Jimu Group Limited - Annual Report 2020

JIMU GROUP LIMITED 積木集團有限公司

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 8187)

ANNUAL REPORT 2020

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CHARACTERISTICS OF GEM OF THE STOCK EXCHANGE OF HONG KONG LIMITED (THE “STOCK EXCHANGE”)

GEM has been positioned as a market designed to accommodate small and mid-sized companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration.

Given that the companies listed on GEM are generally small and mid-sized companies, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM.

Hong Kong Exchanges and Clearing Limited and the Stock Exchange take no responsibility for the contents of this report, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this report.

This report, for which the directors (the “ Directors ”) of Jimu Group Limited (the “ Company ”) collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on GEM of the Stock Exchange (the “ GEM Listing Rules ”) for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this report is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this report misleading.

Jimu Group Limited | Annual Report 2020

CONTENT

Corporate Information	3
Chairman’s Statement	4
Management Discussion and Analysis	6
Report of the Directors	14
Corporate Governance Report	28
Biographies of Directors and Senior Management	40
Independent Auditor’s Report	45
Consolidated Financial Statements
Consolidated Statement of Profit or Loss and Other Comprehensive Income	50
Consolidated Statement of Financial Position	51
Consolidated Statement of Changes in Equity	52
Consolidated Statement of Cash Flows	53
Notes to the Consolidated Financial Statements	55
Five Years’ Financial Summary	130

Jimu Group Limited | Annual Report 2020

CORPORATE INFORMATION

Board of Directors

Executive Directors

Mr. Dong Jun (Chairman) Mr. Huang Zexiong (Chief Executive Officer) Mr. Chen Zuze Mr. Chen Chao

Registered Office

Windward 3, Regatta Office Park PO Box 1350 Grand Cayman KY1-1108 Cayman Islands

Head Office and Principal Place of Business in

Non-Executive Directors

Mr. Wen Cyrus Jun-ming Mr. Lau Kai Pong Mr. Chan Kwun Wah Derek

Hong Kong

Room 20-01, 20/F, LKF Tower 33 Wyndham Street Central, Hong Kong

Independent Non-Executive Directors

Mr. Guo Zhongyong Mr. Hon Ping Cho Terence Mr. Ni Zhixing Ms. Chen Xin

Company Secretary

Ms. Leung Tsz Kwan

Compliance Officer

Mr. Huang Zexiong

Authorised Representatives

Mr. Huang Zexiong Ms. Leung Tsz Kwan

Principal Share Registrar and Transfer Office

Ocorian Trust (Cayman) Limited Windward 3, Regatta Office Park PO Box 1350 Grand Cayman KY1-1108 Cayman Islands

Hong Kong Branch Share Registrar and Transfer Office

Tricor Investor Services Limited Level 54, Hopewell Centre 183 Queen’s Road East Hong Kong

Audit Committee

Mr. Hon Ping Cho Terence (Chairman) Mr. Guo Zhongyong Ms. Chen Xin

Remuneration Committee

Ms. Chen Xin (Chairlady) Mr. Huang Zexiong Mr. Hon Ping Cho Terence

Nomination Committee

Mr. Dong Jun (Chairman) Mr. Guo Zhongyong Ms. Chen Xin

Principal Bankers

Chong Hing Bank Limited Bank of Communications (Hong Kong) Limited The Hongkong and Shanghai Banking Corporation Limited

Auditor

Deloitte Touche Tohmatsu, Certified Public Accountants Public Interest Entity Auditor registered in accordance with the Financial Reporting Council Ordinance

Legal Adviser

Lau, Horton & Wise LLP

Risk Management Committee

Mr. Huang Zexiong (Chairman) Mr. Wen Cyrus Jun-ming Mr. Chen Chao

Company’s Website

www.jimugroup.hk

Stock Code

8187

Jimu Group Limited | Annual Report 2020

CHAIRMAN’S STATEMENT

Dear Shareholders

On behalf of the board (the “ Board ”) of directors (the “ Directors ”) of Jimu Group Limited (the “ Company ”) and its subsidiaries (the “ Group ”), I am pleased to present the annual results of the Group for the year ended 31 December 2020.

Revenue from the footwear and apparel businesses segment increased significantly by 86.4% from approximately HK$31.0 million for 2019 to approximately HK$57.8 million for 2020. The footwear and apparel businesses segment recorded profit of approximately HK$12.0 million for the year ended 31 December 2020. The management believes that the footwear and apparel businesses is recovering and shall continue to seek further development opportunities in both overseas and PRC market.

Revenue from the loan facilitation and credit assessment segment decreased by 67.8% from approximately HK$79.1 million for 2019 to approximately HK$25.5 million for 2020. Loan facilitation and credit assessment segment had recorded a loss of approximately HK$13.4 million for the year ended 31 December 2020. The management expects the impact of Covid-19 to persist in 2021, and the management anticipates a very difficult time ahead. The management had already adopted plans to reduce costs and improve efficiency by closing down some of the branches and layoff under-performing staffs. On the other hand, the Group is actively seeking other Funding Sources include but not limited to banks, asset management companies, trusts and small loan companies.

Moving forward to 2021, the outbreak of Covid-19 further worsen the outlook for the loan facilitation and credit assessment businesses and footwear and apparel businesses as the demand for footwear and apparel businesses and the loan facilitation and credit assessment services businesses are expected to face unstable risk. The outbreak disrupted our operation and business plan and we anticipate a very difficult period ahead.

Looking to the future, we are still confident we will continue to maintain and consolidate our position within the industry, and we will also allocate internal resources to actively seek for healthy development of our existing business and new business opportunities. We plan and have made corresponding preparations to explore in the following aspects:

Seek to enter into strategic cooperation and equity investment of financial institutions with national or local licenses in the Mainland China;
Seek cooperation with many international and domestic financial institutions and leading commercial institutions to market our loan facilitation and credit assessment services capabilities to licensed financial institutions and leading commercial institutions;
Seek cooperation with leading commercial institutions and brand manufacturers in the Mainland China to explore new business opportunity for the loan facilitation and credit assessment services businesses in the sales and circulation of their products;

Jimu Group Limited | Annual Report 2020

CHAIRMAN’S STATEMENT

More diversified funding sources would be sought for the loan facilitation and credit assessment services businesses, so as to maintain and gradually expand its service coverage nationwide.We believe that the exploration in our existing businesses will help the Company maintain healthy and steady business development, and create more value for the shareholders of the Company.

Finally, on behalf of the Board and the management, I wish to extend my sincere appreciation to all of our staff for their tireless efforts, diligence and contribution during 2020 and express my utmost gratitude to all shareholders, investors, customers, suppliers and business partners for their continued and valuable support and trust to the Group.

Dong Jun

Chairman

Hong Kong, 26 March 2021

Jimu Group Limited | Annual Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS REVIEW AND OUTLOOK

Jimu Group Limited (the “ Company ”) and its subsidiaries (collectively referred to as the “ Group ”) is engaged in the footwear and apparel businesses and the loan facilitation and credit assessment businesses.

Footwear and Apparel Businesses

The Group is engaged in the provision of footwear design and development, production management (including quality control) and logistics management service. The Group offers formal and casual footwear for men, women and children to its customers. Over the years of its operations since 2009, the Group has built a diverse global customer portfolio comprising mainly international wholesaler and retailers which are brand owners and/or licensees of formal and casual footwear. In 2020, the Group further expanded its customer portfolio to include branded wholesalers and retailers in the PRC. Also, the Group seized the opportunity for extending to apparel business in 2020 as the potential market for apparel business is massive in PRC. The Group also provide design and development, production management service and logistics management services for apparel products.

Various uncertainties keeping influence the global economy, which have adversely affected customer sentiment, as well as increasingly intense competition in the footwear industry (including competition from countries in South East Asia) which has led to increasingly depressing profit margins for overseas customer. The spread of Covid-19 in 2020 and the subsequent various lockdown imposed by the government of various countries had further worsen the overseas retail market.

On the other hand, PRC was one of the first major economy to emerge from the impact of Covid-19. The management seized the such opportunity and the Group had completed its first footwear order to renowned retailers in the PRC in 2020.

The footwear and apparel businesses segment recorded profit for the year ended 31 December 2020. The management believes that the footwear and apparel businesses are recovering and shall continue to seek further development opportunities in both overseas and PRC market.

Loan Facilitation and Credit Assessment Businesses

The Group commenced the provision of loan facilitation services to customers in China in 2018.

The Group has set up branch office network across different regions in China to provide assistance to customers with financing needs, with a particular focus on individual customers in 3rd and 4th tier cities in China, who in general, compared to individuals in first tier cities, have weaker knowledge or access of financing solutions available in the market. The Group has built a credit rating system which gives customers an internal credit score, taking into account the customer’s financial condition, previous lending and repayment history and other behavior pattern. Our risk team periodically monitors and updates the algorithm to meet changing market conditions. Our branch network, together with our IT infrastructure, allows us to tap into these markets with relative ease. Our credit rating system helps to filter customers with relatively poor credit rating and allows us to focus on more credible customers. The on-site credit team then performs site visits and other due diligence procedures to verify the authenticity of information. Based on these credit scores and due diligence materials, our credit assessment team will consider whether to make a loan recommendation to appropriate funding sources (which may include bank and non-bank institutions). Our branch offices liaise between customers and the funding sources and arrange for contract signing upon agreement by both parties.

Jimu Group Limited | Annual Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

Our branch offices provide customer care services to these customers even after the relevant loans are disbursed. Such services include repayment reminders, and financial health check-ups.

There is a significant downturn in the loan facilitation and credit assessment businesses for the year ended 31 December 2020. There are two main reasons for the significant decline. First, the loan facilitation and credit assessment businesses were significantly affected by Covid-19. The PRC Government imposed a number of policies in early 2020 with an effort to contain the spread of Covid-19, including extension of the Lunar New Year holiday and different level of lockdown and travel restrictions across the PRC. The Group also implemented special working arrangements in the PRC, including but not limited to work-from-home arrangements and reduced business meetings with clients. These measures, together with the impact of Covid-19 on the PRC economy, had caused the loan facilitation service to drop drastically. Second, Covid-19 had also significantly affected lenders and intermediary service platforms (collectively, the “Funding Sources”). These Funding Sources had become less willing to lend or may have even changed their business plans amid such economic condition.

In 2020, The Group has also started credit assessment services by granting an automobile sales service shop the rights to access a system for credit assessment services for its customers. The Group has tailored-made a credit assessment system for the shop and facilitated the shop to assess credit rating of the client. The Group would explore more business opportunities by cooperating with different kind of business sector.

Our revenues are measured based on actual data usage for credit assessment services.

The management expects the impact of Covid-19 to persist in 2021, and the management anticipates a tough time ahead. The management had already adopted plans to reduce costs and improve efficiency by closing down some of the branches and layoff under-performing staffs.

On the other hand, the Group is actively seeking other Funding Sources include but not limited to banks, asset management companies, trusts and small loan companies.

Jimu Group Limited | Annual Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

FINANCIAL REVIEW

Revenue

The Group recorded revenue of approximately HK$83.3 million in 2020, a decrease of 24.4% compared with that of approximately HK$110.2 million for 2019. Set out below is the revenue breakdown by segment for the years ended 31 December 2019 and 2020:

	For theyear ended 31 December	For theyear ended 31 December
	2020	2019 HK$’000 %
	HK$’000 %
Trading of footwear and apparel Men’s Apparel Women’s Apparel Men’s footwear Women’s footwear Children’s footwear		– – – – 12,133 11.0 14,497 13.2 4,395 4.0

	4,443 5.3
	3,227 3.9
	28,191 33.8
	21,961 26.4
	– –

	57,822 69.4	31,025 28.2

Provision of loan facilitation and credit assessment services Pre-loan facilitation services Post-loan facilitation services Provision of credit assessment services		63,917 58.0 15,231 13.8 – –
	9,678 11.6
	11,773 14.1
	4,020 4.9

	25,471 30.6	79,148 71.8

Total	83,293 100.0	110,173 100.0

Footwear and Apparel Businesses

Revenue from the footwear and apparel businesses segment increase significantly by 86.4% from approximately HK$31.0 million for 2019 to approximately HK$57.8 million for 2020. This is mainly due to the successful expansion of the Group’s customer portfolio to include branded wholesalers and retailers in the PRC.

Loan Facilitation and Credit Assessment Businesses

Revenue from the loan facilitation and credit assessment segment decreased by 67.8% from approximately HK$79.1 million for 2019 to approximately HK$25.5 million for 2020. The revenue dropped significantly mainly due to the impact of Covid-19 during the year.

08 Jimu Group Limited | Annual Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

Purchases and changes in inventories

The Group’s purchases and changes in inventories increased by approximately 51.0% from approximately HK$27.9 million for 2019 to approximately HK$42.2 million for 2020. Purchase cost to sales ratio was approximately 73.0% for 2020 comparing to approximately 90.1% for 2019.

Other income

Other income decreased from approximately HK$8.7 million for 2019 to approximately HK$6.4 million for 2020. The decrease is mainly due to the decrease in government grant received and commission income in 2020 comparing to 2019.

Other gains and losses

Other gains (net) amounted to approximately HK$2.2 million for 2020 as compared to other losses (net) approximately HK$9.2 million for 2019. The other losses (net) in 2019 was mainly due to impairment losses recognised on various assets of approximately HK$10.5 million and the other gains (net) in 2020 mainly represented the gain on termination of lease liabilities, net.

Finance costs

Finance costs decreased by approximately 68.4% to approximately HK$0.4 million for 2020 from approximately HK$1.2 million for 2019, which was mainly because the Group had repaid all bank borrowings in 2019. Finance cost in 2020 represented interests on lease liabilities.

Employee benefits expenses

Employee benefits expenses decreased from approximately HK$81.8 million for 2019 to approximately HK$43.2 million for 2020, which was mainly due to cost-cutting and restructuring plan implemented during the year.

Other operating expenses

Other operating expenses decreased from approximately HK$30.5 million for 2019 to approximately HK$17.3 million for 2020, which was mainly a result of the implementation of certain cost-cutting measures during the year.

Income tax credit

Income tax credit increased from approximately HK$0.2 million for 2019 to approximately HK$1.8 million for 2020, This was mainly due to the recognition of deferred tax credit of HK$4.3 million for the year, being partially offset by the current tax provision for the other subsidiaries.

Jimu Group Limited | Annual Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

Loss for the year

As a result of foregoing, loss for the year decreased from approximately HK$33.3 million for 2019 to approximately HK$8.7 million for 2020.

Profit before taxation for footwear and apparel businesses amounting to approximately HK$12.0 million for 2020 as compared to loss before taxation for the footwear and apparel businesses segment approximately HK$13.9 million for 2019, which was mainly due to the higher gross profit margin and lower operating costs for the domestic footwear sales business.

Loss before taxation for the loan facilitation and credit assessment services segment increased from approximately HK$10.4 million for 2019 to approximately HK$13.4 million for 2020. This is mainly due to the impact of Covid-19 and the resulting decrease in revenue as discussed above.

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

As at 31 December 2020, the Group had no outstanding borrowings (2019: Nil). As at 31 December 2020, the cash and cash equivalents of the Group amounted to approximately HK$26.8 million (2019: approximately HK$33.6 million). As at 31 December 2020, debt to equity ratio of the Group was nil (2019: nil). (Debt to equity ratio is calculated by dividing the net debt, which is defined as bank borrowings and bank overdrafts net of bank balances and cash, by total equity at the end of the respective years.) Current ratio as at 31 December 2020 was approximately 2.2 times (2019: approximately 1.3 times).

On 14 October 2020, the Company entered into a placing agreement with Riche Bright Securities Limited (“ Riche Bright ”) as placing agent where Riche Bright agreed to place on a best effort basis a maximum of 22,200,000 new shares of the Company (“ Placing Share ”) of HK$0.01 each at HK$0.438 per Placing Share to at least six placees. The intended use of proceeds from the share placement was for corporate and administrative expenses for the coming twelve months. The placing transaction was completed on 30 October 2020 and a total of 21,600,000 shares were issued. The gross and net proceeds were approximately HK$9.5 million and HK$9.1 million respectively. The net price was approximately HK$0.42 per Placing Share. Details of the Placing Share were set out in the announcements of the Company dated 14 October 2020, 19 October 2020 and 30 October 2020. Out of the net proceeds of HK$9.1 million, approximately HK$0.8 million was used for the corporate and administrative expenses.

The Group maintained sufficient working capital as at 31 December 2020 with bank balances and cash of approximately HK$26.8 million (2019: approximately HK$33.6 million). The Board of Directors will continue to follow a prudent treasury policy in managing its cash balances and maintain a strong and healthy liquidity to ensure that the Group is well placed to take advantage of growth opportunities for the business.

As at 31 December 2020, the Group’s net current assets amounted to approximately HK$17.9 million (2019: approximately HK$11.0 million). The Group’s operations are financed principally by revenue generated from its business operation, available cash and bank balances, share placing, advances from a former director/director, loan from a fellow subsidiary and loan facility from the ultimate holding company. The Group manages liquidity risk by maintaining adequate reserves, by continuously monitoring forecast and actual cash flows and maintains a conservative level of funding to finance its operations. In order to better manage the liquidity position, the Group has arranged an interest bearing loan from a fellow subsidiary of RMB5,890,000 (equivalent to approximately HK$6,998,000) in December 2020. While most of the outstanding trade receivable balances have been settled by the end of December 2020, the liquidity position of the Group has been improved. Upon assessing the level of liquidity position and cash flow forecast of the Group, the entire loan from a fellow subsidiary balance has been settled in January 2021.

10 Jimu Group Limited | Annual Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

PLEDGE OF ASSETS

As at 31 December 2020, the Group had no asset pledged (2019: nil) to secure the Group’s bank borrowings.

EXCHANGE RATE EXPOSURE

Revenue, cost and expenses of the Group’s loan facilitation service segment and footwear and apparel businesses segment are all denominated in Renminbi (“ RMB ”), as such the net exposure to fluctuation of HK$ against RMB is not material. The Group’s management considers that the Group has no significant foreign exchange exposures. Foreign exchange risk arising from the normal course of operations is considered to be minimal. As at 31 December 2020, the Group did not use any financial instrument for hedging the foreign exchange risk.

SIGNIFICANT INVESTMENTS HELD

During the year ended 31 December 2020, there was no significant investment held by the Group.

FUTURE PLANS FOR MATERIAL INVESTMENTS AND CAPITAL ASSETS

During the year ended 31 December 2020, the Group did not have other plans for material investments and capital assets.

MATERIAL ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES AND AFFILIATED COMPANIES

During the year ended 31 December 2020, the Group did not have any material acquisitions and disposals of subsidiaries and affiliated companies.

CONTINGENT LIABILITIES

As at 31 December 2020, the Group did not have any significant contingent liabilities (2019: nil).

CAPITAL COMMITMENTS

As at 31 December 2020, the Group did not have any significant capital commitments (2019: nil).

EMPLOYEES AND EMOLUMENT POLICIES

As at 31 December 2020, the total employees in mainland China and Hong Kong has decreased from approximately 630 in 2019 to approximately 180 in 2020, which was mainly a result of our cost-cutting measures. In order to recruit, develop and retain talented employees, the Group offers competitive remuneration packages to our staff, including internal promotion opportunities and performance based bonus. The Group enters into standard employment contracts with our staff which contain provisions on intellectual property rights and confidentiality.

The remuneration committee of the Company will make recommendation to the Board on the overall remuneration policy and structure relating to all Directors and senior management of the Group.

Jimu Group Limited | Annual Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

PRINCIPAL RISKS AND UNCERTAINTIES

Credit risk

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. As at 31 December 2020, approximately 100% and 99% of the total trade receivables were due from our five largest debtors (all being customers) and our largest debtor (being a customer) respectively. The Group will review and monitor the level of exposure to ensure that follow-up actions are taken to recover overdue debts. In addition, at the end of each reporting year, the Group performs impairment assessment under expected credit loss model so as to ensure that adequate impairment losses are made. The carrying amounts of trade receivables, other receivables and contract assets represent the Group’s maximum exposure to credit risk in relation to financial assets.

Interest rate risk

The Group is exposed to interest rate risk through the impact of rate changes on interest-bearing financial liabilities, mainly the interest-bearing loan from a fellow subsidiary and lease liabilities. The Group monitors the interest rate exposure on a continuous basis.

Liquidity risk

The Group is exposed to minimal liquidity risk as a substantial portion of its financial assets and financial liabilities are due within one year and it can finance its operations from existing shareholders’ funds and internally generated cash flows. For the liquidity risk, the Group monitors and maintains a level of bank balances and cash deemed adequate to finance the Group’s operations and mitigate the effect of fluctuations in cash flows. In addition, an unsecured loan facility has been granted from its ultimate holding company to Jimu Group Enterprises Limited, a wholly-owned subsidiary of the Company, of an aggregate maximum amount of HK$30,000,000 for a period of 36 months which remains unutilised as at 31 December 2020. The Group monitors current and expected liquidity requirements on a regular basis.

COMPLIANCE WITH LAWS AND REGULATIONS

As far as the Board is aware, the Group was in compliance in all material respects with the relevant laws and regulations applicable to the business operations of the Group.

ENVIRONMENTAL POLICIES AND PERFORMANCE

According to our business nature and pursuant to the laws of Hong Kong, there are no specific environmental standards and/or requirements for conducting the Group’s business in Hong Kong. The Group is aware of environmental protection and social responsibility as an enterprise citizen and promotes healthy work place. The Group’s Environmental, Social and Governance Report for the year ended 31 December 2020 will be published on the respective websites of the Stock Exchange and the Company on or before 31 May 2021.

12 Jimu Group Limited | Annual Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

KEY RELATIONSHIP WITH EMPLOYEES, CUSTOMERS AND SUPPLIERS

The Group maintains good relationship with its customers. The sales personnel and merchandisers make regular phone calls to the customers and visit them overseas periodically. If there is any complaint from customers, it will be reported to the management and immediate remedial action will be taken.

The Group also maintains a good relationship with its suppliers. During the year ended 31 December 2020, no complaint was received from the suppliers and there was no disputed debts or unsettled debts and all the debts are settled on or before due dates or a latest date as mutually agreed.

During the year ended 31 December 2020, there was no dispute on salary payments and all accrued remunerations were settled on or before their respective due dates, as stipulated under individual employee’s employment contract. The Group also ensures that all the employees are reasonably remunerated by regular review the policies on salary increment, promotion, bonus, allowances and all other related benefits.

In view of the above and as at the date of the annual report, there is no circumstance or any event which will have a significant impact on the Group’s business and on which the Group’s success depends.

KEY PERFORMANCE INDICATORS

The key financial performance indicators of the Group for the year ended 31 December 2020 is set out in the section headed “Five Years’ Financial Summary” of the annual report.

CLOSURE OF REGISTER OF MEMBERS

The register of members of the Company will be closed from Friday, 18 June 2021 to Friday, 25 June 2021, both days inclusive, during which period no transfer of Shares will be registered. For determining the entitlement of members of the Company to attend and vote at the AGM, all share transfer documents accompanied by the relevant share certificates must be lodged with the Company’s branch share registrar and transfer office in Hong Kong, Tricor Investor Services Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong, no later than 4:30 p.m. on Thursday, 17 June 2021.

Jimu Group Limited | Annual Report 2020

REPORT OF THE DIRECTORS

The board (the “ Board ”) of directors (the “ Directors ”) of Jimu Group Limited (the “ Company ”) presents herewith the annual report together with the audited consolidated financial statements of the Company and its subsidiaries (the “ Group ”) for the year ended 31 December 2020.

PRINCIPAL ACTIVITIES

The principal activity of the Company is investment holding. The Group is principally engaged in the footwear and apparel businesses and the provision of loan facilitation and credit assessment services.

The activities of its principal subsidiaries are set out in note 38 to the consolidated financial statements.

BUSINESS REVIEW

The business review of the Group for the year ended 31 December 2020 is set out in the sections headed “Chairman’s Statement” and “Management Discussion and Analysis” of the annual report.

RESULTS AND APPROPRIATIONS

The results of the Group for the year ended 31 December 2020 and the financial position of the Company and the Group as at 31 December 2020 are set forth in the audited consolidated financial statements on pages 50 to 129 of the annual report.

The Board does not recommend the payment of a final dividend for the year ended 31 December 2020 (2019: nil).

FINANCIAL SUMMARY

A summary of the published results and assets and liabilities of the Group for the last five financial years, as extracted from the audited consolidated financial statements in the annual report and the Prospectus, is set out on page 130. This summary does not form part of the audited consolidated financial statements in the annual report.

RESERVES

Movements in reserves of the Group during the year are set out in the consolidated statement of changes in equity on page 52.

DISTRIBUTABLE RESERVES

As at 31 December 2020, the Company has no distributable reserves available for distribution to shareholders of the Company (2019: nil). Under the Companies Law (Revised) of the Cayman Islands, the share premium of the Company is distributable to the Shareholders provided that immediately following the date on which the dividend is proposed to be distributed, the Company will be in a position to pay off its debts as they fall due in the ordinary course of business. The share premium may also be distributed in form of fully paid bonus shares.

PROPERTY, PLANT AND EQUIPMENT

Details of movements in property, plant and equipment during the year are set out in note 16 to the consolidated financial statements.

Jimu Group Limited | Annual Report 2020

REPORT OF THE DIRECTORS

SHARE CAPITAL

Details of movements in share capital of the Company during the year are set out in note 30 to the consolidated financial statements.

DONATIONS

There were no charitable donations made by the Group during the year ended 31 December 2020 (2019: nil).

DIRECTORS

The Directors during the year ended 31 December 2020 and up to the date of this report were:

Executive Directors

Mr. Dong Jun (Chairman)

Mr. Huang Zexiong (Chief Executive Officer) (Note 1) Mr. Chen Zuze (Note 2)

Mr. Chen Chao (Note 3) Mr. Ho Kin Wai (Note 4) Mr. Peng Shaoxin (Note 5)

Mr. Yan Taotao (Note 6)

Non-Executive Directors

Mr. Wen Cyrus Jun-ming Mr. Lau Kai Pong Mr. Chan Kwun Wah Derek (Note 7)

Independent Non-Executive Directors

Mr. Guo Zhongyong Mr. Hon Ping Cho Terence Mr. Ni Zhixing (Note 8) Ms. Chen Xin (Note 9) Mr. Li Tixin (Note 10)

Notes:

Mr. Huang Zexiong was appointed as executive Director, the authorised representative and compliance officer on 5 June 2020 and appointed as chief executive officer 18 September 2020.
Mr. Chen Zuze was appointed as executive Director on 18 September 2020.
Mr. Chen Chao was appointed as executive Director on 18 September 2020.
Mr. Ho Kin Wai resigned as executive Director on 18 September 2020 and ceased as chief executive officer on the same day.
Mr. Peng Shaoxin resigned as executive Director on 18 September 2020.

Jimu Group Limited | Annual Report 2020

REPORT OF THE DIRECTORS

Mr. Yan Taotao retired as executive Director on 5 June 2020 and ceased as the authorised representative and compliance officer of the Company on the same day.
Mr. Chan Kwun Wah Derek was appointed as non-executive Director on 8 October 2020.
Mr. Ni Zhixing was appointed as independent non-executive Director on 8 October 2020.
Ms. Chen Xin was appointed as independent non-executive Director on 23 November 2020.
Mr. Li Tixin resigned as independent non-executive Director on 23 November 2020.

RE-ELECTION OF DIRECTORS

In accordance with Article 108(a) of the Articles of Association, Mr. Wen Cyrus Jun-ming, and Mr. Hon Ping Cho Terence will retire from office as Directors by rotation at the AGM. Mr. Wen Cyrus Jun-ming, and Mr. Hon Ping Cho Terence will offer themselves for re-election.

In accordance with Article 112 of the Articles of Association, Mr. Chen Zuze, Mr. Chen Chao, Mr. Chan Kwun Wah Derek, Mr. Ni Zhixing and Ms. Chen Xin appointed as Directors during the year will hold office until the forthcoming AGM and, being eligible, will offer themselves for re-election.

DIRECTORS’ SERVICE CONTRACTS

Each of Mr. Dong Jun, Mr. Huang Zexiong, Mr. Chen Zuze and Mr. Chen Chao being an executive Director, has entered into a service agreement with the Company for a initial term of three years commencing from 11 December 2017, 5 June 2020, 18 September 2020 and 18 September 2020 respectively, which shall continue thereafter unless terminated by either party by giving not less than three months’ prior written notice.

Each of Mr. Wen Cyrus Jun-ming and Mr. Lau Kai Pong, being a non-executive Director, has entered into a letter of appointment with the Company for an unfixed term commencing from 11 December 2017 and 27 May 2019 respectively which may be terminated by either party by giving not less than one month’s prior written notice. Mr. Chan Kwun Wah Derek, a non-executive Director, has entered into a letter of appointment with the Company for an initial term of 2 years from 8 October 2020 which may be terminated by either party giving one-month prior notice.

Each of Mr. Guo Zhongyong, Mr. Hon Ping Cho Terence, Mr. Ni Zhixing and Ms. Chen Xin, being an independent non-executive Director, has entered into a letter of appointment with the Company for an unfixed term commencing from 11 December 2017, 11 December 2017, 8 October 2020 and 23 November 2020 which may be terminated by either party by giving not less than one month’s prior written notice.

BIOGRAPHIES OF DIRECTORS AND SENIOR MANAGEMENT

The biographical details of the Directors and senior management are disclosed in the section headed “Biographies of Directors and Senior Management” on pages 40 to 44 in the annual report.

16 Jimu Group Limited | Annual Report 2020

REPORT OF THE DIRECTORS

DIRECTORS’ REMUNERATIONS

Details of the remunerations of the Directors are set out in note 13 to the consolidated financial statements in the annual report.

INDEPENDENT NON-EXECUTIVE DIRECTORS

The Company has received, from each of the independent non-executive Directors, an annual confirmation of his independence pursuant to Rule 5.09 of the Rules Governing the Listing of Securities on GEM (“ GEM Listing Rules ”). The Company considers all of the independent non-executive Directors are independent.

DIRECTORS’ RIGHTS TO ACQUIRE SHARES OR DEBENTURES

Save as disclosed in the paragraph headed “Directors’ and Chief Executives’ Interests and/or Short Positions in Shares, Underlying Shares and Debentures of the Company or any associated corporation” below, at no time during the year or at the end of the year has been/was the Company, its holding company, or any of its subsidiaries or fellow subsidiaries a party to any arrangement to enable the Directors to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

DIRECTORS’ INTEREST IN TRANSACTIONS, ARRANGEMENTS OR CONTRACTS

Save as disclosed in note 24 to the consolidated statement, there has been no transaction, arrangement or contract of significance to which the Company, its holding Company, or any of its subsidiaries or fellow subsidiaries was a party and in which a Director or an entity connected with the Director is or was materially interested, either directly or indirectly, subsisting during or at the end of the year.

EQUITY-LINKED AGREEMENTS

Other than the share option scheme of the Company as disclosed below, no equity-linked agreements that will or may result in the Company issuing shares or that require the Company to enter into any agreements that will or may result in the Company issuing shares were entered into by the Company during the year or subsisted at the end of the year.

MAJOR CUSTOMERS AND SUPPLIERS

Sales to the Group’s five largest customers accounted for approximately 74.2% and sales to the Group’s largest customer amounted to approximately 38.8% of the total sales for the year, respectively. Purchases from the Group’s five largest suppliers accounted for approximately 98.0% and purchases from the Group’s largest supplier amounted to approximately 51.3% of the total purchases for the year.

To the best knowledge of the Directors, neither the Directors, their close associates, nor any shareholders (which to the knowledge of the Directors) owned more than 5% of the Company’s issued shares, had any beneficial interest in any of the Group’s five largest customers or suppliers during the year.

Jimu Group Limited | Annual Report 2020

REPORT OF THE DIRECTORS

RELATED PARTY TRANSACTIONS AND CONNECTED TRANSACTIONS

The significant related party transactions entered into by the Group during the year are set out in note 32 to the consolidated financial statements.

During the year, the Group provides loan facilitation services to the external individual customers to obtain financing from a micro-finance company in PRC, a connected person of the Company. It will continue to carry out such transactions. The transactions fall within the de minimis rule under Rule 20.74(1) of the GEM Listing Rules and are fully exempt from shareholders’ approval, annual review and all disclosure requirements.

In April 2020, 通泉財富（寧夏）科技有限公司 (“ Tongquan ”), a subsidiary of the ultimate holding company, has provided a loan of RMB40,000,000 (equivalent to approximately HK$44,224,000) which is unsecured, interest free and repayable on April 2022 (collectively the “ Facility 1 ”). The entire amounts have been early settled during the current year. In December 2020, Tongquan has provided a loan of RMB5,890,000 (equivalent to approximately HK$6,998,000) (collectively the “ Facility 2 ”) which is unsecured, interest beaning of 5% pre annum and repayable at maturity, of 36 months since draw down date. In December 2020, the Group and Jimu Holdings Limited (“ Jimu Holdings ”) entered into a revolving loan facility pursuant to which Jimu Holdings provided a revolving loan facility up to HK$30,000,000 to the Group at an interest rate of 5% per annum (collectively the “ Facility 3 ”).

Tongquan is a wholly owned subsidiary of Jimu Holdings and Jimu Holdings is a controlling Shareholder of the Company. Hence Tongquan and Jimu Holdings are the connected person of the Company. The transactions contemplated under the Facility 1, Facility 2 and Facility 3 constitute financial assistance for the Group under the GEM Listing Rules. Pursuant to Rule 20.88 of the GEM Listing Rules, such financial assistance received by the Group from Jimu Holdings or Tongquan are fully exempt from the reporting, announcement and independent shareholders’ approval requirements under Chapter 20 to the GEM Listing Rules as they are conducted on normal commercial terms or better and they are not secured by the assets of the Group.

Saved as disclosed, none of the related party transactions constituted a connected transaction or continuing connected transaction (as defined in the GEM Listing Rules) that was required to be disclosed and the Company had not entered into any connected transaction or continuing connected transaction which is subject to the disclosure requirements under the GEM Listing Rules.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

During the year ended 31 December 2020, the Company did not redeem any of its shares, and neither did the Company nor any of its subsidiaries purchase or sell any of the Company’s shares.

18 Jimu Group Limited | Annual Report 2020

REPORT OF THE DIRECTORS

PRE-EMPTIVE RIGHTS

There are no provisions for pre-emptive rights under the Company’s Articles of Association or the laws of the Cayman Islands which would oblige the Company to offer new shares on a pro-rata basis to existing shareholders.

MANAGEMENT CONTRACTS

No contracts concerning the management and administration of the whole or any substantial part of the business of the Group were entered into or existed during the year ended 31 December 2020.

CONTRACTS OF SIGNIFICANCE

No contract of significance in relation to the Group’s business to which any member of the Group was a party and in which a Director had a material interest, whether directly or indirectly, subsisted at the end of the year ended 31 December 2020.

No contract of significance (including provision of services) between the Company, or any of its subsidiaries, and a controlling shareholder or any of its subsidiaries subsisted during the year ended 31 December 2020.

DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND/OR SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY OR ANY ASSOCIATED CORPORATION

As at 31 December 2020, the interests and short positions of the Directors or chief executive of the Company in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the “ SFO ”)), which were required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO; or (b) pursuant to Section 352 of the SFO, to be recorded in the register referred therein; or (c) pursuant to Rule 5.46 of the GEM Listing Rules to be notified to the Company and the Stock Exchange, were as follows:

Long position in shares or underlying shares of the Company

					Approximate
		Number of shares or underlying			percentage
		shares held			of interest
		Ordinary	Share		in such
Name of Director	Capacity	shares	options	Total	corporation
Mr. Ni Zhixing	beneficial owner	200,000	–	200,000	0.04%
		ordinary shares

Jimu Group Limited | Annual Report 2020

REPORT OF THE DIRECTORS

Long position in shares or underlying shares of the associated corporation

							Approximate
							percentage
							of interest in
						No. share(s)	the associated
	Name of associated					held in	corporation in
Name of Director	corporation		Capacity			each class	each class
Mr. Dong Jun	Jimu Holdings Limited		Founder of			21,524,698	29.90%
(“Mr. Dong”)		(formerly known as Pintec		discretionary trust		(ordinary shares)
		Holdings Limited)
		(“Jimu Holdings”)
		(Note 1)
Mr. Wen Cyrus	Jimu Holdings (Note 2)		Interest of controlled			2,210,630	5.17%
Jun-ming				corporation	(series C preferred
(“Mr. Wen”)						shares)
Mr. Wen	Jimu Holdings (Note 3)		Interest of controlled			235,000	0.33%
				corporation		(ordinary shares)
Notes:

Mr. Dong is the founder of a discretionary trust. Mr. Dong is deemed to be interested in the shares of Jimu Holdings in which the discretionary trust is interested has.
These 2,210,630 series C preferred shares are held by Delight Treasure Holdings Limited. Mr. Wen beneficially owns 100% of the issued share capital of Delight Treasure Holdings Limited.
These 235,000 ordinary shares are held by Delight Treasure Holdings Limited. Mr. Wen beneficially owns 100% of the issued share capital of Delight Treasure Holdings Limited.

Save as disclosed above, as at 31 December 2020, none of the Directors or chief executive of the Company had any interest or short position in shares, debentures or underlying shares of the Company and its associated corporations which was required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO; or (b) pursuant to Section 352 of the SFO, to be recorded in the register referred therein; or (c) pursuant to Rule 5.46 of the GEM Listing Rules to be notified to the Company and the Stock Exchange.

Jimu Group Limited | Annual Report 2020

REPORT OF THE DIRECTORS

SUBSTANTIAL SHAREHOLDERS’ AND OTHER PERSONS’ INTERESTS AND/OR SHORT POSITIONS IN SHARES AND UNDERLYING SHARES OF THE COMPANY

As at 31 December 2020, so far as known to any Director or chief executive of the Company, the following persons (other than the Directors and chief executive of the Company) had interests or short positions in the shares and underlying shares of the Company which would fall to be disclosed under the provisions of Divisions 2 and 3 of Part XV of the SFO, or recorded in the register required to be kept under Section 336 of the SFO:

				Approximate
			Number of shares	percentage of
			or underlying	interest in
Name of Shareholder	Capacity		shares held	the Company
Jimu Group Holdings Limited	Beneficiary owner		350,400,000	69.86%
Huawen Industry Group Limited (formerly	Interest in a controlled		350,400,000	69.86%
Known as Jimu Times Limited)		corporation (Note)
Jimu Holdings	Interest in a controlled		350,400,000	69.86%
		corporation (Note)

Note:

Jimu Group Holdings Limited is a registered owner holding 69.86% shareholding interest in the Company. Jimu Group Holdings Limited is owned as to 85% by Huawen Industry Group Limited and Huawen Industry Group Limited is wholly owned by Jimu Holdings. Under the SFO, Jimu Holdings and Huawen Industry Group Limited are deemed to be interested in 350,400,000 Shares

Save as disclosed above, as at 31 December 2020, the Directors were not aware of any other persons who had interests or short positions in the shares and underlying shares of the Company which would fall to be disclosed under the provisions of Divisions 2 and 3 of Part XV of the SFO, or recorded in the register required to be kept under Section 336 of the SFO.

Jimu Group Limited | Annual Report 2020

REPORT OF THE DIRECTORS

SHARE OPTIONS

The Company adopted a share option scheme (the “ Share Option Scheme ”) on 11 May 2016. The following is a summary of the principal terms and conditions of the Share Option Scheme.

1. Purpose of the Share Option Scheme

The Share Option Scheme enables the Company to grant options (the “ Options ”) to eligible persons, which mean among others, any full-time or part-time employee of the Company or any member of the Group, including any executive, non-executive directors and independent non-executive directors, advisors, consultants of our Company or any of the subsidiaries (“ Eligible Person ”) as incentives or rewards for their contributions to our Group.

2. Who may join

The Board may, at its discretion, invite any Eligible Persons to take up Options at a price calculated in accordance with sub-paragraph (4) below. Upon acceptance of the Option, the Eligible Person shall pay HK$1.00 to the Company by way of consideration for the grant. The Option will be offered for acceptance for a period of not less than 5 business days from the date on which the Option is granted.

3. Grant of Option

Any grant of Options must not be made after an inside information has come to the Company’s knowledge until it has announced the information in accordance with the requirements of the GEM Listing Rules. In particular, during the period commencing one month immediately preceding the earlier of (a) the date of our Board meeting (as such date is first notified to the Stock Exchange in accordance with the GEM Listing Rules) for the approval of the Company’s results for any year, half-year, quarter-year period or any other interim period (whether or not required under the GEM Listing Rules), and (b) the deadline for the Company to publish an announcement of its results for any year, half-year, quarter-year period under the GEM Listing Rules or any other interim period (whether or not required under the GEM Listing Rules), and ending on the date of the results announcement, no Option may be granted. The period during which no Option may be granted will cover any period of delay in the publication of a result announcement.

22 Jimu Group Limited | Annual Report 2020

REPORT OF THE DIRECTORS

The total number of Shares issued and to be issued upon exercise of the Options granted to a Eligible Person who accepts or is deemed to have accepted the offer of any Option in accordance with the terms of the Share Option Scheme (“ Participant ”) under the Share Option Scheme and other schemes (including both exercised and outstanding Options) in any 12-month period must not exceed 1% of the Shares in issue from time to time, and provided that if approved by Shareholders in general meeting with such Participant and his close associates (or his associates if the participant is a connected person) abstaining from voting, the Company may make a further grant of Options to such Participant (the “ Further Grant ”) notwithstanding that the Further Grant would result in the Shares issued and to be issued upon exercise of all Options granted and to be granted under the Share Option Scheme and other schemes to such Participant (including exercised, cancelled and outstanding Options) in the 12-month period up to and including the date of the Further Grant representing in aggregate over 1% of the Shares in issue from time to time. In relation to the Further Grant, the Company must send a circular to its Shareholders, which discloses the identity of the relevant Participant, the number and the terms of the Options to be granted (and Options previously granted to such Participant under the Share Option Scheme and other schemes) and the information required under the GEM Listing Rules. The number and terms (including the exercise price) of Options which is the subject of the Further Grant shall be fixed before the relevant Shareholders’ meeting and the date of meeting of our Board for proposing the Further Grant should be taken as the date of grant for the purpose of calculating the Exercise Price (as defined below).

Where Options are proposed to be granted to a director, chief executive or substantial shareholder of the Company or any of their respective associates, the proposed grant must be approved by the independent non-executive Directors (excluding any independent non-executive Director who is the proposed Participant). If a grant of Options to a substantial shareholder of the Company or an independent non-executive Director, or any of their respective associates will result in the total number of the Shares issued and to be issued upon exercise of the Options granted and to be granted (including Options exercised, cancelled and outstanding) to such person in any 12-month period up to and including the date of the grant (i) representing in aggregate over 0.1% (or such other percentage as may from time to time specified by the Stock Exchange) of the Shares in issue, and (ii) having an aggregate value, based on the closing price of the Shares at the date of the grant, in excess of HK$5 million, then the proposed grant of Options must be approved by the Shareholders on a poll in a general meeting.

Jimu Group Limited | Annual Report 2020

REPORT OF THE DIRECTORS

4. Price of Shares

The exercise price for the Shares subject to Options will be a price determined by the Board (“ Exercise Price ”) and notified to each Participant and shall be the highest of (i) the closing price of the Shares as stated in the Stock Exchange’s daily quotations sheet on the date of grant of the Options, which must be a Trading Day; (ii) the average closing price of the Shares as stated in the Stock Exchange’s daily quotations sheets for the five Trading Days immediately preceding the date of grant of the Options; and (iii) the nominal value of a Share.

5. Maximum number of Shares

The total number of Shares which may be issued upon the exercise of all Options to be granted under the Share Option Scheme and other schemes must not, in aggregate, exceed 10% of the Shares in issue (the “ Scheme Mandate Limit ”) unless approved by the Shareholders pursuant to the terms of the Share Option Scheme. Options lapsed in accordance with the terms of the Share Option Scheme or other scheme will not be counted for the purpose of calculating the Scheme Mandate Limit. On the basis of 480,000,000 Shares in issue, the Scheme Mandate Limit will be equivalent to 48,000,000 Shares, representing 10% of the Shares in issue.

Subject to the approval of Shareholders in general meeting, the Company may renew the Scheme Mandate Limit to the extent that the total number of Shares which may be issued upon exercise of all Options to be granted under the Share Option Scheme and other schemes under the Scheme Mandate Limit as renewed must not exceed 10% of the Shares in issue as at the date of such Shareholders’ approval provided that Options previously granted under the Share Option Scheme and other schemes (including those outstanding, cancelled, exercised or lapsed in accordance with the terms thereof) will not be counted for the purpose of calculating the Scheme Mandate Limit as renewed.

The Company may not grant any Options if the number of Shares which may be issued upon exercise of all outstanding Options granted and yet to be exercised under the Share Option Scheme and other schemes in aggregate exceeds 30% of the Shares in issue from time to time.

Jimu Group Limited | Annual Report 2020

REPORT OF THE DIRECTORS

6. Time of exercise of Option

An Option may be exercised in accordance with the terms of the Share Option Scheme at any time during the applicable option period, provided that, among others, the period within which the Option must be exercised shall not be more than 10 years from the date of the grant of Option. The exercise of an Option may be subject to the achievement of performance target and/or any other conditions to be notified by the Board to each Participant, which the Board may in its absolute discretion determine.

7. Period of Share Option Scheme

The Share Option Scheme will be valid and effective for a period of ten years commencing on 30 May 2016, after which period no further Options may be granted but the provisions of the Share Option Scheme shall remain in full force and effect in all other respects and Options granted during the life of the Share Option Scheme may continue to be exercisable in accordance with their terms of issue.

No share option has been granted, cancelled or lapsed since the adoption of the Share Option Scheme and there was no share option outstanding as at 31 December 2020.

INTERESTS IN COMPETING BUSINESS

For the year ended 31 December 2020, none of the Directors or any of their respective close associates (all as defined under the GEM Listing Rules) are engaged in any business that competes or may compete, directly or indirectly, with the business of the Group or have any other conflicts of interest with the Group nor are they aware of any other conflicts of interest which any such persons has or may have with the Group.

BUSINESS ACTIVITIES IN SANCTIONED COUNTRIES

The United States (“ US ”) government and other jurisdictions, including the European Union (“ EU ”), the United Nations and the Australian government, have comprehensive or broad economic sanctions targeting the Sanctioned Countries. “ Sanctioned Countries ” are those countries which are the targets of economic sanctions as administered by the U.S., the EU, the United Nations and Australia.

Jimu Group Limited | Annual Report 2020

REPORT OF THE DIRECTORS

The Board had effectively monitored and evaluated our business exposure to sanctions risk, including (i) the establishment of a risk management committee (the “ Risk Management Committee ”), comprising Mr. Huang Zexiong, Mr. Wen Cyrus Jun-ming and Mr. Chen Chao. The responsibilities of the Risk Management Committee include, among others, monitoring our exposure to sanctions risk and our implementation of the related internal control procedures; (ii) assigned members of our merchandising department and order processing department to review the information relating to our customer(s) or the counterparty(ies) of the contract (including its full name, country of incorporation or registration and country of shipment destination) before entering into any business transaction with any of them. Our designated staff will check the information of our customer(s) or the counterparty(ies) against various lists of restricted parties and countries maintained by the US, the EU, Australia or the United Nations, including, without limitation, any government, individual or entity that is the subject of any OFAC-administered sanctions (the “ International Sanctions List ”), and determine whether our customer(s) or the counterparty(ies) (i) is/are registered or operate(s) in the Sanctioned Countries; (ii) is/are owned or controlled by a sanctioned person; or (iii) has/have shipment destination which is located in the Sanctioned Countries.

During the year ended 31 December 2020 and up to the date of the annual report, none of our products were sold to any Sanctioned Countries. The Group has not entered into any sanctionable transactions that would or may expose our Group, the Stock Exchange, HKSCC, HKSCC Nominees and our shareholders or investors to any risk of being sanctioned. Also, the Company has not used any of the proceeds from the Placing as well as any other funding raised through the Stock Exchange to finance or facilitate, directly or indirectly, activities or business with, or for the benefit of, the Sanctioned Countries or any other government, individual or entity sanctioned by the US, the EU, Australia or the United Nations, which include, without limitation, any government, individual or entity that is the subject of any OFAC-administered sanction. During the year, the Company has maintained separate bank accounts in licensed banks in Hong Kong which are designated for proceeds from the Placing.

DIRECTORS’ EMOLUMENT POLICY

The remuneration committee of the Company was established for reviewing the Group’s emolument policy and structure for all remuneration of the Directors and senior management of the Group having regard to the Group’s operating results, individual performance and comparable market standard and practices. The Company has adopted a share option scheme as an incentive to the Directors and eligible employees, details of which are set out in the section headed “Share Option Scheme” of this report.

CORPORATE GOVERNANCE

The Company is committed to maintain a high standard of corporate governance. Information on the corporate governance practices adopted by the Company is set out in the Corporate Governance Report on pages 28 to 39.

26 Jimu Group Limited | Annual Report 2020

REPORT OF THE DIRECTORS

SUFFICIENCY OF PUBLIC FLOAT

Based on the information that is publicly available to the Company and to the best knowledge of the Directors, the Company has maintained the prescribed public float under the GEM Listing Rules for the year ended 31 December 2020.

PERMITTED INDEMNITY PROVISION

Pursuant to the Articles of Association of the Company, subject to the applicable laws and regulations, every Director shall be indemnified and secured harmless out of the assets and profits of the Company against all actions, costs, charges, losses, damages and expenses which they or any of them may incur or sustain in or about the execution of their duty in their offices. Such permitted indemnity provision has been in force throughout the year. The Company has arranged appropriate directors’ and officers’ liability insurance coverage for the directors and officers of the Group.

AUDITOR

The consolidated financial statements for the year ended 31 December 2020 have been audited by Deloitte Touche Tohmatsu. A resolution will be proposed at the forthcoming annual general meeting of the Company to re-appoint Deloitte Touche Tohmatsu as auditor of the Company.

On behalf of the Board

Mr. Dong Jun

Chairman and Executive Director

Hong Kong, 26 March 2021

Jimu Group Limited | Annual Report 2020

CORPORATE GOVERNANCE REPORT

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE

The corporate governance practices of Jimu Group Limited (the “ Company ”) and its subsidiaries (collectively referred to as the “ Group ”) are based on the principles and the code provisions in the Corporate Governance Code (the “ Code ”) as set out in Appendix 15 to the Rules (“ GEM Listing Rules ”) Governing the Listing of Securities on the GEM of The Stock Exchange of Hong Kong Limited (“ Stock Exchange ”).

During the year ended 31 December 2020, the Company has complied with all the applicable code provisions of the Code, except for the following deviations:

Code Provision A.2.7 of the Code provides that the chairman should at least annually hold meetings with the non-executive directors (including independent non-executive directors) without the executive directors present. For the year ended 31 December 2020, a formal meeting was not arranged between the Chairman and the nonexecutive Directors (including independent non-executive Directors) without the executive Directors present due to the tight schedules of the Chairman and the independent non-executive Directors. Although such meeting was not held during the year, the Chairman could be contacted by email or phone to discuss any potential concerns and/ or questions that the non-executive Directors and the independent non-executive Directors might have and would arrange to set up follow-up meetings, whenever necessary.

Pursuant to Code Provision A.4.1 of the Code stipulates that non-executive directors should be appointed for a specific term, subject to re-election. Mr. Wen Cyrus Jun-ming and Mr. Lau Kai Pong being non-executive Directors and all the independent non-executive Directors were not appointed for a specific term as required under code provision A.4.1 but are subject to retirement by rotation and re-election at annual general meeting in accordance with the articles of association. As such, the Company considers that sufficient measures have been taken to ensure that the Company has good corporate governance practices.

APPOINTMENT, RE-ELECTION AND RETIREMENT OF THE DIRECTORS

In accordance with article 108 of the articles of association (the “ Articles ”) of the Company, at each annual general meeting (“ AGM ”) one-third of the Directors for the time being (or, if their number is not a multiple of three (3), the number nearest to but not less than one-third) shall retire from office by rotation provided that every Director shall be subject to retirement at an AGM at least once every three years.

In accordance with article 112 of the Articles, any director appointed by the Board either to fill a casual vacancy shall hold office only until the first general meeting of the Company after his appointment and be subject to re-election at such meeting and any Director appointed by the Board as an addition to the existing Board shall hold office only until the next following AGM of the Company and shall then be eligible for re-election.

Pursuant to article 108(a) of the Articles, Mr. Wen Cyrus Jun-ming and Mr. Hon Ping Cho Terence will retire from office as Directors by rotation at the AGM and, being eligible will offer themselves for re-election.

Pursuant to article 112 of the Articles, Mr. Chen Zuze, Mr. Chen Chao, Mr. Chan Kwun Wah Derek, Mr. Ni Zhixing and Ms. Chen Xin appointed as Directors during the year will hold office until the forthcoming AGM and, being eligible, will offer themselves for re-election.

28 Jimu Group Limited | Annual Report 2020

CORPORATE GOVERNANCE REPORT

Each of Mr. Dong Jun, Mr. Huang Zexiong, Mr. Chen Zuze and Mr. Chen Chao, being an executive Director, has entered into a service agreement with the Company for a initial term of three years commencing from 11 December 2017, 5 June 2020, 18 September 2020 and 18 September 2020 respectively, which shall continue thereafter unless terminated by either party by giving not less than three months’ prior written notice.

Each of Mr. Wen Cyrus Jun-ming and Mr. Lau Kai Pong, being a non-executive Director, has entered into a letter of appointment with the Company for an unfixed term commencing from 11 December 2017 and 27 May 2019 respectively which may be terminated by either party by giving not less than one month’s prior written notice. Mr. Chan Kwun Wah Derek, being a non-executive Director, has entered into a letter of appointment with the Company for an initial term of 2 years from 8 October 2020 which may be terminated by either party giving one-month prior notice.

No Director proposed for re-election at the AGM has a service contract with the Company which is not determinable by the Company within one year without payment of compensation, other than statutory compensation.

MODEL CODE FOR DIRECTORS’ SECURITIES TRANSACTIONS

The Group has adopted the required standard of dealing, as set out in Rules 5.48 to 5.67 of the GEM Listing Rules, as the code of conduct for securities transactions by the Directors in respect of the shares of the Company. Having made specific enquiry of all Directors, all Directors have confirmed that they have complied with the required standard of dealing and the code of conduct for securities transactions by directors during the year ended 31 December 2020.

BOARD OF DIRECTORS

The Directors who held office during the year ended 31 December 2020 and as at the date of this report are as follows:

Board of Directors

Executive Directors

Mr. Dong Jun (Chairman) Mr. Huang Zexiong (Chief Executive Officer) (Note 1) Mr. Chen Zuze (Note 2)

Mr. Chen Chao (Note 2) Mr. Ho Kin Wai (Note 3) Mr. Peng Shaoxin (Note 3) Mr. Yan Taotao (Note 4)

Non-Executive Directors

Mr. Wen Cyrus Jun-ming Mr. Lau Kai Pong Mr. Chan Kwun Wah Derek (Note 5)

Jimu Group Limited | Annual Report 2020

CORPORATE GOVERNANCE REPORT

Independent Non-Executive Directors

Mr. Guo Zhongyong

Mr. Hon Ping Cho Terence Mr. Ni Zhixing (Note 6)

Ms. Chen Xin (Note 7)

Mr. Li Tixin (Note 8)

Notes:

Mr. Huang Zexiong was appointed as executive Director and chief executive officer on 5 June 2020 and 18 September 2020 respectively.
Mr. Chen Zuze and Mr. Chen Chao were appointed as executive Directors on 18 September 2020.
Mr. Ho Kin Wai and Mr. Peng Shaoxin resigned as executive Directors on 18 September 2020.
Mr. Yan Taotao retired as executive Director on 5 June 2020.
Mr. Chan Kwun Wah Derek was appointed as non-executive Director on 8 October 2020.
Mr. Ni Zhixing was appointed as independent non-executive Director on 8 October 2020.
Ms. Chen Xin was appointed as independent non-executive Director on 23 November 2020.
Mr. Li Tixin resigned as independent non-executive Director on 23 November 2020.

The brief biographic details of the Directors are set out in the section headed “Biographies of Directors and Senior Management” on pages 40 to 44 of the annual report.

The Company has complied with the requirements under Rule 5.05(1) and (2), and 5.05A of the GEM Listing Rules during the year ended 31 December 2020. All independent non-executive Directors also meet the guidelines for assessment of their independence as set out in Rule 5.09 of the GEM Listing Rules.

FUNCTIONS OF THE BOARD

The Board supervises the management of the business and affairs of the Company. The Board’s primary duty is to ensure the viability of the Company and to ensure that it is managed in the best interests of the Shareholders as a whole while taking into account the interests of other stakeholders. The management is delegated with the authority and responsibility by the Board for the management and administration of the Group. The Group has adopted internal guidelines in setting forth matters that require the Board’s approval. Apart from its statutory responsibilities, the Board approves the Group’s strategic plan, key operational initiatives, major investments and funding decisions. It also reviews the Group’s financial performance, identifies principal risks of the Group’s business and ensures implementation of appropriate systems to manage these risks. Daily business operations and administrative functions of the Group are delegated to the management.

The Board is also delegated with the corporate governance functions under code provision D.3.1 of the Code. The Board has reviewed and discussed the corporate governance policy of the Group and is satisfied with the effectiveness of the corporate governance policy.

Jimu Group Limited | Annual Report 2020

CORPORATE GOVERNANCE REPORT

BOARD MEETINGS AND PROCEDURES

Board members were provided with complete, adequate and timely information to allow them to fulfill their duties properly. In compliance with code provision A.1.3 of the Code, at least 14 days’ notice has been given for a regular Board meeting to give all Directors an opportunity to attend. Notice, agenda and board papers of regular Board meetings are sent to all Directors within reasonable time and at least 3 days prior to the meetings. Directors are free to contribute and share their views at meetings and major decisions will only be taken after deliberation at Board meetings. Directors who are considered having conflict of interests or material interests in the proposed transactions or issues to be discussed will not be counted in the quorum of meeting and will abstain from voting on the relevant resolutions. Full minutes are prepared after the meetings and the draft minutes are sent to all Directors for their comments before the final version of which are endorsed in the subsequent Board meeting.

Details of the attendance of the Board meetings, audit committee (the “ Audit Committee ”) meetings, remuneration committee (the “ Remuneration Committee ”) meeting, nomination committee (the “ Nomination Committee ”) meeting, risk management committee (the “ Risk Management Committee ”) meeting and general meetings of the Company held during the year ended 31 December 2020 are summarized as follows:

					Risk
		Audit	Remuneration	Nomination	Management
	Board	Committee	Committee	Committee	Committee	General
	meeting	meeting	meeting	meeting	meeting	meeting
Executive Directors
Mr. Dong Jun	6/6	N/A	N/A	1/1	N/A	1/1
Mr. Huang Zexiong (Note 1)	2/2	N/A	N/A	N/A	N/A	N/A
Mr. Chen Zuze (Note 3)	1/1	N/A	N/A	N/A	N/A	N/A
Mr. Chen Chao (Note 4)	1/1	N/A	N/A	N/A	N/A	N/A
Mr. Ho Kin Wai (Note 5)	5/5	N/A	N/A	N/A	N/A	1/1
Mr. Peng Shaoxin (Note 6)	5/5	N/A	1/1	N/A	1/1	1/1
Mr. Yan Taotao (Note 2)	4/4	N/A	N/A	N/A	1/1	1/1
Non-executive Directors
Mr. Wen Cyrus Jun-ming	6/6	N/A	N/A	N/A	1/1	1/1
Mr. Lau Kai Pong	6/6	N/A	N/A	N/A	N/A	1/1
Mr. Chan Kwun Wah Derek (Note 7)	1/1	N/A	N/A	N/A	N/A	N/A
Independent
Non-executive Directors
Mr. Guo Zhongyong	6/6	5/5	N/A	1/1	N/A	1/1
Mr. Hon Ping Cho Terence	6/6	5/5	1/1	N/A	N/A	1/1
Mr. Ni Zhixing (Note 8)	1/1	N/A	N/A	N/A	N/A	N/A
Ms. Chen Xin (Note 9)	N/A	N/A	N/A	N/A	N/A	N/A
Mr. Li Tixin (Note 10)	6/6	5/5	1/1	1/1	N/A	1/1

Notes:

Mr. Huang Zexiong was appointed as an executive Director on 5 June 2020 and appointed as the chairman of the Risk Management Committee on the same day. He is also appointed as a member of the Remuneration Committee on 18 September 2020.

Jimu Group Limited | Annual Report 2020

CORPORATE GOVERNANCE REPORT

Mr. Yan Taotao retired as an executive Director on 5 June 2020 and ceased to serve as the Chairman of Risk Management Committee on the same day.
Mr. Chen Zuze was appointed as an executive Director on 18 September 2020.
Mr. Chen Chao was appointed as an executive Director on 18 September 2020 and appointed as a member of the Risk Management Committee on the same day.
Mr. Ho Kin Wai resigned as an executive Director on 18 September 2020.
Mr. Peng Shaoxin resigned as an executive Director on 18 September 2020 and ceased to serve as to be a member of the Remuneration Committee and the Risk Management Committee on the same day.
Mr. Chan Kwun Wah Derek was appointed as a non-executive Director on 8 October 2020.
Mr. Ni Zhixing was appointed as an independent non-executive Director on 8 October 2020.
Ms. Chen Xin was appointed as independent non-executive Director on 23 November 2020 and appointed as the chairlady of the Remuneration Committee and a member of the Audit Committee and Nomination Committee on the same day.
Mr. Li Tixin resigned as an independent non-executive Director on 23 November 2020 and ceased to serve as the chairman of the Remuneration Committee and a member of the Audit Committee and Nomination Committee on the same day.

BOARD COMMITTEES

The Board has established specific committees, namely the Audit Committee, the Remuneration Committee, the Nomination Committee and the Risk Management Committee to oversee particular aspects of the Company’s affairs. The Board committees are provided with sufficient resources to discharge their duties.

The written terms of reference of the Audit Committee, the Remuneration Committee and the Nomination Committee are posted on the respective websites of the Stock Exchange and the Company.

AUDIT COMMITTEE

The Company established the Audit Committee on 11 May 2016 with written terms of reference in compliance with the code provisions of the Code. The primary duties of the Audit Committee are to make recommendation to the Board on the appointment and removal of external auditors; review financial statements and material advice in respect of financial reporting; and oversee internal control procedures of the Company.

The Audit Committee currently consists of three members, namely Mr. Hon Ping Cho Terence (Chairman), Mr. Guo Zhongyong and Ms. Chen Xin, all being independent non-executive Directors. The Audit Committee had reviewed the first quarterly report of the Group for the three months ended 31 March 2020, the interim results of the Group for the six months ended 30 June 2020; the third quarterly results of the Group for the nine months ended 30 September 2020 and the final results for the year ended 31 December 2020 before submission to the Board for approval. The Audit Committee is of the view that the annual results complied with the applicable accounting standards, the requirements under the GEM Listing Rules and other applicable legal requirements, and that adequate disclosures had been made.

The Audit Committee held 5 meetings during the year ended 31 December 2020. Details of the attendance of the Audit Committee meetings are set out above.

Jimu Group Limited | Annual Report 2020

CORPORATE GOVERNANCE REPORT

REMUNERATION COMMITTEE

The Company established the Remuneration Committee on 11 May 2016 with written terms of reference in compliance with the code provisions of the Code. The primary duties of the Remuneration Committee are to make recommendation to the Board on the overall remuneration policy and structure relating to all Directors and senior management of our Group; review performance based remuneration; and ensure none of our Directors determine their own remuneration.

The Remuneration Committee currently consists of three members, namely Ms. Chen Xin (Chairlady), Mr. Hon Ping Cho Terence, being independent non-executive Directors, and Mr. Huang Zexiong, an executive Director. The majority of the members of the Remuneration Committee are independent non-executive Directors. The remuneration of the Directors was determined with reference to, among other things, market level of salaries paid by comparable companies, the respective responsibilities of the Directors and the performance of the Group. The Remuneration Committee makes recommendations to the Board on remuneration packages of individual executive Directors and the members of senior management.

The Remuneration Committee held 1 meeting during the year ended 31 December 2020. Details of the attendance of the Remuneration Committee meeting are set out above.

At the meeting, the Remuneration Committee had reviewed the remuneration packages and performance of the Directors and the senior management during the year ended 31 December 2020.

NOMINATION COMMITTEE

The Company established the Nomination Committee on 11 May 2016 with written terms of reference in compliance with the code provisions of the Code. The primary duties of the Nomination Committee are to review the structure, size and composition of the Board on regular basis; identify individuals suitably qualified to become Board members; assess the independence of independent non-executive Directors; and make recommendations to the Board on relevant matters relating to the appointment or re-appointment of Directors.

The Nomination Committee currently consists of three members, namely, Mr. Dong Jun (Chairman), an executive Director, Mr. Guo Zhongyong and Ms. Chen Xin, being independent non-executive Directors (the “ Nomination Committee ”). The majority of the members of the Nomination Committee are independent non-executive Directors.

The Nomination Committee held 1 meeting during the year ended 31 December 2020. Details of the attendance of the Nomination Committee meeting are set out above.

At the meeting, the Nomination Committee had reviewed the structure, size and composition of the Board, assessed the independence of the independent non-executive Directors, reviewed the qualifications of the Directors, the progress on the implementation of the board diversity policy and other related matters of the Company.

Jimu Group Limited | Annual Report 2020

CORPORATE GOVERNANCE REPORT

RISK MANAGEMENT COMMITTEE

The Company established the Risk Management Committee on 11 May 2016. The primary duties of the Risk Management Committee are to review the Company’s risk management policies and monitor the Company’s exposure to sanctions law risks and our implementation of the related internal control procedures.

The Risk Management Committee currently consists of three members, namely Mr. Huang Zexiong (Chairman), Mr. Wen Cyrus Jun-ming and Mr. Chen Chao (the “ Risk Management Committee ”).

The Risk Management Committee held 1 meeting during the year ended 31 December 2020. Details of the attendance of the Risk Management Committee meeting are set out above.

At the meeting, the Risk Management Committee had reviewed and discussed the scope of internal control review and the appointment of an internal control consultant of the Group for the year ended 31 December 2020.

DIVERSITY OF THE BOARD

The Group has adopted policy in relation to the diversity of the members of the Board and the summary of the policy is as follows:

(1) selection of Board members will be based on a range of diversity perspectives, which would include but not limited to gender, age, cultural and educational background, professional experience, skills, knowledge and length of service; and
(2) the Nomination Committee will monitor the implementation of the diversity policy from time to time to ensure the effectiveness of the diversity policy.

INDEPENDENT NON-EXECUTIVE DIRECTORS

All independent non-executive Directors have been appointed for an unfixed term. Every Director is subject to re-election on retirement by rotation in accordance with the articles of association of the Company. The Company has received from each of the independent non-executive Directors an annual confirmation of independence pursuant to Rule 5.09 of the GEM Listing Rules and considers the independent non-executive Directors to be independent as at the date of the annual report.

DIRECTORS’ INDUCTION AND CONTINUING PROFESSIONAL DEVELOPMENT

Each newly appointed Director receives a formal, comprehensive and tailored induction on the first occasion of his appointment to ensure that he has a proper understanding of the Company’s operations and business and is fully aware of the director’s responsibilities under the statues and common law, the GEM Listing Rules, legal and other regulatory requirements and the Company’s business and governance policies. The Directors had attended training sessions on obligations, duties and responsibilities of directors conducted by the Company’s Hong Kong legal advisers.

34 Jimu Group Limited | Annual Report 2020

CORPORATE GOVERNANCE REPORT

The Company will from time to time provide briefings to all Directors to refresh their duties and responsibilities. All Directors are also encouraged to attend relevant training courses at the Company’s expense and they have been requested to provide the Company with their training records. According to the training records maintained by the Company, the trainings received by each of the Directors (including directors’ induction training) up to 31 December 2020 are summarised as follows:

Name of Directors	Type of trainings
Mr. Dong Jun	B
Mr. Huang Zexiong	A, B
Mr. Chen Zuze	A, B
Mr. Chen Chao	A, B
Mr. Wen Cyrus Jun-ming	A, B
Mr. Lau Kai Pong	B
Mr. Chan Kwan Wah Derek	A, B
Mr. Guo Zhongyong	B
Mr. Hon Ping Cho Terence	A, B
Mr. Ni Zhixing	A, B
Ms. Chen Xin	A, B

A: attending seminars/conferences/forums

B: reading newspapers, journals and updates relating to the economy, general business, corporate governance and directors’ duties and responsibilities

COMPANY SECRETARY

Ms. Leung Tsz Kwan (“ Ms. Leung ”) has been appointed as the company secretary of the Company since 30 November 2018. In accordance with Rule 5.15 of the GEM Listing Rules, Ms. Leung has taken no less than 15 hours of relevant professional training during the year ended 31 December 2020.

All Directors have access to the advice and services of the company secretary. The company secretary reports to the Chairman on board governance matters, and are responsible for ensuring that board procedures are followed, and for facilitating communications among Directors as well as with shareholders of the Company (the “ Shareholders ”) and management.

COMPLIANCE OFFICER

Mr. Huang Zexiong, an executive Director, has been appointed as the compliance officer of the Group to oversea all compliance metters.

SENIOR MANAGEMENT’S AND MANAGEMENT’S REMUNERATION

The senior management’s and management’s remuneration payment of the Group during the year ended 31 December 2020 falls within the following bands:

Number of individuals

HK$1,000,000 or below

Jimu Group Limited | Annual Report 2020

CORPORATE GOVERNANCE REPORT

DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

The Directors are responsible for the preparation of the consolidated financial statements of the Group for each financial period to give a true and fair view of the state of affairs of the Group and of the results and cash flows for that period in accordance with accounting principles generally accepted in Hong Kong. The statement by the auditor of the Company about its responsibilities for the financial statements is set out in the independent auditor’s report contained in the annual report. The Directors adopt the going concern approach in preparing the consolidated financial statements and are not aware of any material uncertainties relating to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern.

EXTERNAL AUDITOR’S REMUNERATION

The Company engaged Deloitte Touche Tohmatsu as its principal auditor for the year ended 31 December 2020. There was no disagreement between the Board and the Audit Committee on the selection, appointment, resignation or dismissal of the principal auditor. During the year ended 31 December 2020, the fee payable to Deloitte Touche Tohmatsu in respect of its statutory audit services provided to the Group was HK$1,850,000. The principal auditor of the Company also provided non-audit services in the sum of HK$289,000, which included accountancy and tax filing services.

RISK MANAGEMENT AND INTERNAL CONTROL

The Board acknowledges that it is its duty to monitor the risk management and internal control systems of the Group on an ongoing basis and review their effectiveness. Such systems are designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss.

During the year ended 31 December 2020, the Board, through the Risk Management Committee, conducted review of both design and implementation effectiveness of the risk management and internal control systems of the Group, covering all material controls, including financial, operational and compliance controls, with a view to ensuring that resources, staff qualifications and experience, training programmes and budget of the Group’s accounting, internal audit and financial reporting functions are adequate. In this respect, the Risk Management Committee communicates any material issues to the Board.

During the year ended 31 December 2020, the Group appointed an independent external consultant to:

assist in identifying and assessing the risks of the Group through a series of workshops and interviews; and
independently perform internal control review and assess effectiveness of the Group’s risk management and internal control systems.

36 Jimu Group Limited | Annual Report 2020

CORPORATE GOVERNANCE REPORT

The results of the independent review and assessment were reported to the Risk Management Committee and the Board. Moreover, improvements in internal control and risk management measures as recommended by an independent external consultant to enhance the risk management and internal control systems of the Group and mitigate risks of the Group were adopted by the Board. Based on the findings and recommendations of an independent external consultant as well as the comments of the Risk Management Committee, the Board considered the internal control and risk management systems effective and adequate.

Our Enterprise Risk Management Framework

The Company established its enterprise risk management framework in 2016. While the Board has the overall responsibility to ensure that sound and effective internal controls are maintained, management is responsible for designing and implementing an internal control system to manage all kinds of risks faced by the Group.

Through the risk identification and assessment processes, risks are identified, assessed, prioritized and allocated treatments. Our risk management framework follows the COSO Enterprise Risk Management – Integrated Framework, which allows the Board and management to manage the risks of the Group effectively. The Board receives regular reports through the Risk Management Committee that oversights risk management and internal audit functions.

Our Risk Control Mechanism

The Group adopts a “three lines of defence” corporate governance structure with operational management and controls performed by operations management, coupled with risk management monitoring carried out by the finance and compliance team and independent internal audit outsourced to and conducted by an independent external consultant. The Group maintains a risk register to keep track of all identified major risks of the Group. The risk register provides the Board, the Risk Management Committee, and management with a profile of its major risks and records management’s action taken to mitigate the relevant risks. Each risk is evaluated at least annually based on its likelihood of occurrence and potential impact upon the Group. The risk register is updated by management as the risk owners with addition of new risks and/or removal of existing risks, if applicable, at least annually, after the annual risk evaluation has been performed. This review process can ensure that the Group proactively manages the risks faced by it in the sense that all risk owners have access to the risk register and are aware of and alert to those risks in their area of responsibility so that they can take follow-up action in an efficient manner.

Our risk management activities are performed by management on an ongoing process. The effectiveness of our risk management framework will be evaluated at least annually, and periodic management meeting is held to update the progress of risk monitoring efforts. Management is committed to ensuring that risk management forms part of the daily business operation processes in order to align risk management with corporate goals in an effective manner.

The Company will continue to engage external independent professionals to review the Group’s system of internal controls and risk management annually and further enhance the Group’s internal control and risk management systems as appropriate.

Jimu Group Limited | Annual Report 2020

CORPORATE GOVERNANCE REPORT

There is currently no internal audit function within the Group. The directors have reviewed the need for an internal audit function and are of the view that in light of the size, nature and complexity of the business of the Group, it would be more cost effective to appoint external independent professionals to perform internal audit function for the Group in order to meet its needs. Nevertheless, the directors will continue to review at least annually the need for an internal audit function.

THE SHAREHOLDERS’ RIGHTS TO CONVENE AN EXTRAORDINARY GENERAL MEETING

Pursuant to article 64 of the Articles, extraordinary general meetings shall be convened on the requisition of one or more Shareholders holding, at the date of deposit of the requisition, not less than one-tenth of the paid up capital of the Company having the right of voting at general meetings. Such requisition shall be made in writing to the Board or the company secretary of the Company for the purpose of requiring an extraordinary general meeting to be called by the Board for the transaction of any business specified in such requisition. Such meeting shall be held within 2 months after the deposit of such requisition. If within 21 days of such deposit, the Board fails to proceed to convene such meeting, the requisitionist(s) himself (themselves) may do so in the same manner.

COMMUNICATIONS WITH SHAREHOLDERS AND INVESTORS

In order to keep Shareholders well informed of the business activities and direction of the Group, information about the Group has been provided to the Shareholders through financial reports and announcements. The Company has established its own corporate website (jimugroup.hk) as a channel to facilitate effective communication with its Shareholders and the public. The Company will continue to enhance communications and relationships with its Shareholders and investors. A shareholder communication policy was adopted on 11 May 2016 to comply with code provision E.1.4 of the Code.

Shareholders, investors and interested parties can make enquiries directly to the Company through the following e-mail: [email protected].

PROCEDURES FOR DIRECTING SHAREHOLDERS’ ENQUIRIES TO THE BOARD

Shareholders may at any time send their enquiries and concerns to the Board in writing. Contact details are as follows:

Jimu Group Limited

Address: Room 20-01, 20/F, LKF Tower, 33 Wyndham Street, Central, Hong Kong Tel: (852) 3905-1878 Fax: (852) 3007-6555 E-mail: [email protected]

Shareholders’ enquiries and concerns will be forwarded to the Board and/or relevant committees of the Board, where appropriate, to answer the Shareholders’ questions.

38 Jimu Group Limited | Annual Report 2020

CORPORATE GOVERNANCE REPORT

PROCEDURES FOR PUTTING FORWARD PROPOSALS AT GENERAL MEETINGS BY SHAREHOLDERS

Pursuant to article 113 of the Articles, no person (other than a retiring Director) shall be eligible for election to the office of Director at any general meeting unless a notice in writing of the intention to propose that person for election as a Director and notice in writing by that person of his willingness to be elected shall have been lodged at the head office or at the office of the branch share registrar and transfer office of the Company in Hong Kong no earlier than the day after the despatch of the notice of the general meeting appointed for such election and end no later than 7 days prior to the date of such general meeting and the minimum length of the period during which such notices to the Company may be given will be at least 7 days. The procedures for Shareholders to propose a person for election as a Director is posted on the website of the Company.

SIGNIFICANT CHANGES IN CONSTITUTIONAL DOCUMENTS

There had been no significant changes in the constitutional documents of the Company during the year ended 31 December 2020.

Jimu Group Limited | Annual Report 2020

BIOGRAPHIES OF DIRECTORS AND SENIOR MANAGEMENT

DIRECTORS

Executive Directors

Mr. Dong Jun（董駿）

Executive Director and Chairman

Mr. Dong, aged 43, was appointed as an executive Director and the chairman of the Company on 11 December 2017. Mr. Dong is the founder and the chief executive officer of Jimu Holdings Limited (previously known as Pintec Holdings Limited) (“ JIMU HOLDINGS ”). Mr. Dong has 16 years of financial services and capital market experience. He previously served as a bond trader and fixed income portfolio manager at the New York Branch of Bank Hapoalim. Mr. Dong holds a bachelor degree from Yunnan University, a Master of Business Administration degree from the University of Connecticut, and an Executive Master of Business Administration degree from the China Europe International Business School (CEIBS). He is a Chief Financial Analyst Charterholder and holds Certified Management Accountants and Certified Financial Manager designations. Mr. Dong is a director of Huawen Industry Group Limited (previously known as Jimu Times Limited) (“ Huawen Industry ”), which owns 85% of the issued share capital of Jimu Group Holdings Limited (“ JIMUGROUP ”), the controlling shareholder of the Company. He is also a director of JIMU HOLDINGS, which is the 100% parent company of Huawen Industry. Mr. Dong is currently a director and Chairman of Pintec Technology Holdings Limited (ticker symbol: PT) whose shares are listed on the United States Nasdaq Stock Market.

Mr. Huang Zexiong（黃澤雄） Executive Director and Chief Executive Officer

Mr. Huang, aged 34 was appointed as an executive Director on 5 June 2020 and chief executive officer of the Company on 18 September 2020. Mr. Huang has over 10 years of experience in financial service, focusing on SME financial services, financing guarantees, consumption installments service, real estate mortgage financing, small and micro credit and other financial products. Mr. Huang, joined Jimu Holdings Limited, the immediate holding company, in 2014, hold a bachelor’s degree of Economics from the Yunnan Economic University.

Mr. Chen Zuze（陳袓澤） Executive Director

Mr. Chen, aged 36 was appointed as an executive Director on 18 September 2020. Mr. Chen has over 15 years of experience in the apparel and footwear industry, especially have deep insight and understanding from internet thinking, e-commerce and customer behavior, as well as have strong business practical capabilities and rich team management experience. Prior to joining the Group, he served as a vice executive director in a company incorporated in the People’s Republic of China (“ PRC ”) mainly engaged in the apparel and footwear business. Mr. Chen obtained a Bachelor of Engineering from Zhejiang University.

40 Jimu Group Limited | Annual Report 2020

BIOGRAPHIES OF DIRECTORS AND SENIOR MANAGEMENT

Mr. Chen Chao（陳超）

Executive Director

Mr. Chen, aged 39 was appointed as an executive Director on 18 September 2020. Mr. Chen has over 12 years of experience in financial service, focusing on customer relationship management, credit risk management and team operation management. Prior to joining the Group, he served as a sales manager in Shenzhen Zhong’an Xinye Venture Capital Co., Ltd.（深圳市中安信業創業投資有限公司）from October 2007 to March 2012 and Deputy General Manager in Shenzhen Qianhai Jinzhuoyue Micro Finance Management Co., Ltd.（深圳前海金卓越小額貸款管理有限公司）from August 2013 to November 2014. Mr. Chen joined the Group in 2018 and is vice president of loan facilitation segment. Mr. Chen is currently the director of certain subsidiaries of the Company. He obtained a certificate in Business Management from Nankai University.

Non-executive Directors

Mr. Wen Cyrus Jun-ming（聞俊銘） Non-Executive Director

Mr. Wen, aged 35, was appointed as a non-executive Director on 11 December 2017. Mr. Wen is a partner of Cambium Grove Capital (“ CGC ”) which is an Asia based asset management platform that invests in alternative credit, private equity, venture, and special situation opportunities. Prior to CGC, Mr. Wen worked at various reputable financial institutions including STI Financial Group, VMS Investment Group and Citigroup. He graduated from Washington University in St. Louis with a double major in Finance and International Business. He is a nonexecutive director of Fresh Express Delivery Holdings Group Co., Limited (Stock Code: 1175) since 8 December 2016 and an independent non-executive director of Thing On Enterprise Limited (Stock Code: 2292) since 15 December 2017.

Mr. Lau Kai Pong（劉啓邦） Non-Executive Director

Mr. Lau, aged 41, was appointed as a non-executive Director on 27 May 2019. Mr. Lau is the vice president of Mandra Capital Limited, a company incorporated in Hong Kong with limited liability, which focus on early stage investments in big data, m-commerce, Software as a Service and blockchain, since 2005, responsible for, among others, identifying, performing due diligence reviews and making investment decisions for Telecom Media and Technology (“ TMT ”) projects in the PRC and performing valuation analysis and market studies for TMT companies. Mr. Lau holds a Master’ s Degree in Civil Engineering from Cornell University.

Jimu Group Limited | Annual Report 2020

BIOGRAPHIES OF DIRECTORS AND SENIOR MANAGEMENT

Mr. Chan Kwun Wah Derek（陳冠樺） Non-Executive Director

Mr. Chan, aged 50, was appointed as an independent non-executive Director on 8 October 2020. Mr. Chan is the managing director of Kingston Corporate Finance Limited. He is principally engaged in leading and planning investment banking and financial consultation services, including sponsorship for initial public offerings, structured finance, merger & acquisitions, asset restructuring and corporate governance advisory services. He has earned over 20 years of experience from a few renowned securities firms and global financial institutions. Mr. Chan had worked with Kingston Financial Group Limited from 2004 to 2008 and rejoined in January 2014. He holds a Master of Business Administration in the University of Strathclyde in 1999 and a Bachelor’s Degree in Business Administration in the University of Regina in 1994. He is a responsible officer of Kingston Securities Limited for its Type 1 (dealing in securities) regulated activities and Kingston Corporate Finance Limited for its Type 6 (advising on corporate finance) regulated activities under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the “ SFO ”). He serves as a non-executive director of DL Holdings Group Limited (Stock Code: 1709), a company listed on the Main Board of The Stock Exchange of Hong Kong Limited, since 27 March 2020.

Jimu Group Limited | Annual Report 2020

BIOGRAPHIES OF DIRECTORS AND SENIOR MANAGEMENT

Independent non-executive Directors

Mr. Guo Zhonyong（郭忠勇）

Independent Non-Executive Director

Mr. Guo, aged 50, was appointed as an independent non-executive Director on 11 December 2017. Mr. Guo is Chief Investment Officer at Asia Capital Reinsurance Group (“ ACR ”) in Singapore. Before joining ACR in 2008, he was with XL Capital Group in New York, where he was responsible for structuring and executing asset-backed transactions and investments, focusing on Asia Pacific-Rim. Prior to that, he was with Swiss Re Group in Zurich, London and Hong Kong. Mr. Guo holds an MBA from Columbia University, New York, and a Master in Economics from Shanghai University of Finance & Economics. He is a CFA Charterholder.

Mr. Hon Ping Cho, Terence（韓炳祖） Independent Non-Executive Director

Mr. Hon, aged 61, was appointed as an independent non-executive Director on 11 December 2017. Mr. Hon is currently an independent non-executive director of Xiabuxiabu Catering Management (China) Holdings Co., Ltd. (Stock Code: 520), 361 Degrees International Limited (Stock Code: 1361), Daphne International Holdings Limited (Stock Code: 210) and SinoMab BioScience Limited (Stock Code: 3681) since 28 November 2014, 20 May 2019, 25 September 2019 and 31 October 2019. He was the chief financial officer and company secretary of DTXS Silk Road Investment Holdings Company Limited (Stock Code: 620) (“ DTXS ”) until September 2018. Prior to joining DTXS, from 1996 to 2016, Mr. Hon was appointed as chief financial officer/group finance director at Auto Italia Holdings Limited, China Dongxiang (Group) Co., Ltd., Ka Wah Materials (HK) Limited, TOM Group Limited and Ng Fung Hong Limited, all of which are/were listed on the Stock Exchange. Before moving into commercial sector, he worked with KPMG, an international accounting firm. Mr. Hon is a fellow member of the Association of Chartered Certified Accountants, a member of the Hong Kong Institute of Certified Public Accountants and a member of the Institute of Chartered Accountants in England and Wales. He obtained a Master’s degree in Business Administration (Financial Services) from The Hong Kong Polytechnic University.

Mr. Ni Zhixing（倪志興先生） Independent Non-Executive Director

Mr. Ni, aged 41 was appointed as an independent non-executive Director on 8 October 2020. Mr. Zhi joined Kunming Panlong District State-owned Assets Operation Investment Holdings Company Limited（昆明市盤龍區國有資產經營投資集團有限公司）in January 2018 as a financial controller and is currently holding the position of assistant to the general manager in that company. Mr. Ni has more than 20 years in banking and finance industry. Mr. Ni currently also holds the position of chairman of the board of Yunnan Chenjie Environment Hygiene Management Company Limited（雲南宸潔環境衛生管理有限公司）since April 2019 and a supervisor of Kunming Gangtong City Construction Development Company Limited*（昆明港通城市建設發展有限公司）since October 2018. During the period from January 1999 to January 2018, he worked in Agricultural Bank of China – Kunming Branch and held various positions in the bank including branch manager. Mr. Ni obtained a master’s degree of Business Administration in Yunnan University of Finance and Economics in December 2014 and a bachelor’s degree in Accounting in Yunnan University in July 2005. Mr. Ni is currently a student of the doctoral programme in Enterprise Management in Yunnan University of Finance and Economics.

Jimu Group Limited | Annual Report 2020

BIOGRAPHIES OF DIRECTORS AND SENIOR MANAGEMENT

Ms. Chen Xin（陳歆女士） Independent Non-Executive Director

Ms. Chen, aged 35 was appointed as an independent non-executive Director on 23 November 2020. Ms. Chen obtained a Bachelor in management (Accounting) from Peking University. She has extensive experience in social media marketing and brand promotion. Prior to that, Ms. Chen was engaged in financial management under the State-Owned Assets Supervision and Administration Commission of the State Council and in project management in a consulting company

COMPANY SECRETARY

Ms. Leung Tsz Kwan（梁紫君）

Ms. Leung Tsz Kwan (“ Ms. Leung ”) is a member of the Hong Kong Institute of Certified Public Accountants. Ms. Leung has extensive working experience in company secretarial, accounting and finance in listed companies.

SENIOR MANAGEMENT

Mr. Chow Kin Wing（周建榮） Financial Controller

Mr. Chow joined the Company as financial controller in 2020 where he oversees the Group’s financial control function.

Mr. Chow has extensive experiences in financial management, internal control, taxation and other financial functions. Prior to joining the company, Mr. Chow has extensive experience in international accounting firms and various listed companies in Hong Kong.

Mr. Chow obtained a Bachelor degree in Accounting and Finance from the Queensland University of Technology, Australia. He is an associate member of Hong Kong Institute of Certified Public Accountants, an associate member of the Hong Kong Institute of Chartered Secretaries and The Institute of Chartered Secretaries and Administrators.

Jimu Group Limited | Annual Report 2020

INDEPENDENT AUDITOR’S REPORT

TO THE SHAREHOLDERS OF JIMU GROUP LIMITED 積木集團有限公司 (incorporated in the Cayman Islands with limited liability)

OPINION

We have audited the consolidated financial statements of Jimu Group Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) set out on pages 50 to 129, which comprise the consolidated statement of financial position as at 31 December 2020, and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2020, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

BASIS FOR OPINION

We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the HKICPA’s Code of Ethics for Professional Accountants (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Jimu Group Limited | Annual Report 2020

INDEPENDENT AUDITOR’S REPORT

KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter

How our audit addressed the key audit matter

Revenue recognition on provision of loan facilitation services

We identified the revenue recognition on provision of loan facilitation services as a key audit matter due to its significance to the consolidated financial statements as a whole, as well as significant judgement exercised in the identification of performance obligations and assumptions involved in the allocation of transaction price and estimation of variable considerations.

For the provision of loan facilitation services, management identified multiple performance obligations with revenue from the pre-loan facilitation services recognised at a point in time when the corresponding loan agreement is executed and revenue from the post-loan facilitation services recognised over the loan period on a straight-line basis. As further disclosed in Note 4 to the consolidated financial statements, management allocated the transaction price among pre-loan facilitation services and postloan facilitation services using an expected cost plus a margin approach to determine the best estimate of selling prices of respective performance obligations and estimated the rate of early loan repayment to determine the amount of variable consideration, being the service fees expected to be refunded to the customers due to early repayment of the outstanding loan balance before the original maturity date.

For the year ended 31 December 2020, the Group recognised revenue from provision of loan facilitation services amounting to HK$21,451,000 as set out in Note 5 to the consolidated financial statements.

Our procedures in relation to the revenue recognition on provision of loan facilitation services included:

Obtaining an understanding of the key controls over the processes that the management performed in relation to the revenue recognition;
Understanding revenue recognition policies of the Group and evaluating whether the identification of performance obligations, the allocation of the transaction price and the estimation of variable considerations in each distinct performance obligation are in accordance with the requirements of HKFRS 15 Revenue from Contracts with Customers;
Assessing the reasonableness of key assumptions used in the revenue recognition of loan facilitation business, including the allocation of the transaction price among pre-loan facilitation services and postloan facilitation services and the determination of variable considerations based on the Group’s historical data on cost allocation and service fees refund and re-performing calculations of revenue recognised from the loan facilitation business; and
Performing test of details on loan facilitation service transactions, on a sample basis, by examining the contract with customer and tracing to the fund remittance record to verify the existence of contract.

Jimu Group Limited | Annual Report 2020

INDEPENDENT AUDITOR’S REPORT

OTHER INFORMATION

The directors of the Company are responsible for the other information. The other information comprises the information included in the annual report, but does not include the consolidated financial statements and our auditor’s report thereon.

Our opinion on the consolidated 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 consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated 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 this other information, we are required to report that fact. We have nothing to report in this regard.

RESPONSIBILITIES OF DIRECTORS AND THOSE CHARGED WITH GOVERNANCE FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the directors are responsible for assessing the Group’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 directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED

FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the consolidated 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 solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements 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 consolidated financial statements.

Jimu Group Limited | Annual Report 2020

INDEPENDENT AUDITOR’S REPORT

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS – continued

As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated 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.
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 Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ 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 Group’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 consolidated 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 Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Jimu Group Limited | Annual Report 2020

INDEPENDENT AUDITOR’S REPORT

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS – continued

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, actions taken to eliminate threats or safeguards applied.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated 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.

The engagement partner on the audit resulting in the independent auditor’s report is Lau Chi Kin, Kinson.

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong 26 March 2021

Jimu Group Limited | Annual Report 2020

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2020

NOTES	2020	2019 HK$’000
	HK$’000
Revenue from goods and services 5 Other income 7A Other gains and losses 7B Impairment losses under expected credit loss model, net of reversal 8 Purchases and changes in inventories Employee benefits expenses Other operating expenses 9 Finance costs 10		110,173 8,695 (9,259 (1,685 (27,946 (81,789 (30,518 (1,166
	83,293
	6,404
	2,244
	578
	(42,206)
	(43,190)
	(17,250)
	(368)

Loss before tax Income tax credit 11	(10,495)	(33,495 150
	1,790

Loss for the year 12 Other comprehensive income (expense) Item that will not be reclassified to profit or loss: Exchange differences on translation from functional currency to presentation currency Item that may be reclassified subsequently to profit or loss: Exchange differences arising on translation of foreign operations	(8,705)	(33,345 – (110



	325

	–

Total comprehensive expense for the year	(8,380)	(33,455

Loss per share 15 Basic (HK cents)		(6.95

	(1.80)

Jimu Group Limited | Annual Report 2020

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 31 DECEMBER 2020

NOTES	2020	2019 HK$’000
	HK$’000
Non-current assets Property, plant and equipment 16 Right-of-use assets 17 Rental deposits 19 Contract assets 20		731 2,689 152 247

	306
	–
	76
	91

	473	3,819

Current assets Trade receivables 18 Other receivables, prepayments and deposits 19 Contract assets 20 Bank balances and cash 21		3 10,898 10,162 33,584
	877
	3,263
	2,315
	26,831

	33,286	54,647

Current liabilities Trade payables 22 Other payables and accruals 23 Amount due to a former director/director 24 Tax payable Lease liabilities 26 Contract liabilities 27 Refund liabilities 28		953 12,653 6,350 – 4,194 7,987 11,509
	953
	8,506
	440
	1,902
	675
	1,389
	1,540

	15,405	43,646

Net current assets	17,881	11,001

Total assets less current liabilities	18,354	14,820

Non-current liabilities Loan from a fellow subsidiary 25 Lease liabilities 26 Contract liabilities 27 Refund liabilities 28 Deferred tax liabilities 29		– 4,608 581 1,331 5,451
	6,998
	925
	418
	6
	1,438

	9,785	11,971

Net assets	8,569	2,849

Capital and reserves Share capital 30 Reserves and accumulated losses		4,800 (1,951


	5,016
	3,553

Total equity	8,569	2,849

The consolidated financial statements on pages 50 to 129 were approved and authorised for issue by the board of directors on 26 March 2021 and are signed on its behalf by:

DONG JUN DIRECTOR

HUANG ZEXIONG DIRECTOR

Jimu Group Limited | Annual Report 2020

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2020

	Share	Share	Translation	Capital	Statutory	Accumulated
	capital	premium	reserve	reserve	reserve	losses	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
				(Note a)	(Note b)
At 1 January 2019	4,800	46,917	(67)	(67)	–	(15,279)	36,304
Loss for the year	–	–	–	–	–	(33,345)	(33,345)
Exchange differences arising on
translation of foreign operations	–	–	(110)	–	–	–	(110)
Total comprehensive expense for the year	–	–	(110)	–	–	(33,345)	(33,455)
At 31 December 2019	4,800	46,917	(177)	(67)	–	(48,624)	2,849
Loss for the year	–	–	–	–	–	(8,705)	(8,705)
Exchange differences on translation
from functional currency to
presentation currency	–	–	325	–	–	–	325
Total comprehensive income (expense)
for the year	–	–	325	–	–	(8,705)	(8,380)
Transfer to statutory reserve	–	–	–	–	1,630	(1,630)	–
Deemed contribution from
a former director/director (Note 24)	–	–	–	5,017	–	–	5,017
Placing of new shares (Note 30)	216	9,245	–	–	–	–	9,461
Transaction costs attributable to
placing of new shares	–	(378)	–	–	–	–	(378)
At 31 December 2020	5,016	55,784	148	4,950	1,630	(58,959)	8,569

Notes:

(a) Capital reserve represents i) an amount of HK$77,000 representing the difference between the carrying amount of the non-controlling interests which exceeded the fair value of the consideration paid for the acquisition of additional 60% non-controlling interests in a subsidiary, Alliance International Sourcing Limited (“Alliance”) in previous years; ii) an amount of HK$10,000 representing the sum of the share capital of certain group entities, including Ever Smart International Enterprise Limited, Dodge & Swerve Limited and Alliance, which have been transferred to capital reserve under the reorganisation in 2015; and (iii) an amount of HK$5,017,000 representing the waiver of amount due to a former director/director, pursuant to the deed of waiver agreement entered into between the former director/director and Ever Smart International Enterprise Limited, a wholly owned subsidiary of the Group, during the year ended 31 December 2020.

(b) According to the relevant rules and regulations in the People’s Republic of China (the “PRC”), each of the Company’s PRC subsidiaries shall transfer 10% of their net income after taxation, based on the subsidiary’s PRC statutory accounts, as statutory reserves, until the balance reaches 50% of the respective subsidiary’s registered capital. Further appropriations can be made at the directors’ discretion. The statutory reserves can be used to offset any accumulated losses or convert into paid-up capital of the respective subsidiary.

Jimu Group Limited | Annual Report 2020

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2020

	2020	2019 HK$’000
	HK$’000
OPERATING ACTIVITIES Loss before tax Adjustments for: Depreciation of property, plant and equipment Depreciation of right-of-use assets Finance costs Gain on termination of lease disabilities Impairment losses recognised (reversed) on – right-of-use assets – financial assets and other items under expected credit loss model – prepayments – property, plant and equipment Interest income Loss (gain) on disposal of property, plant and equipment, net		(33,495 1,114 4,052 1,166 (1,310 4,742 1,685 4,726 1,048 (307 (33

	(10,495)

	385
	747
	368
	(2,586)

	159
	(578)
	–
	–
	(305)
	78

Operating cash flows before movements in working capital (Increase) decrease in trade receivables Decrease (increase) in other receivables, prepayments and deposits Decrease in contract assets Decrease in trade payables Decrease in other payables and accruals Decrease in contract liabilities Decrease in refund liabilities	(12,227)	(16,612 6,972 (4,491 29,372 (7,724 (8,223 (1,425 (2,583
	(880)
	8,039
	8,501
	–
	(4,410)
	(6,761)
	(11,294)

Cash used in operations Income tax paid	(19,032)	(4,714 –
	(673)

NET CASH USED IN OPERATING ACTIVITIES	(19,705)	(4,714

INVESTING ACTIVITIES Interest received Payments for rental deposits Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Withdrawal of pledged bank deposits		229 (88 (1,068 1,923 120
	252
	(213)
	(26)
	–
	–

NET CASH FROM INVESTING ACTIVITIES	13	1,116

Jimu Group Limited | Annual Report 2020

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2020

	2020	2019 HK$’000
	HK$’000
FINANCING ACTIVITIES Advance from a fellow subsidiary Proceeds from placing of new shares Advance from a former director/director Repayment to a fellow subsidiary Repayment of lease liabilities Repayment of amount due to a former director/director Transaction costs attributable to placing of new shares Interest paid Repayment of bank borrowings Proceeds from bank borrowings raised		– – 7,000 – (6,273 (650 – (240 (17,169 12,684

	51,222
	9,461
	2,107
	(44,224)
	(3,080)
	(3,000)
	(378)
	(368)
	–
	–

NET CASH FROM (USED IN) FINANCING ACTIVITIES	11,740	(4,648

NET DECREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR Effect of foreign exchange rate changes	(7,952)	(8,246 42,166 (336

	33,584

	1,199

CASH AND CASH EQUIVALENTS AT END OF THE YEAR, REPRESENTED BY BANK BALANCES AND CASH	26,831	33,584

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

1. GENERAL INFORMATION

Jimu Group Limited (the “Company”) is a public listed company incorporated in the Cayman Islands as an exempted company with limited liability and its shares are listed on GEM of The Stock Exchange of Hong Kong Limited. The immediate holding company of the Company is Jimu Group Holdings Limited, a company incorporated in the British Virgin Islands. The ultimate holding company and ultimate controlling shareholder is Jimu Holdings Limited, a company incorporated in the British Virgin Islands. The registered office of the Company is Windward 3, Regatta Office Park, PO Box 1350, Grand Cayman KY1-1108, Cayman Islands. The principal place of business of the Company was Suite 2207, 22/F, Prudential Tower, The Gateway, Harbour City, Kowloon, Hong Kong and changed to Room 20-01, 20/F, LKF Tower, 33 Wyndham Street, Central, Hong Kong on 26 February 2021.

The Company is an investment holding company. The Company and its subsidiaries (collectively referred to as the “Group”) is principally engaged in the footwear and apparel business and the provision of loan facilitation services. The principal activities and other particulars of its principal subsidiaries as at 31 December 2020 are set out in Note 38.

In view of the Group’s expansion of footwear and apparel business, continuous operations of loan facilitation services in the People’s Republic of China (the “PRC”) and suspension of the overseas markets of footwear business, the directors of the Company (the “Directors”) reassessed the functional currency of the Company and determined that Renminbi (“RMB”) better reflects the economic substance of the Company and its business activities as an investment holding company with subsidiaries mainly operating in the PRC. Accordingly, the functional currency of the Company was prospectively changed from United States dollars to RMB with effective from 1 January 2020. For the convenience of the financial statements users, the consolidated financial statements are presented in Hong Kong dollars (“HK$”).

2. APPLICATION OF AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”)

Amendments to HKFRSs that are mandatorily effective for the current year

In the current year, the Group has applied the Amendments to References to the Conceptual Framework in HKFRS Standards and the following amendments to HKFRSs issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) for the first time, which are mandatorily effective for the annual period beginning on or after 1 January 2020 for the preparation of the consolidated financial statements:

Amendments to HKAS 1 and Definition of Material HKAS 8 Amendment to HKFRS 3 Definition of a Business Amendments to HKFRS 9, Interest Rate Benchmark Reform HKAS 39 and HKFRS 7

Except as described below, the application of the Amendments to References to the Conceptual Framework in HKFRS Standards and the amendments to HKFRSs in the current year had no material impact on the Group’s financial positions and performance for the current and prior years and/or on the disclosures set out in these consolidated financial statements.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

2. APPLICATION OF AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”) – continued

2.1 Impacts on application of Amendments to HKAS 1 and HKAS 8 Definition of Material

The Group has applied the Amendments to HKAS 1 and HKAS 8 for the first time in the current year. The amendments provide a new definition of material that states “information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.” The amendments also clarify that materiality depends on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements taken as a whole.

The application of the amendments in the current year had no impact on the consolidated financial statements.

2.2 Impacts on application of Amendment to HKFRS 3 Definition of a Business

The Group has applied the amendments for the first time in the current year. The amendments clarify that while businesses usually have outputs, outputs are not required for an integrated set of activities and assets to qualify as a business. To be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.

The amendments remove the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs. The amendments also introduce additional guidance that helps to determine whether a substantive process has been acquired.

In addition, the amendments introduce an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business. Under the optional concentration test, the acquired set of activities and assets is not a business if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar assets. The gross assets under assessment exclude cash and cash equivalents, deferred tax assets, and goodwill resulting from the effects of deferred tax liabilities. The election on whether to apply the optional concentration test is available on transaction-by-transaction basis.

The amendments had no impact on the consolidated financial statements of the Group but may impact future periods should the Group make any acquisition.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

2. APPLICATION OF AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”) – continued

New and amendments to HKFRSs in issues but not yet effective

The Group has not early applied the following new and amendments to HKFRSs that have been issued but are not yet effective:

HKFRS 17 Insurance Contracts and the related Amendments[1] Amendment to HKFRS 16 Covid-19-Related Rent Concessions[4] Amendments to HKFRS 3 Reference to the Conceptual Framework[2] Amendments to HKFRS 9, HKAS 39, Interest Rate Benchmark Reform – Phase 2[5] HKFRS 7, HKFRS 4 and HKFRS 16 Amendments to HKFRS 10 and Sale or Contribution of Assets between an Investor and its HKAS 28 Associate or Joint Venture[3] Amendments to HKAS 1 Classification of Liabilities as Current or Non-current and related amendments to Hong Kong Interpretation 5 (2020)[1] Amendments to HKAS 16 Property, Plant and Equipment – Proceeds before Intended Use[2] Amendments to HKAS 37 Onerous Contracts – Cost of Fulfilling a Contract[2] Amendments to HKFRSs Annual Improvements to HKFRSs 2018 – 2020[2]

1 Effective for annual periods beginning on or after 1 January 2023
2 Effective for annual periods beginning on or after 1 January 2022
3 Effective for annual periods beginning on or after a date to be determined
4 Effective for annual periods beginning on or after 1 June 2020
5 Effective for annual periods beginning on or after 1 January 2021

Except for the new and amendments to HKFRSs mentioned below, the Directors anticipate that the application of all other new and amendments to HKFRSs will have no material impact on the consolidated financial statements in the foreseeable future.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

2. APPLICATION OF AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”) – continued

New and amendments to HKFRSs in issues but not yet effective – continued

Amendments to HKAS 1 Classification of Liabilities as Current or Non-current and related amendments to Hong Kong Interpretation 5 (2020)

The amendments provide clarification and additional guidance on the assessment of right to defer settlement for at least twelve months from reporting date for classification of liabilities as current or non-current, which:

specify that the classification of liabilities as current or non-current should be based on rights that are in existence at the end of the reporting period. Specifically, the amendments clarify that:
(i) the classification should not be affected by management intentions or expectations to settle the liability within 12 months; and
(ii) if the right is conditional on the compliance with covenants, the right exists if the conditions are met at the end of the reporting period, even if the lender does not test compliance until a later date.
clarify that if a liability has terms that could, at the option of the counterparty, result in its settlement by the transfer of the entity’s own equity instruments, these terms do not affect its classification as current or non-current only if the entity recognises the option separately as an equity instrument applying HKAS 32 Financial Instruments: Presentation.

In addition, Hong Kong Interpretation 5 was revised as a consequence of the Amendments to HKAS 1 to align the corresponding wordings with no change in conclusion.

Based on the Group’s outstanding liabilities as at 31 December 2020, the application of the amendments will not result in reclassification of the Group’s liabilities.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES

3.1 Basis of preparation of consolidated financial statements

The consolidated financial statements have been prepared in accordance with HKFRSs issued by the HKICPA. For the purpose of preparation of the consolidated financial statements, information is considered material if such information is reasonably expected to influence decisions made by primary users. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on the GEM of The Stock Exchange of Hong Kong Limited (“Listing Rules”) and by the Hong Kong Companies Ordinance.

The outbreak of Covid-19 and the subsequent quarantine measures as well as the travel restrictions imposed by many countries have had negative impacts to the global economy, and is also severely impacting the business environment in the PRC and directly and indirectly affect the operations of the Group. The Group closed some of its branches of loan facilitation business after the mandatory government quarantine measures to contain the spread of the pandemic. These measures, together with the impact of Covid-19 on the PRC economy, had caused the demand for loan facilitation services to drop drastically. In addition, the spread of the Covid-19 had further worsen the global retail footwear market and significantly affected lenders and intermediary service platforms (collectively, the “Funding Sources”). These Funding Sources have become less willing to lend or may have even changed their business plans amid such economic condition. As such, the financial performance of the Group were affected in different aspects, including increase in loss before tax, reduction in revenue and recognition of impairment of relevant right-of-use assets and property, plant and equipment as disclosed in the relevant notes.

In preparing the consolidated financial statements of the Group, the Directors have given careful consideration of the Group in light of its loss before tax of approximately HK$10,495,000 for the year ended 31 December 2020. Having considered the facility for unsecured loan of an aggregate maximum amount of HK$30,000,000 for a period of 36 months were granted from its ultimate holding company to Jimu Group Enterprises Limited, a wholly-owned subsidiary of the Company, on 31 December 2020 which remains unutilised at the date of approval of the consolidated financial statements, the Directors are satisfied that the Group will be able to meet in full its financial obligations as they fall due for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the consolidated financial statements.

The consolidated financial statements have been prepared on the historical cost basis at the end of each reporting period, as explained in the accounting policies set out below.

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.1 Basis of preparation of consolidated financial statements – continued

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristic of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in the consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of HKFRS 2 Share-based Payment, leasing transactions that are accounted for in accordance with HKFRS 16 Leases, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in HKAS 2 Inventories or value in use in HKAS 36 Impairment of Assets.

In addition, for financial reporting purpose, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
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; and
Level 3 inputs are unobservable inputs for the asset or liability.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company and its subsidiaries. Control is achieved when the Company:

has power over the investee;
is exposed, or has rights, to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

Consolidation of a subsidiary begins with the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Group gains control until the date when the Group ceases to control the subsidiary.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies.

All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Revenue from contracts with customers

The Group recognises revenue when (or as) a performance obligation is satisfied, i.e. when “control” of the goods or services underlying the particular performance obligation is transferred to the customer.

A performance obligation represents a good or service (or a bundle of goods or services) that is distinct or a series of distinct goods or services that are substantially the same.

Control is transferred over time and revenue is recognised over time by reference to the progress towards complete satisfaction of the relevant performance obligation if one of the following criteria is met:

the customer simultaneously receives and consumes the benefits provided by the Group’s performance as the Group performs;
the Group’s performance creates or enhances an asset that the customer controls as the Group performs; or
the Group’s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.

Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct good or service.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Revenue from contracts with customers – continued

For granting of a licence that is distinct from other promised goods or services, the nature of the Group’s promise in granting a licence is a promise to provide a right to access the Group’s intellectual property if all of the following criteria are met:

the contract requires, or the customer reasonably expects, that the Group will undertake activities that significantly affect the intellectual property to which the customer has rights;
the rights granted by the licence directly expose the customer to any positive or negative effects of the Group’s activities; and
those activities do not result in the transfer of a good or a service to the customer as those activities occur.

If the criteria above are met, the Group accounts for the promise to grant a licence as a performance obligation satisfied over time. Otherwise, the Group considers the grant of licence as providing the customers the right to use the Group’s intellectual property and the performance obligation is satisfied at a point in time at which the licence is granted.

A contract asset represents the Group’s right to consideration in exchange for goods or services that the Group has transferred to a customer that is not yet unconditional. It is assessed for impairment in accordance with HKFRS 9 Financial Instruments (“HKFRS 9”). In contrast, a receivable represents the Group’s unconditional right to consideration, i.e. only the passage of time is required before payment of that consideration is due.

A contract liability represents the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer.

A contract asset and a contract liability relating to same contract are accounted for and presented on a net basis.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Revenue from contracts with customers – continued

Contracts with multiple performance obligations (including allocation of transaction price)

For contracts that contain more than one performance obligations, the Group allocates the transaction price to each performance obligation on a relative stand-alone selling price basis, except for the allocation of variable considerations.

The stand-alone selling price of the distinct service underlying each performance obligation is determined at contract inception. It represents the price at which the Group would sell a promised service separately to a customer. If a stand-alone selling price is not directly observable, the Group estimates it using appropriate techniques such that the transaction price ultimately allocated to any performance obligation reflects the amount of consideration to which the Group expects to be entitled in exchange for transferring the promised service to the customer.

Over time revenue recognition: measurement of progress towards complete satisfaction of a performance obligation

Input method

The progress towards complete satisfaction of a performance obligation is measured based on input method, which is to recognise revenue on the basis of the Group’s efforts or inputs to the satisfaction of a performance obligation relative to the total expected inputs to the satisfaction of that performance obligation, that best depict the Group’s performance in transferring control of goods or services.

Variable consideration

For contracts that contain variable consideration, the Group estimates the amount of consideration to which it will be entitled using either (a) the expected value method or (b) the most likely amount, depending on which method better predicts the amount of consideration to which the Group will be entitled.

The estimated amount of variable consideration is included in the transaction price only to the extent that it is highly probable that such an inclusion will not result in a significant revenue reversal in the future when the uncertainty associated with the variable consideration is subsequently resolved.

At the end of each reporting period, the Group updates the estimated transaction price (including updating its assessment of whether an estimate of variable consideration is constrained) to represent faithfully the circumstances present at the end of the reporting period and the changes in circumstances during the reporting period.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Revenue from contracts with customers – continued

Notwithstanding the above criteria, the Group shall recognise revenue for a sales-based or usagebased royalty promised in exchange for a licence of intellectual property only when (or as) the later of the following events occurs:

the subsequent sale or usage occurs; and
the performance obligation to which some or all of the sales-based or usage-based royalty has been allocated has been satisfied (or partially satisfied).

Refund liabilities

The Group recognises a refund liability if the Group expects to refund some or all of the consideration received from customers.

Principal versus agent

When another party is involved in providing goods or services to a customer, the Group determines whether the nature of its promise is a performance obligation to provide the specified goods or services itself (i.e. the Group is a principal) or to arrange for those goods or services to be provided by the other party (i.e. the Group is an agent).

The Group is a principal if it controls the specified good or service before that good or service is transferred to a customer. The Group is an agent if its performance obligation is to arrange for the provision of the specified good or service by another party.

Commission income/consultancy income

In respect of insurance brokerage service and consultancy service, the Group does not control the specified good or service provided by another party before that good or service is transferred to the customer and acts as an agent. The Group recognises commission income or consultancy income under “other income” and in the amount of any fee or commission to which it expects to be entitled in exchange for arranging for the specified goods or services to be provided by the other party.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Leases

Definition of 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.

For contracts entered into or modified on or after the date of initial application or arising from business combinations, the Group assesses whether a contract is or contains a lease based on the definition under HKFRS 16 at inception, modification date or acquisition date, as appropriate. Such contract will not be reassessed unless the terms and conditions of the contract are subsequently changed.

The Group as a lessee

Allocation of consideration to components of a contract

For a contract that contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.

The Group also applies the practical expedient not to separate non-lease components from lease component, and instead account for the lease component and any associated non-lease components as a single lease component.

Short-term leases

The Group applies the short-term lease recognition exemption to leases of office premises and branches premises that have a lease term of 12 months or less from the commencement date and do not contain a purchase option. Lease payments on short-term leases are recognised as expense on a straight-line basis over the lease term.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Leases – continued

The Group as a lessee – continued

Right-of-use assets

The cost of right-of-use asset includes:

the amount of the initial measurement of the lease liability;
any lease payments made at or before the commencement date, less any lease incentives received;
any initial direct costs incurred by the Group; and
an estimate of costs to be incurred by the Group in dismantling and removing the underlying assets, 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.

Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities.

Right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term.

The Group presents right-of-use assets as a separate line item on the consolidated statement of financial position.

Refundable rental deposits

Refundable rental deposits paid are accounted under HKFRS 9 and initially measured at fair value. Adjustments to fair value at initial recognition are considered as additional lease payments and included in the cost of right-of-use assets.

Lease liabilities

At the commencement date of a lease, the Group recognises and measures the lease liability at the present value of lease payments that are unpaid at that date. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Leases – continued

The Group as a lessee – continued

Lease liabilities – continued

The lease payments include:

fixed payments (including in-substance fixed payments) less any lease incentives receivable;
variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
amounts expected to be payable by the Group under residual value guarantees;
the exercise price of a purchase option if the Group is reasonably certain to exercise the option; and
payments of penalties for terminating a lease, if the lease term reflects the Group exercising an option to terminate the lease.

After the commencement date, lease liabilities are adjusted by interest accretion and lease payments.

The Group remeasures lease liabilities (and makes a corresponding adjustment to the related right-ofuse assets) whenever:

the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the related lease liability is remeasured by discounting the revised lease payments using a revised discount rate at the date of reassessment.
the lease payments change due to changes in market rental rates following a market rent review, in which cases the related lease liability is remeasured by discounting the revised lease payments using the initial discount rate.

The Group presents lease liabilities as a separate line item on the consolidated statement of financial position.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Leases – continued

The Group as a lessee – continued

Lease modifications

The Group accounts for a lease modification as a separate lease if:

the modification increases the scope of the lease by adding the right to use one or more underlying assets; and
the consideration for the leases increases by an amount commensurate with the stand-alone price for the increase in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the particular contract.

For a lease modification that is not accounted for as a separate lease, the Group remeasures the lease liability based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification.

The Group accounts for the remeasurement of lease liabilities by making corresponding adjustments to the relevant right-of-use assets. When the modified contract contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the modified contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recognised at the rates of exchanges prevailing on the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Nonmonetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are recognised in profit or loss in the period in which they arise.

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Group (i.e. HK$) using exchange rates prevailing at the end of each reporting period. Income and expenses items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of translation reserve.

On the disposal of a foreign operation (that is, a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss.

In addition, in relation to a partial disposal of a subsidiary that does not result in the Group losing control over the subsidiary, the proportionate share of accumulated exchange differences are reattributed to non-controlling interests and are not recognised in profit or loss.

Exchange differences relating to the retranslation of the Group’s net assets in RMB to the Group’s presentation currency (i.e. HK$) are recognised directly in other comprehensive income and accumulated in translation reserve. Such exchange differences accumulated in the translation reserve are not reclassified to profit or loss subsequently.

The change in functional currency of the Company was applied prospectively from the date of change. All items were translated into RMB at the exchange rate on that date. The cumulative currency translation differences which had arisen from the translation of foreign operations up to the date of the change in functional currency will not reclassified from equity to profit or loss until the disposal of the relevant operations.

70 Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Borrowing costs

All borrowing costs not directly attributable to the acquisition, construction, or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are recognised in profit or loss in the period in which they are incurred.

Government grants

Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.

Government grants related to income that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable. Government grants relating to compensation of expenses are deducted from the related expenses, other government grants are presented under “other income”.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from loss before tax because of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Taxation – continued

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

For the purposes of measuring deferred tax for leasing transactions in which the Group recognises the right-of-use assets and the related lease liabilities, the Group first determines whether the tax deductions are attributable to the right-of-use assets or the lease liabilities.

For leasing transactions in which the tax deductions are attributable to the lease liabilities, the Group applies HKAS 12 Income Taxes requirements to right-of-use assets and lease liabilities separately. Temporary differences on initial recognition of the relevant right-of-use assets and lease liabilities are not recognised due to application of the initial recognition exemption. Temporary differences arising from subsequent revision to the carrying amounts of right-of-use assets and lease liabilities, resulting from remeasurement of lease liabilities and lease modifications, that are not subject to initial recognition exemption are recognised on the date of remeasurement or modification.

72 Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Taxation – continued

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied to the same taxable entity by the same taxation authority.

Current and deferred tax are recognised in profit or loss.

Short-term employee benefits

Short-term employee benefits are recognised at the undiscounted amount of the benefits expected to be paid as and when employees rendered the services. All short-term employee benefits are recognised as an expense unless another HKFRS requires or permits the inclusion of the benefit in the cost of an asset.

A liability is recognised for benefits accruing to employees (such as wages and salaries and annual leave) after deducting any amount already paid.

Retirement benefit costs

Payments to the defined contribution plans including the Mandatory Provident Fund Scheme and the state-managed retirement benefits schemes in the PRC are recognised as an expense when employees have rendered service entitling them to the contributions.

Property, plant and equipment

Property, plant and equipment are tangible assets that are held for administrative purpose (other than properties under constructions as described below) are stated in the consolidated statement of financial position at cost, less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any.

Depreciation is recognised so as to write off the cost of assets less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Impairment on property, plant and equipment and right-of-use assets

At the end of the reporting period, the Group reviews the carrying amounts of its property, plant and equipment and right-of-use assets to determine whether there is any indication that these assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the relevant asset is estimated in order to determine the extent of the impairment loss, if any.

The recoverable amount of property, plant and equipment and right-of-use assets are estimated individually. When it is not possible to estimate the recoverable amount of an asset individually, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

In testing a cash-generating unit for impairment, corporate assets are allocated to the relevant cash-generating unit when a reasonable and consistent basis of allocation can be established, or otherwise they are allocated to the smallest group of cash generating units for which a reasonable and consistent allocation basis can be established. The recoverable amount is determined for the cash-generating unit or group of cash-generating units to which the corporate asset belongs, and is compared with the carrying amount of the relevant cash-generating unit or group of cash-generating units.

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset (or a cash-generating unit) for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or a cash-generating unit) is reduced to its recoverable amount. For corporate assets or portion of corporate assets which cannot be allocated on a reasonable and consistent basis to a cash-generating unit, the Group compares the carrying amount of a group of cash-generating units, including the carrying amounts of the corporate assets or portion of corporate assets allocated to that group of cash-generating units, with the recoverable amount of the group of cash-generating units. In allocating the impairment loss, the impairment loss is allocated first to reduce the carrying amount of any goodwill (if applicable) and then to the other assets on a pro-rata basis based on the carrying amount of each asset in the unit or the group of cash-generating units. The carrying amount of an asset is not reduced below the highest of its fair value less costs of disposal (if measurable), its value in use (if determinable) and zero. The amount of the impairment loss that would otherwise have been allocated to the asset is allocated pro rata to the other assets of the unit or the group of cash-generating units. An impairment loss is recognised immediately in profit or loss.

74 Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Impairment on property, plant and equipment and right-of-use assets – continued

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cashgenerating unit or a group of cash-generated units) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or a cashgenerating unit or a group of cash-generated units) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

Financial instruments

Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value except for trade receivables arising from contracts with customers which are initially measured in accordance with HKFRS 15. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating interest income and interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts and payments (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset or financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Financial assets

Classification and subsequent measurement of financial assets

Financial assets that meet the following conditions are subsequently measured at amortised cost:

the financial asset is held within a business model whose objective is to collect contractual cash flows; and
the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Financial instruments – continued

Financial assets – continued

Amortised cost and interest income

Interest income is recognised using the effective interest method for financial assets measured subsequently at amortised cost. Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset, except for financial assets that have subsequently become credit-impaired (see below). For financial assets that have subsequently become creditimpaired, interest income is recognised by applying the effective interest rate to the amortised cost of the financial asset from the next reporting period. If the credit risk on the credit-impaired financial instrument improves so that the financial asset is no longer credit-impaired, interest income is recognised by applying the effective interest rate to the gross carrying amount of the financial asset from the beginning of the reporting period following the determination that the asset is no longer credit-impaired.

Impairment of financial assets and other item subject to impairment assessment under HKFRS 9

The Group performs impairment assessment under expected credit loss (“ECL”) model on financial assets (including trade receivables, other receivables and deposits, and bank balances), and contract assets which are subject to impairment assessment under HKFRS 9. The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition.

Lifetime ECL represents the ECL that will result from all possible default events over the expected life of the relevant instrument. In contrast, 12-month ECL (“12m ECL”) represents the portion of lifetime ECL that is expected to result from default events that are possible within 12 months after the reporting date. Assessment are done based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current conditions at the reporting date as well as the forecast of future conditions.

76 Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Financial instruments – continued

Financial assets – continued

Impairment of financial assets and other item subject to impairment assessment under HKFRS 9 – continued

The Group always recognises lifetime ECL for trade receivables and contract assets.

For all other instruments, the Group measures the loss allowance equal to 12m ECL, unless there has been a significant increase in credit risk since initial recognition, in which case, the Group recognises lifetime ECL. The assessment of whether lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default occurring since initial recognition.

(i) Significant increase in credit risk

In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forwardlooking information that is available without undue cost or effort.

In particular, the following information is taken into account when assessing whether credit risk has increased significantly:

an actual or expected significant deterioration in the financial instrument’s external (if available) or internal credit rating;
significant deterioration in external market indicators of credit risk, e.g. a significant increase in the credit spread, the credit default swap prices for the debtor;
existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a significant decrease in the debtor’s ability to meet its debt obligations;
an actual or expected significant deterioration in the operating results of the debtor;
an actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor that results in a significant decrease in the debtor’s ability to meet its debt obligations.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Financial instruments – continued

Financial assets – continued

Impairment of financial assets and other item subject to impairment assessment under HKFRS 9 – continued

(i) Significant increase in credit risk – continued

Irrespective of the outcome of the above assessment, the Group presumes that the credit risk has increased significantly since initial recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and supportable information that demonstrates otherwise.

The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit risk before the amount becomes past due.

(ii) Definition of default

For internal credit risk management, the Group considers an event of default occurs when information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Group, in full (without taking into account any collaterals held by the Group).

Irrespective of the above, the Group considers that default has occurred when a financial asset is more than 90 days past due unless the Group has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Financial instruments – continued

Financial assets – continued

Impairment of financial assets and other item subject to impairment assessment under HKFRS 9 – continued

(iii) Credit-impaired financial assets

A financial asset is credit-impaired when one or more events of default that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired includes observable data about the following events:

(a) significant financial difficulty of the issuer or the borrower;
(b) a breach of contract, such as a default or past due event;
(c) the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider; or
(d) it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation.

(iv) Write-off policy

The Group writes off a financial asset when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery, for example, when the counterparty has been placed under liquidation or has entered into bankruptcy proceedings, or in the case of trade receivables, when the amounts are over two years past due, whichever occurs sooner. Financial assets written off may still be subject to enforcement activities under the Group’s recovery procedures, taking into account legal advice where appropriate. A write-off constitutes a derecognition event. Any subsequent recoveries are recognised in profit or loss.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Financial instruments – continued

Financial assets – continued

Impairment of financial assets and other item subject to impairment assessment under HKFRS 9 – continued

(v) Measurement and recognition of ECL

The measurement of ECL is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical data and forward-looking information. Estimation of ECL reflects an unbiased and probability-weighted amount that is determined with the respective risks of default occurring as the weights.

Generally, the ECL is the difference between all contractual cash flows that are due to the Group in accordance with the contract and the cash flows that the Group expects to receive, discounted at the effective interest rate determined at initial recognition.

Lifetime ECL for contract assets are considered on a collective basis taking into consideration past due information and relevant credit information such as forward looking macroeconomic information.

For collective assessment, the Company takes into consideration the following characteristics when formulating the grouping:

Past-due status;
Respective financial performance and position of debtors;
Nature, size and industry of debtors;
Amount of collateral;
Geographical locations; and
External credit ratings where available.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Financial instruments – continued

Financial assets – continued

Impairment of financial assets and other item subject to impairment assessment under HKFRS 9 – continued

(v) Measurement and recognition of ECL – continued

The grouping is regularly reviewed by management to ensure the constituents of each group continue to share similar credit risk characteristics.

Interest income is calculated based on the gross carrying amount of the financial asset unless the financial asset is credit-impaired, in which case interest income is calculated based on amortised cost of the financial asset.

The Group recognises an impairment gain or loss in profit or loss for all financial instruments by adjusting their carrying amount, with the exception of trade receivables and contract assets where the corresponding adjustment is recognised through a loss allowance account.

Derecognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire or, when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Financial instruments – continued

Financial liabilities and equity

Classification as debt or equity

Debt and equity instruments are classified either as financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.

Financial liabilities at amortised cost

Financial liabilities (including trade payables, other payables, amount due to a former director/director and loan from a fellow subsidiary) are subsequently measured at amortised cost, using the effective interest method.

Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Investment in subsidiaries

Investment in subsidiaries are stated in the Company’s statement of financial position at cost less subsequent accumulated impairment losses, if any.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

4. KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are described in Note 3, the Directors are required to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Revenue related to pre-loan facilitation services and post-loan facilitation services

The Group considers that the pre-loan facilitation and post-loan facilitation services are considered as the two distinct performance obligations to be provided by the Group. Although the Group does not provide these services separately and there is no third-party evidence for the selling price for these services either, as public information is not available regarding the amount of fees the Group’s competitors charge for these services, the Group determined that both performance obligations have standalone value and uses the expected cost plus a margin approach to determine its best estimate of selling prices of these service obligations as the basis for the allocating the transaction price. When estimating the selling prices, the Group considers the cost related to such services, profit margin, customer demand, effect of competition on its services, and other market factors, if applicable.

During the year, the Group recognised revenue in respect of pre-loan facilitation and post-loan facilitation services amounted to HK$9,678,000 and HK$11,773,000 (2019: HK$63,917,000 and HK$15,231,000), respectively.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

4. KEY SOURCES OF ESTIMATION UNCERTAINTY – continued

Key sources of estimation uncertainty – continued

Variable considerations in relation to pre-loan facilitation services and post loan facilitation services

The Group only includes in the transaction price some or all of an amount of variable considerations to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Management considers the variable considerations in the loan facilitation services being the service fees to be refunded to the borrowers due to early loan repayment.

The Group refunds partially service fees to borrowers when they early repay the outstanding loan balance before the original maturity date. The refunded service fees due to early repayment are considered as variable considerations. Management determines that such variable consideration can be reliably estimated at the contract inception.

The expected refund portion of the service fee due to early loan repayment in the loan facilitation service transactions are estimated at contract inception based on the expected value method. The expected value of this component is the sum of probability-weighted amounts in a range of possible consideration amounts on a portfolio basis. The factor that affect the expected value include the estimated rate of early loan repayment. The estimated amount of refunds of service fees due to borrowers’ early repayment are deducted from the gross transaction price for each loan facilitation service transaction before allocating the remaining portion of the transaction price to different performance obligations.

The estimated transaction price is reassessed at each reporting date. Any subsequent changes in the transaction price are allocated to the performance obligations in the contract on the same basis as at the contract inception. Amounts allocated to a satisfied performance obligation shall be recognised as revenue, or as a reduction of revenue, in the period in which the transaction price changes.

Details of the Group’s refund liabilities are set out in Note 28.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

4. KEY SOURCES OF ESTIMATION UNCERTAINTY – continued

Key sources of estimation uncertainty – continued

Provision of ECL for trade receivables and contract assets

Trade receivables with significant balances and credit-impaired are assessed for ECL individually.

For contract assets which are individually insignificant or when the Group does not have reasonable and supportable information that is available without undue cost or effort to measure ECL on individual basis, collective assessment is performed by grouping debtors based on the Group’s internal credit ratings.

The provision of ECL is sensitive to changes in estimates. The information about the ECL and the Group’s trade receivables and contract assets are disclosed in Note 34(b).

Estimated impairment of property, plant and equipment and right-of-use assets

Property, plant and equipment and right-of-use assets are stated at costs less accumulated depreciation and impairment, if any. In determining whether an asset is impaired, the Group has to exercise judgement and make estimation, particularly in assessing: (1) whether an event has occurred or any indicators that may affect the asset value; (2) whether the carrying value of an asset can be supported by the recoverable amount, in the case of value in use, the net present value of future cash flows which are estimated based upon the continued use of the asset; and (3) the appropriate key assumptions to be applied in estimating the recoverable amounts including cash flow projections and an appropriate discount rate. When it is not possible to estimate the recoverable amount of an individual asset (including right-of-use assets), the Group estimates the recoverable amount of the cash generating unit to which the assets belongs, including allocation of corporate assets when a reasonable and consistent basis of allocation can be established, otherwise recoverable amount is determined at the smallest group of cash generating units, for which the relevant corporate assets have been allocated. Changing the assumptions and estimates, including the discount rates or the growth rate in the cash flow projections, could materially affect the recoverable amounts.

As at 31 December 2020, certain branch premises assets of loan facilitation segment which represented property, plant and equipment and right-of-use assets with gross amounts of HK$73,000 and HK$164,000 (2019: HK$1,100,000 and HK$7,113,000) respectively were subject to impairment assessment. Based on the value in use calculation and the allocation, impairment losses have been recognised against the carrying amounts of property, plant and equipment and right-of-use assets of HK$Nil and HK$159,000, respectively (31 December 2019: property, plant and equipment and right-of-use assets of HK$1,048,000 and HK$4,742,000, respectively). Details of the impairment of property, plant and equipment and right-ofuse assets are disclosed in Note 16.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

5. REVENUE FROM GOODS AND SERVICES

(i) Disaggregation of revenue from contracts with customers

	For the year ended 31 December 2020
	Footwear and apparel businesses Loan facilitation and credit assessment services Total
	HK$’000 HK$’000 HK$’000
Types of goods or services Trading of footwear Men’s footwear Women’s footwear


	28,191 – 28,191
	21,961 – 21,961

	50,152 – 50,152

Trading of apparel Men’s apparel Women’s apparel
	4,443 – 4,443
	3,227 – 3,227

	7,670 – 7,670

Provision of loan facilitation services Pre-loan facilitation services Post-loan facilitation services
	– 9,678 9,678
	– 11,773 11,773

	– 21,451 21,451

Provision of credit assessment service	– 4,020 4,020

Total	57,822 25,471 83,293

Geographical market The PRC
	57,822 25,471 83,293

Timing of revenue recognition At a point in time Over time
	57,822 13,517 71,339
	– 11,954 11,954

Total	57,822 25,471 83,293

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

5. REVENUE FROM GOODS AND SERVICES – continued

(i) Disaggregation of revenue from contracts with customers – continued

	For the year ended 31 December 2019	For the year ended 31 December 2019	For the year ended 31 December 2019
		Loan
	Footwear	facilitation and
	and apparel	credit assessment
	businesses	services	Total
	HK$’000	HK$’000	HK$’000
Types of goods or services
Trading of footwear
Men’s footwear	12,133	–	12,133
Women’s footwear	14,497	–	14,497
Children’s footwear	4,395	–	4,395
	31,025	–	31,025
Provision of loan facilitation services
Pre-loan facilitation services	–	63,917	63,917
Post-loan facilitation services	–	15,231	15,231
	–	79,148	79,148
Total	31,025	79,148	110,173
Geographical markets
The PRC	392	79,148	79,540
Australia	11,251	–	11,251
United Arab Emirates	3,919	–	3,919
United Kingdom	3,147	–	3,147
New Zealand	2,507	–	2,507
Chile	1,832	–	1,832
Belgium	1,464	–	1,464
United States	260	–	260
Others	6,253	–	6,253
Total	31,025	79,148	110,173
Timing of revenue recognition
At a point in time	31,025	63,917	94,942
Over time	–	15,231	15,231
Total	31,025	79,148	110,173

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

5. REVENUE FROM GOODS AND SERVICES – continued

(ii) Performance obligations for contracts with customers

Revenue from trading of footwear and apparel

The Group provides footwear and apparel design and development, production management (including quality control) and logistics management service and trading of footwear and apparel directly to international wholesalers and retailers which are brand owners and/or licensees of formal and casual footwear and apparel. All services provided are highly interdependent and interrelated that are significantly affected by each other in the production of footwear and apparel and would not be performed individually out of the production scope. Therefore, these services provided in the production process are not distinct and the whole production process is identified as one performance obligation – trading of footwear and apparel. Revenue is recognised at a point in time when control of the products has transferred according to respective agreed terms of delivery. Following delivery, the customer has full discretion over the manner of distribution and price to sell the products, has the control when selling the products and bears the risks of obsolescence and loss in relation to the products. The normal credit term is 30 days upon delivery.

Revenue is recognised for sales which are considered highly probable that a significant reversal in the cumulative revenue recognised will not occur. The Group requires certain customers to provide upfront deposits range from 50% to 100% of total contract sum. When the Group receives a deposit before production commences, this will give rise to contract liabilities which represent the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer.

Revenue from provision of pre-loan facilitation and post-loan facilitation services

The Group provides pre-loan facilitation and post-loan facilitation services which assist the qualified borrowers to obtain financing from various financial institutions or investors who have registered with online information intermediary service platforms and earns pre-loan facilitation service fees (e.g. business consulting and credit assessment services) and post-loan facilitation service fees (e.g. repayment management services).

The pre-loan facilitation and post-loan facilitation services are considered as the two distinct performance obligations to be provided by the Group. Since the Group does not provide these services separately, and there is no third-party evidence for the selling price for these services, the Group uses its best estimate of standalone selling prices of these service obligations as the basis for allocating the transaction price.

The transaction price allocated to the pre-loan facilitation services is recognised as revenue upon execution of loan agreements between financial institutions or investors and borrowers. When the Group provides post-loan facilitation services, the borrowers simultaneously receive and consume the benefits provided by the Group’s performance and the transaction price allocated to the postloan facilitation services is recognised over the period of the loan on a straight-line basis, which approximates the pattern of when the underlying services are performed.

88 Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

5. REVENUE FROM GOODS AND SERVICES – continued

(ii) Performance obligations for contracts with customers – continued

Revenue from provision of pre-loan facilitation and post-loan facilitation services – continued

The Group generally collects the service fees either at the inception of the loan or by instalments over the period of the loan after the loan is disbursed to the borrowers’ bank accounts. Upon entering into a contract with customer, the Group obtains rights to receive consideration from the customer and assumes performance obligations to provide loan facilitation services to the borrowers. The combination of those rights and performance give rise to a net asset or a net liability depending on relationship between the remaining rights and performance obligations. The contract is an asset if the measure of the remaining rights exceeds the measure of the remaining performance obligations. Contract asset is recognised over the period of the loan in which the loan facilitation services are performed representing the Group’s right to consideration for the services performed that is conditional on the Group’s future performance of the post-loan facilitation services. The contract assets are transferred to trade receivables when the rights become unconditional, i.e. by the end of the loan period. Conversely, the contract is a liability and recognised as contract liability for the portion of fees that the Group collected from the borrowers in relation to loan facilitation services that have not been performed.

The aggregate amount of the service fees is the gross amount of the service fee under a service contract before taking into account the impacts of variable considerations resulting from expected amounts of service fees to be refunded to borrowers in the contract period that would be unearned from borrowers due to an early repayment of loan. The estimated amounts of variable considerations, which are based on expected refunded amount and calculated using the expected value method, are deducted from the total transaction price for each service contract before allocating to different performance obligations based on their relative standalone selling price. The estimated transaction price (including updating its assessment of whether an estimate of variable consideration is constrained) is reassessed at each reporting date.

A refund liability is recognised for the estimated amounts of service fee which was received but is expected to be refunded. They represent the amount of consideration received that the Group does not expect to be entitled to earn and thus is not included in the transaction price because it will be refunded to customers. Any subsequent changes in the transaction price are allocated to the performance obligations in the contract on the same basis as at the contract inception. Amounts allocated to a satisfied performance obligation shall be recognised as revenue, or as a reduction of revenue, in the period in which the transaction price changes. The refund liability is remeasured at each reporting date to reflect changes in the estimate, with a corresponding adjustment to revenue and contract liabilities.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

5. REVENUE FROM GOODS AND SERVICES – continued

(ii) Performance obligations for contracts with customers – continued

Revenue from provision of credit assessment service

The Group earns service income by granting of a licence to an automobile sales service shop to provide a right to access the Group’s software system for credit assessment service for its automobile sales service customers. An up-front fee received in advance for the licence period granted (i.e. 3 years) is recognised over time throughout the service period. Monthly service fee charge based on the actual data usage from each instance is recognised at a point in time when the relevant service has been provided. The normal credit term is 10 days.

(iii) Transaction price allocated to the remaining performance obligations for contracts with customers

The transaction price allocated to the remaining performance obligations (unsatisfied or partially unsatisfied) as at 31 December 2020 and the expected timing of recognising revenue are as follows:

		Loan
	Footwear	facilitation and
	and apparel	credit assessment
	businesses	services	Total
	HK$’000	HK$’000	HK$’000
Within one year	441	1,511	1,952
More than one year but not more
than two years	–	293	293
More than two years	–	109	109
	441	1,913	2,354

The transaction price allocated to the remaining performance obligations (unsatisfied or partially unsatisfied) as at 31 December 2019 and the expected timing of recognising revenue are as follows:

		Loan
	Footwear	facilitation and
	and apparel	credit assessment
	businesses	services	Total
	HK$’000	HK$’000	HK$’000
Within one year	441	9,845	10,286
More than one year but not more
than two years	–	1,085	1,085
More than two years	–	3	3
	441	10,933	11,374

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

6. SEGMENT INFORMATION

Information reported to the Chief Executive Officer of the Company, being the Chief Operating Decision Maker (“CODM”), for the purposes of resource allocation and assessment of segment performance focuses on types of goods or services delivered or provided.

Specifically, the Group’s operating and reportable segment under HKFRS 8 Operating Segments are as follows:

Footwear and apparel businesses – design, development, production management (including quality control) and logistics management services and trading of footwear and apparel (2019: footwear); and
Loan facilitation and credit assessment services – provision of pre-loan facilitation services, post-loan facilitation services and credit assessment service (2019: pre-loan facilitation services and post-loan facilitation services.

The above operating divisions constitute the operating and reportable segments of the Group.

Segment revenue and results

The following is an analysis of the Group’s revenue and results by operating and reportable segments:

For the year ended 31 December 2020

	Footwear and apparel businesses Loan facilitation and credit assessment services	Total
	HK$’000 HK$’000	HK$’000
Segment revenue
	57,822 25,471	83,293

Segment results	12,020 (13,408)	(1,388)

Unallocated expenses Unallocated income		(9,150)
		43

Loss before tax		(10,495)

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

6. SEGMENT INFORMATION – continued

Segment revenue and results – continued

For the year ended 31 December 2019

		Loan
	Footwear	facilitation and
	and apparel	credit assessment
	businesses	services	Total
	HK$’000	HK$’000	HK$’000
Segment revenue	31,025	79,148	110,173
Segment results	(13,916)	(10,425)	(24,341)
Unallocated expenses			(9,302)
Unallocated income			148
Loss before tax			(33,495)

Segment revenue reported above represents revenue generated from external customers. There were no inter-segment sales in the current and prior years.

The accounting policies of the operating segments are the same as the Group’s accounting policies described in Note 3. Segment results represent the profit or loss before tax of each segment without allocation of certain interest income, central administration costs and directors’ emoluments. This is the measure reported to the CODM for the purposes of resource allocation and performance assessment.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

6. SEGMENT INFORMATION – continued

Segment assets and liabilities

The following is an analysis of the Group’s assets and liabilities by operating and reportable segment:

Segment assets

	2020	2019 HK$’000
	HK$’000
Footwear and apparel businesses Loan facilitation and credit assessment services		1,359 43,660
	7,809
	10,376

Total segment assets Unallocated assets – Bank balances and cash – Others	18,185	45,019 12,985 462

	15,368
	206

Consolidated assets	33,759	58,466

Segment liabilities

Segment liabilities
	2020	2019 HK$’000
	HK$’000
Footwear and apparel businesses Loan facilitation and credit assessment services		11,147 42,645
	5,510
	10,153

Total segment liabilities Unallocated liabilities – Others	15,663	53,792 1,825

	9,527

Consolidated liabilities	25,190	55,617

For the purpose of monitoring segment performances and allocating resources between segments:

all assets are allocated to operating segments other than unallocated corporate assets, including primarily certain bank balances and cash and other receivables and deposits.
all liabilities are allocated to operating segments other than unallocated corporate liabilities, including certain other payables and loan from a fellow subsidiary.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

6. SEGMENT INFORMATION – continued

Geographical information

The Group’s operations are located in Hong Kong and the PRC.

Information about the Group’s revenue from external customers is presented based on the locations of the shipment destinations, irrespective of the origin of the goods, or the location of the loan facilitated or credit assessed as detailed below:

	2020	2019 HK$’000
	HK$’000
The PRC Australia United Arab Emirates United Kingdom New Zealand Chile Belgium United States Others*		79,540 11,251 3,919 3,147 2,507 1,832 1,464 260 6,253
	83,293
	–
	–
	–
	–
	–
	–
	–
	–

	83,293	110,173

The revenue from individual country included in “Others” did not contribute over 10% of the total revenue of the Group for the relevant year.

Information about the Group’s non-current assets is presented based on the geographical location of the assets:

	2020	2019 HK$’000
	HK$’000
Hong Kong PRC		478 3,341
	237
	160

	397	3,819

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

6. SEGMENT INFORMATION – continued

Information about major customers

Revenue from customers of the corresponding years contributing over 10% of the Group’s revenue are as follows:

	2020	2019 HK$’000
	HK$’000
Customer A1 Customer B1 Customer C1		– – 11,945
	32,306
	25,516
	–

1 Revenue from trading of footwear and apparel.

7A. OTHER INCOME

	2020	2019 HK$’000
	HK$’000
Commission income (Note a) Consultancy income (Note a) Government grant (Note b) Interest income Sample income Claims received (Note c) Miscellaneous income		3,027 2,663 2,062 307 326 40 270
	33
	5,498
	477
	305
	–
	–
	91

	6,404	8,695

Notes:

(a) The Group provides insurance brokerage referral service or consultancy services to financial institutions in the capacity of an agent. Consultancy income and commission income are recognised according to respective agreed terms when the relevant service is provided and the relevant transaction has been entered between the ultimate individual customer and the financial institutions. The normal credit term granted to the customers is ranging from 1 to 30 days (2019: 1 to 9 days).

(b) The government grant represented financial supports granted by the local government. There were no specific conditions attached to the grant and the amounts were recognised in profit or loss when the grant was received.
(c) Claims received represent compensations received from suppliers for sub-quality products.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

7B. OTHER GAINS AND LOSSES

	2020	2019 HK$’000 1,310 (4,742) (86) 33 (4,726) (1,048) (9,259)
	HK$’000
Gain on termination of lease liabilities, net Impairment loss recognised on right-of-use assets Net foreign exchange losses (Loss) gain on disposal of property, plant and equipment, net Impairment loss recognised on prepayments Impairment loss recognised on property, plant and equipment
	2,586
	(159)
	(105)
	(78)
	–
	–

	2,244

8. IMPAIRMENT LOSSES UNDER EXPECTED CREDIT LOSS MODEL, NET OF REVERSAL

REVERSAL
	2020	2019 HK$’000	) ) ) )
	HK$’000
Impairment losses (recognised) reversed on: – Trade receivables – Contract assets – Other receivables		(972 (631 (82

	(6)
	502
	82

	578	(1,685

Details of impairment assessment are set out in Note 34(b).

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

9. OTHER OPERATING EXPENSES

OTHER OPERATING EXPENSES
	2020	2019 HK$’000
	HK$’000
Auditor’s remuneration Bank charges Claims charged in respect of faulty products Depreciation of property, plant and equipment Depreciation of right-of-use assets Entertainment expenses Expenses relating to short term leases Marketing and promotion expenses Other taxes Outsourcing expenses Professional fees Travelling cost Utilities Others		2,932 233 3,451 1,114 4,052 580 1,435 625 720 4,231 4,237 1,239 1,726 3,943
	2,139
	40
	–
	385
	747
	116
	1,566
	1,270
	339
	1,330
	6,624
	584
	491
	1,619

	17,250	30,518

10. FINANCE COSTS

FINANCE COSTS
	2020	2019 HK$’000
	HK$’000
Interests on bank borrowings Interests on lease liabilities		240 926
	–
	368

	368	1,166

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

11. INCOME TAX CREDIT

	2020	2019 HK$’000 – (150) (150)
	HK$’000
PRC Enterprise Income Tax (“EIT”) – Current tax Deferred tax (Note 29)

	2,518
	(4,308)

	(1,790)

On 21 March 2018, the Hong Kong Legislative Council passed The Inland Revenue (Amendment) (No. 7) Bill 2017 (the “Bill”) which introduces the two-tiered profits tax rates regime. The Bill was signed into law on 28 March 2018 and was gazetted on the following day. Under the two-tiered profits tax rates regime, the first HK$2 million of profits of the qualifying group entity will be taxed at 8.25%, and profits above HK$2 million will be taxed at 16.5%. The profits of group entities not qualifying for the two-tiered profits tax rates regime will continue to be taxed at a flat rate of 16.5%.

Accordingly, the Hong Kong Profits Tax of the qualifying group entity is calculated at 8.25% on the first HK$2 million of the estimated assessable profits and at 16.5% on the estimated assessable profits above HK$2 million. No provision for Hong Kong Profits Tax has been made in the consolidated financial statements as the Group had no assessable profit for the both years.

Under the Law of the PRC on EIT (the “EIT Law”) and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25%, except for certain PRC subsidiaries operating in the Ningxia Hui Autonomous Region during the year ended 31 December 2020 which are subject to a lower concessionary tax rate of 15%. No provision for PRC EIT has been made in the consolidated financial statements for the year ended 31 December 2019 as the Group has no taxable income.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

11. INCOME TAX CREDIT – continued

The tax credit for the year can be reconciled to the loss before tax per the consolidated statement of profit or loss and other comprehensive income as follows:

	2020	2019 HK$’000
	HK$’000
Loss before tax		(33,495
	(10,495)

Tax at the applicable domestic income tax rate (Note) Tax effect of expenses not deductible for tax purposes Tax effect of income not taxable for tax purposes Tax effect of tax losses not recognised Income tax at concessionary rate Utilisation of deductible temporary differences previously not recognised	(1,861)	(6,507 4,123 (437 2,840 – (169
	1,377
	(1,145)
	1,554
	(1,679)
	(36)

Income tax credit for the year	(1,790)	(150

Note: The amounts represented the combined effect of the group entities basing on actual tax rates applicable for each jurisdiction where the relevant group entities operate.

12. LOSS FOR THE YEAR

	2020	2019 HK$’000
	HK$’000
Loss for the year has been arrived at after charging: Directors’ remuneration (Note 13) Other staff costs (excluding directors’ remuneration): – Salaries, allowances and benefits in kind – Retirement benefit scheme contributions – Termination benefits		2,773 63,929 15,087 –

	1,590

	34,587
	4,577
	2,436

Total staff costs (Note)	43,190	81,789

Auditor’s remuneration Depreciation of property, plant and equipment Depreciation of right-of-use assets Expenses relating to short term leases	2,150	2,932 1,114 4,052 1,435
	385
	747
	1,566

Note: For the year ended 31 December 2020, Covid-19 related government grants/assistance amounted to HK$162,000 have been offset against employee benefits expense.

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

13. DIRECTORS’, CHIEF EXECUTIVE’S AND EMPLOYEES’ EMOLUMENTS

(a) Directors’ and the chief executive’s emoluments

Directors’ and chief executive’s remuneration for the year, disclosed pursuant to the applicable Listing Rules and Hong Kong Companies Ordinance, is as follows:

Name of director	Fee Salaries, allowances and other benefits Retirement benefit scheme contributions Total
	HK$’000 HK$’000 HK$’000 HK$’000
For the year ended 31 December 2020 Executive directors Mr. Dong Jun (Chairman) Mr. Huang Zexiong (Chief executive) (appointed on 5 June 2020) Mr. Ho Kin Wai (Chief executive) (resigned on 18 September 2020) Mr. Chen Zuze (appointed on 18 September 2020) Mr. Chen Chao (appointed on 18 September 2020) Mr. Peng Shaoxin (resigned on 18 September 2020) Mr. Yan Taotao (resigned on 5 June 2020)


	– – – –
	– 35 – 35
	– – – –
	– – – –
	– 119 – 119
	– 388 23 411
	– 231 5 236
Sub-total	– 773 28 801
Non-executive directors Mr. Lau Kai Pong Mr. Wen Cyrus Jun-Ming Mr. Chan Kwun Wah Derek (appointed on 8 October 2020)
	– – – –
	– – – –
	55 – – 55
Sub-total	55 – – 55
Independent non-executive directors Mr. Guo Zhongyong Mr. Hon Ping Cho Terence Mr. Ni Zhixing (appointed on 8 October 2020) Ms. Chen Xin (appointed on 23 November 2020) Mr. Li Tixin (resigned on 23 November 2020)
	240 – – 240
	240 – – 240
	14 – – 14
	25 – – 25
	215 – – 215
Sub-total	734 – – 734
Total	789 773 28 1,590

100

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

13. DIRECTORS’, CHIEF EXECUTIVE’S AND EMPLOYEES’ EMOLUMENTS – continued

(a) Directors’ and the chief executive’s emoluments – continued

		Salaries,	Retirement
		allowances	benefit
		and other	scheme
Name of director	Fee	benefits	contributions	Total
	HK$’000	HK$’000	HK$’000	HK$’000
For the year ended 31 December 2019
Executive directors
Mr. Dong Jun (Chairman)	–	450	14	464
Mr. Ho Kin Wai (Chief executive)	–	200	6	206
Mr. Peng Shaoxin	–	1,055	142	1,197
Mr. Yan Taotao	–	–	–	–
Ms. Long Jingjie
(resigned on 9 October 2019)	–	–	–	–
Sub-total	–	1,705	162	1,867
Non-executive directors
Mr. Lau Kai Pong
(appointed on 27 May 2019)	–	–	–	–
Mr. Wen Cyrus Jun-Ming	–	–	–	–
Mr. Zhang Songyi
(resigned on 24 May 2019)	–	–	–	–
Sub-total	–	–	–	–
Independent non-executive directors
Mr. Guo Zhongyong	240	–	–	240
Mr. Hon Ping Cho Terence	240	–	–	240
Mr. Li Tixin (appointed on 27 May 2019)	143	–	–	143
Mr. Liu Jiangtao (resigned on 27 May 2019)	97	–	–	97
Mr. Peng Chuang
(resigned on 9 October 2019)	186	–	–	186
Sub-total	906	–	–	906
Total	906	1,705	162	2,773

101

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

13. DIRECTORS’, CHIEF EXECUTIVE’S AND EMPLOYEES’ EMOLUMENTS – continued

(a) Directors’ and the chief executive’s emoluments – continued

The executive directors’ emoluments shown above were for their service in connection with the management of the affairs of the Company and the Group.

The non-executive directors’ emoluments shown above were for their services as directors of the Company and the Group.

No director nor the chief executive waived any emoluments in respect of the years ended 31 December 2020 and 2019.

(b) Employees’ emoluments – five highest paid employees

The five highest paid employees of the Group during the year ended 31 December 2020 does not include any director (2019: one), details of whose emoluments are set out above. Details of the emoluments of the remaining five (2019: four) highest paid employees who are neither a director nor chief executive of the Company were as follows:

	2020	2019 HK$’000
	HK$’000
Salaries, allowances and other benefits Retirement benefit scheme contributions Compensation for loss of office		3,063 296 –
	2,100
	204
	567

	2,871	3,359

The emoluments of the remaining five (2019: four) highest paid individuals who are neither a director nor chief executive of the Company were within the following bands:

	Number of employees	Number of employees
	2020	2019
Nil to HK$1,000,000		4
	5

102

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

14. DIVIDENDS

No dividend was paid or proposed for the years ended 31 December 2020 and 2019, nor has any dividend been proposed since the end of the reporting period.

15. LOSS PER SHARE

The calculation of the basic loss per share is based on the following data:

	2020	2020
	HK$’000
Loss: Loss for the year for the purpose of basic loss per share

	(8,705)


	2020	2019 ’000
	’000
Number of shares: Weighted average number of ordinary shares for the purpose of basic loss per share		480,000

	483,718

For the year ended 31 December 2020, the weighted average number of ordinary shares for the purpose of basic loss per share has been adjusted for the share placing in October 2020 (details are disclosed in Note 30).

No diluted loss per share for the years ended 31 December 2020 and 2019 is presented as there were no potential ordinary shares in issue for both years.

103

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

16. PROPERTY, PLANT AND EQUIPMENT

			Furniture
	Leasehold	Motor	and office
	improvement	vehicles	equipment	Total
	HK$’000	HK$’000	HK$’000	HK$’000
COST
At 1 January 2019	1,583	5,995	1,067	8,645
Additions	584	–	484	1,068
Disposals	(771)	(4,315)	(689)	(5,775)
Exchange realignment	(33)	(3)	(15)	(51)
At 31 December 2019	1,363	1,677	847	3,887
Additions	–	–	26	26
Disposals	(32)	–	(294)	(326)
Exchange realignment	86	–	37	123
At 31 December 2020	1,417	1,677	616	3,710
DEPRECIATION AND IMPAIRMENT
At 1 January 2019	692	3,531	690	4,913
Provided for the year	537	428	149	1,114
Impairment loss recognised
in profit or loss	609	–	439	1,048
Eliminated on disposals	(629)	(2,653)	(603)	(3,885)
Exchange realignment	(20)	(2)	(12)	(34)
At 31 December 2019	1,189	1,304	663	3,156
Provided for the year	181	140	64	385
Eliminated on disposals	(32)	–	(216)	(248)
Exchange realignment	79	–	32	111
At 31 December 2020	1,417	1,444	543	3,404
CARRYING VALUES
At 31 December 2020	–	233	73	306
At 31 December 2019	174	373	184	731

104

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

16. PROPERTY, PLANT AND EQUIPMENT – continued

The above items of property, plant and equipment are depreciated, after taking into account of their estimated residual values, on a straight-line basis as follows:

Leasehold improvement Over the shorter of the relevant lease or 5 years Motor vehicles 20% per annum Furniture and office equipment 10-50% per annum

Impairment assessment for property, plant and equipment and right-of-use assets

As a result of the impact to the current economic environment related of the Covid-19 pandemic, the Group is experiencing decline in financial performance including branch premises closures of loan facilitation business and decreased in loan facilitation transactions during the year. The management of the Group concluded there was indication for impairment and conducted impairment assessment on recoverable amounts of certain branch premises assets of loan facilitation segment which represented property, plant and equipment and right-of-use assets with gross amounts of HK$73,000 and HK$164,000 (31 December 2019: property, plant and equipment and right-of-use assets with carrying amounts of HK$1,100,000 and HK$7,113,000). The Group regards each individual branch premise as a separately identifiable cashgenerating unit. The Group estimates the recoverable amount of each several branch premises to which the assets belong as it is not possible to estimate their recoverable amount individually.

The recoverable amount of each branch premises have been determined based on a value in use calculation. That calculation uses cash flow projections based on financial budgets approved by the management of the Group covering the remaining tenure of the lease within 5 years as at 31 December 2020 (31 December 2019: within 5 years), and a discount rate of 12% (31 December 2019: 12%). Key assumptions for the value in use calculations related to the estimation of cash inflows/outflows include gross budgeted loan facilitation service revenue and gross margin with a zero growth rate. Such estimation was based on the management’s expectations for the market development as of 31 December 2020 and 2019.

Based on the result of the assessment, management of the Group determined that the recoverable amounts of several branch premises are lower than the carrying amounts. The impairment amount has been allocated to each category of property, plant and equipment and right-of-use assets such that the carrying amount of each category of asset is not reduced below the highest of its fair value less cost of disposal, its value in use and zero. Based on the value in use calculation and the allocation, impairment losses have been recognised against the carrying amounts of property, plant and equipment and right-of-use assets of HK$Nil and HK$159,000, respectively (31 December 2019: property, plant and equipment and right-of-use assets of HK$1,048,000 and HK$4,742,000, respectively).

105

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

17. RIGHT-OF-USE ASSETS

Office premises HK$’000	Branch premises HK$’000	Total HK$’000
As at 31 December 2020 Carrying amounts – As at 31 December 2019 Carrying amounts 1,907 For the year ended 31 December 2020 Depreciation charge 387 Impairment loss recognised in profit or loss –	– 782 360 159	– 2,689 747 159
387	519	906
For the year ended 31 December 2019 Depreciation charge 673 Impairment loss recognised in profit or loss 910	3,379 3,832	4,052 4,742
1,583	7,211	8,794

	2020	2019 HK$’000
	HK$’000
Expense relating to short-term leases		1,435
	1,566

Total cash outflow for leases	5,014	8,059

Additions to right-of-use assets	214	2,559

106

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

17. RIGHT-OF-USE ASSETS – continued

For both years, the Group leases office premises and branch premises for its operations. Lease contracts are entered into for fixed term of 6 months to 5 years (2019: 1 to 6 years). Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. In determining the lease term and assessing the length of the non-cancellable period, the Group applies the definition of a contract and determines the period for which the contract is enforceable. Right-of-use assets are depreciated on a straight-line basis over the lease term.

The Group regularly entered into short-term leases for office premises and branches premises. As at 31 December 2020 and 2019, the portfolio of short-term leases is similar to the portfolio of short-term leases to which the short term lease expense disclosed above.

Details of impairment assessment are set out in Note 16.

18. TRADE RECEIVABLES

TRADE RECEIVABLES
	2020	2019 HK$’000
	HK$’000
Trade receivables from contracts with customers Less: allowance for credit losses		1,450 (1,447
	883
	(6)

	877	3

As at 1 January 2019, trade receivables from contracts with customers amounted to HK$20,835,000.

The following is an aged analysis of trade receivables, net of allowance for credit losses, presented based on the invoice dates:

the invoice dates:
	2020	2019 HK$’000
	HK$’000
0 to 30 days Over 90 days		– 3
	877
	–

	877	3

As at 31 December 2019, included in the Group’s trade receivables balance are debtors with aggregate carrying amount of HK$3,000 (2020: HK$Nil) which are past due as at the reporting date.

Details of impairment assessment of trade receivables are set out in Note 34(b).

107

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

19. OTHER RECEIVABLES, PREPAYMENTS AND DEPOSITS

	2020	2019 HK$’000
	HK$’000
Other receivables (Note a) Prepayments (Note b) Rental deposits (Note c) Other deposits		8,808 729 1,475 38
	1,356
	790
	1,028
	165

Less: Rental deposits shown under non-current assets	3,339	11,050 (152
	(76)

	3,263	10,898

Notes:

(a) As at 31 December 2020, other receivable mainly includes loan facilitation service fee receivables which the Group is entitled to but are held by the Online Intermediary Payment Channel (the ‘’Online Channel”) on behalf of the Group. The amount has been subsequently fully settled. (31 December 2019: loan facilitation service fee receivables which the Group entitled but held by Online Information Intermediary Service Platform (the “Online Platform”) and receivable from a service provider for deposit previously paid, both amounts have been subsequently fully settled.)
(b) Prepayments represent amounts prepaid to suppliers for production moulding of footwear business and have not been refunded. The directors determined that the recoverability of the prepayments were remote in view of the ceased business relationship and hence impairment loss of HK$4,726,000 has been recognised during the year ended 31 December 2019.

Details of impairment assessment of other receivables are set out in Note 34(b).

20. CONTRACT ASSETS

	2020	2019 HK$’000
	HK$’000
Loan facilitation services		10,409
	2,406

Current Non-current		10,162 247
	2,315
	91

	2,406	10,409

As at 1 January 2019, contract assets amounted to HK$35,473,000.

Contract assets primarily relate to the Group’s right to consideration for loan facilitation services completed and not billed because the rights are conditioned on the Group’s future performance. The contract assets are transferred to trade receivables when the rights become unconditional.

Typical payment terms which impact on the amount of the contract assets recognised are set out in Note 5(ii).

108

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

20. CONTRACT ASSETS – continued

The significant decrease (2019: decrease) in the current year is the result of the decrease in loan facilitation transactions entered during the year as disclosed in the Note 3.

Details of impairment assessment of contract assets are set out in Note 34(b).

21. BANK BALANCES AND CASH

Bank balances carry interest at prevailing market rates ranging from 0.01% to 0.35% (2019: 0.01% to 2.70%) per annum.

Details of bank balances denominated in currencies other than the functional currency of the relevant group entities and impairment assessment of bank balances are set out in Note 34.

22. TRADE PAYABLES

The credit period on purchase of goods varies from 20 days to 45 days. The ageing analysis of the trade payables presented based on the invoice dates at the end of the reporting period is as follows:

	2020	2019 HK$’000
	HK$’000
Over 90 days		953
	953

23. OTHER PAYABLES AND ACCRUALS

	2020	2019 HK$’000
	HK$’000
Accrued staff salaries Accrued expenses Other tax payables Accrued bonus Others		6,802 4,167 321 934 429
	3,246
	2,363
	1,964
	–
	933

	8,506	12,653

109

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

24. AMOUNT DUE TO A FORMER DIRECTOR/DIRECTOR

The amount was unsecured, interest-free and repayable on demand. During the year ended 31 December 2020, pursuant to the deed of waiver agreement entered into between the former director/director, who was resigned on 18 September 2020 and is also one of the major shareholders of the Company, and Ever Smart International Enterprise Limited, the wholly owned subsidiary of the Group, of which an amount of HK$5,017,000 (2019: HK$Nil) is waived and recognised as deemed capital contribution. The entire remaining balance of HK$440,000 has been subsequently settled in January 2021.

25. LOAN FROM A FELLOW SUBSIDIARY

In April 2020, 通泉財富（寧夏）科技有限公司 (‘’ 通泉財富 ”), a subsidiary of the ultimate holding company, has provided a loan of RMB40,000,000 (equivalent to approximately HK$44,224,000) which is unsecured, interest free and repayable on April 2022. The entire amount has been early settled during the current year.

In December 2020, 通泉財富 has provided a loan of RMB5,890,000 (equivalent to approximately HK$6,998,000). The amount was unsecured, interest bearing at 5% per annum and repayable at maturity of 36 months since the draw down date. The entire amount has been early settled in January 2021.

26. LEASE LIABILITIES

	2020	2019 HK$’000
	HK$’000
Lease liabilities payable: Within one year Within a period of more than one year but not more than two years Within a period of more than two years but not more than five years		4,194 1,677 2,931

	675
	440
	485

Less: Amount due for settlement with 12 months shown under current liabilities	1,600	8,802 (4,194
	(675)

Amount due for settlement after 12 months shown under non-current liabilities	925	4,608

The weighted average incremental borrowing rate of 8% (2019: 7.55%) was applied to lease liabilities.

110

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

27. CONTRACT LIABILITIES

The following is an analysis of the Group’s contract liabilities:

The following is an analysis of the Group’s contract liabilities:
	2020	2019 HK$’000
	HK$’000
Footwear and apparel businesses Loan facilitation services Credit assessment service		441 8,127 –
	441
	656
	710
	1,807	8,568

Current Non-current		7,987 581
	1,389
	418
	1,807	8,568

As at 1 January 2019, contract liabilities amounted to HK$9,993,000.

Contract liabilities, that are not expected to be settled within the Group’s normal operating cycle, are classified as current and non-current based on the Group’s earliest obligation to transfer goods or services to the customers. The significant decrease (2019: decrease) in the current year is the result of the decrease in loan facilitation transactions entered during the year as disclosed in the Note 3.

The following table shows how much of the revenue recognised relates to carried-forward contract liabilities and how much relates to performance obligations that were satisfied in prior periods.

	Footwear business Loan facilitation service
	HK$’000 HK$’000
For the year ended 31 December 2020 Revenue recognised that was included in the contract liability balance at the beginning of the year

	– 7,378

	Footwear business Loan facilitation service HK$’000 HK$’000 420 6,201
For the year ended 31 December 2019 Revenue recognised that was included in the contract liability balance at the beginning of the year

Typical payment terms which impact on the amount of contract liabilities recognised are set out in Note 5(ii).

111

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

28. REFUND LIABILITIES

The following is an analysis of the Group’s refund liabilities:

	2020	2019 HK$’000
	HK$’000
Refund liabilities arising from refund of loan facilitation service fees due to early repayment		12,840
	1,546

Current Non-current		11,509 1,331
	1,540
	6

	1,546	12,840

Details of the refund liabilities are stated in Note 5(ii).

29. DEFERRED TAX

The following are the major deferred tax liabilities (assets) recognised and movements thereon during the current and prior years:

		Timing
		differences
	Tax	on revenue	Refund
	losses	recognition	liabilities	Total
	HK$’000	HK$’000	HK$’000	HK$’000
		(Note)
At 1 January 2019	(13,264)	21,611	(2,621)	5,726
Charge (credit) to profit or loss	3,746	(3,242)	(654)	(150)
Exchange realignment	248	(438)	65	(125)
At 31 December 2019	(9,270)	17,931	(3,210)	5,451
Charge (credit) to profit or loss	9,429	(16,755)	3,018	(4,308)
Exchange realignment	(487)	977	(195)	295
At 31 December 2020	(328)	2,153	(387)	1,438

Note: The amount represented the timing differences between the revenue recognised and the collection of service fees from loan facilitation services.

Under the EIT Law of the PRC, withholding tax is imposed on dividends declared in respect of profits earned by the Group’s subsidiaries in the PRC from 1 January 2008 onwards. Deferred taxation has not been provided for in the consolidated financial statements in respect of temporary difference attributable to the retained profits earned by the subsidiaries in the PRC amounting to approximately HK$16,300,000 as at 31 December 2020 (2019: HK$Nil) as the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

112

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

29. DEFERRED TAX – continued

At the end of the reporting period, the Group has unused tax losses of approximately HK$34,728,000 (2019: HK$63,581,000) available for offset against future profits. A deferred tax asset has been recognised in respect of HK$1,312,000 (2019: HK$37,080,000) of such losses. No deferred tax asset has been recognised in respect of the remaining HK$33,416,000 (2019: HK$26,501,000) due to the unpredictability of future profit streams. Included in unrecognised tax losses are losses of HK$13,273,000 (2019: HK$7,186,000) that will expire as follows. Other losses may be carried forward indefinitely.

	2020	2019 HK$’000
	HK$’000
2023 2024 2025		585 6,601 –
	585
	6,601
	6,087

	13,273	7,186

At the end of the reporting period, the Group has deductible temporary differences of approximately HK$1,698,000 (2019: HK$13,213,000). A deferred tax asset has been recognised in respect of HK$1,546,000 (2019: HK$12,840,000) of such deductible temporary differences. No deferred tax asset has been recognised in respect of remaining HK$152,000 (2019: HK$373,000) as it is not probable that taxable profit will be available against which the deductible timing differences can be utilised.

30. SHARE CAPITAL OF THE COMPANY

	Number of	Share
	shares	capital
		HK$’000
Authorised ordinary shares at HK$0.01 per share:
At 1 January 2019, 31 December 2019, 1 January 2020
and 31 December 2020	1,000,000,000	10,000
Issued and fully paid shares at HK$0.01 per share:
At 1 January 2019, 31 December 2019 and 1 January 2020	480,000,000	4,800
Placement of new shares on 30 October 2020 (Note)	21,600,000	216
At 31 December 2020	501,600,000	5,016

Note: On 14 October 2020, the Company and a placing agent entered into a placing agreement pursuant to which the Company has conditionally agreed to place a maximum of 22,200,000 placing shares to independent investors at a price of HK$0.438 per share. The placing was completed on 30 October 2020 pursuant to which the Company has allotted and issued 21,600,000 placing shares. The net proceeds derived from the placing amounted to approximately HK$9,083,000 and resulted in the increase in share capital of HK$216,000 and share premium of approximately HK$9,245,000, net of transaction costs of approximately HK$378,000.

113

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

31. RETIREMENT BENEFIT SCHEMES

The Group operates a Mandatory Provident Fund Scheme (“MPF Scheme”) for all qualified employees in Hong Kong under the Mandatory Provident Fund Schemes Ordinance. The assets of the MPF Scheme are held separately from those of the Group in funds under the control of an independent trustee. Under the rule of the MPF Scheme, the employer and its employees are each required to make contributions to the scheme at a rate of 5% specified in the rules, but subject to a cap of HK$1,500 per month. The only obligation of the Group with respect of MPF Scheme is to make the required contributions under the scheme. No forfeited contribution is available to reduce the contribution payable in the future years.

The employees employed in the PRC are members of the state-managed retirement benefit schemes operated by the PRC government. The PRC subsidiaries are required to contribute a certain percentage of their basic payroll to the retirement benefit schemes to fund the benefits. The only obligation of the Group with respect to the retirement benefit schemes is to make the required contributions under the schemes. No forfeited contribution is available to reduce the contribution payable in future years.

During the year ended 31 December 2020, the total contribution charged to profit or loss amounted to HK$4,605,000 (2019: HK$15,249,000).

32. RELATED PARTY DISCLOSURES

Most of the Group’s loan facilitation business is relating to provision of pre-loan facilitation services and post-loan facilitation services to external individual customers (“Ultimate Customers”) to obtain financing from various financial institutions or investors through the Online Platform and Online Channel. Substantially all of the abovementioned business is deriving from Ultimate Customers obtaining the financing from the financial institutions or investors who have registered on the Online Platform operated by a related party of the Company.

Other than as disclosed elsewhere in these consolidated financial statements, the Group had entered into the following significant transactions with related parties during the reporting periods:

(i) In April 2020, a subsidiary of the ultimate holding company, has provided a loan of RMB40,000,000 (equivalent to approximately HK$44,224,000) which is unsecured, interest free and repayable on April 2022. The entire amount has been early settled during the current year.
(ii) In December 2020, a subsidiary of the ultimate holding company, has provided a loan of RMB5,890,000 (equivalent to approximately HK$6,998,000). For the details please refer to Note 25.

114

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

32. RELATED PARTY DISCLOSURES – continued

(ii) During the current year, the Group also provides loan facilitation services to Ultimate Customers to obtain financing from a related party of the Company:

	Year ended 31 December	Year ended 31 December
	2020	2019 HK$’000
	HK$’000
Provision of loan facilitation services		–
	1,114

Compensation of the directors and other key management personnel

The key management of the Group comprises all executive directors of the Company, details of their emoluments are disclosed in Note 13. The emoluments of the executive directors of the Company are decided by the remuneration committee of the Company having regard to individual’s performance, the Group’s performance and profitability, remuneration benchmark in the industry and prevailing market condition.

33. CAPITAL RISK MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The overall strategy remains unchanged from prior year.

The capital structure of the Group consists of cash and cash equivalents, debts including amount due to a former director/director and loan from a fellow subsidiary, and equity attributable to owners of the Company, comprising issued share capital, and reserves.

The Directors review the capital structure regularly. As part of this review, the Directors consider the cost and the risks associates with each class of the capital. Based on the recommendations of the directors, the Group will balance its overall capital structure through the payments of dividends and new share issues as well as issue of new debt or redemption of existing debts.

115

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

34. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

	2020	2019 HK$’000
	HK$’000
Financial assets Amortised cost		41,632

	29,492

Financial liabilities Amortised cost		7,732

	9,324

(b) Financial risk management objectives and policies

The Group’s major financial instruments include trade receivables, other receivables and deposits, bank balances and cash, trade payables, other payables, lease liabilities, amount due to a former director/director and loan from a fellow subsidiary. Details of these financial instruments are disclosed in the respective notes. The risks associated with these financial instruments include market risks (currency risk and interest rate risk), credit risk and liquidity risk. The policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Market risk

(i) Currency risk

Certain bank balances and cash, other receivables and other payables are denominated in foreign currency of the respective group entities which are exposed to foreign currency risk. The Group currently does not have a foreign currency hedging policy. However, management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

The carrying amounts of the foreign currency denominated monetary assets and monetary liabilities at the end of each reporting period are as follows:

	2020	2019 HK$’000
	HK$’000
Asset HK$		8,562

	8,102

Liability Renminbi (“RMB”)		46

	46

116

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

34. FINANCIAL INSTRUMENTS – continued

(b) Financial risk management objectives and policies – continued

Market risk – continued

(i) Currency risk – continued

The Group is mainly exposed to the fluctuation of HK$ against RMB.

As at 31 December 2019, the monetary assets are denominated in HK$ while the entity’s functional currency is US$, the Directors consider that as HK$ is pegged to US$, the Group is not subject to significant foreign currency risk from change in foreign exchange rate of HK$ against US$. As at 31 December 2020 and 2019, the exposure of foreign currency risk on the RMBdenominated monetary liabilities is insignificant on the ground that the carrying amounts are insignificant. Hence, no sensitivity analysis is presented.

The sensitivity analysis includes only outstanding HK$ denominated monetary assets as at 31 December 2020 and adjusts their translation at the end of the reporting period for a 5% change in foreign currency rates. The sensitivity analysis below details the Group’s sensitivity to a 5% increase and decrease in RMB against HK$. 5% represents management’s assessment of the reasonably possible change in foreign exchange rates. A positive number below indicates an increase in post-tax loss and other equity where RMB strengthen 5% against HK$. For a 5% weakening of RMB against HK$, there would be an equal and opposite impact on the profit and other comprehensive income and the amounts below would be negative.

As at 31 December 2020, if RMB had been strengthen/weaken 5% against HK$ and all other variables were held constant, the Group’s post-tax loss for the year ended 31 December 2020 would increase/decrease by approximately HK$338,000.

(ii) Interest rate risk

The Group is exposed to fair value interest rate risk in relation to fixed-rate loan from a fellow subsidiary (see Note 25) and lease liabilities (see Note 26). The Group is also exposed to cash flow interest rate risk in relation to variable-rate bank balances (see Note 21). The Group currently does not have an interest rate hedging policy. However, the management will consider hedging significant interest rate exposure should the need arises.

Interest income from financial assets that are measured at amortised cost is as follows:

	2020	2019 HK$’000
	HK$’000
Financial assets at amortised cost		307
	305

117

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

34. FINANCIAL INSTRUMENTS – continued

(b) Financial risk management objectives and policies – continued

Market risk – continued

(ii) Interest rate risk – continued

Interest expense on financial liabilities not measured at FVTPL:

	2020	2019 HK$’000
	HK$’000
Financial liabilities at amortised cost		1,166
	368

No sensitivity analysis is presented as the Directors consider that the exposure of cash flow interest rate risk arising from bank balances is insignificant.

Credit risk and impairment assessment

Credit risk refers to the risk that the Group’s counterparties default on their contractual obligations resulting in financial losses to the Group. The Group’s credit risk exposures are primarily attributable to trade receivables, other receivables, contract assets and bank balances. The Group does not hold any collateral or other credit enhancements to cover its credit risks associated with its financial assets.

Trade receivables and contract assets arising from contracts with customers

The Group has concentration of credit risk as 99% (2019: 63%) of the total trade receivables was due from the Group’s largest customer. The Group’s concentration of credit risk on the top five largest customers accounted for 100% (2019: 98%) of the total trade receivables. In order to minimise the credit risk, the management of the Group has delegated a team responsible for determination of credit limits and credit approvals.

In addition, the Group performs impairment assessment under ECL model on trade balances individually. The contract assets are assessed on a collective basis, based on shared credit risk characteristics. Reversal of impairment of HK$502,000 (2019: provision of HK$1,603,000) is recognised during the year. Details of the quantitative disclosures are set out below in this note.

118

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

34. FINANCIAL INSTRUMENTS – continued

(b) Financial risk management objectives and policies – continued

Credit risk and impairment assessment – continued

Bank balances

Credit risk on bank balances is limited because the counterparties are reputable banks with high credit ratings assigned by international credit agencies. The Group assessed 12m ECL for bank balances by reference to information relating to probability of default and loss given default of the respective credit rating grades published by external credit rating agencies.

Other receivables

For other receivables, the Directors make periodic individual assessment on the recoverability of other receivables based on historical settlement records, past experience, and also quantitative and qualitative information that is reasonable and supportive forward-looking information that is available without undue cost or effort. The Directors believe that there are no significant increase in credit risk of these amounts since initial recognition and the Group provided impairment based on 12m ECL. For the year ended 31 December 2020, the Group assessed the ECL for other receivables with significant balance with gross carrying amount of HK$756,000 (2019: HK$8,126,000) and a reversal of impairment loss of HK$82,000 (2019: provision of HK$82,000) was recognised.

The Group’s internal credit risk grading assessment comprises the following categories:

Internal			Trade receivables/	Trade receivables/	Other	Other
credit rating	Description		contract assets		financial assets
Low risk	The counterparty has a low risk of default and		Lifetime ECL – not		12m ECL
		does not have any past-due amounts		credit-impaired
Moderate risk	Debtor has a moderate level of credit risk at		Lifetime ECL – not		12m ECL
		the inception of the loan and expect to		credit-impaired
		settle in full
Doubtful	There have been significant increases in		Lifetime ECL – not		Lifetime ECL – not
		credit risk since initial recognition through		credit-impaired		credit-impaired
		information developed internally or external
		resources
Loss	There is evidence indicating the asset is credit-		Lifetime ECL –		Lifetime ECL – credit-
		impaired		credit-impaired		impaired
Write-off	There is evidence indicating that the debtor is		Amount is written off		Amount is written off
		in severe financial difficulty and the Group
		has no realistic prospect of recovery

119

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

34. FINANCIAL INSTRUMENTS – continued

(b) Financial risk management objectives and policies – continued

Credit risk and impairment assessment – continued

The tables below detail the credit risk exposures of the Group’s financial assets and contract assets, which are subject to ECL assessment:

Notes External credit rating Internal credit rating 12m or lifetime ECL	Gross carrying amounts	Gross carrying amounts
	2020	2019 HK$’000
	HK$’000
Financial assets at amortised cost Trade receivables (Note 1) 18 N/A Low risk Lifetime ECL Loss Credit-impaired Other receivables and deposits (Note 2) 19 N/A Low risk 12m ECL Other item Contract assets (Note 3) 20 N/A Tier 1: Low risk Lifetime ECL (collective assessment) Tier 2: Low risk Lifetime ECL (collective assessment) Tier 3: Moderate risk Lifetime ECL (collective assessment) Tier 4: Moderate risk Lifetime ECL (collective assessment)		3 1,447

	877
	6

	883	1,450 8,126 5,082 3,612 1,306 1,033

	1,784

	1,400
	806
	150
	196

	2,552	11,033

120

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

34. FINANCIAL INSTRUMENTS – continued

(b) Financial risk management objectives and policies – continued

Credit risk and impairment assessment – continued

Notes:

(1) For trade receivables, the Group has applied the simplified approach in HKFRS 9 to measure the loss allowance at lifetime ECL.

Debtors with significant outstanding balances and credit-impaired with gross carrying amount of HK$877,000 (2019: HK$3,000) and HK$6,000 (2019: HK$1,447,000), respectively, as at 31 December 2020 were assessed individually.

The estimated loss rates are estimated based on historical observed default rates over the expected life of the debtors and are adjusted for forward-looking macroeconomic information that is available without undue cost or effort.

As at 31 December 2020, no impairment allowance on trade receivables are provided based on individual assessment as the amounts involved are immaterial. Impairment allowance of HK$6,000 (2019: HK$1,447,000) were made on creditimpaired debtors.

(2) Included in other receivables and deposits are amounts mainly representing loan facilitation service fee receivables which the Group is entitled to but are held by the Online Channel on behalf of the Group (2019: loan facilitation service fee receivables which the Group is entitled but held by Online Platform on behalf of the Group, receivable from a service provider for deposit previously held and commission receivable from an insurance company). The Group assessed the loss allowance for these other receivables on 12m ECL basis.

In determining the ECL, the Group has taken into account the historical default experience and forward-looking macroeconomic information as appropriate. There had been no significant increase in credit risk since initial recognition. During the year ended 31 December 2019, impairment allowance of HK$82,000 were made on the receivable from a service provider for deposit previously held, of which the amount has been settled and the impairment allowance has been reversed in full during the year ended 31 December 2020. For the remaining other receivable balances, the Group has considered the consistently low historical default rate in connection with payments and concluded that credit risk inherent in these balances is insignificant.

121

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

34. FINANCIAL INSTRUMENTS – continued

(b) Financial risk management objectives and policies – continued

Credit risk and impairment assessment – continued

Notes: – continued

(3) For contract assets, the Group has applied the simplified approach in HKFRS 9 to measure the loss allowance at lifetime ECL. The Group determines the ECL on these items by using a collective assessment, grouped by internal credit rating for loan facilitation services.

As part of the Group’s credit risk management, the Group applies internal credit rating for its customers in relation to loan facilitation service segment as at 31 December 2020 and 2019. The following table provides information about the exposure to credit risk for contract assets which are assessed based on collective assessment within lifetime ECL (not credit-impaired).

Gross carrying amount

Gross carrying amount
	2020	2 Weighted average loss rate	019 Contract assets HK$’000
	Weighted
	average Contract
	loss rate assets
	HK$’000
Internal credit rating Tier 1: Low risk Tier 2: Low risk Tier 3: Moderate risk Tier 4: Moderate risk		3.8% 5.6% 10.5% 17.3%	5,082 3,612 1,306 1,033


	2.7% 1,400
	7.5% 806
	10.3% 150
	16.0% 196

	2,552		11,033

At the inception of the loan, the management determines the tier of each customers by considering respective financial performance and positions, amount of collateral and geographical locations etc.. The estimated loss rates are estimated based on weighted average historical observed default rates over the expected life of the contract assets among different products and are adjusted for forward-looking macroeconomic information that is available without undue cost or effort. The grouping is regularly reviewed by management to ensure relevant information about specific debtors is updated.

During the year ended 31 December 2020, the Group recognised a reversal of HK$502,000 (2019: provision of HK$631,000) impairment allowance for contract assets, based on collective assessment.

No debtors with significant outstanding balances or assessed as credit-impaired as at 31 December 2020 and 2019.

122

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

34. FINANCIAL INSTRUMENTS – continued

(b) Financial risk management objectives and policies – continued

Credit risk and impairment assessment – continued

The following tables show the reconciliation of loss allowances that has been recognised for trade receivables, contract assets and other receivables.

Trade receivables

		Lifetime ECL
		(credit-impaired)
		HK$’000
As at 1 January 2019		475
Impairment losses recognised		972
As at 31 December 2019		1,447
Write-offs		(1,450)
Impairment losses recognised		6
Exchange realignment		3
As at 31 December 2020		6

The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, e.g. when the debtor has been placed under liquidation or has entered into bankruptcy proceedings, or when the trade receivables are over two years past due, whichever occurs earlier.

Other receivables

		12m ECL
		HK$’000
As at 1 January 2019		–
Impairment losses recognised		82
Exchange realignment		(1)
As at 31 December 2019		81
Impairment losses reversed upon full settlement		(82)
Exchange realignment		1
As at 31 December 2020		–

123

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

34. FINANCIAL INSTRUMENTS – continued

(b) Financial risk management objectives and policies – continued

Credit risk and impairment assessment – continued

Contract assets
		Lifetime ECL
		(non credit-
		impaired)
		HK$’000
As at 1 January 2019		–
Impairment losses recognised		631
Exchange realignment		(7)
As at 31 December 2019		624
Impairment losses reversed		(502)
Exchange realignment		24
As at 31 December 2020		146

124

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

34. FINANCIAL INSTRUMENTS – continued

(b) Financial risk management objectives and policies – continued

Liquidity risk

In management of the liquidity risk, the Group monitors and maintains levels of cash and cash equivalents deemed adequate by the management to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. In addition, an unsecured loan facility has been granted from its ultimate holding company to Jimu Group Enterprises Limited, a wholly-owned subsidiary of the Company, of an aggregate maximum amount of HK$30,000,000 for a period of 36 months which remains unutilised as at 31 December 2020.

The following table details the Group’s remaining contractual maturity for its financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay.

The table includes both interest and principal cash flows.

Liquidity tables

	Weighted average effective interest rate Repayable on demand or less than 1 month 1 – 3 months 4 months to 1 year 1 – 5 years Total undiscounted cash flows Carrying amount at 31 December 2020
	% HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
As at 31 December 2020 Trade payables Other payables Amount due to a former director/director Loan from a fellow subsidiary Lease liabilities

	– 953 – – – 953 953
	– 933 – – – 933 933
	– 440 – – – 440 440
	5.00 – – – 8,048 8,048 6,998
	8.00 57 15 679 1,030 1,781 1,600

	2,383 15 679 9,078 12,155 10,924

	Weighted average effective interest rate Repayable on demand or less than 1 month 1 – 3 months 4 months to 1 year 1 – 5 years Total undiscounted cash flows Carrying amount at 31 December 2019 % HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 – 953 – – – 953 953 – 429 – – – 429 429 – 6,350 – – – 6,350 6,350 7.54 343 1,026 3,341 5,140 9,850 8,802 8,075 1,026 3,341 5,140 17,582 16,534
As at 31 December 2019 Trade payables Other payables Amount due to a former director/director Lease liabilities

125

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

34. FINANCIAL INSTRUMENTS – continued

(c) Fair value measurements of financial instruments

The fair value of financial assets and financial liabilities are determined in accordance with general accepted pricing models based on discounted cash flow analysis.

The Directors consider that the carrying amounts of financial assets and financial liabilities measured at amortised cost in the consolidated financial statements approximate their fair values.

35. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES

The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s consolidated statement of cash flows as cash flows from financing activities.

		Amount due
	Loan from	to a former
	a fellow	director/	Bank	Lease
	subsidiary	director	borrowings	liabilities	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
At 1 January 2019	–	–	17,373	14,097	31,470
Financing cash flows	–	6,350	(4,725)	(6,273)	(4,648)
New leases entered	–	–	–	2,538	2,538
Termination of lease liabilities	–	–	–	(2,266)	(2,266)
Exchange realignment	–	–	–	(220)	(220)
Interest expenses	–	–	240	926	1,166
Repayment of factoring
from customers	–	–	(12,888)	–	(12,888)
At 31 December 2019	–	6,350	–	8,802	15,152
Financing cash flows	6,998	(893)	–	(3,448)	2,657
New leases entered	–	–	–	188	188
Termination of lease liabilities	–	–	–	(4,567)	(4,567)
Exchange realignment	–	–	–	257	257
Interest expenses	–	–	–	368	368
Deemed contribution from a
former director/director	–	(5,017)	–	–	(5,017)
At 31 December 2020	6,998	440	–	1,600	9,038

126

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

36. MAJOR NON-CASH TRANSACTIONS

During the year ended 31 December 2019, certain trade receivables of the Group were discounted with recourse to a bank. As the Group has not transferred the significant risks and rewards relating to these receivables, it continues to recognise the full carrying amount of the receivables and has recognised the cash received on the transfer as a bank borrowings. Accordingly, the bank directly received the contractually entitled cash flows of HK$12,888,000 (2020: HK$Nil) upon settlement of the discounted trade receivables from the Group’s debtors as settlement of the related bank borrowings.

During the year, the Group entered into new lease agreements for the use of leased branch premises for one to three years (2019: two to five years). On the lease commencement, the Group recognised HK$214,000 (2019: HK$2,559,000) of right-of-use assets and HK$188,000 (2019: HK$2,538,000) lease liability.

37. SHARE OPTION SCHEME

The shareholders of the Company adopted a share option scheme at the annual general meeting on 11 May 2016 (the “2016 Share Option Scheme”). No share option has been granted under the 2016 Share Option Scheme since its adoption.

An option may be exercised at any time during the period to be determined and notified by the directors to the grantee but may not be exercised after the expiry of ten years from the date of offer of that opinion. Option is immediately vested at the date of grant and a consideration of HK$1.00 is payable upon acceptance of the offer.

The exercise price is determined by the directors, and will not be less than the higher of the nominal value of the share on the date of offer, the closing price of the Company’s shares on the date of offer; and the average closing price of the shares for the five business days immediately preceding the date of offer.

No share option was granted or exercised for both years.

127

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

38. PARTICULARS OF PRINCIPAL SUBSIDIARIES OF THE COMPANY

Details of the principal subsidiaries as at 31 December 2020 and 2019 are as follows:

Name of subsidiary Place of incorporation/ establishment Place of operation	Issued and fully paid share capital/registered capital	Issued and fully paid share capital/registered capital	Equity interest attributable to the Group Principal activities As of 31 December	Equity interest attributable to the Group Principal activities As of 31 December
	2020	2019	2020	2019 %
			%
Indirectly held subsidiaries Ever Smart International Enterprise Limited 永駿國際企業有限公司 Hong Kong Hong Kong 東莞天達鞋業貿易有限公司#* The PRC The PRC 立鼎萊博（北京）科技有限公司# The PRC The PRC 積木時代（天津）商務信息諮詢有限公司# The PRC The PRC 四川積木美行商務信息諮詢有限公司# The PRC The PRC 斯德伯（寧夏）科技有限公司# The PRC The PRC 格銳德（銀川）企業管理咨詢有限公司# The PRC The PRC				100 Design, development, sourcing, marketing and sale of footwear 100 Design, development, and sourcing of footwear 100 Loan facilitation business 100 Loan facilitation business 100 Loan facilitation business 100 Design, development, sourcing, marketing and sale of footwear – Provision of consultancy service

	HK$1	HK$1	100
	N/A	HK$8,000,000	N/A
	USD10,000,000	USD10,000,000	100
	RMB5,000,000	RMB5,000,000	100
	RMB10,000,000	RMB10,000,000	100
	USD1,000,000	USD1,000,000	100
	RMB10,000,000	–	100

Limited liability company established in the PRC

Deregistered during the year

All the principal subsidiaries operate predominantly in their respective places of incorporation/establishment.

The above table lists the subsidiaries of the Group which, in the opinion of the Directors, principally affected the results or net assets of the Group. To give details of other subsidiaries would, in the opinion of the Directors, result in particulars of excessive length.

None of the subsidiaries had any debt securities subsisting at the end of the year or at any time during the year.

39. EVENT AFTER THE REPORTING PERIOD

On February 2021, the Company has entered into an agreement of engagement of strategic partner (the “Agreement”) with 山東道之堂健康管理有限公司 (“Daozhitang”).

Pursuant to the Agreement, the Group will leverage on its strengths in the mainland’s layout and its credit rating experience to meet the needs of Daozhitang for the development of the big health industry, including but not limited to jointly developing scenario-based financial services for the big health industry, transactional projects such as mergers and acquisitions and restructuring of the big health industry, pursuing business development opportunities and seeking project financing solutions from Daozhitang. The Agreement (except for the confidentiality terms) is not legally binding and the specific terms of the project are subject to further negotiation, determination and formal contract between the Company and Daozhitang. Details of the above are set out in the announcement of the Company dated 10 February 2021.

128

Jimu Group Limited | Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

40. STATEMENT OF FINANCIAL POSITION AND RESERVES OF THE COMPANY

		2020	2019 HK$’000
		HK$’000
Non-current asset Investment in subsidiaries			–

		–
Current assets Prepayments and deposits Amounts due from subsidiaries Bank balances			226 – 8,277
		–
		–
		8,092
		8,092	8,503
Current liability Otherpayables			1,825
		2,525
Net current assets		5,567	6,678
Total assets less current liability		5,567	6,678

Capital and reserves Share capital Reserves and accumulated losses (Note)			4,800 1,878

		5,016
		551
Total equity		5,567	6,678

Note:	The movements in the reserves of the Company are as follows: Share premium Special reserve Translation reserve Accumulated losses Total equity HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note)
	At 1 January 2019 46,917 11,540 – (33,347) 25,110 Loss and total comprehensive expense for the year – – – (23,232) (23,232)
	At 31 December 2019 46,917 11,540 – (56,579) 1,878 Loss and total comprehensive expense for the year – – – (10,299) (10,299) Exchange differences on translation from functional currency to presentation currency – – 105 – 105
	Total comprehensive income (expense) for the year – – 105 (10,299) (10,194) Placing of new shares 9,245 – – – 9,245 Transaction costs attributable to placing of new shares (378) – – – (378)
	At 31 December 2020 55,784 11,540 105 (66,878) 551

Note: The special reserve of the Company comprises deemed contributions from the sole shareholder and premium arisen from the Group’s reorganisation in 2015.

129

Jimu Group Limited | Annual Report 2020

FIVE YEARS’ FINANCIAL SUMMARY

The summary of the consolidated results of Jimu Group Limited (the “Company”) and its subsidiaries (collectively referred to the “Group”) for the years ended 31 December 2016, 2017, 2018, 2019 and 2020 and the consolidated assets and liabilities of the Group as at 31 December 2016, 2017, 2018, 2019 and 2020 are set out in the audited consolidated financial statements.

RESULTS

		Year ended 31 December
	2020	2019 2018 2017 2016 HK$’000 HK$’000 HK$’000 HK$’000
	HK$’000
REVENUE		110,173 219,353 236,732 241,389
	83,293

(LOSS) PROFIT BEFORE TAXATION Income tax credit (expenses)		(33,495) 1,874 (8,824) (13,009) 150 (5,865) (185) (662)
	(10,495)

	1,790

LOSS FOR THE YEAR	(8,705)	(33,345) (3,991) (9,009) (13,671)

Loss attributable to: Owners of the Company Non-controlling interests		(33,345) (3,991) (9,009) (13,671) – – – –

	(8,705)
	–

	(8,705)	(33,345) (3,991) (9,009) (13,671)

ASSETS, LIABILITIES AND NON-CONTROLLING INTERESTS

	As at 31 December	As at 31 December
	2020	2019 2018 2017 2016 HK$’000 HK$’000 HK$’000 HK$’000
	HK$’000
TOTAL ASSETS TOTAL LIABILITIES		58,466 113,673 119,249 116,208 (55,617) (73,129) (74,379) (62,288)
	33,759
	(25,190)

	8,569	2,849 40,544 44,870 53,920

EQUITY: Equity attributable to owners of the Company Non-controlling interests		2,849 40,544 44,870 53,920 – – – –

	8,569
	–

	8,569	2,849 40,544 44,870 53,920

130

Jimu Group Limited | Annual Report 2020

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Jimu Group Limited — Annual Report 2020

51316_rns_2021-03-31_4c14741f-6905-4285-9f3a-9ffbb17996a8.pdf

JIMU GROUP LIMITED 積木集團有限公司

ANNUAL REPORT 2020

CHARACTERISTICS OF GEM OF THE STOCK EXCHANGE OF HONG KONG LIMITED (THE “STOCK EXCHANGE”)

CONTENT

CORPORATE INFORMATION

Board of Directors

Executive Directors

Registered Office

Head Office and Principal Place of Business in

Non-Executive Directors

Hong Kong

Independent Non-Executive Directors

Company Secretary

Compliance Officer

Authorised Representatives

Principal Share Registrar and Transfer Office

Hong Kong Branch Share Registrar and Transfer Office

Audit Committee

Remuneration Committee

Nomination Committee

Principal Bankers

Auditor

Legal Adviser

Risk Management Committee

Company’s Website

Stock Code

CHAIRMAN’S STATEMENT

CHAIRMAN’S STATEMENT

Dong Jun

MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS REVIEW AND OUTLOOK

Footwear and Apparel Businesses

Loan Facilitation and Credit Assessment Businesses

MANAGEMENT DISCUSSION AND ANALYSIS

MANAGEMENT DISCUSSION AND ANALYSIS

FINANCIAL REVIEW

Revenue

Footwear and Apparel Businesses

Loan Facilitation and Credit Assessment Businesses

MANAGEMENT DISCUSSION AND ANALYSIS

Purchases and changes in inventories

Other income

Other gains and losses

Finance costs

Employee benefits expenses

Other operating expenses

Income tax credit

MANAGEMENT DISCUSSION AND ANALYSIS

Loss for the year

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

MANAGEMENT DISCUSSION AND ANALYSIS

PLEDGE OF ASSETS

EXCHANGE RATE EXPOSURE

SIGNIFICANT INVESTMENTS HELD

FUTURE PLANS FOR MATERIAL INVESTMENTS AND CAPITAL ASSETS

MATERIAL ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES AND AFFILIATED COMPANIES

CONTINGENT LIABILITIES

CAPITAL COMMITMENTS

EMPLOYEES AND EMOLUMENT POLICIES

MANAGEMENT DISCUSSION AND ANALYSIS

PRINCIPAL RISKS AND UNCERTAINTIES

Credit risk

Interest rate risk

Liquidity risk

COMPLIANCE WITH LAWS AND REGULATIONS

ENVIRONMENTAL POLICIES AND PERFORMANCE

MANAGEMENT DISCUSSION AND ANALYSIS

KEY RELATIONSHIP WITH EMPLOYEES, CUSTOMERS AND SUPPLIERS

KEY PERFORMANCE INDICATORS

CLOSURE OF REGISTER OF MEMBERS

REPORT OF THE DIRECTORS

PRINCIPAL ACTIVITIES

BUSINESS REVIEW

RESULTS AND APPROPRIATIONS

FINANCIAL SUMMARY

RESERVES

DISTRIBUTABLE RESERVES

Jimu Group Limited Annual Report 2020