[Cover](index=1&type=section&id=%E5%B0%81%E9%9D%A2) The report's cover page [Company Information](index=2&type=section&id=%E5%85%AC%E5%8F%B8%E8%B3%87%E6%96%99) This section provides fundamental company information for Yunshangyi Holdings Limited as of June 28, 2019, including its registered office, principal place of business, board members, committee compositions, principal bankers, and auditor [Chairman's Statement](index=4&type=section&id=%E4%B8%BB%E5%B8%AD%E5%A0%B1%E5%91%8A) The Chairman's Statement reviews the financial performance and challenges for the 2018/2019 fiscal year, noting a decline in revenue and gross profit due to rising production costs, US tariffs, and Brexit, while business with a major Spanish client continued to grow - Financial performance challenged: Revenue and gross profit declined this year due to rising production costs, US trade tariffs, and Brexit[8](index=8&type=chunk) - Core client growth: Despite overall market difficulties, business with a major Spanish fashion retailer achieved continuous growth, becoming a key highlight[8](index=8&type=chunk) - Strategic diversification: To mitigate risks and explore new markets, the Group is considering suitable acquisition and equity investment opportunities, having announced a proposed acquisition of a corporation holding SFC Type 1, 4, and 6 licenses and a money lender's license on March 6, 2019[9](index=9&type=chunk) - Outlook: Future revenue, gross profit, and net profit margins are expected to remain under significant pressure, with the Group focusing on leveraging its supply chain management solutions and actively diversifying its business and revenue streams to address challenges[9](index=9&type=chunk) [Management Discussion and Analysis](index=6&type=section&id=%E7%AE%A1%E7%90%86%E5%B1%A4%E8%A8%8E%E8%AB%96%E5%8F%8A%E5%88%86%E6%9E%90) This section provides an in-depth analysis of the Group's operational and financial performance, liquidity, capital structure, and future outlook [Business Review](index=6&type=section&id=%E6%A5%AD%E5%8B%99%E5%9B%9E%E9%A1%A7) The Group primarily engages in apparel product sales and supply chain management solutions, with revenue and gross profit declining by 33.2% and 61.7% respectively this year due to market challenges, while profit attributable to owners increased by 19.1% driven by a positive return of approximately HK$37.8 million from securities investments | Indicator | Change | Reason | | :--- | :--- | :--- | | Revenue | Decreased by approximately 33.2% year-on-year | Challenging global business environment | | Gross Profit | Decreased by approximately 61.7% year-on-year | Challenging global business environment | | Profit attributable to owners of the Company | Increased by approximately 19.1% year-on-year | Primarily due to a positive return of approximately HK$37.8 million from securities investments | [Financial Review](index=6&type=section&id=%E8%B2%A1%E5%8B%99%E5%9B%9E%E9%A1%8C) In the current fiscal year, the Group's revenue decreased by 33.2% to HK$186.5 million and gross profit by 61.7% to HK$20.9 million, with gross margin falling from 19.5% to 11.2%, while profit attributable to owners of the Company grew 19.1% to HK$18.7 million, primarily due to positive returns from listed investments | Financial Indicator | FY2019 (HK$ Million) | FY2018 (HK$ Million) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Revenue | 186.5 | 279.4 | -33.2% | | Cost of Sales | 165.6 | 224.8 | -26.3% | | Gross Profit | 20.9 | 54.6 | -61.7% | | Gross Margin | 11.2% | 19.5% | -8.3pp | | General and Administrative Expenses | 32.3 | 26.5 | +21.9% | | Profit attributable to owners of the Company | 18.7 | 15.7 | +19.1% | - Four major customers accounted for **64.9% of total revenue**, with the largest customer contributing **22.9%**, and sales to a Spanish customer significantly increased despite overall revenue decline[12](index=12&type=chunk) - The increase in general and administrative expenses was primarily due to **share-based payment expenses** arising from the grant of share options under the Company's share option scheme[16](index=16&type=chunk) [Liquidity and Financial Resources](index=7&type=section&id=%E6%B5%81%E5%8B%95%E8%B3%87%E9%87%91%E5%8F%8A%E8%B2%A1%E5%8B%99%E8%B3%87%E6%BA%90) As of March 31, 2019, the Group maintained a robust financial position with net current assets increasing to HK$110.5 million, cash and bank balances at HK$52.3 million, and a significantly improved current ratio of 12.8 from 3.4, alongside a reduced gearing ratio of 0.06 times from 0.40 times | Indicator | March 31, 2019 | March 31, 2018 | | :--- | :--- | :--- | | Net Current Assets | HK$110.5 Million | HK$77.8 Million | | Cash and Bank Balances | HK$52.3 Million | HK$42.4 Million | | Current Ratio | 12.8 | 3.4 | | Gearing Ratio | 0.06 times | 0.40 times | [Capital Structure and Significant Investments](index=8&type=section&id=%E8%B3%87%E6%9C%AC%E7%B5%90%E6%A7%8B%E8%88%87%E9%87%8D%E5%A4%A7%E6%8A%95%E8%B3%87) This year, the Group successfully raised approximately HK$58.6 million net proceeds through a placement of 123.8 million shares, primarily for seeking acquisition and equity investment opportunities and supplementing working capital, while holding listed securities investments valued at approximately HK$74.8 million as of March 31, 2019, which generated significant unrealized and realized gains - A placement of **123.8 million shares** at HK$0.485 per share was completed on June 1, 2018, raising net proceeds of approximately **HK$58.6 million**[23](index=23&type=chunk) Placement Proceeds Utilization (As of March 31, 2019) | Intended Use | Revised Allocation (HK$ Million) | Utilized (HK$ Million) | Unutilized (HK$ Million) | | :--- | :--- | :--- | :--- | | Procurement and development of own brands | - | - | - | | Enhancement of supply chain and expansion of sales network | - | - | - | | General working capital | 16.1 | 10.1 | 6.0 | | Seeking suitable acquisition and equity investment opportunities | 42.5 | 42.5 | - | | **Total** | **58.6** | **52.6** | **6.0** | Significant Financial Asset Investments (As of March 31, 2019) | Security Name | Investment Cost (HK$ Thousand) | Fair Value (HK$ Thousand) | Unrealized Gain/(Loss) (HK$ Thousand) | Realized Gain (HK$ Thousand) | | :--- | :--- | :--- | :--- | :--- | | Deson Group Holdings Limited | 19,940 | 42,130 | 27,640 | 11,529 | | Evergrande Health Industry Group Limited | 9,300 | 9,190 | (110) | - | - Note: The Group sold all its shares in Debao Group Holdings after March 31, 2019, resulting in a loss of **HK$32.9 million** to be recognized in the next fiscal year[27](index=27&type=chunk) - The Company intends to acquire a corporation holding SFC Type 1, 4, and 6 licenses and a money lender's license for a consideration of **HK$42 million**, which constitutes a discloseable and connected transaction[30](index=30&type=chunk) [Human Resources and Compliance](index=10&type=section&id=%E4%BA%BA%E5%8A%9B%E8%B3%87%E6%BA%90%E8%88%87%E5%90%88%E8%A6%8F) As of March 31, 2019, the Group employed 26 full-time staff, a decrease from 33 in the prior year, with total employee benefit expenses amounting to approximately HK$17.3 million, and the Group has complied with all relevant laws and regulations in its principal business operations in Hong Kong | Indicator | March 31, 2019 | March 31, 2018 | | :--- | :--- | :--- | | Number of Full-time Employees | 26 | 33 | | Total Employee Benefit Expenses | HK$17.3 Million | HK$19.2 Million | [Use of Proceeds and Comparison of Business Objectives with Actual Progress](index=11&type=section&id=%E6%89%80%E5%BE%97%E6%AC%BE%E9%A0%85%E7%94%A8%E9%80%94%E5%8F%8A%E6%A5%AD%E5%8B%99%E7%9B%AE%E6%A8%93%E8%88%87%E5%AF%A6%E9%9A%9B%E6%A5%AD%E5%8B%99%E9%80%B2%E5%B1%95%E7%9A%84%E6%AF%94%E8%BC%83) This section reviews the utilization of approximately HK$5.1 million raised from the GEM listing on October 7, 2015, confirming that all proceeds have been fully utilized as per the adjusted business strategies outlined in the prospectus, primarily for expanding customer geographical coverage, broadening the manufacturer base, developing design capabilities, diversifying product categories, and supplementing general working capital 2015 Listing Proceeds Utilization | Business Strategy and Objective | Adjusted Allocation (HK$ Thousand) | Actual Utilization (HK$ Thousand) | | :--- | :--- | :--- | | Broaden customer geographical coverage | 1,746 | 1,746 | | Broaden third-party manufacturer geographical base | 802 | 802 | | Develop design and development capabilities | 1,233 | 1,233 | | Broaden product categories | 964 | 964 | | General working capital | 330 | 330 | | **Total** | **5,075** | **5,075** | [Outlook](index=11&type=section&id=%E5%89%8D%E6%99%AF) Looking ahead, the Group anticipates continued pressure on sales and gross margins due to global economic and political uncertainties, but will deepen cooperation with its major Spanish client and actively seek acquisition and equity investment opportunities, particularly in Hong Kong's financial sector, to diversify revenue streams - In core business, sales contracts with the major Spanish client are expected to grow, leading to more cooperation opportunities[38](index=38&type=chunk) - Facing challenges: The US-China trade war and Brexit are expected to continue challenging the Group's gross profit[39](index=39&type=chunk) - Strategic direction: The Group will diversify revenue streams by seeking suitable acquisition and equity investment opportunities, especially in the Hong Kong financial industry, and anticipates completing ongoing acquisitions[39](index=39&type=chunk) [Biographical Details of Directors and Senior Management](index=13&type=section&id=%E8%91%A3%E4%BA%8B%E5%8F%8A%E9%AB%98%E7%B4%9A%E7%AE%A1%E7%90%86%E5%B1%A4%E5%B1%A5%E6%AD%B7%E8%A9%B3%E6%83%85) This section provides detailed biographical information for the Company's executive directors, non-executive directors, independent non-executive directors, and senior management members, covering their age, academic backgrounds, professional qualifications, and extensive work experience across banking, finance, apparel, legal, and media sectors [Corporate Governance Report](index=18&type=section&id=%E4%BC%81%E6%A5%AD%E7%AE%A1%E6%B2%BB%E5%A0%B1%E5%91%8A) This report outlines the Company's corporate governance practices during the reporting period, demonstrating its commitment to maintaining high standards and compliance with the Listing Rules' Corporate Governance Code, detailing the Board's composition and responsibilities, the roles of Chairman and CEO, committee structures, meeting attendance, and key work, alongside director professional development, risk management, internal controls, financial reporting, shareholder rights, and the newly adopted dividend policy [Board and Committees](index=18&type=section&id=%E8%91%A3%E4%BA%8B%E6%9C%83%E8%88%87%E5%A7%94%E5%93%A1%E6%9C%83) During the reporting period, the Board held 11 meetings, supported by Audit, Remuneration, and Nomination Committees, all chaired by independent non-executive directors, which regularly convened to fulfill their duties, reviewing annual results, internal controls, director remuneration, and board structure, with a Nomination Policy adopted from January 1, 2019, and the Board affirming that the combined roles of Chairman and CEO, held by Mr. Zhang Lei, contribute to robust leadership in the Group's best interest - The roles of Chairman and Chief Executive Officer are held by the same individual, Mr. Zhang Lei, which deviates from Code Provision A.2.1 of the Corporate Governance Code[55](index=55&type=chunk) Board and Committee Meeting Attendance (FY2019) | Meeting Type | Number of Meetings | | :--- | :--- | | Board Meetings | 11 | | Audit Committee Meetings | 2 | | Remuneration Committee Meetings | 3 | | Nomination Committee Meetings | 3 | - The Audit Committee reviewed the Group's internal control system and deemed it effective and adequate during the reporting period[60](index=60&type=chunk) [Accountability, Audit and Risk Management](index=23&type=section&id=%E5%95%8F%E8%B2%AC%E3%80%81%E5%AF%A9%E6%A0%B8%E8%88%87%E9%A2%A8%E9%9A%AA%E7%AE%A1%E7%90%86) The Board affirms its responsibility for preparing true and fair financial statements, having established a three-tier risk management approach and continuously reviewing internal control systems, which were deemed effective and adequate by the Audit Committee for the year ended March 31, 2019, with audit services fees of HK$1.2 million paid to PricewaterhouseCoopers this year - The Board, through the Audit Committee, conducted an annual review and considered the Group's risk management and internal control systems (covering financial, operational, and compliance controls) to be effective and adequate[71](index=71&type=chunk) Auditor's Remuneration (FY2019) | Service Type | Fee (HK$ Thousand) | | :--- | :--- | | Audit Services | 1,200 | | Non-Audit Services | - | [Shareholders' Rights and Communication](index=24&type=section&id=%E8%82%A1%E6%9D%B1%E6%AC%8A%E5%88%A9%E8%88%87%E6%BA%9D%E9%80%9A) The Company outlines procedures for shareholders to convene extraordinary general meetings, submit inquiries to the Board, and nominate directors, establishing various communication channels including general meetings, annual reports, and the company website, while adopting a dividend policy from January 1, 2019, where dividend distribution is at the Board's discretion based on company performance, cash flow, and other factors - Shareholders holding not less than **10% of the voting rights** have the right to request the Board to convene an extraordinary general meeting[73](index=73&type=chunk) - The Company adopted a dividend policy from January 1, 2019, where dividend distribution is at the Board's sole discretion, subject to the Company's financial performance, cash flow, and future operations, among other factors[80](index=80&type=chunk) [Directors' Report](index=27&type=section&id=%E8%91%A3%E4%BA%8B%E6%9C%83%E5%A0%B1%E5%91%8A) This report covers statutory disclosures for the year ended March 31, 2019, confirming no significant changes in the Group's principal business of investment holding and apparel supply chain management, with no final dividend recommended, and disclosing high customer and supplier concentration, alongside details of directors' and major shareholders' interests, share option scheme movements, and compliance with non-competition undertakings, while maintaining sufficient public float during the year [Results, Dividends and Major Customers](index=27&type=section&id=%E6%A5%AD%E7%B8%BE%E3%80%81%E8%82%A1%E6%81%AF%E8%88%87%E4%B8%BB%E8%A6%81%E5%AE%A2%E6%88%B6) The Group's performance for the year is detailed in the consolidated statement of comprehensive income, with no final dividend recommended by the Board, and high customer and supplier concentration noted, as the largest customer accounted for approximately 23% of total revenue and the top five customers for 73%, while the largest supplier accounted for approximately 26% of total purchases and the top five for 64% - The Directors do not recommend the payment of a final dividend for the year ended March 31, 2019[83](index=83&type=chunk) Customer and Supplier Concentration (FY2019) | Category | Percentage | | :--- | :--- | | Largest customer as % of total revenue | ~23% | | Top five customers as % of total revenue | ~73% | | Largest supplier as % of total purchases | ~26% | | Top five suppliers as % of total purchases | ~64% | [Directors', Shareholders' Interests and Share Option Scheme](index=28&type=section&id=%E8%91%A3%E4%BA%8B%E3%80%81%E8%82%A1%E6%9D%B1%E6%8C%81%E8%82%A1%E5%8F%8A%E8%B3%BC%E8%82%A1%E6%AC%8A%E8%A8%88%E5%8A%83) The report details the shareholding interests of directors, chief executives, and major shareholders in the Company, with Chairman Mr. Zhang Lei beneficially holding approximately 32.89% through controlled corporations and personal interests, and 60,000,000 share options granted during the year, including 20,000,000 to directors, leaving 100,000,000 unexercised options at year-end Directors' and Major Shareholders' Interests (As of March 31, 2019) | Shareholder Name | Capacity/Nature of Interest | Number of Shares Held | Percentage | | :--- | :--- | :--- | :--- | | Mr. Zhang Lei | Interests in controlled corporations and beneficial owner | 369,616,000 | 32.89% | | Mr. Chan Ning Dit | Interests in controlled corporations and beneficial owner | 213,738,000 | 19.02% | | DA Equity Partners Limited | Beneficial owner | 119,018,000 | 10.59% | | Mr. Li Ren | Beneficial owner | 101,884,000 | 9.07% | Share Option Scheme Movements (FY2019) | Item | Number of Share Options | | :--- | :--- | | Outstanding as of April 1, 2018 | 40,000,000 | | Granted during the year | 60,000,000 | | Exercised/Cancelled/Lapsed during the year | - | | Outstanding as of March 31, 2019 | 100,000,000 | - Share options granted to Directors during the year include: **10,000,000** to Mr. Zhai Jiawei and **10,000,000** to Ms. Lu Xuanling[108](index=108&type=chunk) [Independent Auditor's Report](index=35&type=section&id=%E7%8D%A8%E7%AB%8B%E6%A0%B8%E6%95%B8%E5%B8%AB%E5%A0%B1%E5%91%8A) PricewaterhouseCoopers, as the Company's independent auditor, issued an unmodified opinion on the consolidated financial statements for the year ended March 31, 2019, affirming that they present a true and fair view of the Group's consolidated financial position, performance, and cash flows in accordance with the disclosure requirements of the Hong Kong Companies Ordinance, with key audit matters highlighted as impairment assessment of receivables and valuation of share options - Audit Opinion: The auditor issued an **unmodified opinion**, stating that the consolidated financial statements present a true and fair view of the Group's financial position and performance[121](index=121&type=chunk) - Key Audit Matters include: - Impairment assessment of receivables: Management exercised **significant judgment** in estimating the recoverability of receivables[124](index=124&type=chunk)[125](index=125&type=chunk) - Valuation of share options: The fair value assessment of share options involved **subjective and difficult-to-determine significant assumptions**[126](index=126&type=chunk) [Consolidated Financial Statements](index=39&type=section&id=%E7%B6%9C%E5%90%88%E8%B2%A1%E5%8B%99%E5%A0%B1%E8%A1%A8) This section presents the comprehensive financial statements of the Group, including the statement of comprehensive income, statement of financial position, statement of changes in equity, and statement of cash flows, providing a detailed overview of the Group's financial performance, position, and cash movements for the reporting period [Consolidated Statement of Comprehensive Income](index=39&type=section&id=%E7%B6%9C%E5%90%88%E5%85%A8%E9%9D%A2%E6%94%B6%E7%9B%8A%E8%A1%A8) For the year ended March 31, 2019, the Group reported revenue of HK$187 million, a 33.2% year-on-year decrease, and gross profit of HK$20.92 million, a significant 61.7% decrease, yet operating profit reached HK$18.82 million due to HK$37.75 million in other income, primarily from securities investments, resulting in a 19.1% increase in profit and total comprehensive income attributable to owners of the Company to HK$18.68 million Consolidated Statement of Comprehensive Income Summary | Item (HK$ Thousand) | 2019 | 2018 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Revenue | 186,519 | 279,382 | -33.2% | | Gross Profit | 20,918 | 54,584 | -61.7% | | Other Income | 37,753 | - | N/A | | Operating Profit | 18,820 | 20,753 | -9.3% | | Profit attributable to owners of the Company | 18,682 | 15,688 | +19.1% | | Basic Earnings Per Share (HK Cents) | 1.69 | 1.57 | +7.6% | [Consolidated Statement of Financial Position](index=41&type=section&id=%E7%B6%9C%E5%90%88%E8%B2%A1%E5%8B%99%E7%8B%80%E6%B3%81%E8%A1%A8) As of March 31, 2019, the Group's total assets increased by 56.0% to HK$180 million from HK$116 million in the prior year, primarily driven by the addition of HK$74.79 million in financial assets at fair value through profit or loss, while total liabilities significantly decreased to HK$9.63 million and total equity rose to HK$171 million, reflecting substantial securities investment activities during the year Consolidated Statement of Financial Position Summary | Item (HK$ Thousand) | March 31, 2019 | March 31, 2018 | | :--- | :--- | :--- | | **Assets** | | | | Non-current assets | 60,542 | 4,841 | | Current assets | 119,914 | 110,854 | | **Total Assets** | **180,456** | **115,695** | | **Equity and Liabilities** | | | | Total Equity | 170,822 | 82,403 | | Non-current liabilities | 250 | 250 | | Current liabilities | 9,384 | 33,042 | | **Total Liabilities** | **9,634** | **33,292** | | **Total Equity and Liabilities** | **180,456** | **115,695** | [Consolidated Statement of Changes in Equity](index=42&type=section&id=%E7%B6%9C%E5%90%88%E6%AC%8A%E7%9B%8A%E8%AE%8A%E5%8B%95%E8%A1%A8) For the year ended March 31, 2019, the Group's total equity increased from HK$82.4 million at the beginning of the year to HK$171 million, primarily driven by a profit of HK$18.68 million for the year, share-based payments (share options) of HK$9.69 million, and proceeds from share placement of HK$60.04 million Summary of Changes in Equity (HK$ Thousand) | Item | Amount | | :--- | :--- | | Balance as of April 1, 2018 | 82,403 | | Profit for the year | 18,682 | | Share-based payment | 9,694 | | Issue of shares under share placement | 60,043 | | **Balance as of March 31, 2019** | **170,822** | [Consolidated Statement of Cash Flows](index=43&type=section&id=%E7%B6%9C%E5%90%88%E7%8F%BE%E9%87%91%E6%B5%81%E9%87%8F%E8%A1%A8) This year, the Group experienced a net cash outflow from operating activities of HK$5.77 million, mainly due to working capital changes, and a net cash outflow from investing activities of HK$37.40 million, primarily for additions to financial assets at fair value through profit or loss, while net cash inflow from financing activities was HK$53.08 million, mainly from share placement proceeds, resulting in a net increase in cash and cash equivalents of HK$9.91 million for the year, with an ending balance of HK$52.28 million Consolidated Statement of Cash Flows Summary (HK$ Thousand) | Item | 2019 | 2018 | | :--- | :--- | :--- | | Net cash (used in)/from operating activities | (5,769) | 1,635 | | Net cash used in investing activities | (37,404) | (76) | | Net cash from financing activities | 53,082 | 6,800 | | **Net increase in cash and cash equivalents** | **9,909** | **8,359** | | Cash and cash equivalents at beginning of year | 42,375 | 34,016 | | **Cash and cash equivalents at end of year** | **52,284** | **42,375** | [Notes to the Consolidated Financial Statements](index=44&type=section&id=%E7%B6%9C%E5%90%88%E8%B2%A1%E5%8B%99%E5%A0%B1%E8%A1%A8%E9%99%84%E8%A8%BB) The notes to the financial statements provide detailed explanations of the basis of preparation, significant accounting policies, accounting estimates and judgments, and supplementary information for each item in the statements, including segment information, revenue breakdown, share-based payment details, financial instrument classification and risk management, significant investments and acquisitions, and related party transactions, which are essential for understanding the Company's financial position and operating results - Note 5: Revenue by geographical region shows Americas, Europe, Asia Pacific, and Middle East accounting for **46.7%**, **38.8%**, **11.7%**, and **2.7%** of total revenue, respectively[251](index=251&type=chunk) - Note 9: Total share-based payment expense recognized for the year due to the grant of share options was **HK$9.694 million**[278](index=278&type=chunk) - Note 17: On March 6, 2019, the Group paid a refundable deposit of **HK$21 million** for a connected acquisition[300](index=300&type=chunk)[301](index=301&type=chunk) - Note 20: On June 1, 2018, the Company issued **123.8 million ordinary shares** through a placement, raising net proceeds of approximately **HK$58.6 million**[312](index=312&type=chunk) [Financial Summary](index=85&type=section&id=%E8%B2%A1%E5%8B%99%E6%91%98%E8%A6%81) This section provides a summary of the Group's key performance, assets, and liabilities data for the past five fiscal years (2015 to 2019), indicating that while revenue in FY2019 declined from the previous two years, profit for the year reached a five-year high due to non-operating income, and total assets and net assets also reached their highest levels in five years Five-Year Financial Summary (As of March 31) | Item (HK$ Thousand) | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Results** | | | | | | | Revenue | 186,519 | 279,382 | 206,219 | 155,933 | 140,739 | | Profit for the year | 18,682 | 15,688 | 25,143 | 4,139 | 14,780 | | **Assets and Liabilities** | | | | | | | Total Assets | 180,456 | 115,695 | 90,909 | 52,444 | 46,693 | | Total Liabilities | 9,634 | 33,292 | 29,537 | 16,215 | 22,413 | | Net Assets | 170,822 | 82,403 | 61,372 | 36,229 | 24,280 |