Financial Performance - The Group's revenue from food business decreased by approximately 46.0% from approximately RMB 155.6 million in 2020 to approximately RMB 84.1 million during the Reporting Period[13]. - Gross profit from the food segment fell 68.3% from RMB 23.6 million in 2020 to RMB 7.5 million during the Reporting Year[13]. - Gross profit from the fast-moving consumer goods business decreased to RMB 2.5 million from RMB 7.2 million in 2020[14]. - The Group's revenue for the year ended December 31, 2021, fell by approximately 46.8% to approximately RMB 86.5 million from approximately RMB 162.7 million in 2020[46]. - Gross profit for the Reporting Year decreased by 67.8% to approximately RMB 9.9 million, with a gross profit margin dropping to 11.5% from 18.9% in 2020[46]. - The Group recorded a loss of approximately RMB 97.7 million for the Reporting Year, compared to a loss of RMB 32.3 million in 2020[46]. - The gross profit margin for the Group was approximately 11.4% during the Reporting Period, down from approximately 18.9% in the previous year[60]. - The Group's gross profit from the food business was approximately RMB 7.5 million, representing a gross profit margin of 8.9%[60]. Market Conditions - The economic outlook remains uncertain due to sporadic COVID-19 outbreaks and intensified competition in the domestic snack market[13]. - Consumer spending is expected to be further impacted by shrinking spending, supply shocks, and weakening expectations[15]. - The Group's target market includes mid-to-high-end customers, which may be affected by weakened consumer confidence[15]. - The geopolitical tensions and policy reforms in certain industries have significantly impacted the employment rate and income of the middle class[15]. - The Group's food business is expected to face extensive impacts on sales due to the ongoing effects of the Omicron variant[15]. - Domestic consumer spending may become increasingly unstable due to shrinking expenditure and supply chain disruptions[18]. - The ongoing geopolitical tensions from the Russia-Ukraine conflict are anticipated to impact the economic landscape, although China's economy is expected to remain relatively stable[18]. Strategic Initiatives - The Group has attempted to enhance marketing efforts and adopted a flexible pricing strategy to address declining orders[13]. - The Group aims to diversify its income sources to stabilize financial performance amid market uncertainties[21][24]. - The Group maintains a cautiously optimistic view on its low-cost fast-moving consumer goods business despite weakening consumer confidence[20]. - The Group's strategic focus aligns with the government's emphasis on domestic demand and economic dual circulation[20][23]. - The Group plans to enhance its supply chain capacity and has entered into a joint venture for high-demand mobile phones and electronic components[50]. Operational Insights - The Group offered over 100 types of dried seafood, 30 types of algae and fungi, and 60 types of seafood snacks during the Reporting Period[46]. - The Group's products are sold through various channels, including supermarkets, trading companies, convenience stores, and e-commerce retailers[46]. - The Group sources high-quality raw materials and sub-contracts processing to third parties, packaging products under its own brand "Wofan"[46]. - Selling and distribution expenses decreased due to tightened cost control on promotion and advertising activities during the Year[66]. Financial Position - As of December 31, 2021, net current assets decreased to approximately RMB 334.9 million from RMB 391.7 million as of December 31, 2020, primarily due to an increase in inventories and cash equivalents[71]. - Cash and cash equivalents as of December 31, 2021, were approximately RMB 176.4 million, down from RMB 213.5 million as of December 31, 2020, with no bank borrowings reported[71]. - The gearing ratio increased to 0.059 as of December 31, 2021, compared to 0.029 as of December 31, 2020[71]. - Inventories as of December 31, 2021, amounted to approximately RMB 61.7 million, with inventory turnover days increasing to approximately 327 days from 214 days in 2020[71]. - Trade receivables as of December 31, 2021, were approximately RMB 115.6 million, with turnover days increasing to approximately 526 days from 264 days in 2020[71]. - Trade payables decreased to approximately RMB 2.5 million as of December 31, 2021, from approximately RMB 16.4 million in 2020[73]. Governance and Compliance - The Company has adopted the Corporate Governance Code as its own code of corporate governance and has complied with it, except for certain deviations[148]. - The Board currently comprises three executive Directors and three independent non-executive Directors, ensuring that independent non-executive Directors represent 50% of the Board[148]. - The Company has maintained the prescribed public float under the Listing Rules as of the date of this annual report[146]. - The Company is committed to enhancing its corporate governance practices to meet evolving regulatory requirements and shareholder expectations[152]. - The Company has received annual confirmations of independence from all Independent Non-executive Directors, ensuring compliance with Listing Rules[159]. Shareholder Information - The Company did not recommend the payment of a final dividend for the year ended December 31, 2021[76]. - No dividend has been declared or proposed for the year ended December 31, 2021[81]. - The Company has adopted a dividend policy that allows for the declaration and distribution of dividends at the Board's discretion[82]. - Shareholders holding at least one-tenth of the paid-up capital can request the Board to convene an extraordinary general meeting[191]. - The forthcoming Annual General Meeting (AGM) is scheduled for May 2021, with notices sent at least 20 business days in advance[193]. Audit and Risk Management - The audit identified key audit matters, particularly the impairment assessment on trade receivables[199]. - The financial statements were prepared in compliance with Hong Kong Financial Reporting Standards and the Hong Kong Companies Ordinance[197]. - The audit was conducted in accordance with Hong Kong Standards on Auditing, ensuring independence and ethical compliance[198]. - The Audit Committee oversees internal control and risk management procedures of the Company[178]. - An external independent consultant was engaged to assess the Group's risk management and internal control systems, with findings reported to the Audit Committee and the Board[186].

中國升海集團有限公 司 China Shenghai Group Limited ( formerly known as China Shenghai Food Holdings Company Limited ) ( 前稱中國升海食品控股有限公司) ( Incorporated in the Cayman Islands with limited liability ) ( 於開曼群島註冊成立之有限公司 ) Stock Code 股份代號 : 1676 2021 INTERIM REPORT 中期報告 CONTENTS 目錄 2 Corporate Information 公司資料 5 Management Discussion and Analysis 管理層討論與分析 14 Corporate Governance and Other Information 企業管治及其他資料 20 Consolidated Statement of Profit or Loss and Other Comprehensive Income – Unaudited 綜合損益及其他全面收益表－未經審核 22 Consol ...

Corporate Information [Board of Directors and Committees](index=3&type=section&id=Directors%20and%20Committees) This section outlines the Board of Directors' composition and the structure of its Audit, Nomination, and Remuneration Committees - Mr. Liu Rongru serves as Co-Chairman and Chief Executive Officer, responsible for the Group's development, positioning, and strategic planning[7](index=7&type=chunk) - Mr. Li Dongfan was appointed Non-Executive Director and Co-Chairman on January 14, 2020, providing advice on business development, management, and strategic planning[7](index=7&type=chunk) - Mr. Peng Weizheng chairs the Audit Committee, Mr. Liu Rongru chairs the Nomination Committee, and Mr. Liu Dajin chairs the Remuneration Committee[7](index=7&type=chunk) [Company Details](index=3&type=section&id=Company%20Details) This section provides key company details, including registration, principal bankers, share registrar, and contact information - The company's auditor is BDO Limited, Hong Kong[7](index=7&type=chunk) - The company's principal bankers include Xiamen Bank Huachang Sub-branch and China Construction Bank Xiamen Hubin Sub-branch[9](index=9&type=chunk) - The company's stock code is **1676**, and its website is www.chinashenghaigroup.com[9](index=9&type=chunk) Chairman's Statement [Business Review (Chairman's Statement)](index=5&type=section&id=Business%20Review%20%28Chairman%27s%20Statement%29) In 2020, the company's dried seafood product revenue significantly declined by 65.6% to RMB 162.7 million, resulting in a net loss of RMB 32.3 million, while a new fast-moving consumer goods business generated RMB 7.2 million in net revenue - The global economy in 2020 was severely impacted by the COVID-19 pandemic, leading to reduced consumption in China and negative effects on the company's business[12](index=12&type=chunk)[14](index=14&type=chunk) 2020 Key Financial Data (Chairman's Statement) | Indicator | 2020 (RMB million) | 2019 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Dried Seafood Product Revenue | 162.7 | 472.9 | -65.6% | | Gross Profit | 30.7 | 103.8 | -70.4% | | Net Loss | 32.3 | (30.8) | N/A (Loss incurred) | | FMCG Business Total Transaction Value | 132.9 | N/A | N/A | | FMCG Business Net Revenue | 7.2 | N/A | N/A | | FMCG Business Net Profit | 3.2 | N/A | N/A | - To mitigate single-business risk, the company launched a fast-moving consumer goods business in early 2020, primarily selling cosmetics, daily necessities, fashion, and accessories[12](index=12&type=chunk)[15](index=15&type=chunk) [Outlook (Chairman's Statement)](index=6&type=section&id=Outlook%20%28Chairman%27s%20Statement%29) The company plans to transform its traditional sales model by investing in e-commerce, diversifying beyond food products, and seeking M&A opportunities for growth - The pandemic accelerated the shift to e-commerce, prompting the company to increase investment in its e-commerce business[17](index=17&type=chunk)[19](index=19&type=chunk) - The company will expand beyond food products to diversify revenue streams and actively seek cooperation and M&A opportunities for growth[17](index=17&type=chunk)[19](index=19&type=chunk) [Appreciation](index=6&type=section&id=Appreciation) The Board expresses sincere gratitude to all employees, shareholders, investors, customers, and suppliers, committing to pragmatic operations and performance-driven returns - The Board thanks all employees, shareholders, investors, customers, and suppliers for their support[18](index=18&type=chunk)[19](index=19&type=chunk) - The company pledges to uphold its original mission, operate pragmatically, actively pursue development, and reward trust with tangible performance[18](index=18&type=chunk)[19](index=19&type=chunk) Biographical Details of Directors [Executive Directors](index=7&type=section&id=Executive%20Directors) This section details the backgrounds, education, careers, and responsibilities of Executive Directors Mr. Liu Rongru and Ms. Li Jiayin - Mr. Liu Rongru (53) is the Group's founder, CEO, Executive Director, and Co-Chairman, responsible for Group development, positioning, and strategic planning, with over 20 years of experience in the seafood business[22](index=22&type=chunk)[25](index=25&type=chunk) - Ms. Li Jiayin (37) is an Executive Director, responsible for business development, overall management, and strategic planning, holding a Bachelor's degree in Finance and having held senior management positions in various companies[28](index=28&type=chunk)[30](index=30&type=chunk) [Non-Executive Director](index=8&type=section&id=Non-Executive%20Director) This section introduces Mr. Li Dongfan, a Non-Executive Director and Co-Chairman appointed on January 14, 2020, who advises on business development, management, and strategic planning, holding a Ph.D. in Finance - Mr. Li Dongfan (36) was appointed Non-Executive Director and Co-Chairman on January 14, 2020, primarily advising on the Group's business development, management, and strategic planning[29](index=29&type=chunk)[31](index=31&type=chunk) - Mr. Li Dongfan holds a Ph.D. in Philosophy (Finance) from Brampton International University, Canada, and has served as a director for several listed companies[29](index=29&type=chunk)[31](index=31&type=chunk) [Independent Non-Executive Directors](index=9&type=section&id=Independent%20Non-Executive%20Directors) This section outlines the professional backgrounds and responsibilities of Independent Non-Executive Directors Mr. Liu Dajin, Mr. Liu Juntin, and Mr. Peng Weizheng, highlighting their roles in ensuring board independence and expertise - Mr. Liu Dajin (55) has been a practicing member of the Chinese Institute of Certified Public Accountants since 1996, holds a Bachelor's degree in Economics, has taught at several universities, and is currently a professor in the Management Department at Jimei University Chengyi College[33](index=33&type=chunk)[37](index=37&type=chunk) - Mr. Liu Juntin (31) was appointed on January 14, 2020, graduated from Beijing Institute of Technology, currently serves as Assistant Manager at Zhuhai Oasis Industrial Co., Ltd., and is an Independent Non-Executive Director of Mandi Technology Co., Ltd[34](index=34&type=chunk)[38](index=38&type=chunk) - Mr. Peng Weizheng (32) has been a member of the Hong Kong Institute of Certified Public Accountants since 2015, holds a Bachelor of Business Administration in Accountancy, possesses over 10 years of experience in accounting, auditing, and company secretarial matters, and is currently the Company Secretary of Xingfa Aluminium Holdings Limited[35](index=35&type=chunk)[36](index=36&type=chunk)[38](index=38&type=chunk) Management Discussion and Analysis [Business Review (MD&A)](index=10&type=section&id=Business%20Review%20%28MD%26A%29) In 2020, the company's total revenue significantly decreased by 65.6% to RMB 162.7 million, resulting in a net loss of RMB 32.3 million, while a new fast-moving consumer goods business generated RMB 7.2 million in net revenue - In 2020, the company's revenue and gross profit significantly declined, and it recorded a loss for the first time, severely impacted by the COVID-19 pandemic in China[40](index=40&type=chunk) 2020 Key Financial Data (Management Discussion and Analysis) | Indicator | 2020 (RMB million) | 2019 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | 162.7 | 472.9 | -65.6% | | Gross Profit | 30.7 | 103.8 | -70.4% | | Gross Profit Margin | 18.9% | 21.9% | -3.0pp | | Net Loss | 32.3 | (30.8) | N/A (Loss incurred) | | Food Business Revenue | 155.6 | 472.9 | -67.1% | | FMCG Business Net Revenue | 7.2 | N/A | N/A | | FMCG Business Profit | 3.2 | N/A | N/A | - The revenue recognition method for the fast-moving consumer goods business was adjusted from a gross basis in the interim report to a net basis, resulting in a **RMB 66.3 million reduction** in both revenue and cost of sales[44](index=44&type=chunk)[46](index=46&type=chunk) [Outlook (MD&A)](index=12&type=section&id=Outlook%20%28MD%26A%29) The company plans to actively transform its traditional sales model by investing in e-commerce, diversifying beyond food products, and seeking M&A opportunities for growth - The pandemic accelerated e-commerce as a primary consumption method, leading the company to increase investment in its e-commerce business[48](index=48&type=chunk)[52](index=52&type=chunk) - The company will further expand beyond food products to diversify revenue sources and actively seek cooperation and M&A opportunities[48](index=48&type=chunk)[52](index=52&type=chunk) [Operating Results and Financial Review](index=12&type=section&id=Operating%20Results%20and%20Financial%20Review) In 2020, the company's revenue decreased by 65.6% to RMB 162.7 million, primarily due to lower sales volume and average selling prices, with gross profit margin falling to 18.9% and increased sales and administrative expenses as a percentage of revenue Revenue by Product Type | Product Type | 2020 (RMB thousand) | Share (%) | 2019 (RMB thousand) | Share (%) | | :--- | :--- | :--- | :--- | :--- | | Dried Seafood Products | 88,018 | 54.1% | 246,108 | 52.1% | | Algae and Fungi Products | 62,755 | 38.6% | 190,283 | 40.2% | | Marine Leisure Products | 4,780 | 2.9% | 36,497 | 7.7% | | FMCG and Other Businesses | 7,165 | 4.4% | – | N/A | | **Total** | **162,718** | **100%** | **472,888** | **100%** | Gross Profit and Gross Profit Margin | Business Type | 2020 Gross Profit (RMB thousand) | 2020 Gross Profit Margin (%) | 2019 Gross Profit (RMB thousand) | 2019 Gross Profit Margin (%) | | :--- | :--- | :--- | :--- | :--- | | Food Business | 23,551 | 15.1% | 103,769 | 21.9% | | FMCG and Other Businesses | 7,165 | 100% | – | N/A | | **Total** | **30,716** | **18.9%** | **103,769** | **21.9%** | - Sales and distribution expenses as a percentage of revenue increased from **9.2% in 2019 to 22.0% in 2020**, and administrative expenses as a percentage of revenue increased from **3.0% in 2019 to 11.8% in 2020**, primarily due to the decrease in revenue[58](index=58&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk) [Liquidity, Financial Resources, and Capital Structure](index=14&type=section&id=Liquidity%2C%20Financial%20Resources%2C%20and%20Capital%20Structure) In 2020, the company's net current assets decreased to RMB 391.7 million, with cash and cash equivalents at RMB 213.5 million and no bank borrowings, while the gearing ratio increased significantly and operating efficiency declined as evidenced by extended inventory and trade receivable turnover days Overview of Liquidity and Financial Resources | Indicator | 2020 (RMB million) | 2019 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Net Current Assets | 391.7 | 404.3 | -3.1% | | Cash and Cash Equivalents | 213.5 | 242.6 | -12.0% | | Bank Borrowings | 0 | 0 | 0 | | Gearing Ratio | 0.040 | 0.009 | +344.4% | | Inventories | 75.5 | 79.1 | -4.6% | | Inventory Turnover Days | 214 days | 74 days | +189.2% | | Trade Receivables | 133.5 | 102.3 | +30.5% | | Trade Receivables Turnover Days | 264 days | 82 days | +221.9% | | Trade Payables | 16.4 | 8.7 | +88.5% | - The company's capital expenditure increased from **RMB 5 million in 2019 to RMB 7.2 million in 2020**[66](index=66&type=chunk) - As of December 31, 2020, the company had no assets pledged and no significant investments, acquisitions, or disposals of subsidiaries[67](index=67&type=chunk)[68](index=68&type=chunk) [Other Information (MD&A)](index=15&type=section&id=Other%20Information%20%28MD%26A%29) The company primarily operates in China with most transactions settled in RMB, resulting in minimal foreign exchange exposure and no formal hedging policy, while the number of full-time employees decreased in 2020, and no final dividend is recommended - The company primarily operates in China, with transactions settled in RMB, and the Board anticipates that future currency fluctuations will not severely impact operations, thus no formal hedging policy is adopted[69](index=69&type=chunk)[74](index=74&type=chunk) - As of December 31, 2020, the company had **486 full-time employees**, a decrease from **554 in 2019**[70](index=70&type=chunk)[75](index=75&type=chunk) - The Board does not recommend the payment of a final dividend to shareholders for the year ended December 31, 2020[71](index=71&type=chunk)[75](index=75&type=chunk) Report of the Directors [General Business and Financial Information](index=16&type=section&id=General%20Business%20and%20Financial%20Information) The company's principal business is investment holding, with subsidiaries primarily engaged in seafood packaging and sales, and no dividends were declared or recommended during the reporting period - The company's principal business is investment holding, with its subsidiaries primarily engaged in packaging and selling seafood products[77](index=77&type=chunk) - The Board did not declare or recommend any dividends for the year ended December 31, 2020[77](index=77&type=chunk) - The Group's business review, key financial performance indicators, and outlook are provided in the Chairman's Statement and Management Discussion and Analysis[77](index=77&type=chunk) [Environmental and Social Governance](index=16&type=section&id=Environmental%20and%20Social%20Governance) The company is committed to sustainable development and environmental protection through energy conservation and emergency plans, has adopted a dividend policy to share profits while retaining sufficient reserves, and values stakeholder relationships by offering competitive employee remuneration, fostering long-term supplier partnerships, and providing quality products to customers - The company is committed to promoting sustainable development and environmental protection by conserving electricity and implementing emergency plans to reduce environmental impact[77](index=77&type=chunk) - The company has adopted a dividend policy, with dividend recommendations at the Board's discretion, considering factors such as the Group's financial performance, financial position, liquidity, and capital requirements[77](index=77&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) - The company values stakeholder relationships, offering competitive remuneration to employees, establishing long-term partnerships with suppliers, and striving to provide quality products to customers[86](index=86&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk) [Risk Management and Compliance](index=17&type=section&id=Risk%20Management%20and%20Compliance) The company has implemented a comprehensive risk management system covering financial security, production, logistics, technology, and compliance, overseen by the Audit Committee, and no significant breaches of applicable laws or regulations were identified during the year - The company has implemented a risk management system covering financial security, production, logistics, technology, and compliance, with the Audit Committee responsible for oversight[85](index=85&type=chunk)[92](index=92&type=chunk) - No significant breaches or non-compliance with applicable laws and regulations were identified during the year[81](index=81&type=chunk)[83](index=83&type=chunk) - The company faces operational risks related to its business and identifies, assesses, and controls potential risks through a systematic risk management system[85](index=85&type=chunk)[92](index=92&type=chunk) [Share Capital and Reserves](index=18&type=section&id=Share%20Capital%20and%20Reserves) Details of the company's share capital changes are in Note 23 to the consolidated financial statements, and reserve changes are in the consolidated statement of changes in equity, with distributable reserves decreasing to approximately RMB 85.1 million in 2020 - Details of the company's share capital changes are provided in Note 23 to the consolidated financial statements[91](index=91&type=chunk)[94](index=94&type=chunk) - Details of the company's reserve changes are provided in the consolidated statement of changes in equity[96](index=96&type=chunk)[101](index=101&type=chunk) Distributable Reserves | Year | Amount (RMB million) | | :--- | :--- | | 2020 | 85.1 | | 2019 | 92.7 | [Major Customers and Suppliers](index=19&type=section&id=Major%20Customers%20and%20Suppliers) In 2020, sales to the company's largest and top five customers accounted for 8.9% and 36.8% of total turnover, respectively, while purchases from the largest and top five suppliers accounted for 14.7% and 44.6% of total purchases, with no beneficial interests held by directors or major shareholders in these key parties 2020 Major Customer and Supplier Proportions | Type | Proportion (%) | | :--- | :--- | | Sales to Largest Customer | 8.9% | | Sales to Top Five Customers | 36.8% | | Purchases from Largest Supplier | 14.7% | | Purchases from Top Five Suppliers | 44.6% | - No directors, their associates, or shareholders holding 5% or more of the company's shares had any beneficial interest in the Group's top five customers or suppliers[99](index=99&type=chunk)[103](index=103&type=chunk) [Directors' Information and Corporate Actions](index=20&type=section&id=Directors%27%20Information%20and%20Corporate%20Actions) This section lists the Board members for 2020 and up to the report date, confirms the independence of all independent non-executive directors, notes the adoption of a share option scheme with no options granted, discloses directors' and major shareholders' interests, and confirms directors' liability insurance and no significant related party transactions or conflicts of interest during the year - The Board of Directors includes Executive Directors Mr. Liu Rongru and Ms. Li Jiayin, Non-Executive Director Mr. Li Dongfan, and Independent Non-Executive Directors Mr. Liu Dajin, Mr. Peng Weizheng, and Mr. Liu Juntin[105](index=105&type=chunk) - The company has received confirmations of independence from all independent non-executive directors in accordance with Rule 3.13 of the Listing Rules[105](index=105&type=chunk) - The company has adopted a share option scheme, but no share options have been granted under the scheme as of the date of this annual report[108](index=108&type=chunk)[112](index=112&type=chunk)[115](index=115&type=chunk) - Mr. Liu Rongru and his spouse, Ms. Lin Yueying, are deemed to have an interest in **52.5% of the company's shares**[119](index=119&type=chunk)[123](index=123&type=chunk) - The company has purchased and maintains directors' and officers' liability insurance, and there were no significant related party transactions or conflicts of interest during the year[126](index=126&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk) Corporate Governance Report [Compliance with Corporate Governance Code](index=27&type=section&id=Compliance%20with%20Corporate%20Governance%20Code) The company has generally complied with the Corporate Governance Code in Appendix 14 of the Listing Rules during the reporting period, despite deviations regarding the number of board meetings, the combined roles of Chairman and CEO, and committee chairs' attendance at the AGM - The company has adopted the Corporate Governance Code set out in Appendix 14 of the Listing Rules[145](index=145&type=chunk)[147](index=147&type=chunk) - The Board held **three meetings in 2020**, fewer than the minimum of four required annually by Code Provision A.1.1[145](index=145&type=chunk)[147](index=147&type=chunk) - The roles of Co-Chairman and Chief Executive Officer are combined in Mr. Liu Rongru, deviating from Code Provision A.2.1, which requires separation of these roles[146](index=146&type=chunk)[148](index=148&type=chunk) - The chairmen and members of the Audit, Remuneration, and Nomination Committees were unable to attend the 2020 Annual General Meeting due to business commitments, deviating from Code Provision E.1.2[150](index=150&type=chunk)[154](index=154&type=chunk) [Board of Directors (Corporate Governance)](index=28&type=section&id=Board%20of%20Directors%20%28Corporate%20Governance%29) The Board is responsible for leading and overseeing the company, including business, strategic decisions, internal control, and risk management, comprising two executive, one non-executive, and three independent non-executive directors to ensure diversity, and operates with regular meetings, adequate resources, and independent professional advice, guided by diversity and nomination policies - The Board is responsible for leading and overseeing the company, supervising the Group's business, strategic decisions, internal control, and risk management systems[153](index=153&type=chunk) - The Board comprises two executive directors, one non-executive director, and three independent non-executive directors, with independent non-executive directors constituting **one-half of the Board's total members**[157](index=157&type=chunk)[158](index=158&type=chunk) - The company has adopted a Board Diversity Policy, considering factors such as race, gender, age, educational background, and industry experience, and aims to increase the proportion of female members[159](index=159&type=chunk)[160](index=160&type=chunk) - The company has adopted a Nomination Policy, with selection criteria including integrity, business experience, time commitment, diversity, and professional qualifications[168](index=168&type=chunk)[170](index=170&type=chunk)[172](index=172&type=chunk) - All directors have confirmed compliance with the Model Code for Securities Transactions by Directors of Listed Issuers[165](index=165&type=chunk)[169](index=169&type=chunk) [Board Committees](index=33&type=section&id=Board%20Committees) This section details the responsibilities, composition, and meeting activities of the Nomination, Audit, and Remuneration Committees, which regularly convene to review board structure, identify suitable director candidates, oversee financial statements, internal controls, risk management, and formulate remuneration policies for directors and senior management - The Nomination Committee's primary responsibilities include regularly reviewing the Board's structure, identifying suitable director candidates, and assessing the independence of independent non-executive directors[167](index=167&type=chunk)[169](index=169&type=chunk) - The Audit Committee's primary responsibilities include advising on the appointment of external auditors, reviewing financial statements, and overseeing internal control and risk management procedures[176](index=176&type=chunk) - The Remuneration Committee's primary responsibility is to make recommendations to the Board on the overall remuneration policy and structure for all directors and senior management[176](index=176&type=chunk) Board and Committee Meeting Attendance | Director Name | Board Meetings | Audit Committee | Remuneration Committee | Nomination Committee | | :--- | :--- | :--- | :--- | :--- | | Mr. Liu Rongru | 6/7 | N/A | 3/3 | 3/3 | | Ms. Li Jiayin | 7/7 | N/A | N/A | N/A | | Mr. Li Dongfan | 6/7 | N/A | N/A | N/A | | Mr. Liu Dajin | 6/7 | 2/2 | 3/3 | 3/3 | | Mr. Liu Juntin | 5/7 | 2/2 | 2/3 | 2/3 | | Mr. Peng Weizheng | 7/7 | 2/2 | N/A | N/A | [Accountability and Audit](index=38&type=section&id=Accountability%20and%20Audit) The Board and Audit Committee have reviewed the Group's consolidated financial statements, with directors confirming their responsibility for account preparation, the use of appropriate and consistently applied accounting policies, and no material doubts about the company's going concern ability; the auditor is BDO Limited, Hong Kong, with 2020 audit service fees of HKD 1.08 million - The Board and Audit Committee have reviewed the Group's consolidated financial statements, and the directors confirm their responsibility for preparing the accounts[183](index=183&type=chunk)[185](index=185&type=chunk) - The Board believes that appropriate accounting policies have been selected and consistently applied, and there are no material doubts about the Group's ability to continue as a going concern[183](index=183&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk) Auditor's Remuneration | Service Type | 2020 Amount (HKD thousand) | | :--- | :--- | | Review Services | 1,080 | [Risk Management and Internal Controls (Corporate Governance)](index=39&type=section&id=Risk%20Management%20and%20Internal%20Controls%20%28Corporate%20Governance%29) The Board is fully responsible for the company's internal control and risk management systems, aiming to enhance operational efficiency, safeguard shareholder investments and assets, and ensure compliance, with established procedures for handling inside information and external consultants assisting in risk identification and internal control review, which the Board deems effective and adequate - The Board is fully responsible for the company's internal control and risk management systems, aiming to enhance operational efficiency, safeguard shareholder investments and assets, and ensure compliance[189](index=189&type=chunk)[192](index=192&type=chunk) - The company has established and maintains procedures and internal controls for handling and disseminating inside information[190](index=190&type=chunk)[193](index=193&type=chunk) - The company engages external independent consultants to assist in identifying and assessing risks, and to independently review internal controls and evaluate system effectiveness, which the Board considers effective and adequate[191](index=191&type=chunk)[194](index=194&type=chunk) [Shareholders' Rights and Investor Relations](index=40&type=section&id=Shareholders%27%20Rights%20and%20Investor%20Relations) The company encourages shareholders to express opinions and ask questions via email, phone, or general meetings, allows shareholders holding at least one-tenth of the paid-up capital to requisition an extraordinary general meeting, ensures all resolutions at general meetings are voted by poll with results published on the company and HKEX websites, and maintains continuous communication with shareholders through its website - Shareholders can submit questions to the Board or senior management via email, phone, or at general meetings[196](index=196&type=chunk) - Shareholders holding not less than **one-tenth of the paid-up capital** can requisition the Board to convene an extraordinary general meeting[196](index=196&type=chunk) - All resolutions at general meetings are voted by poll, and the results are published on the company's and HKEX websites[196](index=196&type=chunk) - The company maintains continuous communication with shareholders through its website, www.chinashenghaigroup.com, and encourages participation in general meetings[198](index=198&type=chunk)[199](index=199&type=chunk)[201](index=201&type=chunk) Independent Auditor's Report [Opinion and Basis of Opinion](index=42&type=section&id=Opinion%20and%20Basis%20of%20Opinion) Independent auditor BDO Limited issued an unmodified opinion on China Shenghai Group Limited's consolidated financial statements for the year ended December 31, 2020, affirming they present a true and fair view of the company's financial position, performance, and cash flows in accordance with Hong Kong Financial Reporting Standards and the Hong Kong Companies Ordinance, with the audit conducted under Hong Kong Standards on Auditing and the Code of Ethics for Professional Accountants - The auditor issued an unmodified opinion on the consolidated financial statements, deeming them to present a true and fair view of the company's financial position, performance, and cash flows[205](index=205&type=chunk)[209](index=209&type=chunk) - The audit was conducted in accordance with Hong Kong Standards on Auditing and the Code of Ethics for Professional Accountants issued by the Hong Kong Institute of Certified Public Accountants[206](index=206&type=chunk)[210](index=210&type=chunk) [Key Audit Matters](index=42&type=section&id=Key%20Audit%20Matters) The auditor identified revenue recognition and impairment assessment of trade receivables as key audit matters due to inherent management manipulation risk and significant judgment involved, addressing them by reviewing contracts, comparing transaction records, examining accounting entries, assessing internal controls, analyzing aging, and evaluating management estimates - Revenue recognition was identified as a key audit matter due to its significance as a key performance indicator for the Group and the inherent risk of management manipulating revenue recognition[211](index=211&type=chunk)[213](index=213&type=chunk) - The auditor's procedures for revenue recognition included understanding internal controls, sampling sales agreements, comparing sales records with supporting documents, comparing transactions before and after year-end, and examining accounting entries affecting revenue[213](index=213&type=chunk) - Impairment assessment of trade receivables was identified as a key audit matter due to its substantial amount (**RMB 133.5 million**, representing **27% of total assets**) and the significant judgment and estimation involved[215](index=215&type=chunk) - The auditor's procedures for impairment assessment of trade receivables included evaluating internal controls, examining aging reports, assessing the reasonableness of management's loss allowance estimates, and checking post-year-end cash receipts[215](index=215&type=chunk) [Responsibilities](index=45&type=section&id=Responsibilities) This section outlines the respective responsibilities of directors and auditors in the preparation and audit of consolidated financial statements, with directors responsible for preparing true and fair financial statements, ensuring effective internal controls, and assessing going concern, while auditors are responsible for obtaining reasonable assurance about material misstatements and communicating audit scope and findings to the Audit Committee - Directors are responsible for preparing true and fair consolidated financial statements in accordance with Hong Kong Financial Reporting Standards and the Hong Kong Companies Ordinance, and for internal controls[219](index=219&type=chunk)[223](index=223&type=chunk) - Directors are responsible for assessing the Group's ability to continue as a going concern and disclosing related matters where appropriate[220](index=220&type=chunk)[223](index=223&type=chunk) - The auditor's objective is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error[225](index=225&type=chunk) - The auditor communicates with the Audit Committee regarding the audit scope, timing, and significant audit findings, including any significant deficiencies in internal control[227](index=227&type=chunk) Consolidated Statements of Comprehensive Income [Financial Performance Overview](index=48&type=section&id=Financial%20Performance%20Overview) For the year ended December 31, 2020, the company's total revenue significantly decreased to RMB 162.7 million, resulting in a pre-tax loss of RMB 30.3 million and a net loss of RMB 32.3 million, a reversal from the 2019 net profit of RMB 30.8 million, with basic and diluted loss per share at RMB 0.3226 Key Data from Consolidated Statements of Comprehensive Income | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Revenue | 162,718 | 472,888 | | Cost of Sales | (132,002) | (369,119) | | Gross Profit | 30,716 | 103,769 | | Other Income and Other Gains/(Losses) – Net | 1,100 | 1,272 | | Selling and Distribution Expenses | (35,878) | (43,734) | | Administrative Expenses | (19,167) | (14,098) | | Expected Credit Losses on Financial Assets | (3,309) | (261) | | Finance Costs | (444) | (226) | | Other Expenses | (3,358) | (693) | | (Loss)/Profit Before Income Tax | (30,340) | 46,029 | | Income Tax Expense | (1,915) | (15,189) | | (Loss)/Profit for the Year Attributable to Owners of the Company | (32,255) | 30,840 | | Other Comprehensive Income for the Year | 841 | (13) | | Total Comprehensive (Expense)/Income for the Year Attributable to Owners of the Company | (31,414) | 30,827 | | (Loss)/Earnings Per Share – Basic and Diluted (RMB) | (0.3226) | 0.3084 | - In 2020, the company shifted from profit to loss, primarily due to a significant decrease in revenue and an increase in expected credit losses[229](index=229&type=chunk) Consolidated Statements of Financial Position [Financial Position Overview](index=49&type=section&id=Financial%20Position%20Overview) As of December 31, 2020, total assets slightly decreased to RMB 499.8 million, net current assets decreased to RMB 391.7 million, total liabilities increased to RMB 53.4 million due to higher trade payables and debentures, and total equity decreased to RMB 446.4 million Key Data from Consolidated Statements of Financial Position | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Property, Plant and Equipment | 56,979 | 67,356 | | Deferred Tax Assets | 731 | 372 | | Deposits Paid to Suppliers (Non-current) | 1,479 | 5,746 | | Inventories | 75,452 | 79,106 | | Trade Receivables | 133,482 | 102,278 | | Cash and Cash Equivalents | 213,479 | 242,578 | | Total Current Assets | 436,626 | 432,220 | | Trade Payables | 16,353 | 8,716 | | Debentures (Current) | 6,287 | – | | Lease Liabilities (Current) | 2,916 | 1,065 | | Total Current Liabilities | 44,901 | 27,950 | | Net Current Assets | 391,725 | 404,270 | | Debentures (Non-current) | 6,959 | 900 | | Lease Liabilities (Non-current) | 1,515 | 2,163 | | Net Assets | 446,417 | 477,831 | | Share Capital | 8,723 | 8,723 | | Reserves | 437,694 | 469,108 | | Total Equity | 446,417 | 477,831 | - Total assets and total equity both decreased, while total liabilities increased, reflecting financial pressure on the company[231](index=231&type=chunk) Consolidated Statements of Changes in Equity [Equity Changes Overview](index=50&type=section&id=Equity%20Changes%20Overview) For the year ended December 31, 2020, the company's total equity decreased from approximately RMB 477.8 million to RMB 446.4 million, primarily due to a net loss of RMB 32.3 million, despite other comprehensive income from exchange differences Key Data from Consolidated Statements of Changes in Equity | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Balance at Beginning of Year | 477,831 | 447,004 | | (Loss)/Profit for the Year | (32,255) | 30,840 | | Other Comprehensive Income for the Year | 841 | (13) | | Total Comprehensive (Expense)/Income for the Year | (31,414) | 30,827 | | Transfer to Statutory Reserve | – | (1,195) | | Balance at End of Year | 446,417 | 477,831 | - The company's total equity decreased in 2020, primarily due to the net loss incurred during the year[234](index=234&type=chunk) - Statutory reserves are amounts transferred from the net profit of subsidiaries in accordance with Chinese law until they reach **50% of the registered capital**[237](index=237&type=chunk)[238](index=238&type=chunk) Consolidated Statements of Cash Flows [Cash Flow Overview](index=52&type=section&id=Cash%20Flow%20Overview) For the year ended December 31, 2020, the company experienced a net cash outflow from operating activities of RMB 32.7 million, a reversal from the 2019 net inflow, primarily due to a pre-tax loss and increased trade receivables, while investing activities resulted in a net cash outflow of RMB 6.3 million, and financing activities generated a net cash inflow of RMB 9.5 million, mainly from debentures, leading to a decrease in cash and cash equivalents at year-end Key Data from Consolidated Statements of Cash Flows | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Net Cash (Used in)/Generated from Operating Activities | (32,652) | 5,634 | | Net Cash (Used in)/Generated from Investing Activities | (6,342) | 4,184 | | Net Cash Generated from/(Used in) Financing Activities | 9,516 | (1,480) | | Net (Decrease)/Increase in Cash and Cash Equivalents | (29,478) | 8,338 | | Cash and Cash Equivalents at End of Year | 213,479 | 242,578 | - Operating cash flow turned negative, reflecting a deterioration in the company's operating performance[240](index=240&type=chunk) - Financing cash flow turned into a net inflow, primarily driven by proceeds from debentures[242](index=242&type=chunk) Notes to the Consolidated Financial Statements [General Information and Accounting Standards](index=54&type=section&id=General%20Information%20and%20Accounting%20Standards) This section outlines the company's registration, principal activities, controlling shareholder, and adopted Hong Kong Financial Reporting Standards, noting its primary business as investment holding and seafood packaging/sales, with a new fast-moving consumer goods business in 2020, and no significant impact from newly adopted accounting standards - The company was incorporated in the Cayman Islands, and its shares have been listed on the Main Board of the Hong Kong Stock Exchange since July 18, 2017[244](index=244&type=chunk) - The company's principal activities are investment holding, with subsidiaries primarily engaged in packaging and selling seafood products, and procuring and selling fast-moving consumer goods and other products[244](index=244&type=chunk) - The company has adopted several newly revised Hong Kong Financial Reporting Standards, but they have no significant impact on the results or financial position for the current or prior periods[244](index=244&type=chunk) - The consolidated financial statements are prepared on a historical cost basis and presented in RMB[275](index=275&type=chunk) [Significant Accounting Policies](index=61&type=section&id=Significant%20Accounting%20Policies) This section details the company's accounting policies for revenue recognition, property, plant and equipment, leases, inventories, asset impairment, financial instruments, foreign currency, and income tax, noting revenue is recognized upon transfer of control, fast-moving consumer goods revenue is recognized on a net basis, and financial asset impairment uses an expected credit loss model - Revenue is recognized when control of goods or services is transferred to the customer, with fast-moving consumer goods business revenue recognized on a net basis[277](index=277&type=chunk)[279](index=279&type=chunk) - Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, and depreciated using the straight-line method[281](index=281&type=chunk)[284](index=284&type=chunk)[286](index=286&type=chunk) - All leases are capitalized as right-of-use assets and lease liabilities, except for short-term leases and leases of low-value assets[288](index=288&type=chunk)[290](index=290&type=chunk) - Inventories are recognized at the lower of cost and net realizable value, with cost calculated using the weighted average method[294](index=294&type=chunk) - Impairment losses on financial assets are measured using the expected credit loss (ECL) model, with trade receivables applying a simplified approach based on lifetime ECL[303](index=303&type=chunk)[305](index=305&type=chunk)[306](index=306&type=chunk) - The company primarily operates in China, with most transactions settled in RMB, and foreign currency monetary assets and liabilities are translated at the exchange rates prevailing at the end of the reporting period[322](index=322&type=chunk)[324](index=324&type=chunk)[325](index=325&type=chunk)[326](index=326&type=chunk) [Critical Accounting Estimates and Judgements](index=83&type=section&id=Critical%20Accounting%20Estimates%20and%20Judgements) This section outlines the company's critical accounting estimates and judgments regarding depreciation, impairment of receivables, current and deferred tax estimates, and determining whether it acts as a principal or agent in procurement services, all based on historical experience, relevant factors, and considering macroeconomic uncertainties from COVID-19, with management judging the company acts as an agent in fast-moving consumer goods sales, recognizing revenue on a net basis - Depreciation estimates are based on directors' judgment of assets' expected useful lives, with management reassessing at each reporting period end[341](index=341&type=chunk) - Impairment of receivables is based on assumptions about default risk and expected credit loss rates, considering customer historical data, market conditions, and forward-looking estimates[341](index=341&type=chunk) - Current and deferred tax estimates require significant judgment, and final tax outcomes may differ from initial records[343](index=343&type=chunk)[346](index=346&type=chunk) - Management judges the company acts as an agent in the fast-moving consumer goods sales business, recognizing revenue on a net basis, as the company does not bear price and inventory risks and does not obtain control of goods before sale[344](index=344&type=chunk)[345](index=345&type=chunk)[347](index=347&type=chunk) [Revenue and Segment Information](index=85&type=section&id=Revenue%20and%20Segment%20Information) In 2020, the company's total revenue was RMB 162.7 million, comprising RMB 155.6 million from food business and RMB 7.2 million from fast-moving consumer goods and other businesses, with revenue recognized when control of goods or services is transferred, and two reportable segments identified: packaging and selling seafood products, and all other businesses, with the food business segment recording a loss of RMB 25.9 million and the fast-moving consumer goods and other businesses segment recording a profit of RMB 3.2 million Revenue by Nature of Goods Sold or Services Provided | Product Type | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Sales of Aquatic Products | 155,553 | 472,888 | | Procurement and Sales of FMCG and Others | 7,165 | – | | **Total** | **162,718** | **472,888** | Revenue by Geographical Market | Region | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Mainland China | 155,553 | 472,888 | | Hong Kong | 236 | – | | South Korea | 6,929 | – | | **Total** | **162,718** | **472,888** | Segment Results | Segment | 2020 Results (RMB thousand) | 2019 Results (RMB thousand) | | :--- | :--- | :--- | | Sales of Aquatic Products | (25,887) | 51,045 | | All Other Segments | 3,179 | – | | **Total** | **(22,708)** | **51,045** | - In 2020, the food business segment shifted from profit to loss, while the newly launched fast-moving consumer goods and other businesses segment achieved profitability[355](index=355&type=chunk) [Other Income and Expenses](index=89&type=section&id=Other%20Income%20and%20Expenses) In 2020, the company's net other income and gains were RMB 1.1 million, primarily from bank interest, rental income, and government grants, while finance costs totaled RMB 0.444 million, mainly from lease liabilities and debenture interest, resulting in a pre-tax loss of RMB 30.3 million and income tax expense of RMB 1.9 million Other Income and Other Gains/(Losses) – Net | Item | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Bank Deposit Interest Income | 857 | 866 | | Rental Income | 55 | 55 | | Government Grants | 145 | – | | **Total** | **1,100** | **1,272** | Finance Costs | Item | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Interest Expense on Lease Liabilities | 215 | 221 | | Interest Expense on Debentures | 229 | – | | **Total** | **444** | **226** | Income Tax Expense | Item | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Current Tax | 434 | 12,723 | | Under-provision in Prior Years | 149 | 744 | | Deferred Tax | 1,332 | 1,722 | | **Total** | **1,915** | **15,189** | - In 2020, the company received **RMB 0.145 million** in government grants under the Employment Support Scheme from the HKSAR Government's Anti-epidemic Fund[370](index=370&type=chunk)[372](index=372&type=chunk) [Earnings Per Share and Remuneration](index=91&type=section&id=Earnings%20Per%20Share%20and%20Remuneration) In 2020, the company reported a basic and diluted loss per share of RMB 0.3226, a reversal from the 2019 earnings per share of RMB 0.3084, with total remuneration for directors and employees amounting to RMB 3.9 million, including RMB 2.285 million for executive directors, and the five highest-paid individuals comprising three directors and two non-directors with total remuneration of RMB 3.9 million (Loss)/Earnings Per Share | Indicator | 2020 (RMB) | 2019 (RMB) | | :--- | :--- | :--- | | Basic and Diluted (Loss)/Earnings Per Share | (0.3226) | 0.3084 | | Weighted Average Number of Ordinary Shares (thousand shares) | 100,000 | 100,000 | - In 2020, the company shifted from earnings per share to loss per share, reflecting a deterioration in operating performance[380](index=380&type=chunk) Total Directors' Remuneration | Category | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Executive Directors | 2,285 | 2,371 | | Non-Executive Directors | 1,319 | – | | Independent Non-Executive Directors | 296 | 323 | | **Total** | **3,900** | **2,694** | - In 2020, the five highest-paid individuals included **three directors and two non-directors**, with their total remuneration amounting to **RMB 3.9 million**[396](index=396&type=chunk)[397](index=397&type=chunk) [Assets and Liabilities Details](index=96&type=section&id=Assets%20and%20Liabilities%20Details) This section provides detailed changes and composition of property, plant and equipment, deposits paid to suppliers, inventories, trade receivables, deposits, prepayments and other receivables, cash and cash equivalents, trade payables, and accrued expenses, deposits received and other payables, noting a decrease in net property, plant and equipment, an inventory write-down of RMB 2.105 million, and increases in both trade receivables and trade payables in 2020 Net Property, Plant and Equipment | Item | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Electrical Equipment | 1,568 | 3,798 | | Plant and Machinery | 17,819 | 21,177 | | Motor Vehicles | 18 | 25 | | Furniture and Fixtures | 2,429 | 2,971 | | Leasehold Improvements | 30,226 | 36,150 | | Right-of-use Assets | 4,919 | 3,235 | | **Total** | **56,979** | **67,356** | - In 2020, the net value of property, plant and equipment decreased, and an impairment provision of **RMB 0.675 million** was made[405](index=405&type=chunk) - In 2020, inventories were written down by **RMB 2.105 million**, recognized as other expenses in the consolidated statement of comprehensive income[416](index=416&type=chunk) Aging Analysis of Trade Receivables | Aging | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | 0 – 30 days | 20,677 | 40,754 | | 31 – 60 days | 24,847 | 36,638 | | 61 – 90 days | 18,747 | 22,643 | | 91 – 120 days | 11,515 | 3,531 | | 121 – 365 days | 62,276 | – | | **Total** | **138,062** | **103,566** | - The provision for impairment losses on trade receivables increased to **RMB 4.58 million in 2020**[423](index=423&type=chunk) - Trade payables increased to **RMB 16.353 million in 2020**, primarily due to increased procurement of fast-moving consumer goods[427](index=427&type=chunk) [Deferred Tax Assets and Share Capital](index=102&type=section&id=Deferred%20Tax%20Assets%20and%20Share%20Capital) As of December 31, 2020, deferred tax assets totaled RMB 0.731 million, mainly from impairment losses on trade receivables, while the company's share capital remained unchanged despite a share consolidation on May 26, 2020, which merged every ten HKD 0.01 shares into one HKD 0.10 share, resulting in 100 million issued shares Movement in Deferred Tax Assets | Item | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Balance at Beginning of Year | 372 | 281 | | (Charged to)/Credited to Profit or Loss for the Year | 359 | 91 | | Balance at End of Year | 731 | 372 | - Tax losses carried forward in Hong Kong generally have no time limit, while tax losses in China of **RMB 29.823 million** will expire between 2021 and 2025[439](index=439&type=chunk) - On May 26, 2020, the company conducted a share consolidation, merging every ten HKD 0.01 shares into one HKD 0.10 share, resulting in **100 million issued shares**, but the total share capital remained unchanged[441](index=441&type=chunk) [Holding Company Financial Position and Subsidiaries](index=104&type=section&id=Holding%20Company%20Financial%20Position%20and%20Subsidiaries) As of December 31, 2020, the holding company's total equity was RMB 91.979 million, with its principal subsidiaries, including Xiamen Wofeng Food Co., Ltd., Fujian Wofeng Food Co., Ltd., and Hanzhong Trading Co., Ltd., all wholly-owned and primarily engaged in seafood packaging and sales, and fast-moving consumer goods procurement and sales Key Data from Holding Company's Statement of Financial Position | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Investments in Subsidiaries | 347 | 694 | | Amounts Due from Subsidiaries | 107,381 | 104,763 | | Cash and Cash Equivalents | 186 | 141 | | Net Current Assets | 98,591 | 103,628 | | Net Assets | 91,979 | 104,322 | | Total Equity | 91,979 | 104,322 | - The holding company's total distributable reserves to shareholders amounted to **RMB 85.117 million**[447](index=447&type=chunk)[450](index=450&type=chunk) Principal Subsidiaries | Subsidiary Name | Place of Incorporation and Operation | Interest Held (%) | Principal Activities | | :--- | :--- | :--- | :--- | | Xiamen Wofeng Food Co., Ltd. | People's Republic of China | 100% indirectly held | Packaging and sales of seafood products | | Fujian Wofeng Food Co., Ltd. | People's Republic of China | 100% indirectly held | Packaging and sales of seafood products | | Hanzhong Trading Co., Ltd. | Hong Kong | 100% indirectly held | Procurement and sales of fast-moving consumer goods | [Related Party Transactions and Leases](index=107&type=section&id=Related%20Party%20Transactions%20and%20Leases) The company engaged in lease and procurement transactions with related parties, including right-of-use assets and lease liabilities with a company controlled by a major shareholder's spouse, and procurement transactions with Mr. Liu Rongru's cousins, all conducted on terms similar to those with independent third parties, with total lease liabilities of RMB 4.431 million and total cash outflow from leases of RMB 2.611 million in 2020 Related Party Transactions | Related Party | Transaction Type | 2020 Transaction Amount (RMB thousand) | 2019 Transaction Amount (RMB thousand) | | :--- | :--- | :--- | :--- | | Xiamen Yehong Food Co., Ltd. | Right-of-use Assets | 186 | 186 | | Xiamen Yehong Food Co., Ltd. | Lease Liabilities | 14 | 23 | | Mr. Liu Rongjian | Procurement – Cost of Sales | 576 | 622 | | Mr. Liu Rongzhong | Procurement – Cost of Sales | 644 | 696 | - All related party transactions were entered into on terms similar to those with independent third parties[453](index=453&type=chunk) Lease Liabilities | Item | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Office and Factory Premises | 3,521 | 3,228 | | Motor Vehicles | 910 | – | | **Total** | **4,431** | **3,228** | - Total cash outflow from leases in 2020 was **RMB 2.611 million**, a decrease from **RMB 2.805 million in 2019**[467](index=467&type=chunk) [Debentures and Commitments](index=111&type=section&id=Debentures%20and%20Commitments) As of December 31, 2020, the company's total debentures amounted to RMB 13.246 million, with a current portion of RMB 6.287 million, new debentures of RMB 19.776 million issued during the year, and repayments of RMB 6.967 million, with interest rates ranging from 0.1% to 10%, and capital commitments of RMB 3.45 million primarily for property, plant and equipment Debenture Overview | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Balance at Beginning of Year | 900 | – | | Additions | 19,776 | 900 | | Repayments | (6,967) | – | | Interest Expense | 229 | – | | Exchange Difference | (692) | – | | **Balance at End of Year** | **13,246** | **900** | | Current Portion | 6,287 | – | | Non-current Portion | 6,959 | 900 | - Debenture interest rates range from **0.1% to 10%** (2019: **5%**), are unsecured, and have repayment periods ranging from **4 months to 8 years**[472](index=472&type=chunk) Capital Commitments | Item | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Property, Plant and Equipment | 3,450 | – | [Capital Risk Management and Financial Instruments](index=112&type=section&id=Capital%20Risk%20Management%20and%20Financial%20Instruments) The company manages its capital structure by optimizing debt and equity balance to ensure continuous operation, with total equity of RMB 446.4 million as of December 31, 2020, and faces interest rate, credit, and liquidity risks, with all borrowings being fixed-rate, credit risk concentrated in trade receivables from top five customers, and liquidity risk managed by maintaining sufficient reserves and bank financing - The company manages capital by optimizing the balance between debt and equity to ensure continuous operation[475](index=475&type=chunk) Overview of Financial Assets and Liabilities | Category | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--- | :--- | :--- | | Total Financial Assets | 359,917 | 352,884 | | Total Financial Liabilities | 49,433 | 25,891 | - All of the company's borrowings are fixed-rate, thus no interest rate sensitivity analysis is provided[483](index=483&type=chunk)[484](index=484&type=chunk) - Credit risk is primarily concentrated in trade receivables from the **top five customers**, accounting for **35% of total trade receivables**[488](index=488&type=chunk) Expected Loss Rates for Trade Receivables | Aging | 2020 Expected Loss Rate | 2019 Expected Loss Rate | | :--- | :--- | :--- | | Current | 1.62% | 0.41% | | 1 – 30 days overdue | 1.72% | 1.14% | | 31 – 60 days overdue | 2.88% | 2.52% | | 61 – 90 days overdue | 3.01% | 3.78% | | 91 – 120 days overdue | 3.84% | N/A | | Over 120 days overdue | 7.81% | N/A | - Liquidity risk is managed by maintaining sufficient reserves and bank financing[502](index=502&type=chunk) [Events After Reporting Period and Effect of COVID-19](index=124&type=section&id=Event%20After%20Reporting%20Period%20and%20Effect%20of%20COVID-19) Subsequent to the reporting period, the company conditionally agreed to acquire a 51% equity interest in a target company for RMB 19.7 million on March 23, 2021, which is yet to be completed, while the COVID-19 pandemic negatively impacted the company's business through increased costs and reduced or delayed revenue, though the company believes these effects were reflected in 2020 and anticipates no further negative impact if the pandemic remains stable - On March 23, 2021, the company signed an agreement to conditionally acquire a **51% equity interest** in a target company for **RMB 19.7 million**, with the acquisition yet to be completed[510](index=510&type=chunk) - The COVID-19 pandemic led to increased costs in procuring and selling fast-moving consumer goods and other businesses, as well as reduced or delayed revenue from seafood sales[510](index=510&type=chunk) - The company believes the negative impact of COVID-19 on its business was reflected in 2020 and anticipates no further negative impact if the pandemic remains stable[510](index=510&type=chunk) Five-year Financial Summary [Summary of Results](index=125&type=section&id=Summary%20of%20Results) This section provides a summary of the company's results for the past five fiscal years, highlighting a significant decline in revenue to RMB 162.7 million in 2020 and a net loss of RMB 32.3 million, a reversal from profitability in 2016-2019, with earnings per share also turning from a profit of RMB 0.0308 in 2019 to a loss of RMB 0.3226 in 2020 Five-Year Summary of Results | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | 2018 (RMB thousand) | 2017 (RMB thousand) | 2016 (RMB thousand) | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 162,718 | 472,888 | 667,958 | 644,407 | 468,039 | | Gross Profit | 30,716 | 103,769 | 169,094 | 163,506 | 118,397 | | Profit Before Income Tax | (30,340) | 46,029 | 104,415 | 104,385 | 85,416 | | Profit for the Year Attributable to Owners of the Company | (32,255) | 30,840 | 76,414 | 70,202 | 61,152 | | Earnings Per Share – Basic and Diluted (RMB) | 0.3226 | 0.0308 | 0.0764 | 0.0812 | 0.0815 | - In 2020, the company experienced a significant decline in both revenue and profit, shifting from profitability to a loss, marking its worst performance in the past five years[514](index=514&type=chunk) [Summary of Assets, Liabilities and Equity](index=125&type=section&id=Summary%20of%20Assets%2C%20Liabilities%20and%20Equity) This section provides a summary of the company's assets, liabilities, and equity for the past five fiscal years, showing that as of December 31, 2020, total assets were RMB 499.8 million, total liabilities were RMB 53.4 million, and total equity was RMB 446.4 million, with total assets and total equity decreasing and total liabilities increasing compared to 2019 Five-Year Summary of Assets, Liabilities and Equity | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | 2018 (RMB thousand) | 2017 (RMB thousand) | 2016 (RMB thousand) | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Assets | 499,792 | 508,844 | 503,103 | 444,958 | 222,630 | | Total Liabilities | 53,375 | 31,013 | 56,099 | 73,981 | 67,044 | | Total Equity | 446,417 | 477,831 | 447,004 | 370,977 | 155,586 | - In 2020, both total assets and total equity decreased, while total liabilities increased, indicating challenges in the company's financial structure[514](index=514&type=chunk)

China Shenghai Group Limited 中國升海集團有限公 司 ( formerly known as China Shenghai Food Holdings Company Limited ) ( 前稱中國升海食品控股有限公司) ( Incorporated in the Cayman Islands with limited liability ) ( 於開曼群島註冊成立之有限公司 ) Stock Code 股份代號 : 1676 2020 INTERIM REPORT 中期報告 CONTENTS 目錄 2 Corporate Information 公司資料 5 Management Discussion and Analysis 管理層討論與分析 14 Corporate Governance and Other Information 企業管治及其他資料 20 Consolidated Statement of Profit or Loss and Other Comprehensive Income – Unaudited 綜合損益及其他全面收益表－未經審核 22 Consol ...

ANNUAL REPORT 2019 年報 China Shenghai Food Holdings Company Limited 中國升海食品控股有限公司 | --- | --- | |-------|-------------------------------------------------------------------------------------------------------------------------------| | | | | | China Shenghai Food Holdings Company Limited 中國升海食品控股有限公 司 | | | Incorporated in the Cayman Islands with limited liability ) 於開曼群島註冊成立之有限公司 ) Stock Code 股份代號 : 1676 | CONTENTS 目錄 | --- | --- | |-------|-------------------------------------------------------------------- ...

[Corporate Information](index=2&type=section&id=Corporate%20Information) [Corporate Information Details](index=3&type=section&id=Corporate%20Information%20Details) This section outlines the company's board members, independent non-executive directors, committee compositions (audit, nomination, remuneration), company secretary, authorized representatives, auditors, legal advisors, principal bankers, registered office, Hong Kong share registrar, China headquarters, and principal place of business in Hong Kong - Executive Directors include Mr. Liu Rongru (Chairman and CEO) and Mr. Zhai Zhisheng; Mr. Jiang Dehua resigned on **August 6, 2019**[4](index=4&type=chunk) - Independent Non-executive Directors include Mr. Liu Dajin and Ms. Zheng Chengxin; Mr. Huang Xingluan resigned on **July 9, 2019**, and Mr. Chen Sixiong was appointed on the same day[4](index=4&type=chunk) - The Audit Committee is chaired by Ms. Zheng Chengxin, with members including Mr. Liu Dajin and Mr. Chen Sixiong[4](index=4&type=chunk) - The company's auditor is BDO Limited, Hong Kong[4](index=4&type=chunk) - The company website is **www.xmwofan.com**, and the stock code is **01676**[7](index=7&type=chunk) [Management Discussion and Analysis](index=6&type=section&id=Management%20Discussion%20and%20Analysis) [Business Review](index=6&type=section&id=Business%20Review) During the reporting period, the company primarily sold dried seafood, algae, fungi, and marine snack products in China, experiencing a **15.6%** revenue decrease to **RMB 274 million** and a gross margin decline to **24.5%** due to the US-China trade war, with supermarkets remaining the main sales channel - The company's business involves selling dried seafood, algae, fungi, and marine snack products in China[11](index=11&type=chunk) Revenue and Gross Profit Overview | Indicator | 2019 (RMB million) | 2018 (RMB million) | Year-on-year Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 274.0 | 324.5 | -15.6% | | Gross Profit | 67.2 | 83.3 | -19.4% | | Gross Profit Margin | 24.5% | 25.7% | -1.2 percentage points | - Product portfolio includes over **100 types of dried seafood**, **30 types of algae and fungi products**, and **60 types of marine snack products**[13](index=13&type=chunk) - Sales channels include supermarkets, trading companies, convenience stores, and other channels, with **supermarkets remaining the primary sales pillar**[14](index=14&type=chunk) [Outlook](index=7&type=section&id=Outlook) The company anticipates continued downward pressure on Chinese consumer confidence from escalating US-China trade tensions, particularly impacting demand for non-essential items like seafood and algae, while actively pursuing strategic adjustments and M&A opportunities to diversify revenue - US-China trade tensions are expected to exert **downward pressure on Chinese consumer confidence**, significantly reducing demand for non-essential items like seafood and algae[20](index=20&type=chunk) - Strategic adjustment: Due to economic uncertainty, the Group will no longer purchase land in mainland China, instead planning to **lease additional factory space** to maximize organic growth prospects[20](index=20&type=chunk) - Future development: Actively seeking **overseas and domestic collaborations and M&A opportunities** to broaden revenue streams and maintain growth momentum[20](index=20&type=chunk) [Operating Results and Financial Review](index=9&type=section&id=Operating%20Results%20and%20Financial%20Review) During the reporting period, the company experienced declines in revenue and gross profit, a decrease in selling and distribution expenses (though increasing as a percentage of revenue), a rise in administrative expenses due to increased depreciation, and a reduction in income tax expense, reflecting an overall adverse market impact on operating performance [Revenue](index=9&type=section&id=Revenue) During the reporting period, the company's revenue decreased by **15.6%** year-on-year to **RMB 274 million**, primarily due to reduced sales volume despite increased average selling prices, with dried seafood remaining the largest contributor at **51.4%** and supermarkets accounting for **52.7%** of total revenue Total Revenue | Indicator | 2019 (RMB thousand) | 2018 (RMB thousand) | Year-on-year Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 273,995 | 324,455 | -15.6% | Revenue by Product Category | Product Category | 2019 (RMB thousand) | Percentage (%) | 2018 (RMB thousand) | Percentage (%) | | :--- | :--- | :--- | :--- | :--- | | Dried Seafood Products | 140,734 | 51.4% | 160,867 | 49.6% | | Algae and Fungi Products | 110,801 | 40.4% | 133,746 | 41.2% | | Marine Snack Products | 22,460 | 8.2% | 29,842 | 9.2% | | **Total** | **273,995** | **100%** | **324,455** | **100%** | Revenue by Sales Channel | Sales Channel | 2019 (RMB thousand) | Percentage (%) | 2018 (RMB thousand) | Percentage (%) | | :--- | :--- | :--- | :--- | :--- | | Supermarkets | 144,342 | 52.7% | 170,613 | 52.6% | | Trading Companies | 60,398 | 22.0% | 75,996 | 23.4% | | Convenience Stores | 13,696 | 5.0% | 14,818 | 4.6% | | Other Sales Channels | 55,559 | 20.3% | 63,028 | 19.4% | | Food Companies | 21,635 | 7.9% | 22,942 | 7.0% | | Gift Shops | 14,144 | 5.2% | 18,129 | 5.6% | | Retail E-commerce | 18,658 | 6.8% | 19,121 | 5.9% | | Others | 1,083 | 0.4% | 2,819 | 0.9% | | Self-operated Website | 39 | 0.0% | 17 | 0.0% | | **Total** | **273,995** | **100%** | **324,455** | **100%** | [Gross Profit and Gross Profit Margin](index=11&type=section&id=Gross%20Profit%20and%20Gross%20Profit%20Margin) During the reporting period, the company's gross profit decreased by **19.4%** to **RMB 67.2 million**, with the gross profit margin declining from **25.7% to 24.5%**, reflecting a reduction across all product categories Gross Profit and Gross Profit Margin | Indicator | 2019 (RMB thousand) | Gross Profit Margin (%) | 2018 (RMB thousand) | Gross Profit Margin (%) | | :--- | :--- | :--- | :--- | :--- | | Gross Profit | 67,195 | 24.5% | 83,346 | 25.7% | Gross Profit and Gross Profit Margin by Product Category | Product Category | 2019 (RMB thousand) | Gross Profit Margin (%) | 2018 (RMB thousand) | Gross Profit Margin (%) | | :--- | :--- | :--- | :--- | :--- | | Dried Seafood Products | 34,521 | 24.5% | 41,546 | 25.8% | | Algae and Fungi Products | 27,745 | 25.0% | 34,667 | 25.9% | | Marine Snack Products | 4,929 | 21.9% | 7,133 | 23.9% | [Selling and Distribution Expenses](index=11&type=section&id=Selling%20and%20Distribution%20Expenses) Selling and distribution expenses decreased due to reduced product promotion and advertising in new markets, yet their percentage of revenue increased from **7.8% to approximately 8.1%** - Selling and distribution expenses decreased primarily due to the Group's **reduced product promotion and advertising** in new markets[32](index=32&type=chunk) - Selling and distribution expenses as a percentage of revenue increased from **7.8%** for the six months ended June 30, 2018, to approximately **8.1%**[32](index=32&type=chunk) [Administrative Expenses](index=12&type=section&id=Administrative%20Expenses) Administrative expenses increased primarily due to higher depreciation, with their percentage of revenue rising from **1.4% to approximately 2.4%** - Administrative expenses increased due to **higher depreciation expenses**[35](index=35&type=chunk) - Administrative expenses as a percentage of revenue increased from **1.4%** for the six months ended June 30, 2018, to approximately **2.4%**[35](index=35&type=chunk) [Income Tax Expense](index=12&type=section&id=Income%20Tax%20Expense) Income tax expense for the period was **RMB 10.4 million**, a decrease from **RMB 14.5 million** in the prior year, with the effective tax rate slightly declining to **26.4%** and Chinese subsidiaries subject to a **25%** corporate income tax rate Income Tax Expense | Indicator | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Income Tax Expense | 10,401 | 14,534 | - Effective tax rate: **26.4%** in 2019, **26.7%** in 2018[37](index=37&type=chunk) - Chinese subsidiaries are subject to a **25%** corporate income tax rate[37](index=37&type=chunk) [Liquidity and Financial Resources and Capital Structure](index=12&type=section&id=Liquidity%20and%20Financial%20Resources%20and%20Capital%20Structure) The Group maintained a healthy liquidity position during the reporting period, with increased net current assets and cash and cash equivalents, significantly reduced capital expenditures, and no bank borrowings, material capital commitments, or contingent liabilities [Cash Flows](index=12&type=section&id=Cash%20Flows) During the reporting period, the Group primarily met its working capital and other capital requirements through cash generated from operating activities and advances from shareholders - The Group primarily funds its working capital and other capital requirements through **cash generated from operating activities and advances from shareholders**[37](index=37&type=chunk) [Net Current Assets](index=13&type=section&id=Net%20Current%20Assets) Net current assets increased from approximately **RMB 371.1 million** as of December 31, 2018, to approximately **RMB 398.0 million** as of June 30, 2019, primarily due to the combined effect of increased inventories and cash and cash equivalents Net Current Assets | Date | Amount (RMB million) | | :--- | :--- | | December 31, 2018 | 371.1 | | June 30, 2019 | 398.0 | - The increase was primarily attributable to **increases in inventories and cash and cash equivalents**[39](index=39&type=chunk) [Cash and Cash Equivalent and Bank Borrowings](index=13&type=section&id=Cash%20and%20Cash%20Equivalent%20and%20Bank%20Borrowings) The Group maintained a healthy liquidity position during the reporting period, with cash and cash equivalents increasing to approximately **RMB 278.4 million** as of June 30, 2019, from **RMB 234.3 million** at the end of 2018 Cash and Cash Equivalents | Date | Amount (RMB million) | | :--- | :--- | | December 31, 2018 | 234.3 | | June 30, 2019 | 278.4 | [Gearing Ratio](index=13&type=section&id=Gearing%20Ratio) As of June 30, 2019, the gearing ratio remained at **zero** as the Group had no bank borrowings - As of June 30, 2019, the Group's gearing ratio was **zero** due to no bank borrowings[43](index=43&type=chunk) [Capital Expenditures](index=13&type=section&id=Capital%20Expenditures) For the six months ended June 30, 2019, the Group's capital expenditures were approximately **RMB 4 thousand**, a significant decrease from **RMB 3.467 million** in the corresponding period of 2018 Capital Expenditures | Period | Amount (RMB thousand) | | :--- | :--- | | Six months ended June 30, 2019 | 4 | | Six months ended June 30, 2018 | 3,467 | [Capital Commitments](index=13&type=section&id=Capital%20Commitments) As of June 30, 2019, the Group had no material capital commitments - As of June 30, 2019, the Group had **no material capital commitments**[44](index=44&type=chunk) [Contingent Liabilities](index=13&type=section&id=Contingent%20Liabilities) As of June 30, 2019, the Group had no material contingent liabilities or guarantees - As of June 30, 2019, the Group had **no material contingent liabilities or guarantees**[44](index=44&type=chunk) [Pledge of Assets](index=13&type=section&id=Pledge%20of%20Assets) As of June 30, 2019, the Group had not pledged any assets - As of June 30, 2019, the Group had **not pledged any assets**[44](index=44&type=chunk) [Use of Net Proceeds from Initial Public Offering](index=14&type=section&id=Use%20of%20Net%20Proceeds%20from%20Initial%20Public%20Offering) The company listed on July 18, 2017, with net proceeds from the global offering of approximately **HK$123.3 million**, and as of June 30, 2019, most funds were utilized as stated in the prospectus for market expansion, equipment procurement, quality control center construction, sales promotion, and general working capital - Net proceeds from the global offering were approximately **HK$123.3 million**[47](index=47&type=chunk) Use of IPO Proceeds (As of June 30, 2019) | Item | Percentage (%) | Available (HK$ million) | Utilized (HK$ million) | Unutilized (HK$ million) | | :--- | :--- | :--- | :--- | :--- | | Enhance market penetration in North and Central-West China | 36.3% | 44.8 | 37.9 | 6.9 | | Acquire new packaging equipment and establish quality control and testing center | 29.1% | 35.9 | 35.9 | – | | Expand and strengthen sales and promotion efforts | 24.6% | 30.3 | 23.0 | 7.3 | | General working capital | 10.0% | 12.3 | 12.3 | – | - The company has **no intention to use the proceeds for purposes other than those stated in the prospectus**[49](index=49&type=chunk) [Significant Investment, Material Acquisitions and Disposals of Subsidiaries and Associated Companies](index=15&type=section&id=Significant%20Investment,%20Material%20Acquisitions%20and%20Disposals%20of%20Subsidiaries%20and%20Associated%20Companies) During the reporting period, the company had no significant investments, material acquisitions, or disposals of subsidiaries, but will continue to identify potential investment or acquisition opportunities to meet the Group's development needs - The company had **no significant investments, material acquisitions, or disposals of subsidiaries**[51](index=51&type=chunk) - The Group currently has **no plans for any significant investments or acquisitions of capital assets**, but will continue to identify potential investment or acquisition opportunities as needed for its development[51](index=51&type=chunk) [Exchange Risk Exposure](index=15&type=section&id=Exchange%20Risk%20Exposure) The Group primarily operates in China, with most transactions, assets, and liabilities denominated in RMB, and the Board anticipates no significant impact from future currency fluctuations, having adopted no formal hedging policy during the reporting period - The Group primarily operates in China, with most operating transactions settled in **RMB**, and most assets and liabilities denominated in **RMB**[52](index=52&type=chunk) - The Board expects **future currency fluctuations will not materially affect the Group's operations**[52](index=52&type=chunk) - During the reporting period, the Group **did not adopt a formal hedging policy** and did not use any instruments for foreign exchange hedging[52](index=52&type=chunk) [Interim Dividend](index=15&type=section&id=Interim%20Dividend) The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2019 - The Board **does not recommend the payment of an interim dividend** for the six months ended June 30, 2019[55](index=55&type=chunk) [Corporate Governance and Other Information](index=16&type=section&id=Corporate%20Governance%20and%20Other%20Information) [Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares and Debentures](index=16&type=section&id=Directors'%20and%20Chief%20Executive's%20Interests%20and%20Short%20Positions%20in%20Shares,%20Underlying%20Shares%20and%20Debentures) As of June 30, 2019, Executive Director Mr. Liu Rongru held **52.5%** of the company's shares through Precisely Unique Limited, which he controls, making him a substantial controlling shareholder Directors' Shareholding Profile (As of June 30, 2019) | Director Name | Capacity/Nature of Interest | Number of Shares | Approximate Percentage of Shareholding (%) | | :--- | :--- | :--- | :--- | | Mr. Liu Rongru | Interest in controlled corporation/Long position | 525,000,000 | 52.5% | [Interests and Short Positions of the Substantial Shareholders in Shares and Underlying Shares of the Company](index=17&type=section&id=Interests%20and%20Short%20Positions%20of%20the%20Substantial%20Shareholders%20in%20Shares%20and%20Underlying%20Shares%20of%20the%20Company) As of June 30, 2019, substantial shareholders, including Precisely Unique Limited, Mr. Liu Rongru, and his spouse Ms. Lin Yueying, each held **52.5%** of the company's shares Substantial Shareholders' Shareholding Profile (As of June 30, 2019) | Name/Entity | Number of Shares | Approximate Percentage of Shareholding (%) | | :--- | :--- | :--- | | Precisely Unique Limited | 525,000,000 | 52.5% | | Mr. Liu Rongru | 525,000,000 | 52.5% | | Ms. Lin Yueying (Spouse of Mr. Liu Rongru) | 525,000,000 | 52.5% | [Share Option Scheme](index=18&type=section&id=Share%20Option%20Scheme) The company adopted a share option scheme on June 22, 2017, to reward eligible participants, with a maximum of **10%** of the total issued shares (**100 million shares**) available for grant, and no options had been granted as of the interim report date - The Share Option Scheme was adopted on **June 22, 2017**, to recognize and reward eligible participants who have contributed to the Group[65](index=65&type=chunk) - The maximum number of shares that may be granted under the Share Option Scheme shall not exceed **10%** of the total issued shares immediately following the completion of the global offering, which is **100,000,000 shares**[65](index=65&type=chunk) - As of the date of this interim report, **no share options have been granted** under the Share Option Scheme[70](index=70&type=chunk) [Compliance with the Corporate Governance Code](index=20&type=section&id=Compliance%20with%20the%20Corporate%20Governance%20Code) The company complied with the Corporate Governance Code during the reporting period, but a deviation occurred from August 6, 2019, with Mr. Liu Rongru assuming both Chairman and CEO roles, which the Board believes enhances strategy execution and operational efficiency, with plans to restore compliance in the future - The company has **complied with the Corporate Governance Code** for the six months ended June 30, 2019[74](index=74&type=chunk) - Effective **August 6, 2019**, Mr. Liu Rongru assumed both the roles of Chairman and Chief Executive Officer, deviating from Code Provision A.2.1 of the Corporate Governance Code, which stipulates that the roles of chairman and chief executive should be separate[75](index=75&type=chunk) - The Board believes this arrangement facilitates the **execution of the Group's business strategies and enhances operational efficiency**, and plans to identify a suitable candidate to restore compliance with the Code in the future[75](index=75&type=chunk) [Model Code for Securities Transactions by Directors](index=21&type=section&id=Model%20Code%20for%20Securities%20Transactions%20by%20Directors) The company adopted the Model Code as the standard for directors' securities transactions, and all directors confirmed their compliance with the trading standards during the reporting period - The company has **adopted the Model Code** as the code of conduct for directors' securities transactions[78](index=78&type=chunk) - All directors confirmed their **compliance with the trading standards** stipulated in the Model Code during the reporting period[78](index=78&type=chunk) [Audit Committee](index=21&type=section&id=Audit%20Committee) The Audit Committee, comprising three independent non-executive directors with Ms. Zheng Chengxin as Chair, has reviewed and discussed the Group's interim results for the six months ended June 30, 2019 - The Audit Committee comprises **three independent non-executive directors**, with **Ms. Zheng Chengxin appointed as Chair**[79](index=79&type=chunk) - The Audit Committee has **reviewed and discussed the Group's interim results** for the six months ended June 30, 2019[79](index=79&type=chunk) [Update of Directors' Information](index=21&type=section&id=Update%20of%20Directors'%20Information) On July 9, 2019, Mr. Huang Xingluan resigned as an independent non-executive director, and Mr. Chen Sixiong was appointed to the role and various committees; subsequently, on August 6, 2019, Mr. Jiang Dehua resigned as executive director and CEO due to health reasons, and Mr. Liu Rongru was appointed CEO - On **July 9, 2019**, Mr. Huang Xingluan resigned as an independent non-executive director, and Mr. Chen Sixiong was appointed as an independent non-executive director and a member of various committees[80](index=80&type=chunk) - Mr. Chen Sixiong is entitled to an **annual salary of HK$100,000** plus a discretionary bonus[82](index=82&type=chunk) - On **August 6, 2019**, Mr. Jiang Dehua resigned as executive director and chief executive officer due to health reasons, and Mr. Liu Rongru was appointed as the Group's chief executive officer[84](index=84&type=chunk) [Purchases, Sale and Redemption of Listed Securities](index=22&type=section&id=Purchases,%20Sale%20and%20Redemption%20of%20Listed%20Securities) For the six months ended June 30, 2019, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities on the Stock Exchange - For the six months ended June 30, 2019, **neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities** on the Stock Exchange[85](index=85&type=chunk) [Employees](index=22&type=section&id=Employees) As of June 30, 2019, the Group had **614** full-time employees, a decrease from **645** at the end of 2018, with a competitive remuneration policy based on performance, experience, and industry practice - As of June 30, 2019, the Group had a total of **614 full-time employees** (December 31, 2018: 645 employees)[86](index=86&type=chunk) - The Group's remuneration policy provides **competitive compensation** based on employee performance, experience, and prevailing industry practices[86](index=86&type=chunk) [Consolidated Statement of Profit or Loss and Other Comprehensive Income – Unaudited](index=22&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income%20%E2%80%93%20Unaudited) [Consolidated Statement of Profit or Loss and Other Comprehensive Income Summary](index=23&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income%20Summary) For the six months ended June 30, 2019, the company experienced declines in both revenue and profit, with revenue decreasing by **15.6%** year-on-year to **RMB 274 million** and profit for the period attributable to owners decreasing by **27.4%** to **RMB 29.043 million**, resulting in basic and diluted earnings per share of **RMB 0.029** Consolidated Statement of Profit or Loss and Other Comprehensive Income Summary (For the six months ended June 30) | Indicator | 2019 (RMB thousand) | 2018 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 273,995 | 324,455 | -15.6% | | Cost of sales | (206,800) | (241,109) | -14.2% | | Gross Profit | 67,195 | 83,346 | -19.4% | | Other income and other gains | 1,266 | 1,465 | -13.6% | | Selling and distribution expenses | (22,118) | (25,301) | -12.6% | | Administrative expenses | (6,695) | (4,667) | +43.5% | | Operating profit | 39,528 | 54,534 | -27.5% | | Profit before income tax | 39,444 | 54,534 | -27.6% | | Income tax expense | (10,401) | (14,534) | -28.5% | | Profit for the period attributable to owners of the company | 29,043 | 40,000 | -27.4% | | Earnings per share (Basic and diluted) | 0.029 | 0.040 | -27.5% | [Consolidated Statement of Financial Position – Unaudited](index=23&type=section&id=Consolidated%20Statement%20of%20Financial%20Position%20%E2%80%93%20Unaudited) [Consolidated Statement of Financial Position Summary](index=24&type=section&id=Consolidated%20Statement%20of%20Financial%20Position%20Summary) As of June 30, 2019, the company's total assets less current liabilities increased to **RMB 478.3 million**, and net assets rose to **RMB 476.0 million**, with net current assets also increasing primarily due to higher inventories and cash and cash equivalents Consolidated Statement of Financial Position Summary (As of June 30) | Indicator | 2019 (RMB thousand) | December 31, 2018 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | **Non-current Assets** | | | | | Property, plant and equipment | 74,405 | 34,913 | +113.1% | | Prepaid lease payments | 54 | 79 | -31.6% | | Deferred tax assets | 155 | 281 | -44.9% | | Deposits paid to suppliers | 5,661 | 5,616 | +0.8% | | **Total Non-current Assets** | **80,275** | **75,889** | **+5.8%** | | **Current Assets** | | | | | Inventories | 81,992 | 70,306 | +16.6% | | Trade receivables | 68,052 | 109,942 | -38.1% | | Deposits, prepayments and other receivables | 7,399 | 12,713 | -41.8% | | Cash and cash equivalents | 278,381 | 234,253 | +18.8% | | **Total Current Assets** | **435,824** | **427,214** | **+2.0%** | | **Current Liabilities** | | | | | Trade payables | 19,199 | 39,910 | -51.9% | | Accruals and other payables | 13,439 | 7,271 | +84.8% | | Lease liabilities | 1,012 | – | N/A | | Tax provisions | 4,176 | 8,918 | -53.1% | | **Total Current Liabilities** | **37,826** | **56,099** | **-32.6%** | | **Net Current Assets** | **397,998** | **371,115** | **+7.2%** | | **Total Assets Less Current Liabilities** | **478,273** | **447,004** | **+7.0%** | | **Non-current Liabilities** | | | | | Lease liabilities | 2,246 | – | N/A | | **Total Non-current Liabilities** | **2,246** | **–** | **N/A** | | **Net Assets** | **476,027** | **447,004** | **+6.5%** | | **Total Equity** | **476,027** | **447,004** | **+6.5%** | [Consolidated Statement of Changes in Equity – Unaudited](index=25&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Equity%20%E2%80%93%20Unaudited) [Consolidated Statement of Changes in Equity Summary](index=26&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Equity%20Summary) For the six months ended June 30, 2019, the company's total equity increased from **RMB 447.0 million** at the end of 2018 to **RMB 476.0 million**, primarily driven by the profit for the period Consolidated Statement of Changes in Equity Summary (For the six months ended June 30) | Indicator | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Total equity at beginning of period (January 1) | 447,004 | 410,132 | | Profit and total comprehensive income for the period | 29,023 | 40,089 | | Total equity at end of period (June 30) | 476,027 | 450,221 | [Consolidated Statement of Cash Flows – Unaudited](index=26&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows%20%E2%80%93%20Unaudited) [Consolidated Statement of Cash Flows Summary](index=27&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows%20Summary) For the six months ended June 30, 2019, net cash generated from operating activities significantly increased to **RMB 44.630 million**, while cash outflow from investing activities substantially decreased, and financing activities primarily involved lease payments, resulting in an increase in cash and cash equivalents to **RMB 278.4 million** at period-end Consolidated Statement of Cash Flows Summary (For the six months ended June 30) | Indicator | 2019 (RMB thousand) | 2018 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Net cash generated from operating activities | 44,630 | 39,346 | +13.4% | | Net cash generated from/(used in) investing activities | 453 | (45,364) | N/A (from negative to positive) | | Net cash used in financing activities | (591) | – | N/A | | Net increase/(decrease) in cash and cash equivalents | 44,492 | (6,018) | N/A (from negative to positive) | | Cash and cash equivalents at end of period | 278,381 | 278,811 | -0.15% | [Notes to the Unaudited Interim Financial Report](index=28&type=section&id=Notes%20to%20the%20Unaudited%20Interim%20Financial%20Report) [Corporate Information and Basis of Preparation](index=29&type=section&id=Corporate%20Information%20and%20Basis%20of%20Preparation) The company, incorporated in the Cayman Islands on January 8, 2016, primarily engages in investment holding, with the Group's main business being the packaging and sale of seafood products, listed on the HKEX Main Board on July 18, 2017, and its unaudited interim financial report is prepared in accordance with HKAS 34 - The company was incorporated as a limited company in the Cayman Islands under the Companies Law on **January 8, 2016**[106](index=106&type=chunk) - The company's principal business is **investment holding**, while the Group's principal business is the **packaging and sale of seafood products**[106](index=106&type=chunk) - The company's shares were **listed on the Main Board of The Stock Exchange of Hong Kong Limited on July 18, 2017**[106](index=106&type=chunk) - The unaudited condensed interim financial statements have **not been audited or reviewed** and are prepared in accordance with **HKAS 34**[106](index=106&type=chunk) [Changes in Accounting Policies](index=31&type=section&id=Changes%20in%20Accounting%20Policies) Effective January 1, 2019, the Group first applied HKFRS 16 "Leases" using a modified retrospective approach, recognizing the cumulative effect as an adjustment to the opening equity balance without restating comparative information, which introduced a single lessee accounting model requiring capitalization of most leases - The Group initially applied **HKFRS 16 "Leases"** from **January 1, 2019**[110](index=110&type=chunk) - The Group has elected to apply the **modified retrospective approach**, thus recognizing the cumulative effect of initial application as an adjustment to the opening balance of equity as of **January 1, 2019**, with comparative information not restated[111](index=111&type=chunk) - HKFRS 16 introduces a **single accounting model** requiring lessees to recognize right-of-use assets and lease liabilities for all leases, except for short-term leases and leases of low-value assets[112](index=112&type=chunk) [HKFRS 16, Leases](index=31&type=section&id=HKFRS%2016,%20Leases) This section details the introduction of HKFRS 16 and its impact on the Group's accounting policies, including new lease definitions, lessee accounting treatment, lease investment properties, and lessor accounting, with the Group opting not to separate lease and non-lease components and to assess low-value asset leases individually for capitalization - HKFRS 16 defines a lease based on whether a customer **controls the use of an identified asset for a period of time**[115](index=115&type=chunk) - Lessee accounting: Eliminates the requirement for lessees to classify leases as operating or finance leases, instead requiring **capitalization of all leases** (except for short-term leases and leases of low-value assets)[118](index=118&type=chunk) - Leased investment properties: Continue to be **accounted for at fair value**[124](index=124&type=chunk) - Lessor accounting: The accounting policies applicable to the Group as a lessor **remain largely unchanged** from those in HKAS 17[126](index=126&type=chunk) [Critical accounting judgements and sources of estimation uncertainty in applying the above accounting policies](index=38&type=section&id=Critical%20accounting%20judgements%20and%20sources%20of%20estimation%20uncertainty%20in%20applying%20the%20above%20accounting%20policies) In applying HKFRS 16, the Group makes significant judgments in classifying leasehold land and building interests held for own use and in assessing lease terms, including renewal options, which impact the measurement of right-of-use assets and lease liabilities - The Group classifies leasehold land and building interests held for own use into **two separate asset components**: the ownership interest is accounted for under the revaluation model, while the right to use the property under the lease agreement is accounted for at depreciated cost[131](index=131&type=chunk) - In determining the lease term, the Group assesses the **likelihood of exercising renewal options**, considering all relevant facts and circumstances, including favorable terms, leasehold improvements, and the importance of the underlying asset to the Group's operations[135](index=135&type=chunk) [Transitional Impact](index=40&type=section&id=Transitional%20Impact) Upon transition to HKFRS 16, the Group recognized an opening balance of lease liabilities of **RMB 3.767 million** as of January 1, 2019, with a corresponding adjustment to right-of-use assets, and no significant impact on leases previously classified as finance leases - Upon transition to HKFRS 16 (i.e., **January 1, 2019**), the Group recognized an opening balance of lease liabilities of **RMB 3.767 million**[139](index=139&type=chunk) Impact of HKFRS 16 on Consolidated Statement of Financial Position (January 1, 2019) | Consolidated Statement of Financial Position Item | December 31, 2018 Carrying Amount (RMB thousand) | Operating Lease Contracts Capitalized (RMB thousand) | January 1, 2019 Carrying Amount (RMB thousand) | | :--- | :--- | :--- | :--- | | Property, plant and equipment | 34,913 | 3,767 | 38,680 | | Total non-current assets | 75,889 | 3,767 | 79,656 | | Lease liabilities (current) | – | 1,158 | 1,158 | | Net current assets | 371,115 | (1,158) | 369,957 | | Current liabilities | 56,099 | 1,158 | 57,257 | | Total assets less current liabilities | 447,004 | 2,609 | 449,613 | | Lease liabilities (non-current) | – | 2,609 | 2,609 | | Total non-current liabilities | – | 2,609 | 2,609 | | Net assets | 447,004 | – | 447,004 | Net Book Value of Right-of-Use Assets (By Class of Underlying Asset) | Asset Class | January 1, 2019 (RMB thousand) | June 30, 2019 (RMB thousand) | | :--- | :--- | :--- | | Other properties leased for own use | 3,767 | 3,220 | | Plant, machinery and equipment | 34,913 | 71,185 | [Lease Liabilities](index=46&type=section&id=Lease%20Liabilities) As of June 30, 2019, the present value of the Group's lease liabilities was **RMB 3.258 million**, with **RMB 1.012 million** due within one year Maturity Analysis of Lease Liabilities | Term | June 30, 2019 (RMB thousand) | January 1, 2019 (RMB thousand) | | :--- | :--- | :--- | | Within 1 year | 1,012 | 1,158 | | After 1 year but within 2 years | 897 | 969 | | After 2 years but within 5 years | 1,349 | 1,640 | | **Present Value of Lease Liabilities** | **3,258** | **3,767** | [Revenue and Segment Information](index=47&type=section&id=Revenue%20and%20Segment%20Information) The Group's revenue is recognized from the sale of goods when control transfers to customers, operating as a single reportable segment for packaging and selling dried seafood, algae, fungi, and marine snack products, with no single customer contributing **10%** or more of revenue, and all sales occurring within China - Revenue is recognized when **control of the goods is transferred to the customer**[154](index=154&type=chunk) - The Group has **only one reportable and operating segment**: the packaging and sale of dried seafood, algae and fungi products, and marine snack products[155](index=155&type=chunk) - For the six months ended June 30, 2019, **no customer contributed 10% or more** of the Group's revenue[156](index=156&type=chunk) - All of the Group's sales by geographical location are **within mainland China**[156](index=156&type=chunk) [Seasonality of Operations](index=47&type=section&id=Seasonality%20of%20Operations) The Group's product sales typically peak before traditional Chinese holidays, and the company mitigates seasonal impacts by diversifying its product range to maintain stable overall sales volume and revenue - The Group's product sales are typically **higher before traditional Chinese holidays**[158](index=158&type=chunk) - The Group mitigates the seasonal impact by **diversifying its product range** to maintain stable overall sales volume and revenue[158](index=158&type=chunk) [Profit Before Income Tax](index=48&type=section&id=Profit%20Before%20Income%20Tax) Profit before income tax is stated after deducting items such as amortization of prepaid lease payments, cost of inventories, research expenses, depreciation of plant and equipment, depreciation of right-of-use assets, and staff costs Deductions from Profit Before Income Tax (For the six months ended June 30) | Item | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Amortisation of prepaid lease payments | 25 | 25 | | Cost of inventories recognized | 206,800 | 241,109 | | Research expenses | 318 | 380 | | Depreciation of plant and equipment | 3,731 | 119 | | Depreciation of right-of-use assets | 546 | 686 | | Staff costs (salaries and wages) | 17,339 | 12,997 | | Staff costs (retirement benefit scheme contributions) | 1,210 | 1,430 | [Income Tax Expense_Notes](index=48&type=section&id=Income%20Tax%20Expense_Notes) Income tax expense for the reporting period was **RMB 10.401 million**, primarily comprising China corporate income tax and deferred tax expense, with Chinese subsidiaries subject to a **25%** corporate income tax rate and no Hong Kong profits tax provision due to no taxable profit Components of Income Tax Expense (For the six months ended June 30) | Item | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Current tax – China corporate income tax | 10,275 | 14,477 | | Deferred tax expense | 126 | 57 | | **Total** | **10,401** | **14,534** | - The tax rate for the company's Chinese subsidiaries is **25%**[166](index=166&type=chunk) - As the Group recorded **no taxable profit in Hong Kong** during the reporting period, no provision for Hong Kong profits tax was made[166](index=166&type=chunk) [Earnings Per Share](index=49&type=section&id=Earnings%20Per%20Share) For the six months ended June 30, 2019, basic and diluted earnings per share were **RMB 0.029**, a decrease from **RMB 0.040** in the prior year, with no potential dilutive ordinary shares during the period Basic and Diluted Earnings Per Share | Period | Earnings Per Share (RMB) | | :--- | :--- | | Six months ended June 30, 2019 | 0.029 | | Six months ended June 30, 2018 | 0.040 | - Basic earnings per share are calculated based on the profit attributable to owners of the company of **RMB 29,043,000** and the weighted average of **1,000,000,000 shares**[166](index=166&type=chunk) - There were **no potential dilutive ordinary shares** for the six months ended June 30, 2019, and 2018, thus diluted earnings per share were the same as basic earnings per share[167](index=167&type=chunk) [Plant and Equipment](index=49&type=section&id=Plant%20and%20Equipment) For the six months ended June 30, 2019, the Group's cost of acquiring plant and equipment items was approximately **RMB 4 thousand**, a significant decrease from **RMB 3.467 million** in the corresponding period of 2018 Acquisition Cost of Plant and Equipment | Period | Amount (RMB thousand) | | :--- | :--- | | Six months ended June 30, 2019 | 4 | | Six months ended June 30, 2018 | 3,467 | [Non-current Prepayments for Acquisition of Plant and Equipment](index=50&type=section&id=Non-current%20Prepayments%20for%20Acquisition%20of%20Plant%20and%20Equipment) This amount primarily refers to prepayments for leasehold improvements and the acquisition of equipment and machinery - This amount primarily refers to **prepayments for leasehold improvements and the acquisition of equipment and machinery**[169](index=169&type=chunk) [Inventories](index=50&type=section&id=Inventories) As of June 30, 2019, total inventories increased to **RMB 81.992 million**, primarily comprising raw materials and finished goods, with no inventory write-downs during the reporting period Inventory Composition (As of June 30) | Item | 2019 (RMB thousand) | December 31, 2018 (RMB thousand) | | :--- | :--- | :--- | | Raw materials | 15,390 | 13,752 | | Finished goods | 66,602 | 56,554 | | **Total** | **81,992** | **70,306** | - There were **no write-downs of inventories** for the six months ended June 30, 2019, and 2018[171](index=171&type=chunk) [Trade Receivables](index=51&type=section&id=Trade%20Receivables) As of June 30, 2019, net trade receivables significantly decreased to **RMB 68.052 million** from **RMB 109.942 million** at the end of 2018, with the Group granting trade customers credit periods of **30 to 180 days** and all receivables expected to be recovered within one year Ageing Analysis of Trade Receivables (As of June 30) | Ageing | 2019 (RMB thousand) | December 31, 2018 (RMB thousand) | | :--- | :--- | :--- | | 0-30 days | 43,153 | 73,329 | | 31-60 days | 23,453 | 34,245 | | 61-90 days | 1,446 | 2,368 | | **Total** | **68,052** | **109,942** | - The Group's policy is to grant trade customers a credit period generally ranging from **30 to 180 days**[175](index=175&type=chunk) - All trade receivables are **expected to be recovered within one year**[175](index=175&type=chunk) [Deposits, Prepayments and Other Receivables](index=51&type=section&id=Deposits,%20Prepayments%20and%20Other%20Receivables) As of June 30, 2019, total deposits, prepayments, and other receivables decreased to **RMB 7.399 million** from **RMB 12.713 million** at the end of 2018, with a secured loan fully repaid on June 28, 2019 Composition of Deposits, Prepayments and Other Receivables (As of June 30) | Item | 2019 (RMB thousand) | December 31, 2018 (RMB thousand) | | :--- | :--- | :--- | | Secured loan receivable | – | 7,532 | | Others | 7,363 | 4,945 | | Amount due from a related party | 36 | 236 | | **Total** | **7,399** | **12,713** | - The **secured loan was fully repaid on June 28, 2019**[178](index=178&type=chunk) - Amount due from a related party is **unsecured, interest-free**, and repayable upon the expiry of the lease term[178](index=178&type=chunk) [Trade Payables](index=53&type=section&id=Trade%20Payables) As of June 30, 2019, trade payables significantly decreased to **RMB 19.199 million** from **RMB 39.910 million** at the end of 2018, with a typical credit period of **30 days** and book values considered to approximate fair values Ageing Analysis of Trade Payables (As of June 30) | Ageing | 2019 (RMB thousand) | December 31, 2018 (RMB thousand) | | :--- | :--- | :--- | | 0-30 days | 19,199 | 39,910 | - The credit period for trade payables varies depending on terms agreed with different suppliers, typically **30 days**[181](index=181&type=chunk) - Trade payables are short-term in nature, and their **carrying amounts are considered to approximate their fair values**[182](index=182&type=chunk) [Accruals and Other Payables](index=54&type=section&id=Accruals%20and%20Other%20Payables) As of June 30, 2019, total accruals and other payables significantly increased to **RMB 13.439 million** from **RMB 7.271 million** at the end of 2018, primarily due to increased payables for the acquisition of plant and equipment Composition of Accruals and Other Payables (As of June 30) | Item | 2019 (RMB thousand) | December 31, 2018 (RMB thousand) | | :--- | :--- | :--- | | Payables for acquisition of plant and equipment | 6,790 | 1,790 | | Others | 6,649 | 5,481 | | **Total** | **13,439** | **7,271** | [Capital, Reserves and Dividends](index=54&type=section&id=Capital,%20Reserves%20and%20Dividends) The Board does not recommend an interim dividend, and the company's authorized share capital is **HK$100 million**, with an issued share capital of **HK$10 million** divided into **1 billion fully paid shares** [Dividends](index=54&type=section&id=Dividends) The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2019 - The Board **does not recommend the payment of an interim dividend** for the six months ended June 30, 2019[184](index=184&type=chunk) [Share Capital](index=54&type=section&id=Share%20Capital) The company, incorporated on January 8, 2016, has an authorized share capital of **HK$100 million** divided into **10 billion shares** of HK$0.01 each, with an issued share capital of **HK$10 million** comprising **1 billion fully paid shares** as of June 30, 2019 - As of June 30, 2019, the company's authorized share capital was **HK$100,000,000**, divided into **10,000,000,000 shares**[188](index=188&type=chunk) - As of June 30, 2019, the issued share capital was **HK$10,000,000**, divided into **1,000,000,000 shares**, all fully paid or credited as fully paid[188](index=188&type=chunk) - Historical changes in share capital include a **share split and increase in authorized share capital on June 21, 2017**, and the **global offering of 250,000,000 ordinary shares on July 18, 2017**[186](index=186&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk) [Material Related Party Transactions](index=57&type=section&id=Material%20Related%20Party%20Transactions) The Group's related parties include controlling shareholder and director Mr. Liu Rongru, companies controlled by his spouse, and his cousins, with the reporting period seeing lease expenses and procurement transactions with these parties, alongside disclosure of key management personnel remuneration [Name and Relationship with Related Parties](index=57&type=section&id=Name%20and%20Relationship%20with%20Related%20Parties) The Group's related parties include Mr. Liu Rongru (controlling shareholder and director), Xiamen Yehong Food Co., Ltd. (controlled by the controlling shareholder's spouse), and Mr. Liu Rongjian and Mr. Liu Rongzhong (Mr. Liu Rongru's cousins) - Related parties include: **Mr. Liu Rongru** (controlling shareholder and director), **Xiamen Yehong Food Co., Ltd.** (controlled by the spouse of the controlling shareholder), **Mr. Liu Rongjian** (Mr. Liu Rongru's cousin), and **Mr. Liu Rongzhong** (Mr. Liu Rongru's cousin)[191](index=191&type=chunk) [Significant Related Party Transactions](index=58&type=section&id=Significant%20Related%20Party%20Transactions) During the reporting period, the Group engaged in lease expenses and procurement transactions with related parties, including **RMB 100 thousand** in lease expenses with Xiamen Yehong Food Co., Ltd., and procurement transactions of **RMB 356 thousand** and **RMB 508 thousand** with Mr. Liu Rongjian and Mr. Liu Rongzhong, respectively Significant Related Party Transactions (For the six months ended June 30) | Related Party | Type of Transaction | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | :--- | | Xiamen Yehong Food Co., Ltd. | Cost of sales – Lease expenses | 60 | 60 | | Xiamen Yehong Food Co., Ltd. | Administrative expenses – Lease expenses | 40 | 40 | | Mr. Liu Rongjian | Cost of sales – Purchases | 356 | 139 | | Mr. Liu Rongzhong | Cost of sales – Purchases | 508 | 273 | - The Directors confirmed that the aforementioned procurement transactions were entered into on **terms similar to those entered into with third parties**[194](index=194&type=chunk) [Key Management Personnel Remuneration](index=59&type=section&id=Key%20Management%20Personnel%20Remuneration) During the reporting period, the Group's total remuneration for key management personnel was **RMB 2.106 million**, slightly lower than **RMB 2.132 million** in the corresponding period of 2018 Key Management Personnel Remuneration (For the six months ended June 30) | Item | 2019 (RMB thousand) | 2018 (RMB thousand) | | :--- | :--- | :--- | | Short-term benefits | 2,084 | 2,098 | | Contributions to retirement benefit schemes | 22 | 34 | | **Total** | **2,106** | **2,132** | [Commitments](index=59&type=section&id=Commitments) As of June 30, 2019, the Group had no outstanding capital commitments, and total future minimum lease payments under irrevocable operating leases as of December 31, 2018, amounting to **RMB 7.210 million**, have been recognized as lease liabilities under HKFRS 16 since January 1, 2019 [Capital Commitments](index=59&type=section&id=Capital%20Commitments) As of June 30, 2019, the Group had no outstanding capital commitments - As of June 30, 2019, the Group had **no outstanding capital commitments**[197](index=197&type=chunk) [Operating Lease Commitments](index=60&type=section&id=Operating%20Lease%20Commitments) As of December 31, 2018, total future minimum lease payments under irrevocable operating leases amounted to **RMB 7.210 million**, which have been recognized as lease liabilities in the statement of financial position under HKFRS 16 since January 1, 2019 Operating Lease Commitments as of December 31, 2018 (RMB thousand) | Term | Amount | | :--- | :--- | | Within 1 year | 2,554 | | Second to fifth year (inclusive) | 4,656 | | **Total** | **7,210** | - From **January 1, 2019**, future lease payments are recognized as lease liabilities in the statement of financial position in accordance with the policy set out in Note 2[201](index=201&type=chunk) [Fair Value Measurement of Financial Instruments](index=61&type=section&id=Fair%20Value%20Measurement%20of%20Financial%20Instruments) As of June 30, 2019, and 2018, the carrying amounts of the Group's principal financial instruments did not significantly differ from their fair values, as they were all immediately or short-term due - The Group's principal financial instruments include **trade receivables, other receivables, bank balances and cash, trade payables, and other payables**[203](index=203&type=chunk) - As of June 30, 2019, and 2018, the **carrying amounts of all financial instruments did not significantly differ from their fair values**, as they were all immediately or short-term due[204](index=204&type=chunk) [Comparative Figures](index=61&type=section&id=Comparative%20Figures) The Group initially adopted HKFRS 16 using the modified retrospective method on January 1, 2019, and consequently, comparative information has not been restated - The Group initially adopted **HKFRS 16 using the modified retrospective method on January 1, 2019**[205](index=205&type=chunk) - Under this method, **comparative information has not been restated**[205](index=205&type=chunk)

| --- | --- | --- | |-------|-------|------------------------------------------------------------------------------------------------------------------------------------| | | | | | | | China Shenghai Food Holdings Company Limited | | | | 中 國 升 海 食 品 控 股 有 限 公 司 ( Incorporated in the Cayman Islands with limited liability ) ( 於開曼群島註冊成立之有限公司 ) | | | | Stock Code 股份代號：1676 2018 ANNUAL REPORT 年報 | | --- | --- | |-------|----------------------------------------------------------------------------------| | | | | | ...