Hangzhou Great Star Industrial Co., Ltd. 2020 Full Annual Report 2021-035 April 2021 Greatstar Hangzhou headquarter LISTA Allen industry, Switzerland Section 1 Important Notes, Contents and Definitions The Board of Directors, Supervisory Committees and directors, supervisors and senior management of the Company hereby guarantee that no false or misleading statement or major omission was made to the materials in this report and that they will assume all the responsibility, individually and jointly, for the authenticity, accuracy and completeness of the contents of the annual report. Qiu Jianping, the head of the Company, Ni Shuyi, the head of accounting work, and Ni Shuyi, the head of accounting body (accountant in charge), guarantee the authenticity, accuracy and completeness of the financial report in the annual report. All the directors attended the board meeting during which they reviewed this report. This annual report involves forward-looking statements such as future plans, which do not constitute the Company's substantial commitment to investors. Investors and relevant parties should be aware of the associated risks and understand the differences between plans, forecasts and commitments. In this annual report, "Section 4 Discussion and Analysis on Business Conditions ", Part IX " Prospects of the Company " describes in detail the risks that the Company may face in the future. Investors are invited to pay attention to relevant contents and investment risks. The Company has no plans to distribute cash dividends, bonus shares, and convert capital reserve into share capital. Contents Definitions Section 2 Company Profile and Main Financial Indicators I. Company Profile II. Contact Person and Contact Information III. Information Disclosure and Place of Preparation IV. Registration Changes V. Other Relevant Information Accounting firm engaged by the Company The sponsor institution engaged by the Company to perform the continuous supervision responsibility during the reporting period √ Applicable □ Not applicable The financial advisor engaged by the Company to perform the continuous supervision responsibility during the reporting period √ Applicable □ Not applicable VI. Major Accounting Data and Financial Indicators Whether the Company needs to retroactively adjust or restate the accounting data of the previous years □ Yes √ No The Company's net profit before and after deducting non recurring profit and loss in the last three fiscal years is negative, and the audit report of the last year shows that company's the Company ability to continue as a going concern is uncertain □ Applicable √ Not applicable The lower of the net profit before and after deducting the non recurring profit and loss is negative □ Applicable √ Not applicable VII. Accounting data difference under domestic and foreign accounting standards 1. Differences towards net profit and net assets in the financial report disclosed under International Accounting Standards and Chinese Accounting Standards □ Applicable √ Not applicable No difference towards net profit and net assets in the financial report disclosed under International Accounting Standards and Chinese Accounting Standards during the reporting period. 2. Differences towards net profits and net assets in financial statements disclosed under overseas accounting standards and Chinese Accounting Standards □ Applicable √ Not applicable No difference towards net profits and net assets in financial statements disclosed under overseas accounting standards and that disclosed under Chinese Accounting Standards during the reporting period. VIII. Key Quarterly Financial Indicators Unit: RMB Whether major differences exist between the above financial indicators or their sum and those in the disclosed quarterly report and semi-annual report □ Yes √ No IX. Non-recurring Profit and Loss Items and Amount √Applicable □ Not applicable Unit: RMB Explain the non-recurring profit and loss items defined by the Company according to the Interpretative Announcement No. 1 on Information Disclosure of Public Securities Issuing Companies - Non-recurring Profits and Losses and defined from the non-recurring profit and loss items enumerated in the Interpretative Announcement No. 1 on Information Disclosure of Public Securities Issuing Companies - Non-recurring Profits and Losses □ Applicable √ Not applicable No definition of non-recurring profit and loss items defined and enumerated in the Interpretative Announcement No. 1 on Information Disclosure of Public Securities Issuing Companies - Non-recurring Profits and Losses as non-recurring profit and loss items during the reporting period. Section 3 Business Summary I. Primary Business of the Company during Reporting Period During the reporting period, the Company continued to develop its primary business around the global tool consumption field, sustainably developed a number of new product lines including storage and personal protective equipment, accelerated the development of new product research, and continuously made efforts in e-commerce direct sales. At present, company's the Company main products include hand tools and power tools, laser measurement and storage, which are mainly used in the fields of home maintenance, construction engineering, vehicle maintenance, robot and automation, mapping, personal protection, etc. In 2020, the Company's overall operating revenue was RMB 8,544.4402 million , a year-on-year increase of 28.96%. In 2020, the Company's net profit attributable to shareholders of listed companies was RMB 1,350.1325 million , a year-on-year growth of 50.85%, significantly exceeded the annual business objectives set during the pandemic period. 1. Hand Tools and Power Tools Business During the reporting period, on the premise of doing a good job in pandemic prevention and control, the Company seized the strategic opportunity of severely restricted competitors, took advantage of China’s first- in resuming advantage in work and production, its leading position in the international tool industry to give full play to its five advantages in innovation, channel, supply chain, brand and internationalization, and accelerated the development of new categories and e-commerce channels, The market share increased significantly. During the reporting period, the Company independently researched and developed 1629 new products, the output value of new products greatly exceeded the established goal, and made certain progress in the development of new customers. At the same time, it met customers’ needs for pandemic prevention materials, and deepened the customer relationship. In addition, through the acquisition of Shop Vac related assets, the Company has made progress in power tools business and strengthened the local service capacity in the United States; Although the Southeast Asian manufacturing base of the Company was affected by the pandemic, the resumption of work and production was slow, the shipment was smoothly resumed, and the construction of the new base in Thailand and the preliminary work of phase II in Vietnam almost finished; The Company will promote the cross-border e-commerce business as its strategic focus in the future, prioritize resource allocations to related employees and property, and sustain its annual growth in income by over 100%. In 2020, the sales revenue of hand tools and power tools business was RMB 5907.107 million, with a year-on-year growth of 15.70%. 2. Laser Measurement Business During the reporting period, the Company's laser measurement business developed steadily, and completed the strategic switching and channel positioning of key customers. It also made significant progress in new product development and customers development, especially the laser radar products were highly recognized by customers domestically and abroad. The Company has grown into an internationally competitive ODM company in the field of laser measurement, and successfully transformed itself and got out of the dilemma since the China–U.S. trade war in 2018. In 2020, the income of laser measuring instruments was RMB 513.2347 million. 3. Storage Business During the reporting period, the storage business of the Company showed a trend of differentiation. Due to the pandemic situation and the decline of industrial investment in Europe, the business of European Lista company fell by nearly 30%. With the Company's vigorous resource integration and the recovery of real estate in the United States in the third quarter, the storage business in the United States improved significantly, almost unchanged from the prior year. In 2020, the revenue of storage was RMB 939.4204 million. . II. Significant Changes in Prime Assets 1. Significant Changes in Prime Assets 2. Major overseas assets √Applicable □Not applicable III. Analysis of Core Competitiveness 1. Innovation advantage Innovation has always been the soul of company's growth. The Company has a senior professional tool R&D team, always committed to new product R&D and innovation, adhere to the concept of details lead to success, improve the functionality and added value of products, to ensure the long-term core competitiveness of the Company. During the reporting period, the Company invested RMB 245,372.1 thousands in R&D, designed 1629 new products, applied for 57 invention patents and 12 PCT patents. The Company has innovated and developed several products, including replaceable guide pneumatic nail gun, aluminum handle efficiency hammer, multi gear open ratchet wrench, forging ratchet clamp, and has achieved good market feedback. In the 21st China Patent Award authorized by the State Intellectual Property Office and the world intellectual property organization, company's invention patent "screw driver" won the China Patent Excellence Award. In the face of economic fluctuations brought by COVID-19 and the changes in the global tool industry, company's innovation advantages ensure that the Company can respond to and seize market opportunities in a timely manner, continue to gain market share and maintain long-term and stable development. 2. Channel advantage The Company's sales channels and customer trust are the guarantee for the continuous development of GreatStar. The Company's diversified product structure and continuous innovation ability do not only fulfill channel customers’ needs for one-stop purchase, but also continuously help them save the purchasing cost and management, led to improved customer stickiness. The Company has become one of the largest suppliers of tools and storage for Homedepot, WallMart, Lowes, Kingfisher, CTC and other large supermarket chains in the United States, and has been continually expanding new product categories At present, there are more than 21,000 large-scale hardware, building materials, auto parts and other chain supermarkets all over the world selling all kinds of products of the Company at the same time. These channels effectively ensure the rapid development of all kinds of innovative products of the Company. At the same time, the Company has made continuous efforts in cross-border e-commerce, a new sales channel, and achieved three digit growth rate in the reporting period compared with the same period of last year. At present, cross-border e-commerce channel has become the most important sales channel for GreatStar except for the traditional large chain supermarkets. As an effective supplement to the traditional channels, this channel not only provides a new market for the Company to develop its own brand, but also empower the Company's advantages of rapid innovation, formed a vicious product development cycle constitutes of product development - online validation – second-time product development – offline hot product launch and sell. 3. Supply chain advantage After decades of development, the Company has established a global supply chain management system with China as the core, and established a good cooperative relationship with thousands of suppliers around the world to ensure that the Company is not limited to its own production capacity, can quickly respond to market demand and complete the timely delivery of various large orders. Even in the face of the adverse effects of COVID-19, as a leading global tool industry rooted in China, China can maintain stable supply capability and benefit from China's most complete supply chain system with the most fundamental foundation in the world, thus laying a solid foundation for the Company to continuously improve its market share. At the same time, the characteristics of efficiency and flexibility brought by China's super large volume and super fine supply chain network also enable the Company to achieve centralized procurement in China and global distributed use, greatly reduce the comprehensive procurement cost and enhance the market competitiveness of the Company's products. 4. Brand advantage The Company's main products are consumer durables for families and industrial products for professionals, and the brand is the most effective guarantee for the Company to provide products and services to consumers for a long time, so the Company has been committed to building and developing its own brand for a long time. During the reporting period, the Company vigorously developed its own brands, especially e-commerce brands. The sales revenue of Workpro, Pony, Everbrite and other brands increased significantly year on year, reaching RMB 2.6 billion for the first time. The Company acquired relevant assets of Shop Vac, the leading brand of vacuum cleaners in North America, gradually promoted the layout of power tools field, and improved the Company's own brand system. Brand advantages not only further enhance the international competitiveness of the Company's products, but also effectively improve the Company's gross profit margin and business stability, providing a guarantee for the Company's long-term healthy development. 5. Internationalization advantages During the reporting period, the domestic and international economic environment changed dramatically. GreatStar adhered to its international expansion strategy, and fully utilized the Company production capacity and sales market in different regions of the world, actively responded to risks and seek opportunities. During the reporting period, the Company further adjusted its manufacturing division of labor around the world and accelerated the investment pace of GreatStar 's manufacturing base in Southeast Asia. At present, the Company has formed the capacity layout of Vietnam and Cambodia in Southeast Asia. The Thai manufacturing base is about to be put into production. The preliminary site selection work of Vietnam manufacturing base phase II and Cambodia manufacturing base phase II has been completed. Internationalization advantages effectively ensure that does not only play the advantages of China's manufacturing cluster, but also make use of the advantages of Southeast Asia's manufacturing cost and the advantages of local channel services in European and American markets in the competition with other international competitors, so as to create a stronger core competitiveness. The Company is gradually becoming a global resource allocation company integrating European and American local services, Asian industrial chain manufacturing and Chinese management research and development. Section 4 Discussion and Analysis on Business Conditions I. Overview In 2020, the sudden outbreak of COVID-19 seriously affected global trade, and greatly affected the global industrial chain system which brought uncertainty to the sustainable development of the Company. In the first half of the year, the pandemic had a significant adverse impact on the Company's production, logistics and terminal market. However, the Company actively responded to the pandemic situation. While doing a good job in pandemic prevention and control and delivery of main business orders, GreatStar actively arranged the production capacity and sales of pandemic prevention materials, especially personal protective equipment, to ensure the stability of the Company's business in the first half of the year. In the second half of this year, the global tool demand market and supply chain pattern have undergone some continuous changes that are conducive to the Company's operation. The United States has adopted modern monetary theory to stimulate consumption of the ordinary Americans and tried to restart the new and old infrastructure construction in the United States. The Company has seized this opportunity to give full play to its own advantages and continue to gain market share. It has achieved a growth far exceeding that expected in the first half of the year. During the reporting period, the Company achieved a total operating income of RMB 8,544.4402 million, an increase of 28.96% over the same period last year, and the net profit attributable to shareholders of the listed company was RMB 1,350.1325 million, an increase of 50.85% over the same period last year. The completion of each business segment is as follows: 1.Hand Tools and Power Tools Business During the reporting period, the Company gave full play to the advantages of innovation, supply chain, brand, sales channel and internationalization, continued to invest in cross-border e-commerce business and OBM development, and accelerated the pace of product innovation. After the decline in the first half of the year, the main business orders recovered rapidly in Q3. The Company has seized the opportunity of restructuring the global industrial chain and realized the improvement of market share against the trend. The annual sales revenue of hand tools and power tools business was RMB 5,907.107 million, up 15.70% year on year. During the reporting period, the Company's cross-border e-commerce department increased brand investment, carried out KOL marketing and sponsored the "Xfinity" series of "NASCAR" car race in the United States to enhance the brand image and influence; At the same time, we will intensify the launch and promotion of new products to achieve sustainable and rapid growth of cross- border e-commerce business. Thanks to the continuous double-digit growth of OBM revenue such as Arrow and Prime-line, as well as the rapid growth of cross-border e-commerce business, the Company's OBM sales exceeded RMB 2.6 billion for the first time, with a year-on-year growth of 12.52%. Through the acquisition of Shop Vac related assets, the Company entered the North American Vacuum Cleaner Market and gradually grew power tools; At the same time, with the acquisition of production capacity and warehouse, the Company will further improve the production capacity and enhance the storage capacity in the United States, and provide customers with more satisfying North American local services. In addition, the Company continues the construction of manufacturing bases in Southeast Asia. The manufacturing base in Thailand will soon be put into operation, and the construction of phase II manufacturing base in Vietnam and phase II manufacturing base in Cambodia will start. Finally, the Company continued to increase R&D investment, and R&D expenditure reached a record high, which strongly supported the Company's OBM construction and market share acquisition. At the same time, the Company saved various operational expenses, and further consolidated the gross profit margin and net profit of hand tools and power tools business. 2. Laser Measurement Business During the reporting period, the Company's laser measurement business continued to achieve stable sales revenue, despite in face of pandemic outbreak that European and the U.S. companies tried to move production back to their own countries and reconstruct domestic industry supply chain. GreatStar makes full use of the new technology platform to develop new products, and developed more than 100 new laser measurement products throughout the year to ensure that the Company's products always maintain leading position in the ODM field; At the same time, the Company optimized production resources, broke through the existing capacity and supply chain bottlenecks, ensured the timely delivery of orders. At the same time, the Company has successfully completed the strategic transformation and channel positioning of the major customers of laser products, laying a solid foundation for the 21-year laser business to enter a period of rapid development again. Since 2016, the Company's R&D investment in lidar business has also made important progress. The holding subsidiary OLE-SYSTEMS has obtained new orders in the U.S. and European markets, and has carried out long-term cooperation with Datalogic, a famous European brand, and signed a product supply agreement, In cooperation with Chongqing Research Institute Co., Ltd., a leading enterprise in the field of coal mine safety, the mine intrinsic safety lidar level sensor has been developed, which broadens the application field of lidar products of the Company. The annual sales revenue of laser measuring instrument business was RMB 513.2347 million. 3、Storage Business During the reporting period, the storage business of the Company showed a trend of differentiation. Due to the pandemic situation and the decline of industrial investment in Europe, the business of European Lista company fell by nearly 30%. With the Company's vigorous resource integration and the recovery of real estate in the United States in the third quarter, the storage business in the United States improved significantly, basically unchanged from the previous year. At the same time, the Company completed the cooperation with Xindadi company and the construction and production of Cambodian storage manufacturing base, laying a good production capacity foundation for the future sustainable development of this business. In 2020, the revenue of storage will be RMB 939.4204 million. 4、Personal Protective Equipment Business During the reporting period, the Company actively responded to overseas outbreaks and responded to the demand for personal protective equipment put forward by overseas customers. It has earned an additional income of RMB 1 billion 143 million and has successfully entered the new field of PPE (personal protective equipment), reflecting the Company's development capability in non hand tool business and the channel advantage of the Company. In 2020, the income of personal protective articles business reached RMB 1142,565 million. II. Main business analysis 1. Overview See "I. Overview" in " Discussion and Analysis on Business Conditions ". 2. Revenue and Costs (1) Operating income composition Unit: RMB (2) Industries, products or regions that account for more than 10% of the Company's operating income or Profit √Applicable □ Not applicable Unit: RMB In the case that the statistical standards for main business data of the Company are adjusted during the reporting period, the main business data of the Company in recent 1 year are subject to those after the adjustment of the statistical standards at the end of the reporting period □ Applicable √ Not applicable Note: as the Company began to implement the new revenue standard in 2020, the transportation expenses originally included in the sales expenses were included in the main business costs, involving an amount of RMB208,409,500 (freight in 2020), resulting in a decrease in the overall gross profit rate of the Company compared with the same period last year. (3) Whether the Company's physical sales revenue is greater than the service revenue √ Yes □ No Reasons for more than 30% year-on-year changes in the relevant data □ Applicable √ Not applicable (4) Performance of major sales contracts signed by the Company up to the reporting period □ Applicable √Not applicable (5) Composition of operating cost Industry and product categories Unit: RMB Unit: RMB Explanation No (6) Whether the consolidation scope changes in the reporting period √ Yes □ No For details ,please refer to Section 12 financial report 8. Changes in the consolidation scope. (7) Major changes or adjustments of business, products or services of the Company during the reporting Period □ Applicable √ Not applicable (8) Major sales customers and major suppliers Major sales customers of the Company Top 5 customers of the Company Other information of main customers □ Applicable √ Not applicable Major suppliers of the Company Top 5 suppliers of the Company Other information of main suppliers □ Applicable √ Not applicable 3. Cost Unit: RMB 4. R&D Investment √Applicable □ Not applicable The Company continues to increase the investment in R & D personnel and R & D amount, actively develop new technologies, optimize product production process, and constantly improve company's the Company competitiveness. During the reporting period, the Company has developed 1629 new products, applied for 57 invention patents and 12 PCT patents, innovated and developed products including replaceable guide rail pneumatic nail gun, aluminum handle efficiency hammer, multi gear open ratchet wrench and forging ratchet clamp, obtained good market feedback, and effectively improved the overall innovation level and core competitiveness of the Company, To provide a solid guarantee for the sustainable development of the Company. R & D investment of the Company Reasons for the significant change in the proportion of total R & D investment in operating revenue over the previous year □ Applicable √ Not applicable The reason and rationality of the great change of R & D investment capitalization rate □ Applicable √ Not applicable 5. Cash flow Unit: RMB Description of main influencing factors of significant changes in relevant data year on year √Applicable □ Not applicable Reasons for the significant difference between the net cash flow generated by the Company's operating activities and the net profit of the current year in the reporting period □ Applicable √ Not applicable III. Non-main business analysis □ Applicable √ Not applicable IV. Analysis of assets and liabilities 1. Major changes in asset composition The Company will implement new income standard or new lease standard for the first time since 2020, and adjust and implement relevant items of financial statements at the beginning of the year Applicable Unit: RMB 2. Assets and liabilities measured at fair value √Applicable □ Not applicable Unit: RMB Other changes No Did significant changes occur for the Company’s major asset measurement attributes during the reporting period？ □Yes √No 3. Limitation on the assets and rights as of the end of the reporting period Unit: RMB [note] Net assets at the end of the period of Arrow Fastener Co., LLC. V. Analysis of Investment 1. Overall situation √Applicable □ Not applicable 2. Significant equity investments acquired during the reporting period √Applicable □ Not applicable Unit: RMB 3. Significant ongoing non-equity investments during the reporting period □ Applicable √ Not applicable 4. Investments in Financial Assets (1) Investments in Securities √ Applicable □ Not applicable Unit: RMB （2）Investments in Derivative Financial Instruments √ Applicable □ Not applicable Unit: RMB10 thousands 5. Use of Raised Funds √ Applicable □ Not applicable (1) Overall use of Raised Funds √ Applicable □ Not applicable Unit: RMB10 thousands (2) Statement of committed investment projects of Raised Funds √ Applicable □ Not applicable Unit: RMB10 thousands feasibilit Total committed investment based on net Raised Funds (2) Investment Whether expected benefits have been achieved Accumulativ Date of Total investment after alteration (1) Benefits achieved in the current year Investment in the current year Committed y e progress asset ready for intended use investment projects of investment at the end of and project at the end of the period allocation of over- has the period (%) (3) = (2)/(1) changed significa ntly Committed investment projects (3) Statement of Altered Investment Projects of Raised Funds □ Applicable √ Not applicable No such cases in the reporting period. VI. Sale of Significant Assets and Equity 1. Sale of significant assets □ Applicable √Not applicable Disclosure Index Zhejiang CHINT Electrics Co., Ltd. The retained earnings of the reporting period increased by RMB 47,151,416.95 11.05% equity of Zhejiang Supcon Information Technology Co., Ltd Announce 17,688.81 ment 2020/4/8 Yes Yes Yes 2020/04/09 Fair value No N/A No： 2020-016 2. Sale of significant equity □ Applicable √ Not applicable VII. Analysis of Major Holdings and Participating Companies □ Applicable √ Not applicable Major subsidiaries and equity participation companies that affect the Company’s net profit by more than 10% Unit: RMB Acquisition and disposal of subsidiaries during the reporting period □ Applicable √ Not applicable Descriptions for major holdings and participating companies [note] in this report period, Zhejiang GreatStar Electrical Manufacturing Co., Ltd. was absorbed and merged by Zhejiang GreatStar Industrial Co., Ltd. VIII. Structured Entities Controlled by the Company □ Applicable √ Not applicable IX. Prospects of the Company （1）Company development strategy The overall development strategy of the Company is: Focusing on the main business, basing on China, global strategy and planning for a long time. Focusing on the main business ,the Company will continue to use the existing large-scale business supermarket and e-commerce owned channels in Europe and America, focus on the main business of tools as the core products, and will continue to dispose non-core business assets to recover cash and use it for the development of main business. The Company will also rely on the extension of M & A to develop non-hand tools including power tools and outdoor products. Basing on China, the Company will rely on the Southeast Asian supply chain network and Chinese engineers, to lead the global supply chain division of the tool industry, continue to expand the leading position of the industry, lead the development of international tool industry, and gradually take over the industrial transfer in the era of innovative economy with the creation of customer demand as the core in the future. Global strategy means that the Company continues to focus on strengthening the construction of European and American OBM service system and Southeast Asia capacity layout, selecting foreign high-quality companies for industrial merger and integration, better access to international resources and international markets, and gradually upgrading the Company from ODM company made in China to an international OBM company combining Chinese design, Asian manufacturing and European and American local services. Finally, for long-term planning, GreatStar will follow the Company development history of hardware and tools industry, sustained growth in durable consumer goods market and stable cash flow. The company plans its own business and development path for a long horizon, gradually grows its new business. GreatStar’s goal is growing into a great company with stable operation, sustained growth and healthy development to create long-term value for society. The specific business areas are as follows: 1. Hand tools field In the field of hand tools, market demand has rapidly recovered at the end of the second quarter of 2020. With steady increase of disposable income and low debt level among American residents during the pandemic , the Company believes that the market demand in North America will continue to grow steadily. With the recovery of core CPI in the U.S., the growth rate of hand tools industry in the next 3-5 years is expected to reach more than 4%, faster than the annual growth rate of 2.5% in 2015-2020. Due to the low industry threshold and stable demand, the global supply chain system has been shifted towards China since 2015, and the market has been developing strategically towards minimum redundancy and maximum efficiency. It has been clearing up the outdated production capacity. But the China–United States trade war since 2018 and the COVID-19 in 2020 have greatly affected the industry chain. This has caused a sudden supply chain crisis and cash flow break of many overseas companies, and the supply side may have long-term scar effect in the future. In the future, the Company will follow the above trends, continue to take the market as the guidance, give full play to the advantages of innovation, channel, supply chain, brand and internationalization, consolidate and expand the hand tools business, and ensure long-term sustainable growth. (1) International market First, the strong international sales network has been an important factor for the rapid development of the Company in recent years. In addition to continuing develop the existing global large chain supermarket as a core sales channel, the Company will continue to sink into local small and medium-sized distributors, and strengthen the service capacity of North America and Europe sales network. Second, the Company will continue to increase its investment in its own brands. In the future, the Company will continue to acquire famous tool brands like Prime line, Lista and Arrow, and integrate them into company's owned-the Company's own brand lines, jointly promote the brands globally, continuously improve the proportion of OBM sales. The Company will also improve the core value and social influence of its own brand by continuously developing innovative products and providing high-quality services, and realize the continuous improvement of its own brand value, so promote the stable and sustainable rapid development of the Company's business. Third, the Company actively expands overseas production base according to the changes of external environment, and has initially possessed the ability of global capacity allocation. In the future, it will continue to play this advantage to create a mode of combining Asian manufacturing with local services in Europe and America. (2) Domestic market Domestic hand tools industry is still fragmented. As the overall economic growth tends to slow down, the Company will orderly develop domestic tool market, continue the development strategies of major customers and e-commerce platforms, build a refined key client service system, gradually develop the cooperative business system, and strive to build a cooperative system within five years, Gain market share matching its own industry position. (3) Cross border E-commerce As a new consumption path, cross-border e-commerce platform direct marketing has become a new and important hand tool sales channel . Leverage on Amazon based overseas e-commerce platform, the Company successfully realized brand overseas DTC sale. In 2020, the Company achieved the top one sales value on Amazon among the domestic export sellers of hand tools. The Company has taken cross-border e-commerce business as the strategic focus and prioritized the allocation of employees and capital to support this strategic focus, at the same time, GreatStar introduced external talents, deployed innovative product development, and gradually launched online multi-brand sales. In the future, the Company will give full play to the operation ability of e-commerce team, enhance brand power, ensure the effective improvement of brand image while achieve sustained and fast growth in revenue from e-commerce sales. GreatStar aims to build the owned brands into internationally well-known brands, in 3-5 years to achieve a less than 20% market share of the Company's in European and American e-commerce market. 2.Power tools field In the field of power tools, although the market size is far larger than that of the hand tools, due to the high unit price of products, fewer product types and rapid development of electric tool technology in past 10 years, the market share has been grabbed by a few leading companies, and the first five StanleyBlack&Decker (SWK.N), TTI (0669.HK), and Bosch (500530.BO), Makita (6586.T), Husqvarna (HUSQA.S) have concentrated more than 55% of the market share, and the remaining markets are concentrated in the hands of dozens of regional special power tool brands. As the major customer of the Company, the large business supermarket has not developed its own brand power tools business, but has chosen to cooperate with international brands to sell these international brand power tools products in its own channels in an exclusive way, which makes the Company have no way to develop the power tool business according to the path from traditional OEM to ODM in the past 10 years. Since 2020, due to the impact of the pandemic, some regional brands of special power tools such as Shop Vac and BeA have broken down and forced to enter bankruptcy proceedings, which provides the Company with a strategic window period to enter the field of power tools directly through OEM and ODM. At the same time, due to the large-scale application of new energy, especially lithium battery technology in electric vehicles and other fields and the continuous R&D and innovation of related companies, the threshold of lithium battery electric tools has been declining, which provides the industrial basis for the Company to integrate mature technology and overtake leading companies. In the future, the Company will integrate power tool supply chain and channel resources, strengthen independent R & D investment, give priority to the development of vacuum cleaner, power nail gun and other companies already have strong brand power tool business. Meanwhile, the cross-border e-commerce is the main channel, and the self-owned brand is used to create electric tools products specifically for e-commerce customer groups and new housing groups in Europe and America who are born after1985. In the long-term, the Company will pay attention to the trend of international power tool brand companies, continue to purchase the target of high-quality power tools, expand the Company's power tools business, improve the competitiveness of the Company, and build long-term growth momentum for the Company's tool business. 3. Laser measuring instrument field With penetration of mobile internet accelerated, the future market development prospect of laser measurement products is becoming more and more clear. Since 2016, the Company has successfully integrated and developed laser measurement products and industrial ecological chain that meet the need of its own sales network through investment in Huada Kejie, PT company and OLE-SYSTEMS, and gradually become the most competitive laser measurement instrument manufacturer in the world. In the future, the Company will make effort into developing the laser measurement field, focusing on the development of laser sensing core modules such as laser ranging and lidar, including: further research and improvement of laser measurement product line, increasing the integration of domestic and foreign laser measurement product production capacity, and building the largest production and manufacturing base of laser measurement products in the world; By using the technology of independent intellectual property, the fusion of lidar and sensor is improved, customized products based on special application scenarios are developed, and the market promotion and customer cognition of lidar products will be accelerated; Capital will be injected to accelerate the integration of the industry chain and the market ; Accelerate the establishment of European and American local technical support and after-sales service center, to provide more satisfying local services for European and American customers; In about five-years time, the laser product business has been developed into a new core pillar business of the Company, and gradually created an independent brand of laser measurement products. 4. Storage field Storage is a new business developed by the Company in recent three years. However, relying on industrial integration and channel expansion, this business has already been of a certain scale. The global storage market will be about $8 billion in 2020, and due to the large volume of products, high transportation cost and high proportion of raw materials, even the global leading companies will have less than 5% market share. In 2018, the Company entered this new field by merging Lista, the leading European storage company, and successfully integrated Xindadi, the leading domestic storage company in 2020, established Cambodia manufacturing base with the advantages of all parties, successfully entered the mainstream market of the United States, and made the market share increase in the adverse situation. In the future, the Company will continue to integrate excellent storage companies and brands at home and abroad through capital means, and at the same time, innovate and develop storage products suitable for European and American and Chinese civil markets. Through about three years, the Company will establish the Company's absolute leading position in the global storage business. （2） Business plan 1. Overall business objectives The Company sets the strategy to focus on the main business, based in China, global growth and planning for a long time, actively respond to the changes of external environment, adjust the focus of operation timely, seize the rare strategic development opportunities in the next three years and achieve leapfrog development. In 2021, the Company's overall business objective is to achieve a year-on -year 20% growth in sales revenue and net profit from main business. 2. Development objectives of self-owned brands The self - owned brands is the long-term stable core competitiveness of the Company. The Company will continue to invest in promoting its own brands, ensure sales revenue of its own brand products and total sales revenue ratio will continue to grow in 2021. 3. Cross border e-commerce development objective Cross border e-commerce is the strategic core of the Company's continuous growth. The Company will actively integrate internal advantages and resources, and increase the product category and service capacity of cross-border e-commerce in an orderly manner. In 2021, cross-border e-commerce business will continue to maintain an above 50%. growth rate. （3） Possible risks The main business risks faced by the Company include: 1. Exchange rate fluctuation risk Currently, majority of the Company's operating income is from the overseas market, such as the fluctuation of RMB exchange rate, which will have a certain impact on the Company's operating income. Most of the Company's main business orders are denominated in US dollars, and the fluctuation of RMB against US dollar directly affects the price competitiveness of products, thus affecting the Company's operating performance. In this regard, the Company will continue to strengthen overseas business growth and settlement control of foreign exchange, hedge and reduce the impact of exchange rate fluctuations on the Company's performance. 2. Risk of rising raw material price In recent years, the price of main raw materials fluctuates greatly, which causes the production cost of the Company to fluctuate. Although the Company mainly produces outsourcing capacity and has strong bargaining power for upstream outsourcing manufacturers, if the price of raw materials continues to rise, it may still have a certain impact on the profitability of the Company. In this regard, the Company will continue to strengthen procurement and cost control, establish strategic cooperation relationship with suppliers and sign long-term agreements to absorb the risk of raw material price fluctuation risk; Meanwhile, we will continue to optimize the product structure, strengthen the R & D of new and innovative products, set competitive market prices and maintain a stable gross profit rate. 3. Trade friction risk At present, the United States is the largest single market of the Company. Some products exported to the United States are still subject to 25% tariff, which has a negative impact on the development of the Company. In this regard, the Company will pay close attention to global geopolitical changes, continue to implement the international strategy, promote the construction of overseas manufacturing base, cultivate overseas supply chain, establish a global capacity distribution and supply chain system, and ensure the stable development of the Company's business. X. Reception of Research, Communication, Interviews and Other Activities 1. Registration form for reception of research, communication, interviews and other during the reporting period √ Applicable □ Not applicable Section 5 Significant Events I. Profit Distribution to Common Shareholders & Increase of Share Capital due to Conversion of Equity Reserves Status of formulation, execution, or adjustments made to profit distribution policy for common shareholders, especially the cash dividend policy, during the reporting period. √ Applicable □ Not applicable During the reporting period, the Company held the annual general meeting of shareholders in 2019 on May 14, 2020, deliberated and passed the "proposal on the Company's profit distribution plan in 2020". Considering the Company's strategic development plan, 2020 business plan and changes in the external environment, the Company's profit distribution plan in 2020 is: no cash dividend, no bonus shares in 2020, The remaining undistributed profits are carried forward to the next year. During the reporting period, the formulation and implementation of the Company's profit distribution policies were in line with the relevant provisions of the notice on further implementing matters related to cash dividends of listed companies, the regulatory guidelines for listed companies No. 3 - cash dividends of listed companies issued by the CSRC and the articles of association of the Company. The relevant decision-making procedures and mechanisms were complete, and the independent director was diligent and responsible, the legitimate rights and interests of small and medium shareholders have been fully safeguarded. The Company’s plan for profit distribution to common shareholders (preplan) & plan for increase of share capital due to conversion of capital reserves (preplan) for the recent three years (including this reporting period): 1. In 2020, there will be no profit distribution, no capital reserve will be converted into share capital, and the undistributed profit will be carried forward to the next year. 2. The profit distribution plan for the first three quarters of 2019 is as follows: Based on the total share capital of 1,075,247,700 shares on September 30, 2019, deducting the number of shares that the Company has bought back 10,799,651 shares, the Company will distribute RMB 1.9 (tax included) for every 10 shares to all shareholders, with a total of RMB 202,245,129.31n in cash. After the dividend distribution, the undistributed profit balance of the parent company is RMB 2,661,343,455.51 , which will be carried forward to the following years for distribution. This profit distribution does not convert capital reserve into share capital, and does not give bonus shares. The profit distribution plan for 2019 is as follows: buy back 463,300 shares of the Company by means of centralized bidding transaction, accounting for 0.0431% of the total share capital of the Company, and the total amount paid is RMB 5,500,089.06, which can be regarded as the cash dividend of the Company in 2019. In 2019, the Company will not distribute cash dividends, bonus shares, increase share capital by capital accumulation fund, and carry forward the remaining undistributed profits to the next year. 3. The profit distribution plan for 2018 is as follows: repurchase 10,336,351 shares of the Company by means of centralized bidding transaction, accounting for 0.9613% of the total share capital of the Company, and the total amount paid is RMB 99,992,601.00, which can be regarded as the cash dividend of the Company in 2018. In 2018, the Company will not distribute cash dividend, and will not convert capital reserve into the share capital, and the remaining undistributed profit will be carried forward to the next year. Cash dividends of common stock of the Company in recent three years (including the report period) Unit: RMB The Company made a profit in the reporting period and the profit distributable to the common shareholders of the Company was positive, but it did not put forward a preliminary plan for cash dividend distribution: √ Applicable □ Not applicable II. Proposal for Profit Distribution and Conversion of Capital Reserves into Share Capital for the Reporting Period □ Applicable √ Not applicable The Company plans not to distribute cash dividends, bonus shares or increase share capital with accumulation fund. III. Fulfillment of Commitments 1. Commitments made by the Company’s actual controllers, shareholders, related parties, purchasers, and others that were fulfilled during the reporting period and those not fulfilled as of the end of the reporting period √ Applicable □ Not applicable 2. Where there had been Profit Forecast for an asset or project and the reporting period was still within the forecast period, explain reasons for failing to reach forecast performance. □ Applicable √ Not applicable IV. Status of Capital of the Listed Company Used for Non-operating Purposes by the Controlling Shareholder or Its Related Parties □ Applicable √ Not applicable In the reporting period, no controlling shareholder or its related party used capital of the listed Company for non-operating purposes. V. Explanations Provided by the Board of Directors, the Supervisory Committee, and the Independent Directors (If Any) Regarding the “Non-standard Audit Report” Issued by the Auditor for the Reporting Period □ Applicable √ Not applicable VI. Changes in Accounting Policy, Estimation, and Methods When Compared to the Previous Financial Year √ Applicable □ Not applicable 1. The Company will implement the accounting standards for Business Enterprises No. 14 - Revenue (hereinafter referred to as the new revenue standards) revised by the Ministry of finance from January 1, 2020. According to the relevant provisions on the connection between the new and old standards, the information of the comparable period will not be adjusted, and the cumulative impact of the implementation of the new standards on the first implementation date will retroactively adjust the amount of retained earnings and other related items in the financial statements at the beginning of the reporting period. The main impacts of the implementation of the new income standard on the Company's financial statements as of January 1, 2020 are as follows: Unit: RMB No such cases in the reporting period. liabilitiesliabilities 2. Since January 1, 2020, the Company has implemented the No. 13 interpretation of accounting standards for business enterprises issued by the Ministry of Finance in 2019, and the accounting policy change is handled by the future applicable law. VII. Retrospective Restatement due to Correction of Material Accounting Errors in the Reporting Period □ Applicable √ Not applicable VIII. Changes in Consolidation Scope When Compared to the Previous Financial Year √ Applicable □ Not applicable For details of the changes in the Company’s scope of consolidation in 2020, refer to “ V. Changes in the Scope Consolidation ” of “ Chapter 12 Financial Report ” . IX. Details Regarding Engagement and Disengagement of Auditor Auditor engaged at present Has the auditor changed during the reporting period？ □ Yes √ No Status of auditor of internal controls, financial adviser, or sponsor engaged: □ Applicable √ Not applicable X. Possibility of Delisting after Disclosure of This Annual Report □ Applicable √ Not applicable XI. Bankruptcy and Reorganization □ Applicable √ Not applicable There was no such situation for the Company during the reporting period. XII. Significant Lawsuit or Arbitration √ Applicable □ Not applicable XIII. Punishment and Rectification □ Applicable √ Not applicable There was no such situation during the reporting period. XIV. Integrity of the Company, Its Controlling Shareholders, and Actual Controller √ Applicable □ Not applicable During the reporting period, the Company and its controlling shareholder, GreatStar Group, and the actual controller, Mr. Qiu Jianping, were in good faith, and there were no cases of failing to perform the effective judgment of the court, and the debt with a large amount was due and not paid off. XV. Execution of Stock Incentive Plan, ESOP, or Other Employee Incentives □ Applicable √ Not applicable The Company has no stock incentive plan, employee stock ownership plan or other employee incentive measures and their implementation in the reporting period. XVI. Significant Related-party Transactions 1. Related-party transactions relevant to routine operations □ Applicable √ Not applicable No such cases in the reporting period. 2. Related-party transactions relevant to purchases and sales of assets □ Applicable √ Not applicable No such cases in the reporting period. 3. Related-party transactions with joint investments □ Applicable √ Not applicable No such cases in the reporting period. 4. Credits and liabilities with related parties □ Applicable √ Not applicable No such cases in the reporting period. 5. Other significant related-party transactions □ Applicable √ Not applicable No such cases in the reporting period. XVII. Significant Contracts and Their Execution 1. Trusteeships, Contracts, and Leases (1) Trusteeships □ Applicable √ Not applicable No significant trusteeships in the reporting period. (2) Contracts □ Applicable √ Not applicable No significant contracts in the reporting period. (3) Leases □ Applicable √ Not applicable No significant leases in the reporting period. 2. Significant guarantees √ Applicable □ Not applicable (1) Guarantees provided by the Company Unit: RMB10 thousands The listed Company’s guarantees to subsidiaries Description of the specific situation of adopting compound guarantee (2) Illegal provision of guarantees for external parties □ Applicable √ Not applicable No such cases in the reporting period. 3. Cash assets managed under trust (1) Wealth managed under trust √ Applicable □ Not applicable Entrusted finances during the reporting period Unit: RMB10 thousands Details of individual items with significant amount or of low safety, poor liquidity, or without principal guarantee high risk wealth management products □ Applicable √ Not applicable The entrusted financing is expected to fail to recover the principal, or there may be other circumstances that may result in impairment. □ Applicable √ Not applicable (2) Entrusted loans □ Applicable √ Not applicable No such cases in the reporting period. 4. Significant contracts relevant to routine operations □ Applicable √ Not applicable 5. Other significant contracts □ Applicable √ Not applicable No other significant contracts in the reporting period. XVIII. Social Responsibilities 1. Performance of Social Responsibilities (1) Protection of the rights and interests of shareholders and creditors During the reporting period, the Company further strengthened the standardized operation, established and improved the corporate governance structure, standardized the management of the convening, holding and discussion procedures of the general meeting of shareholders, and ensured the shareholders' right to know, participate and vote on major issues of the Company; Constantly improve company's the Company internal control system, modify company's the Company external financial assistance management system according to relevant regulations; We should conscientiously perform the obligation of information disclosure, ensure the authenticity, accuracy, integrity, timeliness and fairness of information disclosure, refrain from selective information disclosure, strictly implement the insider registration and insider confidentiality system, and treat all shareholders and investors fairly; Strengthen the management of investor relations, communicate with investors through investor relations interactive platform, hotline and other ways, so as to protect the legitimate rights and interests of all shareholders of the Company, especially small and medium shareholders. (2) Protection of employees' rights and interests The Company adheres to the people-oriented principle, takes the talent strategy as the focus of enterprise development, strictly abides by the labor law, the law on the protection of women's rights and interests and other relevant laws and regulations, pays employees' pension, medical, unemployment, work-related injury, childbirth and other social insurance on time, respects and protects employees' personal rights and interests, and pays close attention to employees' health, safety and satisfaction. The Company attaches great importance to personnel training, and regularly organizes safety production knowledge training, basic skills training for each post, and comprehensive quality training for management personnel, so that employees can effectively improve their overall professional quality and comprehensive quality, realize the common growth of employees and enterprises, and build a harmonious and stable labor relations. (3) Protection of rights and interests of suppliers, customers and consumers The Company has always followed the trading principle of "honesty, mutual benefit, legality and compliance", paid attention to communication and coordination with all relevant parties, fully respected and protected the legitimate rights and interests of suppliers and customers, and established strategic partnership with suppliers and customers. The Company continues to improve the procurement system and process. In the selection of suppliers, the Company has established a fair and impartial evaluation system to select qualified suppliers. The Company adheres to the supremacy of customer interests, strictly controls product quality, constantly improves service quality, and always pays attention to product safety, so that the rights and interests of all parties have been properly protected. (4) Environmental protection The Company attaches great importance to environmental protection and takes environmental protection, energy conservation and emission reduction as an important work. During the reporting period, the Company carried out effective comprehensive treatment of waste water and waste gas in strict accordance with relevant environmental regulations and corresponding standards, and the waste water and waste gas treatment facilities operated normally. In order to strengthen the management of emission reduction and pollution control, the Company carries out regular inspection, and the overall operation of environmental protection facilities is good, and the work of energy conservation and emission reduction is carried out orderly. 2. Targeted Poverty Alleviation Program （1）Targeted poverty alleviation plan N/A （2）Annual poverty alleviation summary N/A （3）Targeted poverty alleviation （4）Follow up precise poverty alleviation program N/A 3. Environmental protection Are listed company and their subsidiaries key pollutant discharge units announced by environmental protection departments ? □ Yes √ No The Company and its subsidiaries do not belong to the key pollutant discharge units announced by the environmental protection department. XIX.OtherMajorIssues √Applicable□Notapplicable The Company launched the issue of convertible corporate bonds and successfully completed the issuance during the reporting period. The convertible corporate bonds have been listed and traded on Shenzhen Stock Exchange on July 16, 2020. For details, please refer to June 22, June 24, June 29, June 30, 2020, July 2, 2020 July 15, 2020（ www.cninfo.com.cn ）And Securities Daily. XX. Significant Events of Subsidiaries □ Applicable √ Not applicable Section 6 Share Changes and Shareholder Details I. Changes in Shares 1. Changes in shares Unit: shares III. Total number of shares 1,075,247,700 100.00% 0 0 1,075,247,700 100.00% Reasons of share changes √ Applicable □ Not applicable The decrease in the number of shares with limited sales conditions is due to the lifting of the restrictions on the sale of restricted shares held by Chen Hangsheng, director and he Tianle, senior executive, who resigned early during his term of office, and the departure of supervisor Yu Wentian upon the expiration of his term of office. Approval of share changes □ Applicable √ Not applicable Transfer of share ownership □ Applicable √ Not applicable Implementation progress of share repurchase □ Applicable √ Not applicable Implementation of share reduction through aggregate auction □ Applicable √ Not applicable Effects of share changes on the basic EPS, diluted EPS, net assets per share attributable to ordinary shareholders of the Company, and other financial indicators for the last year and the last reporting period □ Applicable √ Not applicable Other contents that the Company considers necessary, or are required by the securities regulatory authorities, to disclose □ Applicable √ Not applicable 2. Changes in restricted shares √ Applicable□Notapplicable Unit: shares II. Issuance and Listing of Securities 1. Issuance of securities (excluding preferred shares) during the reporting period √ Applicable □ Not applicable Explanation of securities issuance (excluding preferred shares) during the reporting period With the approval of "zjxk [2019] No. 2656" issued by China Securities Regulatory Commission, the Company publicly issued 9.726 million convertible corporate bonds on June 24, 2020, with a face value of RMB 100 each and a total issuance amount of RMB 972.6 million. The term of the convertible bonds issued this time is six years from the date of issue, that is, from June 24, 2020 to June 23, 2026. The specific coupon rate of convertible corporate bonds is: 0.40% in the first year, 0.60% in the second year, 1.00% in the third year, 1.50% in the fourth year, 1.80% in the fifth year and 2.00% in the sixth year. With the approval of "SZS [2020] No. 623" issued by Shenzhen Stock Exchange, the Company's RMB 972.6 million convertible bonds will be listed and traded in Shenzhen Stock Exchange from July 16, 2020. The bonds are referred to as "GreatStar convertible bonds" for short, and the bond code is "128115". 2. Explanation on changes in share capital, structure of shareholders, and structure of assets and liabilities □ Applicable √ Not applicable 3. Existing shares held by internal employees of the Company □ Applicable √ Not applicable III. Shareholder and Actual Controller Details 1. Total number of shareholders and their holdings Unit: number of shares 0 Did any of the top 10 common shareholder or the top 10 non-restricted common shareholders of the Company conduct any promissory repurchase during the reporting period？ □ Yes √ No No such cases in the reporting period. 2. Details about the controlling shareholder Nature of ultimate controlling shareholders: natural person Type of controlling shareholders: natural person Change of controlling shareholders during the reporting period □ Applicable √ Not applicable The controlling shareholders of the Company have not changed during the reporting period. 3. Details about the actual controlling persons acting in concert Nature of the actual controller: domestic natural person Type of the actual controller: natural person Change of actual controller during the reporting period □ Applicable √ Not applicable The actual controller did not change during the reporting period. □ Applicable √ Not applicable 4. Other institutional shareholders owning over 10% of shares □ Applicable √ Not applicable 5. Details of restrictions on shareholdings of controlling shareholders, actual controllers, restructuring parties, and other commitment subjects □ Applicable √ Not applicable Section 7 Preferred Shares □ Applicable √ Not applicable No such cases in the reporting period. Section 8 Convertible Corporate Bonds √ Applicable □ Not applicable I. Previous Adjustments of Stock Conversion Price The initial conversion price of the convertible bonds issued this time is RMB 12.28 / share. As of the end of the reporting period, the conversion price has not been adjusted. II. Share Conversions (Cumulative) □ Applicable √ Not applicable III. Top 10 Holders of the Convertible Bond Unit: shares IV. The Profitability, Asset and Credit Status of the Guarantor Have Changed Significantly □ Applicable √ Not applicable V. The Company’s Liabilities at the End of the Reporting Period, Changes in Its Credit Standing, as well as the Cash Arrangements for Repayment of Debt in the Coming Years 1. By the end of the report period, the main financial indicators of company the Company in recent two years are as follows: 2. Credit rating of convertible bonds: On May 22, 2020, Shanghai new century credit evaluation and Investment Service Co., Ltd. issued the credit rating report on the public issuance of convertible corporate bonds by Hangzhou Great Star Industrial Co., Ltd. [new century debt evaluation (010788)]. Shanghai new century credit evaluation and Investment Service Co., Ltd. rated the main credit rating of Hangzhou Great Star Industrial Co., Ltd. as AA, The rating outlook is stable. It thinks that the security of debt service is very high, and gives AA credit rating of "Hangzhou Great Star Industrial Co., Ltd. public offering convertible corporate bonds". During the reporting period, the above ratings did not change. 3. Cash arrangement for debt repayment in future years As of the disclosure date of this report, the Company has fully redeemed the "GreatStar convertible bonds" registered after the closing of the market as of the redemption registration date (February 23, 2021), and completed the payment of the redemption money. There is no cash arrangement for repayment of principal and interest in future years. Section 9 Directors, Supervisors, Senior Management and Employees I. Changes in Shares Held by Directors, Supervisors and Senior Executives II. Changes of Directors, Supervisors, and Senior Executives √ Applicable □ Not applicable III. Resumes of Key Personnel The professional background, main working experience and their main duties in the Company of current directors, supervisors, and senior executives of the Company. 1. Directors Mr. Qiu Jianping，Chairman. Chinese nationality, no permanent residence right outside China. Born in 1962, he graduated from Xi'an Jiaotong University in 1985, majoring in mechanical casting, and obtained a graduate degree and master of engineering degree. From June 2008 to January 2021, he served as the Company's chairman and CEO. From January 2021 to now, he has been the Company chairman. Ms. Chi Xiaoheng, vice chairman and CEO of the Company. Chinese nationality, no permanent residence right outside China. Born in 1975, she has a college degree. From June 2008 to August 2020, she was a director and vice CEO of the Company. From August 2020 to now, he has served as vice chairman and vice CEO of the Company. From January 2021 to now, he has served as vice chairman and CEO of the Company. Mr. Li Zheng, director of the Company, vice CEO. Chinese nationality, no permanent residence right outside China. Born in 1959, he has a college degree. From 2008 to now, he has served as vice chairman and vice CEO of the Company. Ms. Wang Lingling, director of the Company, vice CEO. Chinese nationality, no permanent residence right outside China. Born in 1961, bachelor degree. From 2008 to now, she has been a director and vice CEO of the Company. Ms. Xu Zheng, director of the Company. Chinese nationality, no permanent residence right outside China. Born in 1984, bachelor degree. From 2008 to now, she has been Secretary of the chairman of Great Star Holding Group Co., Ltd. From 2011 to now, she has been a director of Hangcha Group Co., Ltd. Mr. Cen Zhengping, director of the Company, Hong Kong, China, born in 1962, with a master's degree and professor level senior engineer. From May 2019 to now, he has been a director of the Company. Mr. Wang Gang, independent director of the Company. Chinese nationality, no permanent residence right outside China. Born in October 1975, he has a master's degree, certified public accountant and senior economist. From August 2017 to now, he has been director, vice CEO and Secretary of the Board of Directors of Hangzhou Robam Appliances Co., Ltd. From August 2020 to now, he has been the independent director of the Company. Ms. Shi Hong, independent director of the Company. Chinese nationality, no permanent residence right outside China. Born in July 1963, master degree, associate professor. From September 2005 to July 2018, she served as an associate professor of environmental engineering teaching and Research Department of Shanghai Maritime University Marine Science and Engineering College and director of environmental engineering laboratory. From August 2020 to now, she has been the independent director of the Company. Ms. Chen Zhimin, independent director of the Company. Chinese nationality, no permanent residence right outside China. Born in April 1960, she has a master's degree. She is currently a director of Zhejiang CAITONG Capital Investment Co., Ltd., the supervisor of Hangzhou Tigermed Consulting Co., Ltd., Zhejiang Canaan Technology Co., Ltd., Zhejiang Weixing Industrial Development Co., Ltd., Hangzhou Honghua Digital Technology Co., Ltd., and independent director of Tongkun Group Co., Ltd. From August 2020 to now, she has been the independent director of the Company. 2. Supervisors Ms. Jiang Saiping, director of the Company's supervisor. Chinese nationality, no permanent residence right outside China. Born in November 1971, bachelor degree. From 2009 to December 2013, she served as the manager of the Company's foreign sales department, and has been the director of the Company's foreign sales since 2013. Ms. Fu Yajuan, company supervisor. Chinese nationality, no permanent residence right outside China. Born in September 1972, she has a college degree and senior accountant. From July 2008 to now, she has served as the deputy director of finance of the Company. Mr. Chen Jun, company supervisor. Chinese nationality, no permanent residence right outside China. Born in August 1980, he has a bachelor degree and intermediate engineer. From 2009 to now, he has served as the manager of industrial design department, Deputy Secretary General of the Company Enterprise Science and Technology Association and Secretary of R & D and Innovation branch of the GreatStar of the Communist Party of China. 3. Senior Executives Mr. Zhou Siyuan, Secretary of the Board of Directors and vice CEO of the Company. Chinese nationality, no permanent residence right outside China. He was born in 1986, with a master degree. From January 2018 to now, he has been Secretary of the Board of Directors of the Company. Ms. Ni Shuyi, Chief Financial Officer of the Company. Chinese nationality, no permanent residence right outside China. Born in 1976, bachelor degree. From 2008 to now, she has been the Chief Financial Officer the Company. Mr. Wang Weiyi, the Company's vice CEO. Chinese nationality, no permanent residence right outside China. Born in 1970, graduated from Zhejiang University in mechanical manufacturing and technology, with bachelor degree. From 2008 to now, he has been the Company's vice CEO, responsible for product development and quality management of the Company, and is one of the main leaders of the National Laboratory of the Company. Mr. Wang Min, the Company's vice CEO. Chinese nationality, no permanent residence right outside China. Born in 1971, he has a college degree. From 2008 to now, he has been the Company's vice CEO, responsible for the Company's product procurement business. Mr. Li Feng, the Company's vice CEO. Chinese nationality, no permanent residence right outside China. Born in 1975, he has a college degree. From 2008 to now, he has been the Company's vice CEO, responsible for the foreign sales of products. Mr. Zhang Ou, the Company vice CEO, Chinese nationality, no permanent residence abroad, was born in 1967, senior economist and professor. From April 2019 to now, he has been the Company's vice CEO and is responsible for the operation of the laser industry sector of the Company. Positions held in shareholder entities √Applicable □ Not applicable Service status in other company √ Applicable □ Not applicable Details on Company’s current and dismissed directors, supervisors, and senior executives during the reporting period who got punishments from Securities Regulatory Institution in the past three years □ Applicable √ Not applicable IV. Remuneration for Directors, Supervisors, and Senior executives Decision making process, determination basis and actual payment of remuneration for directors, supervisors and senior executives 1. Decision making process of remuneration for directors, supervisors and senior executives The Remuneration Committee of the Company shall propose a remuneration plan for directors, which shall be deliberated and approved by the Board of Directors and the general meeting of shareholders; The salary plan of the Company's supervisor shall be put forward by the human resources department and approved by the Supervisory Committee and the general meeting of shareholders; The salary Committee of the Company's senior management personnel shall put forward part of the plan for post salary, which shall be deliberated and approved by the Board of Directors; The performance pay part is based on the Company's business performance, determines the annual reward principle, combines with the personal performance evaluation of senior executives, and authorizes the chairman to audit and pay. 2. The basis for determining the remuneration of directors, supervisors and senior executives Directors, supervisors and senior executives in the Company receive their job salary according to their positions. At the same time, according to the Company's business performance, the annual reward principle is determined. Combined with personal performance appraisal, chairman is authorized to audit and pay performance salary. Remuneration of directors, supervisors and senior executives during the reporting period Unit: RMB 10 thousands Equity incentives awarded to directors and senior executives of the Company during the reporting period □ Applicable √ Not applicable V. Employees of the Company 1. Number of employees, role type, and educational background 2. Remuneration policy The Company carries out employee salary management in strict accordance with the relevant provisions of the national labor contract law, and pays employees in full and on time before the 20th of each month. The average wage of employees in 2020 is higher than the average wage standard of Zhejiang Province in 2020. The overtime wages of employees in weekdays and weekends are calculated in full according to the regulations, and the comprehensive working hour system is implemented for some positions. We completed one general salary adjustment for all employees, three quarterly salary adjustments and one external salary level survey. There are two kinds of wage calculation schemes: the first-line employees are paid by overtime, and the hourly wage and overtime wage are calculated according to the national labor law; Management positions are calculated by the combination of fixed salary and performance salary. 3. Training plan The training and development of employees is an important part of the Company. In 2020, the training management will continue to focus on three directions: new employee growth education, professional and technical training, and employee professionalism education. Affected by the pandemic situation, the Company organized 227 training sessions in the whole year, with a total of 5,097 people participating in the training, with a total of 14,397 hours; At the same time, continue to carry out the construction of talent echelon, and complete the selection of reserve talents at director level and manager level. In 2021, in order to support the long-term sustainable development of the Company, the Company will focus on the selection and training of reserved talents, strengthen the construction of internal trainer team, build a strong teaching team, and meet the growing training needs. 4. Labor outsourcing □ Applicable √ Not applicable Section 10 Corporate Governance I. Corporate Governance Details During the reporting period, the Company continuously improved the corporate governance structure, established and improved the internal management and control system of the Company, improved the corporate governance level and standardized the operation of the Company in strict accordance with the requirements of relevant laws and regulations such as the Company law, the securities law, the governance standards of listed companies and the Listing Rules of Shenzhen Stock Exchange. As of the end of this report period, the actual situation of corporate governance basically meets the requirements of the relevant listed company governance documents issued by China Securities Regulatory Commission. 1. Shareholders and the Shareholders’ General Meeting In strict accordance with the requirements of the standard opinions of the general meeting of shareholders of listed companies, the articles of association and the rules of procedure of the general meeting of shareholders, the Company standardizes the convening, holding and voting procedures of the general meeting of shareholders, treats all shareholders equally, ensures that all shareholders have the right to know and participate in major matters of the Company, and ensures that all shareholders can fully exercise their rights. 2. Directors and the Board of Directors The Company elects directors in strict accordance with the Company law and the articles of association. At present, the Company has nine directors, including three independent directors, accounting for one-third of all directors. The number and personnel composition of the Board of Directors of the Company meet the requirements of laws and regulations. The board of Directors consists of a Strategy and Development Committee, a Salary and Assessment Committee, a Nomination Committee, and a Management Committee. The audit committee has four special committees. The Board of Directors carries out its work in strict accordance with the articles of association, the rules of procedure of the Board of Directors, the working system of independent director, the working rules of the Secretary of the Board of Directors, and the guidelines for the standardized operation of listed companies of Shenzhen Stock Exchange, and exercises its functions and powers in accordance with the law. All directors of the Company attend the Board of Directors and the general meeting of shareholders on time and are honest and trustworthy perform the director's duties diligently. 3. Supervisors and Supervisory Committees The Company's supervisor will be elected in strict accordance with the Company law, the articles of association and the rules of procedure of the Supervisory Committees. The Company's supervisor will be composed of three supervisors, one of whom is the employee supervisor. The number and personnel composition of the Company's Supervisory Committees meet the requirements of laws and regulations. The Company's supervisors conscientiously perform their duties. In the spirit of being responsible to all shareholders, they hold supervisors' meetings, attend shareholders' meetings and attend the Board of Directors in accordance with the rules of procedure of supervisors and other rules and regulations, and effectively supervise and express independent opinions on the Company's major issues, related party transactions, financial situation, performance of directors and president. 4. Controlling shareholders and the Company The Company and the controlling shareholder are independent in personnel, assets, finance, organization and business, and the Board of Directors, Supervisory Committees and internal organization can operate independently. The behavior of the controlling shareholders of the Company is standardized. They exercise the rights of shareholders and undertake the corresponding obligations through the general meeting of shareholders. They do not directly or indirectly interfere in the decision-making and business activities of the Company beyond the general meeting of shareholders, and damage the legitimate rights and interests of the Company or other shareholders. 5. Performance appraisals and incentives The Company has established a more comprehensive performance appraisal method, and the appointment of senior executives is open and transparent, and in line with the relevant laws, regulations and the Company's internal rules and regulations. The Company has established a work performance evaluation system to link the income of employees with work performance. In the future, the Company will explore more forms of incentive methods, form a multi-level comprehensive incentive mechanism, improve the performance evaluation standards, better mobilize the work enthusiasm of management personnel, and attract and stabilize excellent management talents and technical and business backbones. 6. Interested parties The Company fully respects and protects the legitimate rights and interests of stakeholders, achieves the balance of interests of shareholders, employees, society and other parties, attaches importance to social responsibility, and works with stakeholders to promote the sustainable and healthy development of the Company. 7. Information disclosure and transparency In strict accordance with the provisions of relevant laws and regulations and the Company's information disclosure management system, the Company has strengthened the management of information disclosure affairs, fulfilled the obligation of information disclosure, and designated China Securities Journal, Securities Times, Securities Daily and CNKI as the newspapers and websites of the Company's information disclosure to truly, accurately, timely and completely disclose information, Ensure that all investors have fair access to company information. The Company will continue to improve and perfect the internal rules and regulations of corporate governance, strengthen the standardized operation and promote the sustainable and stable development of the Company in accordance with the requirements of the standards for corporate governance of listed companies and the Listing Rules of Shenzhen Stock Exchange. Are there any differences between the Company’s actual governance status and the Company Law and relevant rules of CSRC？ □ Yes √ No There is no material difference between the Company’s governance status and the Company Law and relevant rules of CSRC. II. Details of the Company’s Separation from the Controlling Shareholder with Respect to Business, Personnel, Assets, Organization, and Financial Affairs During the reporting period, the Company and the controlling shareholder have been completely separated in business, assets, personnel, organization, finance and other aspects. The Company has stable production and operation, perfect internal organization and independent and standardized operation （1） Business Independence of the Company The Company has an independent production, procurement and sales system, which is completely independent of the controlling shareholder in business. There is no horizontal competition between the controlling shareholder and its affiliated enterprises and the Company. （2） Personnel independence of the Company The personnel, personnel and salary of the Company are completely independent. The CEO, vice CEO, Secretary of the Board of Directors, Chief Financial Officer and other senior executives of the Company all work in the Company and receive remuneration. They do not hold any position or receive remuneration in the controlling shareholders and their subordinate enterprises except directors and supervisors. （3） The Company's Asset Integrity The property right relationship between the Company and the controlling shareholders is clear, and the Company's funds, assets and other resources are not illegally occupied or controlled by them. The Company's assets are complete, with production equipment, auxiliary production equipment, patents and other assets suitable for the production and business scope. The Company has complete control and control over all assets. (4) Institutional independence The Board of Directors, Supervisory Committees, the management and other internal organizations of the Company operate independently. All functional departments are completely separated from the controlling shareholders in terms of rights, responsibilities and personnel. There is no superior subordinate relationship between the controlling shareholders and their functional departments and the Company and its functional departments. There is no phenomenon that the controlling shareholders affect the independence of the Company's production, operation and management. (5) Financial independence The Company has set up an independent financial department, established a sound financial and accounting management system, independent accounting, and there is no case of controlling shareholders interfering in the Company's financial and accounting activities. The Company opens an account independently in a commercial bank and does not share a bank account with the controlling shareholder. The Company shall make tax declaration and fulfill tax obligations independently according to law. III. Horizontal Competition □ Applicable √ Not applicable IV. Details about the Annual Shareholders’ General Meeting and Extraordinary Shareholders’ General Meetings Held during the Reporting Period 1. Details about the shareholders’ general meeting during the reporting period 2. Extraordinary Shareholders’ General Meeting requested by the preferred shareholder with restitution of voting right □ Applicable √ Not applicable V. Performance of Independent Directors 1. Details of independent director attendance at board sessions and shareholders’ general meetings Information about directors who do not attend in-person two or more board meetings in a row. N/A 4. Details on independent directors objecting to relevant events Did independent directors object to relevant events？ □ Yes √ No During the reporting period, no independent directors objected to relevant events of the Company. 3. Other details about the performance of independent directors Was advice to the Company from independent directors adopted？ √ Yes □ No Explanation of advice of independent directors for the Company being adopted During the reporting period, the independent director of the Company, in accordance with the articles of association, independent director working system and other laws and regulations, performed his duties in good faith, diligently and conscientiously, actively participated in the Board of Directors and the general meeting of shareholders of the Company, seriously deliberated various motions, and objectively expressed his own views and opinions. At the same time, he took the initiative to communicate with other directors, supervisors, senior executives, internal audit department personnel and external auditors of the Company, paid attention to the Company's operation and management, financial capital status and other matters, provided professional opinions on the Company's internal control, business decision-making, development strategy and other aspects, and expressed independent opinions on the Company's foreign investment and other major matters, We seriously participated in the Company's decision-making, relied on our own professional knowledge and ability to make objective, fair and independent judgments, gave full play to the role of independent director, and safeguarded the legitimate rights and interests of the Company and all shareholders, especially small and medium shareholders. VI. Performance of Special Committee Affiliated to the Board during the Reporting Period 1. Performance of audit committee During the reporting period, the audit committee of the Board of Directors, in accordance with the provisions of laws, regulations, articles of association and detailed rules for the implementation of the audit committee of the Company, guided the audit department of the Company to review the Company's internal control system and implementation, important accounting policies, financial status and operation, and the use and management of raised funds, supervise and urge the financial department to improve the financial management system. In this year, a total of five meetings were held to review the Company's regular financial statements and other matters, to understand the Company's financial situation and operation in detail, to strictly review the construction and implementation of the Company's internal control system, and to effectively guide and supervise the Company's financial situation and operation. In the process of audit work in 2020, the audit committee will negotiate with the audit institution to determine the time arrangement and key audit scope of the annual financial report audit work before the audit institution enters the site; Supervise the progress of the audit work of the accounting firm, maintain the communication with the annual audit certified public accountants, timely exchange opinions on the problems found in the audit process, and ensure that the audit work is completed on time and with high quality. At the same time, the audit report issued by the audit institution is reviewed, and the audit work of the audit institution in 2020 is evaluated and summarized. 2. Performance of remuneration and appraisal committee During the reporting period, the remuneration and appraisal committee of the Board of Directors reviewed the remuneration of the Company's directors and senior executives in 2020 in accordance with laws, regulations, the articles of association and the detailed rules for the implementation of the remuneration and assessment committee. 3. Performance of strategy committee During the reporting period, the strategy committee of the Board of Directors organized and carried out work in accordance with laws, regulations, the articles of association and the implementation rules of the Strategy and Development Committee of the Company, deliberated on the overall future development plan and strategic deployment of the Company, studied and put forward professional opinions on major issues such as major asset restructuring and convertible corporate bond issuance of the Company, to make suggestions for the implementation of major issues and subsequent planning. 4. Performance of Nomination Committee During the reporting period, the Nomination Committee of the Board of Directors organized and carried out work in accordance with laws, regulations, the articles of association and the implementation rules of the Nomination Committee of the Company, reviewed the proposed directors and senior executives of the Company, put forward suggestions, and submitted relevant proposals to the Board of Directors for deliberation. VII. Details on the Work of the Supervisory Committee Were there risks in the Company according to the supervision of Supervisory Committees during the reporting period？ □ Yes √ No Supervisory committees raised no objection to matters under supervision during the reporting period. VIII. Assessment and Incentive Mechanisms for Senior Executives The evaluation, incentive and restraint mechanism of the Company's senior executives is effective through the implementation rules of the Company's remuneration and appraisal committee, that is, through the establishment of the evaluation, incentive mechanism and compensation system, the Company's business objectives and development strategies are organically combined with the personal development objectives, and the Company's long-term interests are consistent with the personal economic interests, Fully mobilize the potential of senior executives to create a good talent competition environment for the development of the Company. The Board of Directors of the Company assesses the work performance of the Company's senior executives by taking the year as the unit and the annual target completion index as the main basis. The Board of Directors is responsible for evaluating the responsibilities, abilities and performance of the CEO. The CEO is responsible for the evaluation of other senior executives of the Company, and the evaluation is conducted in the form of the combination of operation and management work and the completion of relevant tasks. During the reporting period, the senior executives of the Company were able to perform their duties in strict accordance with the Company law, articles of association and other laws and regulations. IX. Internal Controls 1. Details on material weakness found in the Company’s internal control during reporting period □ Yes √ No 2. Self-appraisal report on internal controls X. Audit Report or Authentication Report on Internal Controls Audit Report on Internal Controls Audit opinion in the Audit Report on Internal Controls Did the auditor issue an Audit Report on Internal Controls with a non-standard opinion？ □ Yes √ No Is the Audit Report on Internal Controls from the auditor consistent with the Self-assessment Report from the Board？ √ Yes □ No Section 11 Corporate Bonds Were there bonds publicly issued and listed on an exchange, either at or not at maturity, and are not fully paid on the approval report date of the annual report？ No Section 12 Financial Report I. Audit Report Auditor’s Report To the Shareholders of Hangzhou Great Star Industrial Co., Ltd.: I. Audit Opinion We have audited the accompanying financial statements of Hangzhou Great Star Industrial Co., Ltd. (the Company), which comprise the consolidated and parent company balance sheets as at December 31, 2020, the consolidated and parent company income statements, the consolidated and parent company cash flow statements, and the consolidated and parent company statements of changes in equity for the year then ended, as well as notes to financial statements. In our opinion, the attached financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2020, and of its financial performance and its cash flows for the year then ended in accordance with China Accounting Standards for Business Enterprises. II. Basis for Audit Opinion We conducted our audit in accordance with China Standards on Auditing. Our responsibilities under those standards are further described in the Certified Public Accountant’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the China Code of Ethics for Certified Public Accountants, and we have fulfilled other ethical responsibilities. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. III. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not express a separate opinion on these matters. (I)Revenue recognition 1. Description Please refer to section V (II) 1 and III (XXVI) of the notes to the financial statements for details. The Company’s operating revenue mainly comes from sales of hand tools and power tools, laser measurement, storage, and personal protective equipment (PPE), etc. In 2020, the operating revenue amounted to RMB 8,544,440,154.30. As operating revenue is one of the key performance indicators of the Company, there might be inherent risks that the Company’s management (the “Management”) adopts inappropriate revenue recognition to achieve specific goals or expectations, we have identified revenue recognition as a key audit matter. 2. Responsive audit procedures Our main audit procedures for revenue recognition are as follows: (1) We obtained understandings of key internal controls related to revenue recognition, assessed the design of these controls, determined whether they had been executed, and tested the effectiveness of the operation; (2) We checked sale contracts, obtained understandings of main contractual terms or conditions, and assessed whether the revenue recognition method was appropriate; (3) We performed analysis procedure on operating revenue and gross margin by month, product, client, etc., so as to identify whether there are significant or abnormal fluctuations and find out the reason of fluctuations; (4) For revenue from domestic sales, we checked supporting documents related to revenue recognition by sampling method, including sales contracts, orders, sales invoices, delivery lists, delivery orders, shipping documents, client acceptance receipts, etc.; for revenue from overseas sales, we checked supporting documents including sales contracts, bills of clearance, waybills, client acceptance receipts, sales invoices, etc. by sampling method; (5) We performed confirmation procedures on current sales amount by sampling method in combination with confirmation procedures on accounts receivable; (6) We performed cut-off tests on the operating revenue recognized around the balance sheet date, and assessed whether the operating revenue was recognized in the appropriate period; and (7) We checked whether information related to operating revenue had been presented appropriately in the financial statements. (II)Impairment of goodwill 1. Description Please refer to section III (XXI) and V (I) 19 of the notes to the financial statements for details. As of December 31, 2020, the book balance of goodwill amounted to 1,955,407,883.83RMB, with provision for impairment of 129,879,900.27RMB, and the carrying amount amounted to 1,825,527,983.56RMB. For asset group or asset group portfolio related to goodwill, if there is objective evidence indicating impairment loss, the Management will perform impairment test on goodwill together with related asset group or asset group portfolio at the end of each period, and the recoverable amount of related asset group or asset group portfolio is determined based on the estimated present value of future cash flows. Key assumptions adopted in the impairment test include: revenue growth rate in detailed forecast period, growth rate in perpetual forecast period, gross margin, discount rate, etc. As the amount of goodwill is significant and impairment test involves significant judgment of the Management, we have identified impairment of goodwill as a key audit matter. 2. Responsive audit procedures Our main audit procedures for impairment of goodwill are as follows: (1)We obtained understandings of key internal controls related to impairment of goodwill, assessed the design of these controls, determined whether they had been executed, and tested the effectiveness of their operation; (2) We reviewed the present value of future cash flows estimated by the Management in previous years and the actual operating results, and assessed the accuracy of the Management’s historical estimations; (3) We obtained understandings of and assessed the competency, professional quality and objectivity of external appraisers engaged by the Management; (4) We assessed the reasonableness and consistency of impairment test method adopted by the Management; (5) We assessed the reasonableness of key assumptions used in impairment test and reviewed whether the relevant assumptions were consistent with overall economic environment, industry condition, management situation, historical experience, and other assumptions related to the financial statements used by the Management; (6) We tested the accuracy, completeness and relativity of data used in the impairment test and reviewed the internal consistency of related information in the impairment test; (7) We tested whether the calculation of estimated present value of future cash flows was accurate; and (8) We checked whether information related to impairment of goodwill had been presented appropriately in the financial statements. IV. Other Information The Management is responsible for the other information. The other information comprises the information included in the Company’s annual report, but does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard. V. Responsibilities of the Management and Those Charged with Governance for the Financial Statements The Management is responsible for preparing and presenting fairly the financial statements in accordance with China Accounting Standards for Business Enterprises, as well as designing, implementing and maintaining internal control relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process. VI. Certified Public Accountant’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with China Standards on Auditing will always detect a material misstatement when it exists. Misstatement can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. We exercise professional judgment and maintain professional skepticism throughout the audit performed in accordance with China Standards on Auditing. We also: (I) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. (II) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. (III) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Management. (IV) Conclude on the appropriateness of the Management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. (V) Evaluate the overall presentation, structure and content of the financial statements, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. (VI) Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain sole responsibility for our audit opinion. We communicate with those charged with governance regarding the planned audit scope, time schedule and significant audit findings, including any deficiencies in internal control of concern that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. II. Financial Statements The notes to financial statements expressed in Renminbi RMB 1、Consolidated Balance Sheet By: Hangzhou Great Star Industrial Co., Ltd. Consolidated balance sheet as at December 31, 2020 Currency: RMB Legal representative: Qiu Jianping Officer in charge of accounting: Ni Shuyi Head of accounting department: Ni Shuyi 2、Parent company balance sheet Currency: RMB 3、Consolidated income statement Currency: RMB For the business combination under common control in the current period, the combined party achieved net profit XXRMB, and XXRMB last period Legal representative: Qiu Jianping Officer in charge of accounting: Ni Shuyi Head of accounting department:Ni Shuyi 4、Parent company income statement Currency: RMB 5、Consolidated cash flow statement Currency: RMB 6、Parent company cash flow statement Currency: RMB 7、Consolidated statement of changes in equity Current Period Currency: RMB Preceding period Currency: RMB 8、Parent company statement of changes in equity Current Period Currency: RMB Preceding Period Currency: RMB III. Company profile Hangzhou Great Star Industrial Co., Ltd. (the “Company”), a limited liability company by shares, was transformed from a limited liability company. It was jointly invested by natural persons 仇建平 (Qiu Jianping), 王玲玲 (Wang Lingling), 李政 (Li Zheng), 王伟毅 (Wang Weiyi) and 王暋 (Wang Min). It was registered at Hangzhou Administration for Industry and Commerce on August 9, 2001. After several equity changes, taking March 31, 2008 as benchmark date, the Company was transformed into a limited liability by shares on an integral basis and was registered at Hangzhou Administration for Industry and Commerce on July 2, 2008. Headquartered in Hangzhou, Zhejiang Province, the Company currently holds a business license with unified social credit code of 91330000731506099D. As of December 31, 2020, the Company had registered capital of RMB 1,075,247,700.00, with total share of 1,075,247,700 shares (each with par value of oneRMB), of which, 62,718,689 shares are restricted outstanding A shares, and 1,012,529,011 shares are unrestricted outstanding A shares. The Company’s shares were listed at Shenzhen Stock Exchange on July 13, 2010. The Company belongs to the tool hardware industry. The main business activities are R&D, production and sales of hand tools and power tools, laser measurement, storage and PPE. The Company’s main products are hand tools and power tools, laser measurement, storage and PPE. The financial statements were approved and authorized for issue by the eighth meeting of the fifth session of the Board of Directors dated April 14, 2021. The Company has brought 63 subsidiaries including 杭州联和电气制造有限公司 (Hangzhou United Electric Manufacture Co., Ltd. ), 常州华达科捷光电仪器有限公司 (Changzhou Huada Kejie Opto-electro Instrument Co., Ltd.), 杭州联和工具制造有限公司 (Hangzhou United Tools Co., Ltd.), 浙江巨星工具有限公司 (Zhejiang Great Star Tools Co., Ltd.), Prim’ Tools Limited, 香港巨星国际有限公司 (Hong Kong Great Star International Co., Ltd.), Great Star Tools USA, Inc, GreatStar Europe AG, 海宁巨星智能设备有限公司 (Haining Great Star Intelligent Equipment Co., Ltd.) into the consolidation scope. Please refer to section XII (IX) Interest in other entities of notes to financial statements for details. IV. Preparation basis of the financial statements 1、Preparation basis The financial statements have been prepared on the basis of going concern. 2、Assessment of the ability to continue as a going concern The Company has no events or conditions that may cast significant doubts upon the Company’s ability to continue as a going concern within the 12 months after the balance sheet date. V. Significant accounting policies and estimates Detailed significant accounting policies and estimates notes: The Company has set up accounting policies and estimates on transactions or events such as impairment of financial instruments, depreciation of fixed assets, depreciation of right-of-use assets, amortization of intangible assets, and revenue recognition, etc. based on the Company’s actual production and operation features. 1、 Statement of compliance The financial statements have been prepared in accordance with the requirements of China Accounting Standards for Business Enterprises (CASBEs), and present truly and completely the financial position, results of operations and cash flows of the Company. 2、 Accounting period The accounting year of the Company runs from January 1 to December 31 under the Gregorian calendar. 3、 Operating cycle The Company has a relatively short operating cycle for its business, an asset or a liability is classified as current if it is expected to be realized or due within 12 months. 4、Functional currency The functional currency of the Company and its domestic subsidiaries is Renminbi (RMB) , while the functional currency of subsidiaries engaged in overseas operations including Hong Kong Great Star International Co., Ltd., Great Star Tools USA, Inc and GreatStar Europe AG is the currency of the primary economic environment in which they operate. 5、Accounting treatments of business combination under and not under common control 1. Accounting treatment of business combination under common control Assets and liabilities arising from business combination are measured at carrying amount of the combined party included in the consolidated financial statements of the ultimate controlling party at the combination date. Difference between carrying amount of the equity of the combined party included in the consolidated financial statements of the ultimate controlling party and that of the combination consideration or total par value of shares issued is adjusted to capital reserve, if the balance of capital reserve is insufficient to offset, any excess is adjusted to retained earnings. 2. Accounting treatment of business combination not under common control When combination cost is in excess of the fair value of identifiable net assets obtained from the acquiree at the acquisition date, the excess is recognized as goodwill; otherwise, the fair value of identifiable assets, liabilities and contingent liabilities, and the measurement of the combination cost are reviewed, then the difference is recognized in profit or loss. 6、Compilation method of consolidated financial statements The parent company brings all its controlled subsidiaries into the consolidation scope. The consolidated financial statements are compiled by the parent company according to “CASBE 33 – Consolidated Financial Statements”, based on relevant information and the financial statements of the parent company and its subsidiaries. 7、 Classification of joint arrangements and accounting treatment of joint operations 1. Joint arrangements include joint operations and joint ventures. 2. When the Company is a joint operator of a joint operation, it recognizes the following items in relation to its interest in a joint operation: (1) its assets, including its share of any assets held jointly; (2) its liabilities, including its share of any liabilities incurred jointly; (3) its revenue from the sale of its share of the output arising from the joint operation; (4) its share of the revenue from the sales of the assets by the joint operation; and (5) its expenses, including its share of any expenses incurred jointly. 8、Recognition criteria of cash and cash equivalents Cash as presented in cash flow statement refers to cash on hand and deposit on demand for payment. Cash equivalents refer to short-term, highly liquid investments that can be readily converted to cash and that are subject to an insignificant risk of changes in value. 9、 Foreign currency translation 1. Translation of transactions denominated in foreign currency Transactions denominated in foreign currency are translated into RMB at the spot exchange rate at the transaction date at initial recognition. At the balance sheet date, monetary items denominated in foreign currency are translated at the spot exchange rate at the balance sheet date with difference, except for those arising from the principal and interest of exclusive borrowings eligible for capitalization, included in profit or loss; non-cash items carried at historical costs are translated at the spot exchange rate at the transaction date, with the RMB amounts unchanged; non-cash items carried at fair value in foreign currency are translated at the spot exchange rate at the date when the fair value was determined, with difference included in profit or loss or other comprehensive income. 2. Translation of financial statements measured in foreign currency The assets and liabilities in the balance sheet are translated into RMB at the spot rate at the balance sheet date; the equity items, other than undistributed profit, are translated at the spot rate at the transaction date; the revenues and expenses in the income statement are translated into RMB at the spot exchange rate at the transaction date. The difference arising from the aforementioned foreign currency translation is included in other comprehensive income. 10、Financial instruments 1. Classification of financial assets and financial liabilities Financial assets are classified into the following three categories when initially recognized: (1) financial assets at amortized cost; (2) financial assets at fair value through other comprehensive income; (3) financial assets at fair value through profit or loss. Financial liabilities are classified into the following four categories when initially recognized: (1) financial liabilities at fair value through profit or loss; (2) financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies; (3) financial guarantee contracts not fall within the above categories (1) and (2), and commitments to provide a loan at a below-market interest rate, which do not fall within the above category (1); (4) financial liabilities at amortized cost. 2. Recognition criteria, measurement method and derecognition condition of financial assets and financial liabilities (1) Recognition criteria and measurement method of financial assets and financial liabilities When the Company becomes a party to a financial instrument, it is recognized as a financial asset or financial liability. The financial assets and financial liabilities initially recognized by the Company are measured at fair value; for the financial assets and liabilities at fair value through profit or loss, the transaction expenses thereof are directly included in profit or loss; for other categories of financial assets and financial liabilities, the transaction expenses thereof are included into the initially recognized amount. However, at initial recognition, for accounts receivables that do not contain a significant financing component or in circumstances where the Company does not consider the financing components in contracts within one year,, the Company measures their transaction price in accordance with “CASBE 14 – Revenues”. (2) Subsequent measurement of financial assets 1) Financial assets measured at amortized cost The Company measures its financial assets at the amortized costs using effective interest method. Gains or losses on financial assets that are measured at amortized cost and are not part of hedging relationships shall be included into profit or loss when the financial assets are derecognized, reclassified, amortized using effective interest method or recognized with impairment loss. 2) Debt instrument investments at fair value through other comprehensive income The Company measures its debt instrument investments at fair value. Interests, impairment gains or losses, and gains and losses on foreign exchange that calculated using effective interest method shall be included into profit or loss, while other gains or losses are included into other comprehensive income. Accumulated gains or losses that initially recognized as other comprehensive income should be transferred out into profit or loss when the financial assets are derecognized. 3) Equity instrument investments at fair value through other comprehensive income The Company measures its equity instrument investments at fair value. Dividends obtained (other than those as part of investment cost recovery) shall be included into profit or loss, while other gains or losses are included into other comprehensive income. Accumulated gains or losses that initially recognized as other comprehensive income should be transferred out into retained earnings when the financial assets are derecognized. 4) Financial assets at fair value through profit or loss The Company measures its financial assets at fair value. Gains or losses arising from changes in fair value (including interests and dividends) shall be included into profit or loss, except for financial assets that are part of hedging relationships. (3) Subsequent measurement of financial liabilities 1) Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include held-for-trading financial liabilities (including derivatives that are liabilities) and financial liabilities designated as at fair value through profit or loss. The Company measures such kind of liabilities at fair value. The amount of changes in the fair value of the financial liabilities that are attributable to changes in the Company’s own credit risk shall be included into other comprehensive income, unless such treatment would create or enlarge accounting mismatches in profit or loss. Other gains or losses on those financial liabilities (including interests, changes in fair value that are attributable to reasons other than changes in the Company’s own credit risk) shall be included into profit or loss, except for financial liabilities that are part of hedging relationships. Accumulated gains or losses that originally recognized as other comprehensive income should be transferred out into retained earnings when the financial liabilities are derecognized. 2) Financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies The Company measures its financial liabilities in accordance with “CASBE 23 – Transfer of Financial Assets” 3) Financial guarantee contracts not fall within the above categories 1) and 2), and commitments to provide a loan at a below-market interest rate, which do not fall within the above category 1) The Company measures its financial liabilities at the higher of: a. the amount of loss allowances in accordance with impairment requirements of financial instruments; b. the amount initially recognized less the amount of accumulated amortization recognized in accordance with “CASBE 14 – Revenues”. 4) Financial liabilities at amortized cost The Company measures its financial liabilities at amortized cost using effective interest method. Gains or losses on financial liabilities that are measured at amortized cost and are not part of hedging relationships shall be included into profit or loss when the financial liabilities are derecognized and amortized using effective interest method. (4) Derecognition of financial assets and financial liabilities 1) Financial assets are derecognized when: a. the contractual rights to the cash flows from the financial assets expire; or b. the financial assets have been transferred and the transfer qualifies for derecognition in accordance with “CASBE 23 – Transfer of Financial Assets”. 2) Only when the underlying present obligations of a financial liability are relieved totally or partly may the financial liability be derecognized accordingly. 3. Recognition criteria and measurement method of financial assets transfer Where the Company has transferred substantially all of the risks and rewards related to the ownership of the financial asset, it derecognizes the financial asset, and any right or liability arising from such transfer is recognized independently as an asset or a liability. If it retained substantially all of the risks and rewards related to the ownership of the financial asset, it continues recognizing the financial asset. Where the Company does not transfer or retain substantially all of the risks and rewards related to the ownership of a financial asset, it is dealt with according to the circumstances as follows respectively: (1) if the Company does not retain its control over the financial asset, it derecognizes the financial asset, and any right or liability arising from such transfer is recognized independently as an asset or a liability; (2) if the Company retains its control over the financial asset, according to the extent of its continuing involvement in the transferred financial asset, it recognizes the related financial asset and recognizes the relevant liability accordingly. If the transfer of an entire financial asset satisfies the conditions for derecognition, the difference between the amounts of the following two items are included in profit or loss: (1) the carrying amount of the transferred financial asset as of the date of derecognition; (2) the sum of consideration received from the transfer of the financial asset, and the accumulative amount of the changes of the fair value originally included in other comprehensive income proportionate to the transferred financial asset (financial assets transferred refer to debt instrument investments at fair value through other comprehensive income). If the transfer of financial asset partially satisfies the conditions to derecognition, the entire carrying amount of the transferred financial asset is, between the portion which is derecognized and the portion which is not, apportioned according to their respective relative fair value, and the difference between the amounts of the following two items are included into profit or loss: (1) the carrying amount of the portion which is derecognized; (2) the sum of consideration of the portion which is derecognized, and the portion of the accumulative amount of the changes in the fair value originally included in other comprehensive income which is corresponding to the portion which is derecognized (financial assets transferred refer to debt instrument investments at fair value through other comprehensive income). 4. Fair value determination method of financial assets and liabilities The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value. The inputs to valuation techniques used to measure fair value are arranged in the following hierarchy and used accordingly: (1) Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company can access at the measurement date. (2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability, for example, interest rates and yield curves observable at commonly quoted intervals; market-corroborated inputs; (3) Level 3 inputs are unobservable inputs for the asset or liability. Level 3 inputs include interest rate that is not observable and cannot be corroborated by observable market data at commonly quoted intervals, historical volatility, future cash flows to be paid to fulfill the disposal obligation assumed in business combination, and financial forecast developed using the Company’s own data, etc. 5. Impairment of financial instruments (1) Measurement and accounting treatment The Company, on the basis of expected credit loss, recognizes loss allowances of financial assets at amortized cost, debt instrument investments, contract assets or leases receivable at fair value through other comprehensive income, loan commitments other than financial liabilities at fair value through profit or loss, financial guarantee contracts not belong to financial liabilities at fair value through profit or loss or financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies. Expected credit losses refer to the weighted average of credit losses with the respective risks of a default occurring as the weights. Credit loss refers to the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive (i.e. all cash shortfalls), discounted at the original effective interest rate. Among which, purchased or originated credit-impaired financial assets are discounted at the credit-adjusted effective interest rate. At the balance sheet date, the Company shall only recognize the cumulative changes in the lifetime expected credit losses since initial recognition as a loss allowance for purchased or originated credit-impaired financial assets. For accounts receivable and contract assets resulting from transactions as regulated in “CASBE 14 – Revenues” which do not contain a significant financing component or in circumstances where the Company does not consider the financing components in contracts within one year,, the Company chooses simplified approach to measure the loss allowance at an amount equal to lifetime expected credit losses. For financial assets other than the above, on each balance sheet date, the Company shall assess whether the credit risk on the financial instrument has increased significantly since initial recognition. The Company shall measure the loss allowance for the financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since initial recognition; otherwise, the Company shall measure the loss allowance for that financial instrument at an amount equal to 12-month expected credit loss. Considering reasonable and supportable forward-looking information, the Company compares the risk of a default occurring on the financial instrument as at the balance sheet date with the risk of a default occurring on the financial instrument as at the date of initial recognition, so as to assess whether the credit risk on the financial instrument has increased significantly since initial recognition. The Company may assume that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have relatively low credit risk at the balance sheet date. The Company shall estimate expected credit risk and measure expected credit losses on an individual or a collective basis. When the Company adopts the collective basis, financial instruments are grouped with similar credit risk features. The Company shall remeasure expected credit loss on each balance sheet date, and increased or reversed amounts of loss allowance arising therefrom shall be included into profit or loss as impairment losses or gains. For a financial asset measured at amortized cost, the loss allowance reduces the carrying amount of such financial asset presented in the balance sheet; for a debt investment measured at fair value through other comprehensive income, the loss allowance shall be recognized in other comprehensive income and shall not reduce the carrying amount of such financial asset. (2) Financial instruments with expected credit risk assessed and expected credit losses measured on a collective basis (3) Accounts receivable and contract assets with expected credit losses measured on a collective basis 1) Specific portfolios and method for measuring expected credit loss credit loss rate of accounts receivable, so as to calculate expected credit loss. 2) Accounts receivable – comparison table of ages and lifetime expected credit loss rate of portfolio grouped with ages 6. Offsetting financial assets and financial liabilities Financial assets and financial liabilities are presented separately in the balance sheet and are not offset. However, the Company offsets a financial asset and a financial liability and presents the net amount in the balance sheet when, and only when, the Company: (a) currently has a legally enforceable right to set off the recognized amounts; and (b) intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously. For a transfer of a financial asset that does not qualify for derecognition, the Company does not offset the transferred asset and the associated liability. 11、 Notes Receivable Due to the short term of notes receivable and the low risk of breach of contract, the Company has a strong ability to fulfill its obligation to pay the cash flow of the contract in the short term. Therefore, the Company regards the notes receivable as a financial instrument with lower credit risk and directly assumes that the credit risk has not increased significantly since the initial confirmation. Considering the historical default rate is zero, the Company's fixed bad debt reserve rate for the notes receivable is 0 12、Accounts Receivable Details refer to the Section V、Significant accounting policies and estimates 10、Financial instruments of the financial statements notes 13、 Receivables Financing Details refer to the Section V、Significant accounting policies and estimates 10、Financial instruments of the financial statements notes 14、 Other Receivables Recognition method and accounting treatment of expected credit loss of the other receivable Details refer to the Section V、Significant accounting policies and estimates 10、Financial instruments of the financial statements notes 15、 Inventories 1. Classification of inventories Inventories include finished goods or goods held for sale in the ordinary course of business, work in process in the process of production, and materials or supplies etc. to be consumed in the production process or in the rendering of services. 2. Accounting method for dispatching inventories: Inventories dispatched from storage are accounted for with weighted average method at the end of each month. 3. Basis for determining net realizable value At the balance sheet date, inventories are measured at the lower of cost and net realizable value; provisions for inventory write-down are made on the excess of its cost over the net realizable value. The net realizable value of inventories held for sale is determined based on the amount of the estimated selling price less the estimated selling expenses and relevant taxes and surcharges in the ordinary course of business; the net realizable value of materials to be processed is determined based on the amount of the estimated selling price less the estimated costs of completion, selling expenses and relevant taxes and surcharges in the ordinary course of business; at the balance sheet date, when only part of the same item of inventories have agreed price, their net realizable value is determined separately and is compared with their costs to set the provision for inventory write-down to be made or reversed. 4. Inventory system Perpetual inventory method is adopted. 5. Amortization method of low-value consumables and packages (1) Low-value consumables Low-value consumables are amortized with one-off method. (2) Packages Packages are amortized with one-off method. 16、 Contract assets The Company presents contract assets or contract liabilities in the balance sheet based on the relationship between its performance obligations and customers’ payments. Contract assets and contract liabilities under the same contract shall offset each other and be presented on a net basis. The Company presents an unconditional right to consideration (i.e., only the passage of time is required before the consideration is due) as a receivable, and presents a right to consideration in exchange for goods that it has transferred to a customer (which is conditional on something other than the passage of time) as a contract asset. 17、 Contract costs Assets related to contract costs including costs of obtaining a contract and costs to fulfil a contract. The Company recognizes as an asset the incremental costs of obtaining a contract if those costs are expected to be recovered. The costs of obtaining a contract shall be included into profit or loss when incurred if the amortization period of the asset is one year or less. If the costs incurred in fulfilling a contract are not within the scope of standards related to inventories, fixed assets or intangible assets, etc., the Company shall recognize the costs to fulfil a contract as an asset if all the following criteria are satisfied: 1. The costs relate directly to a contract or to an anticipated contract, including direct labor, direct materials, manufacturing overhead cost (or similar cost), cost that are explicitly chargeable to the customer under the contract, and other costs that are only related to the contract; 2. The costs enhance resources of the Company that will be used in satisfying performance obligations in the future; and 3. The costs are expected to be recovered. An asset related to contract costs shall be amortized on a systematic basis that is consistent with related goods or services, with amortization included into profit or loss. The Company shall make provision for impairment and recognize an impairment loss to the extent that the carrying amount of an asset related to contract costs exceeds the remaining amount of consideration that the Company expects to receive in exchange for the goods or services to which the asset relates less the costs expected to be incurred. The Company shall recognize a reversal of an impairment loss previously recognized in profit or loss when the impairment conditions no longer exist or have improved. The carrying amount of the asset after the reversal shall not exceed the amount that would have been determined on the reversal date if no provision for impairment had been made previously. 18、 Non-current assets or disposal groups classified as held for sale 1. Classification of non-current assets or disposal groups as held for sale Non-current assets or disposal groups are accounted for as held for sale when the following conditions are all met: a. the asset must be available for immediate sale in its present condition subject to terms that are usual and customary for sales of such assets or disposal groups; b. its sales must be highly probable, i.e., the Company has made a decision on the sale plan and has obtained a firm purchase commitment, and the sale is expected to be completed within one year. When the Company acquires a non-current asset or disposal group with a view to resale, it shall classify the non-current asset or disposal group as held for sale at the acquisition date only if the requirement of “expected to be completed within one year” is met at that date and it is highly probable that other criteria for held for sale will be met within a short period (usually within three months). An asset or a disposal group is still accounted for as held for sale when the Company remains committed to its plan to sell the asset or disposal group in the circumstance that non-related party transactions fail to be completed within one year due to one of the following reasons: a. a buyer or others unexpectedly set conditions that will extend the sale period, while the Company has taken timely actions to respond to the conditions and expects a favorable resolution of the delaying factors within one year since the setting; b. a non-current asset or disposal group classified as held for sale fails to be sold within one year due to rare cases, and the Company has taken action necessary to respond to the circumstances during the initial one-year period and the criteria for held for sale are met. 2. Measurement of non-current assets or disposal groups as held for sale (1) Initial measurement and subsequent measurement For initial measurement and subsequent measurement as at the balance sheet date of a non-current asset or disposal group as held for sale, where the carrying amount is higher than the fair value less costs to sell, the carrying amount is written down to the fair value less costs to sell, and the write-down is recognized in profit or loss as assets impairment loss, meanwhile, provision for impairment of assets as held for sale shall be made. For a non-current asset or disposal group classified as held for sale at the acquisition date, the asset or disposal group is measured on initial recognition at the lower of its initial measurement amount had it not been so classified and fair value less costs to sell. Apart from the non-current asset or disposal group acquired through business combination, the difference arising from the initial recognition of a non-current asset or disposal group at the fair value less costs to sell shall be included into profit or loss. The assets impairment loss recognized for a disposal group as held for sale shall reduce the carrying amount of goodwill in the disposal group first, and then reduce its carrying amount based on the proportion of each non-current asset’s carrying amount in the disposal group. No provision for depreciation or amortization shall be made on non-current assets as held for sale or non-current assets in disposal groups as held for sale, while interest and other expenses attributable to the liabilities of a disposal group as held for sale shall continue to be recognized. (2) Reversal of assets impairment loss When there is a subsequent increase in fair value less costs to sell of a non-current asset as held for sale at the balance sheet date, the write-down shall be recovered, and shall be reversed not in excess of the impairment loss that has been recognized after the non-current asset was classified as held for sale. The reversal shall be included into profit or loss. Assets impairment loss that has been recognized before the classification is not reversed. When there is a subsequent increase in fair value less costs to sell of a disposal group as held for sale at the balance sheet date, the write-down shall be recovered, and shall be reversed not in excess of the non-current assets impairment loss that has been recognized after the disposal group was classified as held for sale. The reversal shall be included into profit or loss. The reduced carrying amount of goodwill and non-current assets impairment loss that has been recognized before the classification is not reversed. For the subsequent reversal of the impairment loss that has been recognized in a disposal group as held for sale, the carrying amount is increased based on the proportion of carrying amount of each non-current asset (excluding goodwill) in the disposal group. (3) Non-current asset or disposal group that is no longer classified as held for sale and derecognized A non-current asset or disposal group that does not met criteria for held for sale and no longer classified as held for sale, or a non-current asset that removed from a disposal group as held for sale shall be measured at the lower of: a. its carrying amount before it was classified as held for sale, adjusted for any depreciation, amortization or impairment that would have been recognized had it not been classified as held for sale; and b. its recoverable amount. When a non-current asset or disposal group classified as held for sale is derecognized, unrecognized gains or losses shall be included into profit or loss. 19、 Debt investments 20、 Other debt investments 21、 Long-term receivables 22、 Long-term equity investments 1. Judgment of joint control and significant influence Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control of these policies. 2. Determination of investment cost (1) For business combination under common control, if the consideration of the combining party is that it makes payment in cash, transfers non-cash assets, assumes its liabilities or issues equity securities, on the date of combination, it regards the share of the carrying amount of the equity of the combined party included in the consolidated financial statements of the ultimate controlling party as the initial cost of the investment. The difference between the initial cost of the long-term equity investments and the carrying amount of the combination consideration paid or the par value of shares issued offsets capital reserve; if the balance of capital reserve is insufficient to offset, any excess is adjusted to retained earnings. When long-term equity investments are obtained through business combination under common control achieved in stages, the Company determines whether it is a “bundled transaction”. If it is a “bundled transaction”, stages as a whole are considered as one transaction in accounting treatment. If it is not a “bundled transaction”, on the date of combination, investment cost is initially recognized at the share of the carrying amount of net assets of the combined party included the consolidated financial statements of the ultimate controlling party. The difference between the initial investment cost of long-term equity investments at the acquisition date and the carrying amount of the previously held long-term equity investments plus the carrying amount of the consideration paid for the newly acquired equity is adjusted to capital reserve; if the balance of capital reserve is insufficient to offset, any excess is adjusted to retained earnings. (2) For business combination not under common control, investment cost is initially recognized at the acquisition-date fair value of considerations paid. When long-term equity investments are obtained through business combination not under common control achieved in stages, the Company determined whether they are stand-alone financial statements or consolidated financial statements in accounting treatment: 1) In the case of stand-alone financial statements, investment cost is initially recognized at the carrying amount of the previously held long-term equity investments plus the carrying amount of the consideration paid for the newly acquired equity. 2) In the case of consolidated financial statements, the Company determines whether it is a “bundled transaction”. If it is a “bundled transaction”, stages as a whole are considered as one transaction in accounting treatment. If it is not a “bundled transaction”, the carrying amount of the acquirer’s previously held equity interest in the acquiree is remeasured at the acquisition-date fair value, and the difference between the fair value and the carrying amount is recognized in investment income; when the acquirer’s previously held equity interest in the acquiree involves other comprehensive income under equity method, the related other comprehensive income is reclassified as income for the acquisition period, excluding other comprehensive income arising from changes in net liabilities or assets from remeasurement of defined benefit plan of the acquiree. (3) Long-term equity investments obtained through ways other than business combination: the initial cost of a long-term equity investment obtained by making payment in cash is the purchase cost which is actually paid; that obtained on the basis of issuing equity securities is the fair value of the equity securities issued; that obtained through debt restructuring is determined according to “CASBE 12 – Debt Restructuring”; and that obtained through non-cash assets exchange is determined according to “CASBE 7 – Non-cash Assets Exchange”. 3. Subsequent measurement and recognition method of profit or loss For long-term equity investments with control relationship, it is accounted for with cost method; for long-term equity investments with joint control or significant influence relationship, it is accounted for with equity method. 4. Disposal of a subsidiary in stages resulting in the Company’s loss of control (1) Stand-alone financial statements The difference between the carrying amount of the disposed equity and the consideration obtained thereof is recognized in profit or loss. If the disposal does not result in the Company’s loss of significant influence or joint control, the remained equity is accounted for with equity method; however, if the disposal results in the Company’s loss of control, joint control, or significant influence, the remained equity is accounted for according to “CASBE 22 – Financial Instruments: Recognition and Measurement”. (2) Consolidated financial statements 1) Disposal of a subsidiary in stages not qualified as “bundled transaction” resulting in the Company’s loss of control Before the Company’s loss of control, the difference between the disposal consideration and the proportionate share of net assets in the disposed subsidiary from acquisition date or combination date to the disposal date is adjusted to capital reserve (capital premium), if the balance of capital reserve is insufficient to offset, any excess is adjusted to retained earnings. When the Company loses control, the remained equity is remeasured at the loss-of-control-date fair value. The aggregated value of disposal consideration and the fair value of the remained equity, less the share of net assets in the disposed subsidiary held before the disposal from the acquisition date or combination date to the disposal date is recognized in investment income in the period when the Company loses control over such subsidiary, and meanwhile goodwill is offset correspondingly. Other comprehensive income related to equity investments in former subsidiary is reclassified as investment income upon the Company’s loss of control. 2) Disposal of a subsidiary in stages qualified as “bundled transaction” resulting in the Company’s loss of control In case of “bundled transaction”, stages as a whole are considered as one transaction resulting in loss of control in accounting treatment. However, before the Company loses control, the difference between the disposal consideration at each stage and the proportionate share of net assets in the disposed subsidiary is recognized as other comprehensive income at the consolidated financial statements and reclassified as profit or loss in the period when the Company loses control over such subsidiary. 23、 Investment property Investment property measurement model Measurement by cost model The depreciation or amortization method 1. Investment property includes land use right of leased-out property and of property held for capital appreciation and buildings that have been leased out. 2. The initial measurement of investment property is based on its cost, and subsequent measurement is made using the cost model, the depreciation or amortization method is the same as that of fixed assets and intangible assets. 24、 Fixed assets 1. Recognition principles of fixed assets Fixed assets are tangible assets held for use in the production of goods or rendering of services, for rental to others, or for administrative purposes, and expected to be used during more than one accounting year. Fixed assets are recognized if, and only if, it is probable that future economic benefits associated with the assets will flow to the Company and the cost of the assets can be measured reliably. 2. Depreciation method of different categories of fixed assets 3. Recognition and pricing principles of fixed assets rented-in under finance lease Finance lease is determined when one or a combination of the following conditions are satisfied: (1) the ownership has been transferred to the lessee when the leasing term is due; (2) the lessee has the option to purchase the leasing asset at a price that is much lower than its fair value, so it can be reasonably determined that the lessee will take the option at the very beginning of the lease; (3) the leasing term accounts for most time of the useful life (ordinarily accounting for 75% or higher) even if the ownership does not transfer to the lessee; (4) the present value of the minimum amount of rent that the lessee has to pay at the first day of the lease amounts to 90% or higher of its fair value at the same date; or the present value of the minimum amount of rent that the lessor collects at the first day of the lease amounts to 90% or higher of its fair value at the same date; and/or (5) the leased assets are of such a specialized nature that only the lessee can use them without major modifications. Fixed assets rented-in under finance lease are recorded at the lower of fair value and the present value of the minimum lease payment at the inception of the lease, and are depreciated following the depreciation policy for self-owned fixed assets. 25、 Construction in progress 1. Construction in progress is recognized if, and only if, it is probable that future economic benefits associated with the item will flow to the Company, and the cost of the item can be measured reliably. Construction in progress is measured at the actual cost incurred to reach its designed usable conditions. 2. Construction in progress is transferred into fixed assets at its actual cost when it reaches the designed usable conditions. When the auditing of the construction in progress was not finished while reaching the designed usable conditions, it is transferred to fixed assets using estimated value first, and then adjusted accordingly when the actual cost is settled, but the accumulated depreciation is not to be adjusted retrospectively. 26、Borrowing costs 1. Recognition principle of borrowing costs capitalization Where the borrowing costs incurred to the Company can be directly attributable to the acquisition and construction or production of assets eligible for capitalization, it is capitalized and included in the costs of relevant assets; other borrowing costs are recognized as expenses on the basis of the actual amount incurred, and are included in profit or loss. 2. Borrowing costs capitalization period (1) The borrowing costs are not capitalized unless the following requirements are all met: 1) the asset disbursements have already incurred; 2) the borrowing costs have already incurred; and 3) the acquisition and construction or production activities which are necessary to prepare the asset for its intended use or sale have already started. (2) Suspension of capitalization: where the acquisition and construction or production of a qualified asset is interrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowing costs is suspended; the borrowing costs incurred during such period are recognized as expenses, and are included in profit or loss, till the acquisition and construction or production of the asset restarts. (3) Ceasing of capitalization: when the qualified asset under acquisition and construction or production is ready for the intended use or sale, the capitalization of the borrowing costs is ceased. 3. Capitalization rate and capitalized amount of borrowing costs For borrowings exclusively for the acquisition and construction or production of assets eligible for capitalization, the to-be-capitalized amount of interests is determined in light of the actual interest expenses incurred (including amortization of premium or discount based on effective interest method) of the special borrowings in the current period less the interest income on the unused borrowings as a deposit in the bank or as a temporary investment; where a general borrowing is used for the acquisition and construction or production of assets eligible for capitalization, the Company calculates and determines the to-be-capitalized amount of interests on the general borrowing by multiplying the weighted average asset disbursement of the part of the accumulative asset disbursements less the general borrowing by the capitalization rate of the general borrowing used. 27、Productive biological assets 28、Oil & gas assets 29、Right-of-use assets 1. Recognition principles of right-of-use asset Right-of-use asset refers to the asset that represents the Company’s right as lessee to use an underlying asset for the lease term. The Company recognizes a right-of-use asset at the commencement date. Right-of-use assets are recognized only when: (a) it is probable that the economic benefits will flow to the Company; and (b) the cost of the right-of-use asset can be measured reliably. 2. Initial measurement of the right-of-use asset The right-of-use asset is measured at cost and the cost shall comprise: (1) the amount of the initial measurement of the lease liability; (2) any lease payments made at or before the commencement date, less any lease incentives received; (3) any initial direct costs incurred by the lessee; and (4) an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease. 3. Subsequent measurement of the right-of-use asset (1) After the commencement date, the Company measures the right-of-use asset applying a cost model. (2) The Company shall depreciate the right-of-use asset. If it is reasonable to be certain that the ownership of the underlying asset can be acquired by the end of the lease term, the Company depreciates the right-of-use asset from the commencement date to the end of the useful life of the underlying asset. Otherwise, the Company depreciates the right-of-use asset from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. Depreciation method of different categories of right-of-use assets are as follows: (3) When the Company remeasures the lease liability on the basis of the present value of the lease payments after changes and adjusts the carrying amount of the right-of-use asset accordingly, if the carrying amount of the right-of-use asset is reduced to zero and there shall be a further reduction in the measurement of the lease liability, any remaining amount of the remeasurement shall be recognized in profit or loss. 30、Intangible assets （1）Measurement method, useful life and impairment test 1. Intangible assets include land ownership, land use right, patent right, trademark right, propitiatory technology, management software, and sewage disposal right etc. The initial measurement of intangible assets is based on its cost. 2. For intangible assets with finite useful lives, their amortization amounts are amortized within their useful lives systematically and reasonably, if it is unable to determine the expected realization pattern reliably, intangible assets are amortized by the straight-line method with details as follows: Intangible assets with indefinite useful lives are not amortized, but their useful life is reviewed annually. “Indefinite useful life” is determined when it is impossible to estimate the period of future economic benefits brought by the intangible asset to the Company. In the Company, intangible asset with indefinite useful life refers to land ownership. （2）Accounting policy of expenditures on the research phase of an internal project Expenditures on the research phase of an internal project are recognized as profit or loss when they are incurred. An intangible asset arising from the development phase of an internal project is recognized if the Company can demonstrate all of the followings: (1) the technical feasibility of completing the intangible asset so that it will be available for use or sale; (2) its intention to complete the intangible asset and use or sell it; (3) how the intangible asset will generate probable future economic benefits, among other things, the Company can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset; (4) the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and (5) its ability to measure reliably the expenditure attributable to the intangible asset during its development. 31、Impairment of part of long-term assets For long-term assets such as long-term equity investments, investment property at cost model, fixed assets, construction in progress, right-of-use assets, intangible assets with finite useful lives, etc., if at the balance sheet date there is indication of impairment, the recoverable amount is to be estimated. For goodwill recognized in business combination and intangible assets with indefinite useful lives, no matter whether there is indication of impairment, impairment test is performed annually. Impairment test on goodwill is performed on related asset group or asset group portfolio. When the recoverable amount of such long-term assets is lower than their carrying amount, the difference is recognized as provision for assets impairment through profit or loss. 32、Long-term prepayments Long-term prepayments are expenses that have been recognized but with amortization period over one year (excluding one year). They are recorded with actual cost, and evenly amortized within the beneficiary period or stipulated period. If items of long-term prepayments fail to be beneficial to the following accounting periods, residual values of such items are included in profit or loss. 33、Contract liabilities The Company presents contract assets or contract liabilities in the balance sheet based on the relationship between its performance obligations and customers’ payments. Contract assets and contract liabilities under the same contract shall offset each other and be presented on a net basis. The Company presents an obligation to transfer goods to a customer for which the Company has received consideration (or the amount is due) from the customer as a contract liability. 34、Employee benefits （1）Accounting treatment for short-term employee benefits The Company recognizes, in the accounting period in which an employee provides service, short-term employee benefits actually incurred as liabilities, with a corresponding charge to profit or loss or the cost of a relevant asset. （2）Accounting treatment for post-employment benefits The Company classifies post-employment benefit plans as either defined contribution plans or defined benefit plans. (1) The Company recognizes in the accounting period in which an employee provides service the contribution payable to a defined contribution plan as a liability, with a corresponding charge to profit or loss or the cost of a relevant asset. (2) Accounting treatment by the Company for defined benefit plan usually involves the following steps: 1) In accordance with the projected unit credit method, using unbiased and mutually compatible actuarial assumptions to estimate related demographic variables and financial variables, measure the obligations under the defined benefit plan, and determine the periods to which the obligations are attributed. Meanwhile, the Company discounts obligations under the defined benefit plan to determine the present value of the defined benefit plan obligations and the current service cost; 2) When a defined benefit plan has assets, the Company recognizes the deficit or surplus by deducting the fair value of defined benefit plan assets from the present value of the defined benefit plan obligation as a net defined benefit plan liability or net defined benefit plan asset. When a defined benefit plan has a surplus, the Company measures the net defined benefit plan asset at the lower of the surplus in the defined benefit plan and the asset ceiling; 3) At the end of the period, the Company recognizes the following components of employee benefits cost arising from defined benefit plan: a. service cost; b. net interest on the net defined benefit plan liability (asset); and c. changes as a result of remeasurement of the net defined benefit liability (asset). Item a and item b are recognized in profit or loss or the cost of a relevant asset. Item c is recognized in other comprehensive income and is not to be reclassified subsequently to profit or loss. However, the Company may transfer those amounts recognized in other comprehensive income within equity. （3）Accounting treatment for termination benefits Termination benefits provided to employees are recognized as an employee benefit liability for termination benefits, with a corresponding charge to profit or loss at the earlier of the following dates: (1). when the Company cannot unilaterally withdraw the offer of termination benefits because of an employment termination plan or a curtailment proposal; or (2). when the Company recognizes cost or expenses related to a restructuring that involves the payment of termination benefits. （4）Accounting treatment for Other long-term employee benefits When other long-term employee benefits provided to the employees satisfied the conditions for classifying as a defined contribution plan, those benefits are accounted for in accordance with the requirements relating to defined contribution plan, while other benefits are accounted for in accordance with the requirements relating to defined benefit plan. The Company recognizes the cost of employee benefits arising from other long-term employee benefits as the followings: a. service cost; b. net interest on the net liability or net assets of other long-term employee benefits; and c. changes as a result of remeasurement of the net liability or net assets of other long-term employee benefits. As a practical expedient, the net total of the aforesaid amounts is recognized in profit or loss or included in the cost of a relevant asset. 35、Lease liabilities 36、Provisions 1. Provisions are recognized when fulfilling the present obligations arising from contingencies such as providing guarantee for other parties, litigation, products quality guarantee, onerous contract, etc., may cause the outflow of the economic benefit and such obligations can be reliably measured. 2. The initial measurement of provisions is based on the best estimated expenditures required in fulfilling the present obligations, and its carrying amount is reviewed at the balance sheet date. 37、Share-based payment 1. Types of share-based payment Share-based payment consists of equity-settled share-based payment and cash-settled share-based payment. 2. Accounting treatment for settlements, modifications and cancellations of share-based payment plans (1) Equity-settled share-based payment For equity-settled share-based payment transaction with employees, if the equity instruments granted vest immediately, the fair value of those equity instruments is measured at grant date and recognized as transaction cost or expense, with a corresponding adjustment in capital reserve; if the equity instruments granted do not vest until the counterparty completes a specified period of service, at the balance sheet date within the vesting period, the fair value of those equity instruments measured at grant date based on the best estimate of the number of equity instruments expected to vest is recognized as transaction cost or expense, with a corresponding adjustment in capital reserve. For equity-settled share-based payment transaction with parties other than employees, if the fair value of the services received can be measured reliably, the fair value is measured at the date the Company receives the service; if the fair value of the services received cannot be measured reliably, but that of equity instruments can be measured reliably, the fair value of the equity instruments granted measured at the date the Company receives the service is referred to, and recognized as transaction cost or expense, with a corresponding increase in equity. (2) Cash-settled share-based payment For cash-settled share-based payment transactions with employees, if share appreciation rights vest immediately, the fair value of the liability incurred as the acquisition of services is measured at grant date and recognized as transaction cost or expense, with a corresponding increase in liabilities; if share appreciation rights do not vest until the employees have completed a specified period of service, the liability is measured, at each balance sheet date until settled, at the fair value of the share appreciation rights measured at grant date based on the best estimate of the number of share appreciation right expected to vest. (3) Modifications and cancellations of share-based payment plan If the modification increases the fair value of the equity instruments granted, the Company includes the incremental fair value granted in the measurement of the amount recognized for services received as consideration for the equity instruments granted; similarly, if the modification increases the number of equity instruments granted, the Company includes the fair value of the additional equity instruments granted, in the measurement of the amount recognized for services received as consideration for the equity instruments granted; if the Company modifies the vesting conditions in a manner that is beneficial to the employee, the Company takes the modified vesting conditions into account. If the modification reduces the fair value of the equity instruments granted, the Company does not take into account that decrease in fair value and continue to measure the amount recognized for services received as consideration for the equity instruments based on the grant date fair value of the equity instruments granted; if the modification reduces the number of equity instruments granted to an employee, that reduction is accounted for as a cancellation of that portion of the grant; if the Company modifies the vesting conditions in a manner that is not beneficial to the employee, the Company does not take the modified vesting conditions into account. If the Company cancels or settles a grant of equity instruments during the vesting period (other than that cancelled when the vesting conditions are not satisfied), the Company accounts for the cancellation or settlement as an acceleration of vesting, and therefore recognizes immediately the amount that otherwise would have been recognized for services received over the remainder of the vesting period. 38、Other financial instruments such as preferred shares, perpetual bonds 39、Revenue Revenue recognition and measurement principle 1. Revenue recognition principles At contract inception, the Company shall assess the contracts and shall identify each performance obligation in the contracts, and determine whether the performance obligation should be satisfied over time or at a point in time. The Company satisfies a performance obligation over time if one of the following criteria are met, otherwise, the performance obligation is satisfied at a point in time: (1) the customer simultaneously receives and consumes the economic benefits provided by the Company’s performance as the Company performs; (2) the customer can control goods as they are created by the Company’s performance; (3) goods created during the Company’s performance have irreplaceable uses and the Company has an enforceable right to the payments for performance completed to date during the whole contract period. For each performance obligation satisfied over time, the Company shall recognize revenue over time by measuring the progress towards complete satisfaction of that performance obligation. In the circumstance that the progress cannot be measured reasonably, but the costs incurred in satisfying the performance obligation are expected to be recovered, the Company shall recognize revenue only to the extent of the costs incurred until it can reasonably measure the progress. For each performance obligation satisfied at a point in time, the Company shall recognize revenue at the time point that the client obtains control of relevant goods or services. To determine whether the customer has obtained control of goods, the Company shall consider the following indications: (1) the Company has a present right to payment for the goods, i.e., the customer is presently obliged to pay for the goods; (2) the Company has transferred the legal title of the goods to the customer, i.e., the customer has legal title to the goods; (3) the Company has transferred physical possession of the goods to the client, i.e., the customer has physically possessed the goods; (4) the Company has transferred significant risks and rewards of ownership of the goods to the client, i.e., the customer has obtained significant risks and rewards of ownership of the goods; (5) the customer has accepted the goods; (6) other evidence indicating the customer has obtained control over the goods. 2. Revenue measurement principle (1) Revenue is measured at the amount of the transaction price that is allocated to each performance obligation. The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer, excluding amounts collected on behalf of third parties and those expected to be refunded to the customer. (2) If the consideration promised in a contract includes a variable amount, the Company shall confirm the best estimate of variable consideration at expected value or the most likely amount. However, the transaction price that includes the amount of variable consideration only to the extent that it is high probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. (3) In the circumstance that the contract contains a significant financing component, the Company shall determine the transaction price based on the price that a customer would have paid for if the customer had paid cash for obtaining control over those goods or services. The difference between the transaction price and the amount of promised consideration is amortized under effective interest method over contractual period. The effects of a significant financing component shall not be considered if the Company expects, at the contract inception, that the period between when the customer obtains control over goods or services and when the customer pays consideration will be one year or less. (4) For contracts containing two or more performance obligations, the Company shall determine the stand-alone selling price at contract inception of the distinct good underlying each performance obligation and allocate the transaction price to each performance obligation on a relative stand-alone selling price basis. 3. Revenue recognition method The Company’s sales of hand tools and power tools, laser measurement, storage and PPE are performance obligations satisfied at a point in time. Revenue from domestic sales is recognized when the Company has delivered goods to the designated address as agreed by contract and such delivered goods have been verified for acceptance by customers, and the Company has collected the payments or has obtained the right to the payments, and related economic benefits are highly probable to flow to the Company. Revenue from overseas sales is recognized when the Company has declared goods to the customs based on contractual agreements and has obtained a bill of lading, and the Company has collected the payments or has obtained the right to the payments, and related economic benefits are highly probable to flow to the Company. Revenue recognition principles’ differences may occur in the similar business but different operating models. 40、Government grants 1. Government grants shall be recognized if, and only if, the following conditions are all met: (1) the Company will comply with the conditions attaching to the grants; (2) the grants will be received. Monetary government grants are measured at the amount received or receivable. Non-monetary government grants are measured at fair value, and can be measured at nominal amount in the circumstance that fair value cannot be assessed. 2. Government grants related to assets Government grants related to assets are government grants with which the Company constructs or otherwise acquires long-term assets under requirements of government. In the circumstances that there is no specific government requirement, the Company shall determine based on the primary condition to acquire the grants, and government grants related to assets are government grants whose primary condition is to construct or otherwise acquire long-term assets. They offset carrying amount of relevant assets, or they are recognized as deferred income. If recognized as deferred income, they are included in profit or loss on a reasonable and systematic basis over the useful lives of the relevant assets. Those measured at notional amount are directly included into profit or loss. For assets sold, transferred, disposed or damaged within the useful lives, balance of unamortized deferred income is transferred into profit or loss of the period in which the disposal occurred. 3. Government grants related to income Government grants related to income are government grants other than those related to assets. For government grants that contain both parts related to assets and parts related to income, in which those two parts are blurred, they are thus collectively classified as government grants related to income. For government grants related to income used for compensating the related future cost, expenses or losses, they are recognized as deferred income and included in profit or loss or used to offset relevant cost during the period in which the relevant cost, expenses or losses are recognized; for government grants related to income used for compensating the related cost, expenses or losses incurred to the Company, they are directly included in profit or loss or used to offset relevant cos 4. Government grants related to the ordinary course of business shall be included into other income or used to offset relevant cost based on business nature, while those not related to the ordinary course of business shall be included into non-operating revenue or expenditures. 41、Deferred tax assets/Deferred tax liabilities 1. Deferred tax assets or deferred tax liabilities are calculated and recognized based on the difference between the carrying amount and tax base of assets and liabilities (and the difference of the carrying amount and tax base of items not recognized as assets and liabilities but with their tax base being able to be determined according to tax laws) and in accordance with the tax rate applicable to the period during which the assets are expected to be recovered or the liabilities are expected to be settled. 2. A deferred tax asset is recognized to the extent of the amount of the taxable income, which it is most likely to obtain and which can be deducted from the deductible temporary difference. At the balance sheet date, if there is any exact evidence that it is probable that future taxable income will be available against which deductible temporary differences can be utilized, the deferred tax assets unrecognized in prior periods are recognized. 3. At the balance sheet date, the carrying amount of deferred tax assets is reviewed. The carrying amount of a deferred tax asset is reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow the benefit of the deferred tax asset to be utilized. Such reduction is subsequently reversed to the extent that it becomes probable that sufficient taxable income will be available. 4. The income tax and deferred tax for the period are treated as income tax expenses or income through profit or loss, excluding those arising from the following circumstances: (a) business combination; and (b) the transactions or items directly recognized in equity. 42、Leases （1）Accounting treatment for operating lease When the Company is the lessee, lease payments are recognized as cost or profit or loss with straight-line method over the lease term. Initial expenses are recognized directly into profit or loss. Contingent rents are charged as profit or loss in the periods in which they are incurred. When the Company is the lessor, lease income is recognized as profit or loss with straight-line method over the lease term. Initial expenses, other than those with material amount and eligible for capitalization which are recognized as profit or loss by installments, are recognized directly as profit or loss. Contingent rents are charged as profit or loss in the periods in which they are incurred. Notes: it is applicable to other companies apart from Lista Holding AG and its subsidiaries （2）Accounting treatment for finance lease When the Company is the lessee, at the commencement of the lease term, lessees recognize finance leases as assets and liabilities in their balance sheets at amounts equal to the lower of fair value of the leased property and the present value of the minimum lease payments, each determined at the inception of the lease, and recognize the minimum lease payments as the entering value of long-term payable, and treat the difference of the two as unrecognized finance expense. Any initial direct costs of the lessee are added to the amount recognized as an asset. The effective interest method is used to recognize finance expense of the period during the lease term. When the Company is the lessor, at the commencement of the lease, lessor recognizes the aggregate of minimum lease receipts and initial direct costs, each determined at the inception of the lease, as the entering value of finance lease receivables, and recognize the unguaranteed residual value at the same time. The difference between the aggregate of the minimum lease receipts, the initial direct costs and the unguaranteed residual value, and the sum of their present values is recognized as unrealized finance income. The effective interest method is used to recognize finance income of the period during the lease term. Notes: it is applicable to other companies apart from Lista Holding AG and its subsidiaries （3） Lista Holding AG and its subsidiaries Lista Holding AG and its subsidiaries adopt IFRS to prepare financial statements and have implemented IFRS 16 Lease. Details of accounting policies on leases of Lista Holding AG and its subsidiaries are as follows: (1) Identification of a lease At inception of a contract, the entity assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset for a period of time, the entity assesses whether, throughout the period of use, the customer has both the rights to obtain substantially all of the economic benefits from use of the identified asset and to direct the use of the identified asset. (2) Identification of separate leases For a contract that contains more than one lease component, the entity separates the components and accounts for each lease component separately. The right to use an underlying asset is a separate lease component if both: a) the lessee can benefit from use of the underlying asset either on its own or together with other resources that are readily available to the lessee; and b) the underlying asset is neither highly dependent on, nor highly interrelated with, the other underlying assets in the contract. (3) The entity as the lessee At the commencement date, the entity recognizes a lease that has a lease term of 12 months or less as a short-term lease, which shall not contain a purchase option; the entity recognizes a lease as a lease of a low-value asset if the underlying asset is lower than CHF 10,000.00 when it is new. If the entity subleases an asset, or expects to sublease an asset, the head lease does not qualify as a lease of a low-value asset. For all short-term leases and leases of low-value assets, lease payments are recognized as cost or profit or loss with straight-line method over the lease term. Apart from the above-mentioned short-term leases and leases of low-value assets with simplified approach, the entity recognizes right-of-use assets and lease liabilities at the commencement date. At the commencement date, the entity measures the lease liability at the present value of the lease payments that are not paid at that date, discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the entity’s incremental borrowing rate shall be used. Unrecognized financing expenses, calculated at the difference between the lease payment and its present value, are recognized as interest expenses over the lease term using the discount rate which has been used to determine the present value of lease payment and included in profit or loss. Variable lease payments not included in the measurement of lease liabilities are included in profit or loss in the periods in which they are incurred. After the commencement date, if there is a change in the following items: (a) actual fixed payments; (b) amounts expected to be payable under residual value guarantees; (c) an index or a rate used to determine lease payments; (d) assessment result or exercise of purchase option, extension option or termination option., the entity remeasures the lease liability based on the present value of lease payments after changes. (4) The entity as the lessor At the commencement date, the entity classifies a lease as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. Otherwise, it is classified as an operating lease. 1）Operating lease Lease receipts are recognized as lease income with straight-line method over the lease term. Initial direct costs incurred shall be capitalized, amortized on the same basis as the recognition of lease income, and included into profit or loss by installments. Variable lease payments related to operating lease which are not included in the lease payment are charged as profit or loss in the periods in which they are incurred. If an operating lease is changed, the entity will treat it as a new lease for accounting treatment from the effective date of the change, and the amount of advance receipts or lease receivables related to the lease before the change shall be regarded as the amount of the new lease. 2) Finance lease At the commencement date, the entity recognizes the finance lease payment receivable based on the net investment in the lease (sum of the present value of unguaranteed residual value and lease receipts that are not received at the commencement date, discounted by the interest rate implicit in the lease), and derecognizes assets held under the finance lease. The entity calculates and recognizes interest income using the interest rate implicit in the lease over the lease term. Variable lease payments not included in the measurement of the net investment in the lease are charged as profit or loss in the periods in which they are incurred. (5) Lease modification a. A lease modification as a separate lease The entity accounts for a lease modification as a separate lease if both: (a) the modification increases the scope of the lease by adding the right to use one or more underlying assets; and (b) the consideration for the lease increases by an amount commensurate with the stand-alone price for the increase in scope. b. A lease modification not as a separate lease 1) The entity as the lessee At the effective date of the lease modification, the entity redetermines the lease term of the modified lease and remeasures the lease liability by discounting the revised lease payment using a revised discount rate. The revised discount rate is determined as the interest rate implicit in the lease for the remainder of the lease term; if the interest rate implicit in the lease cannot be readily determined, the revised discount rate is determined as the entity’s incremental borrowing rate at the effective date of the modification. The entity accounts for the remeasurement of the lease liability by: a. decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease. The entity recognizes in profit or loss any gain or loss relating to the partial or full termination of the lease. b. making a corresponding adjustment to carrying amount of the right-of-use asset for all other lease modifications. 2) The entity as the lessor If the lease would have been classified as an operating lease had the modification been in effect at the inception date, the entity accounts for the lease modification as a new lease from the effective date of the modification, and measures the carrying amount of the underlying asset as the net investment in the lease immediately before the effective date of the lease modification. Otherwise, the entity applies regulations in the “CASBE 22 – Financial Instruments: Recognition and Measurement” regarding the modification or renegotiation of contracts. 43、Other significant accounting policies and estimates 44、Significant changes in accounting policies and estimates （1）Significant changes in accounting policies √ applicable □not applicable 1. The Company has adopted “CASBE 14 - Revenues” (the “revised revenue standard”) revised by Ministry of Finance of PRC since January 1, 2020. Pursuant to regulations on convergence between original and revised standards, no adjustment shall be made on comparable information, and the difference arising from adoption on the adopting date shall be retrospectively adjusted into retained earnings or other comprehensive income at the beginning of the reporting period. Main effects on the financial statements as of January 1, 2020 due to adoption of revised revenue standard are as follows: 2. The Company has adopted the “Interpretation of China Accounting Standards for Business Enterprises No. 13” issued by the Ministry of Finance in 2019 since January 1, 2020, and the prospective application method is applicable to changes in accounting policies. （2）Significant changes in accounting estimates □ applicable√ not applicable （3）Adjustments of the related financial statement items at the beginning of the years since 2020 preliminary use new revenue principles and new lease standards Applicable Need to adjust opening balance of balance sheet accounts or not √Yes □No Consolidated balance sheet Currency: RMB Instruction for adjustments Parent company balance sheet Currency: RMB Instruction for adjustments （4）Instructions of retrospectively adjusted comparative data since 2020 preliminary adopt to new revenue principles and new lease standards □ applicable√ not applicable 45、Others VI. Taxes 1、Main taxes and tax rates Different enterprise income tax rates applicable to different taxpayers: 2、Tax preferential policies 1. According to the relevant provisions of the “Administrative Measures for the Recognition of High-tech Enterprises” (Guo Ke Fa Huo [2016] No. 32) and the “Guidelines for the Management of High-tech Enterprise Recognition” (Guo Ke Fa Huo [2016] No. 195), the Company was recognized as a high-tech enterprise, and obtained the “High-tech Enterprise Certificate” with the number of GR201933003334 for a valid period of 3 years (from Year 2019 to Year 2021), and the enterprise income tax is calculated and levied at a tax rate of 15% in 2020. 2. According to the “List of the First Batch of High-tech Enterprises to be Recognized in Jiangsu Province in 2020” by the National High-tech Enterprise Certification Management Leading Group Office, the subsidiary Changzhou Huada Kejie Opto-electro Instrument Co., Ltd. was recognized as a high-tech enterprise and obtained the “High-tech Enterprise Certificate” with the number of GR202032002996 for a valid period of 3 years (from Year 2020 to Year 2022), and the enterprise income tax is calculated and levied at a tax rate of 15% in 2020. 3. According to the relevant provisions of the “Administrative Measures for the Recognition of High-tech Enterprises” (Guo Ke Fa Huo [2016] No. 32) and the “Guidelines for the Management of High-tech Enterprise Recognition” (Guo Ke Fa Huo [2016] No. 195), the sub-subsidiary Dongguan Ouda Electronics Ltd. was recognized as a high-tech enterprise, and obtained the “High-tech Enterprise Certificate” with the number of GR201844004499 for a valid period of 3 years (from Year 2018 to Year 2020), and the enterprise income tax is calculated and levied at a tax rate of 15% in 2020. 4. According to the “Response to Zhejiang Province’s 2020 High-tech Enterprise Registration” (Guo Ke Huo Zi [2020] No. 251) by the National High-tech Enterprise Certification Management Leading Group Office, the subsidiary Hangzhou GreatStar Intelligent Technology Co., Ltd. was recognized as a high-tech enterprise, and obtained the “High-tech Enterprise Certificate” with the number of GR202033007432 for a valid period of 3 years (from Year 2020 to Year 2022), and the enterprise income tax is calculated and levied at a tax rate of 15% in 2020. 5. According to the “Notice on Publicizing the List of High-tech Enterprises to be Recognized in Zhejiang Province in 2018” by the National High-tech Enterprise Certification Management Leading Group Office, the subsidiary Hangzhou United Precision Tool Company was recognized as a high-tech enterprise, and obtained the “High-tech Enterprise Certificate” with the number of GR201833003235 for a valid period of 3 years (from Year 2018 to Year 2020), and the enterprise income tax is calculated and levied at a tax rate of 15% in 2020. 6. According to the relevant provisions of the “Administrative Measures for the Recognition of High-tech Enterprises” (Guo Ke Fa Huo [2016] No. 32) and the “Guidelines for the Management of High-tech Enterprise Recognition” (Guo Ke Fa Huo [2016] No. 195), the subsidiary Hangzhou United Tools Co., Ltd. was recognized as a high-tech enterprise, and obtained the “High-tech Enterprise Certificate” with the number of GR201833003962 for a valid period of 3 years (from Year 2018 to Year 2020), and the enterprise income tax is calculated and levied at a tax rate of 15% in 2020. 7. According to the relevant provisions of the “Administrative Measures for the Recognition of High-tech Enterprises” (Guo Ke Fa Huo [2016] No. 32) and the “Guidelines for the Management of High-tech Enterprise Recognition” (Guo Ke Fa Huo [2016] No. 195), the subsidiary Hangzhou United Electric Manufacture Co., Ltd. was recognized as a high-tech enterprise, and obtained the “High-tech Enterprise Certificate” with the number of GR201933005763 for a valid period of 3 years (from Year 2019 to Year 2021), and the enterprise income tax is calculated and levied at a tax rate of 15% in 2020. 8. According to the relevant provisions of the “Administrative Measures for the Recognition of High-tech Enterprises” (Guo Ke Fa Huo [2016] No. 32) and the “Guidelines for the Management of High-tech Enterprise Recognition” (Guo Ke Fa Huo [2016] No. 195), the sub-subsidiary Zhe Jiang Yiyang Tool Manufacture Co., Ltd. was recognized as a high-tech enterprise, and obtained the “High-tech Enterprise Certificate” with the number of GR201933001929 for a valid period of 3 years (from Year 2019 to Year 2021), and the enterprise income tax is calculated and levied at a tax rate of 15% in 2020. 9. According to the relevant provisions of the “Administrative Measures for the Recognition of High-tech Enterprises” (Guo Ke Fa Huo [2016] No. 32) and the “Guidelines for the Management of High-tech Enterprise Recognition” (Guo Ke Fa Huo [2016] No. 195), the subsidiary Suzhou Xindadi Hardware Product Co., Ltd. was recognized as a high-tech enterprise, and obtained the “High-tech Enterprise Certificate” with the number of GR201832000874 for a valid period of 3 years (from Year 2018 to Year 2020), and the enterprise income tax is calculated and levied at a tax rate of 15% in 2020. 10. In accordance with the “Notice on Issuing the Administrative Measures for VAT Preferential Policies for Promoting Employment of the Disabled” by Ministry of Finance and State Taxation Administration (Cai Shui [2016] No. 52), the subsidiary 龙游沪工锻三工具有限公司 (Longyou Hugong Forging Three Tools Co., Ltd. ) arranges employment for the disabled. After filing with the competent tax authority, it enjoys the preferential policy of limited VAT refund upon collection in 2020. 3、Others VII. Notes to items of consolidated financial statements 1、Cash and bank balances Currency: RMB Other remarks: Other cash and bank balances at the end of the period included deposit for bank acceptance in amount of RMB 14,267,400.00, deposited investments in amount of RMB2,154,766.92, deposit for forward foreign exchange settlement in amount of 3,295,074.50, project performance bond in amount of RMB 495,608.89, deposit for ETC in amount of RMB 30,000.00 and deposits in Alipay in amount of RMB4,818,404.69. Other cash and bank balances at the beginning of the period included deposit for bank acceptance in amount of RMB 304,626,677.30, deposited investments in amount of RMB 22,822,339.65, deposit for L/C in amount of RMB 1,720,341.04, deposit for L/G in amount of RMB 300,000.00and deposit in Alipay in amount of RMB 505,311.60. 2、Held-for-trading financial assets Currency: RMB Other remarks: 3、Derivative financial assets Currency: RMB Other illustration: 4、Notes receivable （1）Details on categories Currency: RMB Currency: RMB Bad debts provision made on an individual basis Currency: RMB Notes receivable with provision for bad debts made on a collective basis:0 Currency: RMB Instructions of this portfolio recognition basis Bad debts provision made on a collective basis: Currency: RMB Instructions of this portfolio recognition basis Provision for bad debts of accounts receivable is made in accordance with the general model of expected credit loss, please refer to the disclosure of other receivables to disclose the relevant information on the provision for bad debts: □ applicable√ not applicable （2）Provision , recovered or reversed of the bad debt in current period Changes in provision for bad debts in current period Currency: RMB The major provision for bad debts reversal in current period: □ applicable√ not applicable （3）Pledged notes receivable at end of the account period Currency: RMB （4）Notes receivable by the Company endorsed or discounted and not due on the balance sheet date Currency: RMB （5）Notes receivable transfer to accounts receivable due to the failure to performance at end of the period. Currency: RMB Other instructions The Company has derecognized the endorsed or discounted bank acceptance. However, if any bank acceptance is not recoverable when it is due, the Company still holds joint liability on such acceptance, according to the China Commercial Instrument Law. （6）Notes receivable actually written off in current period Currency: RMB Including the major written off of the notes receivables Currency: RMB Instructions for written off the notes receivables: 5、Accounts receivable （1）Details on categories Currency: RMB Bad debts provision made on an individual basis: Currency: RMB Bad debts provision made on a collective basis: 10,758,871.39 Currency: RMB Instructions of this portfolio recognition basis Bad debts provision made on an individual basis: Currency: RMB Instructions of this portfolio recognition basis If the provision for bad debts of accounts receivable is made in accordance with the general model of expected credit loss, please refer to the disclosure of other receivables to disclose the relevant information on the provision for bad debts: □ applicable√ not applicable Disclosure as account receivable aging Currency: RMB （2）Provision , recovered or reversed of the bad debt in current period Changes in provision for bad debts in current period Currency: RMB The major provision for bad debts reversal in current period Currency: RMB （3）Accounts receivable actually written off in current period Currency: RMB Including the major written off of the account receivables Currency: RMB Instructions for Written off the account receivables （4）Details of the top 5 debtors with largest balances Currency: RMB （5）Accounts receivable derecognized due to financial assets transfer （6）Transfer of accounts receivable and continued involvement in formed assets and liabilities Other instructions: Closing balance of top 5 debtors totaled RMB480,849,910.16, accounting for 36.10% of the total closing balance of accounts receivable, and provision for bad debts made thereon totaled RMB24,042,550.65. 6、Receivables financing Currency: RMB increase/decrease of Receivables financing and Changes in fair value in current period √ applicable □not applicable 1) Details on categories (Continued) 2) Receivables financing with provision for impairment made on a collective basis (2) Provision for impairment of receivables financing (3) Endorsed or discounted but undue notes at the balance sheet date The Company has derecognized the endorsed or discounted bank acceptance. However, if any bank acceptance is not recoverable when it is due, the Company still holds joint liability on such acceptance, according to the China Commercial Instrument Law. (4) Receivables financing derecognized due to financial assets transfer Note: Of which, the USD amount and the RMB amount of the receivables financing transfer without recourse were USD 119,975,202.71 and RMB 10,049,326.56 respectively. The USD amount of financing transfer without recourse was translated into RMB equivalent of RMB782,826,200.16 at the closing exchange rate. Provision for bad debts of accounts receivable is made in accordance with the general model of expected credit loss, please refer to the disclosure of other receivables to disclose the relevant information on the provision for bad debts: □ applicable√ not applicable Other instructions: 7、Prepaid expenses （1）Age analysis Currency: RMB Explanations for the reason prepaid expenses with material and aged over 1 year not be settled timely: （2）Details of the top 5 debtors with largest balances Other instructions: (1) Provision for bad debts made in the current period amounted to RMB789,748.35. Provision for bad debts increased by RMB -171,548.08 due to exchange rate fluctuations, and increased by RMB 1,843,287.67 due to business combination not under common control. No provision for bad debts was recovered or reversed in the current period. (2) Prepaid expenses actually written off in current period amounted to RMB 45,688.79. 8、Other receivables Currency: RMB （1）Interest receivables 1）Interest receivables on categories Currency: RMB 2）The major overdue interest receivables Currency: RMB Debtors Closing balance Overdue date Overdue reason Impaired or not and basis Other instructions: 3）Changes in provision for bad debts □ applicable√ not applicable （2）Dividends receivable 1）Dividends receivable on categories Currency: RMB 2）Material dividends receivable aged over 1 year Currency: RMB Items(Invested entity) Closing balance ages Reason for not recovered Impaired or not and basis 3）Changes in provision for bad debts □ applicable√ not applicable Other instructions: （3）Other receivables 1）Other receivables categorized by nature Currency: RMB 2）Changes in provision for bad debts Currency: RMB The book balance movements of the material provision for bad debts in current period □ applicable√ not applicable Disclosure as account receivable aging Currency: RMB 3）Provision , recovered or reversed of the bad debt in current period Changes in provision for bad debts in current period: Currency: RMB Of which, major recovered or reversed amount in current period Currency: RMB 4）Other Accounts receivable actually written off in current period Currency: RMB Including major written off of other Accounts receivable Currency: RMB Instructions for written off other Accounts receivable 5）Details of the top 5 debtors with largest balances Currency: RMB 6）Other Accounts receivable related to government grants Currency: RMB 7）Other accounts receivable derecognized due to financial assets transfer 8）Transfer of other accounts receivable and continued involvement in formed assets and liabilities Other instructions: 9、Inventories Does the Company need to comply with the disclosure requirements of the real estate industry No （1）Details on categories Currency: RMB （2）Provision for inventory write-down Currency: RMB （3）Insctructions of inventory closing balance with borrowing expenses capitalization amount （4）Instructions for the costs to fulfil a contract amortized in current period 10、Contract assets Currency: RMB The amount and reason for the material change of the contract assets book balance : Currency: RMB provision for bad debts of contract assets is made in accordance with the general model of expected credit loss, please refer to the disclosure of other receivables to disclose the relevant information on the provision for bad debts:: □ applicable√ not applicable Contract assets impairment in current period Currency: RMB Other instructions: 11、Assets held for sale Currency: RMB Other instructions: 12、Non-current assets due within one year Currency: RMB Major debt investments/ Other debt investments Currency: RMB Other instructions: 13、Other current assets Currency: RMB Other instructions: 14、Debt investments Currency: RMB Major debt investments Currency: RMB Provision for impairment Currency: RMB The book balance changes of the material provision for bad debts in current period □ applicable√ not applicable Other instructions: 15、Other debt investments Currency: RMB Material other debt investments Currency: RMB Provision for impairment Currency: RMB The book balance changes of the material provision for bad debts in current period □ applicable√ not applicable Other instructions: 16、Long-term receivables （1）Details Currency: RMB Impairment for bad debt provision Currency: RMB The book balance changes of the material provision for bad debts in current period □ applicable√ not applicable （2）Long-term receivables derecognized due to financial assets transfer （3）Transfer of Long-term receivables and continued involvement in formed assets and liabilities Other instructions 17、Long-term equity investments Currency: RMB Other instructions Note: At the end of 2019, cost of the Company’s long-term equity investment in Hangzhou Meiqi Technology Co., Ltd. under equity method was 2,977,272.88RMB, with provision for impairment of 2,977,272.88RMB. Hangzhou Meiqi Technology Co., Ltd. was cancelled on August 31, 2020. 18、Other equity instrument investments Currency: RMB Itemized disclosure of non-trading equity instrument investments in current period Currency: RMB Other instructions: Other equity instrument investments derecognized in current period Pursuant to the resolution deliberated and passed by the 32nd meeting of the fourth session of the Board of Directors dated April 8, 2020, the Company transferred its 11.05% equity in Zhejiang Supcon Information Technology Co., Ltd. to浙江正泰电器股份有限公司 (Zhejiang Chint Electrics Co., Ltd.) at the consideration of RMB 176,888,118.45. As of the end of the current period, the above equity transfer has been completed. 19、Other non-current financial assets Currency: RMB Other instructions: 20、Investment property （1）Investment property measured with cost model □ applicable√ not applicable （2）Investment property measured with fair value model □ applicable√ not applicable （3）Investment property with certificate of titles being unsettled Currency: RMB Other instructions 21、Fixed assets Currency: RMB （1）Details Currency: RMB （2）Temporarily idle fixed assets Currency: RMB （3）Fixed assets leased in under finance leases Currency: RMB （4）Fixed assets leased out through operating leases Currency: RMB （5）Fixed assets with certificate of titles being unsettled Currency: RMB Other instructions （6）Fixed assets liquidation Currency: RMB Other instructions 22、Construction in progress Currency: RMB （1）Details Currency: RMB （2）Changes in significant projects Currency: RMB （3）Provision for impairment of Construction in progress in current period Currency: RMB Other instructions （4）Construction materials Currency: RMB Other instructions: 23、Productive biological assets （1）Productive biological assets measured with Cost Model □ applicable√ not applicable （2）Productive biological assets measured with fair value model □ applicable√ not applicable 24、Oil & gas assets □ applicable√ not applicable 25、Right-of-use assets Currency: RMB Opening balance 203,075,743.20 1,591,818.80 669,860.40 3,435,767.00 208,773,189.40 Other instructions: 26、Intangible assets （1）Details Currency: RMB The proportion of intangible assets formed through the Company's internal research and development to the balance of intangible assets at the end of the period （2）Land use right with certificate of titles being unsettled Currency: RMB Other instructions: 27、Development expenditures Currency: RMB Other instructions 28、Goodwill （1）Cost Currency: RMB （2）Provision for impairment Currency: RMB Related information of asset group or asset group portfolios which include goodwill Note: Provision for impairment of goodwill arising from recognition of deferred tax liabilities of relevant asset group of Longyou Hugong Forging Three Tools Co., Ltd. was made in the same amount due to reversal of deferred tax liabilities in the current period. Goodwill impairment test process, key parameters (such as the growth rate of the forecast period when the present value of future cash flows are expected, the growth rate of the stable period, the profit rate, the discount rate, the forecast period, etc.) and the confirmation method of goodwill impairment loss (3) Impairment test process 1）Lista Holding AG ① Related information ofassetgroup orassetgroup portfolioswhich includegoodwill ② Impairmenttestprocess,method and conclusion ofgoodwillimpairmentloss The recoverable amount of goodwill is computed based on the present value of estimated future cash flows, which is based on the 5-year estimated annual cash flows approved by the Company. The discount rate used in estimating the annual cash flows is 10.12%, and the cash flows subsequent to the estimated period are expected to be stable. Other key data used in the impairment test include: the estimated selling price, sales amount, cost of product, and other relevant expenses. Such key data are determined by the Company based on its experience and its prediction towards market development. The discount rate used by the Company is the pre-tax interest rate that reveals the time value of currency under the current market situation and special risks of certain asset group. Pursuant to the Evaluation Report numbered Wan Bang Ping Bao [2021] 55 issued by 万邦资产评估有限公司 (Wanbang Asset Appraisal Co., Ltd. ), which is engaged by the Company, the recoverable amount of asset group or asset group portfolios that include goodwill totaled RMB 1,601,030,000.00, and the carrying amount totaled RMB 1,671,428,887.67. RMB70,398,887.67 is recognized as goodwill impairment loss, RMB70,398,887.67 of which is attributable to goodwill impairment loss to be recognized. 2）Arrow Fastener Co., LLC ① Related information ofassetgroup orassetgroup portfolioswhich includegoodwill ② Impairmenttestprocess,method and conclusion ofgoodwillimpairmentloss The recoverable amount of goodwill is computed based on the present value of estimated future cash flows, which is based on the 5-year estimated annual cash flows approved by the Company. The discount rate used in estimating the annual cash flows is 11.01%, and the cash flows subsequent to the estimated period are expected to be stable. Other key data used in the impairment test include: the estimated selling price, sales amount, cost of product, and other relevant expenses. Such key data are determined by the Company based on its experience and its prediction towards market development. The discount rate used by the Company is the pre-tax interest rate that reveals the time value of currency under the current market situation and special risks of certain asset group. Pursuant to the Evaluation Report numbered Wan Bang Ping Bao [2021] 56 issued by Wanbang Asset Appraisal Co., Ltd., which is engaged by the Company, the recoverable amount of asset group or asset group portfolios that include goodwill totaled RMB928,100,000.00, and the carrying amount totaled RMB924,839,344.36, which suggests that the Company’s goodwill is not impaired. 3）Changzhou Huada Kejie Opto-electro Instrument Co., Ltd. ① Related information ofassetgroup orassetgroup portfolioswhich includegoodwill Note: It includes goodwill attributable to non-controlling shareholders ② Impairmenttestprocess,method and conclusion ofgoodwillimpairmentloss The recoverable amount of goodwill is computed based on the present value of estimated future cash flows, which is based on the 5-year estimated annual cash flows approved by the Company. The discount rate used in estimating the annual cash flows is 13.59%, and the cash flows subsequent to the estimated period are expected to be stable. Other key data used in the impairment test include: the estimated selling price, sales amount, cost of product, and other relevant expenses. Such key data are determined by the Company based on its experience and its prediction towards market development. The discount rate used by the Company is the pre-tax interest rate that reveals the time value of currency under the current market situation and special risks of certain asset group. Pursuant to the Evaluation Report numbered Wan Bang Ping Bao [2021] 57 issued by Wanbang Asset Appraisal Co., Ltd., which is engaged by the Company, the recoverable amount of asset group or asset group portfolios that include goodwill totaled RMB348,500,000.00, and the carrying amount totaled RMB342,396,112.14, which suggests that the Company’s goodwill is not impaired. 4）Prim' Tools Limited ① Related information ofassetgroup orassetgroup portfolioswhich includegoodwill 2. Impairmenttestprocess,method and conclusion ofgoodwillimpairmentloss The recoverable amount of goodwill is computed based on the present value of estimated future cash flows, which is based on the 5-year estimated annual cash flows approved by the Company. The discount rate used in estimating the annual cash flows is 13.92%, and the cash flows subsequent to the estimated period are expected to be stable. Other key data used in the impairment test include: the estimated selling price, sales amount, cost of product, and other relevant expenses. Such key data are determined by the Company based on its experience and its prediction towards market development. The discount rate used by the Company is the pre-tax interest rate that reveals the time value of currency under the current market situation and special risks of certain asset group. Pursuant to the Evaluation Report numbered Wan Bang Ping Bao [2021] 58 issued by Wanbang Asset Appraisal Co., Ltd., which is engaged by the Company, the recoverable amount of asset group or asset group portfolios that include goodwill totaled RMB166,720,000.00, and the carrying amount totaled RMB 142,523,159.31, which suggests that the Company’s goodwill is not impaired. 5）Prime-Line Products, LLC ① Related information ofassetgroup orassetgroup portfolioswhich includegoodwill ② Impairmenttestprocess,method and conclusion ofgoodwillimpairmentloss The recoverable amount of goodwill is computed based on the present value of estimated future cash flows, which is based on the 5-year estimated annual cash flows approved by the Company. The discount rate used in estimating the annual cash flows is 11.01%, and the cash flows subsequent to the estimated period are expected to be stable. Other key data used in the impairment test include: the estimated selling price, sales amount, cost of product, and other relevant expenses. Such key data are determined by the Company based on its experience and its prediction towards market development. The discount rate used by the Company is the pre-tax interest rate that reveals the time value of currency under the current market situation and special risks of certain asset group. Pursuant to the Evaluation Report numbered Wan Bang Ping Bao [2021] 59 issued by Wanbang Asset Appraisal Co., Ltd., which is engaged by the Company, the recoverable amount of asset group or asset group portfolios that include goodwill totaled RMB285,990,000.00, and the carrying amount totaled RMB277,549,462.84, which suggests that the Company’s goodwill is not impaired. 6）Other companies The Company performed impairment test on relevant asset groups of Suzhou Xindadi Hardware Product Co., Ltd., Prexiso AG, Longyou Hugong Forging Three Tools Co., Ltd., Eudura Holding Limited, Haining Sheffield Cutting Tools Co., Ltd., Zhejiang Guoxin Tools Co., Ltd., and Longyou Yiyang Forging Co., Ltd. The recoverable amount of asset groups or asset group portfolios that include goodwill is computed based on the present value of estimated future cash flows, which is based on the 5-year estimated annual cash flows approved by the Company. The cash flows subsequent to the estimated period are expected to be stable. The discount rate used by the Company is the pre-tax interest rate that reveals the time value of currency under the current market situation and special risks of certain asset group. Other key data used in the impairment test include: the estimated selling price, sales amount, cost of product, and other relevant expenses. Such key data are determined by the Company based on its experience and its prediction towards market development. Such estimations on recoverable amount suggest that the Company’s goodwill is not impaired. The impact of goodwill impairment testing Other instructions 29、Long-term prepayments Currency: RMB Other instructions 30、Deferred tax assets and deferred tax liabilities （1）Deferred tax assets before offset Currency: RMB （2）Deferred tax liabilities before offset Currency: RMB （3）Deferred tax assets or liabilities after offset Currency: RMB （4）Details of unrecognized deferred tax assets Currency: RMB （5）Maturity years of deductible losses of unrecognized deferred tax assets. Currency: RMB Other instructions: 31、Other non-current assets Currency: RMB Other instructions: 32、Short-term borrowings （1）Details on categories Short-term loan classification Currency: RMB Instructions for Short-term loan classification: （2）Short-term loans that have been overdue but not repaid The total amount of short-term loans that have been overdue and not repaid at the end of the period isRMB, of which the major short-term loans overdue unpaid are as follows: Currency: RMB Other instructions: 33、Held-for-trading financial liabilities Currency: RMB Other instructions: 34、Derivative financial liabilities Currency: RMB Other instructions: 35、Notes payable Currency: RMB The total amount of notes payable due and not paid at the end of the period isRMB. 36、Accounts payable （1）Details Currency: RMB （2）Major accounts payable aged over 1 year Currency: RMB Other instructions: 37、Prepaid expenses （1）Details Currency: RMB （2）Major prepaid expenses aged over 1 year Currency: RMB 38、Contract liabilities Currency: RMB The amount and reason for the material change in the book balance during the reporting period Currency: RMB 39、Employee benefits payable （1）Details of employee benefits payable Currency: RMB （2）Details of short-term employee benefits Currency: RMB （3）Details of defined contribution plan Currency: RMB Other instructions: 40、Taxes and rates payable Currency: RMB Other instructions: 41、Other payables Currency: RMB （1）Interest payable Currency: RMB Significant interest overdue but not been paid Currency: RMB Other instructions: （2）Dividends payable Currency: RMB Other instructions，including material dividends payable aged over 1year,should disclosure the reason unpaid: （3）Other payable 1）Other payable categorized by nature Currency: RMB 2）Major other payables aged over 1 year Currency: RMB Other instructions 42、Liabilities held for sale Currency: RMB Other instructions: 43、Non-current liabilities due within one year Currency: RMB other instructions: 44、Other current liabilities Currency: RMB Current period movements for the short-term bonds payable Currency: RMB Other instructions: 45、Long-term borrowings （1）Details on categories Currency: RMB Details on long-term borrowings: Other instructions，contain interest peroid: 46、Bonds payable （1）Details for bonds payable Currency: RMB （2）Current period movements Currency: RMB （3）Converting conditions and time of convertible bonds Pursuant to the approval numbered Zheng Jian Xu Ke [2019] 2656 issued by China Securities Regulatory Commission, the Company publicly issued 9.726 million convertible corporate bonds, each with par value of RMB100, with total amount of RMB972.60 million and term of 6 years. RMB 972,600,000 convertible corporate bonds of the Company have been listed for trading at Shenzhen Stock Exchange since July 16, 2020. The abbreviation of the bonds is “Great Star convertible bonds” with code number of “128115”. The conversion period of the convertible corporate bonds runs from the first trading day after six months following the completion of the issuance to the maturity date of the bonds. The initial conversion price of the convertible bonds was RMB 12.28/share, which was not lower than the average transaction price of the Company’s A shares on the preceding 20 trading days prior to the announcement of the prospectus (in the case of stock price adjustment caused by ex-right or ex-dividend, the closing price on the trading days before the adjustment shall be subject to the corresponding ex-right or ex-dividend adjustment) and the average transaction price of the Company’s A shares on the previous trading day （4）Instructions of other financial instruments classified as financial liabilities Information of other financial instruments such as preferred stocks and perpetual bonds issued at the end of the period Movements of other financial instruments such as preferred stocks and perpetual bonds issued at the end of the period Currency: RMB Instructions for the basis of other financial instruments transferred to financial liabilities Other instructions: 47、Lease liabilities Currency: RMB Other instructions: 48、Long-term payables Currency: RMB （1）Long-term payables categorized by nature Currency: RMB Other instructions:: （2）Special payables Currency: RMB Items Opening balance Increase Decrease Closing balance 形成原因reason Other instructions: 49、Long-term employee benefits payable （1）Details for Long-term employee benefits payable Currency: RMB Total 77,924,731.15 39,397,630.54 （2）Movements in defined benefit plan Present value of obligations in defined benefit plan: Currency: RMB Plan assets: Currency: RMB Net defined benefit liability Currency: RMB Contents and risks of defined benefit plan, and effect on amount, timing and uncertainty of future cash flows: The Company’s defined benefit plan consists of two parts, namely the Swiss pension plan and the German pension plan. 1) The Swiss pension plan is operated by Pensionskasse, a foundation stipulated by the Swiss law, as well as other companies of economy and finance relevance. The plan is applicable to retired employees, disabled employees and their family members. Pursuant to the Swiss pension law, the plan is managed by a pension trust committee, which is responsible for investment strategies related to fund assets. The goal of the investment strategies is to possess 28.00% equity, 39.00% debt, 27.00% assets and 6.00% other financial instruments and cash portfolio. The plan generally exposes the Company to actuarial risks such as inflation, interest rate risk, lifespan risk and wages risk. 2) The German pension plan lasted until 1991 and was terminated in 1991 in accordance with the German law. The plan no longer applies to new employees and other accruals after 1991, but the remaining obligations remain on the balance sheet. The above-mentioned defined benefit plan has no significant impact on amount, timing and uncertainty of future cash flows. Significant actuarial assumption, reasonableness of the assumption and sensitive analysis on defined benefit plan: Defined benefit plan liability and cost are determined through actuarial valuation. The significant actuarial assumptions for determining the defined benefit obligation are the discount rate and mortality rate. The sensitive analysis of the Swiss pension plan is determined based on the potential reasonable changes in actuarial assumptions at the end of the reporting period. 1) If all other actuarial assumptions remain unchanged and the discount rate is higher (or lowered) by 0.5%, the defined benefit obligation of the Swiss pension plan will decrease by CHF 5,524,000.00 (or increase by CHF 6,291,000.00). 2) If all other actuarial assumptions remain unchanged and the life expectancy of men and women increases (or decreases) by one year, the defined benefit obligation of the Swiss pension plan will increase by CHF 726,000.00 (or decrease by CHF 642,000.00). Other instructions: 50、Provisions Currency: RMB Other instructions, including relevant important assumptions and description of important estimated liabilities: 51、Deferred income Currency: RMB Projects involving government grants: Currency: RMB Other instructions: 52、Other non-current liabilities Currency: RMB Other instructions: 53、Equity Currency: RMB Other instructions: 54、Other equity instruments （1）Basic information of preferred shares, perpetual bonds and other financial instruments issued outstanding at the end of the period （2）Statement of changes in preferred shares, perpetual bonds and other financial instruments issued outstanding at the end of the period Currency: RMB Changes of other equity instruments in the current period, reasons for changes, and basis for relevant accounting treatment: The increasing of other equity instruments in current period was due to the equity parts for convertible corporate bonds issued by the Company, details refer to the description of Section XII (VII) 46, Bonds payable. Other instructions: The increase in other equity instruments in the current period is the equity component of convertible corporate bonds issued by the Company. See section 12 (7) 46 notes on bonds payable for details. Other explanation: 55、Capital reserve Currency: RMB Other instructions, including the increase and decrease of the current period and the reasons for the change: 1) Remarks on changes in capital reserve – share premium In the current period, the Company acquired 25.20% equity of 杭州巨星工匠工具有限公司 (Hangzhou Great Star Craftsman Tools Co., Ltd.) from the non-controlling shareholders at the consideration of RMB 0 . When the Company prepares the consolidated financial statements, the difference of RMB 1,959,810.76 between the newly acquired long-term equity investments arising from purchase of non-controlling equity and proportionate share in net assets of Hangzhou GreatStar Craftsman Tools Co., Ltd. was to offset capital reserve. 2) Capital reserve-Description of changes in other capital reserves Long-term equity investments and capital reserve were adjusted by RMB 40,030,405.87 , RMB 1,224,640.08 and RMB 19,355,033.13 respectively due to the Company’s share in changes in equity, other than net profit or loss, other comprehensive income and profit distribution, in Zhejiang Guozi Robotics Co., Ltd., Zhejiang Hangcha Holdings Co., Ltd., and Hangzhou Zhongce Haichao Enterprise Management Co., Ltd. based on shareholding proportion. 56、Treasury stock Currency: RMB Other instructions, including the increase and decrease of the current period and the reasons for the change: Pursuant to the resolution of the 17th meeting of the fourth session of the Board of Directors, the Company agreed to use its own funds, not less than RMB 100 million (inclusive) and not more than RMB 200 million (inclusive), to repurchase part of the Company’s shares through centralized bidding transaction. The repurchase price shall not exceed RMB17.5 per share, and the repurchase period shall not exceed 12 months following the date of approval. As of the end of the period, the repurchase period has expired. The special account for share repurchase has accumulatively repurchased 10,799,651 shares, and the accumulative payment totaled RMB 105,492,690.23 . 57、Other comprehensive income Currency: RMB .56 206,836,584.48 6.95 3,145,255.00 250,842,746.43 105,837, 346.87 Other instructions, including the adjustment of the effective part of the profit and loss of cash flow hedging converted into the initial recognition amount of the hedged item: 58、Special reserve Currency: RMB Other instructions, including the increase and decrease of the current period and the reasons for the change: 59、Surplus reserve Currency: RMB Description of surplus reserve, including changes in the current period and reasons for changes: P ursuantto theCompany’sArticlesofAssociation,statutory surplusreservewasappropriated at10%ofthenetprofitgenerated byparentcompany in thecurrentperiod. 60、Undistributed profit Currency: RMB Details of undistributed profit at the beginning of adjustment period: 1)、Due to the retroactive adjustment of the accounting standards for business enterprises and its related new regulations, the undistributed profits at the beginning of the period are affected. 2)、Due to the change of accounting policy, the undistributed profit at the beginning of the period is affected. 3)、Due to the correction of major accounting errors, the undistributed profits at the beginning of the period are affected. 4)、The change of consolidation scope caused by the same control affects the opening undistributed profit. 5)、The other adjustments affects the opening undistributed profit. 61、Operating revenue and operating costs Currency: RMB The lower of the audited net profit before and after deduction of non-recurring gains and losses is negative or not □ Yes √ No Related information of revenue: Whether the lower of net profit before and after the audit deduction of non-current profit and loss is negative □ Yes √ No Income related information: Currency: RMB Information relating to performance obligations: Performance obligations of sales of hand tools and power tools, laser measurement, storage, PPE and other products are generally fulfilled within one year. The Company collects advances or provides term of credit based on different customers. The Company acts as the main responsible person for direct sales. The Company obtains the unconditional right to collect payments when the following conditions are all met: 1) for domestic sales: a. the Company delivers the product to the customer in accordance with the contract; and b. the customer has accepted the product; 2) for overseas sales: a. the Company has declared the product in accordance with the contract; b. the Company has obtained the bill of lading or, the Company has shipped the product to the designated destination and the goods are delivered to the customer; and c. the control of the goods is transferred to the customer. Information relating to the transaction price allocated to the remaining performance obligation: At the end of this report period, the amount of income corresponding to the performance obligations that have been signed but not yet fulfilled or not fulfilled is RMB 72,490,372.55 , of which RMB72,490,372.55 is expected to be recognized in 2021, RMBXXX is expected to be recognized in XX year, and RMBXXX is expected to be recognized in XX year. Other instructions: 62、Taxes and surcharges Currency: RMB Other instructions: 63、Selling expenses Currency: RMB Total 458,274,408.65 586,968,060.26 Other instructions: 64、Administrative expenses Currency: RMB Other instructions: 65、R&D expenses Currency: RMB Other instructions: 66、Financial expenses Currency: RMB Other instructions: 67、Other income Currency: RMB 68、Investment income Currency: RMB Other instructions: 69、Net exposure hedging income Currency: RMB Other instructions: 70、Gains on changes in fair value Currency: RMB Other instructions: 71、Credit impairment loss Currency: RMB Other instructions 72、Assets impairment loss Currency: RMB Other instructions 73、Gains on asset disposal Currency: RMB 74、Non-operating revenue Currency: RMB Government grants included in current profits and losses: Currency: RMB assets/Relate d to profit or loss Other instructions: Pursuant to the resolution deliberated and passed by the third meeting of the third session of the Board of Directors and the general manager meeting, the Company purchased relevant operating assets of Shop-Vac Corporation and its domestic subsidiaries through the Company’s subsidiaries Great Star Tools USA, Inc and 广东狮万克电器有限公司 (Guangdong ShopVac Electrical Appliances Co., Ltd.). The relevant assets acquired by the Company constitute a business as they have the capabilities of input, processing and output, and their cost expenses or revenues can be independently calculated. Therefore, relevant provisions of CASBE 20 - Business Combination apply to the acquisition. The consideration for acquisition of the above-mentioned operating assets and business was RMB326.36 million, with fair value of RMB379.70 million, and the excess of fair value over the consideration in amount of RMB53.34 million was included in non-operating income. 75、Non-operating expenditures Currency: RMB Other instructions 76、Income tax expenses （1）Details Currency: RMB （2）Reconciliation of accounting profit to income tax expenses Currency: RMB Other instructions: 77、Other comprehensive income, net of income tax See note VII- 57, other comprehensive income for details. 78、Notes to items of the consolidated cash flow statement （1）Other cash receipts related to operating activities Currency: RMB Instructions of other cash received related to operating activities: （2）Other cash payments related to operating activities Currency: RMB Instructions of other cash paid related to operating activities: （3）Other cash receipts related to investing activities Currency: RMB Instructions of other cash received related to investment activities: （4）Other cash payments related to investing activities Currency: RMB Instructions of other cash paid related to investment activities: （5）Other cash receipts related to financing activities Currency: RMB Other cash received related to financing activities [Note] Suzhou Xindadi Pipe Industry Co., Ltd. is a company controlled by Cao Guozhen, a minority shareholder of Suzhou Xindadi Hardware Products Co., Ltd. （6）Other cash payments related to financing activities Currency: RMB Instructions of other cash paid related to financing activities: 79、Supplement information to the cash flow statement （1）Supplement information to the cash flow statement Currency: RMB （2）Net cash payment for acquisition of subsidiaries in current period Currency: RMB Other instructions （3）Net cash received for disposal of subsidiaries in the current period Currency: RMB Other instructions （4）Composition of cash and cash equivalents Currency: RMB Other instructions: Due to restrictions on liquidity, the Company recognized deposit for bank acceptance, project performance bond, deposit for forward foreign exchange settlement, deposit for L/G, deposit for L/C, deposit for ETC, and deposited investments as cash and bank balances that are not cash and cash equivalents. Opening balance of the above deposits was RMB 329,469,357.99 and closing balance was RMB 20,242,850.31 . (5) Amount of endorsed commercial acceptance not involving cash receipts and payments 80、Notes to items in statement of changes in owner's equity Explain the name of "other" items and the amount of adjustment for the balance at the end of last year 81、Assets with title or use right restrictions Currency: RMB Other instructions: Note: It refers to net assets of Arrow Fastener Co., LLC at the end of the current period. 82、Monetary items in foreign currencies （1）Monetary items in foreign currencies Currency: RMB Other instructions （2）Description of overseas business entities, including for important overseas business entities, disclosure of their main overseas business locations, functional currency and selection basis, and disclosure of reasons for changes in functional currency. √ applicable □ not applicable 83、Hedging Disclose the qualitative and quantitative information of the hedged items and related hedging instruments and the hedged risks according to the types of Hedging: 84、Government grants （1）Government grants related to assets Currency: RMB （2）Government grants related to income and used to compensate incurred relevant costs, expenses or losses □ applicable√ not applicable √ applicable □ not applicable Other instructions (1) Government subsidies related to income and used to compensate company'sthe Company related costs or losses (2) In the current period, government grants included into profit or loss totaled 33RMB,219,875.11. 85、Others VIII. Changes in the consolidation scope 1、Business combination not under common control （1）Business combination not under common control in current period Currency: RMB (Continued) Note: Suzhou Xindadi Hardware Product Co., Ltd. and its subsidiaries include the following: （2）Combination costs and goodwill Currency: RMB The illustration of Combination costs fair value determination method , contingent consideration and its movements. Main reason for the formation of the large amount goodwill: Other instructions: （3）Acquisition-date identifiable assets and liabilities of acquirees Currency: RMB The fair value determination method of identifiable assets and liabilities: The contingent liabilities of the acquirees assumed in the business combination: Other instructions: （4）Gain/loss of equity held prior to acquisition-date remeasured at fair value If exists any business combination achieved in stages and gain control during the reporting period or not □ Yes √ No （5）Related instructions on that cannot reasonably determine the combination consideration or the fair value of the acquiree’s identifiable assets and liabilities at the acquisition date or at the end of the acquisition period. （6）Other instructions 2、Business combination under common control （1）Business combination under common control in current period Currency: RMB the combined combined party combination date party during the Comparison Period Other instructions: （2）Combination cost Currency: RMB Instructions of contingent consideration and its movements: Other instructions: （3）Carrying amount of combined party assets and liabilities on the combination date Currency: RMB The contingent liabilities of the acquirees assumed in the business combination: Other illustration: 3、Reverse purchase Basic information of the transaction, basis for reverse purchase, whether the assets and liabilities retained by the listed company constitute business and its basis, determination of combination cost, adjusted amounts and calculation according to the processing of equity transaction. 4、Disposal of the subsidiaries If exists single disposal of a subsidiary resulting in the Company’s loss of control or not □ Yes √ No If exists disposal of a subsidiary in stages resulting in the Company’s loss of control or not □ Yes √ No 5、Changes in the consolidation scope due to other reasons Explain the changes in the consolidation scope resulting from other causes (such as new subsidiaries, liquidation subsidiaries, etc. ) and related information: 1. Entities brought into the consolidation scope Note: As of the balance sheet date, the Company has not paid in capital contribution in Hangzhou Great Star Opto-electronics Technology Co., Ltd., and Great Star Tools USA, Inc has not paid in capital contribution in 4900 Highlands Parkway, LLC and Hangzhou Equipment Holdings, LLC 2. Entities excluded from the consolidation scope Note: In the current period, Zhejiang GreatStar Industrial Co., Ltd. was absorbed by Zhejiang Great Star Tools Co., Ltd. 6、Others IX. Interestin otherentities 1、Interest in significant subsidiaries （1）Significant subsidiaries Instructions if the shareholding proportion differs from the voting rights proportion over the subsidiary: Basis of holding half or less voting rights but still control the investee and holding more than half of the voting rights but do not control the investee: The basis of control for the important structured entity included in the scope of consolidation: The basis for determining whether the Company is an agent or a principal: Other instructions: （2）Significant not wholly-owned subsidiaries Currency: RMB Instructions if the non-controlling shareholders proportion differs from the voting rights proportion over the subsidiary: Other instructions: （3）Main financial information of significant not wholly-owned subsidiaries Currency: RMB Currency: RMB Other instructions: （4）Significant restrictions on the use of company assets and the settlement of company debt （5）Financial support or other support to structured entities included in the consolidated financial statements Other instructions: 2、Transactions resulting in changes in subsidiaries’ equity but without losing control （1）Changes in subsidiaries’ equity （2）Effect of transactions on non-controlling interest and equity attributable to parent company Currency: RMB Other instructions: 3、Interest in associates （1）Significant associates Instructions if the holding proportion differs from the voting rights proportion over the associates or joint ventures : Note: The Company holds 26.00% and 31.85% equity of Shanghai Reno Opto-electronics Technology Co., Ltd. and Changzhou Stabila Laser Instrument Company Limited, respectively, through Changzhou Huada Kejie Opto-electro Instrument Co., Ltd. Basis for significant influence over an entity on which the Company held less than 20% voting rights: The Company holds 19.00% equity of Ningbo Donghai Bank Co., Ltd., making it its second largest shareholder. The Company has representatives in its Board of Directors who have the power to participate in decision-making on its financial and operating policies。 （2）Main financial information of significant joint ventures Currency: RMB Other instructions: （3）Main financial information of significant associates Currency: RMB Other instructions: （4）Aggregated financial information of insignificant associates Currency: RMB Other instructions: （5）Instructions of significant restrictions on the ability of joint ventures or associates to transfer funds to the Company （6）Excess losses incurred by associates Currency: RMB Other instructions （7）Unconfirmed commitment related to the joint venture investment （8）Contingent liabilities related to the joint venture investment 4、Major joint operations Instructions if the shareholding proportion differs from the voting rights proportion over the joint operations: If the joint operation is a single entity, notify the basis classified as joint operation: Other instructions: 5、The equity of the structured entity not involved in the scope of consolidation. Related instructions for the structured entity not involved in the scope of consolidation. 6、Others X. Risks related to financial instruments In risk management, the Company aims to seek the appropriate balance between the risks and benefits from its use of financial instruments and to mitigate the adverse effects that the risks of financial instruments have on the Company’s financial performance, so as to maximize the profits of shareholders and other equity investors. Based on such risk management objectives, the Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits on a timely and reliable basis. The Company has exposure to the following risks from its use of financial instruments, which mainly include: credit risk, liquidity risk, and market risk. The Management has deliberated and approved policies concerning such risks, and details are。 (I) Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation。 1. Credit risk management practice (1) Evaluation method of credit risk At each balance sheet date, the Company assesses whether the credit risk on a financial instrument has increased significantly since initial recognition. When assessing whether the credit risk has increased significantly since initial recognition, the Company takes into account reasonable and supportable information, which is available without undue cost or effort, including qualitative and quantitative analysis based on historical data, external credit risk rating, and forward-looking information. The Company determines the changes in default risk of financial instruments during the estimated lifetime through comparison of the default risk at the balance sheet date and the initial recognition date, on an individual basis or a collective basis The Company considers the credit risk on a financial instrument has increased significantly when one or more of the following qualitative and quantitative standards are met: 1) Quantitative standard mainly relates to the scenario in which, at the balance sheet date, the probability of default in the remaining lifetime has risen by more than a certain percentage compared with the initial recognition 2) Qualitative standard mainly relates to significant adverse changes in the debtor’s operation or financial position, present or expected changes in technology, market, economy or legal environment that will have significant adverse impact on the debtor’s repayment ability (2) Definition of default and credit-impaired assets A financial instrument is defined as defaulted when one or more following events have occurred, of which the standard is consistent with that for credit-impairment: 1) significant financial difficulty of the debtor； 2) a breach of binding clause of contract； 3) it is very likely that the debtor will enter bankruptcy or other financial reorganization； 4) the creditor of the debtor, for economic or contractual reasons relating to the debtor’s financial difficulty, having granted to the debtor a concession(s) that the creditor would not otherwise consider。 2. Measurement of expected credit losses The key factors in the measurement of expected credit loss include the probability of default, loss rate of default, and exposure to default risk. The Company develops a model of the probability of default, loss rate of default, and exposure to default risk on the basis of quantitative analysis of historical data (e.g. counterparty rating, guarantee measures and collateral type, payment method, etc.) and forward-looking information。 3. Please refer to section V (I) 4, 5, and 7 of the notes to the financial statements for details on the reconciliation table of opening balance and closing balance of provision for losses of financial instrument 4. Exposure to credit risk and concentration of credit risk The Company’s credit risk is primarily attributable to cash and bank balances and receivables. In order to control such risks, the Company has taken the following measures (1) Cash and bank balances The Company deposits its bank balances and other cash and bank balances in financial institutions with relatively high credit levels, hence, its credit risk is relatively low. (2) Receivables The Company performs credit assessment on customers using credit settlement on a continuous basis. The Company selects credible and well-reputed customers based on credit assessment result, and conducts ongoing monitoring on balance of receivables, to avoid significant risks in bad debts. As the Company only conducts business with credible and well-reputed third parties, collateral is not required from customers. The Company manages credit risk aggregated by customers. As of December 31, 2020, the Company has certain concentration of credit risk, and 36.10% (December 31, 2019: 37.68%) of the total accounts receivable was due from the five largest customers of the Company. The Company held no collateral or other credit enhancement on balance of receivables The maximum amount of exposure to credit risk of the Company is the carrying amount of each financial asset at the balance sheet (II) Liquidity risk Liquidity risk is the risk that the Company may encounter deficiency of funds in meeting obligations associated with cash or other financial assets settlement, which is possibly attributable to failure in selling financial assets at fair value on a timely basis, or failure in collecting liabilities from counterparties of contracts, or early redemption of debts, or failure in achieving estimated cash flows. In order to control such risk, the Company comprehensively utilized financing tools such as notes settlement, bank borrowings, etc. and adopts long-term and short-term financing methods to optimize financing structures, and finally maintains a balance between financing sustainability and flexibility. The Company has obtained credit limit from several commercial banks to meet working capital requirements and expenditures Financial liabilities classified based on remaining time period till maturity (Continued) (III) Market risk Market risk is the risk that the Company may encounter fluctuation in fair value or future cash flows of financial instruments due to changes in market price. Market risk mainly includes interest risk and foreign currency risk 1. Interest risk Interest risk is the risk that an enterprise may encounter fluctuation in fair value or future cash flows of financial instruments due to changes in market interest. The Company’s fair value interest risks arise from fixed-rate financial instruments, while the cash flow interest risks arise from floating-rate financial instruments. The Company determines the proportion of fixed-rate financial instruments and floating-rate financial instruments based on the market environment, and maintains a proper financial instruments portfolio through regular review and monitoring. The Company’s interest risk in cash flows relates mainly to bank borrowings with floating interest rate As of December 31, 2020, balance of borrowings with interest accrued at floating interest rate totaled RMB1,009,781,140.56 (December 31, 2019: RMB889,351,150.00). If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Company’s gross profit and equity will not be significantly affected 2. Foreign currency risk Foreign currency risk is the risk arising from changes in fair value or future cash flows of financial instrument resulted from changes in exchange rate. The Company’s foreign currency risk relates mainly to foreign currency monetary assets and liabilities. When short-term imbalance occurred to foreign currency assets and liabilities, the Company may trade foreign currency at market exchange rate when necessary, in order to maintain the net risk exposure within an acceptable level Please refer to section 12 (7) 82 of notes to financial statements for details in foreign currency financial assets and liabilities at the end of the period XI. Fairvaluedisclosure 1、Details of fair value of assets and liabilities at fair value at the balance sheet date Currency: RMB 2、Basis for determining level 1 fair value at recurring and non-recurring fair measurement Debt instrument investments are measured using market quotes as a reasonable estimate of fair value. 3、Qualitative and quantitative information of valuation technique(s) and key input(s) for level 2 fair value at recurring and non-recurring fair measurement Derivative financial assets are measured using valuation notices provided by banks and securities companies as a reasonable estimate of fair value 4、Qualitative and quantitative information of valuation technique(s) and key input(s) for level 3 fair value at recurring and non-recurring fair measurement 1. As receivables financing is within 1 year, whose time value has no significant impact on the fair value, it is recognized that the fair value of receivables financing mentioned above is approximately equal to its carrying amount 2. Equity instrument investments and other equity instrument investments (Hangzhou Haibang Xinhu Talent Venture Capital Investment Partnership (LP)), are measured using investment cost as a reasonable estimate of fair value, based on overall consideration of business environment and operating conditions 5、Continuous third level fair value measurement items, adjustment information between opening balance and closing balance and sensitivity analysis of the non-observable parameter 6、Continuous fair value measurement items, the reasons for conversion and the policy for conversion time determination if it occurs different levels’ conversion during current period 7、Valuation techniques changing and its reason in current period 8、The fair value of financial assets and financial liabilities not measured with fair value. 9、Others XII. Related party relationshipsand transactions 1、Related party relationships Instructions for the parent company: The Company’s ultimate controlling party is Qiu Jianping and his spouse Wang Lingling Other instructions: 2、Subsidiaries of the Company See note IX, Interest in significant subsidiaries. 3、Associates and joint ventures of the Company See note IX, Interest in associates。 The information of other associates or joint ventures with related party transactions to the Company or existing carrying amount with the Company in previous periods are as follows: Other instructions: 4、Other related parties of the Company Other instructions: 5、Related party transactions （1）Purchase and sale of goods, rendering and receiving of services Purchase of goods and receiving of services Currency: RMB Sale of goods and rendering of services Currency: RMB Instructions for purchase and sale of goods, rendering and receiving of services （2）Situation for related entrusted management/contracting and entrusting management/subcontracting The situation for entrusted management/contracting Currency: RMB income/contractin g income confirmed in current period Instructions for related entrusting/contracting situation The situation table for entrusting management/subcontracting Currency: RMB fee/subcontractin g fee confirmed in current period Instructions for related management/subcontracting situation （3）Related party leases The Company as the lessor Currency: RMB The Company as the lessee Currency: RMB Instructions for related party leases （4）Related party guarantee The Company as the guarantor Currency: RMB The Company as the guaranteed party Currency: RMB Instructions for related party guarantee: The Company issued letter of guarantee for bank loans of GreatStar Europe AG, a wholly-owned subsidiary, and GreatStar Greatstar Holding Group. Ltd provided suretyship guarantee for the letter of guarantee issued by the Company. As of December 31, 2020, the balance of bank loans under the letter of guarantee totaled EUR 48,500,000.00, with payment maturity between February 28, 2021 and June 26, 2023 （5）Fund borrowing from related parties Currency: RMB （6）Assets exchange or debt restructuring between the related parties Currency: RMB （7）Key management’s emoluments Currency: RMB （8）Other transactions with related parties 6、Balance due to or from related parties （1）Balance due from related parties Currency: RMB （2）Balance due to related parties Currency: RMB 7、Related party commitments 8、Others XIII. Share-based payment 1、Overall situation of Share-based payment □ applicable√ not applicable 2、Equity-settled share-based payment □ applicable√ not applicable 3、Cash-settled share-based payment □ applicable√ not applicable 4、Amendment and termination of share-based payment 5、Others XIV. Commitments and contingencies 1、Important commitments Significant commitments on balance sheet date As of the approved issuing date of this report, the Company has no significant commitments to be disclosed 2、Contingencies （1）Important contingent matters as at the balance sheet date As of the approved issuing date of this report, the Company has no significant contingencies to be disclosed （2）The Company has no important contingent matters to disclose, and also should make illustration There are no significant contingent matters to be disclosed 3、Others XV. Events after the balance sheet date 1、Important non-adjustment matters Currency: RMB 2、Distribution of profits Currency: RMB 3、Sales return 4、Other events after the balance sheet date (1) Profit distribution after the balance sheet date According to the “Proposal on 2020 Profit Distribution Plan” deliberated and approved by the eighth meeting of the fifth session of the Board of Directors of the Company dated April 14, 2021, the Company will not distribute cash dividend or bonus shares, will not use capital reserve to increase share capital, and the remaining undistributed profits will be carried forward to the next year. (2) Deliberated and approved by the fifth meeting of the fifth session of the Board of Directors of the Company dated January 22, 2021, the Company is approved to exercise the conditional redemption right of “Great Star Convertible Bond” (bond code: 128115), and redeem all non-converted “Great Star Convertible Bond” registered with China Securities Depository and Clearing Co., Ltd. Shenzhen Branch after the market closure on the redemption registration date at the price of the face value of the bond plus the interest accrued in the current period. As of the market closure on February 23, 2021, there are still 25,732 unconverted “Great Star Convertible Bond”, and the number of redemption during this time is 25,732. As of February 24, 2021, all the “Great Star Convertible Bond” registered as of the market closure on the redemption registration date (the trading day immediately before the redemption date: February 23, 2021) have been redeemed. Since March 5, 2021, the “Great Star Convertible Bond” issued by the Company have been delisted on the Shenzhen Stock Exchange (3) Deliberated and approved by the fifth meeting of the sixth session of the Board of Directors of the Company dated March 29, 2021, the Company is approved to increase capital of EUR 27.90 million or USD equivalent to its wholly-owned subsidiary GreatStar Europe AG, and GreatStar Europe AG will purchase related assets from Joh. Friedrich Behrens AG through cash payment at the consideration of EUR 27.90 million. The related assets include real estate, machinery, intellectual property rights, inventory, and certain subsidiary equity related to Joh. Friedrich Behrens AG’s main business. (4) Deliberated and approved by the seventh meeting of the fifth session of the Board of Directors of the Company dated April 6, 2021, the Company is approved to enter into the “Offer to Purchase Geelong Holdings Limited” (the “Offer”) with Orchid Asia Investment Management Group Co., Ltd. (Orchid Asia) and Geelong Orchid Holdings Ltd. According to the Offer, the Company will purchase 100% equity of Geelong Holdings Limited held by Orchid Asia through Geelong Orchid Holdings Ltd. through cash payment at the consideration of USD 131.40 million. The funds required for the transaction will be raised by the Company itself, partly from the change in the use of part of the raised funds, which will be required for deliberation and approval by the Company’s shareholders’ general meeting. If the shareholders’ general meeting fails to approve the “Proposal on Changing the Use of Part of the Raised Funds for the Acquisition of Equity”, the Company will use all self-raised funds for the acquisition without a separate deliberation and approval by the Board of Directors, which will not affect the effectiveness and implementation of the acquisition （5）According to the “Proposal on Absorbing the Wholly-owned Subsidiary Hangzhou Lianhe Machinery Co., Ltd.” deliberated and approved by the eighth meeting of the fifth session of the Board of Directors of the Company dated April 14, 2021, in order to better integrate the Company’s existing innovative R&D resources and better support the Company’s own brand and cross-border e-commerce business development, the Company is approved to absorb its wholly-owned subsidiary, Hangzhou Lianhe Machinery Co., Ltd., and incorporate its project “R&D Center Construction Project” into the Company’s R&D system. The financial statements of Hangzhou Lianhe Machinery Co., Ltd. have been consolidated into the Company’s consolidated financial statements. The absorbing merger will not have a material impact on the Company’s production, operation and financial status. XVI. Other significant matters 1、Accounting error correction for previous period （1）The retrospectively adjusted method Currency: RMB （2）the prospective application method 2、Debt restructuring 3、Assets Exchange （1）Non-cash Assets Exchange （2）Other assets Exchange 4、Annuity Plan 5、Discontinued operations Currency: RMB Other illustration 6、Segment information （1）Identification basis for reportable segments Reportable segments are identified according to the structure of the Company’s internal organization, management requirements and internal reporting system, and based on product segments. Assets and liabilities shared by different segments are allocated among segments proportionate to their respective sizes. The Company determines the reporting segments on the basis of the regional segments, the main operating revenue and the main operating cost shall be divided by the actual sales place, and the assets and liabilities shall be divided by the location of the operating entity. （2）Financial information of product segments Currency: RMB （3）If the Company has no reporting segments or cannot disclose the total assets and liabilities of each reporting segments, the reasons shall be explained （4）Other illustration 7、Other important transactions and matters that can affect investor decision - making 8、Others 1. Leases of Lista Holding AG and its subsidiaries (1) Please refer to section 12 (5) 29 of notes to financial statements for details on right-of-use assets. (2) Please refer to section 12 (5) 42 of notes to financial statements for details on the Company’s accounting policies on short-term leases and leases for which the underlying asset is of low value. The amounts of short-term leases and low-value asset leases included into profit or loss are as follows Total 810,799.00 (3) Current profit and loss and cash flow related to lease (4) Please refer to section XII (X) of the notes to the financial statements for details on maturity analysis of lease payments and related liquidity risk management 2. Lista Holding AG and its subsidiaries as the lessor (1) Operating lease 1) Lease income 2) Undiscounted lease payments to be received arising from non-cancellable leases based on the lease contract signed with lessee (2) Finance lease 1) Current period profit or loss related to finance lease 2) Undiscounted lease payments to be received arising from non-cancellable leases based on the lease contract signed with lessee 3) Reconciliation of undiscounted lease payments to net investment in the lease XVII. Notesto itemsofparentcompany financialstatements 1、Accounts receivable （1）Details on categories Currency: RMB Bad debts provision made on an individual basis: Currency: RMB Bad debts provision made on an individual basis: Currency: RMB Illustration of this portfolio recognition basis: Bad debts provision made on an individual basis: Currency: RMB Illustration of this portfolio recognition basis: If the provision for bad debts of accounts receivable is made in accordance with the general model of expected credit loss, please refer to the disclosure of other receivables to disclose the relevant information on the provision for bad debts: □ applicable√ not applicable Disclosure as account receivable aging Currency: RMB （2）Provision , recovered or reversed of the bad debt in current period Changes in provision for bad debts in current period: Currency: RMB The major provision for bad debts reversal in current period: Currency: RMB （3）Accounts receivable actually written off in current period Currency: RMB Including the major written off of the account receivables: Currency: RMB instructions for Written off the account receivables: （4）Details of the top 5 debtors with largest balances Currency: RMB %of the total closing balance Closing balance of provision for Receivable bad debts （5）Accounts receivable derecognized due to financial assets transfer （6）Transfer of accounts receivable and continued involvement in formed assets and liabilities Other illustration: Closing balance of top 5 debtors totaled RMB 957,949,797.95, accounting for 70.80% of the total closing balance of accounts receivable, and provision for bad debts made thereon totaled RMB 47,897,614.97. 2、Other receivables Currency: RMB （1）Interest receivables 1）Interest receivables on categories Currency: RMB 2）Material overdue interest Other instructions: 3）Provision for bad debt □ applicable√ not applicable （2）Dividends receivable 1）Details on categories Currency: RMB 2）Material dividends receivable aged over 1 year Currency: RMB 3）Provision for bad debt □ applicable√ not applicable Other instructions: （3）Other receivables 1）Other receivables categorized by nature Currency: RMB 2）Provision for bad debt Currency: RMB The book balance changes of the material provision for bad debts in current period □ applicable√ not applicable Disclosure as account receivable aging Currency: RMB 3）Provision , recovered or reversed of the bad debt in current period Changes in provision for bad debts in current period: Currency: RMB Of which, major recovered or reversed amount in current period: Currency: RMB 4）Other Accounts receivable actually written off in current period Currency: RMB Including major written off of other Accounts receivable Currency: RMB Instructions for written off other Accounts receivable 5）Details of the top 5 debtors with largest balances Currency: RMB 6）Other Accounts receivable related to government grants Currency: RMB Debtors Government subsidy Closing balance Ages Estimated collection date, amount, and basis 7）Other accounts receivable derecognized due to financial assets transfer 8）Transfer of other accounts receivable and continued involvement in formed assets and liabilities Other instructions: 3、Long-term equity investments Currency: RMB （1）Investments in subsidiaries Currency: RMB （2）Investments in associates Currency: RMB （3）Other illustration At the end of 2019, cost of the Company’s long-term equity investment in Hangzhou Meiqi Technology Co., Ltd. under equity method was RMB 2,977,272.88, with provision for impairment of RMB2,977,272.88. Hangzhou Meiqi Technology Co., Ltd. was cancelled on August 31, 2020 4、Operating revenue and cost Currency: RMB relevant information: Currency: RMB Information relating to performance obligations:: Performance obligations of sales of hand tools and power tools, laser measurement, storage, PPE and other products are generally fulfilled within one year. The Company collects advances or provides term of credit based on different customers. The Company acts as the main responsible person for direct sales. The Company obtains the unconditional right to collect payments when the following conditions are all met: 1) for domestic sales: a. the Company delivers the product to the customer in accordance with the contract; and b. the customer has accepted the product; 2) for overseas sales: a. the Company has declared the product in accordance with the contract; b. the Company has obtained the bill of lading or, the Company has shipped the product to the designated destination and the goods are delivered to the customer; and c. the control of the goods is transferred to the customer. Information relating to the transaction price allocated to the remaining performance obligation: At the end of this report period, the amount of income corresponding to the performance obligations that have been signed but not yet fulfilled or not fulfilled is RMB 39,453,211.46 , of which RMB 39,453,211.46 is expected to be recognized in 2021, RMB XXX is expected to be recognized in XX year, and RMBXXX is expected to be recognized in XX year. Other instructions: 5、Investment income Currency: RMB 6、Others XVIII. Supplementary information 1、Non-recurring profit or loss √applicable□ not applicable Currency: RMB Reasons shall be given for non-recurring profit or loss items defined by the Company in accordance with the definitions of Explanatory Announcement of Corporate Information Disclosure on the Public Issuance of Securities NO.1——Non-recurring profit or loss and items listed in Explanatory Announcement of Corporate Information Disclosure on the Public Issuance of Securities NO.1——Non-recurring profit or loss as recurrent profit or loss items □ applicable√ not applicable 2、RONA and EPS 3、Differences in accounting figure between domestic and foreign accounting standards （1）Discrepancies in net profit and net assets in financial reports disclosed in accordance with International Accounting Standards and China Accounting Standards □ applicable√ not applicable （2）Discrepancies in net profit and net assets in financial reports disclosed in accordance with Foreign Accounting Standards and China Accounting Standards □ applicable√ not applicable （3）The reason for the differences in accounting figure between domestic and foreign accounting standards, if the difference has be adjusted comply with the overseas audit institution, disclosure the name of the overseas institution 4、Others 2. Calculation process of weighted average return on net assets 3. Calculation process of basic EPS and diluted EPS (1) Calculation process of basic EPS Note: Repurchased shares have been excluded from the opening balance of total shares. (2) Calculation process of diluted EPS Section 13 Reference file directory I. Financial statements containing signatures of the legal representative, the head of accounting work, and the head of accounting body with seals. II. Original audit report stamped by Pan-China Certified Public Accountants LLP (special general partnership)and signed and stamped with the certified public accountants. III. Original copies of the documents and announcement of the Company published on the newspaper designated by the CSRC in the reporting period. Reference files above are all kept at board office. HANGZHOU GREATSTAR INDUSTRIAL CO., LTD. Chairman: Qiu Jianping April 14,2021
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