DIT Group Limited — Annual Report 2017

Mar 28, 2018

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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China Minsheng Drawin Technology Group Limited 中民築友科技集團有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 726)

ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2017

The board of directors (the “Directors”) of China Minsheng Drawin Technology Group Limited (the “Company”) is pleased to present the audited consolidated results of the Company and its subsidiaries (the “Group”) for the year ended 31 December 2017, together with the comparative figures for the year ended 31 December 2016 as follows:

FINANCIAL INFORMATION

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the year ended 31 December 2017

Notes Revenue 3 Cost of sales 6 Gross profit Other income 4 Other gains/(losses) – net 5 Selling and distribution expenses 6 Administrative expenses 6 Impairment loss on other receivables 16 Operating profit/(loss) Finance costs 7	Year ended 31 December 2017 HK$’000 216,587 (207,619) 8,968 69,797 227,622 (17,408) (159,110) – 129,869 (17,272)	Year ended 31 December 2016 HK$’000 37,042 (28,654) 8,388 68,436 (24,879) (6,531) (90,870) (30,000) (75,456) (14,953)

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CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (continued)

For the year ended 31 December 2017

Notes Profit/(loss) before income tax Income tax credit/(expense) 8 Profit/(loss) for the year Profit/(loss) for the year, attributable to – Owners of the Company – Non-controlling interests Other comprehensive income/(loss), which may be reclassified subsequently to profit or loss – Changes in fair value of available-for-sale financial assets – Currency translation differences Other comprehensive income/(loss) for the year, net of tax Total comprehensive income/(loss) for the year Total comprehensive income/(loss) for the year, attributable to – Owners of the Company – Non-controlling interests Earnings/(loss) per share attributable to owners of the Company (expressed in HK$ cents per share) – Basic and diluted 10	Year ended 31 December 2017 HK$’000 112,597 11,224 123,821 131,719 (7,898) 123,821 209 122,141 122,350 246,171 253,700 (7,529) 246,171 1.27	Year ended 31 December 2016 HK$’000 (90,409) (10,889) (101,298) (101,136) (162) (101,298) 9,669 (50,153) (40,484) (141,782) (141,626) (156) (141,782) (0.99)

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2017

Notes ASSETS Non-current assets Property, plant and equipment 11 Land use rights 12 Investment properties 13 Intangible assets Deferred income tax assets 19 Investment in an associate 14 Current assets Inventories Trade and other receivables and prepayments 16 Available-for-sale financial assets 15 Financial assets at fair value through profit or loss 17 Cash and cash equivalents Restricted cash Total assets EQUITY Equity attributable to owners of the Company Share capital (nominal value) Reserves Non-controlling interests Total equity	As at 31 December 2017 HK$’000 928,708 628,458 18,543 782 20,751 182,735 1,779,977 78,609 402,516 23,926 – 582,511 449 1,088,011 2,867,988 1,120,960 723,517 1,844,477 560,917 2,405,394	As at 31 December 2016 HK$’000 718,420 534,960 35,662 886 594 – 1,290,522 16,467 120,525 121,252 44,968 784,546 46,953 1,134,711 2,425,233 1,020,960 350,551 1,371,511 553,677 1,925,188

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued) As at 31 December 2017

Notes LIABILITIES Non-current liabilities Convertible bond 18 Deferred income 20 Deferred income tax liabilities 19 Bank Borrowings 21 Current liabilities Trade and other payables 20 Advances from customers Current income tax liabilities Bank Borrowings 21 Total liabilities Total equity and liabilities	As at 31 December 2017 HK$’000 – 23,475 7,962 101,686 133,123 266,537 22,987 22,003 17,944 329,471 462,594 2,867,988	As at 31 December 2016 HK$’000 177,426 – 17,014 – 194,440 256,830 1,844 4,204 42,727 305,605 500,045 2,425,233

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NOTES:

1 GENERAL INFORMATION

China Minsheng Drawin Technology Group Limited (the “Company”) was incorporated as an exempted company with limited liability in Bermuda on 28 February 1991 under the Companies Act 1981 of Bermuda and its issued shares are listed on the main board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) starting from 25 July 1991.

The address of the registered office of the Company is Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda. The principal place of business of the Company is Suites 1001-1004, Level 10, One Pacific Place, 88 Queensway, Admiralty, Hong Kong.

The principal activities of the Company and its subsidiaries (the “Group”) are prefabricated construction work, licensing and property investment in the People’s Republic of China (the “PRC”).

The consolidated financial statements are presented in Hong Kong dollars (“HK$”) and rounded to the nearest thousand (“HK$’000”), unless otherwise stated.

The ultimate parent company of the Company is China Minsheng Investment Corp. Ltd., a company incorporated in the People’s Republic of China.

The annual results set out in this announcement do not constitute the Group’s consolidated financial statements for the year ended 31 December 2017 but are extracted from those financial statements.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of the consolidated financial statements have been consistently applied to the period and year presented, unless otherwise stated.

2.1 Basis of preparation

The consolidated financial statements of the Company have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (”HKFRSs”) and the disclosure requirements of the Hong Kong Companies Ordinance Cap. 622. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss and investment properties, which are carried at fair value.

The preparation of financial statements in conformity with HKFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies.

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2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.1 Basis of preparation (continued)

New amendments of HKFRSs adopted by the Group in 2017

HKFRS 12 (Amendments)	Amendments to “Disclosure of Interests in Other Entities”
	on clarifying that the disclosure requirement of the
	standard is applicable to interests in entities classified as
	held for sale except for summarised financial information
HKAS 12 (Amendments)	Amendments to “Income Taxes” on how to account for
	deferred tax assets related to debt instruments measured
	at fair value
HKAS 7 (Amendments)	Amendments to “Statement of Cash Flows” regarding
	additional disclosure on changes in liabilities arising
	from financing activities

The adoption of the above new amendments and improvements starting from 1 January 2017 did not give rise to any significant impact on the Group’s results of operations and financial position for the year ended 31 December 2017.

3 REVENUE

Revenue from sales of prefabricated units Revenue from licensing Revenue from consulting service income Rental income from investment properties Revenue from sales of equipment OTHER INCOME Government subsidies_(note (a))_ Interest income on bank deposits Sundry income	Year ended 31 December 2017 HK$’000 173,565 32,711 2,910 1,586 5,815 216,587 Year ended 31 December 2017 HK$’000 62,789 2,081 4,927 69,797	Year ended 31 December 2016 HK$’000 36,547 – – 495 –
		37,042
		Year ended 31 December 2016 HK$’000 63,427 5,002 7
		68,436

4 OTHER INCOME

note:

(a) Government subsidies of HK$62,789,000 except HK$6,224,000 recorded in trade and other receivables and prepayments (Note 16) were received by eight PRC subsidiaries of the Group during the year ended 31 December 2017.

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5 OTHER GAINS/(LOSSES) – NET

Gains on disposal of subsidiaries_(Note 23) Recovery of trade and other receivables(Note 16) Net realised gain/(loss) on redemption of available-for-sale financial assets(Note 15) Gain on recovery of other receivables – interest charged on late settlement Fair value (loss)/gains on investment properties(Note 13) Net loss on disposal of investment properties(Note 13) Provision for onerous contract Net exchange (losses)/gains Net realised loss on financial assets at fair value through profit or loss(Note 17)_ Gains on disposal of property, plant and equipment Others (loss)/gain	Year ended 31 December 2017 HK$’000 212,334 30,488 5,820 1,420 (16,264) (2,073) (1,857) (1,272) (413) – (561) 227,622	Year ended 31 December 2016 HK$’000 – 72,026 (78,705) – 231 – – 8,710 (27,144) 1 2 (24,879)

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6 EXPENSES BY NATURE

Expenses included in cost of sales, selling and distribution expenses and administrative expenses are analysed as follows:

Employee benefits expenses_(note (a)) Raw materials and consumables used Depreciation(Note 11)_ Operating lease rentals on buildings Land use tax and value-added tax surcharges Entertainment and travelling expenses Amortisation of land use rights and intangible assets Legal and professional fees Utilities Impairment loss on inventories Office expenses Bank charges Design fee Registration expenses Auditors’ remuneration – audit services – non-audit services Change in inventories of finished goods and work in progress Others Total of cost of sales, selling and distribution expenses and administrative expenses	Year ended 31 December 2017 HK$’000 150,744 104,000 42,357 21,677 17,877 16,543 12,772 10,788 6,153 4,998 3,724 1,904 1,904 1,403 1,750 67 (34,934) 20,410 384,137	Year ended 31 December 2016 HK$’000 66,684 9,139 2,470 12,197 2,131 9,631 901 7,668 2,228 – 1,186 44 – 3,165 1,400 250 4,149 2,812
		126,055

Note:

(a) Employee benefit expenses (including directors’ and chief executive’s emoluments)

Wages and salaries Pensions Other welfare benefit expenses Charged to statement of profit or loss and other comprehensive income Number of employees	Year ended 31 December 2017 HK$’000 135,246 7,970 7,528 150,744 1,023	Year ended 31 December 2016 HK$’000 42,125 1,859 22,700
		66,684
		538

All Chinese employees of the Group participate in defined contribution employee social security plans, including pension, medical, housing and other welfare benefits, organised and administered by the governmental authorities. According to the relevant regulations, the premiums and welfare benefit contributions that should be borne by the Group are calculated based on percentages of the total salary of employees, subject to a certain ceiling, and are paid to the labour and social welfare authorities. The Group has no other substantial commitments to the employees.

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7 FINANCE COSTS

Interest expenses on convertible bond_(Note 18) Interest expenses on bank borrowings 8 INCOME TAX (CREDIT)/EXPENSE Current income tax – PRC corporate income tax – Hong Kong profits tax Deferred income tax(Note 19)_ Total income tax (credit)/expense for the year	Year ended 31 December 2017 HK$’000 13,209 4,063 17,272 Year ended 31 December 2017 HK$’000 23,080 151 23,231 (34,455) (11,224)	Year ended 31 December 2016 HK$’000 14,650 303
		14,953
		Year ended 31 December 2016 HK$’000 3,675 529
		4,204 6,685
		10,889

The income tax on the Group’s profit/(loss) before income tax differs from the theoretical amount that would arise using the enacted tax rate of the home country of the companies within the Group as follows:

Profit/(loss) before income tax Income tax calculated at respective statutory rates Tax benefit Previously unrecognised tax losses now recognised as deferred tax assets Adjustment of previously recognised deferred tax liabilities due to conversion of convertible bond Non-deductible expenses Non-taxable income Research and development expenditure additional deduction Utilisation of previously unrecognised tax losses Utilisation of previously unrecognised temporary differences Tax losses and temporary differences not recognised as deferred tax assets Prior year’s tax filing differences Total income tax (credit)/expense for the year	Year ended 31 December 2017 HK$’000 112,597 16,227 (3,870) (4,289) (1,545) 2,243 (17,244) (2,093) (3,089) (5,270) 7,555 151 (11,224)	Year ended 31 December 2016 HK$’000 (90,409)
		(14,002) – – – 14,176 (89) (1,925) (350) (11,880) 24,410 549
		10,889

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8 INCOME TAX (CREDIT)/EXPENSE (continued)

Hong Kong profits tax

The applicable Hong Kong profits tax rate is 16.5% (year ended 31 December 2016: 16.5%) on the estimated assessable profit derived in Hong Kong for the year.

PRC corporate income tax

Under the Corporate Income Tax Law of the PRC (“CIT Law”), the CIT rate applicable to the Group’s subsidiaries established in mainland China is 25%.

The CIT Law and its implementation rules impose a withholding tax at 10% for dividends distributed by a PRC-resident enterprise to its immediate holding company outside PRC for earnings generated beginning 1 January 2008 and undistributed earnings generated prior to 1 January 2008 are exempted from such withholding tax. A lower 5% withholding tax rate may be applied when the immediate holding companies are established in Hong Kong according to the tax treaty arrangement between the PRC and Hong Kong. The Company’s mainland China subsidiaries did not have plan for distribution dividend to the Company, thus no such withholding tax was accrued (31 December 2016: Nil).

9 DIVIDEND

The Board of Directors did not recommend any payment of dividend in respect of the year ended 31 December 2017 (year ended 31 December 2016: Nil).

10 EARNINGS/(LOSS) PER SHARE

(a) Basic

Basic earnings/(loss) per share for the year is calculated by dividing the consolidated earnings/(loss) of the Group attributable to owners of the Company by the weighted average number of ordinary shares in issue during the year.

Consolidated earnings/(loss) attributable to owners of the Company (HK$’000) Weighted average number of ordinary shares in issue (’000) Basic earnings/(loss) per share (HK cents)	Year ended 31 December 2017 131,719 10,360,288 1.27	Year ended 31 December 2016 (101,136) 10,209,603 (0.99)

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10 EARNINGS/(LOSS) PER SHARE (continued)

(b) Diluted

Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has only one category of dilutive potential ordinary shares for the year ended 31 December 2016, which was the convertible bond (Note 18). The convertible bond was fully exercised by the bond owner in exchange of 1 billion ordinary shares at HK 0.2 per share on 6 November 2017.

The convertible bond is assumed to have been converted into ordinary shares from the beginning of the year, and the earnings attributable to owners of the Company is adjusted to eliminate the interest expense less the tax effect before the conversion. Given the impact of conversion of convertible bond on earnings per share is anti-dilutive for the year ended 31 December 2017 and 2016, diluted earnings/(loss) per share therefore is equal to basic earnings/(loss) per share.

11 PROPERTY, PLANT AND EQUIPMENT

At 1 January 2017 Cost Accumulated depreciation Net book amount Year ended 31 December 2017 Opening net book amount Additions Transfers upon completion Disposals Depreciation charge Currency translation differences Closing net book amount At 31 December 2017 Cost Accumulated depreciation Net book amount	Buildings HK$’000 215,688 – 215,688 215,688 70,155 409,559 (93,964) (14,191) 14,623 601,870 615,190 (13,320) 601,870	Computer equipment HK$’000 3,568 (292) 3,276 3,276 1,511 – (722) (875) 323 3,513 4,629 (1,116) 3,513	Motor vehicles HK$’000 8,484 (283) 8,201 8,201 7,082 – (5,394) (1,944) 820 8,765 10,426 (1,661) 8,765	Furniture & fixtures HK$’000 4,536 (92) 4,444 4,444 8,944 – (596) (1,810) 247 11,229 13,072 (1,843) 11,229	Equipment HK$’000 145,034 (611) 144,423 144,423 9,127 91,410 (55,957) (19,448) 9,316 178,871 194,962 (16,091) 178,871	Leasehold improvements HK$’000 11,122 (2,259) 8,863 8,863 5,956 – (203) (4,089) 886 11,413 17,847 (6,434) 11,413	Plant under development for prefabricated construction business HK$’000 333,525 – 333,525 333,525 299,230 (500,969) (38,522) – 19,783 113,047 113,047 – 113,047	Total HK$’000 721,957 (3,537)
								718,420
								718,420 402,005 – (195,358) (42,357) 45,998
								928,708
								969,173 (40,465)
								928,708

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11 PROPERTY, PLANT AND EQUIPMENT (continued)

At 1 January 2016 Cost Accumulated depreciation Net book amount Year ended 31 December 2016 Opening net book amount Additions Transfers upon completion Disposals Depreciation charge Currency translation differences Closing net book amount At 31 December 2016 Cost Accumulated depreciation Net book amount	Buildings HK$’000 – – – – 107,516 115,124 – – (6,952) 215,688 215,688 – 215,688	Computer equipment HK$’000 318 (62) 256 256 3,429 – – (182) (227) 3,276 3,568 (292) 3,276	Motor vehicles HK$’000 330 (313) 17 17 8,638 – (16) (293) (145) 8,201 8,484 (283) 8,201	Furniture & fixtures HK$’000 180 (77) 103 103 4,574 – – (82) (151) 4,444 4,536 (92) 4,444	Equipment HK$’000 3,964 – 3,964 3,964 41,365 104,487 – (618) (4,775) 144,423 145,034 (611) 144,423	Leasehold improvements HK$’000 3,859 (965) 2,894 2,894 7,497 – – (1,295) (233) 8,863 11,122 (2,259) 8,863	Plant under development for prefabricated construction business HK$’000 74,164 – 74,164 74,164 491,812 (219,611) – – (12,840) 333,525 333,525 – 333,525	Total HK$’000 82,815 (1,417)
								81,398
								81,398 664,831 – (16) (2,470) (25,323)
								718,420
								721,957 (3,537)
								718,420

Depreciation of property, plant and equipment of HK$42,357,000 (year ended 31 December 2016: HK$2,470,000) has all been charged to administrative expenses and cost of sales in the consolidated statement of profit or loss and other comprehensive income.

As at 31 December 2017, property, plant and equipment with a net book value of RMB85 million were pledged as collateral for the Group’s borrowings (Notes 21).

There was no interest capitalised in plant under development for prefabricated construction business for the year ended 31 December 2017 (year ended 31 December 2016: Nil).

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12 LAND USE RIGHTS

Beginning balance Additions Amortisation of prepaid operating lease payments Disposals Currency transaction differences Ending balance	Year ended 31 December 2017 HK$’000 534,960 154,306 (12,937) (84,921) 37,050 628,458	Year ended 31 December 2016 HK$’000 – 554,639 (2,435) – (17,244) 534,960

At 31 December 2017, one of the Group’s subsidiary’s ( 中民築友科技（衡陽）有限公司 ) land use right with a net book value of approximately RMB50 million (year ended December 2016: Nil) had been pledged as collateral for the subsidiary’s bank borrowings (Note 21).

At 31 December 2017, one of the Group’s subsidiary’s ( 中民築友科技（江蘇）有限公司 ) land use right with a net book value of approximately RMB60 million (year ended December 2016: Nil) had been pledged as collateral for subsidiary’s bank borrowings (Note 21).

At 31 December 2017, one of the Group’s subsidiary’s ( 中民築友科技（佛山）有限公司 ) land use right with a net book value of approximately RMB51 million (year ended December 2016: Nil) had been pledged as collateral for subsidiary’s bank borrowings (Note 21).

During the year ended 31 December 2017, amortisation of land use rights of HK$12,314,000 (year ended 31 December 2016: HK$889,000) has been charged to cost of sales and administrative expenses in the consolidated statement of profit or loss and other comprehensive income and HK$623,000 (year ended 31 December 2016: HK$1,546,000) has been capitalized to plant under development for prefabricated construction business.

13 INVESTMENT PROPERTIES

Beginning balance Disposals Net loss on disposal of investment properties_(Note 5) Net (loss)/gain from fair value adjustments(Note 5)_ Currency translation differences Ending balance	Year ended 31 December 2017 HK$’000 35,662 (2,052) (2,073) (16,264) 3,270 18,543	Year ended 31 December 2016 HK$’000 37,723 – – 231 (2,292) 35,662

Investment properties held by the Group are all commercial properties located in Shandong, the PRC.

– 13 –

13 INVESTMENT PROPERTIES (continued)

During the year, the investment properties have a significant decrease in value because the decline of retail property market in Zouping County. Zouping County is relatively less developed area in Shandong Province, demand for retail properties is low and vacancy rate remains at high level. In result, sales price of investment properties showed significant decrease in 2017.

Investment properties have been fair valued as at 31 December 2017 and 2016 by Grant Sherman Appraisal Limited, professional valuer. The revaluation gains or losses are included in ‘Other gains/(losses) – net’ in the consolidated statement of profit or loss and other comprehensive income (Note 5).

As at 31 December 2017 and 2016, the fair value of investment properties which was determined using income approach by reference to the value of income, cash flow or cost savings generated by the asset.

There were no transfer among Level 1, Level 2 and Level 3 during the year. The Group’s policy is to recognise transfers into/out of fair value hierarchy levels as of the date of the event or change in circumstances that caused the transfer. The investment properties are within level 3 of fair value hierarchy as of 31 December 2017 and 2016.

As at 31 December 2017 and 2016, the Group’s aggregate future minimum lease payments receivable under non-cancellable operating leases is not material.

14 INVESTMENT IN AN ASSOCIATE

Share of net assets Less: Provision for impairment	Year ended 31 December 2017 HK$’000 182,735 – 182,735	Year ended 31 December 2016 HK$’000 – – –

As at the 31 December 2017, the Company had indirect interests in the following associate:

	Place of
	incorporation	Proportion of			Issued
Name	and operation	ownership	interest		Share capital	Principal activities
		Held by the	Indirectly
		Company		held
Zhejiang China Minsheng	China	–		47%	HK$200,000,000	Construction
Drawin Technology						industrialization
Company Limited
浙江中民築友科技有限公司

(a) The Group disposed 2% and 51% of its equity interest in Zhejiang China Minsheng Drawin Technology Company Limited (“Zhejiang China Minsheng”) in June 2017 and December 2017, respectively. Zhejiang China Minsheng become an associate of the Group after the transaction is completed (Note 23(a)).

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14 INVESTMENT IN AN ASSOCIATE (continued)

The financial year end dates of the above associate is coterminous with that of the Group.

The associate was accounted for using the equity method and remeasured to its fair value with the change in the carrying amount recognised in other gains/(losses) – net (Note 5).

There are no contingent liabilities relating to the Group’s interests in the associate.

Extracts of financial information of principal associates

The following tables illustrate the financial information of the Group’s principal associate as extracted from its financial statements:

Zhejiang China Minsheng

Summarised balance sheet Current assets Cash and cash equivalents Other current assets Total current assets Non-current assets Current liabilities Financial liabilities (excluding trade payables) Other current liabilities Total current liabilities Non-current liabilities Net assets	As at 31 December 2017 HK$’000 7,433 78,187 85,620 423,806 35,889 80,516 116,405 4,223 388,798

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15 AVAILABLE-FOR-SALE FINANCIAL ASSETS

Beginning balance Acquisitions Disposals Net fair value change through other comprehensive income Net realised gain/(loss) on redemption of available-for-sale financial assets_(Note 5) Currency transaction differences Ending balance Available-for-sale financial assets include the following: Structured deposits(note (a)) Listed equity securities in Hong Kong, at fair value(Note 17 (a))_	Year ended 31 December 2017 HK$’000 121,252 1,217,126 (1,325,342) 209 5,820 4,861 23,926 As at 31 December 2017 HK$’000 23,926 – 23,926	Year ended 31 December 2016 HK$’000 195,243 123,050 (121,454) 9,669 (78,705) (6,551) 121,252 As at 31 December 2016 HK$’000 119,619 1,633 121,252

note:

(a) The structured deposits represent principal-guaranteed short-term deposit products maintained by the Group for generating interest income on a rolling basis. These structured deposits mainly invest in bonds or monetary market instruments with higher credit ratings and higher liquidity in the interbank market, including but not limited to assets such as treasury bonds, central bank bills, financial bonds, bond repurchases and inter-bank deposits. However, they do not have any conversion feature which converts any part of the structure deposits into any of the underlying assets or other equity or debt securities or instruments.

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16 TRADE AND OTHER RECEIVABLES AND PREPAYMENTS

Trade receivables – related parties Trade receivables – third party Notes receivable Less: Provision for impairment of trade receivables Total receivables, net Earnest money for acquisition of a Shanghai property company (note (a)) Other receivables in relation to redemption of private funds_(note (b)) Value-added tax recoverable Government grant(Note (4)) Receivables of disposal of a subsidiary – related party(Note 23) Receivables of disposal of a subsidiary – third party(Note 23) Receivables relating to transaction with a minority interest (note (c)) Amounts due from related parties Deposits Prepayments Others Less: Provision for impairment of other receivables (notes (a) & (b))_	As at 31 December 2017 HK$’000 38,344 78,765 – – 117,109 – – 46,258 6,224 62,232 99,144 9,570 39,552 6,128 11,575 4,724 402,516 – 402,516	As at 31 December 2016 HK$’000 – 35,124 4,099 (472) 38,751 28,000 23,795 44,362 – – – – 2,207 4,625 4,274 4,511 150,525 (30,000) 120,525

The aging of trade receivables as at 31 December 2017 and 2016 based on the invoice issue date are as follows:

	As at	As at
	31 December	31 December
	2017	2016
	HK$’000	HK$’000
Less than 1 year	117,109	35,124
1 to 2 years	–	–
More than 2 years	–	472

The maximum exposure to credit risk as at 31 December 2017 and 2016 is the carrying value of each class of receivables mentioned above. The Group does not hold any collateral security against the receivables.

As at 31 December 2017 and 2016, the fair value of trade and other receivables approximate their carrying amounts.

As at 31 December 2017 and 2016, the carrying amount of trade and other receivables and prepayments are primarily dominated in Renminbi.

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16 TRADE AND OTHER RECEIVABLES AND PREPAYMENTS (continued)

The carrying amounts of the Group’s trade and other receivables and prepayments are denominated in the following currencies:

HK dollar Renminbi	As at 31 December 2017 HK$’000 3,192 399,324 402,516	As at 31 December 2016 HK$’000 26,340 94,185 120,525

Notes:

• (a) On 24 December 2014, the Group entered into a non-legally binding framework agreement with Greenland Holding Group Company Limited (“Greenland”) relating to a possible acquisition of the entire interest of Jinhong Property Development Limited by the Group. Subsequently, a total HK$28 million was paid to Greenland as refundable earnest money. On 8 March 2016, the Group had decided not to proceed with the possible acquisition and the framework agreement had lapsed pursuant to its terms. In 2016, the Group recognised HK$21 million impairment for the above earnest money after unsuccessful claim for such refund for an extended period of time. On February 2017, the Group filed lawsuits against Greenland. On 22 May 2017, a court mediation letter which required Greenland to refund the earnest money to the Group was issued. On 31 May 2017, the entire earnest money of HK$28 million was recovered by the Group and the impairment loss of HK$21 million previously recognised was reversed in 2017 accordingly.

• (b) This refers to outstanding redemption proceeds as of 31 December 2016 in relation to a private fund due from Quantum Enhanced Fund (“QEF”). On 24 November 2016, the Group filed a lawsuit against QEF to recover the outstanding principal and its related costs and interests. In 2016, the Group recognised a HK$9 million impairment loss for the principal amount redeemable from QEF due to the unfavourable response after repeated requests. On 13 February 2017, a court judgement was entered against QEF in favour of the Group. However, as QEF has not responded to the statutory demands and the court judgement, the Group took further legal action by filing a petition for winding up QEF on 31 March 2017. After above continuous efforts of the Group to collect the receivables, the full amount of HK$18.2 million and approximately HK$1.4 million related interest income were subsequently recovered by the Group in June 2017. Accordingly, the impairment loss previously recognised of HK$9 million was reversed in 2017.

• (c) In September 2017, the Group disposed 10% equity interest in China Minsheng Drawin Technology (Pingdingshan) Limited and the remaining of the consideration is included in the other receivable.

17 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

	As at	As at
	31 December	31 December
	2017	2016
	HK$’000	HK$’000
Equity securities, at fair value
– Listed in Hong Kong	–	44,968

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17 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (continued)

The fair value of all equity securities is based on their current bid prices in an active market.

Beginning balance Acquisitions Disposals Net realised loss on financial assets at fair value through profit or loss_(Note 5)_ Ending balance	Year ended 31 December 2017 HK$’000 44,968 – (44,555) (413) –	Year ended 31 December 2016 HK$’000 90,169 21,612 (39,669) (27,144) 44,968

Note:

• (a) As at 31 December 2017, the Group does not hold any financial assets at fair value through profit or loss.

In January 2017, the Company disposed all of the remaining listed shares and the net realised loss on both available-for-sale investments and financial assets at fair value through profit or loss recognised in other gains/(losses) net (Note 5).

As at 31 December 2016, the Group had available-for-sale investments and financial assets at fair value through profit or loss with a market value of HK$1,633,000 and HK$44,968,000 respectively, representing the investment portfolio as follows:

Stock code Name of investee company Nature of Investment Number of shares held as at 31 December 2016 Percentage of total share capital owned by the Group as at 31 December 2016 Available-for-sale investments (Note 15) 1171.HK Yanzhou Coal Mining Company Listed shares 100,000 0.01% 1898.HK China Coal Energy Company Limited Listed shares 300,000 0.01% Total Financial assets at fair value through profit or loss 1106.HK Sino Haijing Holdings Limited Listed shares 7,000,000 0.07% 1129.HK China Water Industry Group Limited Listed shares 13,816,000 0.87% 404.HK HSIN Chong Group Holdings Limited Listed shares 15,000,000 0.26% 370.HK China Best Group Holding Limited Listed shares 57,300,000 0.79% 8148.HK Aurum Pacific (China) Group Limited Listed shares 8,780,000 0.97% 866.HK China Qinfa Group Limited Listed shares 6,940,000 0.28% 707.HK Co-prosperity Holdings Limited Listed shares 36,000,000 0.90% 8047.HK China Ocean Fishing Holdings Limited Listed shares – – 1089.HK Leyou Technologies Holdings Limited Listed shares – – 8085.HK Hong Kong Life Sciences and Technologies Group Limited Listed shares – – Total	Investment cost HK$’000 1,502 4,516 6,018 1,801 20,949 15,000 14,182 8,247 1,978 8,976 – – – 71,133	Market value as at 31 December 2016 Percentage to the Group’s net assets as at 31 December 2016 HK$’000 529 0.03% 1,104 0.06% 1,633 0.09% 1,302 0.07% 17,823 0.93% 5,325 0.28% 10,600 0.55% 1,326 0.07% 1,464 0.08% 7,128 0.37% – – – – – – 44,968 2.35%	Net realised gain/(loss) for the year ended 31 December 2016 HK$’000 167 213 380 182 (4,697) (6,225) (3,438) (8,788) (236) (1,848) 2,194 (698) (3,590)* (27,144)

• During the year ended 31 December 2016, the Group disposed these financial assets at fair value through profit or loss with a net realised gain/(loss) as listed in the table above.

– 19 –

18 CONVERTIBLE BOND

The Company issued a zero coupon convertible bond at a par value of HK$200 million on 27 May 2015. The bond matures on the third anniversary of the date of issue at the nominal price of HK$200 million or can be converted into shares at the holder’s option during the period from the date which is six months from the date of the issue and up to ten business days prior to the maturity date at the conversion price of HK$0.2 per conversion share. The value of the liability component and the equity conversion component were determined at issuance of the bond.

The convertible bond recognised in the consolidated statement of financial position is calculated as follows:

Nominal value of the convertible bond Less: Equity component Interest expenses Professional fees Less: Convertible bond exercised for the year Liability component Analysed for reporting purposes as non-current liabilities	As at 31 December 2017 HK$’000 200,000 (45,118) 154,882 36,199 (446) 190,635 (190,635) – –	As at 31 December 2016 HK$’000 200,000 (45,118) 154,882 22,990 (446) 177,426 – (177,426) (177,426)

The fair value of the liability component of the convertible bond approximates its book value. The fair value is calculated using cash flows discounted at a rate based on borrowing rate of 8.9% and are within level 2 of the fair value hierarchy. On 6 November 2017, the convertible bond amounting to HK$200 million was fully exercised by the bond owner in the exchange of 1,000,000,000 ordinary shares at HK$0.2 per share.

19 DEFERRED INCOME TAX

Deferred tax assets – to be recovered after more than 12 months – to be recovered within 12 months Deferred tax liabilities – to be settled after more than 12 months – to be settled within 12 months Deferred tax liabilities (net)	As at 31 December 2017 HK$’000 20,751 – 20,751 (7,962) – (7,962) 12,789	As at 31 December 2016 HK$’000 594 – 594 (14,352) (2,662) (17,014) (16,420)

– 20 –

19 DEFERRED INCOME TAX (continued)

The gross movement on the deferred income tax account is as follows:

At beginning of the year (Credited)/charged to profit or loss_(Note 8)_ Disposal of subsidiary Currency translation differences At the end of the year	Year ended 31 December 2017 HK$’000 16,420 (34,455) 5,434 (188) (12,789)	Year ended 31 December 2016 HK$’000 10,269 6,685 – (534) 16,420

The movement in deferred income tax assets and liabilities for the year ended 31 December 2017 and the year ended 31 December 2016, without taking into consideration the offsetting of balance within the same tax jurisdiction are as follows:

Deferred income tax liabilities

At 1 January 2017 Credited to profit or loss_(Note 8) Currency translation differences At 31 December 2017 At 1 January 2016 Charged/(credited) to profit or loss (Note 8) Currency translation differences At 31 December 2016 Deferred income tax assets Movements At 1 January 2017 Credited – to profit or loss(Note 8)_ – to other comprehensive income Disposal of subsidiary At 31 December 2017	Fair value gains arising from investment properties Convertible bond Government Grant HK$’000 HK$’000 HK$’000 3,932 3,725 9,357 (4,066) (3,725) (1,981) 134 – 586 – – 7,962 4,127 6,142 – 57 (2,417) 9,659 (252) – (302) 3,932 3,725 9,357 Tax losses Elimination of intra-group unrealised profit HK$’000 HK$’000 – 594 21,762 2,921 763 144 (5,433) – 17,092 3,659	Fair value gains arising from investment properties Convertible bond Government Grant HK$’000 HK$’000 HK$’000 3,932 3,725 9,357 (4,066) (3,725) (1,981) 134 – 586 – – 7,962 4,127 6,142 – 57 (2,417) 9,659 (252) – (302) 3,932 3,725 9,357 Tax losses Elimination of intra-group unrealised profit HK$’000 HK$’000 – 594 21,762 2,921 763 144 (5,433) – 17,092 3,659	Total HK$’000 17,014 (9,772) 720 7,962 10,269 7,299 (554) 17,014 Total HK$’000 594 24,683 907 (5,433) 20,751

– 21 –

19 DEFERRED INCOME TAX (continued)

Deferred income tax assets (continued)

At 1 January 2016 Credited to profit or loss_(Note 8)_ Currency translation differences At 31 December 2016	Tax losses HK$’000 – – – –	Elimination of intra-group unrealised profit HK$’000 – 614 (20) 594	Total HK$’000 – 614 (20) 594

Deferred tax assets arising from the unused tax losses has been recognized to the extent that it is probable that sufficient taxable profit will be available to allow such deferred tax assets to utilised this year in the consolidated financial statements.

The Group did not recognized deferred income tax relating to unused tax losses of approximately HK$ 205.8 million (31 December 2016: approximately HK$ 141.7 million). These tax losses amounting to HK$117.8 million (31 December 2016: 87.8 million) have no expiry dates and the remaining will expire within five years.

20 TRADE AND OTHER PAYABLES

Trade payables – related party Trade payables – third party Payable related to acquisition of Guangzhou plant_(note (a)) Accrued payroll Accrued tax payable(note (b)) Accrued payable for property, plant and equipment construction – third party Accrued payable for property, plant and equipment construction – related party Technology transfer contract fee(note (c))_ Notes payable Amounts due to related parties Interest payable Provision for onerous contract Others	As at 31 December 2017 HK$’000 8,740 77,281 6,171 18,927 1,671 105,068 24,484 – 2,299 – – 1,857 20,039 266,537	As at 31 December 2016 HK$’000 – 9,015 6,171 14,055 24,995 137,429 – 38,144 – 21,030 294 – 5,697 256,830

– 22 –

20 TRADE AND OTHER PAYABLES (continued)

notes:

• (a) In 2015, the Group acquired a plant, together with certain equipment in Guangzhou. Total consideration is HK$75,565,000, of which HK$6,171,000 has not yet been paid as of 31 December 2017 (31 December 2016: HK$6,171,000).

• (b) As of 31 December 2016, accrued tax payable mainly referred to tax accrued for the formation of a joint venture named as China Minsheng Drawin (Changsha) Technology Company Limited (“CM Changsha”) in 2016. During the year ended 31 December 2016, the Company and its related party, China Minsheng Drawin Co., Ltd. (“JV Partner”) set up CM Changsha with each party holding 51% and 49% equity interest in CM Shangsha respectively. The Group holds the newly set up entity as a subsidiary. As of 31 December 2016, the JV Partner has injected approximately HK$297.7 million land use right (excluding related tax) and approximately HK$298.5 million property, plant and equipment into the entity. As of 31 December 2016, the Group has accrued approximately HK$22.3 million tax for this transaction mainly including deed tax in accordance with PRC tax laws and regulations. In 2017, the Group obtained tax exemption and recorded the tax exemption in deferred income as a subsidy from the local government.

• (c) During the year ended 31 December 2016, the Group entered into licensing agreements with certain third parties to transfer technology related to prefabricated construction. As of 31 December 2017, the license agreement was terminated with the third party and the amount was repaid to the counter party.

The aging analysis of trade payables and notes payable as at 31 December 2017 and 2016 based on the invoice issue date are as follows:

				As at	As at
			31	December	31 December
				2017	2016
				HK$’000	HK$’000
Less than	1	year		86,021	9,015

As at 31 December 2017 and 2016, the fair value of trade and other payables approximate their carrying amounts.

As at 31 December 2017 and 2016, the carrying amounts of trade and other payables are primarily denominated in Renminbi.

21 BANK BORROWINGS

Bank borrowings – current Bank borrowings – non-current	As at 31 December 2017 HK$’000 17,944 101,686 119,630	As at 31 December 2016 HK$’000 42,727 – 42,727

In 2016, one of the Group’s subsidiary borrowed a one-year short-term loan of approximately US$5.8 million from a third party bank carrying an annual interest rate of 1.9%. The short term borrowing is guaranteed by the Group’s letter of credit of approximately US$6.2 million, which in turn is further guaranteed by HK$46,953,000 restricted cash of the Group as of 31 December 2016.

– 23 –

21 BANK BORROWINGS (continued)

In 2017, one of the Group’s subsidiary (中民築友科技（衡陽）有限公司) borrowed a 36-month long-term loan of RMB40 million from a third party bank with a floating interest rate. The long term borrowing is pledged by the subsidiary’s property,plant and equipment with a net book value of approximately RMB85 million and the Group’s land use right with a net book value of approximately RMB50 million, which in turn is further guaranteed by China Minsheng Jiaye Investment Co., Ltd.

In 2017, one of the Group’s subsidiary (中民築友科技（江蘇）有限公司) borrowed a 36-month long-term loan of RMB20 million from a third party bank with a floating interest rate. The long term borrowing is pledged by the subsidary’s land use right with a net book value of approximately RMB60 million, which in turn is further guaranteed by 中民築友科技投資有限公司.

In 2017, one of the Group’s subsidiary (中民築友科技（佛山）有限公司) borrowed a 60-month long-term loan of RMB40 million from a third party bank with a floating interest rate. The long term borrowing is pledged by the subsidiary’s land use right with a net book value of approximately RMB51 million which in turn is further guaranteed by 中民築友科技投資有限公司.

At 31 December, the group’s borrowings were repayable as follows:

Within 1 year Between 1 and 2 years Between 2 and 5 years	As at 31 December 2017 HK$’000 17,944 35,889 65,797 119,630	As at 31 December 2016 HK$’000 42,427 – –
		42,427

22 SEGMENT REPORTING

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decisions.

The Group is managed centrally and the Directors are of the view that the whole Group is one single business segment and hence no segment information is presented.

– 24 –

23 DISPOSAL OF SUBSIDIARIES

• (a) In June 2017, the Group firstly disposed 2% of its equity interest in Zhejiang China Minsheng to 淅江環宇建設集團有限公司 at a total consideration of HKD13.8 million. As the change in the Group’s ownership interest in Zhejiang China Minsheng that do not result in the Group losing the control of Zhejiang China Minsheng is equity transaction, the difference with its carrying amount of approximately HK10.0 million was recognized as a disposal gain in the other reserve.

In December 2017, the Group further disposed 51% of its equity interest in Zhejiang China Minsheng to another company, Hangzhou Residential Area Development Centre Co., Limited, and lost control in the Zhejiang China Minsheng. Zhejiang China Minsheng became an associate of the Group after the transaction. The consideration in relation to the 51% equity interest of Zhejiang China Minsheng was approximately HKD198.3 million. On the disposal date, the net assets value of Zhejiang China Minsheng was amounted to HK$190.0 million and approximately HK$97.9 million was recoginsed as a gain relating to disposal 51% of the equity interest of Zhejiang China Minsheng in the consolidated statement of profit or loss and other comprehensive income.

After the disopals of 2% and 51% of equtiy interest in Zhejiang China Minsheng, the 47% retained intererst in Zhejiang China Minsheng hely by the Group was re-measured to its fair value of approximately HK$182.7 million at the date when control was lost and approroxiamated HK$ 90.2 million was recognised as gains on disposal of subsidiaries in the consolidated statement of profit or loss and other comprehensive income.

Net assets disposed of: Property, plant and equipment Land use rights Deferred income tax assets Inventories Trade and other receivables and prepayments Cash and bank balances Trade and other payables Advances from customers Borrowing Non-controlling interests Net assets attributed to owners of the Company Fair value of 47% retained interest accounted for as an associate Gain on disposal of the subsidiary recognised in profit and loss_(Note 5)_ Currency transaction differences Satisfied by cash

2017 HK$’000 150,311 68,528 2,002 26,529 51,658 7,433 (70,821) (9,695) (35,889) (3,699) 186,357 (182,735) 188,171 6,494 198,287

– 25 –

23 DISPOSAL OF SUBSIDIARIES (continued)

• (a) (continued)

An analysis of the net inflow of cash and cash equivalents in respect of the disposal of the subsidiary is as follows:

Cash proceeds received Cash and bank balances disposed of Net inflow of cash and cash equivalents in respect of the disposal of the subsidiary	2017 HK$’000 99,143 (7,433) 91,710

(b) In December 2017, Group disposed its 100% equity interest in China Minsheng Drawin Building Technology Company Limited (“Building Technology”) to Tianjin China Minsheng Drawin Technology Co., Limited ( 天津中民築友科技有限公司 ), which is the immediate holding company of the Group, at a total consideration of HK$62.2 million. On the disposal date the net asset value attributable to the Group of Building Technology was approximately HK$37.5 million. The Group recorded a gain on disposal of approximately HK$24.2 million.

Net assets disposed of: Property, plant and equipment Land use rights Intangible assets Trade and other receivables and prepayment Inventories Cash and bank balances Deferred income tax assets Trade and other payables Advances from customers Non-controlling interests Gain on disposal of the subsidiary recognised in profit and loss_(Note 5)_ Currency translation differences Satisfied by cash	2017 HK$’000 45,047 16,393 195 53,930 32,994 43,726 3,431 (96,615) (55,049) (6,575) 37,477 24,163 592 62,232

An analysis of the net outflow of cash and cash equivalents in respect of the disposal of the subsidiary is as follows:

Cash proceeds received Cash and bank balances disposed of Net outflow of cash and cash equivalents in respect of the disposal of the subsidiary	2017 HK$’000 – (43,726) (43,726)

– 26 –

MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS REVIEW AND PROSPECTS

Strong Market Potential Continued as China Focused on Innovation, Industrial Upgrade and Reforms

It was a very strong year for equities in 2017. There are also clear signals that Euro Zones and Japanese policymakers are withdrawing from their QE stimulus in the near future. While the US Federal Reserve has started to raise interest rates, rates so far have remained at relatively soft-bottom levels throughout much of the world. In our views, we believe the moderate approach in guiding US interest rates hike, as it structured today, is in the right direction to bolster the global resilience and steady economic growth. The recent trade friction between China and the US had pulled major indexes into correction landscape, though the trade policy could take years to affect markets, the two nations are still aggressively dragging their feet on resolving the deal which in large part will do good to the global economy. Many analysts believe the conflict will sooner or later be eased or compromised as long as there is a good chance for them to get back to the negotiating table.

In China, the recent twin meetings of the Chinese People’s Political Consultative Conference and the National People’s Congress have laid out concrete economic targets and policy tasks for 2018. The core focus has shifted clearly to the supply-side, with an emphasis on innovation, industrial upgrade and reforms. The government will continue to focus on supply-side reforms, pushing for capacity cut, costs reduction and environmental control for businesses, positive to the industry leaders in the upstream sectors. GDP and CPI growth targets are kept at “around 6.5%” and “around 3%” respectively. Stable growth while maintaining basically stable macro leverage level should continue, generating upside to the overall employment and labor wages. On property, China will continue shanty town redevelopment and “long-term housing mechanism”, including construction activities on rental projects and social units, these should help to increase our PC sales opportunities and market penetration.

Accelerating the Pace of Prefabricated Construction Across the Country

The Company is the first listed enterprise under China Minsheng Investment Corp. Ltd., focusing on the modernization of construction industry in China. With its development of over three years, its concentration on the research and operations prefabricated construction industrial chain has made it equip with leading industrial and technological capabilities. With its increasing brand influence, the expanding market development, the effectiveness of the promotion of our featured products is significant. We have five major construction industrialized technology systems which lead the industry, with a total of nearly 1,400 patent applications, we securely rank number 1 in the industry country-wide. The Group aims at products innovation and industry layout towards the national strategies of the construction supply side reform, made in China 2025, beautiful rural villages, lifting the poor out of poverty through relocation, and the “Belt and Road” initiative. We have established or planned to establish the construction of green construction technology parks and prefabricated construction items across 22 provinces and 42 cities including Changsha, Shanghai, Nanjing, Hangzhou, Shenzhen, Foshan, Hengyang and Qingdao, and have started to cooperate with countries along the “One Belt, One Road” regions including Mongolia and South Africa, building up the technological export of construction work industry.

– 27 –

Intelligent Design

In April 2017, the internal conference for the Group’s iDrawin-BIM (Buliding Information Model) product was held at Changsha Technology Park. The conference showcased the latest theoretical exploration of artificial intelligence, and its trend of application in the area of industrialized construction. It showed iDrawin-BIM, the key product in the 5MAC system as the key product of the Group’s 5MAC technology system. It has solved the localization problem of foreign BIM softwares occurred in the country. It has also realized the compatibility and control with the manufacture and assemble process, achieving a zero error in design, a 60% reduction in coordination time, a 70% reduction in checklist process, a 80% reduction in manufacturing brief, a 90% reduction in labor budget, and a five-fold increase in overall efficiency, laying a solid foundation for the improvement of the Group’s entire industrial chain management level.

EMPC Full Industry Chain – General Contracting of prefabricated Construction Work

The world’s first IDrawin 5MAC information technology system, as self-developed by the Group, integrates the smart BIM design, VR, APP, and the management concept of industrial chain synergies. It is the first player to achieve the integration breakthrough based on the entire industry chain (eg. integrated engineering, manufacturing, procurement and construction) of BIM and EMPC in China. As the research and development on information technology on EMPC industry chain network has proven to be successful, our overall informatization level in the field is ahead of our peers. On top our informatization technology, the Company will build up a big data computing platform combining “intelligent design cloud platform, intelligent manufacturing cloud platform, intelligent fabrication cloud platform and big data centre” with “three major platforms in one centre”, creating an EMPC project management platform that leads the industry. The EMPC project control centre of the Company is a master control centre with on site construction monitoring and back office digital management and control functions, for the purpose of project management by using informatization methods. As the projects progress, the Company controls the deviation rate of its project management in a timely and effective manner by conducting big data analysis.

In October 2017, Xiangya Students’ Apartment Project in Central South University was successfully completed. The project is an EMPC construction project designed, manufactured and constructed by our Company. It is also the very first EMPC public construction project using prefabricated construction technology. The project’s construction quality was widely accepted, and was ranked as the model prefabricated construction site in Hunan Province.

New Materials

At the end of September 2017, the first decoration board (彩力板) production line in China with an annual production capacity of 1 million sq.m. was officially put into operation. Decoration board is a exterior wall decoration hanging panels made of ultra-high performance of cementitious composites, which are green and environmentally-friendly construction materials, with the advantages of aesthetic, durable, low water absorption, high duty, light weight and fireproof. It is applicable to all kinds of exterior walls of buildings, such as newly constructed, reformed or expanded. It is an important component of the Group’s product systems. It marks the completion of its exterior wall technology system. The competitiveness of the Group’s prefabricated construction products in the overall market is further elevated.

– 28 –

In December 2017, the thermal decoration boards, in which the intellectual property right is owned by the Company, have passed the relevant evaluation, and has been successfully listed in the Promotion and Application Catalogue of Energy-Saving Technologies, Skills, Materials and Equipment of Construction in Hunan Province (《湖南省建築節能技術、工藝、材料、 設備推廣應用目錄》). The Catalogue, compiled and released by the Department of Housing and Urban-Rural Development of Hunan Province, is designed to build a construction system with the characteristics of low-carbon, to guide the promotion and application of building energy-saving technologies, skills, materials and equipment in Hunan Province, to improve the energy-saving technologies and management of construction, and to ensure the quality of construction projects. All products included in the Catalogue are required to have social benefits, with outstanding environmental benefits, excellent in application effect, and favorable response from consumers. With excellent product performance and social benefits, the thermal decorative boards are included successfully. It suggests that the thermal decorative boards will be supported by more policies and receive more market attention through the Promotion and Application Catalogue in the future, It will gain a lot more potential market opportunities, and create new points of growth for profit.

High technology platform

The Group positions the prefabricated construction industry as a high-tech manufactoring sector in construction field. The Company has specifically established a construction technology research institute. Under which, there are five professional technical institutes, which are responsible for research and development of the most cutting-edge technologies and common technologies in the world, the promotion of the research and development of specific technologies and its implementation. Through self research and development, the Group has formed five major construction industrialization technology systems (namely architectural design technology system, new material technology system, intelligent manufacturing technology system, building information technology system and on-site assembling technology system, in which the intellectual property is fully owned by the Company, and leads the industry. As at December 2017, the Company has a total of 1,400 patent applications, which ranked number one in the country.

As always, the Company focuses on leading the development of the industry and business development by technology innovation. The Company has the most comprehensive scientific research system in the industry, which involves the five major areas of construction systems, new materials, intelligent equipment, digital technology, and engineering. In 2017, once again, we won a number of industry awards: being recognized as the first national prefabricated construction industry base by the Ministry of Housing and Urban-Rural Development; being entitled as “the national advantageous intellectual property enterprise in 2017” by the State Intellectual Property Office, which is the only selected enterprise in prefabricated construction industry; being rate as the “benchmark innovative enterprise of Chinese prefabricated construction industry”, and being officially approved as the model enterprise of intelligent manufacturing in Hunan province, which is the first prefabricated construction enterprise being rated successful in the province.

– 29 –

The Company continues to build up a top-notch scientific research platform in the industry: the establishment of the “Prefabricated construction Joint Research and Development centre of Southeast University” and “Prefabricated Energy-Saving Construction Engineering Research centre”. We have been granted the license of the “Post-doctoral Scientific Research Station Cooperative Research and Development Center” and the “Post-doctoral Innovation and Venture Realization Base”, demonstrating that we have the capability to carry out postdoctoral scientific research. In December 2017, the Company was awarded as “Fellow and Expert Workstation” by Changsha Municipal People’s Government, which is the major actions of promoting the industry and academic collaboration, introducing and cultivating high level talent of technology, and enhancing the breakthrough of key technologies.

Technological Results

The self-developed wall panels structure system has passed the tests of magnitude 8 rare earthquake in the National Seismic Prevention Laboratory.

In October 2017, the “Versatile Residential Buildings” (“百變住宅”), the Company’s innovative products of prefabricated construction, was officially launched. It provides a solution to the personalization needs of the commodity housing owners, realizing the complete openness of the residential living space. The residential versatility can be achieved through the innovation of building structural system, integrated interior system and exterior wall system. By using our self-developed versatile structure system, each unit is a large flat plate (excluding balcony) with no beam nor pillar, achieving the complete openness space within the unit. The idea is to totally return the right of building the interior space to build the right to the home buyers. Even in the same high-rise residential, each owner is able to allocate the space and decorate the layout by different functions according to his personal actual needs, and hence the personal needs of different age groups and different families can be satisfied.

Business Prospects

Year 2018 will be a crucial year witnessing the rapid business growth of the Group. The Group will continue to build up the green Technology Parks by way of direct investment or technological license, to continuously improve the our production layout nationwide. As our Technology Parks across the country are putting into operations, together with the policies in support of prefabricated construction by national and local governments of all levels, the Group expects that the production capacity of its PC components will increase to approximately 700,000 to 1,000,000 cubic meter. As the sales scale grows, our production capacity will be used effectively.

In 2018, the Group will continue to promote the asset-light operation model to release some of equity interests in Technology Parks to acquire better investment returns. At the same time, the Group will expand its licensing cooperation projects in the areas of policy-intensive and promising market prospects of prefabricated construction, conduct in-depth cooperation with local strong and capable enterprises to jointly promote the transformation and upgrading of the local prefabricated construction.

As of 28 February 2018, our Group has contracted an aggregate of third party sales of prefabricated units approximately RMB565.7 million which are RMB191.5 million already recognized as revenue and RMB374.2 million not yet recognized as revenue.

– 30 –

Looking forward, the Group will strive to growing steadily in terms of performance, enhance the management level of the modernized enterprise, further improve its financial and operating performance, and fully guarantee that all shareholders of the Company can enjoy the benefits brought from its performance growth.

FINANCIAL REVIEW

Review of Results

The Group was principally engaged in the business of prefabricated construction work and property investment in the People’s Republic of China (the “PRC”).

Revenue

The revenue of the Group increased by approximately 5.85 times from approximately HK$37.0 million for the year ended 31 December 2016 to approximately HK$216.6 million for the year ended 31 December 2017. The significant increase in revenue were mainly attributable to the numbers of Technology Parks for the manufacturing and sale of prefabricated units increased from two to eight during the year of 2017. The revenue generated from granting license, sales of equipment and consulting services income for the year ended 31 December 2017 which are new revenue stream as compared with the year ended 31 December 2016. As a result, the Group recorded sales revenue for year ended 31 December 2017 of prefabricated units of approximately HK$173.6 million (2016: approximately HK$36.5 million), granting license of approximately HK$32.7 million (2016: Nil), sales of equipment of approximately HK$5.8 million (2016: Nil), consulting service income of approximately HK$2.9 (2016: Nil) and rental income from investment properties of approximately HK$1.6 million (2016: approximately HK$0.5 million).

Cost of sales

The Group recorded cost of sales of approximately HK$207.6 million (2016: approximately HK$28.7 million) for the year ended 31 December 2017. The increase was primarily attributable by the sales increase of prefabricated units.

Gross profit and gross profit margin

The gross profit of the Group in 2017 was approximately HK$9.0 million, representing an increase of 6.9% from approximately HK$8.4 million in 2016. The gross profit margin decreased to 4.1% in 2017 from 22.6% in 2016, which was mainly attributable to the decrease of average sales price of prefabricated units, the increase in cost of prefabricated units and the increase in manufacturing cost in result of overcapacity of new plants during the year.

– 31 –

Other income

Other income for the year ended 31 December 2017 increased from approximately HK$68.4 million for the year ended 31 December 2016 to approximately HK$69.8 million. Other income mainly comprised of (i) the government subsidiaries of approximately HK$62.8 million received by eight PRC subsidiaries of the Group; (ii) interest income arose from bank deposits of approximately HK$2.1 million and (iii) sundry income of surcharges return approximately HK$4.9 million.

Other gains/(losses) – net

For the year ended 31 December 2017, other gains (net) amounting to approximately HK$227.6 million mainly comprised of (i) gain on disposal of two subsidiaries amounting to approximately HK$212.3 million; (ii) the recovery of trade and other receivables amounting to approximately HK$30.5 million; (iii) fair value loss on investment properties amounting to approximately HK$16.3 million; (iv) net loss on disposal of investment properties amounting to approximately HK$2.1 million; (v) interest charged on recovered other receivables amounting to approximately HK$1.4 million; (vi) provision for onerous contract amounting to approximately HK$1.9 million and (vii) net realised gain on redemption of available-for-sale financial assets amounting to approximately HK$5.8 million.

Selling and distribution expenses

Selling and distribution expenses of approximately HK$17.4 million (2016: HK$6.5 million) for the year ended 31 December 2017, such expenses are directly related to the sale of prefabricated units and such increase was in line with the increase in sales revenue.

Administrative expenses

During the year ended 31 December 2017, the administrative expenses increased by 75.1% to HK$159.1 million in 2017 from HK$90.9 million in 2016, which was mainly attributable to the staff costs increased by 39.4% to HK$83.9 million in 2017 from HK$60.2 million in 2016 and the remaining increase of approximately $44.5 million represented the increase in other general administrative expenses, such as rental expenses, entertainment, travelling expenses and legal and professional fee etc.

Finance costs

Finance costs of approximately HK$17.3 million for the year ended 31 December 2017 represented (i) the effective interest of approximately HK$13.2 million which is amortised on the zero coupon convertible bond with outstanding principal amount of HK$200 million issued on 27 May 2015; and (ii) the interest expenses of approximately HK$4.1 million for three bank borrowings made in 2017.

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Liquidity and Financial Resources

The liquidity and financial position of the Group as at 31 December 2017 remained healthy, with cash and bank balances amounted to approximately HK$582.5 million (2016: approximately HK$784.5 million) and a current ratio of 3.3 (2016: 3.6).

As at 31 December 2017, the Group hold three bank borrowings amounted to approximately HK$119.6 million and the gearing ratio (expressed as a percentage of total borrowings over total assets) was 4.2% (2016: 9.1%).

On 6 November 2017, the convertible bond amounting to HK$200 million was fully exercised by the bond owner in the exchange of 1 billion ordinary shares at HK$0.2 per share.

FINAL DIVIDEND

The Board does not recommend the payment of a final dividend for the year ended 31 December 2017 (2016: Nil).

GENERAL INFORMATION

CORPORATE GOVERNANCE PRACTICES

The Company is committed to maintaining high standard corporate governance practices as the Board considers that good and effective corporate governance is essential for enhancing accountability and transparency of a company to the investing public and other stakeholders. During the year ended 31 December 2017, the Company has complied with the code provisions set out in the Corporate Governance Code (the “Code”) contained in Appendix 14 to the Listing Rules on the Stock Exchange, except for:

• (a) code provision A.2.1 of the Code in relation to the separation of roles of chairman and chief executive officer, as both of the roles are currently undertaken by the Chairman of the Board;

• (b) code provision A.4.1 of the Code in relation to the appointment of Mr. Zhou Feng as a non-executive director for a specific term, subject to re-election;

• (c) code provision A.6.7 of the Code in relation to Directors should attend the general meetings of the Company. Due to their respective engagements, Mr. Yin Jun, Mr. Mi Hongjun, Mr. Chen Donghui, Ms. Gan Ping, Mr. Zhao Xiaodong, Mr. Zhou Feng, Mr. Jiang Hongqing and Mr. Ma Lishan were unable to attend the special general meeting of the Company held on 26 April 2017. And due to their respective engagements, Mr. Chen Donghui, Mr. Zhao Xiaodong and Mr. Lee Chi Ming were unable to attend the annual general meeting of the Company held on 12 June 2017.

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Mr. Yin Jun, being the chief executive officer of the Company, was appointed as chairman of the Board on 3 October 2016. In view of the current rapid development of the Group, the Board believes that vesting the roles of both chairman of the Board and chief executive officer in the same person can facilitate the execution of the Group’s business strategies and boost effectiveness of its operation. In addition, under the supervision of the Board which comprised three executive Directors, three non-executive Directors, and four independent non-executive Directors, the interests of the shareholders of the Company will be adequately and fairly represented. The Company may seek to re-comply with code provision A.2.1 by identifying and appointing a suitable and qualified candidate to the position of the chief executive officer in due course by considering the business needs and developments of the Group.

During the year, each of the non-executive Directors has entered into an appointment letter with the Company for a term of two years, except for Mr. Zhou Feng, who was subject to retirement from office by rotation and re-election in accordance with the provisions of the Company’s bye-laws and whose re-election has not been passed by the Shareholders as a resolution at the annual general meeting as disclosed in an announcement published by the Company on 12 June 2017. As such, the Company considers that such provision in the articles is sufficient to meet the underlying objective of code provision A.4.1, and the Company had fully complied with such code provision after Mr. Zhou Feng ceased to be non-executive director of the Company with effect from the conclusion of the annual general meeting.

CODE FOR SECURITIES TRANSACTIONS

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) contained in Appendix 10 to the Listing Rules as its code of conduct regarding Directors’ securities transactions. In response to the specific enquiry made by the Company, all the Directors confirmed that they fully complied with the required standard as set out in the Model Code throughout the year ended 31 December 2017.

PURCHASE, SALE OR REDEMPTION OF SECURITIES

During the year ended 31 December 2017, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the listed securities of the Company.

REVIEW OF THE RESULTS

The audit committee of the Company has reviewed with the management and the independent auditor of the Company the annual results and the consolidated financial statements of the Group for the year ended 31 December 2017.

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PUBLICATION OF FINAL RESULTS ANNOUNCEMENT ON THE STOCK EXCHANGE WEBSITE

This final results announcement is also published on the Stock Exchange’s website (http://www.hkex.com.hk) and the Company’s website (http://cmdrawin.todayir.com). The annual report containing all information required by the Listing Rules will be dispatched to the Shareholders and will be available on websites of the Stock Exchange and the Company in due course.

By order of the Board of China Minsheng Drawin Technology Group Limited Yin Jun Chairman and Executive Director

Hong Kong, 28 March 2018

As at the date of this announcement, the Board comprises Mr. Yin Jun (Chairman), Mr. Chen Domingo and Mr. Mi Hongjun as executive directors; Mr. Chen Donghui, Ms. Gan Ping and Mr. Zhao Xiaodong as non-executive directors; Mr. Chan Chi Hung, Mr. Jiang Hongqing, Mr. Lee Chi Ming, and Mr. Ma Lishan as independent non-executive directors.

• For identification purpose only

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