CONTENTS Corporate Information 2 Chairman’s Statement 3 Management Discussion and Analysis 5 Biographical Details of Directors and 12 Senior Management Corporate Governance Report 16 Directors’ Report 28 Environmental, Social and Governance Report 39 Independent Auditor’s Report 64 Consolidated Statement of Profit or Loss 69 Consolidated Statement of 70 Other Comprehensive Income Consolidated Statement of Financial Position 71 Consolidated Statement of Changes in Equity 73 Consolidated Statement of Cash Flows 75 Notes to the Financial Statements 77 Five Years Financial Summary 156 Huobi Technology Holdings Limited 2020 Annual Report 1 Corporate Information BOARD OF DIRECTORS PRINCIPAL BANKER EXECUTIVE DIRECTORS DBS Bank Ltd., Hong Kong Branch Mr. Li Lin BVI PRINCIPAL SHARE REGISTRAR AND (Chairman and Chief Executive Officer) TRANSFER OFFICE Mr. Lee Chris Curl (Chief Financial Officer) Maples Fund Services (Cayman) Limited (resigned on 10 August 2020) PO Box 1093, Boundary Hall Mr. Lan Jianzhong Cricket Square Grand Cayman INDEPENDENT NON-EXECUTIVE DIRECTORS KY1–1102 Cayman Islands Mr. Duan Xiongfei Mr. Yip Wai Ming Mr. Ngai Matthew Cheuk Yin HONG KONG BRANCH SHARE REGISTRAR AND TRANSFER OFFICE AUDIT COMMITTEE Tricor Investor Services Limited Mr. Yip Wai Ming (Chairman) Level 54 Hopewell Centre Mr. Duan Xiongfei 183 Queen’s Road East Mr. Ngai Matthew Cheuk Yin Hong Kong REMUNERATION COMMITTEE LEGAL ADVISER AS TO HONG KONG LAW Mr. Ngai Matthew Cheuk Yin (Chairman) Patrick Mak & Tse – Mr. Lan Jianzhong Rooms 901 905 Mr. Yip Wai Ming 9/F, Wing On Centre 111 Connaught Road Central NOMINATION AND CORPORATE GOVERNANCE Hong Kong COMMITTEE AUDITOR Mr. Duan Xiongfei (Chairman) Mr. Yip Wai Ming BDO Limited Mr. Lan Jianzhong 25th Floor, Wing On Centre (appointed on 10 August 2020) 111 Connaught Road Central Mr. Lee Chris Curl Hong Kong (resigned on 10 August 2020) COMPANY SECRETARY REGISTERED OFFICE Mr. Lee Chris Curl 3rd Floor, J&C Building (resigned on 10 August 2020) PO Box 362 Mr. Ng Gilbert Man Him Road Town, Tortola (resigned on 10 August 2020) BVI VG 1110 Mr. Ng Kwan Ho (appointed on 10 August 2020) HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS IN HONG KONG Room 1404–05 14/F, Nan Fung Tower 88 Connaught Road Central Hong Kong Tel: (852) 3616 0815, Fax: (852) 3596 3011 Websites: www.huobitech.com http://www.irasia.com/listco/hk/huobitech/ 2 Huobi Technology Holdings Limited 2020 Annual Report Chairman’s Statement Dear Shareholders, On behalf of the board (the “Board”) of directors (the “Directors”) of Huobi Technology Holdings Limited (the “Company” and together with its subsidiaries the “Group”), I am pleased to present the annual report of the Group for the financial year ended 30 September 2020. MACROECONOMIC CONDITIONS During the challenging 2020, the global liquidity crisis triggered by the COVID-19 pandemic led to various epic volatile movements in the capital market. In March, the U.S. stock market set its biggest single-day decline since 1987. It only took three months for the Nasdaq Index to recover the loss with a record high. The Dow Jones Industrial Average continued to rise, and for the first time crossed the 30,000 threshold on November 24. As compared to other major economies across the world, China’s economy has performed comparatively better. The International Monetary Fund forecasts that China will be the only major economy that maintains a positive growth in 2020. In the first three quarters, China’s GDP amounted to RMB72.28 trillion (RMB, the same below), representing a year-on-year increase of 0.7% at comparable prices. It showed a steady recovery growth in the single quarter. The unemployment rate in cities and towns nationwide decreased to 5.4% in September from August by 0.2%. During the year, the total retail sales of consumer goods reached the highest level of RMB3.53 trillion, representing a year-on-year increase of 3.3%. During the year, the added value of industries above the designated size reported a record high, an increase by 6.9% year-on-year. The rapid rebound in the capital market was driven by the monetary stimulus, rather than a truly comprehensive economic recovery. In the context of the COVID-19 pandemic without an effective control, major developed countries continue to experience a low inflation. Due to the combination of low inflation with an economic uncertainty, the inflation targeting, the cornerstone of monetary policies settled by central banks in various countries, faced a tremendous challenge. BUSINESS OVERVIEW Despite the pressure brought by rising external volatility, the management of the Group made great efforts to safeguard the stability of production and operation and received an outstanding result. In terms of the contract manufacturing business, sales of high-margin products further increased and sales of low-margin products further decreased, which to a certain extent offset the decrease in turnover caused by the weak demand from major customers. During the same period, the cost and expenses dropped due to the declining copper price. In terms of the blockchain technology business, upon completion of the acquisition of Win Techno Inc. in July 2019, the relevant business proceeded successfully with an increasing income. The Group will continue to concentrate resources on the development of cloud software and database services for global customers from innovative technology sectors, including blockchain, fintech and big data. In addition, it is noteworthy that Huobi Asset Management (Hong Kong) Limited, a wholly-owned subsidiary of the Group, obtained Type 4 and Type 9 licenses by the Securities and Futures Commission in Hong Kong on 31 July 2020. Huobi Wallet Hong Kong Limited obtained the relevant Trust or Company Service Provider License issued by the Companies Registry in Hong Kong on 19 August 2020. The Group will develop an integrated financial service platform that provides securities advisory and asset management services to professional investors. Huobi Technology Holdings Limited 2020 Annual Report 3 Chairman’s Statement MACROCOSMIC VIEWPOINT During this year, Decentralized Finance (DEFI) morphed into an unexpected momentum following years of ordeals. Over a few months, the total lock-up volume of the DEFI protocol on Ethereum has grown from less than US$1 billion to more than US$15 billion. The 24 hours’ trading volume of the header protocol surpassed the world’s leading centralized exchange. An unexpected market star is actually the result of the persisted efforts throughout the entire industry, which lives up to the Chinese proverb of “gentlemen change like leopards, the glory shines growingly”. As characterized by “decentralization and point-to-point value transfer”, the “internet of value” system and Web3.0 may come sooner than expected, and become a catalyst for new production relations and productivity. At the same time, Micro Strategy, the US listed company, and Grayscale Investment as the leading institutions, have also begun to increase their holdings of virtual assets such as Bitcoin. Furthermore, major economies have introduced comprehensive compliance and regulation polices to govern the virtual asset industry. As a result, licensed operations in this particular industry have become a general trend. Essentially, every major economic crisis results from overproduction. Subsequent to the crisis, demand and supply will be rebalanced until a new technological revolution further enhances productivity and production efficiency, which in turn stimulates the expansion of demand. Looking ahead, the blockchain technology will undoubtedly take its valuable position in the next round of humankind technological revolution and industrial upgrading. The PRC government has made it clear that the integration and application of the blockchain technology play a vital role in new technological innovation and industrial reform, and therefore the blockchain shall serve as the critical breakthrough for the indigenous innovation of core technologies to accelerate and advance the development of the blockchain technology and industrial innovation. FUTURE PROSPECTS We firmly believe that the advancement of the industry should be accompanied by trial and error, just as the process of history should tolerate volatility. Species with the best genes can always survive and grow in the most dramatic volatility, and long-termism will eventually triumph over opportunism. Only by stopping reminiscing about the successes of the past then we can transcend the cognition of the present. We wish to live with time, commonsense, and modesty. The Group will always stay on course for the long-term development of its business. While safeguarding the steady advancement of the Company’s manufacturing business and operating cash flow, the Company will persist in promoting and venturing into business diversity and continue to promote scientific and technological innovation in the development of a new generation of digital financial infrastructure, which is based on the blockchain technology and centers on the development of the internet of value. The Group believes that its persistence in long-termism and technological innovation will generate reasonable long-term returns to the shareholders in the future. On behalf of the Board, Li Lin Chairman HKSAR 18 December 2020 4 Huobi Technology Holdings Limited 2020 Annual Report Management Discussion and Analysis MATERIAL EVENTS Change of Company Name Pursuant to (i) the passing of the special resolution at the extraordinary general meeting of the Company held on 9 October 2019; and (ii) the issue of the Certificate of Name Change by the Registry of Corporate Affairs in the British Virgin Islands on 11 October 2019, the Company has changed its official registered English name from “Pantronics Holdings Limited” to “Huobi Technology Holdings Limited” and its Chinese name from “桐成 控股有限公司” to “火幣科技控股有限公司”. With effect from 9:00 a.m. on 18 November 2019, the English stock short name of the Company for trading in the Shares on the Stock Exchange has changed from “PANTRONICS HLDG” to “HUOBI TECH” and the Chinese stock short name of the Company has changed from “桐成控股” to “火幣科技”.