弘业期货(03678) - 2020 - 年度财报

Important Notice This section confirms the report's accuracy and completeness, along with the unqualified audit opinion on the 2020 financial statements - The company's Board of Directors, Supervisory Board, and senior management guarantee the truthfulness, accuracy, and completeness of this annual report, assuming corresponding legal responsibilities[5] - The company's 2020 financial report was audited by KPMG Huazhen LLP, which issued an unqualified audit opinion[5] Chairman's Statement Chairman Zhou Yong reviews the challenging 2020 global economy and highlights the company's strong performance and key operational achievements - Chairman Zhou Yong reviewed the significant volatility of the global macroeconomy in 2020 due to the pandemic, noting China's leading recovery as the only major economy to achieve positive annual growth[7][8] - Despite challenges, the company achieved favorable results in 2020, securing a 'dual victory' in pandemic control and business operations, with key operating indicators reaching new highs[9][10] Key Operating Indicator Growth in 2020 | Indicator | Year-on-Year Growth | | :--- | :--- | | Operating Revenue | 141.98% | | Brokerage Turnover | 88.43% | | Average Daily Client Equity | 47.40% | | Period-End Client Equity | 61.22% | Definitions This section provides definitions for specific terms used throughout the report, covering company entities, shareholders, and financial indicators - This section defines specific terms used in the report, including company entities, shareholders, subsidiaries, regulatory bodies, business terms, and financial indicators, providing a foundation for understanding the report content[13][14][19] Company Information This section provides comprehensive details about the company, including its profile, historical development, organizational structure, and network of subsidiaries and branches Company Profile This section provides core company information, including its name, registered capital, business qualifications, and key personnel - The company's full Chinese name is Hongye Futures Co., Ltd., with H-share stock code 3678[26][32] - The company's registered capital is RMB 907 million, holding multiple business qualifications including commodity futures brokerage, financial futures brokerage, futures investment consulting, asset management, fund sales, and stock option trading participant status[31] Historical Development This section details the company's evolution from its 1995 establishment, including name changes, equity shifts, capital increases, and its 2015 listing on the Hong Kong Stock Exchange - The company's predecessor, Jiangsu Jinling Futures Brokerage Co., Ltd., was established on July 31, 1995, with an initial registered capital of RMB 10 million[34] - The company was listed on the Main Board of the Hong Kong Stock Exchange on December 30, 2015, with stock code 03678, increasing its total share capital to 907 million shares post-listing[43] Organizational Structure This section visually presents the company's organizational structure, illustrating the hierarchical relationships from the Shareholders' Meeting to the General Manager's Office and its various departments - The company's governance structure is topped by the Shareholders' Meeting, with a Board of Directors and a Supervisory Board; the Board has four specialized committees, and the General Manager's Office oversees various functional and business departments, branches, and the subsidiary Hongye Capital[45] Subsidiaries Overview This section introduces the company's three main subsidiaries: Hongye Capital, Hongye International Financial, and Hongye International Asset Management, detailing their registration, main businesses, and the company's equity stake Subsidiaries Overview | Company Name | Main Business | Place of Establishment | Registered Capital | Shareholding Percentage | | :--- | :--- | :--- | :--- | :--- | | Hongye Capital | Basis Trading, Cooperative Hedging, Warehouse Receipt Services, OTC Derivatives, Market Making | China | RMB 240 million | 100% | | Hongye International Financial | Futures Trading, Securities Trading | Hong Kong | HKD 190 million | 100% | | Hongye International Asset Management | Asset Management, Securities Investment Consulting | Hong Kong | HKD 20 million | 100% | Branch Network Distribution As of the reporting period end, the company operates 45 domestic branches, including 39 business departments and 6 sub-branches, with detailed listings of their locations and establishment dates - As of the end of 2020, the company had 39 business departments and 6 sub-branches across China, primarily located in municipalities, Jiangsu Province, and other economically developed regions[50] Financial Highlights This section provides a concise overview of the company's key financial performance and position, highlighting significant changes in revenue, profit, assets, and cash flow Key Financial Data and Indicators In 2020, the company achieved strong performance, with operating revenue surging by 141.98% to RMB 1.561 billion and net profit attributable to parent increasing by 211.80% to RMB 66.32 million, driven by a 61.22% rise in client equity 2020 Key Financial Indicators | Indicator (RMB 10,000) | 2020 | 2019 | Increase | | :--- | :--- | :--- | :--- | | Operating Revenue | 156,138 | 64,524 | 141.98% | | Total Profit | 9,270 | 4,158 | 122.94% | | Net Profit Attributable to Parent | 6,632 | 2,127 | 211.80% | | Net Cash Inflow from Operating Activities | 80,307 | 11,192 | 617.54% | | Basic Earnings Per Share (RMB/share) | 0.0731 | 0.0234 | - | | Total Assets | 634,916 | 451,077 | 40.76% | | Client Equity Payable | 428,784 | 265,955 | 61.22% | | Equity Attributable to Parent | 164,667 | 159,897 | 2.98% | Net Capital and Risk Control Indicators As of year-end 2020, the company's net capital was RMB 962 million, and despite a decrease, all risk control indicators significantly exceeded regulatory standards, demonstrating robust risk resilience and stable operations Net Capital and Key Risk Control Indicators (As of December 31, 2020) | Indicator | Value | Regulatory Standard | | :--- | :--- | :--- | | Net Capital (RMB million) | 962 | ≥ 30 | | Net Capital / Sum of Risk Capital Reserves | 344% | ≥ 100% | | Net Capital / Net Assets | 58% | ≥ 20% | | Liquid Assets / Liquid Liabilities | 453% | ≥ 100% | | Total Liabilities / Net Assets | 20% | ≤ 150% | Management Discussion and Analysis This section provides a comprehensive review of the company's operational performance, financial condition, and future strategic outlook, alongside an analysis of industry trends and risk management Industry Review In 2020, China's economy achieved positive growth amidst the global pandemic, driving the futures industry to record high trading volumes and values, with significant growth in brokerage and asset management businesses - In 2020, China's futures market achieved record high trading volume and value, reaching 6.153 billion lots and RMB 437.53 trillion, respectively, representing year-on-year increases of 55.29% and 50.56%[78] - Chinese futures products performed exceptionally well in the global market, particularly in the agricultural sector, dominating the top ten in global trading volume[79] - As of the end of 2020, total assets of futures companies reached RMB 984.825 billion, with brokerage business revenue increasing by 49.13% year-on-year and asset management business scale growing by 52.57% year-on-year, indicating significant strengthening of industry capital and business scale[81] Business Review In 2020, the company achieved a "dual victory" in operations despite the pandemic, with operating revenue increasing by 141.98% and net profit attributable to parent by 211.80%, driven by strong performance across all four main business segments 2020 Key Company Performance Indicators | Indicator | 2020 | Year-on-Year Growth | | :--- | :--- | :--- | | Operating Revenue | RMB 1.561 billion | 141.98% | | Net Profit Attributable to Parent | RMB 66 million | 211.80% | | Period-End Client Equity | RMB 4.288 billion | 61.22% | | Asset Management Scale | RMB 22.131 billion | 96% | Futures Brokerage Business The futures brokerage business demonstrated steady performance in 2020, with client equity increasing by 61.22% to RMB 4.288 billion and brokerage turnover growing by 93.74%, leading to a 24.84% rise in fee and interest income despite lower commission rates Futures Brokerage Business Core Data (2020 vs 2019) | Indicator | End of 2020 | End of 2019 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Client Equity | RMB 4.288 billion | RMB 2.660 billion | +61.22% | | Fee and Interest Income | RMB 279 million | RMB 223 million | +24.84% | | Brokerage Turnover | RMB 6.162898 trillion | - | - | | Brokerage Volume | 95.7498 million lots | 61.1966 million lots | +56.46% | Asset Management Business The company's asset management business achieved significant growth in 2020, with its scale increasing by 96% to RMB 22.131 billion, ranking among the top three in the industry, and business revenue surging by over 133% - As of the end of 2020, the company's asset management scale reached RMB 22.131 billion, a 96% year-on-year increase, ranking among the top three in the industry[90] - Asset management business generated fee income of RMB 13.42 million, a 133.80% year-on-year increase (original increase of RMB 7.68 million)[90][108] Commodity Trading and Risk Management Business Risk management subsidiary Hongye Capital experienced rapid business growth, achieving RMB 1.198 billion in operating revenue, a 2.41-fold increase year-on-year, with market-making contributing 64.91% of profit, while actively promoting "insurance + futures" projects - Hongye Capital achieved full-year operating revenue of RMB 1.198 billion, a 2.41-fold year-on-year increase, with market-making business contributing 64.91% of profit[92] - The company steadily advanced its "insurance + futures" projects, providing price risk services for agricultural products in multiple national-level poverty-stricken counties, with the natural rubber project achieving a payout ratio as high as 143%[93] Financial Asset Investment To optimize fund operations, the group engaged in multi-channel financial asset investments, resulting in a 144.18% increase in financial asset disposal and dividend income to RMB 39.24 million by the end of 2020, primarily due to higher gains from trading financial assets - As of the end of 2020, the group's financial asset disposal and dividend income was RMB 39.24 million, a 144.18% year-on-year increase[94] Financial Statement Analysis This section provides an in-depth analysis of the company's financial position, highlighting significant improvements in profitability, asset expansion, and cash flow, while maintaining a stable asset structure Profitability and Asset Structure In 2020, the company's profitability significantly improved, with net profit attributable to parent increasing by 211.80% and return on equity rising to 4.07%, while total assets grew by 40.76% driven by client equity, and the asset-liability ratio (excluding client equity) increased to 20% - In 2020, the group achieved operating revenue of RMB 1.561 billion, a 141.98% year-on-year increase; net profit attributable to parent was RMB 66 million, a 211.80% year-on-year increase[94] - As of the end of 2020, total assets were RMB 6.349 billion, a 40.76% year-on-year increase; total liabilities were RMB 4.702 billion, a 61.50% year-on-year increase; the asset-liability ratio (excluding client equity) was 20%, up 6 percentage points from the previous year[95][97] Income Statement Analysis The 2020 net profit surge of 211.80% was primarily driven by substantial increases in fee income and other operating income, while net interest income declined due to lower proprietary fund balances, and business and management expenses rose due to higher employee compensation and insurance costs 2020 Income Statement Key Item Changes | Item (RMB 10,000) | 2020 | 2019 | Increase | | :--- | :--- | :--- | :--- | | Fee Income | 22,946 | 16,122 | 42.33% | | Net Interest Income | 7,264 | 9,117 | (20.32%) | | Investment Income | 3,789 | 1,800 | 110.50% | | Other Operating Income | 120,607 | 33,730 | 257.57% | | Business and Management Expenses | 26,860 | 22,060 | 21.76% | | Net Profit | 6,632 | 2,127 | 211.80% | - Fee income growth was primarily driven by a year-on-year increase of RMB 89.73 million (103.94%) in futures exchange fee rebates and a year-on-year increase of RMB 7.68 million (133.80%) in asset management business income[105][108] - Business and management expenses increased by RMB 48 million, mainly due to a RMB 20.23 million increase in employee compensation and a RMB 12.45 million increase in insurance expenses from expanded "insurance + futures" business[127][129][131] Asset Items Analysis As of year-end 2020, the group's total assets reached RMB 6.349 billion, a 40.76% year-on-year increase, primarily driven by a 38.25% rise in cash and cash equivalents to RMB 5.09 billion and a 66.04% increase in financial investment assets to RMB 1.04 billion Asset Structure Changes (As of Year-End) | Asset Category (RMB 10,000) | 2020 | 2019 | Increase | | :--- | :--- | :--- | :--- | | Cash and Cash Equivalents | 508,978 | 368,169 | 38.25% | | Financial Investment Assets | 104,038 | 62,659 | 66.04% | | Other Assets | 21,900 | 20,249 | 8.15% | | Total | 634,916 | 451,077 | 40.76% | Liability Items Analysis As of year-end 2020, the group's total liabilities reached RMB 4.702 billion, a 61.50% year-on-year increase, primarily driven by a 61.22% surge in client equity payable to RMB 4.288 billion, which constituted 91.18% of total liabilities Liability Structure Changes (As of Year-End) | Liability Category (RMB 10,000) | 2020 | 2019 | Increase | | :--- | :--- | :--- | :--- | | Client Equity Payable | 428,784 | 265,955 | 61.22% | | Other Operating Liabilities | 41,465 | 25,225 | 64.38% | | Total | 470,249 | 291,180 | 61.50% | Equity Items Analysis As of year-end 2020, the group's total shareholders' equity was RMB 1.647 billion, a modest 2.98% year-on-year increase, with share capital remaining constant and the growth primarily attributable to increased reserves from accumulated earnings Shareholder Equity Changes (As of Year-End) | Equity Item (RMB 10,000) | 2020 | 2019 | Increase | | :--- | :--- | :--- | :--- | | Share Capital | 90,700 | 90,700 | – | | Reserves | 73,967 | 69,197 | 6.89% | | Total Shareholders' Equity | 164,667 | 159,897 | 2.98% | Business Innovation and Risk Control The company prioritized business innovation, achieving significant results in international business, risk management, and wealth management, while controlling risks through robust pre-event systems, in-process supervision, and post-event inspections - International business subsidiary Hongye International Financial's full-year operating revenue increased by 5% year-on-year, and total profit rose by 11% year-on-year, successfully obtaining RQFII qualification[158] - Risk management subsidiary Hongye Capital's full-year operating revenue increased by 2.57 times year-on-year, expanding its market-making products to 13, with OTC options notional principal reaching RMB 3.4 billion[159] - Wealth management business innovation upgraded, with public fund transaction volume nearing RMB 500 million, distribution income increasing by 4.62 times year-on-year, and total profitability of proprietary investment products at 5.69%[161] Risk Factors and Countermeasures The company addresses key risks including internal control, ethical, market, credit, and investment risks through comprehensive management systems, stringent internal controls, employee training, and robust monitoring mechanisms to ensure secure and efficient operations - The company identified five major risks: risk management and internal control risks, ethical risks (employees and introducing brokers), market risks (price volatility, client default), credit risks (client default), and investment risks (project decision-making, management, exit)[171][175][177][179][181] Risk Management System The company has established a comprehensive four-tier risk management system, encompassing the Board, Risk Management Committee, Chief Risk Officer, and departmental risk control leads, ensuring risks are within acceptable limits and achieving enterprise value maximization, consistently earning an A-class A-level regulatory rating for twelve consecutive years - The company's risk management organizational structure includes four levels: the Board of Directors, the Risk Management Committee, the Chief Risk Officer, and risk control personnel in various business departments[187] - Since 2009, the company has consistently received the "A-class A-level" regulatory rating from the China Securities Regulatory Commission for twelve consecutive years, demonstrating its robust risk management capabilities[182] Industry Competition and Core Competencies In 2020, the company maintained its competitive edge with an 88.43% increase in brokerage turnover and a 0.70% market share, consistently earning an A-class A-level rating for twelve years, underpinned by its strategic location, extensive network, innovation, efficient trading platforms, strong client service, experienced management, and comprehensive business licenses - The company's core competencies include: 1. Superior geographical location (Jiangsu leader); 2. Extensive branch network (45 branches); 3. Strong innovation capabilities; 4. Efficient and stable online trading platform; 5. Strong client service capabilities; 6. Experienced management team; 7. Comprehensive domestic and international business qualifications[198][201][202][203][204][205][207] Future Outlook Looking ahead, the company plans to transform from a platform service provider to a comprehensive professional investment bank, focusing on upgrading brokerage, platform-based and specialized asset management, full coverage risk management, seizing wealth management opportunities, expanding international business, and increasing financial technology investment - The company's business development structure will upgrade to five "centers" focusing on brokerage, risk management, wealth management, asset management, and international business, supported by two "platforms" for online and offline operations[210] - Future strategic priorities include "platform-based + specialized" asset management, full coverage of risk management business, seizing wealth management opportunities, deepening international business expansion, and continuous investment in financial technology[212][213][214][215] Business Review This section reviews the company's key financial ratios and corporate social responsibility, noting an increase in net assets per share to RMB 1.82, a rise in the asset-liability ratio (excluding client equity) to 20%, and a significant improvement in weighted average return on net assets to 4.07%, alongside commitments to employee relations, environmental protection, legal compliance, and client relationships Key Financial Ratios | Indicator | 2020 | 2019 | | :--- | :--- | :--- | | Net Assets Per Share Attributable to Parent (RMB/share) | 1.82 | 1.76 | | Asset-Liability Ratio (%) | 20% | 14% | | Weighted Average Return on Net Assets | 4.07% | 1.31% | - The company values employee well-being, with a total of 659 employees as of the end of 2020, and has established a comprehensive system for talent acquisition, development, and performance evaluation[221][222] Events After Reporting Period Subsequent to the reporting period, the company decided to acquire office property in Nanjing for approximately RMB 280 million and parking spaces for up to RMB 41 million, funded by proprietary capital and up to 50% loans, to enhance its corporate image and competitiveness - After the reporting period, the company decided to acquire office property in Nanjing Financial City Phase II for approximately RMB 280 million, and additionally purchase parking spaces for no more than RMB 41 million[227] Board of Directors' Report This section details the Board's activities, including the proposed profit distribution plan and the utilization of IPO proceeds Profit Distribution Plan The Board of Directors proposes a final cash dividend of RMB 0.05 per share (tax inclusive) for 2020, totaling RMB 45.35 million, subject to approval at the Annual General Meeting - The Board of Directors proposes a final cash dividend of RMB 0.05 per share (tax inclusive) for 2020, totaling RMB 45.35 million[234][236] Use of Proceeds The company's 2015 IPO raised approximately HKD 536 million net, with HKD 453 million utilized by year-end 2020, primarily for Hong Kong and global business development, asset management, and commodity trading, while a proposed change in use for HKD 50 million originally allocated to futures brokerage business is pending approval Use of Proceeds (As of December 31, 2020) | Purpose (HKD 10,000) | Usable Amount | Amount Used | Remaining Amount | | :--- | :--- | :--- | :--- | | Development of Hong Kong and Global Futures Business | 17,157 | 16,500 | 657 | | Development of Asset Management Business | 13,404 | 12,136 | 1,268 | | Development of Commodity Trading and Risk Management Business | 10,723 | 9,784 | 939 | | Development and Strengthening of Existing Futures Brokerage Business | 5,361 | 52 | 5,309 | | Purchase of IT Equipment and Software | 2,681 | 2,580 | 101 | | General Working Capital | 4,289 | 4,288 | 1 | | Total | 53,615 | 45,340 | 8,275 | Other Significant Matters This section addresses other important aspects of the company's operations, including material litigation and related party transactions Material Litigation and Arbitration During the reporting period, the company was involved in several material lawsuits, including new cases concerning employee infringement (RMB 5.69 million) and a subsidiary's PTA procurement dispute (RMB 10.71 million), while a case involving a former employee's forged seal was dismissed, and another related to a former employee's personal loan guarantee is under appeal - Two new material lawsuits occurred during the reporting period: one involving an employee infringement liability dispute, where the plaintiff sought approximately RMB 5.69 million in compensation and the company was requested to bear joint liability; another was a PTA procurement dispute involving subsidiary Hongye Capital, seeking confirmation of a claim of approximately RMB 10.71 million[284][285] Related Parties and Related Party Transactions The company's main related parties are controlling shareholder Suhao Holdings and major shareholder Hongye Co., Ltd., with ongoing related party transactions primarily involving financial services to Suhao Holdings and its affiliates, and property leases from Hongye Co., Ltd., all within annual caps and confirmed as fair and reasonable 2020 Ongoing Related Party Transactions Execution | Transaction Agreement | Actual Amount (RMB 1,000) | Annual Cap (RMB 1,000) | | :--- | :--- | :--- | | Suhao Financial Services Framework Agreement | 36.0 | 6,000 | | Hongye Property Lease and Management Services Agreement | 5,657.2 | 8,000 | Share Capital Changes and Major Shareholders This section provides an overview of the company's shareholding structure and identifies its major shareholders Shareholding Structure As of year-end 2020, the company's total share capital remained unchanged at 907 million shares, with controlling shareholder Jiangsu Suhao Holdings Group Co., Ltd. holding a combined 47.59% stake, and public H-share shareholders holding 26.61% Major Shareholder Holdings (As of December 31, 2020) | Shareholder Name | Share Class | Number of Shares Held | Percentage of Total Share Capital | | :--- | :--- | :--- | :--- | | Jiangsu Suhao Holdings Group Co., Ltd. | Domestic Shares | 275,456,777 | 30.37% | | Jiangsu Hongye Co., Ltd. | Domestic Shares | 147,900,000 | 16.31% | | Jiangsu Hongsu Industrial Co., Ltd. | Domestic Shares | 143,548,000 | 15.83% | | Jiangsu Huahong International Group Co., Ltd. | Domestic Shares | 63,930,134 | 7.05% | | Public Shareholders | H Shares | 241,400,000 | 26.61% | - Controlling shareholder Suhao Holdings is deemed to have an interest in a total of 431,642,122 domestic shares, representing 47.59% of the company's total issued shares[329][331] Directors, Supervisors, Senior Management, and Employees This section provides details on the company's human resources, including employee demographics and remuneration Employees and Remuneration As of the reporting period end, the company and its subsidiaries had 659 employees, with over 84% holding bachelor's degrees or higher, 56.6% in futures brokerage, and 63.73% aged 35 or younger, reflecting a young and well-educated workforce, with total employee costs of approximately RMB 154 million in 2020 Employee Composition (As of End of 2020) | Category | Sub-category | Number of People | Percentage | | :--- | :--- | :--- | :--- | | Total Employees | - | 659 | 100% | | Educational Background | Doctoral | 4 | 0.61% | | | Master's | 114 | 17.30% | | | Bachelor's | 439 | 66.62% | | Position Category | Futures Brokerage | 373 | 56.60% | | | Asset Management | 29 | 4.40% | | | Commodity Trading and Risk Management | 57 | 8.65% | | Age Structure | 35 and Below | 420 | 63.73% | | | 36 to 40 | 137 | 20.79% | - For the year ended December 31, 2020, total employee costs (including directors' remuneration) were approximately RMB 154 million[389] Corporate Governance Report This section outlines the company's corporate governance framework, including the composition and performance of the Board of Directors and its specialized committees Board of Directors and Performance of Duties The company's Board of Directors, comprising 8 members including 3 independent non-executive directors, met 9 times during the reporting period to deliberate on key matters such as annual results, profit distribution, A-share listing applications, major investments, and personnel appointments, demonstrating diligent performance of duties - The Board of Directors consists of 8 directors, including 3 independent non-executive directors, complying with the Listing Rules[402] - During the reporting period, the Board of Directors held 9 meetings, deliberating on 37 proposals including annual results, profit distribution, withdrawal and re-initiation of A-share listing application, acquisition of office premises, and senior management appointments[407][408][409][410][411][416] Board Committees The company has established four Board committees—Audit, Remuneration, Nomination, and Risk Management—with compositions compliant with regulatory requirements, each holding multiple meetings during the reporting period to review specialized matters and enhance the Board's decision-making professionalism and scientific rigor - The Audit Committee, composed of 2 independent non-executive directors and 1 non-executive director, held 3 meetings during the reporting period to review annual results, internal audit reports, and the re-appointment of auditors[423][436] - The Remuneration Committee, composed of 2 independent non-executive directors and 1 non-executive director, held 2 meetings during the reporting period to review the remuneration of directors, supervisors, and senior management[425][428][435] - The Nomination Committee, composed of 1 executive director and 2 independent non-executive directors, held 3 meetings during the reporting period to review senior management appointments and removals[429][430][435] Supervisory Board Report This section details the Supervisory Board's oversight activities and its independent assessment of the company's operations and financial integrity Supervisory Board's Work Performance In 2020, the Supervisory Board fully exercised its oversight functions, holding 4 meetings to review the company's legal compliance, financial status, use of proceeds, and internal controls, concluding that decision-making processes were lawful, financial reports were accurate, and directors and senior management diligently performed their duties without harming company or shareholder interests - The Supervisory Board believes the company operates lawfully, its decision-making procedures are legitimate, and directors and senior management diligently perform their duties without discovering any violations[491] - The Supervisory Board reviewed and approved the company's financial situation, use of proceeds, and internal control self-assessment report, deeming the financial reports true and accurate and the internal control system effective[492][494][495] Financial Report This section presents the company's audited financial statements, including the audit opinion, key audit matters, balance sheet, and income statement Audit Opinion KPMG Huazhen LLP issued an unqualified audit opinion on Hongye Futures' 2020 consolidated and parent company financial statements, affirming their fair presentation in all material respects in accordance with Chinese Enterprise Accounting Standards - Auditor KPMG Huazhen LLP issued an unqualified audit opinion on the company's 2020 financial statements[498] Key Audit Matters Auditors identified two key audit matters: the fair value assessment of financial instruments, particularly those requiring significant management judgment for Level 2 and 3 inputs, and the consolidation of structured entities, where management's judgment on inclusion significantly impacts the consolidated balance sheet - Key Audit Matter One: Assessing the fair value of financial instruments, as the valuation of some financial instruments is complex and involves significant management judgment in determining valuation model inputs, especially for Level 2 and Level 3 financial instruments[502] - Key Audit Matter Two: Consolidation of structured entities, as significant management judgment is involved in determining whether structured entities should be consolidated, which can materially impact the consolidated balance sheet[503] Balance Sheet As of year-end 2020, the group's total assets were RMB 6.349 billion, total liabilities RMB 4.702 billion, and equity attributable to parent RMB 1.647 billion, with assets primarily comprising cash and bank balances (RMB 2.894 billion) and receivable margin deposits (RMB 2.131 billion), and liabilities mainly consisting of payable margin deposits (RMB 4.247 billion) Consolidated Balance Sheet Summary (As of December 31, 2020) | Item (RMB) | Amount | | :--- | :--- | | Total Assets | 6,349,161,798.87 | | Cash and Bank Balances | 2,894,295,423.20 | | Receivable Margin Deposits | 2,131,088,863.50 | | Trading Financial Assets | 1,014,876,858.36 | | Total Liabilities | 4,702,494,071.37 | | Payable Margin Deposits | 4,247,090,138.08 | | Total Shareholders' Equity | 1,646,667,727.50 | Income Statement For the year 2020, the group's operating revenue totaled RMB 1.561 billion, primarily driven by other operating income (mainly risk management business) at RMB 1.206 billion and fee income at RMB 229 million, resulting in a net profit of RMB 66.32 million after operating expenses of RMB 1.465 billion Consolidated Income Statement Summary (2020) | Item (RMB) | Amount | | :--- | :--- | | Total Operating Revenue | 1,561,379,595.38 | | Fee Income | 229,458,231.66 | | Net Interest Income | 72,644,679.32 | | Other Operating Income | 1,206,069,904.43 | | Total Operating Expenses | (1,465,104,523.25) | | Other Operating Costs | (1,171,435,651.77) | | Business and Management Expenses | (268,599,105.55) | | Total Profit | 92,703,446.57 | | Net Profit | 66,322,455.26 |