Financial Performance - Kingdom Holdings recorded a sales growth of 21.0% for the year, reaching RMB 2.4 billion, with a profit of RMB 162.8 million[16]. - The Group's revenue for the year increased by approximately 21.0% to RMB2,445,428,000 compared to RMB2,021,055,000 in 2022[43]. - Gross profit rose by approximately 6.4% year-on-year to RMB411,488,000, while the overall gross profit margin decreased by 2.3 percentage points to 16.8%[43]. - Profit for the year was RMB162,790,000, a decrease from RMB171,808,000 in 2022[43]. - Revenue from overseas sales amounted to RMB1,251,191,000, representing approximately 51.2% of the Group's total revenue[45]. - Domestic sales in China increased by approximately 54.2% to RMB 1,194,237,000, accounting for approximately 48.8% of the Group's total revenue[52][53]. - Other income and gains for the year recorded a net gain of RMB18,927,000, down from RMB54,431,000 in the previous year[79]. - The Group recorded a net profit of approximately RMB162,790,000 for the Year, compared to RMB171,808,000 for the year ended 31 December 2022, representing a decrease of about 5.9%[92][98]. Operational Efficiency - The Group's total consumption of electricity, water, steam, and natural gas decreased by 7.0%, 6.1%, 12.5%, and 6.8% respectively[17]. - The Group's production capacity for linen and industrial hemp yarn is currently 23,000 tonnes, with high utilization rates across its four production bases in China[65][67]. - The Group's production bases are continuously improved with the latest technologies, enhancing operational efficiency and reducing production costs[64][67]. - The Group aims to improve production processes to enhance operational efficiencies in pursuit of sustainable development[181]. Sustainability Initiatives - Kingdom achieved carbon neutrality in November 2023, verified by SGS, through various carbon emission reduction initiatives[18]. - The company has integrated Environmental, Social, and Governance (ESG) principles into its business strategy to ensure sustainable operations[17]. - The Group is collaborating with CottonConnect to develop the REEL Linen Code of Conduct, focusing on sustainability and traceability in the linen supply chain[59][61]. - The Group aims to promote the REEL Linen Code of Conduct, a sustainability initiative to improve environmental and product quality standards in the linen industry[145]. - The company has launched the REEL initiative aimed at promoting sustainable practices in the linen industry, focusing on improving environmental conditions and product traceability in its global supply chain[148]. Challenges and Risks - The geopolitical tensions and disruptions in shipment routes have posed challenges to the Group's operations during the year[15]. - The Group's principal risks include unstable demand for linen yarn, protectionism, and potential punitive tariffs on products made in China[188]. - The year 2024 and beyond are expected to be challenging due to geopolitical tensions and rising operational costs in Asia[143]. Dividends and Shareholder Relations - The Board has recommended a final dividend of HK$0.09 per ordinary share for the year, consistent with the previous year[24]. - The Board recommended a final dividend of HK$0.09 per share for the year, unchanged from 2022[44]. - The Chairman expressed gratitude to shareholders and business partners for their continuous support during the challenging year[25]. Future Outlook - Looking ahead to 2024, the company will focus on globalization, process orientation, standardization, and digitalization to enhance operational efficiency and customer service quality[23]. - The Group plans to establish a new factory in Egypt in 2024 to diversify its supply chain, following a feasibility study conducted in 2023[133]. - The company is conducting feasibility studies for new factories in Egypt and North Africa to diversify its supply chain, benefiting from potential EU tariff exemptions[148]. - The company plans to cautiously advance the new factory project in 2024, responding to the increasing operational costs in Asia and the aging population in China[148]. Employee and Management Information - As of December 31, 2023, the Group had a total of 3,700 employees, a decrease from 4,087 employees in 2022[135]. - Total staff costs for the year increased by approximately 0.3% to RMB 262,496,000, compared to RMB 261,764,000 in 2022[135]. - Ms. Shen Hong, aged 57, has over 20 years of financial experience and is the Group's managing director[161]. - Mr. Yan Jianmiao, aged 58, is an independent non-executive director with a strong academic background in economics and international trade[170]. - Mr. Chan Yan Kwan Andy, aged 55, serves as the chief financial officer and has over 20 years of experience in accounting and finance[174].

Revenue and Profitability - The group's revenue increased by approximately 21.0% from RMB 2,021,055,000 in 2022 to RMB 2,445,428,000 in 2023, driven by rising prices of pure linen yarn[6]. - Profit for the year declined by 5.2% to approximately RMB 162,790,000 in 2023, down from RMB 171,808,000 in 2022[6]. - Basic earnings per share fell by 6.9% to approximately RMB 0.27 in 2023, compared to RMB 0.29 in 2022[6]. - Total comprehensive income for the year was RMB 163,040,000 in 2023, compared to RMB 168,727,000 in 2022[8]. - The gross profit margin decreased by 2.3 percentage points to approximately 16.8% in 2023, compared to 19.1% in 2022, due to raw material cost increases outpacing the rise in pure linen yarn prices[6]. - Gross profit rose by about 6.4% to RMB 411,488,000, while the overall gross margin decreased by 2.3 percentage points to 16.8%[104]. Assets and Liabilities - Non-current assets decreased from RMB 1,167,881,000 in 2022 to RMB 1,093,960,000 in 2023[9]. - Current assets increased significantly from RMB 1,737,041,000 in 2022 to RMB 2,189,216,000 in 2023[9]. - Total liabilities increased from RMB 1,319,707,000 in 2022 to RMB 1,626,352,000 in 2023[9]. - The net asset value increased from RMB 1,487,990,000 in 2022 to RMB 1,587,212,000 in 2023[11]. - The carrying amount of non-current assets was RMB 1,043,000,000 as of December 31, 2023, down from RMB 1,150,000,000 in 2022[38]. - The company's total non-current assets were RMB 1,078,857,000 as of December 31, 2023, compared to RMB 1,159,408,000 in 2022[45]. - The total liabilities, including current and non-current borrowings, reached RMB 869,526,000 in 2023, compared to RMB 752,903,000 in 2022, reflecting an increase of 15.5%[95]. Sales and Market Performance - Revenue from mainland China reached RMB 1,194,237,000, up 54% from RMB 774,455,000 in 2022[44]. - The company's pure linen yarn export volume was 7,955 tons, representing a decrease of about 30.5% from 11,477 tons in the previous year[102]. - Overseas sales contributed RMB 1,251,191,000, accounting for approximately 51.2% of total revenue, with the EU contributing RMB 468,957,000 (19.2%) and non-EU countries RMB 782,234,000 (32.0%)[105]. - The company maintained its position as the largest pure linen yarn exporter in China for 21 consecutive years, holding over 40% of the total export volume[102]. - The group's revenue increased by approximately 21.0% to RMB 2,445,428,000, driven by a rise in the selling price of pure linen yarn, with sales to China and non-EU markets growing by 54.2% and 12.7% respectively[119]. Dividends and Shareholder Returns - The board proposed a final dividend of HKD 0.09 per ordinary share for the year ended December 31, 2023, unchanged from 2022[6]. - The board proposed a final dividend of HKD 0.09 per share, totaling approximately RMB 51,356,000, subject to shareholder approval[124]. Operational Efficiency and Costs - The group's sales and distribution expenses were approximately RMB 42,229,000, accounting for about 1.7% of total revenue, a decrease from 2.1% in the previous year due to reduced promotional costs[121]. - Administrative expenses for the year were approximately RMB 116,078,000, a slight decrease of about 2.5% compared to RMB 119,013,000 in 2022, mainly due to savings in general office expenses[140]. - Total financial costs for the year were approximately RMB 36,800,000, an increase from RMB 33,852,000 in 2022, with bank loan interest expenses totaling RMB 37,708,000[170]. Inventory and Receivables - The group's inventory increased by approximately 48.8% to RMB 1,019,545,000, up from RMB 685,180,000 in the previous year, with average turnover days rising from 147 to 153 days[177]. - Trade receivables and notes receivable increased by approximately 31.0% to RMB 558,356,000, compared to RMB 426,267,000 in the previous year, while average turnover days decreased from 85 to 73 days[178]. - The aging analysis of accounts receivable showed that the total amount overdue for more than three months was RMB 10,150, a decrease of 73.0% from RMB 37,670 in 2022[82]. Investments and Subsidiaries - The company has 100% ownership in Overseas Kingdom Limited and Jiangsu Jinyuan Linen Co., Ltd., both engaged in investment holding and linen production respectively[15]. - The company holds 78.67% of Heilongjiang Jinda Hemp Industry Co., Ltd., which focuses on the production and sales of industrial hemp[17]. - The group is investing in a new production facility in Ethiopia, which will increase annual capacity by 5,000 tons, and is expected to be a demonstration project for the Belt and Road Initiative[115]. Future Outlook and Strategic Initiatives - The geopolitical situation, including the ongoing Russia-Ukraine conflict and military actions in Israel, continues to pose challenges for 2024 and beyond[199]. - Supply chain diversification is urgent due to China's aging population and rising operational costs in Asia[199]. - A feasibility study is underway for establishing new factories in Egypt and North Africa, which could benefit from reduced or zero import tariffs from EU member states, with cautious progress planned for 2024[199]. - The company has partnered with UK non-profit organizations to transform the flax industry and implement the REEL (Responsible Flax) code of conduct, focusing on sustainability[199]. - The REEL initiative aims to improve environmental conditions, product quality, and traceability in global supply chains for sustainable flax sourcing[199]. Financial Reporting and Compliance - The financial statements are prepared in accordance with International Financial Reporting Standards and are presented in RMB, rounded to the nearest thousand[19]. - The consolidated financial statements include the company and its subsidiaries as of December 31, 2023, with all intercompany transactions fully eliminated[20]. - The company reassesses control over subsidiaries if there are changes in the elements of control, ensuring accurate financial reporting[22]. - The company has adopted new and revised International Financial Reporting Standards in the current financial statements, with no significant impact on measurement or presentation[25].

Financial Performance - The Group's gross profit decreased by approximately 16.9% to approximately RMB154,701,000, with a gross profit margin dropping by approximately 0.6 percentage points to approximately 18.8% due to rising raw material costs and currency fluctuations [1][2] - Total revenue for the Review Period dropped by approximately 14.2% to approximately RMB821,476,000, primarily due to weaker demand in export markets, particularly in the European Union, countered by higher average selling prices and new product launches [13][14] - Profit for the Review Period was approximately RMB67,500,000, representing a decline of approximately 20.1% compared to RMB84,439,000 for the same period last year [40] - Profit attributable to owners of the parent was approximately RMB67,549,000, down approximately 18.1% from RMB82,494,000 in the previous year [42] - Income tax expense for the Review Period was approximately RMB20,984,000, with an effective tax rate of approximately 23.7%, down from 27.8% in the previous year [39] - Revenue decreased by approximately 14.2% to approximately RMB821,476,000 for the six months ended 30 June 2023 from approximately RMB957,058,000 for the same period in 2022, mainly due to lower demand from export markets, particularly in the European Union [59] - Profit for the Review Period dropped by approximately 20.1% to RMB67,500,000 for the six months ended 30 June 2023 from approximately RMB84,439,000 for the same period in 2022 [62] - Profit attributable to the owners of the parent decreased by approximately 18.1% to RMB67,549,000 for the six months ended 30 June 2023 from approximately RMB82,494,000 for the same period in 2022 [62] Sales and Market Performance - Domestic sales in China grew by 10.2%, while export sales to the European Union and non-European Union regions decreased by approximately 29.2% and 22.4%, respectively [13][14] - The quantity of linen yarn sold during the Review Period was 7,275 tonnes, which is 31.2% fewer than the 10,572 tonnes sold during the same period in 2022 [66] - Domestic sales reached RMB344,603,000, contributing approximately 41.9% to total revenue, an increase of approximately 10.2% year-on-year [73] - Overseas sales amounted to RMB476,873,000, contributing approximately 58.1% to total revenue, a decrease of approximately 26.0% year-on-year [73] - Sales to European Union countries decreased by 29.2% year-on-year, while sales to non-European Union countries decreased by 22.4% year-on-year due to weak demand [73] Cost Management and Expenses - Administrative expenses decreased by approximately 17.9% to approximately RMB49,361,000, attributed to lower staff costs, research and development expenses, and reduced provisions for bad debts [6][7] - Selling and distribution expenses amounted to approximately RMB13,957,000, accounting for approximately 1.7% of total revenue, down from approximately 2.4% in the previous period [4] - Total finance costs for the Review Period were approximately RMB15,326,000, lower than the previous year's RMB17,624,000, due to a reduced average loan balance [9] - The total employee cost during the Review Period was approximately RMB80,261,000, a decrease from RMB97,418,000 in the same period last year [120] - Total staff costs for the review period amounted to approximately RMB80,261,000, down from RMB97,418,000 for the six months ended June 30, 2022 [139] Assets and Liabilities - The Group's total assets as of 30 June 2023 were approximately RMB3,088,772,000, an increase from RMB2,904,922,000 as of 31 December 2022 [12] - As of June 30, 2023, total equity was approximately RMB1,504,247,000, an increase from approximately RMB1,487,990,000 as of December 31, 2022 [18] - The Group's total borrowings repayable within 12 months increased to approximately RMB786,642,000 from approximately RMB696,344,000 as of December 31, 2022, resulting in a gross debt gearing ratio of approximately 56.0% compared to 50.6% previously [18] - Net current assets as of June 30, 2023, were approximately RMB433,541,000, up from approximately RMB417,334,000 as of December 31, 2022 [49] - Cash and cash equivalents decreased to approximately RMB168,180,000 as of June 30, 2023, from approximately RMB467,469,000 as of December 31, 2022 [50] - The liquidity ratio as of June 30, 2023, was approximately 129.1%, slightly down from 131.6% as of December 31, 2022 [50] Production and Operations - The Ethiopia factory has resumed normal production and is ramping up its production capacity during the Review Period [75] - The Group procured approximately 19,419 tonnes of raw materials during the Review Period, a year-on-year decrease of approximately 13.4% from 22,426 tonnes [81] - The average procurement unit price surged approximately 64.3% to RMB 44,658 per tonne, up from RMB 27,177 in the corresponding period last year due to supply shortages [81] - As of June 30, 2023, the Group had five production bases with an annual capacity of 7,000 tonnes (90% utilization), 6,000 tonnes (90% utilization), and 5,000 tonnes (80% utilization) among others [84] - A total of 194 tonnes of hemp yarn were produced during the Review Period, marking the Group's first venture into the hemp yarn market with a 75.34% equity interest in Heilongjiang Kingdom Enterprise Co., Ltd. [87] - The weaving and fabric factory in China is under construction and is expected to start trial production in the fourth quarter of 2023 [103] Strategic Initiatives - The Group is committed to investing in Ethiopia to reduce costs and benefit from the European Union's Everything but Arms initiative, which provides duty-free access to products made in least developed countries [102] - The Group aims to establish a scaled hemp yarn production within three years to meet market demand [148] - The Group has partnered with COTTONCONNECT to develop the REEL Linen Code of Conduct, promoting sustainability in the flax industry [149] - The Group's strategy includes developing proprietary intellectual property rights and pursuing advanced management practices to enhance long-term shareholder value [175] - The Group aims to become one of the largest linen yarn manufacturers globally, focusing on sustainable development and technical innovation [175] Corporate Governance and Shareholder Matters - The Company has not declared any interim dividend for the six months ended June 30, 2023, consistent with the previous year [190] - The Group's primary objective is to enhance long-term total return for shareholders through solid financial fundamentals [175] - The Company has adopted a share award plan to incentivize and retain personnel, aligning their interests with those of shareholders [193] - No Shares have been awarded pursuant to the Share Award Plan during the Review Period [198] - As of June 30, 2023, there were 13,230,750 Shares held by the Trustee, representing approximately 2.1% of the issued Shares of the Company [198] - All Directors have confirmed compliance with the required standards regarding securities transactions during the Review Period [199] - The Company has established its own code of conduct for Directors' securities transactions, which meets or exceeds the Model Code standards [199]

[Interim Results Highlights](index=1&type=section&id=Interim%20Results%20Highlights) [Key Financial Performance](index=1&type=section&id=Key%20Financial%20Performance) The company's revenue, profit, and basic EPS declined for the six months ended June 30, 2023, impacted by weak export demand, soaring raw material costs, and exchange rate fluctuations | Metric | Six Months Ended June 30, 2023 (RMB '000) | Six Months Ended June 30, 2022 (RMB '000) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 821,476 | 957,058 | -14.2% | | Gross Margin | 18.8% | 19.4% | -0.6 percentage points | | Profit for the Period | 67,500 | 84,439 | -20.1% | | Profit Attributable to Owners of the Parent | 67,549 | 82,494 | -18.1% | | Basic Earnings Per Share | RMB 0.11 | RMB 0.13 | -15.4% | - The decrease in revenue was primarily due to **weak demand** in export markets, especially the EU region, leading to a **reduction in flax yarn sales**, but partially offset by an **increase in the average selling price** of flax yarn, new product launches, and the **appreciation of the USD against RMB**[2](index=2&type=chunk) - Gross margin slightly decreased by **0.6 percentage points to 18.8%**, mainly due to **soaring raw material costs**, despite increased flax yarn selling prices, capacity release from the Ethiopia plant, and the appreciation of the USD against RMB[2](index=2&type=chunk) [Interim Condensed Consolidated Financial Statements](index=2&type=section&id=Interim%20Condensed%20Consolidated%20Financial%20Statements) [Interim Condensed Consolidated Statement of Profit or Loss](index=2&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss) For the six months ended June 30, 2023, the Group's revenue and various profit metrics decreased year-on-year, mainly due to increased cost of sales, reduced other income and gains, and changes in selling and administrative expenses | Metric | Six Months Ended June 30, 2023 (RMB '000) | Six Months Ended June 30, 2022 (RMB '000) | | :--- | :--- | :--- | | Revenue | 821,476 | 957,058 | | Cost of Sales | (666,775) | (770,976) | | Gross Profit | 154,701 | 186,082 | | Other Income and Gains | 13,100 | 37,842 | | Selling and Distribution Expenses | (13,957) | (23,210) | | Administrative Expenses | (49,361) | (60,087) | | Finance Costs | (15,326) | (17,624) | | Profit Before Tax | 88,484 | 117,005 | | Profit for the Period | 67,500 | 84,439 | | Profit Attributable to Owners of the Parent | 67,549 | 82,494 | | Basic Earnings Per Share | RMB 0.11 | RMB 0.13 | [Interim Condensed Consolidated Statement of Comprehensive Income](index=3&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Comprehensive%20Income) For the six months ended June 30, 2023, the Group's total comprehensive income for the period was RMB 66,880 thousand, a decrease from RMB 82,912 thousand in the prior year, mainly due to reduced profit and exchange differences on translating foreign operations | Metric | Six Months Ended June 30, 2023 (RMB '000) | Six Months Ended June 30, 2022 (RMB '000) | | :--- | :--- | :--- | | Profit for the Period | 67,500 | 84,439 | | Exchange Differences on Translating Foreign Operations | (620) | (1,527) | | Total Comprehensive Income for the Period | 66,880 | 82,912 | | Attributable to Owners of the Parent | 66,929 | 80,967 | | Attributable to Non-controlling Interests | (49) | 1,945 | [Interim Condensed Consolidated Statement of Financial Position](index=4&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2023, the Group's total assets, net current assets, and total equity increased compared to December 31, 2022, but cash and cash equivalents significantly decreased, while inventories and trade and bills payables increased | Metric | June 30, 2023 (RMB '000) | December 31, 2022 (RMB '000) | | :--- | :--- | :--- | | Total Non-current Assets | 1,166,797 | 1,167,881 | | Total Current Assets | 1,921,975 | 1,737,041 | | Inventories | 1,042,867 | 685,180 | | Cash and Cash Equivalents | 168,180 | 467,469 | | Total Current Liabilities | 1,488,434 | 1,319,707 | | Trade and Bills Payables | 433,421 | 367,096 | | Net Current Assets | 433,541 | 417,334 | | Total Assets Less Current Liabilities | 1,600,338 | 1,585,215 | | Total Equity | 1,504,247 | 1,487,990 | - Total current assets increased, primarily due to a **significant increase in inventories** from **RMB 685,180 thousand to RMB 1,042,867 thousand**[5](index=5&type=chunk) - Cash and cash equivalents **decreased significantly** from **RMB 467,469 thousand to RMB 168,180 thousand**[5](index=5&type=chunk) [Notes to the Interim Condensed Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20the%20Interim%20Condensed%20Consolidated%20Financial%20Statements) [Company and Group Information](index=6&type=section&id=Company%20and%20Group%20Information) Jinda Holdings Limited was incorporated in the Cayman Islands in 2006 and listed on the Hong Kong Stock Exchange, with the Group primarily engaged in the production and sale of flax yarn - The Company was incorporated in the Cayman Islands on **July 21, 2006**, and listed on the Hong Kong Stock Exchange on **December 12, 2006**[8](index=8&type=chunk) - The Group is principally engaged in the **production and sale of flax yarn**[40](index=40&type=chunk) [Basis of Preparation and Accounting Policies](index=6&type=section&id=Basis%20of%20Preparation%20and%20Accounting%20Policies) The interim condensed consolidated financial statements are prepared in accordance with IAS 34 and incorporate new and revised IFRSs for the first time, with minimal impact on the Group's financial position or performance - The interim condensed consolidated financial statements are prepared in accordance with **International Accounting Standard 34 "Interim Financial Reporting"**[41](index=41&type=chunk) - New and revised International Financial Reporting Standards, including amendments to **IAS 1, IAS 8, and IAS 12**, were adopted for the first time during this period[10](index=10&type=chunk)[21](index=21&type=chunk)[42](index=42&type=chunk) - The amendments to **IAS 12 (International Tax Reform – Pillar Two Model Rules)** have no impact on the Group as it does not fall within their scope[47](index=47&type=chunk) [Basis of Preparation](index=6&type=section&id=Basis%20of%20Preparation) The interim condensed consolidated financial statements are prepared in accordance with IAS 34 "Interim Financial Reporting" and should be read in conjunction with the Group's annual financial statements for the year ended December 31, 2022 - The interim condensed consolidated financial statements are prepared in accordance with **International Accounting Standard 34 "Interim Financial Reporting"**[41](index=41&type=chunk) - These interim condensed consolidated financial statements should be read in conjunction with the Group's annual financial statements for the year ended **December 31, 2022**[20](index=20&type=chunk) [Changes in Accounting Policies and Disclosures](index=6&type=section&id=Changes%20in%20Accounting%20Policies%20and%20Disclosures) The Group adopted amendments to IAS 1, IAS 8, and IAS 12 effective January 1, 2023, which have minimal quantitative impact on the interim condensed consolidated financial information, primarily affecting accounting policy disclosures or being inapplicable to the Group - Amendments to **IAS 1** require disclosure of material accounting policy information, expected to impact accounting policy disclosures in the annual consolidated financial statements but with **no impact on interim condensed consolidated financial information**[23](index=23&type=chunk) - Amendments to **IAS 8** clarify the distinction between changes in accounting estimates and changes in accounting policies, with **no impact on the Group's financial position or performance**[45](index=45&type=chunk) - Amendments to **IAS 12** narrow the scope of the initial recognition exemption, requiring recognition of deferred tax assets and liabilities related to leases, but with **no significant impact on the retained earnings balance as of January 1, 2022**[24](index=24&type=chunk)[46](index=46&type=chunk) [Operating Segments](index=8&type=section&id=Operating%20Segments) The Group primarily engages in the production and sale of flax yarn, organized as a single business unit, with geographical data showing mainland China as the main location for non-current assets, and revenue distributed across mainland China, EU, and non-EU regions - The Group is organized into a **single business unit**, primarily comprising the production and sale of flax yarn, hence no segment analysis is presented[48](index=48&type=chunk) [Geographical Information](index=8&type=section&id=Geographical%20Information) The Group's revenue is sourced from mainland China, the EU, and non-EU regions, with increased revenue from mainland China and decreased revenue from EU and non-EU regions, while non-current assets are primarily located in mainland China and Ethiopia Revenue by Customer Location | Region | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Mainland China | 344,603 | 312,827 | | European Union | 240,230 | 339,165 | | Non-European Union | 236,643 | 305,066 | | Total | 821,476 | 957,058 | Non-current Assets by Asset Location | Region | June 30, 2023 (RMB '000) | December 31, 2022 (RMB '000) | | :--- | :--- | :--- | | Mainland China | 799,890 | 790,849 | | Ethiopia | 356,869 | 368,559 | | Total | 1,156,759 | 1,159,408 | [Information about Major Customers](index=9&type=section&id=Information%20about%20Major%20Customers) For the six months ended June 30, 2023, the Group had no sales to a single customer accounting for 10% or more of total revenue - For the six months ended June 30, 2023, there were **no sales to a single customer** accounting for **10% or more of the Group's total revenue**[52](index=52&type=chunk) [Revenue, Other Income and Gains](index=9&type=section&id=Revenue,%20Other%20Income%20and%20Gains) The Group's revenue primarily derives from the sale of flax yarn, hemp yarn, and waste, recognized at a point in time, while other income and gains, mainly net exchange gains, government grants, and bank interest income, significantly decreased year-on-year - Revenue refers to the sales value of **flax yarn, hemp yarn, and waste**, net of sales tax and any sales discounts and returns[53](index=53&type=chunk) Revenue Analysis | Type of Goods or Services | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Sales of Flax Yarn, Hemp Yarn and Waste | 802,256 | 929,011 | | Other Services | 19,220 | 28,047 | | Total Revenue | 821,476 | 957,058 | | Timing of Revenue Recognition: | | | | Goods Transferred at a Point in Time | 802,256 | 929,011 | | Services Provided Over Time | 19,220 | 28,047 | Other Income and Gains | Item | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Net Exchange Gains | 4,223 | 28,238 | | Gain on Disposal of Items of Property, Plant and Equipment | 1,982 | – | | Government Grants | 2,889 | 8,117 | | Bank Interest Income | 1,958 | 529 | | Others | 2,048 | 958 | | Total | 13,100 | 37,842 | [Finance Costs](index=10&type=section&id=Finance%20Costs) For the six months ended June 30, 2023, the Group's total finance costs were RMB 15,326 thousand, a decrease from RMB 17,624 thousand in the prior year, primarily due to lower average loan balances | Item | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Interest on Bank Loans | 16,235 | 20,751 | | Interest on Lease Liabilities | 196 | 363 | | Total Interest Expense on Financial Liabilities Not at Fair Value Through Profit or Loss | 16,431 | 21,114 | | Less: Interest Capitalized | (1,105) | (3,490) | | Total Finance Costs | 15,326 | 17,624 | - The lower total finance costs were mainly due to a **lower average loan balance** during the review period compared to the same period last year[84](index=84&type=chunk) [Profit Before Tax](index=11&type=section&id=Profit%20Before%20Tax) For the six months ended June 30, 2023, the Group's profit before tax was RMB 88,484 thousand, a decrease from RMB 117,005 thousand in the prior year, primarily due to reduced cost of inventories sold, service costs, R&D expenses, and employee benefit expenses, as well as a significant decline in net exchange gains | Item | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Cost of Inventories Sold | 647,555 | 742,929 | | Cost of Services | 19,220 | 28,047 | | Depreciation | 50,869 | 51,420 | | Research and Development Expenses | 12,656 | 15,699 | | Employee Benefit Expenses | 80,261 | 97,418 | | Net Exchange Gains | (4,223) | (28,238) | | Fair Value Loss on Derivative Financial Instruments | – | 4,875 | | Impairment (Reversal) / Provision for Inventories | (3,296) | 2,884 | | Impairment Provision for Trade and Bills Receivables | 74 | 3,841 | | Finance Costs | 15,326 | 17,624 | | Bank Interest Income | (1,958) | (529) | [Income Tax Expense](index=12&type=section&id=Income%20Tax%20Expense) For the six months ended June 30, 2023, the Group's income tax expense was RMB 20,984 thousand, a decrease from RMB 32,566 thousand in the prior year, with the effective tax rate falling from 27.8% to 23.7%, reflecting varying tax policies across regions, such as a 15% preferential rate for high-tech enterprises in mainland China and a 5-year profit tax exemption in Ethiopia | Item | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Current Period Expense | 23,511 | 22,533 | | Deferred | (2,527) | 10,033 | | Total Tax Expense for the Period | 20,984 | 32,566 | - The effective tax rates for the review period and the prior year were approximately **23.7% and 27.8%**, respectively[112](index=112&type=chunk) - Zhejiang Jinda in mainland China enjoys a **15% preferential tax rate** as a high-tech enterprise, while the Ethiopia plant benefits from a **5-year profit tax exemption**[58](index=58&type=chunk)[59](index=59&type=chunk) [Dividends](index=12&type=section&id=Dividends) The Board of Directors resolved not to declare any interim dividend for the six months ended June 30, 2023 - The Board of Directors resolved **not to declare any interim dividend** for the six months ended June 30, 2023 (six months ended June 30, 2022: nil)[89](index=89&type=chunk) [Earnings Per Share](index=13&type=section&id=Earnings%20Per%20Share) For the six months ended June 30, 2023, the Group's basic and diluted earnings per share were both RMB 0.11, a decrease from RMB 0.13 in the prior year, primarily due to reduced profit attributable to owners of the parent | Metric | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Profit Attributable to Ordinary Equity Holders of the Parent Used for Basic EPS Calculation | 67,549 | 82,494 | | Weighted Average Number of Ordinary Shares in Issue for Basic EPS Calculation (thousand shares) | 616,447 | 616,447 | | Basic Earnings Per Share | RMB 0.11 | RMB 0.13 | | Diluted Earnings Per Share | RMB 0.11 | RMB 0.13 | - Diluted earnings per share are calculated based on the profit attributable to ordinary equity holders of the parent for the reporting period, considering the dilutive effect of potential ordinary shares, but **no share awards met vesting conditions** during this period[61](index=61&type=chunk)[62](index=62&type=chunk) [Trade and Other Receivables](index=14&type=section&id=Trade%20and%20Other%20Receivables) As of June 30, 2023, the Group's total trade and bills receivables increased to RMB 440,733 thousand from December 31, 2022, with customers generally granted credit terms of 30 to 150 days, and the Group maintaining a credit control department to manage risks | Item | June 30, 2023 (RMB '000) | December 31, 2022 (RMB '000) | | :--- | :--- | :--- | | Trade Receivables | 335,142 | 273,073 | | Bills Receivables | 105,991 | 153,520 | | Impairment | (400) | (326) | | Total | 440,733 | 426,267 | Ageing Analysis of Trade Receivables | Ageing | June 30, 2023 (RMB '000) | December 31, 2022 (RMB '000) | | :--- | :--- | :--- | | Within 1 Month | 186,069 | 148,389 | | 1 to 2 Months | 62,215 | 49,438 | | 2 to 3 Months | 63,823 | 37,250 | | Over 3 Months | 22,635 | 37,670 | | Total | 334,742 | 272,747 | - Customers are generally granted credit terms of **30 to 150 days**, and the Group maintains a credit control department to minimize credit risk[36](index=36&type=chunk) [Trade and Other Payables](index=15&type=section&id=Trade%20and%20Other%20Payables) As of June 30, 2023, the Group's total trade and bills payables increased to RMB 433,421 thousand from December 31, 2022, with these balances being unsecured, non-interest-bearing, and having a credit period of 90 days | Ageing | June 30, 2023 (RMB '000) | December 31, 2022 (RMB '000) | | :--- | :--- | :--- | | Due within 1 Month or on Demand | 55,170 | 65,609 | | Due after 1 Month but within 3 Months | 343,251 | 252,383 | | Over 3 Months | 35,000 | 49,104 | | Total | 433,421 | 367,096 | - The above balances are **unsecured and non-interest-bearing**, with a credit period of **90 days**[95](index=95&type=chunk) [Events After the Reporting Period](index=15&type=section&id=Events%20After%20the%20Reporting%20Period) The Group did not undertake any significant post-reporting period events after June 30, 2023 - The Group did not undertake any **significant post-reporting period events** after June 30, 2023[96](index=96&type=chunk) [Management Discussion and Analysis](index=16&type=section&id=Management%20Discussion%20and%20Analysis) [Business Review](index=16&type=section&id=Business%20Review) The Group faced global economic challenges during the review period, leading to a decline in revenue, but partially offset negative impacts through product innovation and market expansion efforts; raw material costs soared, yet the Group remains optimistic about the flax textile industry's future, continuing investments in Ethiopia and the hemp yarn market while advancing weaving and fabric projects - Revenue decreased by **14.2% to RMB 821,476 thousand** during the review period, primarily due to a **31.2% reduction in flax yarn sales** from weak export market demand, but partially offset by increased average selling prices and the appreciation of the USD against RMB[98](index=98&type=chunk) - The average procurement unit price for flax fiber, a key raw material, **soared by approximately 64.3% to RMB 44,658 per ton**, mainly due to supply shortages caused by low harvests[71](index=71&type=chunk) - The Group continues to invest in its Ethiopia plant, expecting cost savings and benefits from the EU's "Everything But Arms (EBA)" initiative, while actively entering the hemp yarn market and advancing weaving and fabric factory construction[74](index=74&type=chunk)[101](index=101&type=chunk)[103](index=103&type=chunk) [Economic Outlook](index=16&type=section&id=Economic%20Outlook) Despite the end of the COVID-19 pandemic, geopolitical tensions persist, with many countries anticipating low single-digit economic growth or contraction in 2023 - The COVID-19 pandemic has ended, but geopolitical tensions between different countries persist, with many developed and developing countries forecasting **low single-digit economic growth or even contraction in 2023**[68](index=68&type=chunk) [Revenue and Sales Strategy](index=16&type=section&id=Revenue%20and%20Sales%20Strategy) The Group's revenue decreased by 14.2% during the review period, mainly due to weak export market demand, though domestic sales grew by 10.2%, as the Group implements an international sales strategy and continues to expand its domestic market presence Revenue by Sales Region | Region | 2023 (RMB '000) | 2022 (RMB '000) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | China | 344,603 | 312,827 | +10.2% | | European Union | 240,230 | 339,165 | -29.2% | | Non-European Union | 236,643 | 305,066 | -22.4% | | Total Revenue | 821,476 | 957,058 | -14.2% | - During the review period, **7,275 tons of flax yarn were sold**, a **31.2% decrease** compared to 10,572 tons in the prior year[98](index=98&type=chunk) - The Group implements an **international sales strategy**, with a sales network spanning approximately **20 countries and regions globally**, and continues to expand its domestic market[98](index=98&type=chunk) [Raw Material Procurement](index=17&type=section&id=Raw%20Material%20Procurement) The Group primarily imports flax fiber from Europe, with procurement volume decreasing by 13.4% during the review period, but the average procurement unit price soaring by 64.3% due to supply shortages; the Group will closely monitor international markets and prudently formulate procurement plans - The Group's main raw material for flax yarn, **flax fiber**, is primarily imported from quality suppliers in France, Belgium, and the Netherlands[71](index=71&type=chunk) - Approximately **19,419 tons of raw materials were procured** during the review period, a **decrease of about 13.4%** year-on-year, with the average procurement unit price soaring by approximately **64.3% to RMB 44,658 per ton** due to supply shortages from low harvests[71](index=71&type=chunk) [Production Capacity](index=17&type=section&id=Production%20Capacity) The Group operates five production bases with a total annual capacity of 27,000 tons, where Chinese plants utilize approximately 80%-90% of capacity, and the Ethiopia plant operates at around 60% utilization, which is continuously improving Production Bases and Capacity | No. | Plant | Location | Country | Annual Capacity (tons) | Utilization/Status | | :--- | :--- | :--- | :--- | :--- | :--- | | 1 | Haiyan Phase I Plant | Zhejiang | China | 7,000 | Approx. 90% | | 2 | Rugao Plant | Jiangsu | China | 6,000 | Approx. 90% | | 3 | Haiyan Phase II Plant | Zhejiang | China | 5,000 | Approx. 80% | | 4 | Qinggang Plant | Heilongjiang | China | 4,000 | Approx. 90% | | 5 | Ethiopia | Adama | Ethiopia | 5,000 | Approx. 60% | - The Ethiopia factory operated normally during the review period, with **continuously improving production capacity**[102](index=102&type=chunk) [Ethiopia Investment](index=18&type=section&id=Ethiopia%20Investment) The Group's investment in Ethiopia aims to save land, labor, energy costs, and tax expenses, while benefiting from the EU's "Everything But Arms (EBA)" initiative for Least Developed Countries - The Ethiopia investment helps the Group save on **land costs, labor costs, energy costs, and tax expenses**[74](index=74&type=chunk) - This investment allows the Group to benefit from the EU's "Everything But Arms (EBA)" initiative for Least Developed Countries, granting **duty-free and quota-free access** to all products manufactured in LDCs entering EU countries[74](index=74&type=chunk) [Weaving and Fabric Project & Hemp Yarn](index=18&type=section&id=Weaving%20and%20Fabric%20Project%20%26%20Hemp%20Yarn) The Group is expanding into flax weaving and fabric business, with trial production expected at its China factory in Q4 2023, while also producing 194 tons of multi-specification hemp yarn and anticipating strong growth in the hemp yarn market - The weaving and fabric factory in China is still under construction, with trial production expected to begin in **Q4 2023**, aiming to broaden flax application areas[103](index=103&type=chunk) - A total of **194 tons of multi-specification hemp yarn** were produced during the review period, and the Group believes the hemp yarn market will grow rapidly in the coming years, benefiting from China's national policy promoting hemp cultivation and textile use in Heilongjiang province[101](index=101&type=chunk) [Financial Review](index=18&type=section&id=Financial%20Review) The Group experienced declines in revenue, gross profit, and profit for the period during the review period; revenue decreased due to weak export market demand, gross margin slightly fell due to soaring raw material costs, while other income and gains, selling and distribution expenses, administrative expenses, and finance costs all decreased, with a corresponding reduction in income tax expense | Metric | Six Months Ended June 30, 2023 (RMB '000) | Six Months Ended June 30, 2022 (RMB '000) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 821,476 | 957,058 | -14.2% | | Gross Profit | 154,701 | 186,082 | -16.9% | | Gross Margin | 18.8% | 19.4% | -0.6 percentage points | | Other Income and Gains | 13,100 | 37,842 | -65.3% | | Selling and Distribution Expenses | 13,957 | 23,210 | -39.9% | | Administrative Expenses | 49,361 | 60,087 | -17.9% | | Total Finance Costs | 15,326 | 17,624 | -13.0% | | Profit for the Period | 67,500 | 84,439 | -20.1% | | Profit Attributable to Owners of the Parent | 67,549 | 82,494 | -18.1% | | Income Tax Expense | 20,984 | 32,566 | -35.5% | [Revenue](index=18&type=section&id=Revenue_FinancialReview) Revenue decreased by 14.2% to RMB 821,476 thousand during the review period, primarily due to weak export market demand leading to reduced flax yarn sales, but partially offset by increased average selling prices and the appreciation of the USD against RMB; domestic sales grew by 10.2%, while export sales to EU and non-EU regions fell by 29.2% and 22.4% respectively Revenue Breakdown by Sales Region | Region | 2023 (RMB '000) | % of Total Revenue | 2022 (RMB '000) | % of Total Revenue | Year-on-Year Revenue Change (RMB '000) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | China | 344,603 | 41.9% | 312,827 | 32.7% | 31,776 | +10.2% | | European Union | 240,230 | 29.3% | 339,165 | 35.4% | (98,935) | -29.2% | | Non-European Union | 236,643 | 28.8% | 305,066 | 31.9% | (68,423) | -22.4% | | Total Revenue | 821,476 | 100.0% | 957,058 | 100.0% | (135,582) | -14.2% | - The decrease in revenue was mainly due to **weak demand in export markets**, especially the EU region, caused by the COVID-19 pandemic and geopolitical tensions during the review period, leading to a reduction in flax yarn sales[76](index=76&type=chunk) [Gross Profit and Gross Margin](index=19&type=section&id=Gross%20Profit%20and%20Gross%20Margin) Gross profit decreased by 16.9% to RMB 154,701 thousand during the review period, and gross margin declined by 0.6 percentage points to 18.8%, primarily due to soaring raw material costs, despite increased flax yarn selling prices, capacity release from the Ethiopia plant, and the appreciation of the USD against RMB - The Group's gross profit decreased by approximately **16.9% to approximately RMB 154,701 thousand** during the review period[106](index=106&type=chunk) - Gross margin decreased by approximately **0.6 percentage points to approximately 18.8%**, mainly due to **soaring raw material costs** during the review period[106](index=106&type=chunk) [Other Income and Gains](index=19&type=section&id=Other%20Income%20and%20Gains_FinancialReview) Other income and gains during the review period, primarily comprising government grants, interest income, and net exchange gains, significantly decreased year-on-year, mainly due to reduced government grants and lower net exchange gains Other Income and Gains | Item | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Government Grants and Subsidies | 2,889 | 8,117 | | Bank Interest Income | 1,958 | 529 | | Net Exchange Gains | 4,223 | 28,238 | | Total | 13,100 | 37,842 | - Net exchange gains were mainly attributable to the **appreciation of the USD against RMB** during the review period, as all overseas invoices are denominated in USD[139](index=139&type=chunk) - Government grants and subsidies decreased because the Chinese government provided **more subsidies in the prior year** to curb the COVID-19 pandemic[139](index=139&type=chunk) [Selling and Distribution Expenses](index=20&type=section&id=Selling%20and%20Distribution%20Expenses) Selling and distribution expenses were approximately RMB 13,957 thousand during the review period, a 39.9% decrease from the prior year, with the percentage of total revenue declining, mainly due to reduced sales commissions payable - The Group's selling and distribution expenses were approximately **RMB 13,957 thousand** during the review period, a decrease of approximately **39.9%** compared to the prior year[140](index=140&type=chunk) - The decrease in selling expenses as a percentage of revenue was mainly due to **reduced sales commissions payable**, as commissions are only paid for certain export sales and not for domestic sales in China[140](index=140&type=chunk) [Administrative Expenses](index=20&type=section&id=Administrative%20Expenses) Administrative expenses were approximately RMB 49,361 thousand during the review period, a 17.9% decrease from the prior year, primarily due to reduced staff costs, R&D expenses, and bad debt provisions - The Group's administrative expenses were approximately **RMB 49,361 thousand** during the review period, a decrease of approximately **17.9%** compared to the prior year[81](index=81&type=chunk) - The decrease in administrative expenses was mainly due to a **RMB 3.0 million reduction in staff costs**, a **RMB 3.0 million reduction in R&D expenses**, and a **RMB 3.8 million reduction in bad debt provisions**[81](index=81&type=chunk) [Other Expenses](index=20&type=section&id=Other%20Expenses) Other expenses were approximately RMB 673 thousand during the review period, a significant decrease from the prior year, primarily due to the absence of fair value losses on derivative instruments and losses on asset disposals in the current period - The Group's other expenses were approximately **RMB 673 thousand** during the review period, a significant decrease from approximately RMB 5,998 thousand in the prior year[109](index=109&type=chunk) - During the review period, there were **no fair value losses on derivative instruments** (prior year: RMB 4,875 thousand) and **no losses on asset disposals** (prior year: approximately RMB 621 thousand)[109](index=109&type=chunk) [Finance Costs](index=20&type=section&id=Finance%20Costs_FinancialReview) Total finance costs were approximately RMB 15,326 thousand during the review period, a 13.0% decrease from the prior year, primarily due to lower average loan balances, with both net interest on borrowings and interest on lease liabilities declining - Total finance costs for the review period were approximately **RMB 15,326 thousand**, a decrease of approximately **13.0%** compared to the prior year[84](index=84&type=chunk) - The lower total finance costs were mainly due to a **lower average loan balance** during the review period compared to the same period last year[84](index=84&type=chunk) - Net interest on borrowings was approximately **RMB 15,130 thousand**, and interest on lease liabilities was approximately **RMB 196 thousand**, both decreasing from the prior year[110](index=110&type=chunk)[111](index=111&type=chunk) [Profit for the Period](index=21&type=section&id=Profit%20for%20the%20Period) The Group recorded a profit of approximately RMB 67,500 thousand during the review period, a 20.1% decrease from the prior year - The Group recorded a profit of approximately **RMB 67,500 thousand** during the review period, a decrease of approximately **20.1%** compared to the prior year[145](index=145&type=chunk) [Profit Attributable to Owners of the Parent](index=21&type=section&id=Profit%20Attributable%20to%20Owners%20of%20the%20Parent) Profit attributable to owners of the parent was approximately RMB 67,549 thousand during the review period, an 18.1% decrease from the prior year - During the review period, the Group recorded a profit attributable to owners of the parent of approximately **RMB 67,549 thousand**, a decrease of approximately **18.1%** compared to the prior year[114](index=114&type=chunk) [Non-controlling Interests](index=21&type=section&id=Non-controlling%20Interests) Non-controlling interests of approximately RMB 49 thousand represent the share of losses attributable to non-controlling interests in certain subsidiaries of the Group during the review period - Non-controlling interests of approximately **RMB 49 thousand** represent the share of losses attributable to non-controlling interests in certain subsidiaries of the Group during the review period (six months ended June 30, 2022: share of profit of RMB 1,945 thousand)[146](index=146&type=chunk) [Liquidity and Financial Resources](index=22&type=section&id=Liquidity%20and%20Financial%20Resources) As of June 30, 2023, the Group's cash and cash equivalents significantly decreased, and the current ratio slightly declined, but net current assets increased; the total capital-to-debt ratio rose to 56.0%, and the Board believes existing financial resources are adequate, considering various financing options | Metric | June 30, 2023 (RMB '000) | December 31, 2022 (RMB '000) | | :--- | :--- | :--- | | Cash and Cash Equivalents | 168,180 | 467,469 | | Net Current Assets | 433,541 | 417,334 | | Current Ratio | 129.1% | 131.6% | | Total Equity | 1,504,247 | 1,487,990 | | Total Borrowings | 843,029 | 752,903 | | Total Capital-to-Debt Ratio | 56.0% | 50.6% | - The Group's cash and cash equivalents are primarily denominated in **RMB, USD, EUR, HKD, and Ethiopian Birr**, while borrowings are mainly denominated in **RMB and EUR**[150](index=150&type=chunk) - The Board believes the Group's existing financial resources are relatively adequate, and should additional funds be required, the Group may consider **all possible financing options**[117](index=117&type=chunk) [Capital Commitments](index=22&type=section&id=Capital%20Commitments) As of June 30, 2023, the Group's outstanding contractual capital commitments for the purchase of property, plant, and equipment not provided for in the interim condensed consolidated financial statements were approximately RMB 172,371 thousand, a decrease from the end of last year - As of June 30, 2023, the Group's outstanding contractual capital commitments for the purchase of property, plant, and equipment not provided for in the interim condensed consolidated financial statements were approximately **RMB 172,371 thousand** (December 31, 2022: approximately RMB 208,855 thousand)[150](index=150&type=chunk) - As of June 30, 2023, the Group had **no authorized but not contracted capital commitments**[150](index=150&type=chunk) [Contingent Liabilities](index=23&type=section&id=Contingent%20Liabilities) As of June 30, 2023, the Group had no significant contingent liabilities - As of June 30, 2023, the Group had **no significant contingent liabilities**[120](index=120&type=chunk) [Pledge of Assets](index=23&type=section&id=Pledge%20of%20Assets) As of June 30, 2023, the Group pledged property, plant, and equipment with a carrying amount of approximately RMB 286,967 thousand and inventories of approximately RMB 40,000 thousand to secure current interest-bearing bank loans of RMB 220,000 thousand - Current interest-bearing bank loans of **RMB 220,000 thousand** are secured by certain property, plant, and equipment with a carrying amount of approximately **RMB 286,967 thousand** and inventories of approximately **RMB 40,000 thousand**[120](index=120&type=chunk) [Major Acquisitions and Disposals](index=23&type=section&id=Major%20Acquisitions%20and%20Disposals) During the review period, the Group did not undertake any major acquisitions or disposals of subsidiaries, associates, or joint ventures - During the review period, the Group did not undertake any **major acquisitions or disposals** of subsidiaries, associates, or joint ventures[121](index=121&type=chunk) [Material Investments Held](index=23&type=section&id=Material%20Investments%20Held) During the review period, the Group did not hold any material investments - The Group did not hold any **material investments** during the review period[122](index=122&type=chunk) [Future Plans for Material Investments or Capital Assets](index=23&type=section&id=Future%20Plans%20for%20Material%20Investments%20or%20Capital%20Assets) Aside from maintenance of existing factory projects and vertical expansion into weaving and fabric business, the directors confirm there are currently no plans to acquire any material investments or capital assets - Aside from various maintenance and upkeep of existing factory projects and vertical expansion into the weaving and fabric business, the directors confirm that as of the date of this announcement, there are **currently no plans to acquire any material investments or capital assets**[123](index=123&type=chunk) [Foreign Currency Risk](index=23&type=section&id=Foreign%20Currency%20Risk) The Group's transactions are primarily denominated in RMB, USD, EUR, HKD, and Ethiopian Birr; the Group regularly monitors and manages exchange rate fluctuations and may use credit facilities to enter into foreign currency forward contracts and derivative financial instruments - The Group's transactions are primarily denominated in **RMB, USD, EUR, HKD, and Ethiopian Birr**[124](index=124&type=chunk) - The Group regularly monitors and properly manages exchange rate fluctuations between these currencies and may use credit facilities to enter into certain **foreign currency forward contracts and derivative financial instruments** when necessary[124](index=124&type=chunk) [Remuneration Policy and Employees](index=24&type=section&id=Remuneration%20Policy%20and%20Employees) The Group's remuneration policy is set by the Board with reference to qualifications, experience, responsibilities, contributions, and market levels; as of June 30, 2023, the Group employed 3,842 employees, with total staff costs of approximately RMB 80,261 thousand, and has adopted share option and share award schemes to incentivize staff - The Group's employee remuneration policy is formulated by the Board with reference to each employee's **qualifications, experience, responsibilities, contributions to the Group, and prevailing market remuneration levels** for similar positions[126](index=126&type=chunk) - As of June 30, 2023, the Group employed a total of **3,842 employees** (June 30, 2022: 4,342 employees), with total staff costs incurred during the review period amounting to approximately **RMB 80,261 thousand**[154](index=154&type=chunk) - The Group has also adopted a **share option scheme and a share award scheme** to provide incentives and rewards to directors and other employees who have contributed to the Group's business success[155](index=155&type=chunk) [Principal Risks and Uncertainties](index=25&type=section&id=Principal%20Risks%20and%20Uncertainties) The Group faces principal risks including demand for flax yarn, trade protectionism, raw material supply stability, exchange rate fluctuations, execution risks of the Ethiopia expansion project, and production disruptions caused by pandemics - The Group faces principal risks and uncertainties including **demand for flax yarn, trade protectionism** in certain countries and potential punitive tariffs on Chinese-made products, **stability of raw material supply, depreciation of the USD against RMB, execution risks** of the new expansion project in Ethiopia, and **pandemic outbreaks** leading to production disruptions[129](index=129&type=chunk) - The **Sino-US trade conflict** is expected to continue for the foreseeable future[130](index=130&type=chunk) [Prospects and Plans](index=25&type=section&id=Prospects%20and%20Plans) The Group's Ethiopia factory has commenced operations, contributing additional capacity; the Group will continue to promote the CELC Masters of Linen Code of Conduct to foster sustainable development in the flax industry and actively advance the cultivation of fiber hemp planting bases in China, aiming for large-scale production within three years - The Group's factory in Ethiopia has commenced operations and will contribute **additional production capacity** to the Group[158](index=158&type=chunk) - The Group will continue to promote the **CELC Masters of Linen Code of Conduct** to foster sustainable development in the flax industry[159](index=159&type=chunk)[171](index=171&type=chunk) - The Group is actively promoting the cultivation of **fiber hemp planting bases in China**, striving to achieve large-scale production of fiber hemp spinning within three years to meet market demand[131](index=131&type=chunk) [Other Information](index=26&type=section&id=Other%20Information) [Corporate Strategy and Long-Term Business Model](index=26&type=section&id=Corporate%20Strategy%20and%20Long-Term%20Business%20Model) The Group's primary objective is to enhance long-term shareholder returns through a global production layout, sustainable development, technological innovation, independent intellectual property, product brand marketing, and excellent management, aspiring to become one of the world's largest flax yarn manufacturers - The Group's primary objective is to **enhance long-term total shareholder returns**, with a strategy to build a solid financial foundation and deliver sustained returns[173](index=173&type=chunk) - To achieve this goal, the Company implements a strategy of **globalized production layout**, commits to **sustainable development and technological innovation**, develops **independent intellectual property**, engages in **product brand marketing**, and pursues **management excellence**[173](index=173&type=chunk) [Purchase, Sale or Redemption of the Company’s Listed Securities](index=26&type=section&id=Purchase,%20Sale%20or%20Redemption%20of%20the%20Company%E2%80%99s%20Listed%20Securities) Neither the Company nor its subsidiaries purchased, sold, or redeemed any of the Company's listed securities during the review period - Neither the Company nor its subsidiaries purchased, sold, or redeemed any of the Company's listed securities during the review period[160](index=160&type=chunk) [Interim Dividends](index=26&type=section&id=Interim%20Dividends_OtherInformation) The Board of Directors resolved not to recommend the declaration of any interim dividend for the six months ended June 30, 2023 - The Board of Directors resolved **not to recommend the declaration of any interim dividend** for the six months ended June 30, 2023 (June 30, 2022: nil)[134](index=134&type=chunk) [Share Option Scheme](index=26&type=section&id=Share%20Option%20Scheme) The Company adopted a share option scheme on May 30, 2016, to provide incentives and rewards to directors, employees, consultants, and others who have contributed to the Group's business success; no share options have been granted under the scheme since its adoption - The Company adopted a share option scheme on **May 30, 2016**, to provide incentives and rewards to any director, employee, consultant, client, supplier, agent, business partner, or advisor/contractor of the Group who has contributed to its business success[162](index=162&type=chunk) - Since the adoption of the scheme on May 30, 2016, **no share options have been granted** under the scheme[162](index=162&type=chunk) [Share Award Scheme](index=27&type=section&id=Share%20Award%20Scheme) The Company adopted a share award scheme on August 26, 2016, to incentivize, recognize, and reward eligible persons and align award holders' interests with shareholders'; award shares will be funded by market purchases, held in trust by a trustee, and no shares were granted during the review period, with approximately 2.1% of issued shares held by the trustee for future grants as of June 30, 2023 - The Company adopted a share award scheme on **August 26, 2016**, with the purpose of incentivizing, recognizing, and rewarding eligible persons for their contributions to the Group, attracting and retaining personnel, and aligning the interests of award holders with those of shareholders[163](index=163&type=chunk) - Awards will be funded by **shares purchased in the market at prevailing market prices**, and no new shares will be allotted and issued under the share award scheme[136](index=136&type=chunk) - During the review period, **no shares were granted** under the share award scheme; as of June 30, 2023, a total of **13,230,750 shares** were held by the trustee for future grants, representing approximately **2.1% of the Company's issued shares** as of June 30, 2023[137](index=137&type=chunk) [Events After the Reporting Period](index=28&type=section&id=Events%20After%20the%20Reporting%20Period_OtherInformation) There were no significant post-reporting period events requiring disclosure by the Group after June 30, 2023, and up to the date of this announcement - There were **no significant post-reporting period events** requiring disclosure by the Group after June 30, 2023, and up to the date of this announcement[178](index=178&type=chunk) [Standard of Securities Dealings by Directors](index=28&type=section&id=Standard%20of%20Securities%20Dealings%20by%20Directors) The Company has established a code of conduct for directors' securities dealings, with terms no less exacting than the Model Code in Appendix 10 of the Listing Rules; all directors confirmed compliance with the relevant code during the review period and up to the date of this announcement - The Company has established its own code of conduct for directors' securities dealings, with terms **no less exacting than the Model Code** for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited[183](index=183&type=chunk) - Following specific inquiries with all directors, all directors confirmed that they have **complied with the required standards** set out in the Model Code and the Company's code of conduct regarding directors' securities dealings during the review period and up to the date of this announcement[183](index=183&type=chunk) [Compliance with Corporate Governance Code](index=28&type=section&id=Compliance%20with%20Corporate%20Governance%20Code) The Company is committed to establishing good corporate governance practices and believes it has complied with the Code Provisions in Part 2 throughout the review period, except for the non-segregation of duties between the Chairman and Chief Executive Officer; the Board believes the existing structure fosters strong and stable leadership - The Company is committed to establishing **good corporate governance practices and procedures** to be a transparent and accountable organization, open and responsible to shareholders[179](index=179&type=chunk) - The Company has complied with the Code Provisions set out in Part 2 of the Code throughout the review period, **except for Code Provision C.2.1** (segregation of duties between the Chairman and Chief Executive Officer)[179](index=179&type=chunk) - The Board believes that, based on the nature and scale of the Group's business and Mr. Ren Weiming's extensive industry experience, the existing structure contributes to **strong and stable leadership**, enabling the Company to operate effectively[179](index=179&type=chunk) [Audit Committee and Review of Interim Results](index=29&type=section&id=Audit%20Committee%20and%20Review%20of%20Interim%20Results) The Company has established an Audit Committee, comprising three independent non-executive directors, chaired by Mr. Liu Yingjie; the Audit Committee has reviewed the Group's interim results for the review period with no disagreements - The Company has established an Audit Committee, comprising **three independent non-executive directors**: Mr. Liu Yingjie, Mr. Yan Jianmiao, and Mr. Luo Guangxin[180](index=180&type=chunk) - **Mr. Liu Yingjie serves as the Chairman** of the Audit Committee and possesses appropriate professional qualifications and experience in accounting matters[180](index=180&type=chunk) - The Group's interim results for the review period have been **reviewed by the Audit Committee, with no disagreements**[180](index=180&type=chunk) [Acknowledgements](index=29&type=section&id=Acknowledgements) The Company's Chairman extends gratitude to the directors for their valuable advice and guidance, and to all Group employees for their diligent work and loyal service - The Company's Chairman extends gratitude to the directors for their **valuable advice and guidance**, and to all Group employees for their **diligent work and loyal service**[181](index=181&type=chunk)

Financial Performance - Kingdom Holdings Limited achieved annual sales revenue exceeding RMB 2 billion, marking a record high[15]. - The Group's revenue for the year increased by approximately 12.3% to RMB2,021,055,000 compared to RMB1,799,690,000 in 2021[42]. - Gross profit rose by approximately 32.7% year-on-year to RMB386,900,000, with an overall gross margin increase to 19.1% in 2022 from 16.2% in 2021[42]. - Profit for the year was RMB171,808,000, significantly up from RMB90,500,000 in 2021[42]. - Revenue from overseas sales amounted to RMB1,246,600,000, representing approximately 61.7% of the Group's total revenue[44]. - Domestic sales in China increased by approximately 15.1% to RMB 774,455,000, representing about 38.3% of the Group's total revenue[51]. - The Group's net profit for the year was RMB 171,808,000, compared to RMB 90,500,000 in the previous year, with basic earnings per share increasing to RMB 0.29 from RMB 0.14[46]. - Other income and gains for the year amounted to RMB54,431,000, significantly up from RMB7,136,000 in 2021, driven by increased interest income and government grants[77]. Production and Capacity - The company produced 21,725 tonnes of linen yarn in 2022, an increase from 20,756 tonnes in 2021[15]. - The Group is expanding its production capacity, with a total designated annual capacity of 23,000 tons for linen and industrial hemp yarn across its four production bases in China[63]. - The factory in Ethiopia is expected to reach an annual capacity of 5,000 tonnes of linen yarn within one to two years[16]. - The new production facility in Ethiopia has boosted the Group's annual production capacity by 5,000 tonnes, with the factory ramping up to about 40% of its designed capacity[68][72]. Export and Market Position - Kingdom maintained over 40% of the total pure linen yarn export from China, reinforcing its position as the largest exporter for 20 consecutive years[15]. - The Group exported 11,477 tonnes of pure linen yarn in 2022, accounting for 53.3% of China's total pure linen yarn exports[36]. - The Group has maintained its position as the largest pure linen yarn exporter in China for 20 consecutive years[41]. - The Group's five largest exporting countries accounted for 80.6% of total export revenue during the year, with Italy, Portugal, India, Turkey, and Korea being the top markets[48]. Sustainability and Environmental Initiatives - The company is collaborating with CottonConnect to develop the REEL Linen Code of Conduct, promoting sustainability in the linen industry[17]. - Kingdom aims to expand into the linen weaving and fabric business, leveraging local government incentives[22]. - The company is committed to achieving carbon neutrality and reducing emissions as part of its environmental strategy[17]. - Kingdom continues to promote industrial hemp yarn as an environmentally friendly product[17]. - The REEL initiative aims to improve environmental conditions, product quality, and traceability in the supply chain, aligning with the group's sustainability goals[144]. Dividends and Reserves - The Board recommended a final dividend of HK$0.09 per ordinary share for the year, up from HK$0.06 in 2021[23]. - The final dividend recommended by the Board is HK$0.09 per share, up from HK$0.06 in 2021[43]. - As of December 31, 2022, the Company's distributable reserves amounted to RMB609,415,000, a decrease from RMB644,737,000 as of December 31, 2021[192]. Management and Governance - The Group has a diverse board with members having extensive backgrounds in finance, accounting, and international trade[165]. - The Group's management team includes professionals with significant experience in their respective fields, enhancing its operational capabilities[165]. - The board composition reflects a commitment to governance and oversight, with independent directors providing additional expertise[165]. - The Group aims to leverage its leadership's experience to drive future growth and innovation in its operations[165]. Financial Position and Liabilities - Total assets as of December 31, 2022, were RMB2,904,922,000, an increase from RMB2,789,467,000 in 2021[32]. - Total liabilities decreased slightly to RMB1,416,932,000 in 2022 from RMB1,438,851,000 in 2021[32]. - The liquidity ratio increased to approximately 131.6% from 113.3% in 2021[111]. - The total debt-to-equity ratio as of December 31, 2022, was approximately 50.6%, a decrease from 65.6% in 2021[116]. Challenges and Risks - The Group faces risks including unstable demand for linen yarn, potential punitive tariffs on products made in China, and execution risks related to a new expansion project in Ethiopia[183]. - The Group has complied with relevant laws and regulations that significantly impact its operations during the Year[177].

香港交易及結算所有限公司及香港聯合交易所有限公司對本公告的內容概不負責， 對其準確性或完整性亦不發表任何聲明，並明確表示概不就因本公告全部或任何部 分內容而產生或因依賴該等內容而引致的任何損失承擔任何責任。 KINGDOM HOLDINGS LIMITED 金 達 控 股 有 限 公 司 （於開曼群島註冊成立的有限公司， 以「金達（開曼）有限公司」的名稱於香港經營業務） 528 （股份代號： ） 全年業績公告 截至二零二二年十二月三十一日止年度 財務摘要 • 1,799,690,000 本集團收入由截至二零二一年十二月三十一日止年度約人民幣 12.3% 元增加約 至截至二零二二年十二月三十一日止年度約人民幣 2,021,055,000 元，乃由於亞麻紗售價上漲。 • 2.9 截至二零二二年十二月三十一日止年度的毛利率上升 個百分點至本年度 19.1% 16.2% 約 （二零二一年： ）。 • 89.8% 截至二零二二年十二月三十一日止年度的溢利大幅增加 至人民幣 171,808,000 元，而截至二零二一年十二月三十一日止年度則為約人民幣 90,500,000 ...

Financial Performance - Revenue increased by approximately 26.5% to approximately RMB957,058,000 for the six months ended 30 June 2022 from approximately RMB756,724,000 for the six months ended 30 June 2021[14] - Profit for the Review Period surged by 5.9 times to approximately RMB84,439,000 for the six months ended 30 June 2022 from approximately RMB12,289,000 for the six months ended 30 June 2021[17] - Profit attributable to the owners of the parent surged by approximately 4.8 times to approximately RMB82,494,000 for the six months ended 30 June 2022 from approximately RMB14,280,000 for the six months ended 30 June 2021[17] - Basic earnings per share increased by 5.5 times to approximately RMB0.13 for the six months ended 30 June 2022 from RMB0.02 for the six months ended 30 June 2021[17] - Gross profit margin improved by approximately 8.7 percentage points to approximately 22.4% for the six months ended 30 June 2022 from approximately 13.7% for the six months ended 30 June 2021[15] - Gross profit increased by approximately 106.1% to approximately RMB214,129,000, with a gross profit margin improvement of 8.7 percentage points to approximately 22.4%[50] - Other income and gains rose significantly to approximately RMB36,884,000, compared to RMB1,471,000 in the same period last year, primarily due to government grants and a net exchange gain[51] Sales and Market Performance - The increase in revenue was mainly attributable to the higher average selling price of linen yarn, particularly organic and REEL linen yarn, benefiting from market recovery and additional production capacity from the Group's factory in Ethiopia[22] - Domestic sales amounted to RMB312,827,000, contributing approximately 32.7% to total revenue, with a year-on-year increase of approximately 2.9%[25] - Overseas sales reached RMB644,231,000, accounting for approximately 67.3% of total revenue, with a significant year-on-year increase of approximately 42.3%[25] - Sales to European Union countries increased by 51.1%, while sales to non-European Union countries rose by 33.6% during the Review Period[25] Production and Capacity - A total of 11,189 tonnes of linen and hemp yarn were produced during the Review Period, with 371 tonnes specifically being hemp yarn[38] - The Group's production capacity is nearly fully utilized across its five production bases in China[30] - The Group's Ethiopian factory commenced production in 2021, with capacity ramping up during the Review Period, aimed at reducing costs and benefiting from the EU's Everything but Arms initiative[40] Financial Position - Total assets of the Group as at 30 June 2022 were approximately RMB3,045,925,000, up from RMB2,789,467,000 as at 31 December 2021[17] - As of 30 June 2022, the Group had net current assets of approximately RMB274,407,000, an increase from approximately RMB178,810,000 as of 31 December 2021[71] - The liquidity ratio of the Group as of 30 June 2022 was approximately 117.7%, up from approximately 113.3% as of 31 December 2021[71] - The Group's cash and cash equivalents as of 30 June 2022 were approximately RMB345,072,000, an increase from approximately RMB249,213,000 as of 31 December 2021[71] Expenses and Costs - Administrative expenses increased by approximately 60.9% to RMB60,087,000, driven by higher staff costs and additional research and development expenses[56] - Selling and distribution expenses amounted to approximately RMB51,257,000, accounting for 5.4% of total revenue, up from 4.3% in the previous year[51] - The Group's total staff costs for the Review Period amounted to approximately RMB97,418,000, compared to RMB66,445,000 for the six months ended 30 June 2021[92] Corporate Governance and Shareholder Information - The Board will continuously review the share award plan to incentivize employees contributing to the Group's success[98] - The Company has established an Audit Committee to review financial reporting processes and internal controls, comprising three independent non-executive Directors[171][172] - The Company has complied with the Corporate Governance Code, except for the separation of the roles of chairman and chief executive officer, which are held by the same individual[166][168] - The Company has not granted any share options under its share option scheme since its adoption on May 30, 2016[147] Future Outlook and Strategic Initiatives - The Company aims to become one of the largest linen yarn manufacturers globally by implementing a strategic global production layout and focusing on sustainable development and technical innovation[144] - The Group confirmed ongoing investment in the Ethiopia factory project and plans for a new warehouse in Heilongjiang, with no other material investment plans as of the report date[82] - The Group has partnered with COTTONCONNECT to develop the REEL Linen Code of Conduct, promoting sustainability in the linen industry[114] Risks and Challenges - The principal risks include demand for linen yarn, trade protectionism, and potential tariffs on products made in China[104] - The Group's operations are gradually returning to normal after two years of the COVID-19 pandemic, although trade tensions between the U.S. and China are expected to persist[112]

Production and Capacity - Kingdom produced 20,756 tonnes of linen yarn in 2021, up from 16,704 tonnes in 2020, maintaining over 40% of China's total pure linen yarn export for 19 consecutive years[15]. - The Kingdom Ethiopia factory commenced production in the second half of 2021, targeting an annual capacity of 5,000 tonnes of linen yarn[17]. - The Group's production capacity for linen and industrial hemp yarn is currently 22,000 tonnes, with high utilization rates across its four production bases in China[61]. - The new production facility in Ethiopia has boosted the Group's annual production capacity by 5,000 tonnes, with production commencing in the second half of 2021[65]. - The Group's annual production capacity in China is now 22,000 tonnes, with utilization rates close to 100% across all four production bases[72]. Financial Performance - The Group's revenue surged by approximately 70.2% year-on-year to RMB 1,799,690,000 in 2021, compared to RMB 1,057,426,000 in 2020[40]. - Gross profit increased by approximately 216.4% year-on-year to RMB 339,528,000, with an overall gross margin rising to 18.9% in 2021 from 10.1% in 2020[40]. - Profit for the year was RMB 90,500,000, a significant recovery from a net loss of RMB 12,678,000 in 2020[40]. - The Group's total revenue for the year reached RMB1,799,690,000, representing a year-on-year increase of 70.2%[51]. - Domestic sales in China increased by approximately 41.3% to RMB673,137,000, accounting for approximately 37.4% of the Group's total revenue[48]. - Revenue from overseas sales amounted to RMB1,126,553,000, representing approximately 62.6% of the Group's total revenue[43]. - The Group recorded a net profit of approximately RMB90,500,000 for the Year, compared to a net loss of approximately RMB12,678,000 for the year ended 31 December 2020[87]. Export and Market Position - The Group exported 14,138 tonnes of pure linen yarn in 2021, a 85.5% increase from 7,640 tonnes in 2020, maintaining over 40% of China's total pure linen yarn exports[39]. - The Group has been the largest pure linen yarn exporter in China for 19 consecutive years[39]. - The top five exporting countries accounted for 80.5% of the Group's total export revenue during the year, up from 76.2% in 2020[45]. - Sales to the EU and non-EU markets grew by 86.1% and 102.4%, respectively, indicating strong international demand[75]. Sustainability and Innovation - Kingdom is committed to achieving carbon neutrality and is collaborating with CottonConnect to develop the REEL Linen Code of Conduct for sustainable practices[19]. - The company aims to promote industrial hemp yarn as an environmentally friendly product alongside its linen offerings[19]. - The trend towards environment-friendliness and the use of natural fibers is growing, with many fashion brands committing to sustainable materials, which will benefit linen yarn[127]. - The Group aims to explore the production of linen fabric and expand the use of hemp yarn to extend its product offerings[129]. - Kingdom is collaborating with CottonConnect to develop the REEL Linen Code of Conduct, promoting sustainability in the linen supply chain[127]. Corporate Governance and Management - The company has a diverse board with members having significant experience in finance, textiles, and corporate governance[146][150][151]. - The management team has been in place since 2003, indicating stability and continuity in leadership[140][141][144][145]. - The board composition reflects a mix of executive, non-executive, and independent directors, ensuring a balanced governance structure[146][150][151]. - The Group's independent non-executive director, Mr. Yan Jianmiao, has extensive experience in international economics and has held various academic and directorial positions[154]. - The Group's chief financial officer, Mr. Chan Yan Kwan Andy, has over 20 years of experience in accounting and finance, previously serving in senior financial roles[157]. Employee Relations and Compensation - The Group is committed to establishing a close relationship with employees, providing a fair workplace, competitive remuneration, and ongoing training and development resources[175]. - The remuneration policy for employees is based on qualifications, experience, responsibilities, and market rates, ensuring competitive compensation[122]. - The Group provides both internal and external training programs for its employees to enhance their skills[122]. - The Directors' remuneration is determined based on the Group's operating results and individual performance, reflecting a performance-driven approach[122]. Risks and Challenges - The principal risks include demand for linen yarn, protectionism, possible punitive tariffs on products made in China, and execution risk of the new expansion project in Ethiopia[174]. - The Group faces risks including demand fluctuations for linen yarn, trade protectionism in various countries, and potential punitive tariffs on Chinese products[177]. Financial Position and Liquidity - The liquidity ratio improved to approximately 113.3%, up from 109.3% in 2020[99]. - Total equity increased to approximately RMB1,350,616,000, compared to RMB1,239,635,000 in 2020[99]. - The gross debt gearing ratio decreased to approximately 65.6%, down from 81.9% in 2020[100]. - The Group's net current assets as of December 31, 2021, were approximately RMB 178,810,000, an increase from RMB 124,115,000 in 2020[103]. - Total cash and deposits amounted to approximately RMB 293,943,000 as of December 31, 2021, compared to RMB 199,771,000 in 2020, with cash and cash equivalents at RMB 249,213,000[103].

Financial Performance - Revenue increased by approximately 78.3% to approximately RMB756,724,000 for the six months ended 30 June 2021 from approximately RMB424,317,000 for the six months ended 30 June 2020[34] - Gross profit margin improved by approximately 0.5 percentage points to approximately 13.7% for the six months ended 30 June 2021 from approximately 13.2% for the six months ended 30 June 2020[35] - Profit for the Review Period increased by 8.4% to approximately RMB12,289,000 for the six months ended 30 June 2021 from approximately RMB11,340,000 for the six months ended 30 June 2020[35] - Profit attributable to the owners of the parent surged by approximately 41.5% to approximately RMB14,280,000 for the six months ended 30 June 2021 from approximately RMB10,093,000 for the six months ended 30 June 2020[35] - Basic earnings per share remained at approximately RMB0.02 for the six months ended 30 June 2021[35] Revenue Breakdown - Domestic sales reached RMB 303,921,000, contributing approximately 40.2% of total revenue, with a year-on-year increase of approximately 127.2%[63] - Overseas sales amounted to RMB 452,803,000, accounting for approximately 59.8% of total revenue, with a year-on-year increase of approximately 55.8%[63] - Sales to European Union countries increased by 44.5%, while sales to non-European Union countries rose by 68.8% during the Review Period[63] - The Group sold a total of 11,370 tonnes of linen yarn, representing an increase of approximately 104% in sales quantity compared to 5,567 tonnes in the same period last year[63] Operational Efficiency - The increase in revenue was mainly attributable to the recovery in demand for linen yarn in all markets during the Review Period[40] - The overall market demand recovery contributed to the significant revenue growth during the Review Period[40] - The Group's operational efficiency improved during the Review Period compared to the partial shutdown of factories in early 2020 due to the pandemic[35] - The Group's production facilities are operating at close to 100% capacity across all five production bases[48] Cost and Expenses - The average procurement unit price for raw materials decreased by approximately 22.3% to RMB 21,291 per tonne, down from RMB 27,430 in the corresponding period last year[49] - Selling and distribution expenses rose to approximately RMB32,281,000, accounting for approximately 4.3% of total revenue, up from approximately 3.8% in the previous period[70] - Administrative expenses increased by approximately 18.2% to approximately RMB37,354,000, mainly due to higher staff costs and bonuses[75] - Other income and gains decreased to approximately RMB1,001,000 from approximately RMB9,463,000 in the corresponding period, primarily due to fewer government grants and subsidies[69] Financial Position - As of 30 June 2021, the Group had net current assets of approximately RMB120,451,000, slightly down from approximately RMB121,545,000 as of 31 December 2020[85] - The liquidity ratio as of 30 June 2021 was approximately 109.5%, compared to approximately 109.1% as of 31 December 2020[86] - As of June 30, 2021, total equity of the Group was approximately RMB1,232,031,000, a slight increase from RMB1,227,235,000 as of December 31, 2020[87] - The Group's interest-bearing bank and other borrowings repayable within 12 months amounted to approximately RMB880,841,000, down from RMB962,399,000 as of December 31, 2020, resulting in a gross debt gearing ratio of approximately 75.7% compared to 82.8% previously[90] Investment and Expansion - The investment in Ethiopia is expected to help the Group save on land, labor, energy, and tax costs, while benefiting from favorable trade agreements[57] - The Group confirmed ongoing investment in the Ethiopia factory project and plans for a new warehouse in Heilongjiang, with no current plans for other material investments[94] - The Group's factory in Ethiopia has gradually commenced production, with the first batch of finished products shipped in August 2021, aiming for increased production in the near future[116] Corporate Governance - The Company has complied with all code provisions of the Corporate Governance Code throughout the Review Period, except for a deviation regarding the separation of roles of chairman and CEO[155][159] - The Audit Committee, comprising three independent non-executive Directors, reviewed the interim results with no disagreements noted[161] Shareholder Information - As of June 30, 2021, Mr. Ren Weiming holds 314,872,000 shares, representing approximately 50.01% of the issued share capital[122] - Mr. Ngan Kam Wai Albert holds 67,418,000 shares, accounting for approximately 10.71% of the issued share capital[122] - Kingdom Investment Holdings Limited holds approximately 302,800,000 shares, representing 48.09% of the issued share capital[128] - Mr. Ren Weiming owns 76.38% of Kingdom Investment (BVI), which holds a controlling interest in the company[128] Risk Factors - The principal risks include demand for linen yarn, trade protectionism, potential punitive tariffs on Chinese products, and stable raw material supply[112] - The Group's raw materials, specifically fiber flax, are imported from Europe, which may impact production costs and supply stability[112] - Trade tensions between the United States and China are anticipated to persist, with unilateral sanctions and retaliation possible[114] Compliance and Reporting - The company has adopted revised International Financial Reporting Standards (IFRSs) for the first time in the current period, which may impact future financial reporting[197] - The interim financial statements have been prepared in accordance with International Accounting Standard (IAS) 34, indicating compliance with international financial reporting standards[192]

[Corporate Information](index=4&type=section&id=Corporate%20Information%20公司資料) The company is registered in the Cayman Islands, with its principal place of business in Hong Kong and head office in China, primarily banking with Bank of China [Board of Directors](index=4&type=section&id=Board%20of%20Directors%20董事會) The Board of Directors comprises four executive, one non-executive, and three independent non-executive directors, chaired by Mr. Ren Weiming - Board members include Ren Weiming (Chairman), Shen Yueming, Zhang Hongwen, Shen Hong (Executive Directors), Yan Jinwei (Non-executive Director), and Liu Yingkit, Law Kwong Shun, Yan Jianmiao (Independent Non-executive Directors)[7](index=7&type=chunk)[8](index=8&type=chunk)[9](index=9&type=chunk)[10](index=10&type=chunk) [Committees](index=4&type=section&id=Committees%20委員會) The company has an Audit Committee, Remuneration Committee, and Nomination Committee to ensure effective corporate governance - The Audit Committee is chaired by Mr. Liu Yingkit, the Remuneration Committee by Mr. Yan Jianmiao, and the Nomination Committee by Mr. Law Kwong Shun[10](index=10&type=chunk)[11](index=11&type=chunk)[12](index=12&type=chunk) [Company Details](index=4&type=section&id=Company%20Details%20公司詳情) The company is registered in the Cayman Islands, with its principal place of business in Hong Kong and head office in China, primarily banking with Bank of China - The company's registered office is at Cricket Square, Cayman Islands; China head office is in Henggang Town, Haiyan County, Zhejiang Province; Hong Kong principal place of business is on the 54th Floor, Hopewell Centre, 183 Queen's Road East[16](index=16&type=chunk) - Principal bankers are Bank of China Rugao Branch and Haiyan Branch[16](index=16&type=chunk) - The company's stock code is **00528**, and its website is http://www.kingdom-china.com[16](index=16&type=chunk) [Chairman's Statement](index=6&type=section&id=Chairman's%20Statement%20主席報告書) The Chairman's Statement outlines the company's 2020 performance, strategic initiatives, and future outlook including dividend policy [2020 Performance Overview](index=6&type=section&id=2020%20Performance%20Overview%20二零二零年業績概覽) In 2020, Kingdom, as the world's largest linen yarn manufacturer, saw pure linen yarn exports decrease by 29.9% due to COVID-19, yet maintained over 40% of China's total exports, retaining market leadership - Kingdom produced **16,704 tons of linen yarn** in 2020, making it the world's largest linen yarn manufacturer[20](index=20&type=chunk) - Affected by the COVID-19 pandemic, pure linen yarn exports in 2020 were **7,640 tons**, a decrease of approximately **29.9%** from **10,900 tons** in 2019[21](index=21&type=chunk) - Kingdom continued to account for over **40%** of China's total pure linen yarn exports in 2020, maintaining its leading position as China's largest pure linen yarn exporter for **18 consecutive years**[21](index=21&type=chunk) - The company's top five export markets were Italy, India, Turkey, South Korea, and Portugal[21](index=21&type=chunk) [Strategic Initiatives](index=6&type=section&id=Strategic%20Initiatives%20戰略舉措) The company continues to invest in technological innovation, filing 10 patents, and actively promotes sustainable development by partnering with CottonConnect on the REEL Linen Code of Conduct, while also venturing into industrial hemp yarn production in Heilongjiang and investing in new facilities in Ethiopia for long-term benefits - **10 patents** were applied for in 2020, of which **3 were invention patents**; as of December 31, 2020, there were **60 approved patents** and **31 pending patent applications**[22](index=22&type=chunk) - Partnered with CottonConnect to develop the REEL Linen Code of Conduct, promoting sustainable development in the linen industry[23](index=23&type=chunk) - Began production of industrial hemp yarn through a joint venture in Heilongjiang Province (with a **72.72% stake**), with an annual capacity of **4,000 tons**, marking the Group's first foray into the industrial hemp yarn market[28](index=28&type=chunk) - Acquired **300,000 square meters** of land in Adama Industrial Park, Ethiopia, to invest in new production facilities, expected to save on land lease, labor, energy, and tax costs, and potentially gain export quotas and tariff exemptions[30](index=30&type=chunk) [Outlook and Dividend Policy](index=7&type=section&id=Outlook%20and%20Dividend%20Policy%20前景與股息政策) Despite COVID-19 delaying trial production in Ethiopia, the Board remains confident in the Group's future operations and profitability, thus no final dividend for 2020 is recommended to conserve resources for future expansion - The COVID-19 pandemic caused delays in the trial production of the Ethiopia production facility[31](index=31&type=chunk) - The Board does not recommend a final dividend for 2020 (2019: **HK7.0 cents per ordinary share**) to conserve resources for the Group's near-term and future expansion[32](index=32&type=chunk) [Five Year Financial Summary](index=10&type=section&id=Five%20Year%20Financial%20Summary%20五年財務摘要) The Five Year Financial Summary provides an overview of the Group's historical performance across key financial metrics including revenue, gross profit, assets, and liabilities [Financial Performance](index=10&type=section&id=Financial%20Performance%20財務表現) In 2020, the Group's revenue and gross profit significantly declined, shifting from profit to loss, reflecting the severe impact of the pandemic on operations Five Year Financial Summary - Statement of Profit or Loss (RMB thousands) | Indicator | 2020 | 2019 | 2018 | 2017 | 2016 | |:---|:---|:---|:---|:---|:---| | Revenue | 1,057,426 | 1,499,560 | 1,245,643 | 1,023,962 | 856,243 | | Cost of sales | (950,129) | (1,136,293) | (987,762) | (907,694) | (704,365) | | Gross profit | 107,297 | 363,267 | 257,881 | 116,268 | 151,878 | | Other income and gains | 23,269 | 17,364 | 24,308 | 25,575 | 54,358 | | Selling and distribution costs | (38,879) | (49,453) | (48,687) | (39,361) | (37,951) | | Administrative expenses | (76,062) | (82,061) | (73,020) | (49,670) | (58,968) | | Other expenses | (16,847) | (10,327) | (6,818) | (38,200) | (643) | | Finance costs | (36,583) | (22,148) | (21,520) | (17,712) | (16,059) | | Gain on disposal of a subsidiary | 11,123 | 235 | – | – | – | | Profit/(Loss) before tax | (26,682) | 216,877 | 132,144 | (3,100) | 92,615 | | Income tax (expense)/credit | 14,692 | (61,112) | (28,957) | 3,722 | (22,586) | | Profit for the year | (11,990) | 155,765 | 103,187 | 622 | 70,029 | | Attributable to owners of the parent | (10,796) | 151,468 | 102,006 | (3,132) | 66,344 | | Non-controlling interests | (1,194) | 4,297 | 1,181 | 3,754 | 3,685 | [Assets and Liabilities](index=10&type=section&id=Assets%20and%20Liabilities%20资产及负债) At the end of 2020, both the Group's total assets and liabilities decreased, yet net assets remained above RMB 1 billion Five Year Financial Summary - Statement of Financial Position (RMB thousands) | Indicator | 2020 | 2019 | 2018 | 2017 | 2016 | |:---|:---|:---|:---|:---|:---|\n| Total assets | 2,597,130 | 2,725,785 | 2,127,748 | 1,962,416 | 1,930,435 | | Total liabilities | (1,371,027) | (1,444,890) | (974,239) | (912,220) | (843,999) | | Non-controlling interests | (41,886) | (43,085) | (40,620) | (32,439) | (18,685) | | Net assets | 1,184,217 | 1,237,810 | 1,112,889 | 1,017,757 | 1,067,751 | [Management Discussion and Analysis](index=11&type=section&id=Management%20Discussion%20and%20Analysis%20管理層討論及分析) Management Discussion and Analysis details the Group's 2020 business performance, market strategies, production operations, financial position, and future outlook [Business Review](index=11&type=section&id=Business%20Review%20業務回顧) In 2020, COVID-19 severely impacted the global economy, leading to fashion brand bankruptcies and a shift to online shopping; despite growth in China's textile exports, the Group's pure linen yarn exports fell by 29.5%, with revenue and gross profit declining sharply, turning from profit to loss - The COVID-19 pandemic severely impacted the global economy, leading to fashion brand bankruptcies and a shift in consumer behavior towards online shopping[46](index=46&type=chunk) - China's textile industry exports grew by **29.2%** in 2020, and cotton market prices rose by **11.9%**, potentially positively impacting linen yarn demand[47](index=47&type=chunk) - China's total pure linen yarn exports decreased by approximately **24.0%** year-on-year in 2020, with Kingdom exporting **7,640 tons**, accounting for **49%** of China's total exports[48](index=48&type=chunk) 2020 Group Financial Performance | Indicator | 2020 (RMB thousands) | 2019 (RMB thousands) | Year-on-year change | |:---|:---|:---|:---|\n| Revenue | 1,057,426 | 1,499,560 | -29.5% | | Gross profit | 107,297 | 363,267 | -70.5% | | Overall gross profit margin | 10.1% | 24.2% | -14.1 percentage points | | Loss/Net profit for the year | (11,141) | 155,765 | Shift from profit to loss | | Basic loss/earnings per share | (0.02) | 0.25 | Shift from profit to loss | | Final dividend | Not recommended | HK7.0 cents/share | Dividend cancelled | [Major Markets and Customers](index=12&type=section&id=Major%20Markets%20and%20Customers%20主要市場及客戶) The Group's sales network spans over 20 countries and regions globally, with overseas sales accounting for 54.9% of total revenue in 2020, of which EU countries contributed 28.6%; domestic sales decreased by 26.8%, but demand for eco-friendly and sustainable linen products in China is growing - The Group's sales network covers over **20 countries and regions** globally, with a subsidiary in Italy and agents in Turkey, Portugal, Italy, Lithuania, and South Korea[56](index=56&type=chunk) 2020 Sales Analysis by Domestic and Overseas Markets (RMB thousands) | Market | 2020 Revenue | 2020 Share | 2019 Revenue | 2019 Share | Revenue Year-on-Year Change | Revenue Year-on-Year Change (%) | |:---|:---|:---|:---|:---|:---|:---|\n| China | 476,377 | 45.1% | 650,576 | 43.4% | (174,199) | -26.8% | | EU | 302,630 | 28.6% | 349,183 | 23.3% | (46,553) | -13.3% | | Non-EU | 278,419 | 26.3% | 499,801 | 33.3% | (221,382) | -44.3% | | Total Revenue | 1,057,426 | 100.0% | 1,499,560 | 100.0% | (442,134) | -29.5% | - In 2020, the top five export countries were Italy, Portugal, India, Turkey, and South Korea, accounting for **76.2%** of total export revenue (2019: **81.5%**)[61](index=61&type=chunk) - China's domestic sales decreased by **26.8%**, but the market for linen textiles has significant potential as consumers increasingly prefer environmentally friendly and sustainable products[62](index=62&type=chunk) [Raw Material Procurement and Related Strategies](index=14&type=section&id=Raw%20Material%20Procurement%20and%20Related%20Strategies%20原材料採購及相關策略) The Group primarily sources flax fiber from France and Belgium, leveraging its bargaining power as a major buyer to stabilize costs; it also collaborates with local farmers in Heilongjiang to secure industrial hemp fiber supply and plans a warehouse there to establish a national hemp material trading hub, further promoting sustainable procurement through the REEL Linen Code of Conduct - Prices for flax fiber, the main raw material for linen yarn, remained stable, primarily imported from high-quality origins like France and Belgium, where the Group, as one of the largest buyers, has strong bargaining power[67](index=67&type=chunk) - Collaborated with local farmers in Heilongjiang, China, to ensure a stable supply of industrial hemp fiber, and plans to build a warehouse in Heilongjiang, aiming to establish a national trading hub for hemp materials in China[68](index=68&type=chunk) - Partnered with CottonConnect to develop the REEL Linen Code of Conduct, committed to sourcing more sustainable linen and improving environmental, quality, and traceability aspects of the supply chain[69](index=69&type=chunk) [Production Bases and Productivity](index=15&type=section&id=Production%20Bases%20and%20Productivity%20生產基地及產能) As of end-2020, the Group operated four production bases in China with a combined design annual capacity of 22,000 tons of linen and industrial hemp yarn; its first overseas facility in Ethiopia is complete and expected to resume trial production in 2021, further boosting capacity and benefiting from tax incentives - As of December 31, 2020, the Group owned four production bases in China, located in Rugao, Jiangsu; Haiyan, Zhejiang (two phases); and Heilongjiang[73](index=73&type=chunk)[75](index=75&type=chunk) - The combined design annual capacity for linen yarn and industrial hemp yarn at the China production bases reached **22,000 tons** (based on standard **24 count** specifications)[75](index=75&type=chunk) - The Heilongjiang production facility, with a **72.72% stake**, is the Group's first venture into the industrial hemp yarn market, with an annual capacity of **4,000 tons**[76](index=76&type=chunk) - The production facility in Adama Industrial Park, Ethiopia, has completed construction, with Phase I expected to increase annual capacity by **5,000 tons** and resume trial production in 2021[80](index=80&type=chunk) - The Ethiopia project is expected to save on land lease, labor, energy, and taxes, and may also secure export quotas and tariff exemptions[80](index=80&type=chunk) Existing and Planned Production Bases | No. | Plant | Location | Country | Annual Capacity (tons) | Utilization/Status | |:---|:---|:---|:---|:---|:---|\n| 1 | Haiyan Phase I Plant | Zhejiang | China | 7,000 | Close to 100% | | 2 | Rugao Plant | Jiangsu | China | 6,000 | Close to 100% | | 3 | Haiyan Phase II Plant | Zhejiang | China | 5,000 | Close to 100% | | 4 | Qinggang Plant | Heilongjiang | China | 4,000 | Close to 100% | | 5 | Ethiopia | Adama | Ethiopia | 5,000 | Expected to resume trial production in 2021 | [Patents, Awards and Recognition](index=18&type=section&id=Patents%2C%20Awards%20and%20Recognition%20專利%E3%80%81獎項及殊榮) As of December 31, 2020, the Group held 60 registered patents and had 31 patent applications pending, reflecting continuous investment in technological innovation - As of December 31, 2020, the Group held **60 registered patents** and had **31 pending patent applications**[85](index=85&type=chunk) [Financial Review](index=18&type=section&id=Financial%20Review%20財務回顧) In 2020, the Group's financial performance significantly deteriorated, with revenue and gross profit sharply declining, turning from profit to loss, primarily due to falling linen yarn prices, exchange losses, and increased finance costs; liquidity indicators decreased, but total equity remained at a high level 2020 Key Financial Indicators Changes (RMB thousands) | Indicator | 2020 | 2019 | Change Rate | |:---|:---|:---|:---|\n| Revenue | 1,057,426 | 1,499,560 | -29.5% | | Gross profit | 107,297 | 363,267 | -70.5% | | Gross profit margin | 10.1% | 24.2% | -14.1 percentage points | | Other income and gains | 23,208 | 17,364 | +33.6% | | Selling and distribution expenses | 38,879 | 49,453 | -21.4% | | Administrative expenses | 76,062 | 82,061 | -7.3% | | Other expenses | 16,847 | 10,327 | +63.1% | | Finance costs | 36,583 | 22,148 | +65.1% | | Loss/Profit for the year | (11,141) | 155,765 | Shift from profit to loss | | Loss/Profit attributable to owners of the parent | (9,947) | 151,468 | Shift from profit to loss | - The decrease in revenue was primarily due to a decline in the selling price of pure linen yarn[86](index=86&type=chunk) - The increase in other income and gains was mainly from government grants (**RMB 16,598 thousand**, 2019: **RMB 8,161 thousand**) and gains on disposal of non-current assets (**RMB 2,755 thousand**)[86](index=86&type=chunk) - Selling and distribution expenses as a percentage of revenue increased, primarily due to higher sea freight costs caused by the COVID-19 pandemic[89](index=89&type=chunk) - Other expenses primarily included a net exchange loss of approximately **RMB 14,700 thousand** due to the depreciation of the US dollar against the RMB (2019: exchange gain of **RMB 5,186 thousand**)[91](index=91&type=chunk) - Finance costs increased mainly due to higher total interest expenses on bank loans[91](index=91&type=chunk) 2020 Statement of Financial Position Key Indicators (RMB thousands) | Indicator | 2020 | 2019 | Change Rate | |:---|:---|:---|:---|\n| Inventories | 793,825 | 795,592 | -0.2% | | Average inventory turnover days | 305 days | 217 days | +88 days | | Trade and notes receivables | 375,836 | 345,813 | +8.7% | | Average trade receivables turnover days | 125 days | 78 days | +47 days | | Trade and notes payables | 198,863 | 358,817 | -44.6% | | Average trade payables turnover days | 107 days | 97 days | +10 days | | Interest-bearing bank and other borrowings | 1,015,603 | 902,351 | +12.6% | | Net current assets | 121,545 | 178,938 | -32.1% | | Current ratio | 109.1% | 113.3% | -4.2 percentage points | | Total equity | 1,227,235 | 1,280,895 | -4.2% | | Total debt to equity ratio | 82.8% | 70.4% | +12.4 percentage points | [Capital Commitments](index=22&type=section&id=Capital%20Commitments%20資本承擔) As of December 31, 2020, the Group's contractual capital commitments not provided for in the financial statements amounted to approximately RMB 100,889,000, primarily for the purchase of property, plant, and equipment Capital Commitments (RMB thousands) | Indicator | 2020 | 2019 | |:---|:---|:---|\n| Contractual capital commitments outstanding for the purchase of property, plant and equipment | 100,889 | 41,370 | [Material Acquisition and Disposal](index=22&type=section&id=Material%20Acquisition%20and%20Disposal%20重大收購及出售) In 2020, the Group terminated a planned RMB 50,000,000 acquisition of land and buildings, fully recovering RMB 48,000,000 in prepayments due to a change in land use - On October 23, 2020, Zhejiang Jinyuan and Jinda Chuangye entered into a settlement agreement to terminate the planned acquisition of a plot of land and buildings located at No. 192, Xinqiao North Road, Wuyuan Town, Haiyan County, Zhejiang Province, China[110](index=110&type=chunk) - The termination was due to a change in the land use of the property to commercial purposes, making it unsuitable for the original plan of constructing production facilities[110](index=110&type=chunk) - The Group fully recovered the prepayment of **RMB 48,000,000** in October 2020[110](index=110&type=chunk) [Foreign Currency Risk](index=24&type=section&id=Foreign%20Currency%20Risk%20外幣風險) The Group's transactions are primarily denominated in RMB, USD, EUR, and HKD, with exchange rate fluctuations regularly monitored; no foreign exchange forward contracts or cross-currency swap contracts were entered into or outstanding in 2020 - The Group's transactions are primarily denominated in RMB, US dollars, Euros, and Hong Kong dollars, with exchange rate fluctuations regularly monitored[118](index=118&type=chunk) - No foreign exchange forward contracts or cross-currency swap contracts were entered into using credit facilities in 2020, and there were no such outstanding contracts as of December 31, 2020[118](index=118&type=chunk) [Remuneration Policy and Share Option Scheme](index=25&type=section&id=Remuneration%20Policy%20and%20Share%20Option%20Scheme%20薪酬政策及購股權計劃) As of end-2020, the Group's total headcount decreased to 2,890, with total staff costs down 9.7%, mainly due to factory automation and layoffs from the suspended Ethiopia plant trial production; the Group offers comprehensive remuneration, benefits, and training, alongside share option and award schemes to incentivize employees Employee Headcount and Cost Changes | Indicator | 2020 | 2019 | Change Rate | |:---|:---|:---|:---|\n| Total employees | 2,890 people | 3,099 people | -6.7% | | Total staff costs | 184,224 thousand RMB | 204,072 thousand RMB | -9.7% | - The decrease in staff costs was primarily due to reduced personnel requirements from partial factory automation and the termination of local workers due to the suspension of trial production at the Ethiopia factory[124](index=124&type=chunk) - The Group provides comprehensive remuneration, retirement plans, and benefits to employees, along with internal and external training[125](index=125&type=chunk) - The Group has adopted a share option scheme and a share award plan, aiming to incentivize and reward directors and other employees who contribute to the Group's success[127](index=127&type=chunk) [Outlook and Plans](index=26&type=section&id=Outlook%20and%20Plans%20前景及計劃) COVID-19 is expected to significantly improve in H2 2021, with linen yarn demand gradually recovering; the Group will leverage environmental and natural fiber trends, competitive advantages of its Ethiopia plant, and China's domestic market potential, while also exploring entry into the linen fiber/garment market - The impact of the COVID-19 pandemic is expected to continue at least through the first half of 2021, but the situation is anticipated to significantly improve in the second half, with linen yarn demand expected to recover and gradually grow[129](index=129&type=chunk) - The use of environmentally friendly and natural fibers has become a trend, and linen yarn, as an eco-friendly fiber, will benefit from this; the Group's REEL Linen Code of Conduct, in collaboration with CottonConnect, will contribute to sustainable development[131](index=131&type=chunk) - China has become one of the largest consumer markets for linen textiles, and the Group will leverage its market-leading position to seize domestic market opportunities[135](index=135&type=chunk) - Phase I of the Ethiopia factory has been completed and is expected to resume trial production in 2021; its export quotas and tariff reductions will enhance the Group's competitiveness[137](index=137&type=chunk) - The Group will explore the possibility of entering the linen fiber/garment market in the future[139](index=139&type=chunk) [Directors and Senior Management](index=30&type=section&id=Directors%20and%20Senior%20Management%20董事及高級管理層) This chapter introduces the background, responsibilities, and key contributions of the company's Board members and senior management [Executive Directors](index=30&type=section&id=Executive%20Directors%20執行董事) Mr. Ren Weiming serves as Chairman and Executive Director, overseeing overall Group management and business development strategy; Mr. Shen Yueming, Mr. Zhang Hongwen, and Ms. Shen Hong, as Executive Directors, are responsible for daily operations, management, and financial control, respectively - Mr. Ren Weiming (**61 years old**) has been involved in the silk and textile industry since 1979, serving as Chairman and General Manager of Zhejiang Jinda Chuangye Co., Ltd. since 2000, and joined the Group in March 2003, responsible for overall management and business development strategy[146](index=146&type=chunk) - Mr. Shen Yueming (**59 years old**) joined the Group in March 2003, responsible for daily operations and management, and participates in decision-making[148](index=148&type=chunk) - Mr. Zhang Hongwen (**54 years old**) joined the Group in 2003, previously serving as Assistant to the General Manager's Office and Head of the Capital Settlement Department at Jinda Chuangye[152](index=152&type=chunk) - Ms. Shen Hong (**54 years old**) joined the Group in March 2003, serving as the Group's Management Director, with over **20 years of financial experience**[153](index=153&type=chunk) [Non-executive Director](index=31&type=section&id=Non-executive%20Director%20非執行董事) Mr. Yan Jinwei, as a Non-executive Director, possesses extensive experience in textile trading and serves as Honorary Permanent President of the Hong Kong Textile Merchants Association - Mr. Yan Jinwei (**71 years old**) joined the Group in September 2004, serving as Chairman of Yiyu Co., Ltd., engaged in linen and linen blend textile trading, and is the Honorary Permanent President of the Hong Kong Textile Merchants Association[154](index=154&type=chunk) [Independent Non-executive Directors](index=32&type=section&id=Independent%20Non-executive%20Directors%20獨立非執行董事) Mr. Liu Yingkit, Mr. Law Kwong Shun, and Mr. Yan Jianmiao, as Independent Non-executive Directors, bring professional backgrounds and extensive experience in finance, accounting, investment banking, and international economics, respectively - Mr. Liu Yingkit (**47 years old**) joined the Group in November 2006, is a Fellow of the Hong Kong Institute of Certified Public Accountants, holds a Master's degree in Finance, and has extensive experience in financial accounting[159](index=159&type=chunk) - Mr. Law Kwong Shun (**47 years old**) joined the Group in May 2010, has over **10 years of experience** in investment banking and corporate finance advisory, and is a member of the American Institute of Certified Public Accountants and the Hong Kong Institute of Certified Public Accountants[160](index=160&type=chunk) - Mr. Yan Jianmiao (**55 years old**) joined the Group in May 2016, is a professor in the Department of International Economics at Zhejiang University, and holds a Ph.D. in Economics[164](index=164&type=chunk) [Senior Management](index=34&type=section&id=Senior%20Management%20高級管理層) Mr. Chan Yan Kwan serves as the company's Financial Controller and Company Secretary, with over 20 years of experience in accounting and finance - Mr. Chan Yan Kwan (**52 years old**) joined the Group in January 2014, serving as Financial Controller and Company Secretary, with over **20 years of experience** in accounting and finance, and is a Fellow of the Hong Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants of the UK[167](index=167&type=chunk) [Report of the Directors](index=35&type=section&id=Report%20of%20the%20Directors%20董事會報告) The Report of the Directors provides detailed information on the Group's principal activities, results, risks, stakeholder relationships, dividend policy, and corporate governance [Principal Activities and Results](index=35&type=section&id=Principal%20Activities%20and%20Results%20主要業務及業績) The company primarily engages in the production and sale of linen yarn, with 2020 results presented in the consolidated statement of profit or loss - The company is an investment holding company, and its principal subsidiaries are engaged in the production and sale of linen yarn[173](index=173&type=chunk) - The Group's 2020 results are presented in the consolidated statement of profit or loss on page 87[174](index=174&type=chunk) [Business Review and ESG](index=35&type=section&id=Business%20Review%20and%20ESG%20業務回顧及環境%E3%80%81社會及管治) The Group's business review and future development are detailed in the Chairman's Statement and Management Discussion and Analysis; the Group is committed to environmental sustainability, reducing emissions through eco-friendly equipment, and complying with relevant laws and regulations - The Group's business review and future development are elaborated in the Chairman's Statement (page 4) and Management Discussion and Analysis (page 9)[175](index=175&type=chunk) - The Group is committed to environmental sustainability, with factories actively adopting eco-friendly and energy-saving equipment; in 2020, photovoltaic solar energy accounted for **4.3%** of total electricity consumption, and annual consumption of electricity, water, steam, and natural gas decreased by **17.0%**, **11.4%**, **1.2%**, and **12.5%**, respectively[177](index=177&type=chunk) - Except for continuing connected transactions announced on March 12, 2021, the Group complied with relevant laws and regulations materially affecting the company during 2020[179](index=179&type=chunk) [Principal Risks and Uncertainties](index=36&type=section&id=Principal%20Risks%20and%20Uncertainties%20主要風險及不明朗因素) Key risks include linen yarn demand, trade protectionism, raw material supply stability, cotton price volatility, USD depreciation against RMB, Ethiopia project execution risks, and production disruptions from pandemics - Principal risks include demand for linen yarn, trade protectionism in certain countries, and potential punitive tariffs on Chinese-made products[185](index=185&type=chunk) - Other risks include stable supply of raw materials, sustained decline in cotton prices, depreciation of the US dollar against the RMB, execution risks of the new expansion project in Ethiopia, and production disruptions caused by pandemic outbreaks[185](index=185&type=chunk) [Relationship with Stakeholders](index=36&type=section&id=Relationship%20with%20Stakeholders%20與利益相關者的關係) The Group values its relationships with employees, customers, and business partners, providing a fair and safe work environment, competitive remuneration, career development opportunities, and continuous training resources - The Group considers employees, customers, and business partners crucial for sustainable development[186](index=186&type=chunk) - The company provides a fair and safe working environment, promotes employee diversity, and offers competitive remuneration, benefits, and career development opportunities based on performance[186](index=186&type=chunk) - The Group continuously provides training and development resources to employees to enhance their performance and self-fulfillment[186](index=186&type=chunk) [Important Events Since Year-End](index=37&type=section&id=Important%20Events%20Since%20Year-End%20財政年度末後重大事件) No significant events affecting the company have occurred from the end of the financial year up to the date of this report - No significant events affecting the company have occurred from the end of the financial year up to the date of this report[190](index=190&type=chunk) [Dividend and Reserves](index=37&type=section&id=Dividend%20and%20Reserves%20股息及儲備) The Board does not recommend a final dividend for 2020; as of December 31, 2020, the company's distributable reserves were RMB 648,096,000, with charitable and other donations totaling approximately RMB 1,175,000 during the year - The Board decided at its meeting on March 19, 2021, not to recommend a final dividend for 2020[192](index=192&type=chunk) Dividend and Donations (RMB thousands) | Indicator | 2020 | 2019 | |:---|:---|:---|\n| Proposed final dividend | Nil | 39,484 | | Distributable reserves | 648,096 | 646,020 | | Charitable and other donations | 1,175 | 282 | [Share Capital and Property, Plant and Equipment](index=38&type=section&id=Share%20Capital%20and%20Property%2C%20Plant%20and%20Equipment%20股本及物業%E3%80%81廠房及設備) Details of the Group's share capital changes are in note 27 to the financial statements; during 2020, the Group acquired approximately RMB 89,349,000 in property, plant, and equipment - Details of the Group's share capital changes are set out in note 27 to the financial statements[195](index=195&type=chunk) - During 2020, the Group acquired approximately **RMB 89,349,000** in property, plant, and equipment[197](index=197&type=chunk) [Directors' Information and Interests](index=38&type=section&id=Directors'%20Information%20and%20Interests%20董事資料及權益) Board members remained unchanged in 2020 and up to the report date; some directors are subject to retirement by rotation and eligible for re-election; directors confirmed their independence and no service contracts terminable within one year; directors and chief executive hold interests in company shares, with Mr. Ren Weiming holding 50.01% - The Board members remained unchanged during 2020 and up to the date of this annual report, comprising four executive directors, one non-executive director, and three independent non-executive directors[200](index=200&type=chunk) - In accordance with the company's articles of association, Ms. Shen Hong, Mr. Liu Yingkit, and Mr. Law Kwong Shun will retire by rotation at the upcoming Annual General Meeting and are eligible for re-election[201](index=201&type=chunk) - The company has received confirmation of independence from its independent non-executive directors, and the Board considers all independent non-executive directors to be independent[206](index=206&type=chunk) - The directors have not entered into any service contracts with the Group that are not terminable by the Group within one year without payment of compensation[204](index=204&type=chunk) Directors' Long Positions in Company Shares (as of December 31, 2020) | Director Name | Personal Interests (shares) | Corporate Interests (shares) | Total Shares Held (shares) | Approximate Percentage of Issued Share Capital (%) | |:---|:---|:---|:---|:---|\n| Mr. Ren Weiming | 12,072,000 | 302,800,000 | 314,872,000 | 50.01 | | Mr. Yan Jinwei | 418,000 | 67,000,000 | 67,418,000 | 10.71 | | Ms. Shen Hong | 504,000 | – | 504,000 | 0.08 | - Mr. Ren Weiming is deemed to have an interest in the shares held by Kingdom Investment, which holds approximately **76.38%** of the issued share capital[226](index=226&type=chunk) [Interests and Short Positions of Substantial Shareholders](index=43&type=section&id=Interests%20and%20Short%20Positions%20of%20Substantial%20Shareholders%20主要股東的權益及淡倉) As of December 31, 2020, excluding directors, substantial shareholders included Kingdom Investment Holdings Limited (BVI) and Millionfull International Co., Ltd., holding 48.09% and 10.29% of the company's shares, respectively Substantial Shareholders' Long Positions in Company Shares (as of December 31, 2020) | Shareholder Name | Capacity | Number of Shares (shares) | Approximate Percentage of Issued Share Capital (%) | |:---|:---|:---|:---|\n| Kingdom Investment Holdings Limited (BVI) | Beneficial owner | 302,800,000 | 48.09 | | Millionfull International Co., Ltd. | Beneficial owner | 64,800,000 | 10.29 | - Kingdom Investment (BVI) is **76.38%** owned by Mr. Ren Weiming, an executive director and substantial shareholder[236](index=236&type=chunk) - Millionfull International is owned **51.00%** by Mr. Yan Jinwei, a non-executive director, and **23.00%** by his spouse, respectively[236](index=236&type=chunk) [Share Option Scheme and Share Award Plan](index=44&type=section&id=Share%20Option%20Scheme%20and%20Share%20Award%20Plan%20購股權計劃及股份獎勵計劃) The company has a share option scheme and a share award plan to incentivize employees; no share options were granted or exercised in 2020; under the share award plan, 5,159,250 vested shares were transferred to employees, and 1,000,000 shares returned to the pool due to resignations, with 12,200,750 shares remaining unvested as of end-2020 - The share option scheme was adopted on May 30, 2016, aiming to provide incentives to directors, employees, and others; the exercise price of share options shall not be less than a specified market price, and the exercise period shall not exceed **10 years**[241](index=241&type=chunk)[242](index=242&type=chunk)[247](index=247&type=chunk) - No share options were granted or exercised under the share option scheme during 2020[249](index=249&type=chunk) - The share award plan was adopted on August 26, 2016, aiming to incentivize, recognize, and reward eligible persons who contribute to the Group's success[250](index=250&type=chunk) - During 2020, **5,159,250 vested shares** were transferred to employees, and **1,000,000 granted shares** were returned to the share pool due to employee resignations[256](index=256&type=chunk) - As of December 31, 2020, a total of **12,200,750 granted shares** are expected to vest between 2021 and 2022, with an additional **1,030,000 shares** available for future grants to employees[256](index=256&type=chunk) [Connected Transactions](index=47&type=section&id=Connected%20Transactions%20關連交易) The Group has multiple continuing connected transactions with director-controlled companies, including office and plant leases, procurement of electricity, chemicals, additives, and tools, and sales of finished goods and electricity; some transactions were exempt from disclosure due to small amounts, but chemical and tool procurement transactions were not timely disclosed due to oversight, with a framework agreement retroactively effective from March 12, 2021 - The Group has multiple continuing connected transactions with Jinda Chuangye and its associated companies (such as Zhejiang Yuyuan Photovoltaic Co., Ltd., Jinxiu Jiangnan Silk Co., Ltd., Huitong Financial Leasing (Shanghai) Co., Ltd.), in which Mr. Ren Weiming holds controlling interests[269](index=269&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk)[276](index=276&type=chunk)[278](index=278&type=chunk)[281](index=281&type=chunk) - Transaction types include leasing offices and plants (as lessee), leasing motor vehicles (as lessee), leasing offices (as lessor), purchasing electricity, purchasing chemicals and additives, purchasing tools and accessories, and selling finished goods and electricity[269](index=269&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk)[276](index=276&type=chunk)[278](index=278&type=chunk)[281](index=281&type=chunk) - In 2020, the Group's operating lease expenses for leasing offices and plants from Jinda Chuangye amounted to **RMB 476,000**[269](index=269&type=chunk)[1024](index=1024&type=chunk) - In 2020, the Group purchased electricity from Zhejiang Yuyuan Photovoltaic Co., Ltd. for **RMB 2,166,000**, with electricity prices discounted by approximately **3.5%** compared to market prices[278](index=278&type=chunk)[1024](index=1024&type=chunk) - In 2020, the Group purchased chemicals, additives, and tools from Jinxiu Jiangnan Silk Co., Ltd. totaling **RMB 8,367,000**[281](index=281&type=chunk)[1024](index=1024&type=chunk) - In 2020, the Group sold finished goods to Jinxiu Jiangnan Silk Co., Ltd. for **RMB 75,000**[278](index=278&type=chunk)[1024](index=1024&type=chunk) - In 2020, the Group and Jinda Chuangye agreed to cancel the acquisition of buildings and land use rights for **RMB 50,000,000**, with the prepayment of **RMB 48,000,000** fully refunded[110](index=110&type=chunk)[1026](index=1026&type=chunk) - The independent non-executive directors have reviewed the continuing connected transactions and confirmed they were conducted in the ordinary course of business on normal commercial terms and in the overall interests of the shareholders[292](index=292&type=chunk)[296](index=296&type=chunk) - Due to oversight, the procurement transactions with Jinxiu Jiangnan in 2020 were not timely disclosed; a framework agreement was entered into on March 12, 2021, with retroactive effect, to comply with Listing Rules reporting, announcement, and annual review requirements[289](index=289&type=chunk) [Other Financial Information](index=53&type=section&id=Other%20Financial%20Information%20其他財務信息) Details of the Group's bank and other borrowings are in note 26 to the financial statements; neither the company nor its subsidiaries purchased, sold, or redeemed any listed securities in 2020; the company's articles of association and Cayman Islands Companies Law contain no pre-emptive rights; details of the Group's pension schemes are in notes 2.4 and 7 to the financial statements - Details of the Group's bank and other borrowings are set out in note 26 to the financial statements[304](index=304&type=chunk) - Neither the company nor any of its subsidiaries purchased, sold, or redeemed any listed securities during 2020[304](index=304&type=chunk) - There are no pre-emptive rights provisions in the company's articles of association or the Cayman Islands Companies Law[304](index=304&type=chunk) - Details of the Group's pension schemes are set out in notes 2.4 and 7 to the financial statements[304](index=304&type=chunk) [Directors' Interests in Competing Business](index=54&type=section&id=Directors'%20Interests%20in%20Competing%20Business%20董事於競爭業務中的權益) As of December 31, 2020, no director or their associates held interests in businesses directly or indirectly competing with the Group; Mr. Ren Weiming holds interests in "excluded businesses" such as silk, banking, and finance leasing, which differ from the Group's products, and he has committed not to compete with the Group's business - As of December 31, 2020, no director or their respective associates had any interest in any business that directly or indirectly competes or may compete with the Group's business[308](index=308&type=chunk) - Mr. Ren Weiming holds interests in private companies engaged in the silk and/or silk product manufacturing and/or trading industry, banking, and financial leasing, which are considered "excluded businesses" as they differ from the products manufactured by the Group[309](index=309&type=chunk) - Mr. Ren Weiming has undertaken not to directly or indirectly participate in or engage in any business that competes with the Group's business[310](index=310&type=chunk) - The Group has received annual confirmations from Kingdom Investment and Mr. Ren Weiming, confirming their full compliance with the non-competition undertaking[317](index=317&type=chunk) [Corporate Strategy and Long Term Business Model](index=55&type=section&id=Corporate%20Strategy%20and%20Long%20Term%20Business%20Model%20公司策略及長期業務模式) The company is committed to sustainable development and technological innovation, developing proprietary intellectual property, building product brands, and pursuing advanced management to become one of the world's largest linen yarn manufacturers, achieving long-term value creation - The company is committed to sustainable development and technological innovation, developing proprietary intellectual property, product brand marketing, and pursuing excellent management to become one of the world's largest linen yarn manufacturers[318](index=318&type=chunk) - The Board regularly reviews progress on ESG-related objectives to achieve sustainable development of the Group's business, thereby creating or maintaining long-term value[319](index=319&type=chunk)[320](index=320&type=chunk) [Dividend Policy](index=55&type=section&id=Dividend%20Policy%20股息政策) The company adopted a dividend policy on December 14, 2018, stipulating annual dividends of no less than 20% of the Group's profit attributable to shareholders, though distribution remains at the Board's sole discretion, considering various financial and business factors - The company adopted a dividend policy on December 14, 2018, stipulating annual dividends of no less than **20%** of the Group's profit attributable to shareholders[321](index=321&type=chunk) - Dividend distribution is at the sole discretion of the Board, considering factors such as the Group's financial performance, shareholder interests, business conditions, working capital requirements, future expansion plans, creditworthiness, and economic conditions[324](index=324&type=chunk) - The dividend policy does not constitute a legally binding commitment, and the company reserves the right to update, revise, and amend the policy at any time[325](index=325&type=chunk) [Corporate Governance](index=56&type=section&id=Corporate%20Governance%20企業管治) The Group's principal corporate governance practices are set out in the Corporate Governance Report on page 58 - The Group's principal corporate governance practices are set out in the Corporate Governance Report on page 58[326](index=326&type=chunk) [Closure of Register of Members](index=56&type=section&id=Closure%20of%20Register%20of%20Members%20暫停股份過戶登記手續) To determine eligibility for attending and voting at the Annual General Meeting, the company will suspend share transfer registration from May 14, 2021, to May 21, 2021 (both dates inclusive) - To determine eligibility for attending and voting at the Annual General Meeting, the company will suspend share transfer registration from Friday, May 14, 2021, to Friday, May 21, 2021 (both dates inclusive)[327](index=327&type=chunk) - Unregistered share holders must submit all transfer documents to Tricor Investor Services Limited, the company's Hong Kong share registrar, by 4:30 p.m. on Thursday, May 13, 2021[327](index=327&type=chunk) [Auditors](index=57&type=section&id=Auditors%20核數師) Ernst & Young will retire, and a resolution for their re-appointment will be proposed at the upcoming Annual General Meeting; the company has not changed auditors in the past three years - Ernst & Young will retire, and a resolution for their re-appointment will be proposed at the upcoming Annual General Meeting[332](index=332&type=chunk) - The company has not changed auditors in the past three years[332](index=332&type=chunk) [Corporate Governance Report](index=60&type=section&id=Corporate%20Governance%20Report%20企業管治報告) The Corporate Governance Report details the company's 2020 corporate governance practices, Board operations, committee functions, internal controls, and shareholder rights [Corporate Governance Practices](index=60&type=section&id=Corporate%20Governance%20Practices%20企業管治常規) The company adopted the Corporate Governance Code in Appendix 14 of the Listing Rules and complied with all code provisions in 2020, except for the non-segregation of Chairman and Chief Executive roles - The company has adopted the Corporate Governance Code as set out in Appendix 14 of the Listing Rules as its own code[342](index=342&type=chunk) - During 2020, the company's corporate governance practices complied with all code provisions, except for the non-segregation of the roles of Chairman and Chief Executive[343](index=343&type=chunk) [Model Code for Directors' Securities Transactions](index=60&type=section&id=Model%20Code%20for%20Directors'%20Securities%20Transactions%20董事進行證券交易的標準守則) The company adopted the Model Code for Securities Transactions by Directors, and all directors confirmed compliance with the code in 2020 - The company has adopted the Model Code for Securities Transactions by Directors and has established a code of conduct no less exacting than the Model Code[344](index=344&type=chunk) - All directors have confirmed their compliance with the provisions of the Model Code throughout 2020 and up to the date of this annual report[344](index=344&type=chunk) [The Board](index=60&type=section&id=The%20Board%20董事會) The Board comprises eight directors, overseeing Group business, strategic decisions, and performance; in 2020, the Board met regularly and met Listing Rules requirements for independent non-executive directors; while Chairman and CEO roles are not segregated, the Board believes this structure facilitates efficient operations - The Board of Directors comprises **eight directors**, including **four executive directors**, **one non-executive director**, and **three independent non-executive directors**[345](index=345&type=chunk) - The Board is responsible for overseeing the Group's business, strategic decisions, and performance, and holds regular meetings[345](index=345&type=chunk)[350](index=350&type=chunk) 2020 Board and Committee Meeting Attendance | Director | Board | Remuneration Committee | Audit Committee | Nomination Committee | Annual General Meeting | |:---|:---|:---|:---|:---|:---|\n| Mr. Ren Weiming | 5/5 | – | – | – | 1/1 | | Mr. Shen Yueming | 5/5 | – | – | 1/1 | 1/1 | | Mr. Zhang Hongwen | 5/5 | 1/1 | – | – | 1/1 | | Ms. Shen Hong | 5/5 | – | – | – | 1/1 | | Mr. Yan Jinwei | 5/5 | – | – | – | 1/1 | | Mr. Liu Yingkit | 5/5 | – | 2/2 | 1/1 | 1/1 | | Mr. Law Kwong Shun | 5/5 | 1/1 | 2/2 | 1/1 | 1/1 | | Mr. Yan Jianmiao | 5/5 | 1/1 | 2/2 | – | 1/1 | - During 2020, the Board complied with the Listing Rules' requirements for at least **three independent non-executive directors**, with at least one possessing appropriate professional accounting or financial management expertise, and independent non-executive directors constituting at least **one-third** of the Board members[356](index=356&type=chunk) - Mr. Ren Weiming, the company's Chairman, also oversees the Group's general operations; the Board believes this structure helps establish strong and stable leadership, enabling the company to operate effectively[372](index=372&type=chunk) - Mr. Liu Yingkit and Mr. Law Kwong Shun have served as independent non-executive directors for over **nine years** and will be re-appointed through separate resolutions[364](index=364&type=chunk) [Directors' Continuous Training and Development](index=65&type=section&id=Directors'%20Continuous%20Training%20and%20Development%20董事持續培訓及發展) The company regularly updates directors with information and encourages continuous professional development; in 2020, all directors attended training covering corporate governance, latest Listing Rule changes, and case studies - Directors are regularly informed of the company's latest performance, condition, and outlook, and are encouraged to participate in continuous professional development[380](index=380&type=chunk) - In 2020, the company arranged training covering corporate governance, latest Listing Rule changes, and case studies, which all directors attended[380](index=380&type=chunk) [Directors' and Officers' Liability Insurance and Indemnity](index=65&type=section&id=Directors'%20and%20Officers'%20Liability%20Insurance%20and%20Indemnity%20董事及高級職員的責任保險及彌償保險) The company has arranged liability insurance for directors and officers to indemnify them against potential legal proceedings; no claims occurred in 2020 - The company has arranged liability insurance to indemnify directors and officers against potential legal proceedings[382](index=382&type=chunk) - No claims were made against directors and officers during 2020[382](index=382&type=chunk) [Company Secretary](index=65&type=section&id=Company%20Secretary%20公司秘書) Company Secretary Mr. Chan Yan Kwan completed no less than 15 hours of relevant professional training in 2020 - Company Secretary Mr. Chan Yan Kwan completed no less than **15 hours** of relevant professional training in 2020[383](index=383&type=chunk) [Board Committees](index=65&type=section&id=Board%20Committees%20董事委員會) The Board has a Remuneration Committee, Nomination Committee, and Audit Committee, each with clear written terms of reference, reporting regularly to the Board; most members of each committee are independent non-executive directors, ensuring their independence - The Board has established an Audit Committee, Remuneration Committee, and Nomination Committee to oversee specific aspects of the company's affairs[384](index=384&type=chunk) - All Board committees have clear written terms of reference and report regularly to the Board[384](index=384&type=chunk) - The majority of members on each Board committee are independent non-executive directors[387](index=387&type=chunk) [Remuneration Committee](index=66&type=section&id=Remuneration%20Committee%20薪酬委員會) The Remuneration Committee reviews and recommends directors' and senior management's remuneration and benefits to the Board, ensuring their appropriateness; one meeting was held in 2020 to review and approve director remuneration - The primary function of the Remuneration Committee is to review and recommend to the Board the remuneration and other benefits of directors and senior management, and to monitor them regularly to ensure their appropriateness[389](index=389&type=chunk) - The Remuneration Committee comprises one executive director (Mr. Zhang Hongwen) and two independent non-executive directors (Mr. Yan Jianmiao, Mr. Law Kwong Shun)[390](index=390&type=chunk) - One meeting was held in 2020 to review and approve director remuneration[393](index=393&type=chunk) [Nomination Committee](index=67&type=section&id=Nomination%20Committee%20提名委員會) The Nomination Committee reviews the Board Diversity Policy and recommends director candidates based on skills, knowledge, and experience; one meeting was held in 2020 to review the Board's structure, size, composition, and diversity policy - The primary function of the Nomination Committee is to review the Board Diversity Policy and provide recommendations to the Board regarding the appointment or re-appointment of directors and succession planning for directors, based on their skills, knowledge, and experience[397](index=397&type=chunk) - The Nomination Committee members include one executive director (Mr. Shen Yueming) and two independent non-executive directors (Mr. Liu Yingkit, Mr. Law Kwong Shun)[397](index=397&type=chunk) - One meeting was held in 2020 to review the Board's structure, size, composition, and diversity policy[399](index=399&type=chunk) - Measurable objectives for Board diversity include: at least **half** of the Board members having textile industry experience, at least one director holding a position in a textile industry association, and gender not being a primary consideration[427](index=427&type=chunk)[428](index=428&type=chunk)[430](index=430&type=chunk) [Audit Committee](index=71&type=section&id=Audit%20Committee%20審核委員會) The Audit Committee reviews and monitors the Group's financial reporting process, risk management, and internal control systems, providing recommendations to the Board; two meetings were held in 2020 to review financial results, external auditor relationship, and internal audit reports - The primary responsibilities of the Audit Committee are to review and monitor the Group's financial reporting process, risk management and internal control systems, and internal audit function, and to provide advice to the Board[433](index=433&type=chunk) - The Audit Committee comprises three independent non-executive directors: Mr. Liu Yingkit (Chairman), Mr. Law Kwong Shun, and Mr. Yan Jianmiao[437](index=437&type=chunk) - Two meetings were held in 2020 to review the company's relationship with external auditors, 2019 final results, 2020 interim results, and continuing connected transactions, and two communications with external auditors were conducted without management present[441](index=441&type=chunk) - The Audit Committee also reviewed and approved the internal audit report and considered the effectiveness of the internal audit function[441](index=441&type=chunk) [Internal Control and Risk Management](index=73&type=section&id=Internal%20Control%20and%20Risk%20Management%20內部監控及風險管理) The company established a sound and effective internal control and risk management system, comprising the Board, Audit Committee, management team, and all departments as three lines of defense; in 2020, the Audit Committee conducted two reviews and evaluations of the internal control system, finding no material deficiencies or weaknesses - The company has established sound and effective internal controls to safeguard shareholders' investments and company assets[447](index=447&type=chunk) - The company has implemented an optimized risk management and internal control system, including the Board, Audit Committee, management team, and all departments[449](index=449&type=chunk) - The risk management system is structured into three lines of defense: individual departments as the first line, internal control and management teams as the second line, and the Audit Committee under the Board as the third line[449](index=449&type=chunk) - During 2020, the Audit Committee conducted two reviews and evaluations of the effectiveness of the internal control system, finding no material deficiencies or weaknesses[454](index=454&type=chunk)[459](index=459&type=chunk) [Inside Information](index=75&type=section&id=Inside%20Information%20內幕消息) The company has established procedures and internal controls for handling and disseminating inside information, strictly prohibiting unauthorized use of confidential information; the Chairman and Financial Controller are the primary spokespersons for external media communications - The company is aware of its obligations under Chapter 13 of the Listing Rules and the Securities and Futures Ordinance, and should announce any inside information as soon as reasonably practicable[462](index=462&type=chunk) - The company's policy strictly prohibits unauthorized use of confidential information or inside information[463](index=463&type=chunk) - The Chairman and Financial Controller are the primary spokespersons for all external media communications of the company[463](index=463&type=chunk) [Annual Remuneration Payable to Senior Management](index=75&type=section&id=Annual%20Remuneration%20Payable%20to%20Senior%20Management%20應付高級管理層成員的年度薪酬) For the year ended December 31, 2020, one senior management member's annual remuneration ranged between RMB 1,000,001 and RMB 1,500,000 2020 Senior Management Member Annual Remuneration Range | Remuneration Range (RMB) | Number of Individuals | |:---|:---|\n| 1,000,001 – 1,500,000 | 1 | [Auditors' Remuneration](index=75&type=section&id=Auditors'%20Remuneration%20核數師薪酬) In 2020, the company paid external auditor Ernst & Young RMB 1,950,000 for audit services and RMB 84,000 for tax services 2020 Auditor's Remuneration (RMB thousands) | Service Type | Fees Paid | |:---|:---|\n| Audit services | 1,950 | | Tax services | 84 | - Apart from audit and tax services, the company did not engage Ernst & Young for any other non-audit services during 2020[469](index=469&type=chunk) [Accountability and Audit](index=76&type=section&id=Accountability%20and%20Audit%20問責及審核) The Board is responsible for preparing true and fair consolidated financial statements in compliance with accounting standards and Listing Rules; the Board believes the Group can continue as a going concern and has no disagreements with the Audit Committee on external auditor selection and appointment - Directors are aware of their responsibility to prepare true and fair consolidated financial statements and ensure compliance with all applicable accounting standards and Listing Rules[470](index=470&type=chunk) - Directors believe the financial statements have been prepared on a going concern basis, and no material uncertainties have been identified that may cast significant doubt on the Group's ability to continue as a going concern[470](index=470&type=chunk) - The directors had no disagreements with the Audit Committee regarding the selection and appointment of external auditors[444](index=444&type=chunk) [Shareholders' Rights](index=76&type=section&id=Shareholders'%20Rights%20股東權利) Shareholders holding at least one-tenth of the company's paid-up capital may request the Board in writing to convene an extraordinary general meeting or propose resolutions; shareholders can send inquiries to the Board via mail or email - Any one or more shareholders holding not less than **one-tenth** of the company's paid-up capital have the right to request the Board in writing to convene an extraordinary general meeting or propose resolutions[474](index=474&type=chunk) - Shareholders can send inquiries and questions to the Board via mail to the principal place of business in Hong Kong or by email to ir@kingdom-china.com[484](index=484&type=chunk) [Constitutional Documents and Investor Relations](index=78&type=section&id=Constitutional%20Documents%20and%20Investor%20Relations%20章程文件及投資者關係) No changes to the company's constitutional documents occurred in 2020, with the latest version available on the company and Stock Exchange websites; the company maintains communication with investors and shareholders through various channels to enhance transparency and confidence - No changes to the company's constitutional documents occurred in 2020, and the latest version is available on the company's and the Stock Exchange's websites[491](index=491&type=chunk) - The company maintains contact with analysts and fund managers through various channels, including one-on-one meetings, telephone communications, and press releases[487](index=487&type=chunk) - The company's general meetings provide a platform for shareholders to communicate with the Board, and the Chairman of the Board and chairmen of various committees or their representatives will attend to answer questions[487](index=487&type=chunk) - As of December 31, 2020, the company's market capitalization was approximately **HK$812,284,620**[492](index=492&type=chunk) [Independent Auditor's Report](index=82&type=section&id=Independent%20Auditor's%20Report%20獨立核數師報告) The Independent Auditor's Report provides an opinion on the Group's consolidated financial statements as of December 31, 2020, outlining the basis, key matters, and responsibilities of the audit [Opinion](index=82&type=section&id=Opinion%20意見) The auditor believes Kingdom Holdings Limited's consolidated financial statements present a true and fair view of the Group's financial position as of December 31, 2020, and its financial performance and cash flows for the year then ended, in compliance with IFRS and Hong Kong Companies Ordinance disclosure requirements - The auditor believes the consolidated financial statements present a true and fair view of the Group's consolidated financial position as of December 31, 2020, and its consolidated financial performance and consolidated cash flows for the year then ended, in accordance with International Financial Reporting Standards[502](index=502&type=chunk) - The consolidated financial statements have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance[502](index=502&type=chunk) [Basis for Opinion](index=82&type=section&id=Basis%20for%20Opinion%20意見的基礎) The auditor conducted the audit in accordance with Hong Kong Standards on Auditing and complied with the HKICPA's Code of Ethics, deeming the audit evidence obtained sufficient to support their opinion - The audit was conducted in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants[503](index=503&type=chunk) - The auditor is independent of the Group and has fulfilled other ethical responsibilities in accordance with the Code of Ethics for Professional Accountants[503](index=503&type=chunk) - The audit evidence obtained is sufficient and appropriate to provide a basis for the audit opinion[503](index=503&type=chunk) [Key Audit Matters](index=83&type=section&id=Key%20Audit%20Matters%20關鍵審計事項) Key audit matters include the impairment assessment of non-current assets, which involves highly subjective management assumptions regarding cash flow forecasts, future growth rates, and discount rates - One of the key audit matters is the impairment assessment of non-current assets[508](index=508&type=chunk) - As of December 31, 2020, the carrying amount of property, plant and equipment, right-of-use assets, and other intangible assets was **RMB 1,127 million**, accounting for **43%** of the Group's total assets[512](index=512&type=chunk) - The impairment assessment requires management to make key assumptions, such as five-year cash flow forecasts, future growth rates, and discount rates, which are highly subjective[512](index=512&type=chunk) [Other Information in the Annual Report](index=84&type=section&id=Other%20Information%20in%20the%20Annual%20Report%20年報內的其他信息) The company's directors are responsible for other information in the annual report; the auditor's opinion does not cover this information but they review it for material inconsistencies with the consolidated financial statements - The company's directors are responsible for other information in the annual report, including the Chairman's Statement, Management Discussion and Analysis, Report of the Directors, and Corporate Governance Report[515](index=515&type=chunk) - The auditor's opinion on the consolidated financial statements does not cover other information, and they do not express any form of assurance conclusion thereon[517](index=517&type=chunk) - The auditor reviews other information to consider whether it is materially inconsistent with the consolidated financial statements or the knowledge obtained in the audit, or otherwise appears to be materially misstated[518](index=518&t