Financial Performance - Total revenue for the year ended December 31, 2022, was HKD 119,894,000, a decrease of 52.7% compared to HKD 253,031,000 in 2021[37] - Gross profit for the same period was HKD 66,761,000, down 33.8% from HKD 100,929,000 in the previous year[37] - The company reported a net profit of HKD 17,780,000 for 2022, a decline of 70.7% from HKD 60,456,000 in 2021[37] - Basic earnings per share for 2022 were HKD 0.43, compared to HKD 1.42 in 2021, reflecting a significant decrease[37] - The company reported a segment profit of HKD 26,032,000 for the year ended December 31, 2022, compared to a loss of HKD 32,065,000 in 2021[46] - The company’s total equity decreased to HKD 1,327,085,000 in 2022 from HKD 1,430,645,000 in 2021, representing a decline of approximately 7.2%[40] - The company's net profit attributable to shareholders for 2022 was HKD 17,822,000, a decrease of 70.4% compared to HKD 60,323,000 in 2021[91] - The after-tax profit for the year ended December 31, 2022, was HKD 17.8 million, a decrease of 70.6% from HKD 60.5 million in 2021, mainly due to reduced gross profits in property-related and trading businesses[149] Revenue and Profitability - The company reported a loss from joint ventures and associates of HKD 14,774,000 for the year[37] - The fair value gain from investment properties was HKD 13,581,000, down from HKD 15,190,000 in the previous year[37] - The property-related business generated revenue of HKD 29.0 million for the year ended December 31, 2022, a decrease of 43.5% from HKD 51.3 million in 2021, largely due to a downturn in the mainland Chinese real estate market[154] - The company reported a significant loss in its property-related business, shifting from a profit of HKD 18.2 million in 2021 to a loss of HKD 32.1 million in 2022, driven by adverse market conditions[155] - Revenue decreased by approximately 52.6% from HKD 253.0 million for the year ended December 31, 2021, to HKD 119.9 million for the year ended December 31, 2022, primarily due to a downturn in the real estate market in mainland China[167] - Gross profit decreased by HKD 34.1 million, mainly due to declines in property-related and trading businesses, which saw gross profit reductions of HKD 20.0 million and HKD 18.1 million, respectively[168] Assets and Liabilities - Non-current liabilities increased to HKD 247,238,000 in 2022 from HKD 195,489,000 in 2021, representing a rise of 26.4%[22] - The company’s total assets decreased to HKD 1,574,323,000 in 2022 from HKD 1,626,134,000 in 2021, reflecting a decline of approximately 3.2%[39] - The company’s total liabilities increased to 384,176 thousand HKD in 2022 from 306,349 thousand HKD in 2021, representing an increase of about 25.4%[74] - The total bank loans amounted to HKD 243.4 million, up from HKD 168.7 million in the previous year, primarily used for working capital[186] - The company's asset-liability ratio was 5.3%, compared to -4.5% in the previous year, indicating a shift towards a more leveraged position[194] Cash Flow and Financing - Cash and cash equivalents decreased to HKD 210,987,000 in 2022 from HKD 272,591,000 in 2021, a reduction of about 22.6%[39] - The financing costs for the year ended December 31, 2022, were HKD 11.4 million, an increase of 35.7% from HKD 8.4 million in 2021, primarily due to higher average bank loan balances[148] - The interest expense on bank loans rose to HKD 11,113,000 in 2022 from HKD 8,277,000 in 2021, marking an increase of 34.0%[82] - The group has approximately HKD 23.5 million of unutilized net proceeds from share placements, expected to be fully utilized by December 31, 2023[192] - The group has allocated funds for investment in various financial products to enhance liquidity and interest income[199] Strategic Initiatives and Market Outlook - The health industry in China is projected to expand significantly, with a market size expected to reach RMB 16 trillion by 2030[102] - The company has made strategic investments in cell therapy, including a stake in a national high-tech enterprise and the establishment of a new entity focused on cell immunotherapy[104] - The company launched a new skincare brand, "肌小簡," which combines medical aesthetics and skincare, promoting a 60% light medical aesthetic and 40% simplified skincare approach[110] - The company is actively pursuing international expansion, enhancing brand building and channel development to foster new business growth points[114] - The health industry received strong governmental support, with total health expenditure in China reaching RMB 2.2542 trillion in 2022, a year-on-year increase of 17.8%[130] - The company aims to integrate online and offline services in the skincare sector, focusing on scientific skincare and high-efficiency products[112] - The company has established partnerships with international ingredient suppliers to enhance its product offerings in the skincare market[111] - The company continues to invest in skin health management, striving to reshape skincare habits and industry dynamics through innovation[112] - The company has received approval for clinical trials of its Class I biological product, "Human Umbilical Cord Mesenchymal Stem Cell Injection," indicating progress in its R&D efforts[134] - The company has filed over 50 patents, including nearly 10 international patents, showcasing its commitment to innovation in the cell therapy sector[134] - The company has established a flagship store for its "Jixiao Jian" light medical beauty brand, which has received positive customer feedback for its integrated skincare solutions[139] - The company is expanding its market presence in Australia with the launch of a new luxury townhouse project in Yarrabend, Melbourne[141] - The company is focusing on the commercialization of cell therapy products and aims to synergize its health management business with other segments[136] - The company anticipates a new era post-COVID-19, with both opportunities and challenges arising from changes in the international environment and the overall improvement of China's economic situation[142] Operational Efficiency - Administrative expenses decreased to HKD 29,682,000 from HKD 37,394,000, a reduction of 20.8%[37] - Operating expenses for the year ended December 31, 2022, totaled HKD 35.7 million, a decrease of 16.4% from HKD 42.7 million in 2021, attributed to effective cost control measures[148] - The company recorded a foreign exchange loss of HKD 5,565,000 in 2022, an improvement from a loss of HKD 9,936,000 in 2021[81] - The impairment loss on trade receivables was reported at 239 thousand HKD, a decrease from 919 thousand HKD in the previous year, showing a reduction of approximately 74.0%[64] - The provision for trade receivables increased to HKD 2,638,000 in 2022 from HKD 2,534,000 in 2021, reflecting a rise of 4.1%[94]

Credit Risk Management - The company has established strict credit risk management and internal control procedures for its lending transactions[3] - The credit risk assessment process includes evaluating the financial status, loan purpose, shareholder background, and business reputation of new clients[3] - The company conducts regular reviews of overdue amounts and takes follow-up actions to minimize credit risk[6] - The financial department prepares monthly aging analysis of debtors to closely monitor credit risk[6] - The company emphasizes the importance of due diligence and creditworthiness in its lending practices[3] Loan Approval Process - The management team is responsible for approving smaller loan amounts, while larger loans require board discussion and approval[5] - Any potential loans involving related parties will be reported to the board for assessment and compliance with listing rules[5] - The company aims to ensure that all lending transactions align with the overall interests of the company and its shareholders[5] Overdue Payment Handling - The company has implemented a structured procedure for handling overdue payments, including reminders and collection actions[6] - The financial department reports the status of the loan portfolio to the CEO monthly for monitoring purposes[6]

Financial Performance - The company's revenue for the six months ended June 30, 2022, was HKD 64.6 million, a decrease of approximately 54.2% from HKD 141.1 million for the same period in 2021[8]. - Gross profit for the same period was HKD 44.1 million, down 29.0% from HKD 62.1 million in 2021, while the gross profit margin increased from 44.0% to 68.2%[11]. - The company reported a profit attributable to owners of the company of HKD 10.6 million for the six months ended June 30, 2022, compared to HKD 43.2 million in 2021[9]. - The after-tax profit for the six months ended June 30, 2022, was HKD 10.4 million, a decrease of 76.0% compared to HKD 43.3 million for the same period in 2021[18]. - The total comprehensive loss for the period amounted to HKD 42,301,000, compared to a total comprehensive income of HKD 38,430,000 in 2021[140]. - The company reported a net profit of HKD 10,562,000 for the six months ended June 30, 2022, compared to HKD 43,190,000 for the same period in 2021, indicating a significant decrease[200]. Revenue Breakdown - The decline in revenue was primarily due to a downturn in the real estate market in mainland China, leading to a decrease in sales of construction materials and property sales by HKD 65.8 million and HKD 17.9 million, respectively[8]. - Revenue from the healthcare-related business increased 3.2 times to HKD 37.9 million, with profit rising 8.8 times to HKD 27.5 million, primarily due to the launch of the skincare brand "肌小簡" in the second half of 2021[19]. - Revenue from the trading business decreased by 84.9% to HKD 11.7 million, with profit down 41.5% to HKD 9.3 million, mainly due to the overall downturn in the real estate market in mainland China[22]. - Revenue from the sales agency business fell by 82.5% to HKD 3.8 million, resulting in a loss of HKD 0.1 million, attributed to the sluggish real estate market in mainland China[23]. - Revenue from the industrial hemp business plummeted by 98.7% to HKD 0.3 million, with a loss of HKD 2.1 million, due to the ban on industrial hemp in cosmetics in mainland China[26]. - Revenue from the sale of healthcare-related products was HKD 33,841,000 for the six months ended June 30, 2022, compared to HKD 20,000 for the same period in 2021, showing a substantial increase[183]. Operating Expenses and Costs - Operating expenses for the six months ended June 30, 2022, were HKD 17.2 million, a reduction of 22.9% from HKD 22.3 million in 2021, attributed to effective cost control measures[15]. - Financing costs increased to HKD 4.9 million, up 14.0% from HKD 4.3 million in 2021, primarily due to an increase in the average balance of bank loans[16]. - The company incurred financing costs of HKD 4,890,000 during the reporting period[183]. Assets and Liabilities - Non-current assets decreased to HKD 823.6 million as of June 30, 2022, down HKD 37.7 million from HKD 861.3 million at the end of 2021[28]. - Total liabilities increased to HKD 373.5 million as of June 30, 2022, up HKD 67.2 million from HKD 306.3 million at the end of 2021, primarily due to an increase in bank loans[31]. - Total net assets decreased to HKD 1,354.0 million as of June 30, 2022, down HKD 76.7 million from HKD 1,430.7 million at the end of 2021, mainly due to share buybacks and foreign exchange losses[32]. - Current assets were HKD 903,973,000, an increase from HKD 869,690,000 at the end of 2021[142]. - Total liabilities as of June 30, 2022, were HKD 260,590,000, compared to HKD 195,489,000 at the end of 2021[144]. Cash Flow - As of June 30, 2022, the group's cash and cash equivalents totaled HKD 138.9 million, a decrease from HKD 272.6 million as of December 31, 2021[34]. - For the six months ended June 30, 2022, net cash generated from operating activities was HKD 68.0 million, primarily due to cash inflows from daily operations[35]. - The net cash used in investing activities was HKD 242.7 million, mainly due to short-term interest loans of HKD 345.6 million to independent third parties[35]. - The cash and cash equivalents decreased by HKD 126,032 thousand, contrasting with an increase of HKD 32,586 thousand in the same period last year[149]. Strategic Focus and Future Plans - The company plans to continue focusing on health-related products and expand its market presence in response to changing consumer demands[12]. - The company aims to leverage its R&D, brand, and channel advantages in skin health management to develop effective skincare products and medical beauty combined business models[68]. - The company is actively pursuing clinical research collaborations with several hospitals, completing 17 case enrollments despite challenges posed by the COVID-19 pandemic[73]. - The company is focusing on expanding its industrial hemp business, with a strategic investment in CBD vaporizer technology and the launch of the high-end health consumer brand AlpReleaf in Europe[75]. - The company aims to build a sustainable revenue growth source by maintaining its leading position in the industrial hemp value chain[76]. Corporate Governance and Compliance - The company has adopted the principles of the Corporate Governance Code as per the Listing Rules Appendix 14[118]. - The audit committee consists of two independent non-executive directors and one non-executive director, overseeing financial reporting and internal controls[120]. - The company has confirmed compliance with the standards set forth in the Model Code for Securities Transactions by Directors of Listed Issuers[119]. Stock Options and Shareholder Information - A total of 12,603,000 stock options were granted to twelve participants under the 2019 stock option plan[89]. - The stock options granted to directors of investment entities are contingent upon achieving specific performance targets related to drug development and financial performance by 2020, 2022, and 2023[92]. - The total number of stock options granted to nine directors and senior management is 1,512,000, which do not require performance targets[94]. - The company has a total of 427,175,263 shares available for issuance under the 2019 stock option plan, representing approximately 10% of the issued share capital as of the interim report date[97].

Market Overview - The Chinese health market reached a scale of RMB 13 trillion in 2020, making it the second largest globally[23]. - In 2021, China's GDP per capita was RMB 80,976, equivalent to approximately USD 12,551, surpassing the global average[23]. Company Strategy and Investments - The company has strategically invested in Yinguang Biotechnology and established Meikang in 2020 to enhance its position in cell therapy and immune therapy[26]. - The company is focusing on skin health management, developing effective skincare products and combining them with medical aesthetics[24]. - Yinguang Biotechnology has made significant progress in stem cell drug development, establishing multiple product pipelines for various diseases[27]. - The company has received a new invention patent for a CAR-T technology that shows improved binding and efficacy compared to traditional methods[28]. - The Shenzhen government has prioritized legislation for cell and gene industries, indicating strong local support for the sector[26]. - The company is positioned to leverage its first-mover advantage in the cell therapy industry as supportive policies are implemented[27]. - The company aims to drive growth through technological advancements and professional services in health and beauty[24]. - The company is committed to long-term development in the health industry, aligning with national strategies like "Healthy China 2030" and the 14th Five-Year Plan[24]. Financial Performance - The company's revenue for the year ended December 31, 2021, was HKD 253.0 million, a decrease of approximately 4.6% from HKD 265.1 million in 2020[43]. - Gross profit for the year was HKD 100.9 million, down 9.3% from HKD 111.3 million in 2020, with a gross margin decline from 42.0% to 39.9%[44]. - Other income and net gains decreased by 32.2% to HKD 21.9 million, primarily due to unfavorable foreign exchange impacts, shifting from a gain of HKD 5.2 million in 2020 to a loss of HKD 9.9 million in 2021[46]. - Total operating expenses were HKD 42.7 million, a reduction of 15.3% from HKD 50.4 million in 2020, mainly due to the sale of clinics in Hong Kong and Shanghai[47]. - Financing costs decreased by 38.7% to HKD 8.4 million, attributed to a reduction in average bank loan balances compared to 2020[48]. - Profit after tax for the year was HKD 60.5 million, a decrease of 28.9% from HKD 85.1 million in 2020, primarily due to the absence of one-time gains recorded in the previous year[49]. Business Segments - Revenue from the industrial hemp business increased by 4.3% to HKD 26.5 million, with segment profit rising 35.0% to HKD 5.4 million[51]. - Revenue from healthcare-related businesses decreased by 48.0% to HKD 28.5 million, with segment profit declining 14.9% to HKD 12.0 million[52]. - Trade business revenue increased by 9.6% to HKD 146.8 million, but segment profit decreased by 35.0% to HKD 14.7 million due to various financial impacts[54]. Asset and Liabilities - The group's non-current assets increased to HKD 861.3 million as of December 31, 2021, from HKD 742.7 million in 2020, primarily due to an increase in fair value investments[64]. - Total current assets decreased to HKD 875.7 million as of December 31, 2021, from HKD 960.2 million in 2020, mainly due to a reduction in prepayments and other receivables[64]. - The group's total liabilities increased to HKD 306.3 million as of December 31, 2021, from HKD 299.6 million in 2020, primarily due to an increase in bank loans[64]. - The group's net asset value increased to HKD 1,430.7 million as of December 31, 2021, from HKD 1,403.3 million in 2020, driven by a profit of HKD 60.5 million for the year[65]. Cash Flow and Investments - The net cash used in operating activities was HKD 83.3 million for the year ended December 31, 2021, primarily for working capital needs[67]. - The net cash generated from investing activities was HKD 161.6 million, mainly from fund and financial product investments[70]. - The group has 100% ownership of a residential development project in Australia, with approximately 80% of the civil works completed as of December 31, 2021[58]. - The group's investment portfolio increased to HKD 315.0 million as of December 31, 2021, up from HKD 193.1 million in 2020, reflecting a strategic focus on health-related investments[84]. Employee and Governance - The employee count increased to 138 as of December 31, 2021, from 116 in 2020, reflecting growth in operations[87]. - The company emphasizes the importance of employee relations, offering competitive compensation and continuous training programs[101]. - The company has adopted a stock option plan to attract and retain key employees[101]. - The company has established service contracts with its directors, with terms ranging from one to three years, allowing for termination with written notice[141]. - The company has not established a corporate governance committee; thus, the board is responsible for executing corporate governance functions[190]. Shareholder Information - As of December 31, 2021, the total shares held by Mr. Zhou Xuzhou amounted to 2,251,534,761 shares, representing 53.43% of the issued shares[144]. - Dr. Zeng Wentao holds 75,000,000 shares, which accounts for 1.78% of the issued shares[144]. - The major shareholder U-Home Group International Limited holds 964,172,530 shares, representing 22.88% of the issued shares[153]. - The total amount of distributable reserves as of December 31, 2021, was HKD 361,216,000, an increase from HKD 342,662,000 in 2020[131]. Corporate Governance and Compliance - The company has adopted the corporate governance code principles and complied with all applicable code provisions during the fiscal year ending December 31, 2021[184]. - The board held four meetings during the fiscal year to discuss and formulate the overall strategy and review financial performance[189]. - All independent non-executive directors have confirmed their independence in accordance with the listing rules[188]. - The company has a policy in place for reviewing dividend policies[196].

美 瑞 健 康 国 际 产 业 集 团 Meilleure Health International Industry Group Meilleure Health International Industry Group Limited 美瑞健康國際產業集團有限公司 ( 於百慕達註冊成立之有限公司 ) (股份代號：2327) 中期報告２０２１ 一份專注 兩倍用心 三倍高效 十重保障 百倍體驗 終身受益 美瑞健康——精準健康管理 目錄 管理層討論及分析 3 其他資料 16 董事及高級管理人員履歷 23 獨立審閱報告 26 中期簡明綜合損益表 28 中期簡明綜合全面收益表 29 中期簡明綜合財務狀況表 30 中期簡明綜合權益變動表 32 中期簡明綜合現金流量表 33 中期簡明綜合財務報表附註 34 1 公司資料 2 中期報告 2021 美瑞健康國際產業集團有限公司 公司資料 | --- | --- | |---------------------------------|------------------------------------------------| | 董事會 | 註冊辦事處 | | 執行董 ...

[Company Information](index=3&type=section&id=Company%20Information) The Board of Directors comprises executive, non-executive, and independent non-executive directors, supported by audit, remuneration, nomination, and strategy committees - The Board of Directors consists of executive, non-executive, and independent non-executive directors, with established audit, remuneration, nomination, and strategy committees[6](index=6&type=chunk)[7](index=7&type=chunk)[10](index=10&type=chunk)[19](index=19&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk) - Ernst & Young retired on June 24, 2020, and Zhonghui Anda Certified Public Accountants Limited was appointed as the new auditor[22](index=22&type=chunk) [Co-Chairmen's Report](index=4&type=section&id=Co-Chairmen%27s%20Report) The Group achieved a significant turnaround in 2020 with 12.9% revenue growth and a net profit of 85.1 million HKD, driven by strong performance in industrial hemp and healthcare businesses - In 2020, the Group's revenue increased by **12.9% year-on-year to 265.1 million HKD**, achieving a net profit of **85.1 million HKD** and turning losses into profits[27](index=27&type=chunk) - Industrial hemp business revenue grew by nearly **16 times to 25.4 million HKD**, launching the "Mazhuang" skincare brand and expanding the CANNERGY CBD vaping brand in Japan[27](index=27&type=chunk)[40](index=40&type=chunk) - Healthcare-related business revenue increased by **29.2% to 54.8 million HKD**, turning losses into profits, primarily due to increased demand for health services during the pandemic and sales agency services for COVID-19 related products[27](index=27&type=chunk) - The Group continues to strengthen its upstream and downstream industrial chain layout for healthcare and industrial hemp businesses, increasing R&D, product, and marketing investments, and launching the "Scientific Sleep Project"[26](index=26&type=chunk)[32](index=32&type=chunk)[49](index=49&type=chunk) - The UN Commission on Narcotic Drugs lowered cannabis control levels, anticipating more relaxed global industrial hemp policies, which is beneficial for the Group[45](index=45&type=chunk) [Management Discussion and Analysis](index=10&type=section&id=Management%20Discussion%20and%20Analysis) This section analyzes the Group's 2020 financial performance, highlighting revenue growth, profit turnaround, segment contributions, and significant balance sheet changes Comparison of Financial Performance 2020 vs 2019 | Metric | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Revenue | 265,135 | 234,779 | | Gross Profit | 111,251 | 71,832 | | Gross Profit Margin | 42.0% | 30.6% | | Profit/(Loss) Before Tax | 103,587 | (5,344) | | Profit/(Loss) for the Year | 85,066 | (23,010) | | Profit/(Loss) Attributable to Owners of the Company | 83,439 | (20,174) | - Revenue increased by **12.9%**, primarily due to a **23.9 million HKD** increase in CBD downstream product sales and **9.7 million HKD** from COVID-19 related healthcare product sales agency services[55](index=55&type=chunk) - Gross profit increased by **55.0%**, with gross margin rising to **42.0%**, mainly benefiting from Mazhuang product sales and high-margin COVID-19 related healthcare product sales[56](index=56&type=chunk) - Annual profit turned into a gain, primarily due to increased gross profit, no goodwill impairment (compared to **33.0 million HKD** impairment in 2019), a **31.7 million HKD** gain from partial disposal of an associate, and a **14.1 million HKD** gain from disposal of a subsidiary[62](index=62&type=chunk) Performance of Business Segments 2020 | Business Segment | Revenue (thousand HKD) | YoY Revenue Change | Segment Profit/(Loss) (thousand HKD) | | :--- | :--- | :--- | :--- | | Industrial Hemp Business | 25,371 | Increased by nearly 16 times | 4,027 (turned into profit) | | Healthcare-Related Business | 54,757 | Increased by 29.2% | 14,076 (turned into profit) | | Trading Business | 133,960 | Decreased by 6.2% | 22,603 (increased by approx. 2 times) | | Sales Agency Services | 29,805 | Increased by 1.7% | 24,090 (increased by 9.5%) | | Property Investment and Leasing | 21,242 | Increased by 13.4% | 1,845 (decreased by 95.1%) | - Net assets increased by **137.6 million HKD to 1,403.3 million HKD**, primarily due to the annual profit of **85.1 million HKD** and foreign exchange gains of **63.4 million HKD** from overseas operations[80](index=80&type=chunk) - Bank loans decreased by **159.8 million HKD**, leading to a **148.6 million HKD** reduction in total liabilities, and the gearing ratio decreased from **14% to -1.4%**, indicating a net cash position[79](index=79&type=chunk)[95](index=95&type=chunk) - Significant acquisitions and disposals included the disposal of the entire equity of Dexin Pharmaceutical Development Co., Ltd. and 60% equity of La Clinique de Paris International Limited, alongside the acquisition of the entire equity of Bairui (Shenzhen) Health Management Co., Ltd., aiming to optimize business structure and focus on the China market[106](index=106&type=chunk)[107](index=107&type=chunk) [Directors' Report](index=21&type=section&id=Directors%27%20Report) The report details the company's principal activities, key risks, regulatory compliance, dividend policy, share option scheme, and directors' interests - The Company's principal business is investment holding, with subsidiaries engaged in industrial hemp, healthcare, building materials trading, property sales agency, property investment and leasing, and residential property development[121](index=121&type=chunk) - Key risks include macroeconomic changes, legal and regulatory compliance risks, reputation and performance risks, and financial risks[123](index=123&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk) - The Group complies with all relevant laws and regulations in China, Hong Kong, Australia, Japan, Switzerland, and Bermuda[127](index=127&type=chunk) - The Board has resolved not to declare a dividend for the year ended December 31, 2020[135](index=135&type=chunk) - The Company's share option scheme was approved and adopted on June 20, 2019, to incentivize eligible participants, with an exercise price not less than a specified market price or par value[141](index=141&type=chunk)[1111](index=1111&type=chunk) Interests of Directors and Chief Executives in Shares (as at December 31, 2020) | Director Name | Capacity | Total Interests (L) | Percentage of Total Issued Shares | | :--- | :--- | :--- | :--- | | Mr. Zhou Xuzhou | Interests in controlled corporations | 2,120,258,291 | 49.63% | | Mr. Zhou Xuzhou | Personal interests | 124,130,470 | 2.91% | | Dr. Zeng Wentao | Personal interests | 75,000,000 | 1.76% | | Ms. Zhou Wenchuan | Personal interests | 31,938,000 | 0.75% | | Dr. Mao Zhenhua | Interests in controlled corporations | 113,890,000 | 2.67% | - The Group entered into continuing connected transactions with Yuye Group Co., Ltd. (wholly owned by Mr. Zhou Xuzhou) to provide property sales and consulting services, with a maximum annual service fee not exceeding **RMB 40,000,000** for 2021-2023[181](index=181&type=chunk)[182](index=182&type=chunk) - Zhonghui Anda Certified Public Accountants Limited was appointed as the Company's auditor on June 24, 2020[202](index=202&type=chunk) [Corporate Governance Report](index=35&type=section&id=Corporate%20Governance%20Report) This report confirms the company's compliance with the Corporate Governance Code, detailing board structure, responsibilities, committee functions, and internal control systems - The Company adopted and complied with all applicable code provisions of the Corporate Governance Code as set out in Appendix 14 of the Listing Rules during the 2020 financial year[207](index=207&type=chunk) - The Board of Directors comprises three executive directors, one non-executive director, and three independent non-executive directors, holding eight board meetings in 2020[209](index=209&type=chunk)[211](index=211&type=chunk) - The Board is responsible for formulating and reviewing corporate governance policies, overseeing director and senior management training, ensuring legal compliance, establishing codes of conduct, and reviewing the corporate governance report[216](index=216&type=chunk) - The Remuneration Committee, Nomination Committee, Audit Committee, and Strategy Committee have been established to oversee the Group's related affairs[215](index=215&type=chunk) Auditor's Remuneration (2020) | Service Nature | Amount (thousand HKD) | | :--- | :--- | | Audit services | 1,150 | | Non-audit services | 300 | | **Total** | **1,450** | - The Board Diversity Policy considers various aspects such as gender, age, cultural and educational background, professional experience, skills, knowledge, and length of service[264](index=264&type=chunk)[265](index=265&type=chunk) - The Board is responsible for maintaining sound and effective internal control systems and regularly reviews the effectiveness of risk management and internal control systems at least once a year[278](index=278&type=chunk)[281](index=281&type=chunk) [Environmental, Social and Governance Report](index=49&type=section&id=Environmental%2C%20Social%20and%20Governance%20Report) This report outlines the Group's commitment to sustainable development, detailing its environmental, social, and governance performance and strategies for a healthy future [About This Report](index=49&type=section&id=About%20This%20Report) This report covers the environmental, social, and governance performance of Marianna Health International Industry Group Limited and its subsidiaries from January 1 to December 31, 2020, across six major operating segments in Hong Kong, China, Japan, and Australia, prepared in accordance with the HKEX ESG Reporting Guide - The reporting period is from **January 1, 2020, to December 31, 2020**[287](index=287&type=chunk) - The report covers the Group's six major operating segments in Hong Kong, China, Japan, and Australia[288](index=288&type=chunk)[289](index=289&type=chunk) - The report is prepared in accordance with the "comply or explain" provisions of the Hong Kong Stock Exchange's Environmental, Social and Governance Reporting Guide[290](index=290&type=chunk) [About the Group](index=51&type=section&id=About%20the%20Group) Marianna Health is an international medical and health industry group listed on the main board of the HKEX, headquartered in Hong Kong with operations across China, Japan, Australia, and Switzerland, focusing on health management and CBD downstream product applications, with a total turnover of 265.1 million HKD in 2020 - The Group is an international medical and health industry group listed on the Main Board of the Stock Exchange, headquartered in Hong Kong with operations across China, Japan, Australia, and Switzerland[300](index=300&type=chunk) - Core businesses include health management and CBD downstream product applications, primarily engaged in industrial hemp, healthcare-related, trading, sales agency, property investment and leasing, and property development businesses[300](index=300&type=chunk)[301](index=301&type=chunk)[302](index=302&type=chunk)[303](index=303&type=chunk)[304](index=304&type=chunk)[305](index=305&type=chunk) - Total turnover in 2020 was **265.1 million HKD**[300](index=300&type=chunk) [2020 Highlights](index=52&type=section&id=2020%20Highlights) In 2020, Marianna Health actively responded to COVID-19 challenges, focusing on high-growth industrial hemp and healthcare businesses, demonstrating corporate social responsibility in anti-epidemic efforts, and enhancing brand influence through international exhibitions and awards - The Group innovated and adapted during the pandemic, focusing on industrial hemp and healthcare-related businesses, achieving initial success with its "one body, two wings" strategy[308](index=308&type=chunk) - COVID-19 response actions included global procurement and donation of anti-epidemic supplies, transitioning to mask production, and exporting anti-epidemic supplies and test kits globally, contributing new profit growth to the Group[309](index=309&type=chunk)[311](index=311&type=chunk)[315](index=315&type=chunk)[316](index=316&type=chunk) - Participated in international events such as the 3rd Tokyo International Beauty & Health Food Expo, Birmingham Cannabis Expo, and the 2nd World Health Expo in Wuhan, promoting CBD health consumer brands[320](index=320&type=chunk)[321](index=321&type=chunk) - Received multiple awards, including "Outstanding Contribution Private Enterprise in Guangdong Province for Fighting COVID-19," "WISE 2020 China New Economy King Most Influential Consumer Brand in Lifestyle Sector" (Mazhuang), and "Best Small and Mid-Cap Enterprise" (5th Golden Hong Kong Stocks Awards Ceremony)[325](index=325&type=chunk)[329](index=329&type=chunk)[332](index=332&type=chunk) [Marianna Health's Sustainability](index=58&type=section&id=Marianna%20Health%27s%20Sustainability) Marianna Health integrates sustainability into its strategy, with the Board committed to ESG performance, developing an "Embrace a Healthy Future" ESG strategy through stakeholder engagement and materiality assessment, covering business, products, people, and environment - The Board is committed to contributing to and pioneering the Group's environmental, social, and governance performance, risks, and opportunities[335](index=335&type=chunk) - Actively interacts with stakeholders including investors, employees, customers, suppliers, media, and government agencies through channels such as AGMs, press releases, meetings, performance appraisals, and focus group interviews[338](index=338&type=chunk)[339](index=339&type=chunk) - Conducted a materiality assessment, identifying and prioritizing **20 material ESG issues**, including resource use, waste management, customer health and safety, service quality, anti-corruption, and employee retention[342](index=342&type=chunk)[343](index=343&type=chunk)[349](index=349&type=chunk) - Formulated an ESG strategy themed "Embrace a Healthy Future," covering four core areas: business, products, people, and environment, aiming for global business distribution[354](index=354&type=chunk)[355](index=355&type=chunk) [Service Enhancement](index=63&type=section&id=Service%20Enhancement) Marianna Health is dedicated to providing quality products and services, aiming for product globalization through active customer feedback, product innovation (especially in CBD applications), strict safety and quality standards, and responsible marketing and supply chain management to ensure customer satisfaction and compliance - Actively collects customer feedback, conducts customer satisfaction surveys, received no significant complaints, and is committed to continuous improvement of product and service quality[359](index=359&type=chunk) - Established Smart Plant Lab, hired experts to research industrial hemp ingredients, successfully creating the CBD skincare brand "Mazhuang" and CBD vaping brand "CANNERGY"[360](index=360&type=chunk)[368](index=368&type=chunk)[372](index=372&type=chunk) - Strictly adheres to international production standards (GMP, ISO 9001, ISO 22716), establishes QA and QC requirements, ensures purity and concentration of CBD products, with no product recalls or returns[363](index=363&type=chunk)[364](index=364&type=chunk)[365](index=365&type=chunk) - Upholds responsible marketing and advertising principles, clearly stating ingredients and concentrations for all cannabis-containing products, and obtaining relevant qualifications and approval numbers[376](index=376&type=chunk)[377](index=377&type=chunk) - Implements a four-step supply chain management policy, including sample production and inspection, price comparison, professional judgment, and contract signing, ensuring smooth and legal supply chain operations[383](index=383&type=chunk) - Yunnan Hansu Biotechnology Co., Ltd. is the Group's sole industrial hemp supplier, with its extraction base operating under GMP standards and holding relevant licenses[387](index=387&type=chunk) [Business Integrity](index=70&type=section&id=Business%20Integrity) Marianna Health is committed to developing a highly ethical and integrity-driven business, adhering to commercial regulations, implementing anti-corruption policies, data privacy protection, labor law compliance, and intellectual property protection, while actively expanding cross-industry collaborations to promote CBD product industrialization and marketization - Committed to developing a business with high ethical standards and integrity, strictly complying with anti-corruption and bribery laws, with no instances of bribery, extortion, fraud, or money laundering found[393](index=393&type=chunk) - Established strict confidentiality systems to protect confidential data of customers, suppliers, and contractors, with no serious violations of data privacy laws found[396](index=396&type=chunk)[397](index=397&type=chunk) - Strictly adheres to labor standards, prohibits child and forced labor, manages overtime applications via DingTalk, and has no labor disputes[400](index=400&type=chunk) - Committed to intellectual property protection, timely applying for patent registrations, respecting and safeguarding IP rights of relevant holders, and obtained **one CBD application business patent in 2020**[401](index=401&type=chunk) - Actively expands close collaborations with allies across various industries, including partnerships with Yunnan Hansu, a strategic agreement with Yunnan Industrial Hemp Industry Investment Co., Ltd., and cooperation with Shenzhen Meishenwei Technology Co., Ltd. to develop CBD e-vaporizers[405](index=405&type=chunk)[409](index=409&type=chunk) - Hosted the "Sleep and Health Summit Forum" and launched the "Scientific Sleep Project," aiming to promote healthy sleep concepts[409](index=409&type=chunk) [Employee Care](index=76&type=section&id=Employee%20Care) Marianna Health values employees as key assets, committed to attracting talent, fostering potential, and enhancing belonging through attractive compensation, fair recruitment, occupational health and safety, and comprehensive training for professional development - Formulated attractive and reasonable compensation packages, including basic salary, position salary, performance bonuses, adjusted based on operating conditions and employee positions[417](index=417&type=chunk) - Provides diverse benefits, including general bonuses, year-end/quarterly incentives, professional training, subsidies (health checks, dinner, rent, education, travel), and share option schemes[422](index=422&type=chunk) - Adheres to fair recruitment and evaluation systems, with no serious violations of equal opportunity, diversity, and anti-discrimination laws found[425](index=425&type=chunk)[426](index=426&type=chunk) - Follows the "safety first, prevention paramount" principle, provides labor protection equipment, conducts safety education and training, and establishes emergency handling guidelines, with no serious industrial accidents occurring[427](index=427&type=chunk)[428](index=428&type=chunk) - Developed comprehensive employee training policies, including internal guidance and external seminars, with training on securities trading and connected transactions provided to the Board in 2020[431](index=431&type=chunk) [Giving Back to Society](index=80&type=section&id=Giving%20Back%20to%20Society) Marianna Health is committed to building a healthy and positive society, actively fulfilling corporate social responsibility during the 2020 pandemic by donating anti-epidemic supplies to hospitals, sponsoring sports events to promote healthy living, and organizing cultural activities to convey positive energy - Donated masks and supplies worth **RMB 300,000** to Shenzhen Third People's Hospital on International Women's Day 2020, and partnered to donate over **6,000 boxes of masks** to Wuhan University People's Hospital and Zhongnan Hospital[434](index=434&type=chunk) - Sponsored the 2020 Wuchang Super Marathon Online Run, promoting healthy living and expressing gratitude to healthcare workers[435](index=435&type=chunk) - Organized the "Journey of the Soul" National Poetry Competition, promoting the corporate mission of pursuing physical health and spiritual beauty[440](index=440&type=chunk) [Green Environment](index=82&type=section&id=Green%20Environment) Marianna Health is committed to environmental health and sustainable development, strictly complying with environmental laws. The Group advocates green office practices, implements sound waste management (especially medical waste), and identifies and reduces greenhouse gas emissions to mitigate operational environmental impact - Strictly complies with environmental laws and regulations, and is developing environmental policies to mitigate all environmental impacts and identify potential risks[444](index=444&type=chunk) - Advocates green office practices, encouraging employees to reduce unnecessary packaging, conserve water and electricity, and use energy-labeled appliances[445](index=445&type=chunk)[446](index=446&type=chunk)[449](index=449&type=chunk) - Implements a sound waste management strategy, entrusting licensed institutions to handle medical waste from clinics and sorting household waste for recycling[450](index=450&type=chunk)[451](index=451&type=chunk)[455](index=455&type=chunk) - Identified carbon emission sources primarily from electricity consumption and business travel, and continuously explores methods to reduce greenhouse gas emissions[456](index=456&type=chunk) Greenhouse Gas Emissions 2020 | Scope | Description | Quantity (tonnes CO2e) | | :--- | :--- | :--- | | Scope Two | Purchased electricity | 63.32 | | Scope Three | Business air travel | 3.49 | | **Total** | | **66.81** | [Key Performance Indicators Summary](index=87&type=section&id=Key%20Performance%20Indicators%20Summary) This section summarizes Marianna Health's 2020 environmental and social key performance indicators, including greenhouse gas emissions, waste management, energy and water usage, total employees, turnover rate, health and safety, training, and supplier distribution, with comparisons to 2019 Environmental Key Performance Indicators (2020 vs 2019) | Metric | FY2020 | FY2019 | | :--- | :--- | :--- | | Total greenhouse gas emissions (tonnes CO2e) | 66.81 | 159 | | Greenhouse gas emissions intensity (tonnes CO2e/total full-time employees) | 0.64 | 1.7 | | Medical waste (tonnes) | 0.12 | 0.1 | | Total electricity consumption (kWh) | 82,008.29 | 157,561 | | Total water consumption (cubic meters) | 1,206.00 | 1,659 | | Total paper consumption (tonnes) | 0.37 | Not applicable | | Total packaging material consumption (tonnes) | 17.20 | Not applicable | Social Key Performance Indicators (FY2020) | Metric | Category | Quantity/Percentage | | :--- | :--- | :--- | | Total number of employees | – | 116 persons | | Number of employees by gender | Male | 50 persons | | | Female | 66 persons | | Turnover rate | Total turnover rate | 10.08% | | | Male | 10.71% | | | Female | 9.59% | | Number of work-related fatalities | – | 0 cases | | Number of work-related injuries | – | 0 cases | | Percentage of trained employees by gender | Male | 44.83% | | | Female | 55.17% | | Average training hours per employee by gender | Male | 99.69 hours | | | Female | 112.56 hours | | Number of suppliers by region | Guangdong (China) | 11 number | | | Jiangsu (China) | 7 number | | | Japan | 3 number | [Biographies of Directors and Senior Management](index=98&type=section&id=Biographies%20of%20Directors%20and%20Senior%20Management) This section provides professional backgrounds and experience for the executive, non-executive, and independent non-executive directors, as well as key senior management personnel - Executive Directors include Co-Chairman Mr. Zhou Xuzhou (founder of Yuye Group, over **26 years** of real estate experience), Co-Chairman Dr. Zeng Wentao (PhD in Economics, real estate and healthcare industry experience), and Vice Chairman and CEO Ms. Zhou Wenchuan (MBA)[518](index=518&type=chunk)[519](index=519&type=chunk)[522](index=522&type=chunk) - Non-executive Director Dr. Mao Zhenhua is the Chairman of China Chengxin Credit Management Co., Ltd., with extensive experience in credit services, banking, real estate, and industrial investment[523](index=523&type=chunk) - Independent Non-executive Directors include Mr. Gao Guanjiang (PhD in Economics, banking, investment banking, and securities finance experience), Professor Zhou Zhiwei (DBA, direct investment and corporate capital experience), and Mr. Wu Peng (PhD, supply chain management and green supply chain research)[524](index=524&type=chunk)[527](index=527&type=chunk)[528](index=528&type=chunk) - Senior management Mr. Li Shupai serves as Chief Financial Officer and Company Secretary, with over **18 years** of experience in auditing, corporate finance, and financial management[529](index=529&type=chunk) [Independent Auditor's Report](index=101&type=section&id=Independent%20Auditor%27s%20Report) The auditor confirms the fair presentation of the consolidated financial statements, highlighting key audit matters such as investment property valuation and impairment of properties under development - The auditor (Zhonghui Anda Certified Public Accountants Limited) believes that the consolidated financial statements truly and fairly reflect the Group's consolidated financial position as at December 31, 2020, and its consolidated financial performance and cash flows for the year then ended, in accordance with Hong Kong Financial Reporting Standards[533](index=533&type=chunk) - Key audit matters include the valuation of investment properties (2020 balance of **559.7 million HKD**, fair value loss of **16.9 million HKD**) and impairment of properties under development for sale (2020 balance of **245.3 million HKD**), both involving significant judgment and estimation[536](index=536&type=chunk)[541](index=541&type=chunk) [Audited Consolidated Financial Statements](index=105&type=section&id=Audited%20Consolidated%20Financial%20Statements) This section presents the Group's comprehensive audited financial statements, including income statements, balance sheets, cash flows, and detailed explanatory notes [Consolidated Statement of Profit or Loss](index=105&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss) The Group's 2020 consolidated statement of profit or loss shows revenue growth to 265.1 million HKD, a significant increase in gross profit, and a successful turnaround from a 2019 loss to an annual profit of 85.1 million HKD, primarily due to increased income and reduced goodwill impairment Key Data from Consolidated Statement of Profit or Loss (2020 vs 2019) | Metric | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Revenue | 265,135 | 234,779 | | Gross Profit | 111,251 | 71,832 | | Fair value (loss)/gain on investment properties | (16,869) | 21,990 | | Gain on partial disposal of an associate | 31,713 | – | | Gain on disposal of subsidiaries | 14,072 | – | | Other income and gains, net | 32,255 | 17,303 | | Selling and distribution expenses | (8,717) | (3,107) | | Administrative expenses | (41,691) | (36,753) | | Goodwill impairment | – | (33,017) | | Finance costs | (13,682) | (16,393) | | Share of loss of associates | (4,316) | (22,960) | | Profit/(Loss) for the year | 85,066 | (23,010) | | Profit/(Loss) attributable to owners of the Company | 83,439 | (20,174) | | Basic and diluted earnings/(loss) per share | 1.95 HK cents | (0.48) HK cents | [Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=106&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) The Group's 2020 consolidated statement of profit or loss and other comprehensive income shows a total comprehensive income of 138.9 million HKD, building on an annual profit of 85.1 million HKD and including exchange differences from translating overseas operations, a significant improvement from the 2019 comprehensive loss Key Data from Consolidated Statement of Profit or Loss and Other Comprehensive Income (2020 vs 2019) | Metric | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Profit/(Loss) for the year | 85,066 | (23,010) | | Fair value change of equity investments at fair value through other comprehensive income | (8,562) | 721 | | Exchange differences arising from translation of overseas operations | 63,411 | (14,037) | | Exchange differences reclassified to profit or loss on disposal of subsidiaries | (967) | – | | Other comprehensive income/(loss) for the year, net of tax | 53,882 | (13,316) | | Total comprehensive income/(loss) for the year | 138,948 | (36,326) | | Attributable to owners of the Company | 137,899 | (33,084) | | Non-controlling interests | 1,049 | (3,242) | [Consolidated Statement of Financial Position](index=107&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) The Group's 2020 consolidated statement of financial position shows a slight decrease in total assets but an increase in current assets, with significant reductions in both current and non-current liabilities, leading to a substantial increase in net assets to 1,403.3 million HKD and an improved financial structure Key Data from Consolidated Statement of Financial Position (2020 vs 2019) | Metric | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Total non-current assets | 742,681 | 824,039 | | Total current assets | 960,179 | 889,814 | | **Total Assets** | **1,702,860** | **1,713,853** | | Total current liabilities | 108,897 | 242,489 | | Total non-current liabilities | 190,700 | 205,704 | | **Total Liabilities** | **299,597** | **448,193** | | **Net Assets** | **1,403,263** | **1,265,660** | | Equity attributable to owners of the Company | 1,400,922 | 1,259,605 | | Non-controlling interests | 2,341 | 6,055 | [Consolidated Statement of Changes in Equity](index=109&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Equity) The Group's 2020 consolidated statement of changes in equity shows that equity attributable to owners of the Company increased from 1,259.6 million HKD in 2019 to 1,400.9 million HKD in 2020, primarily influenced by total comprehensive income for the year and recognition of share-based payments - Equity attributable to owners of the Company increased from **1,259,605 thousand HKD** as at December 31, 2019, to **1,400,922 thousand HKD** as at December 31, 2020[577](index=577&type=chunk) - Total comprehensive income for the year was **138,948 thousand HKD**, of which **137,899 thousand HKD** was attributable to owners of the Company[576](index=576&type=chunk) - Share-based payments settled in equity of **4,279 thousand HKD** were recognized[576](index=576&type=chunk) [Consolidated Statement of Cash Flows](index=110&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) The Group's 2020 consolidated statement of cash flows shows a significant increase in net cash inflow from operating activities, a shift from net outflow to net inflow from investing activities, and net cash outflow from financing activities, resulting in a net increase of 70.1 million HKD in cash and cash equivalents Key Data from Consolidated Statement of Cash Flows (2020 vs 2019) | Metric | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Net cash from operating activities | 70,805 | 25,409 | | Net cash from/(used in) investing activities | 108,138 | (360,094) | | Net cash (used in)/from financing activities | (108,877) | 327,780 | | Net increase/(decrease) in cash and cash equivalents | 70,066 | (6,905) | | Effect of exchange rate changes | 7,172 | 1,992 | | Cash and cash equivalents at December 31 | 233,467 | 156,229 | [Notes to the Consolidated Financial Statements](index=112&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) This section provides detailed notes to the audited consolidated financial statements, covering general information, accounting policies, key judgments and estimates, financial risk management, fair value measurements, segment information, revenue breakdown, specific explanations for various expenses and assets/liabilities, equity, reserves, share-based payments, cash flow notes, capital commitments, and related party transactions, offering a comprehensive understanding for report users [General Information](index=112&type=section&id=General%20Information) Marianna Health International Industry Group Limited is an investment holding company incorporated in Bermuda and listed on the Main Board of the HKEX, with principal activities covering industrial hemp, healthcare, building materials trading, property sales agency, property investment and leasing, and residential property development, ultimately controlled by Mr. Zhou Xuzhou - The Company is incorporated in Bermuda, with its shares listed on the Main Board of The Stock Exchange of Hong Kong Limited[588](index=588&type=chunk) - Principal activities include industrial hemp business, healthcare-related business, building materials trading, property sales agency services, property investment and leasing, and residential property development[588](index=588&type=chunk) - The ultimate controlling party is Mr. Zhou Xuzhou, Co-Chairman and Executive Director of the Board[588](index=588&type=chunk) [Adoption of New and Revised Hong Kong Financial Reporting Standards](index=112&type=section&id=Adoption%20of%20New%20and%20Revised%20Hong%20Kong%20Financial%20Reporting%20Standards) The Group adopted all new and revised Hong Kong Financial Reporting Standards effective for 2020, with no significant impact on accounting policies or financial statement presentation, except for the practical expedient applied to COVID-19 related rent concessions under HKFRS 16, resulting in a 311,000 HKD reduction in lease liabilities - The Group has adopted all new and revised Hong Kong Financial Reporting Standards effective from January 1, 2020[589](index=589&type=chunk) - The adoption of these standards had no significant changes to accounting policies, financial statement presentation, or amounts, except for the amendments to HKFRS 16 "COVID-19-Related Rent Concessions"[589](index=589&type=chunk)[592](index=592&type=chunk) - The practical expedient was applied to eligible COVID-19 related rent concessions, resulting in a **311,000 HKD** reduction in total lease liabilities, recognized in profit or loss[593](index=593&type=chunk) [Significant Accounting Policies](index=114&type=section&id=Significant%20Accounting%20Policies) This section details Marianna Health's significant accounting policies for preparing consolidated financial statements, covering consolidation, business combinations, associates and joint arrangements, recognition and measurement of various assets (e.g., property, plant and equipment, investment properties, intangible assets, inventories, financial assets), revenue recognition, employee benefits, share-based payments, borrowing costs, government grants, income tax, segment reporting, and related party transactions - The consolidated financial statements are prepared in accordance with Hong Kong Financial Reporting Standards and Hong Kong Generally Accepted Accounting Principles, using the historical cost convention, modified by fair value revaluation[596](index=596&type=chunk) - Subsidiaries are consolidated based on the control principle, while associates and joint ventures are accounted for using the equity method[598](index=598&type=chunk)[606](index=606&type=chunk)[614](index=614&type=chunk) - Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, while investment properties are measured at fair value, with changes recognized in profit or loss[625](index=625&type=chunk)[627](index=627&type=chunk) - Financial assets are classified as measured at amortized cost, equity investments at fair value through other comprehensive income, and financial assets at fair value through profit or loss[643](index=643&type=chunk) - Revenue is recognized when performance obligations are satisfied by transferring control of products or services to customers, either over time or at a point in time, depending on contract terms[664](index=664&type=chunk) - Equity-settled share-based payments are measured at fair value at the grant date and expensed over the vesting period[674](index=674&type=chunk) - Income tax comprises current tax and deferred tax, with deferred tax recognized on differences between the carrying amounts of assets and liabilities and their tax bases[683](index=683&type=chunk) [Critical Judgments and Key Estimates](index=133&type=section&id=Critical%20Judgments%20and%20Key%20Estimates) This section clarifies Marianna Health's critical judgments in applying accounting policies, including property lease classification and deferred tax on investment properties, and identifies key estimation uncertainties affecting financial statement amounts, such as net realizable value of properties under development, fair value of investment properties and financial instruments, goodwill impairment, expected credit loss provisions for financial assets, and income tax - Critical judgments include property lease classification (the Group as lessor) and deferred tax on investment properties (rebutting the presumption of recovery through sale)[707](index=707&type=chunk)[708](index=708&type=chunk) - Key estimation uncertainties include the net realizable value of properties under development for sale, fair value of investment properties and financial instruments, goodwill impairment, expected credit loss provisions for financial assets measured at amortized cost, and income tax[710](index=710&type=chunk)[713](index=713&type=chunk)[714](index=714&type=chunk)[715](index=715&type=chunk)[716](index=716&type=chunk)[717](index=717&type=chunk) [Financial Risk Management](index=135&type=section&id=Financial%20Risk%20Management) The Group's financial risk management aims to minimize adverse impacts of foreign exchange, credit, liquidity, and interest rate risks on financial performance through strict monitoring, counterparty financial assessment, regular review of receivables, and maintaining sufficient cash reserves, while using the gearing ratio to monitor capital structure - The Group is exposed to foreign exchange risk (AUD, RMB, USD, JPY, and CHF), credit risk, liquidity risk, and interest rate risk[721](index=721&type=chunk)[760](index=760&type=chunk) - Credit risk is mitigated through careful selection of counterparties, continuous assessment of debtors' financial conditions, and strict monitoring of receivables aging[726](index=726&type=chunk) - Liquidity risk is managed by regularly monitoring current and anticipated liquidity needs, ensuring sufficient cash reserves to meet demands[755](index=755&type=chunk) - Capital management aims to ensure going concern ability and maintain an optimal capital structure to reduce capital cost, with a gearing ratio of **-1.4% in 2020** (2019: **14%**), indicating a net cash position[766](index=766&type=chunk)[769](index=769&type=chunk) [Fair Value Measurement](index=144&type=section&id=Fair%20Value%20Measurement) This section discloses the Group's fair value measurements for financial instruments and investment properties, using a three-level fair value hierarchy. Unlisted equity investments, financial product investments, and Hong Kong investment properties are primarily measured using Level 2 inputs, while China investment properties and derivative instruments are mainly measured using Level 3 unobservable inputs, with detailed valuation techniques and key input data provided - Fair value measurement uses a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[770](index=770&type=chunk) - Level 2 fair value measurements include unlisted equity investments (recent market prices of similar transactions), unlisted fund investments (net asset value statements), financial product investments (market prices), and investment properties in Hong Kong (direct comparison approach)[826](index=826&type=chunk) - Level 3 fair value measurements include unlisted equity investments (valuation multiples, discount for lack of marketability), derivative financial instruments (Black-Scholes option pricing model, expected volatility), and investment properties in China (term and reversion method, estimated rental value, rental growth, long-term vacancy rate, discount rate)[832](index=832&type=chunk) - In 2020, **22,648,000 HKD** of unlisted equity investments classified as fair value through other comprehensive income were reclassified from Level 2 to Level 3 due to a lack of observable market data[823](index=823&type=chunk) [Segment Information](index=149&type=section&id=Segment%20Information) The Group has reorganized its reportable segments into six strategic business units: industrial hemp, healthcare-related, trading, sales agency services, property investment and leasing, and property development. This section provides an analysis of each segment's revenue, results, assets, and liabilities, as well as revenue and non-current assets by geographical area, and lists major customer revenue contributions - The Group has six reportable segments: industrial hemp business, healthcare-related business, trading business, sales agency services, property investment and leasing, and property development[835](index=835&type=chunk) Segment Revenue and Profit/(Loss) (2020 vs 2019) | Segment | 2020 Revenue (thousand HKD) | 2019 Revenue (thousand HKD) | 2020 Segment Profit/(Loss) (thousand HKD) | 2019 Segment Profit/(Loss) (thousand HKD) | | :--- | :--- | :--- | :--- | :--- | | Industrial Hemp Business | 25,371 | 1,504 | 4,027 | (1,035) | | Healthcare-Related Business | 54,757 | 42,405 | 14,076 | (5,686) | | Trading Business | 133,960 | 142,801 | 22,603 | 7,505 | | Sales Agency Services | 29,805 | 29,344 | 24,090 | 21,991 | | Property Investment and Leasing | 21,242 | 18,725 | 1,845 | 36,832 | | Property Development | – | – | (79) | (1,342) | Geographical Information (2020 vs 2019) | Region | 2020 Revenue (thousand HKD) | 2019 Revenue (thousand HKD) | 2020 Non-current Assets (thousand HKD) | 2019 Non-current Assets (thousand HKD) | | :--- | :--- | :--- | :--- | :--- | | China | 241,653 | 214,201 | 699,572 | 683,492 | | Hong Kong | 13,357 | 20,578 | 1,662 | 103,350 | | Other | 10,125 | – | 307 | – | | **Consolidated Total** | **265,135** | **234,779** | **701,541** | **786,842** | - Customer A in the sales agency services segment contributed **29,805 thousand HKD** to 2020 revenue, accounting for **11%** of total sales[868](index=868&type=chunk) [Revenue](index=155&type=section&id=Revenue) The Group's total revenue for 2020 was 265.1 million HKD, primarily from sales of building materials, healthcare management services, CBD downstream products, and property sales and consulting services. This section details the revenue contributions from various products and services, broken down by geographical market and timing of revenue recognition Revenue Sources (2020 vs 2019) | Revenue Source | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Sales of CBD downstream products | 25,371 | 1,504 | | Healthcare management services income | 39,528 | 38,861 | | Healthcare-related product sales agency services income | 10,940 | – | | Sales of healthcare-related products | 2,810 | 3,544 | | Medical beauty services income | 1,479 | – | | Sales of building materials | 133,960 | 142,801 | | Property sales and consulting services income | 29,805 | 29,344 | | Rental income | 21,242 | 18,725 | | **Total Revenue** | **265,135** | **234,779** | - In 2020, revenue from customer contracts was **243,893 thousand HKD**, with **204,365 thousand HKD** recognized at a point in time and **39,528 thousand HKD** recognized over time[868](index=868&type=chunk)[872](index=872&type=chunk) - Revenue recognition policies include: CBD downstream products recognized upon transfer of product control; healthcare management services recognized over time; healthcare-related product sales agency services recognized on a net basis; building materials sales recognized upon transfer of product control; property sales and consulting services recognized when services are provided and buyer enters into a sales agreement[880](index=880&type=chunk)[881](index=881&type=chunk)[882](index=882&type=chunk)[883](index=883&type=chunk)[886](index=886&type=chunk)[888](index=888&type=chunk) [Other Income and Gains, Net](index=160&type=section&id=Other%20Income%20and%20Gains%2C%20Net) The Group's other income and gains, net, for 2020 was 32.3 million HKD, a significant increase from 2019, primarily from interest income, government grants, fair value gains on investments at fair value through profit or loss, and net foreign exchange gains Other Income and Gains, Net (2020 vs 2019) | Source | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Interest income | 8,237 | 8,252 | | Government grants | 2,368 | 884 | | Dividend income from equity investments at fair value through other comprehensive income | 346 | 451 | | COVID-19 related rent concessions | 311 | – | | Fair value gains on investments at fair value through profit or loss | 14,713 | 10,298 | | Net foreign exchange gains/(losses) | 5,218 | (640) | | Fair value loss on derivative financial assets | (271) | – | | **Total** | **32,255** | **17,303** | - Government grants include **1,513 thousand HKD** in local government operating subsidies and **855 thousand HKD** from the Hong Kong SAR Government's Employment Support Scheme under the Anti-epidemic Fund[892](index=892&type=chunk) [Finance Costs](index=161&type=section&id=Finance%20Costs) The Group's finance costs for 2020 were 13.7 million HKD, a decrease from 2019, primarily comprising interest on bank loans and lease liabilities Finance Costs (2020 vs 2019) | Source | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Interest on bank loans | 12,989 | 15,949 | | Interest on lease liabilities | 693 | 444 | | **Total** | **13,682** | **16,393** | [Income Tax Expense](index=161&type=section&id=Income%20Tax%20Expense) The Group's income tax expense for 2020 was 18.5 million HKD, mainly comprising China corporate income tax, Hong Kong profits tax, and Australian interest income withholding tax, with deferred tax adjustments. This section provides a reconciliation of income tax expense to profit/(loss) before tax Income Tax Expense (2020 vs 2019) | Source | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Current tax – China | 23,539 | 11,339 | | Current tax – Hong Kong | (1,242) | 2,478 | | Withholding tax on interest income – Australia | 2,278 | – | | Deferred tax | (6,024) | 3,849 | | **Income Tax Expense** | **18,521** | **17,666** | - Hong Kong profits tax rate is **16.5%** (with **8.25%** for certain qualifying corporations), China corporate income tax rate is **25%**, and Australian corporate income tax rate is **30%**[896](index=896&type=chunk)[899](index=899&type=chunk)[900](index=900&type=chunk) [Profit/(Loss) for the Year](index=163&type=section&id=Profit%2F%28Loss%29%20for%20the%20Year) The Group's profit for 2020 was 85.1 million HKD. This section lists the main expense and income items affecting this profit, including depreciation and amortization, gains on disposal of investments, fair value changes of investment properties, auditor's remuneration, cost of inventories sold, impairment losses on receivables, and staff costs Major Components of Profit/(Loss) for the Year (2020 vs 2019) | Item | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Amortization of other intangible assets | 256 | 267 | | Depreciation of property, plant and equipment | 782 | 802 | | Depreciation of right-of-use assets | 6,871 | 5,123 | | Gain on partial disposal of an associate | (31,713) | – | | Gain on disposal of subsidiaries | (14,072) | – | | Fair value loss/(gain) on investment properties | 16,869 | (21,990) | | Auditor's remuneration | 1,150 | 1,783 | | Cost of inventories sold | 123,595 | 132,647 | | Net impairment loss on receivables | 544 | 5,436 | | Goodwill impairment | – | 33,017 | | Staff costs (including directors' emoluments) | 32,297 | 30,744 | [Directors' Emoluments](index=164&type=section&id=Directors%27%20Emoluments) This section details the emoluments of each director for 2020, including fees, salaries and allowances, and equity-settled share-based payments, totaling 4.6 million HKD, with Executive Director Ms. Zhou Wenchuan receiving the highest remuneration Directors' Emoluments (2020) | Director Name | Fees (thousand HKD) | Salaries and Allowances (thousand HKD) | Share-based Payments (thousand HKD) | Total (thousand HKD) | | :--- | :--- | :--- | :--- | :--- | | Mr. Zhou Xuzhou | – | 800 | – | 800 | | Dr. Zeng Wentao | – | 325 | 592 | 917 | | Ms. Zhou Wenchuan | – | 1,200 | 989 | 2,189 | | Dr. Mao Zhenhua | 180 | – | – | 180 | | Professor Zhou Zhiwei | 180 | – | – | 180 | | Mr. Gao Guanjiang | 180 | – | – | 180 | | Mr. Wu Peng | 120 | – | – | 120 | | **2020 Total** | **660** | **2,325** | **1,581** | **4,566** | - No director waived or agreed to waive any emoluments during the year, nor were any emoluments paid as compensation for joining or leaving[915](index=915&type=chunk)[916](index=916&type=chunk) [Five Highest Paid Individuals](index=165&type=section&id=Five%20Highest%20Paid%20Individuals) The total emoluments for the Group's five highest-paid individuals (one director and four other individuals) in 2020 amounted to 7.5 million HKD, primarily comprising salaries and allowances, discretionary bonuses, and equity-settled share-based payments Emoluments of Five Highest Paid Individuals (2020 vs 2019) | Item | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Salaries and allowances | 6,570 | 5,120 | | Discretionary bonuses | 420 | 2,238 | | Equity-settled share-based payments | 354 | – | | Retirement benefit scheme contributions | 120 | 98 | | **Total** | **7,464** | **7,456** | - Emoluments ranged from **1,000,001 HKD to 3,500,000 HKD**[920](index=920&type=chunk) [Retirement Benefit Schemes](index=166&type=section&id=Retirement%20Benefit%20Schemes) The Group operates a Mandatory Provident Fund Scheme for Hong Kong employees, participates in local government central pension schemes for China subsidiary employees, and provides various defined contribution retirement schemes for overseas subsidiaries, with contributions based on fixed percentages or agreed amounts - Hong Kong employees participate in the Mandatory Provident Fund Scheme, with the Group contributing **5% of salary**, up to a maximum of **1,500 HKD per month**[922](index=922&type=chunk) - Employees of China subsidiaries participate in local government-operated central pension schemes, with the Group contributing a certain percentage of employees' basic salaries and wages[922](index=922&type=chunk) - Overseas subsidiaries offer various defined contribution retirement schemes, with Group and employee contributions calculated as a fixed percentage of basic remuneration or agreed amounts[922](index=922&type=chunk) [Dividends](index=166&type=section&id=Dividends) The Board has decided not to declare a dividend for the year ended December 31, 2020 - The Board has resolved not to declare a dividend for the year ended December 31, 2020 (2019: nil)[923](index=923&type=chunk) [Earnings/(Loss) Per Share](index=166&type=section&id=Earnings%2F%28Loss%29%20Per%20Share) The Group's basic earnings per share for 2020 was 1.95 HK cents, a significant improvement from a loss of 0.48 HK cents per share in 2019. No diluted adjustment was made to basic earnings per share for 2020 as the average market share price was below the assumed exercise price - Basic earnings per share for 2020 was **1.95 HK cents** (2019: loss per share of **0.48 HK cents**)[924](index=924&type=chunk) - No diluted adjustment was made to basic earnings per share for 2020, as the average market share price was below the assumed exercise price of the share options[925](index=925&type=chunk) [Property, Plant and Equipment](index=167&type=section&id=Property%2C%20Plant%20and%20Equipment) The Group's property, plant and equipment had a carrying amount of 1.7 million HKD as at December 31, 2020, a decrease from 2019. This section provides detailed changes in cost, accumulated depreciation, and carrying amount, including the impact of additions, disposal of subsidiaries, and exchange differences Changes in Property, Plant and Equipment (2020 vs 2019) | Item | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | **Cost** | | | | At January 1 | 9,118 | 8,676 | | Additions | 365 | 135 | | Disposal of subsidiaries | (5,611) | – | | Exchange differences | 226 | 307 | | **At December 31** | **4,098** | **9,118** | | **Accumulated Depreciation** | | | | At January 1 | 7,058 | 5,909 | | Expense for the year | 782 | 802 | | Disposal of subsidiaries | (5,545) | – | | Exchange differences | 115 | 347 | | **At December 31** | **2,410** | **7,058** | | **Carrying Amount (at December 31)** | **1,688** | **2,060** | [Leases and Right-of-Use Assets](index=168&type=section&id=Leases%20and%20Right-of-Use%20Assets) The Group's right-of-use assets had a carrying amount of 5.1 million HKD and lease liabilities had a present value of 4.0 million HKD as at December 31, 2020. This section details depreciation expense, interest expense, total cash outflow for leases, the impact of COVID-19 related rent concessions, and provides a maturity analysis of lease liabilities Key Data for Leases and Right-of-Use Assets (2020 vs 2019) | Item | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Right-of-use assets – properties (at December 31) | 5,118 | 18,126 | | Depreciation expense of right-of-use assets | 6,871 | 5,123 | | Interest on lease liabilities | 693 | 444 | | Total cash outflow for leases | 7,074 | 5,526 | | Additions to right-of-use assets | 2,204 | 17,721 | | COVID-19 related rent concessions | 311 | – | | Present value of lease liabilities (at December 31) | 4,012 | 18,739 | - Lease agreements are typically entered into for fixed terms of **two to five years**, with average effective borrowing rates ranging from **2% to 6%**[939](index=939&type=chunk)[1077](index=1077&type=chunk) - COVID-19 related rent concessions resulted in a **311,000 HKD** reduction in total lease liabilities, recognized in profit or loss[939](index=939&type=chunk) [Investment Properties and Investment Properties Held for Sale](index=170&type=section&id=Investment%20Properties%20and%20Investment%20Properties%20Held%20for%20Sale) The Group's investment properties and investment properties held for sale had a total carrying amount of 565.5 million HKD as at December 31, 2020. This section provides detailed changes in these properties, including fair value losses, disposal of subsidiaries, and exchange differences, along with valuation methods and encumbrance information Changes in Investment Properties and Investment Properties Held for Sale (2020 vs 2019) | Item | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | **Investment Properties** | | | | At January 1 | 594,177 | 586,522 | | Disposal of subsidiaries | (50,300) | – | | Fair value loss/(gain) | (16,869) | 21,990 | | Exchange differences | 32,677 | (9,322) | | **At December 31** | **559,685** | **594,177** | | **Investment Properties Held for Sale** | | | | At January 1 | 5,450 | 17,583 | | Exchange differences | 336 | (171) | | **At December 31** | **5,786** | **5,450** | | **Total (at December 31)** | **565,471** | **599,627** | - The fair value of investment properties in China is determined by independent professional valuers using the income approach (term and reversion method)[947](index=947&type=chunk) - Investment properties in China with a carrying amount of **338.7 million HKD** (2019: **503.8 million HKD**) have been pledged as collateral for bank loans[949](index=949&type=chunk) [Goodwill](index=172&type=section&id=Goodwill) The Group's goodwill had a carrying amount of 18.5 million HKD as at December 31, 2020, primarily allocated to the healthcare-related business segment in China. This section details changes in goodwill cost, accumulated impairment losses, and carrying amount, and explains the impairment testing methodology and key assumptions, including the 33.0 million HKD impairment loss recognized in 2019 Changes in Goodwill (2020 vs 2019) | Item | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | **Cost** | | | | At January 1 | 82,790 | 82,790 | | Disposal of subsidiaries | (35,282) | – | | **At December 31** | **47,508** | **82,790** | | **Accumulated Impairment Losses** | | | | At January 1 | 50,551 | 17,534 | | Impairment loss recognized | – | 33,017 | | Disposal of subsidiaries | (21,543) | – | | **At December 31** | **29,008** | **50,551** | | **Carrying Amount (at December 31)** | **18,500** | **32,239** | - Goodwill is allocated to the cash-generating unit of the healthcare-related business in China[965](index=965&type=chunk) - Impairment tests determine value in use based on discounted cash flow method, with key assumptions including discount rate (**23.11%**), growth rate (**3%**), budgeted gross margin, and revenue during the period[968](index=968&type=chunk)[969](index=969&type=chunk) - Goodwill impairment loss of **33,017,000 HKD** was recognized in 2019, reducing goodwill to its recoverable amount of **32,239,000 HKD**[969](index=969&type=chunk) [Other Intangible Assets](index=174&type=section&id=Other%20Intangible%20Assets) The Group's other intangible assets had a carrying amount of 59,000 HKD as at December 31, 2020, primarily comprising computer systems. This section details changes in cost, accumulated amortization, and carrying amount, including the impact of additions, disposal of subsidiaries, and exchange differences Changes in Other Intangible Assets (2020 vs 2019) | Item | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | **Cost** | | | | At January 1 | 1,953 | 1,950 | | Additions | 52 | 4 | | Disposal of subsidiaries | (1,879) | – | | Exchange differences | 71 | (1) | | **At December 31** | **197** | **1,953** | | **Accumulated Amortization** | | | | At January 1 | 1,584 | 1,318 | | Amortization for the year | 256 | 267 | | Disposal of subsidiaries | (1,769) | – | | Exchange differences | 67 | (1) | | **At December 31** | **138** | **1,584** | | **Carrying Amount (at December 31)** | **59** | **369** | [Subsidiaries](index=175&type=section&id=Subsidiaries) This section lists details of Marianna Health's significant subsidiaries as at December 31, 2020, including their place of incorporation, issued share capital, percentage of equity interest attributable to the Group, and principal activities. These subsidiaries are located in the British Virgin Islands, Hong Kong, China, Japan, Switzerland, and Australia, with businesses covering investment holding, industrial hemp, healthcare, property leasing, and development - The Group has subsidiaries located in the British Virgin Islands, Hong Kong, China, Japan, Switzerland, and Australia[978](index=978&type=chunk)[981](index=981&type=chunk)[984](index=984&type=chunk)[989](index=989&type=chunk)[990](index=990&type=chunk) - Principal activities include investment holding, industrial hemp-related business, healthcare-related business, trading business, sales agency services, property investment and leasing, property development, and health management[978](index=978&type=chunk)[981](index=981&type=chunk)[984](index=984&type=chunk)[989](index=989&type=chunk)[990](index=990&type=chunk) - Ruilong Bio-Technology Co., Limited (Hong Kong) and Ruilong Bio-Technology Co., Ltd. (Japan) are key subsidiaries for industrial hemp-related businesses, with the Group indirectly holding a **71%** equity interest[978](index=978&type=chunk) - Bairui (Shenzhen) Health Management Co., Ltd. and Shenzhen Bairui Clinic are key subsidiaries for health management businesses, with the Group indirectly holding **100%** and **80%** equity interests, respectively[984](index=984&type=chunk)[989](index=989&type=chunk)[990](index=990&type=chunk) [Investments in Associates](index=178&type=section&id=Investments%20in%20Associates) The Group's investments in associates had a carrying amount of 47.3 million HKD as at December 31, 2020, primarily including Yunnan Hansu Biotechnology Co., Ltd. and Beijing Meiaikang Technology Co., Ltd. This section details equity changes, disposal gains, and financial summaries for these associates, also mentioning foreign exchange controls on RMB - Investments in associates had a carrying amount of **47,327 thousand HKD** (2019: **74,839 thousand HKD**)[998](index=998&type=chunk) - In 2020, **4.55%** equity interest in Yunnan Hansu Biotechnology Co., Ltd. was disposed of, generating a gain of **31,713 thousand HKD**, reducing equity interest from **25.55% to 21%**[999](index=999&type=chunk) - In 2020, equity interest in Beijing Meiaikang Technology Co., Ltd. was subscribed, with an additional capital injection of **RMB 10,000,000**, increasing equity interest from **5% to 20.83%**, and recognizing a call option of **487 thousand HKD**[1000](index=1000&type=chunk) Financial Information Summary of Major Associates (2020) | Name | Principal Business | Percentage of Voting Rights Held by Group | Net Assets (thousand HKD) | Carrying Amount of Group's Share of Equity (thousand HKD) | | :--- | :--- | :--- | :--- | :--- | | Yunnan Hansu | Cannabis processing | 21% | 172,914 | 36,312 | | Meiaikang | Immune cell R&D | 20.83% | 11,153 | 11,015 | [Investments in Joint Ventures](index=180&type=section&id=Investments%20in%20Joint%20Ventures) The Group's investments in joint ventures had a carrying amount of 69.2 million HKD as at December 31, 2020, primarily including Shenzhen Yinguan Biotechnology Co., Ltd. and Shenzhen Meishenrui Technology Co., Ltd. This section provides details on the equity structure, principal activities, and financial summaries of these joint ventures, also mentioning foreign exchange controls on RMB - Investments in joint ventures had a carrying amount of **69,164 thousand HKD** (2019: **65,032 thousand HKD**)[1011](index=1011&type=chunk) - Major joint ventures include Shenzhen Yinguan Biotechnology Co., Ltd. (bio-services and storage) and Shenzhen Meishenrui Technology Co., Ltd. (manufacturing CBD vaping products and other materials), with the Group holding a **45%** equity interest in both[1013](index=1013&type=chunk) Financial Information Summary of Major Joint Ventures (2020) | Name | Principal Business | Percentage of Voting Rights Held by Group | Net Assets (thousand HKD) | Carrying Amount of Group's Share of Equity (thousand HKD) | | :--- | :--- | :--- | :--- | :--- | | Shenzhen Yinguan | Bio-services and storage | 45% | 38,844 | 65,498 | | Shenzhen Meishenrui | Manufacturing CBD vaping products and other materials | 45% | 8,147 | 3,666 | [Equity Investments at Fair Value Through Other Comprehensive Income](index=183&type=section&id=Equity%20Investments%20at%20Fair%20Value%20Through%20Other%20Comprehensive%20Income) The Group's equity investments at fair value through other comprehensive income amounted to 28.6 million HKD as at December 31, 2020, primarily unlisted equity investments intended for long-term holding. Dividends of 346,000 HKD were received from these investments during the year Equity Investments at Fair Value Through Other Comprehensive Income (2020 vs 2019) | Item | 2020 (thousand HKD) | 2019 (thousand HKD) | | :--- | :--- | :--- | | Unlisted equity investments | 28,572 | 33,825 | - These investments are intended for long-term holding to avoid the volatility impact of fair value changes on profit or loss[1023](index=1023&type=chunk) - Dividends of **346,000 HKD** were received in 2020 (2019: **451,000 HKD**)[1023](index=1023&type=chunk) [Derivative Financial Assets](index=183&type=section&id=Derivative%20Financial%20Assets) The Group's derivative financial assets amounted to 243,000 HKD as at December 31, 2020, primarily a call option arising from the subscription of certain equity interests in Beijing Meiaikang Technology Co., Ltd. This option is not for hedging purposes, and its fair value loss was deducted

--- 美 瑞 健 康 国 际 产 业 集 团 Meilleure Health International Industry Group Meilleure Health International Industry Group Limited 美瑞健康國際產業集團有限公司 (於百慕達註冊成立之有限公司) (股份代號 : 2327) 一份專注 兩倍用心 三倍高效 十重保障 百倍體驗 終身受益 美瑞健康——精準健康管理 中 期 報 告 2020 目錄 公司資料 2 管理層討論及分析 3 其他資料 29 董事及高級管理人員履歷 45 獨立審閱報告 51 中期簡明綜合損益表 53 中期簡明綜合全面收益表 54 55 | --- | --- | |-------|------------------------| | | | | | 中期簡明綜合財務狀況表 | | | 中期簡明綜合權益變動表 | | | 中期簡明綜合現金流量表 | | | | 57 58 中期簡明綜合財務報表附註 59 1 美瑞健康國際產業集團有限公司 | --- | --- | |--------------------------------- ...

Business Strategy and Growth - The Group's strategy, termed "one core and two wings," focuses on high-end health management driven by cannabinoid and cell health applications[12]. - During the reporting period, the Group emphasized a coordinated growth mechanism combining organic growth and external expansion[12]. - The Group's vision is to maintain a healthy future by investing in healthcare, focusing on health management and industrial hemp as core operations[12]. - The Group's strategic initiatives are aligned with the broader trends in the healthcare industry, particularly in the context of regulatory changes and market demand[12]. - The Group's health management business strategy emphasizes continuous R&D capabilities and a rich product line to enhance competitiveness[26]. - The Group is focusing on capturing market opportunities in the industrial hemp sector, particularly in healthcare and consumer goods, as legalization accelerates globally[105]. Financial Performance - The Group recorded a turnover of HK$234.8 million during the Reporting Period, representing a 1.9% increase compared to 2018[17]. - Revenue from the health management business decreased by 10.0% compared to 2018, primarily due to the impact of social movements in Hong Kong[17]. - Revenue from clinics in Mainland China grew by over 100% compared to 2018, contributing positively to the overall performance[17]. - The Group achieved a net cash flow from operating activities growth rate of 41.9% compared to 2018[17]. - The Group recorded a loss attributable to owners of the parent of HK$20.2 million for the year ended December 31, 2019, compared to a profit of HK$80.5 million in 2018[48][50]. - Gross profit for the year ended December 31, 2019 was HK$71.8 million, representing a decrease of 20.4% compared to HK$90.2 million in 2018, with a gross profit margin declining to 30.6% from 39.1%[44][46]. - Total operating expenses for the year ended December 31, 2019 were HK$39.9 million, an increase of 20.2% from HK$33.2 million in 2018[47][49]. Investments and Acquisitions - The Group acquired a 45% stake in Shenzhen Wingor Biotechnology Co., Ltd., enhancing its R&D capabilities in health management[19]. - The Group acquired a 5.55% equity interest in Yunnan Hansu, increasing its total shareholding to 25.55%, reinforcing its first-mover advantage in the industrial hemp extraction field[25][27]. - The Group established a joint venture with Shenzhen Mason Vap Technology Co., Ltd to integrate its industry advantages with Masonvap's manufacturing experience[28][29]. - The Group plans to invest not less than HK$100 million to establish an industrial hemp holding company[98]. - The Group aims to enhance R&D capabilities and enter the cell and gene treatment market through the acquisition of Shenzhen Wingor[112]. Market Opportunities and Future Outlook - The Group plans to leverage the Healthy China Action (2019-2030) to enhance its health management business and expand into cell storage and functional medicine[24]. - The Group's outlook remains positive despite global economic uncertainties, with a focus on leveraging its traditional business for stable cash flow[34]. - The ongoing uncertainty from the epidemic and US-China trade disputes is expected to create more opportunities for mergers and acquisitions at lower prices[148]. - The Group believes it has sufficient resources and funds to select and acquire suitable strategic businesses and assets[148]. Corporate Governance and Management - Mr. Liu Lailin resigned as an Executive Director effective 27 May 2019, and Mr. Wu Peng was appointed as an Independent Non-Executive Director on the same date[186]. - Dr. Zeng Wentao was re-designated from Independent Non-Executive Director to Executive Director effective 27 May 2019, with a new service contract for three years[189]. - The service contracts for directors are generally terminable by either party with a notice period ranging from two to three months[187][190][195]. Employee and Operational Insights - The Group provides ongoing training to employees to enhance their skills and professional development[165]. - The Group has adopted share option schemes to attract, retain, and motivate key employees, granting share options to eligible employees[165]. - The Group maintains stable business relationships with suppliers, ensuring sufficient inventory levels and bargaining power to manage price fluctuations[168]. Legal and Compliance - The Group's operations are compliant with all relevant laws and regulations in Hong Kong, the PRC, Australia, and Bermuda in 2019[160]. - As of March 31, 2020, a lawsuit against a subsidiary was ongoing, with potential claims amounting to approximately HK$2.3 million, but no provision was deemed necessary at this stage[103].

Financial Performance - The company recorded revenue of approximately HKD 108,594,000 for the six months ended June 30, 2019, a decrease of 17.4% compared to HKD 131,490,000 for the same period in 2018[13]. - Gross profit for the same period was approximately HKD 44,059,000, an increase of 25.2% from HKD 35,180,000 in the previous year[13]. - Profit before tax was approximately HKD 49,428,000, a slight increase of 0.1% compared to HKD 49,394,000 for the six months ended June 30, 2018[13]. - Net profit attributable to the owners of the parent was approximately HKD 41,102,000, up 5.8% from HKD 38,840,000 in the prior year[13]. - Trading business revenue for the six months ended June 30, 2019, was approximately HKD 52.9 million, a decrease of 44.0% compared to HKD 94.6 million for the same period in 2018[25]. - Sales agency service revenue increased approximately 160% to HKD 18.2 million for the six months ended June 30, 2019, compared to HKD 6.9 million for the same period in 2018[26]. - Property investment and leasing business revenue increased by 4.9% to approximately HKD 9.7 million for the six months ended June 30, 2019[27]. - Healthcare-related business revenue increased by 33.5% to approximately HKD 27.7 million for the six months ended June 30, 2019, but incurred a loss of approximately HKD 860,000 due to increased R&D expenses[29]. - The company reported a net profit of HKD 39,212,000 for the six months ended June 30, 2019, compared to HKD 39,051,000 in the same period of 2018, reflecting a slight increase of 0.4%[65]. - Total comprehensive income for the period amounted to HKD 36,719,000, significantly higher than HKD 21,774,000 in the previous year, indicating a year-over-year increase of 68.8%[67]. Investment Activities - The company acquired a 45% stake in Shenzhen Yinguang Biotechnology Co., Ltd. for a total consideration of approximately RMB 55,095,000[16]. - Following the acquisition, the company became the largest shareholder of Shenzhen Yinguang, holding a majority of the board seats[17]. - The company successfully placed 360,000,000 new shares at a price of HKD 0.91 per share, raising approximately HKD 325,707,000 for investment in industrial hemp extraction and general working capital[19]. - The company acquired an additional 5.55% equity stake in Yunnan Hanzu for approximately RMB 14.6 million (approximately HKD 16.5 million) in July 2019[22]. - The company plans to invest no less than HKD 100 million to establish an industrial hemp holding group, with subsidiaries in Australia and Switzerland currently being formed[23]. - The company is actively expanding its presence in the industrial hemp market, with plans for joint ventures and equity purchases to capture growth opportunities[33]. - The company plans to invest no less than HKD 100 million to establish an industrial hemp holding group, Hemp International Holdings Limited[36]. - The group has established a subsidiary in Australia, Australia Hemp Health Pty Ltd, and is in the process of establishing subsidiaries in Switzerland[36]. - The joint venture with Long Dance Industrial aims to create a wholly-owned subsidiary in Japan for the development and application of cannabinoid vaporization technology[39]. - The company holds a 51% equity interest in the joint venture, which is expected to enhance its product portfolio and create new growth opportunities[37]. Financial Position - As of June 30, 2019, the group's cash and cash equivalents totaled approximately HKD 140.24 million, a decrease from HKD 161.14 million as of December 31, 2018[41]. - Current assets amounted to approximately HKD 999.19 million, while current liabilities were about HKD 300.87 million as of June 30, 2019[42]. - The debt-to-equity ratio was 28% as of June 30, 2019, compared to 23% as of December 31, 2018[43]. - The company has sufficient resources and funds to pursue strategic acquisitions amid global economic uncertainties[39]. - Bank loans secured against certain assets amounted to approximately HKD 367.91 million as of June 30, 2019, up from HKD 219.56 million as of December 31, 2018[45]. - The company’s total liabilities increased to HKD 656,261,000 as of June 30, 2019, compared to HKD 474,954,000 at the end of 2018, marking a rise of 38.2%[72]. - The net current assets stood at HKD 698,322,000, significantly higher than HKD 278,398,000 in the previous year, indicating an increase of 150.9%[73]. - The company’s equity attributable to owners of the parent increased to HKD 1,181,778,000 from HKD 817,003,000, reflecting a growth of 44.6%[80]. - The company reported a cash outflow from investing activities of HKD 468,004,000, compared to an inflow of HKD 49,466,000 in the previous year, indicating a significant shift in investment strategy[85]. - The financing activities generated a cash inflow of HKD 402,639,000, a substantial increase from HKD 39,704,000 in the same period last year, suggesting enhanced capital raising efforts[85]. Regulatory and Reporting Standards - The financial statements are prepared in accordance with Hong Kong Financial Reporting Standards, specifically HKFRS 34 for interim financial reporting[91]. - The adoption of HKFRS 16 has been implemented, which requires the recognition and measurement of all leases using a single asset and liability model[95]. - The company has chosen to apply the modified retrospective approach for HKFRS 16, with no restatement of comparative information for 2018[96]. - The company recognized lease liabilities at the present value of remaining lease payments discounted using the incremental borrowing rate as of January 1, 2019[101]. - The company has opted for exemptions for low-value asset leases and short-term leases, recognizing lease payments as expenses on a straight-line basis[100]. - The company’s financial reporting policies are consistent with those applied in the preparation of the annual consolidated financial statements for the year ended December 31, 2018[92]. - The adoption of HKFRS 16 resulted in a right-of-use asset value of HKD 3,497 million and a lease liability of HKD 4,016 million as of January 1, 2019[108]. - The total undiscounted lease liabilities amounted to HKD 4,429 million as of January 1, 2019[112]. - The average incremental borrowing rate as of January 1, 2019, was 6%[113]. - The company recognized short-term lease expenses of HKD 2,852,000 for the six months ended June 30, 2019[120]. Strategic Focus and Future Outlook - The company aims to focus on health solutions and become a leading global health service provider in the second half of 2019[30]. - The company continues to explore market expansion opportunities and new product development strategies in the health industry[62]. - The company plans to expand its health management services and sales agency operations to capture more market share in mainland China[136]. - The company is focusing on enhancing its product offerings and exploring new technologies to improve service delivery[136]. - Future guidance indicates a cautious outlook due to market conditions, with expectations of gradual recovery in revenue streams[136]. Acquisition Details - The company acquired 45% equity in Shenzhen Yinguang for RMB 55.1 million, enhancing its competitive position in health management services[31]. - The acquisition of Shenzhen Yinguang is expected to enhance the company's competitive position in health management services and provide opportunities in the cell and gene therapy market[161]. - The fair value of identifiable net assets of Shenzhen Yinguang at the acquisition date was approximately HKD 31,522,000, with goodwill arising from the acquisition amounting to HKD 50,602,000[189]. - For the six months ended June 30, 2019, the company reported a loss of HKD 3,587,000 attributable to Shenzhen Yinguang, while revenue from the subsidiary was HKD 1,031,000[196]. - If the acquisition had been completed at the beginning of the reporting period, the company's total revenue for the six months ended June 30, 2019, would have been HKD 108,611,000, with profit amounting to HKD 31,691,000[196]. - The company has chosen to measure non-controlling interests based on the proportionate share of identifiable net assets of Shenzhen Yinguang[162]. - The acquisition-related costs were not significant, with cash paid amounting to HKD 64,781,000 and other payables of HKD 422,000[164]. - The company holds a majority of seats on the board of Shenzhen Yinguang, allowing it to control the subsidiary despite owning less than 50% of voting rights[161]. - The acquisition is expected to strengthen the company's research and development capabilities and broaden its product portfolio in the health management sector[161].

Financial Performance - The Group recorded a turnover of approximately HK$230,542,000 for the year ended 31 December 2018, representing an increase of 2.4 times compared to HK$68,705,000 in 2017[20]. - Profit attributable to owners of the Company amounted to approximately HK$80,537,000, a slight increase of 0.6% from HK$80,066,000 in 2017; excluding goodwill impairment, profit increased by 22.5% to approximately HK$98,071,000[20]. - Revenue from the Healthcare Related Business was approximately HK$46,248,000, an increase of 7.5% from HK$43,036,000 in 2017, with profit from this segment rising 10.7 times to approximately HK$2,985,000[20]. - Revenue from the Trading Business was approximately HK$118,847,000, representing an increase of 107.1 times compared to HK$1,099,000 in 2017, with profit increasing 34.4 times to approximately HK$16,221,000[20]. - Revenue from the Agency Service was approximately HK$46,731,000, an increase of 2.2 times from HK$14,727,000 in 2017, with profit rising by 205.3% to approximately HK$39,991,000[25]. - Revenue from the Property Investment and Leasing Business increased by 90.1% to approximately HK$18,716,000, while profit decreased by 29.5% to approximately HK$74,943,000 due to a decrease in fair value gain on investment properties[25]. Dividends and Reserves - The Board does not recommend the payment of a final dividend for the year ended 31 December 2018[25]. - Profit attributable to shareholders before dividends was approximately HK$80,537,000 for the year ended 31 December 2018, compared to HK$80,066,000 in 2017[159]. - The aggregate amount of the Company's reserves available for distribution to its owners as of 31 December 2018 was HK$599,375,000, an increase from HK$501,050,000 in 2017[160]. - The Company did not recommend the payment of a final dividend for the year ended 31 December 2018[157]. Acquisitions and Investments - The Group acquired a 20% equity interest in Yunnan Hansu Biotechnology Co., Ltd. for RMB 60 million, completed on March 16, 2018, with a net profit of RMB 50,020,000 for the year ended December 31, 2018[26]. - Shenzhen Meilleure agreed to acquire a 45% equity interest in Shenzhen Wingor for RMB 55,278,000, enhancing its position in the health management service field[54]. - The acquisition of Shenzhen Wingor is expected to allow the Group to enter the cell and gene treatment market, solidifying its competitive position[54]. - The acquisition of Shenzhen Wingor is expected to enhance the company's competitive position in the health management sector through precision medicine and provide opportunities in the cell and gene therapy market[55]. - The acquisition was completed in February 2019, making the company the largest single shareholder of Shenzhen Wingor[55]. Financial Position - As of December 31, 2018, the group's cash and cash equivalents totaled approximately HK$161,142,000, an increase from HK$50,852,000 in 2017, primarily due to increased fundraising and bank borrowings[56]. - The group had aggregate banking facilities of HK$283,466,000 as of December 31, 2018, compared to HK$175,537,000 in 2017, with a short-term loan of HK$219,563,000 utilized[56]. - Approximately 8.43% of the group's cash and cash equivalents are denominated in Hong Kong dollars, 36.58% in RMB, and 50.61% in US dollars[56]. - The company raised HK$54,600,000 for working capital and the acquisition of the 45% equity interest in Shenzhen Wingor Biotechnology Co., Ltd.[70]. - Bank borrowings secured by the Group's assets amounted to HK$219,563,000 as of 31 December 2018, up from HK$128,287,000 in 2017[1]. - The increase in cash and cash equivalents reflects the company's successful fundraising efforts and strategic financial management[56]. - As of 31 December 2018, the gearing ratio was 23%, down from 30% in 2017, with net debt of HK$249,922,000 and equity attributable to owners of the Company amounting to HK$817,003,000[1]. Legal and Compliance - The Company is currently involved in a legal action with potential damages claimed at approximately HK$2,316,666 plus interests[146][147]. - The directors believe that there is no need to make a provision for the claim due to its preliminary stage and the nature of the acquisition of La Clinique De Paris International Limited[152]. - The Company is not aware of any tax relief or exemption available to shareholders due to their holding of the Company's securities[161]. Employment and Governance - As of December 31, 2018, the Group employed approximately 86 employees[174]. - The Directors are required to retire by rotation once every three years, with one-third of the Directors retiring at each annual general meeting[176]. - The Group's remuneration policies align with market practices and are based on individual performance and experience[174]. Research and Development - Yunnan Hansu is the first facility in China to comply with GMP standards and holds the largest extraction base for Cannabidiol (CBD) and other cannabinol substances[38]. - The cooperation with Hemp Investment Group is a strategic initiative for the Group's investment in the medical and healthcare industry[38]. - Yunnan Hansu has applied for 17 patents and is recognized as a leading benchmark in the hemp industry globally[39].