consolidated financial statements[358][365] - Details of movements in the company's and the Group's reserves during the year are set out in the consolidated statement of changes in equity and Note 30 to the consolidated financial statements[362][369] - As of December 31, 2020, the company's distributable reserves were approximately RMB 152.9 million[372][379] Major Customers and Suppliers In FY2020, sales to the Group's top five customers accounted for approximately 31.4% of total revenue, with the largest customer contributing 11.0%; purchases from the top five suppliers represented approximately 30.2% of total purchases, with the largest supplier at 9.4%; no directors, their associates, or shareholders holding over 5% of the company's share capital had interests in the top five suppliers or customers - Total sales attributable to the Group's top five customers accounted for approximately 31.4% of total revenue in FY2020, with the largest customer contributing approximately 11.0%[388][392] - The Group's purchases from its top five suppliers accounted for approximately 30.2% of total purchases in FY2020, with the largest supplier contributing approximately 9.4%[389][393] - No directors, their associates, or shareholders holding more than 5% of the company's issued share capital had any interests in the top five suppliers or customers[389][393] Directors' Interests and Share Option Scheme As of December 31, 2020, no directors, chief executives, or their associates held disclosable interests or short positions in the company's shares, underlying shares, or debentures; the company adopted a share option scheme to reward employees, retain talent, and attract suitable personnel, but no options were granted or exercised in FY2020 - As of December 31, 2020, no directors, chief executives, or their associates held any disclosable interests or short positions in the shares, underlying shares, or debentures of the company or any of its associated corporations[411][416] - The Share Option Scheme aims to recognize and reward eligible participants for their contributions to the Group, encourage optimized performance and efficiency, and attract, retain, or maintain ongoing business relationships with eligible participants beneficial to the Group[413][418] - In FY2020, no share options were granted or exercised under the Share Option Scheme, and there were no outstanding share options at the end of the reporting period[428][430] Interests of Shareholders Disclosable Under The SFO As of December 31, 2020, major shareholder Mr. Chan Sing Pat held 41.42% of the company's shares through his wholly-owned Master Professional Holdings Limited, with his spouse, Ms. Li Zhi Ping, deemed to have the same interest; Mr. Lin Shi Xin beneficially owned 8.75% of the company's shares Major Shareholders' Long Positions in Shares and Underlying Shares of the Company | Major Shareholder Name | Nature of Interest | Number of Ordinary Shares | Approximate Percentage of Company's Issued Share Capital | | :--- | :--- | :--- | :--- | | Mr. Chan Sing Pat | Interest in controlled corporation | 371,859,000 | 41.42% | | Master Professional Holdings Limited | Beneficial owner | 371,859,000 | 41.42% | | Ms. Li Zhi Ping | Spouse's interest | 371,859,000 | 41.42% | | Mr. Lin Shi Xin | Beneficial owner | 78,563,000 | 8.75% | - Mr. Chan Sing Pat holds shares in the company through his wholly-owned Master Professional