Global Corn Group Limited — Interim / Quarterly Report 2018

Aug 29, 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.

GLOBAL SWEETENERS HOLDINGS LIMITED 大成糖業控股有限公司 *

(incorporated in the Cayman Islands with limited liability)

(Stock code: 03889)

INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS

ENDED 30 JUNE 2018

FINANCIAL HIGHLIGHTS

	Six months ended 30 June	Six months ended 30 June
	(Unaudited)
	2018	2017	Change %
	(HK$ million)	(HK$ million)
Revenue	894.5	597.7	49.7
Gross profit	56.8	82.7	(31.3)
Loss before tax	(132.0)	(51.4)	N/A
Loss for the period	(132.8)	(53.5)	N/A
Basic loss per share (HK cents)	(8.7)	(3.5)	N/A
Interim dividend per share (HK cents)	Nil	Nil	N/A

• For identification purposes only

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The board (“Board”) of directors (“Directors”) of Global Sweeteners Holdings Limited (the “Company”) hereby announces the unaudited consolidated interim results of the Company and its subsidiaries (collectively the “Group”) for the six months ended 30 June 2018 (the “Period”).

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended 30 June 2018

Notes REVENUE 4 Cost of sales Gross profit Other income and gains 4 Selling and distribution expenses Administrative expenses Other expenses Finance costs 5 LOSS BEFORE TAX 6 Income tax expense 7 LOSS FOR THE PERIOD OTHER COMPREHENSIVE INCOME (LOSS) Items that may be reclassified to profit or loss in subsequent periods: Exchange differences on translation of financial statements of foreign subsidiaries TOTAL COMPREHENSIVE LOSS FOR THE PERIOD

Six months ended 30 June 2018 2017 (Unaudited) (Unaudited) HK$’000 HK$’000 894,474 597,682 (837,707) (514,946) 56,767 82,736 12,548 16,367 (89,310) (57,073) (57,242) (51,633) (20,727) (18,835) (34,078) (22,956) (132,042) (51,394) (786) (2,118) (132,828) (53,512) 7,580 (3,244) (125,248) (56,756)

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Notes LOSS ATTRIBUTABLE TO: Owners of the Company Non-controlling interests TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO: Owners of the Company Non-controlling interests LOSS PER SHARE 8 Basic Diluted	Six months ended 30 June 2018 2017 (Unaudited) (Unaudited) HK$’000 HK$’000 (132,828) (53,512) — — (132,828) (53,512) (125,326) (56,619) 78 (137) (125,248) (56,756) HK(8.7) cents HK(3.5)cents HK(8.7) cents HK(3.5)cents

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CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

30 June 2018

Notes NON-CURRENT ASSETS Property, plant and equipment Prepaid land lease payments Deposits paid for acquisition of property, plant and equipment Goodwill Other intangible assets CURRENT ASSETS Inventories Trade and bills receivables 10 Prepayments, deposits and other receivables 11 Pledged deposits Cash and bank balances CURRENT LIABILITIES Trade and bills payables 12 Other payables and accruals Interest-bearing bank borrowings Due to fellow subsidiaries Tax payable NET CURRENT LIABILITIES TOTAL ASSETS LESS CURRENT LIABILITIES	30 June 2018 (Unaudited) HK$’000 859,586 142,168 63 — 3,243 1,005,060 207,921 224,813 75,393 — 116,589 624,716 277,373 263,210 907,055 169,035 25,036 1,641,709 (1,016,993) (11,933)	31 December 2017 (Audited) HK$’000 896,985 147,999 308 — 3,243 1,048,535 169,130 136,980 66,012 41,103 173,697 586,922 176,446 258,432 711,807 126,095 26,355 1,299,135 (712,213) 336,322

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Notes NON-CURRENT LIABILITIES Interest-bearing bank borrowings Deferred income Deferred tax liabilities NET LIABILITIES CAPITAL AND RESERVES Share capital 13 Reserves Deficit attributable to owners of the Company Non-controlling interests TOTAL DEFICIT	30 June 2018 (Unaudited) HK$’000 194,048 33,571 8,669 236,288 (248,221) 152,759 (394,755) (241,996) (6,225) (248,221)	31 December 2017 (Audited) HK$’000 415,663 34,072 9,560 459,295 (122,973) 152,759 (269,429) (116,670) (6,303) (122,973)

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30 June 2018

1. CORPORATE INFORMATION

The interim condensed consolidated financial statements of the Group for the Period are authorised for issue in accordance with a resolution of the Board passed on 29 August 2018.

The Company was incorporated in the Cayman Islands under the Companies Law, Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands as an exempted company with limited liability on 13 June 2006. The principal activity of the Company is investment holding. The registered office address of the Company is Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman KY1-1111, Cayman Islands. The principal place of business of the Company in Hong Kong is located at Unit 1104, Admiralty Centre, Tower 1, No. 18 Harcourt Road, Hong Kong. The Group is principally engaged in the manufacture and sale of corn refined products and corn sweeteners. There were no changes in the nature of the Group’s principal activities during the Period.

The Company is a subsidiary of Global Corn Bio-chem Technology Company Limited, a company incorporated in the British Virgin Islands. In the opinion of the Directors, the ultimate holding company is Global Bio-chem Technology Group Company Limited (“GBT”, and together with its subsidiaries, the “GBT Group”), a company incorporated in the Cayman Islands whose shares are also listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

2. BASIS OF PREPARATION AND ACCOUNTING POLICIES

2.1 BASIS OF PREPARATION

The interim condensed consolidated financial statements for the Period have been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on the Stock Exchange and Hong Kong Accounting Standard (“HKAS”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants.

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual consolidated financial statements for the year ended 31 December 2017.

2.2 GOING CONCERN

The Group recorded a loss of approximately HK$132.8 million (six months ended 30 June 2017: approximately HK$53.5 million) for the Period and as at 30 June 2018, had net current liabilities of approximately HK$1,017.0 million (31 December 2017: approximately HK$712.2 million) and net liabilities of approximately HK$248.2 million (31 December 2017: approximately HK$123.0 million). In addition, any potential liabilities or obligations arising from the financial guarantee contracts as discussed in note 14 to the interim condensed consolidated financial statements may have a significant negative impact on the liquidity position of the Group. There is a material uncertainty related to these conditions that may cast significant doubt on the Group’s ability to continue as a going concern and therefore, the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. In view of these circumstances and based

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on the recommendations of the audit committee of the Company (the “Audit Committee”) after its critical review of the management’s position, the management of the Company has taken the following steps to improve the Group’s financial position:

1) Active negotiations with banks to obtain adequate bank borrowings

The management of the Company has been actively negotiating with banks in the People’s Republic of China (the “PRC” or “China”) to secure the renewals of the Group’s short-term and long-term bank loans to meet its liabilities when fall due. A debt-equity swap proposal for the restructure of the debt of the Company’s subsidiaries in Changchun was submitted to the People’s Government of Jilin Province for consideration. On 26 March 2018, Mr. Yuan Weisen, the Chairman of GBT, met with the representatives of Bank of China (“BOC”) on behalf of the Group and the GBT Group, and it was proposed that the Group and the GBT Group should provide a revised debt-equity swap proposal to BOC. On 2 April 2018, a revised debt-equity swap proposal was submitted to BOC for their consideration. During the Period, the management of the Company met with BOC, the People’s Government of Jilin Province and the relevant professional parties on a regular basis to discuss the proposal and other alternatives to restructure the existing bank borrowings.

2) Transfer of two subsidiaries in Changchun to the GBT Group

As announced by the Company and GBT on 21 July 2017, the Group entered into an agreement with the GBT Group for the sale and purchase of two subsidiaries of the Company, Changchun Dihao Foodstuff Development Co., Ltd. (“Dihao Foodstuff”) and Changchun Dihao Crystal Sugar Industry Development Co., Ltd. (together with Dihao Foodstuff, the “Target Companies”) (the “Transaction”).

The Transaction will enable the Group to direct its resources to high value-added markets. In addition, as announced by the Company and GBT on 8 December 2017, and the circular of the Company dated 17 January 2018, Dihao Foodstuff is one of the guarantors of the new supplier guarantees for the benefit of Changchun Dajincang Corn Procurement Ltd.（長春大 金倉玉米收儲有限公司）(“Dajincang”). As all of the other guarantors of the new supplier guarantees are members of the GBT Group but not the Group, the Transaction would relieve the Group from the new guarantee executed by Dihao Foodstuff for the benefit of Dajincang (the “Dihao New Supplier Guarantee”).

Following the completion of the Transaction, the Target Companies will cease to be the subsidiaries of the Company and the financial performance of the Target Companies will cease to be consolidated into that of the Group. It is expected that after completion of the Transaction, the financial performance of the Group will improve.

The completion of the Transaction is conditional upon the fulfillment of certain conditions. Up to the date of the approval of these interim condensed consolidated financial statements, those conditions have not been completely fulfilled. Specifically, the management is still in the process of discussing with the relevant banks for the release of the guarantees and/or charges given by a member of the Group in respect of the indebtedness of Dihao Foodstuff. As disclosed in the announcement of the Company dated 16 July 2018, as additional time is required for the fulfillment of the conditions precedent, the Long Stop Date has been extended to 31 December 2018.

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3) Monitoring of the Group’s operating cash flows

The Group has taken various measures to tighten cost controls over production costs and expenses with the aim to attain profitable and positive cash flow operations. During the Period, the Group has optimised its production in order to minimise operating cash outflows.

4) Financial support from the indirect controlling shareholder of GBT

The Group has received a written confirmation dated 8 June 2018 from Jilin Agricultural Investment Group Co., Ltd. （吉林省農業投資集團有限公司 , “Nongtou”) that it will continue to provide financial support to the Group and the GBT Group in the next 24 months for their operations on a going concern basis and undertake all the liabilities that may arise from the Dihao New Supplier Guarantee. Such assistance received by the Group is not secured by any assets of the Group.

In addition, the Group signed a corn purchasing contract for the supply of 300,000 metric tonnes (“MT”) of corn kernels with Jilin Jiliang Assets Supply Chain Management Co., Ltd.（吉林吉糧資產供應鏈管理有限公司 , “Jiliang”）, a subsidiary of Nongtou, in January 2018 to ensure a stable supply of corn kernels. During the Period, the Group purchased approximately 28,000 MT of corn kernels from Jiliang which accounted for 11.4% of total corn procurement of the Group.

Furthermore, the Group, through the connection of Nongtou, signed a corn purchasing contract for the supply of 500,000 MT of corn kernels with a state-owned enterprise (the “State-owned Supplier”) in January 2018 to further secure a stable supply of corn kernels for 2018. During the Period, the Group purchased approximately 76,000 MT of corn kernels from the State-owned Supplier which accounted for 31.1% of total corn procurement of the Group.

Nongtou, being a state-owned enterprise, was established in August 2016 and its unaudited net assets value amounted to RMB1,212.3 million at 30 June 2018, is tasked to consolidate the state-owned investments in the agricultural sector in Jilin Province. The management of the Company is of the view that Nongtou would be able to support the operations of the Group and the GBT Group, to provide synergistic effects among its various investments in the agricultural sector in Jilin Province and to provide adequate and sufficient financial support to the Group.

The validity of the going concern basis on which the interim condensed consolidated financial statements are prepared is dependent on the successful and favourable outcomes of the steps being taken by the management of the Company and the development of the events as described above. Based on the measures as outlined above, the management of the Company considers that the Group would be able to generate sufficient funds to meet its financial obligations as and when they fall due in the foreseeable future. Therefore, the interim condensed consolidated financial statements have been prepared on a going concern basis and do not include any adjustments relating to the recognition of provisions or the realisation and reclassification of non-current assets and non-current liabilities that may be necessary if the Group is unable to continue as a going concern.

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Should the going concern assumption be inappropriate, adjustments may have to be made to reflect the situation that assets may need to be realised at the amounts other than which they are currently recorded in the interim condensed consolidated statement of financial position. In addition, the Group may have to recognise further liabilities that might arise, and to reclassify non-current assets and non-current liabilities as current assets and current liabilities, respectively.

2.3 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES

Except for the adoption of the new and revised Hong Kong Financial Reporting Standards (“HKFRSs”) as explained below, the accounting policies adopted in the preparation of the interim condensed consolidated financial statements for the Period are the same as those used in the preparation of the annual financial statements for the year ended 31 December 2017.

The Group has adopted, for the first time, the following new and revised HKFRSs that are relevant to the Group.

Annual Improvements to 2014-2016 Cycle: HKFRS 1 and HKAS 28 HKFRSs HK(IFRIC)-Int 22 Foreign Currency Transactions and Advance Consideration HKFRS 9 Financial Instruments HKFRS 15 Revenue from Contracts with Customers

Annual Improvements to HKFRSs: 2014-2016 Cycle: HKFRS 1 and HKAS 28

• 1) HKFRS 1: Deletion of short-term exemptions for first-time adopters

The amendments delete the paragraphs of certain short-term exemptions and related effective dates which provided reliefs that are no longer applicable.

• 2) HKAS 28: Measuring an associate or joint venture at fair value

The amendments clarify that the election to measure associates or joint ventures at fair value or retain the fair value measurement applied by investment entity associates or joint ventures can be made separately for each associate or joint venture at the relevant date.

HK(IFRIC)-Int 22: Foreign Currency Transactions and Advance Consideration

The interpretation specifies the date of the transaction for determining an exchange rate to use for transactions that involve advance consideration paid or received in a foreign currency.

The adoption of above annual improvements to HKFRSs and interpretation has no significant effect on these interim condensed consolidated financial statements.

HKFRS 9 “Financial Instruments”

HKFRS 9, which superseded HKAS 39 in its entirety, introduces new requirements on the classification and measurement of financial assets and financial liabilities, hedge accounting and impairment of financial assets. HKFRS 9 largely retains the existing requirements in HKAS 39

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for the classification and measurement of financial liabilities. However, it eliminates the previous HKAS 39 categories for financial assets of held-to-maturity, loans and receivables and available for sale. Under HKFRS 9, on initial recognition, a financial asset is classified as measured at amortised cost, fair value through other comprehensive income and fair value through profit or loss. The classification of financial assets under HKAS 39 is generally based on the business model in which the financial asset is managed and its contractual cash flow characteristics.

The adoption of HKFRS 9 does not have any significant effect on the Group’s accounting policies on classification and measurement of financial liabilities and financial assets.

In addition, HKFRS 9 introduces new requirements on impairment of financial assets. HKFRS 9 requires an expected credit loss model, as opposed to an incurred credit loss model under HKAS 39. The new expected credit loss model applies to financial assets measured at amortised cost but not to investments in equity instruments. The Group’s financial assets measured at amortised cost consist of trade and other receivables, pledged deposits and cash and bank balances. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised. The application of HKFRS 9 results in earlier recognition of credit losses which are not yet incurred in respect of the Group’s financial assets measured at amortised cost. The expected credit losses are probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the differences between the cash flows due to the entity in accordance with the contract and the cash flows that are expected to receive). Expected credit losses are discounted at the effective rate of the financial asset.

Under HKFRS 9, loss allowances are measured on either one of the following bases:

• 12-month expected credit loss: result from possible default events within 12 months; and

• Lifetime expected credit loss: result from all possible default events over the expected life of a financial instrument.

The Group measures loss allowances at an amount equal to lifetime expected credit loss.

The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 90 days past due.

• The Group considers a financial asset to be in default when:

• The borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising security (if any is held); or

• The financial asset is more than 90 days past due.

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The Group has applied HKFRS 9 in accordance with the transition provisions set out in HKFRS 9 for classification and measurement (including impairment) retrospectively to instruments that have not been derecognised at 1 January 2018 (date of initial application) and has not applied the requirements to instruments that have already been derecognised at 1 January 2018. The effect on adoption of HKFRS 9 is not material to the interim condensed consolidated financial statements of the Group.

HKFRS 15 “Revenue from Contracts with Customers”

HKFRS 15 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. It replaced HKAS 18 “ Revenue ”, HKAS 11 “ Construction contracts ” and the related interpretations. Under HKFRS 15, revenue is recognised when a customer obtains control of the goods or services. Determining the timing of the transfer of control whether it is at a point in time or over time requires judgement. An entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, by applying the following five steps:

• Step 1: Identify the contract(s) with a customer;

• Step 2: Identify the performance obligations in the contract(s);

• Step 3: Determine the transaction price, the amount of consideration in a contract to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer;

• Step 4: Allocate the transaction price to the performance obligations in the contract(s); and

• Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.

HKFRS 15 also includes a cohesive set of disclosure requirements that would result in an entity providing users of financial statements with comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers.

The adoption of this standard does not have a significant impact on the measurement and recognition of revenue of the Group.

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2.4 NEW AND REVISED HKFRSs NOT yET ADOPTED

The Group has not applied the following new and revised HKFRSs that have been issued but are not yet effective, and which are relevant to the Group, in the interim condensed consolidated financial statements:

Annual Improvements to 2015-2017 Cycle1 HKFRSs HKFRS 16 Leases1 HK(IFRIC)-Int 23 Uncertainty over Income Tax Treatments1 Amendments to HKAS 28 Investments in Associates and Joint Ventures2 Amendments to HKFRS 10 and Sale or Construction of Assets between an Investor and its HKAS 28 Associate or Joint Venture2

• 1 Effective for annual periods beginning on or after 1 January 2019

• 2 Effective date to be determined

The management of the Company is in the process of assessing the possible impact on the future adoption of these new and revised HKFRSs, but is not yet in a position to reasonably estimate their impact on the Company’s interim condensed consolidated financial statements.

3. OPERATING SEGMENT INFORMATION

For management purposes, the Group is organised into business units based on their products and services and has three (six months ended 30 June 2017: three) reportable operating segments as follows:

• (i) the corn refined products segment which comprises the manufacture and sale of corn starch, gluten meal, corn oil and other corn refined products;

• (ii) the corn sweeteners segment which comprises the manufacture and sale of glucose syrup, maltose syrup, high fructose corn syrup and maltodextrin; and

• (iii) the trading segment which includes the sale of amino acids of the GBT Group in the Huadong region, the PRC.

The management, who is the chief operating decision-maker, monitors the results of the Group’s operating segments separately for the purpose of making decisions in relation to resources allocation and performance assessment. Segment performance is evaluated based on reportable segments’ profit or loss, which is a measure of adjusted loss before tax. The adjusted loss before tax is measured consistently with the Group’s loss before tax except that finance costs as well as corporate income and expenses are excluded from such measurement.

Intersegment sales and transfers are transacted with reference to the then prevailing selling prices used for sales made to third parties.

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(a) Operating segment information

	Corn refined	products	Corn sweeteners	Corn sweeteners	Trading	Trading		Total	Total
			Six months		ended 30 June
	2018	2017	2018	2017	2018	2017	2018		2017
	(Unaudited) (Unaudited) (Unaudited) (Unaudited)				(Unaudited) (Unaudited)		(Unaudited)		(Unaudited)
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000		HK$’000
Segment revenue:
Sales to external customers	331,820	260,586	562,184	330,856	470	6,240	894,474		597,682
Intersegment sales	204,157	131,882	49,914	—	—	—	254,071		131,882
	535,977	392,468	612,098	330,856	470	6,240	1,148,545		729,564
Reconciliation:
Elimination of intersegment sales							(254,071)		(131,882)
Revenue							894,474		597,682
Segment results	(65,887)	(385)	(25,836)	(21,401)	72	297	(91,651)		(21,489)
Reconciliation:
Unallocated bank interest and other
corporate income							4		48
Corporate and other unallocated
expenses							(6,317)		(6,997)
Finance costs							(34,078)		(22,956)
Loss before tax							(132,042)		(51,394)
Income tax expense							(786)		(2,118)
Loss for the period							(132,828)		(53,512)

(b) Geographical information

			Regions	other	than
	The	PRC	the PRC			Total
			Six months	ended	30 June
	2018	2017	2018		2017	2018	2017
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)		(Unaudited)	(Unaudited)
	HK$’000	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000
Segment revenue:
Revenue from external customers	826,039	561,540	68,435		36,142	894,474	597,682

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4. REVENUE, OTHER INCOME AND GAINS

Revenue Sale of goods Other income and gains Gains arising from sale of packing materials and by-products, net Bank interest income Government grants_(Note)_ Subcontracting income Gain on disposal of property, plant and equipment Amortisation of deferred income Reversal of impairment of trade and bills receivables, net Reversal of impairment of other receivables, net Reversal of write-down of inventories Reversal of impairment of deposits paid for acquisition of property, plant and equipment Others Total

Six months ended 30 June 2018 2017 (Unaudited) (Unaudited) HK$’000 HK$’000 894,474 597,682 96 71 769 279 — 2,502 2,072 1,134 — 10 99 92 8,614 — 335 10,577 2 92 — 91 561 1,519 12,548 16,367

Note: Government grants represent rewards to certain subsidiaries of the Company located in the PRC with no further obligations and conditions to be complied with.

5. FINANCE COSTS

An analysis of finance costs of the Group is as follows:

Interest on bank borrowings Interest on trade payables Finance costs for discounting bills receivable Total	Six months ended 30 June 2018 2017 (Unaudited) (Unaudited) HK$’000 HK$’000 28,864 22,717 5,138 — 76 239 34,078 22,956

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6. LOSS BEFORE TAX

The Group’s loss before tax is arrived at after charging (crediting):

Cost of inventories sold Depreciation Amortisation of prepaid land lease payments Foreign exchange loss, net Write-down (Reversal of write-down) of inventories, net (Reversal of impairment) Impairment of trade and bills receivables, net Reversal of impairment of other receivables, net Reversal of impairment of deposits paid for acquisition of property, plant and equipment Loss (Gain) on disposal of property, plant and equipment Corn subsidy, included in cost of sales INCOME TAX EXPENSE Current tax — The PRC enterprise income tax Income tax expense

Six months ended 30 June 2018 2017 (Unaudited) (Unaudited) HK$’000 HK$’000 834,341 512,538 40,319 30,325 3,804 3,494 177 465 1,827 (326) (8,614) 1,332 (335) (10,577) — (91) 44 (10) (990) (22,593) Six months ended 30 June 2018 2017 (Unaudited) (Unaudited) HK$’000 HK$’000 786 2,118 786 2,118

7. INCOME TAX EXPENSE

No Hong Kong profits tax has been provided as the Group had no assessable profits arising in Hong Kong during the six months ended 30 June 2018 and 2017. The PRC enterprise income tax has been provided at the rate of 25% (six months ended 30 June 2017: 25%) on the estimated assessable profits of the subsidiaries operating in the PRC.

8. LOSS PER SHARE

The calculation of the basic loss per share is based on the loss attributable to owners of the Company for the Period of approximately HK$132,828,000 (six months ended 30 June 2017: HK$53,512,000) and the weighted average number of ordinary shares in issue during the Period of 1,527,586,000 (six months ended 30 June 2017: 1,527,586,000) shares.

Diluted loss per share is the same as basic loss per share as there was no potential dilutive ordinary shares outstanding during the Period and the six months ended 30 June 2017.

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9. DIVIDEND

The Board has resolved not to recommend any payment of interim dividend for the Period (six months ended 30 June 2017: Nil).

10. TRADE AND BILLS RECEIVABLES

Trade receivables Bills receivable Impairment	30 June 2018 (Unaudited) HK$’000 273,785 32,776 (81,748) 224,813	31 December 2017 (Audited) HK$’000 221,907 6,307 (91,234) 136,980

The Group normally gives credit terms of 30 to 90 days (31 December 2017: 30 to 90 days) to established customers. The Group seeks to maintain strict control over its outstanding receivables. Overdue balances are reviewed regularly by the management.

Trade and bills receivables are non-interest-bearing. Significant concentration of risk exists where the Group has material exposures to trade and bills receivables from three customers located in the PRC which accounted for 24% (31 December 2017: 36%) of the total trade and bills receivables as at 30 June 2018.

Ageing analysis of the trade and bills receivables as at the end of the reporting period, based on the invoice date and net of provision, is as follows:

Within 1 month 1 to 2 months 2 to 3 months Over 3 months	30 June 2018 (Unaudited) HK$’000 124,471 56,814 30,797 12,731 224,813	31 December 2017 (Audited) HK$’000 89,680 32,808 7,741 6,751 136,980

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11. PREPAyMENTS, DEPOSITS AND OTHER RECEIVABLES

Prepayments Deposits and other debtors The PRC value-added tax and other tax receivables Current portion of prepaid land lease payments Corn subsidy receivable	30 June 2018 (Unaudited) HK$’000 35,395 2,900 28,366 7,777 955 75,393	31 December 2017 (Audited) HK$’000 27,757 3,308 27,077 7,870 — 66,012

12. TRADE AND BILLS PAyABLES

Notes Trade payables — To third parties 12(a) — To Jiliang 12(b) Bills payable	30 June 2018 (Unaudited) HK$’000 224,658 52,715 277,373 — 277,373	31 December 2017 (Audited) HK$’000 135,343 — 135,343 41,103 176,446

The Group normally obtains credit terms ranging from 30 to 90 days (31 December 2017: 30 to 90 days) from its suppliers.

Note 12(a): At 30 June 2018, the trade payables to third parties included balances payable to the Stateowned Supplier of HK$62.3 million (31 December 2017: Nil), which are unsecured and interest-bearing at 8% to 9% per annum.

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Ageing analysis of the trade and bills payables at the end of the reporting period, based on the date of the receipt of goods purchased, is as follows:

Within 1 month 1 to 2 months 2 to 3 months Over 3 months	30 June 2018 (Unaudited) HK$’000 79,240 17,388 53,965 126,780 277,373	31 December 2017 (Audited) HK$’000 59,270 4,853 3,976 108,347 176,446

Note 12(b): The trade payables to Jiliang are unsecured and interest-bearing at 8% to 12% per annum.

13. SHARE CAPITAL

Authorised: 100,000,000,000 (31 December 2017: 100,000,000,000) ordinary shares of HK$0.10 each Issued and fully paid: 1,527,586,000 (31 December 2017: 1,527,586,000) ordinary shares of HK$0.10 each	30 June 2018 (Unaudited) HK$’000 10,000,000 152,759	31 December 2017 (Audited) HK$’000 10,000,000 152,759

14. FINANCIAL GUARANTEES

Dihao Foodstuff together with certain fellow subsidiaries have jointly provided corporate guarantees to a bank in the PRC in respect of banking facilities granted to a former major supplier, Dajincang, starting from 2010 (the “Financial Guarantee Contracts”). The maximum amount of the banking facilities was RMB2.5 billion at 30 June 2018 (31 December 2017: RMB2.5 billion). The Directors have tried to engage a professional valuer to assess the fair value of the Financial Guarantee Contracts. However, since the Directors were unable to obtain sufficient and reliable financial information of Dajincang, the professional valuer was unable to complete the valuation. Therefore, no financial guarantee liability has been recognised in the interim condensed consolidated financial statements in respect of the Financial Guarantee Contracts.

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MANAGEMENT DISCUSSION AND ANALySIS

The Group is principally engaged in the manufacture and sale of corn refined products and corn sweeteners, categorised into upstream and downstream products. The Group’s upstream products include corn starch, gluten meal, corn oil and other corn refined products. Corn starch is refined downstream to produce various corn sweeteners such as corn syrup (glucose syrup, maltose syrup and high fructose corn syrup) and corn syrup solid (maltodextrin). The Group is also the sole distributor of GBT in the Huadong region in the PRC, selling their lysine and other corn refined products.

UPDATE ON REMEDIAL MEASURES

The consolidated financial statements of the Group for the year ended 31 December 2017 (the “2017 Financial Statements”) had been subject to a disclaimer of opinion of the auditor of the Company on the basis as set out in the paragraph headed “Basis for disclaimer of opinion” in the independent auditor’s report in the Company’s annual report for the year ended 31 December 2017 (“2017 Annual Report”). Further to the management’s response and relevant remedial measures taken and to be taken by the management as set out in the paragraph headed “Update on Remedial Measures” in the 2017 Annual Report, the management of the Company wishes to update on certain remedial measures taken by the management during the Period:

1. Financial guarantees contracts

As disclosed in the joint announcement of the Company and GBT dated 8 December 2017 and the circular of the Company dated 17 January 2018, the term of the loan (“Previous Supplier Loan”) granted by BOC to Dajincang under certain loan agreements entered into between Dajincang and BOC in 2016 and 2017 (“Previous Supplier Loan Agreements”) with an aggregate principal amount of RMB2.49 billion had expired in September 2017, and Dajincang still did not have sufficient financial resources to repay the Previous Supplier Loan when the same fell due. To avoid immediate demand for full repayment of the Previous Supplier Loan by the guarantors or any of them pursuant to the Previous Supplier Guarantees, Dajincang proposed to refinance the Previous Supplier Loan by entering into the new loan agreements with BOC for all indebtedness due and owing to BOC (“New Supplier Loan”). As one of the conditions to the New Supplier Loan, Dihao New Supplier Guarantee was granted by Dihao Foodstuff to BOC to guarantee the obligations of Dajincang under the New Supplier Loan. The amount drawn down by Dajincang as at 30 June 2018 and up to the date of this announcement amounted to RMB2.49 billion (31 December 2017: RMB2.49 billion).

As detailed in the 2017 Annual Report, the previous supplier guarantees given by Dihao Foodstuff for the benefit of Dajincang were not recognised in the 2017 Financial Statements because the Group was unable to obtain reliable financial information of Dajincang starting from 2010 for the professional valuer to conduct an accurate valuation. During the Period, as a result of similar difficulties encountered by the Group in 2017, no valuation could be conducted.

— 19 —

During the Period, the Group and GBT Group have continued to negotiate with BOC to find solutions to relieve the Group from its obligation under the Dihao New Supplier Guarantee, and continued to explore other alternatives in case Dajincang fails to repay the New Supplier Loan which will consequently trigger the Group’s obligations as the guarantors pursuant to the Dihao New Supplier Guarantee.

On 21 July 2017, the Group entered into the sale and purchase agreement (the “S&P Agreement”) with GBT, for the sale of the entire equity interest in Target Companies. Subject to the conditions set out in the S&P Agreement being fulfilled, upon the completion of the Transaction which is now expected to be on or before 31 December 2018, such financial uncertainties brought to the Group by the possible financial obligations under the Dihao New Supplier Guarantee would no longer exist, upon Dihao Foodstuff ceasing to be a member of the Group. The assessment of the amount required to be recognised in respect of the Dihao New Supplier Guarantee in the consolidated financial statements of the Group as at 31 December 2018 will thus be unnecessary. However, the auditor of the Company may still be unable to determine whether any adjustments in respect of the Dihao New Supplier Guarantee as at 31 December 2017 were necessary, which may have a significant impact on the financial position of the Group as at 31 December 2017, and on the financial performance and the elements making up the consolidated statement of cash flows of the Group for the year ending 31 December 2018.

2. Material uncertainty relating to going concern

With respect to the material uncertainty relating to the Group’s ability to continue as a going concern, the Directors have expressed their views and outlined the steps that have been taken by the management to improve the Group’s financial position in note 2.2 to the interim condensed consolidated financial statements.

Depending on the successful and favourable outcomes of the proposed steps as set out in note 2.2 to the interim condensed consolidated financial statements, the Board, including the Audit Committee, is of the view that the Company could continue to operate as a going concern in the foreseeable future, and that the relevant disclaimer opinion may not appear in the final results for the year ending 31 December 2018.

BUSINESS REVIEW

The selling prices of the Group’s products are affected by the prices of their raw materials (principally corn kernels and corn starch), the demand and supply of each of the products and their respective substitutes in the market and the variety of product specifications.

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During the Period, economic activities in the PRC remained resilient with GDP grown 6.8% for the first half of 2018. Domestic demand has shown signs of slow recovery. While international corn price decreased to 358 US cents per bushel (equivalent to RMB932 per MT (end of June 2017: 426 US cents per bushel) by the end of the Period, domestic corn price increased to approximately RMB1,727 per MT (end of June 2017: RMB1,656 per MT) by the end of June 2018 in China as corn production dropped to 210 million MT (2016/17: approximately 220 million MT) in 2017/18 harvest according to the latest estimates from the Ministry of Agriculture of China. The improved market sentiment of the upstream corn-refinery industry during the Period and the expiry of the provincial corn procurement subsidies programme in end of April 2017 drove up the Group’s cost of raw materials significantly during the Period. Notwithstanding the re-introduction of the provincial corn procurement subsidies in April 2018, the subsidy amount was substantially lowered. For instance, the Liaoning provincial government reduced the subsidy amount to RMB50 for qualified corn refiners for every MT of corn purchased locally as compared to RMB100 previously. During the Period, the Group was entitled to HK$1.0 million (six months ended 30 June 2017: HK$22.6 million) of subsidy for the purchase of corn kernels for its operations. The increased corn cost has put pressure on the performance of the Group’s upstream business during the Period.

As for the sugar market, due to increased production in various major sugar producing countries during the 2017/18 harvest, the international sugar price dropped to 12.35 US cents per pound (equivalent to RMB1,808 per MT) (end of June 2017: 13.68 US cents per pound) by the end of June 2018. In the PRC, domestic sugar production increased by 1.2 million MT to 10.5 million MT in the 2017/18 harvest, with expanded sugarbeet and sugarcane acreage. As a result, domestic sugar price dropped by approximately 16.1% year-on-year to RMB5,580 per MT (end of June 2017: RMB6,654 per MT) by end of June 2018. The huge difference between international sugar price and domestic sugar price has increased the competitiveness of imported sugar. As such, the government has implemented a series of measures, including raising import tariff for sugar imports without quota from major supplying countries to protect cane sugar and beet sugar producers. Such measures are expected to uphold the domestic sugar price in 2018. Years of industry development has got customers accustomed to the user-friendliness of corn sweeteners. The substitution effect between sugar and sweeteners is no longer as prominent as it used to be. Sugar price fluctuation has become a reference point for the pricing of sweeteners. Although the decrease in sugar price will have an impact on sweeteners prices, the demand for sweetener products has been stable. Coupled with the commencement of the sweeteners production facilities in the Xinglongshan site, the sales volume of the Group’s corn sweetener products increased by 45.0% during the Period.

While the sweeteners market remains stable, the price of corn kernels in the PRC is affected by the direction of the state government agricultural policy from time to time. The Group is cautious with changes in agricultural policy as well as macro-economic environment in light of the uncertainties added by the trade war. Notwithstanding the changes in the upstream operating environment, the upstream operation serves as a feedstock of the Group’s downstream production which has strategic value to the Group’s operation. As such, in response to the ever-changing environment, the Group will closely monitor the market movements and optimise its production scale from time to time.

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FINANCIAL PERFORMANCE

With the completion and commencement of the sweeteners production facilities in the Xinglongshan site, the Group’s consolidated revenue increased by approximately 49.7% to approximately HK$894.5 million (2017: HK$597.7 million) when compared to the corresponding period last year. However, due to changes in the agricultural subsidy policy of the provincial governments, the corn procurement subsidy which the Group was entitled to was substantially lowered as compared to the corresponding period last year. Consequently, the corn subsidy entitled to the Group for the Period decreased by 95.6% to approximately HK$1.0 million (2017: HK$22.6 million). On the other hand, the price of corn kernels increased by 26.3% during the Period. The combined effect of the above has driven up the cost of sales per MT by 29.0% during the Period, while the average selling price increased by merely 18.6%. The Group’s gross profit and gross profit margin decreased by 31.3% and 7.5 per cent point to approximately HK$56.8 million (2017: HK$82.7 million) and 6.3% (2017: 13.8%) respectively. In addition, the finance costs of the Group increased by 48.3% during the Period. As a result, the Group recorded a net loss and LBITDA (i.e., loss before interest, taxation, depreciation and amortisation) of HK$132.8 million and HK$53.8 million respectively as compared to net loss and EBITDA (i.e. earning before interest, taxation, depreciation and amortisation) of HK$53.5 million and HK$5.4 million respectively for the corresponding period last year. The management has adopted a number of measures to improve the financial performance and financial position of the Group, among others, the Group entered into a S&P Agreement with GBT in July 2017 to dispose of the Target Companies in Changchun in order to release the financial burden from relocation of the production facilities in Changchun and the Dihao New Supplier Guarantee. The Group also signed corn purchasing agreements with Jiliang and the State-owned Supplier in January 2018 to ensure a stable supply of corn kernels.

Upstream products

(Sales amount: HK$331.8 million (2017: HK$260.6 million)) (Gross loss: HK$17.8 million (2017: Gross profit: HK$30.3 million))

During the Period, the sales volume of corn starch and other corn refined products were approximately 79,000 MT (2017: 71,000 MT) and 55,000 MT (2017: 54,000 MT) respectively. Internal consumption of corn starch was approximately 81,000 MT (2017: 55,000 MT), which was mainly used as raw material for production of downstream products in the Group’s Jinzhou and Shanghai production sites.

There have been changes in the provincial corn procurement subsidies programme. The Liaoning provincial government has suspended the corn procurement subsidies given to qualified corn refiners for every MT of corn purchased and processed in April 2017. Although the corn procurement subsidies were subsequently re-introduced in April 2018, the amount of subsidy was substantially lower than that of the previous year. As a result, the Group’s cost of corn kernels for the Period increased significantly by 26.3% while the average selling prices of corn starch and other corn

— 22 —

refined products merely increased by 22.8% and 10.3%, respectively. Consequently, the corn starch segment recorded a gross profit margin of approximately 6.5% (2017: 16.6%) while the other corn refined products segment recorded a gross loss margin of 25.9% (2017: gross profit margin: 4.4%) for the Period.

The Group has been the sole distributor of the GBT Group for the sales and marketing of their upstream corn refined products in the Huadong region in the PRC since 2016. No trading of GBT’s upstream products was recorded during the Period (2017: HK$1.5 million).

Corn syrup

(Sales amount: HK$401.7 million (2017: HK$247.5 million)) (Gross profit: HK$55.0 million (2017: HK$45.7 million))

During the Period, the revenue and gross profit of corn syrup increased by 62.3% and 20.4% respectively to approximately HK$401.7 million (2017: HK$247.5 million) and HK$55.0 million (2017: HK$45.7 million) respectively. It was mainly attributable to the increase in sales volume by 43.5% to approximately 132,000 MT (2017: 92,000 MT) as a result of the completion of the relocation and commencement of the glucose/maltose production facilities in the Xinglongshan site. However, as the northeast China market has been primarily concentrated with low-margin industrial users and the increased corn cost had passed on to the downstream operation, the gross profit margin of corn syrup decreased to 13.7% (2017: 18.5%) during the Period.

Corn syrup solid

(Sales amount: HK$160.5 million (2017: HK$83.4 million)) (Gross profit: HK$19.6 million (2017: HK$6.2 million))

During the Period, the revenue and gross profit of maltodextrin increased by 92.4% and 216.1% respectively to approximately HK$160.5 million (2017: HK$83.4 million) and HK$19.6 million (2017: HK$6.2 million) respectively. Such increase was mainly attributable to the increase in sales volume of maltodextrin by 48.6% to approximately 55,000 MT (2017: 37,000 MT) as a result of the completion of the relocation of the maltodextrin production facilities to Xinglongshan and a 29.4% increase in selling price year-on-year. Together with the improved efficiency subsequent to the relocation of the production facilities, the gross profit margin of corn syrup solid increased to 12.2% (2017: 7.4%).

Trading of amino acids

(Sales amount: HK$0.5 million (2017: HK$6.2 million)) (Gross profit: Nil (2017: HK$0.5 million))

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The Group has entered into a master sales agreement with the GBT Group since 2016 for the marketing and selling of their lysine and other corn refined products in the Huadong region in the PRC. Results of trading of corn starch and other corn refined products are included in the financial results of upstream products. Results of the trading segment include only those of amino acids.

During the Period, the revenue of the trading of amino acids decreased to approximately HK$0.5 million (2017: HK$6.2 million) and no gross profit was recorded during the Period (2017: HK$0.5 million). The downturn of trading of amino acids business was mainly attributable to the weak lysine market driven by the poor market sentiment of the husbandry industry and the soft hog prices during the Period.

Export sales

During the Period, the Group exported approximately 18,000 MT (2017: 27,000 MT) of upstream corn refined products and approximately 9,000 MT (2017: 83 MT) of corn sweeteners; their export sales amounted to approximately HK$41.6 million (2017: HK$35.9 million) and HK$26.8 million (2017: HK$0.2 million) respectively, together representing 7.7% (2017: 6.0%) of the Group’s total revenue.

Other income and gains, operating expenses, finance costs and income tax expense

Other income and gains

During the Period, other income of the Group decreased by 23.8% to approximately HK$12.5 million (2017: HK$16.4 million), which was mainly attributable to the difference arising from a government grants which the Group was entitled to amounted to HK$2.5 million for the six months ended 30 June 2017.

Selling and distribution expenses

During the Period, the selling and distribution expenses increased by 56.4% to approximately HK$89.3 million (2017: HK$57.1 million), accounting for 10.0% (2017: 9.6%) of the Group’s revenue. Such increase was mainly attributable to the increase in sales volume and export sales volume of corn sweeteners product which incurred a higher transportation cost and handling fee.

Administrative expenses

Administrative expenses increased by 10.9% to approximately HK$57.2 million (2017: HK$51.6 million), representing 6.4% (2017: 8.6%) of the Group’s revenue. As revaluation work has been done on buildings for administrative use in the PRC at the end of 2017 where value of these buildings appreciated, additional depreciation expenses were recognised during the Period.

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Other expenses

Other expenses of the Group increased slightly to approximately HK$20.7 million (2017: HK$18.8 million) during the Period. Such increase was mainly attributable to the net loss arising from the disposal of substandard corn kernels which amounted to HK$4.7 million during the Period.

Finance costs

During the Period, finance costs of the Group increased to approximately HK$34.1 million (2017: HK$23.0 million) as a result of the increase in interest on payables to corn suppliers, which amounted to HK$5.1 million (2017: Nil).

Income tax expense

Although the Group recorded a net loss during the Period, a subsidiary of the Company in the PRC generated net profit which was subject to the PRC enterprise income tax. As a result, income tax expense amounted to approximately HK$0.8 million was provided for the Period (2017: HK$2.1 million).

Net loss attributable to shareholders

As a result of the deterioration of the operating environment and the increase in finance costs, the Group’s net loss was widened to approximately HK$132.8 million (2017: HK$53.5 million) during the Period.

FINANCIAL RESOURCES AND LIQUIDITy

Structure of interest bearing borrowings and net borrowing position

As at 30 June 2018, the Group’s bank borrowings decreased by 2.3% to approximately HK$1,101.1 million (31 December 2017: HK$1,127.5 million), all of which (31 December 2017: 100.0%) was denominated in Renminbi. The change in total borrowings was mainly attributable to exchange rate adjustment of approximately HK$13.3 million as at 30 June 2018 and the settlement of bank borrowing amounted to approximately HK$13.1 million during the Period. The average interest rate of bank borrowings during the Period increased slightly to approximately 5.2% (31 December 2017: 5.1%) per annum. As at 30 June 2018, interest-bearing bank borrowings amounted to approximately RMB207.0 million have been charged at fixed interest rates of 7.0% to 8.0% for terms of one year to three years. Other than that, the rest of the Group’s interest-bearing bank borrowings are charged with reference to floating interest rate.

Considering the management’s continuous efforts in monitoring the cash flow of the Group and in maintaining good relationship with banks, the Group has not experienced any difficulties in renewing the existing banking facilities as of the date of this announcement.

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Turnover days, liquidity ratios and gearing ratios

Credit terms, normally 30 to 90 days, are granted to customers, depending on their credit worthiness and business relationships with the Group. With the completion and commencement of the sweeteners production facilities in the Xinglongshan site, Dihao Foodstuff granted a longer credit period to their customers in order to re-establish business relationship. In addition, the Shanghai operation of the Group accepted customer’s settlement by bills which has a longer settlement period. As a result, the trade and bills receivables increased to HK$224.8 million (31 December 2017: HK$137.0 million) and the trade receivables turnover days increased to 46 days (31 December 2017: 36 days) during the Period.

During the Period, trade payables turnover days increased to approximately 60 days (31 December 2017: 52 days) as part of the cash flow management.

As at 30 June 2018, the inventory level increased by 22.9% to approximately HK$207.9 million (31 December 2017: HK$169.1 million) as a result of increased inventory in the Jinzhou operation. Meanwhile, the cost of sales increased by 62.7% to approximately HK$837.7 million (six months ended 30 June 2017: HK$514.9 million) for the Period subsequent to the completion and commencement of the sweeteners production facilities in Xinglongshan. Consequently, the inventory turnover days decreased to approximately 45 days (31 December 2017: 50 days) for the Period.

As at 30 June 2018, the current ratio decreased to approximately 0.4 (31 December 2017: 0.5) and quick ratio remain at 0.3 (31 December 2017: 0.3). Gearing ratio in terms of debts (i.e. total interestbearing bank borrowings) to total deficit and debts (i.e. aggregate total of shareholders deficit, noncontrolling interests and total interest-bearing bank borrowings) was approximately 129.1% (31 December 2017: 112.2%).

DISCLOSURE PURSUANT TO RULES 13.19 AND 13.21 OF THE LISTING RULES

Reference is made to the joint announcement of the Company and GBT dated 31 October 2016. Under the various loan agreements (the “Loan Agreements”) entered into between Jinzhou Yuancheng Bio-chem Technology Co., Ltd.（錦州元成生化科技有限公司）(“Jinzhou Yuancheng”), which is an indirect wholly owned subsidiary of the Company, and Jinzhou Branch of China Construction Bank（中國建設銀行股份有限公司錦州分行）(the “Lender”) in respect of a 18-month fixed term loan in the aggregate principal amount of RMB224.0 million guaranteed by certain members of the Group (the “Loan”), Jinzhou Yuancheng is required to satisfy certain financial covenants, failure to perform or comply with any of those financial covenants entitles the Lender to, among others, declare the outstanding principal amount, accrued interest and all other sums payable under the Loan immediately due and payable. On 25 August 2017, Jinzhou Yuancheng signed various renewal agreements to renew the Loan Agreements in aggregate principal amount of RMB218.0 million pursuant to which the due date of the Loan has been extended to September 2018. Based on the unaudited management accounts of Jinzhou Yuancheng for the Period, Jinzhou Yuancheng has continued to fail to fulfill certain financial covenants under the Loan Agreements. Such breach entitles the Lender to, among others, declare the outstanding principal amount, accrued

— 26 —

interest and all other sums payable under the Loan Agreements immediately due and payable. In addition, such breach may also trigger cross default provisions (the “Cross Default”) in other loan agreements entered into by the Group in the aggregate outstanding principal amount of RMB238.8 million as at 30 June 2018. Save for the Cross Default, the breach has not resulted in any triggering of cross default provisions of other loan agreements and/or banking facilities entered into by the Group.

The Group has yet to receive a waiver from the Lender for waiver of such breach. Despite the above non-compliance, the Group has not experienced any difficulties in obtaining further financing with its banks for its working capital. Further announcement(s) regarding the Loan and status of the waivers will be made as and when appropriate.

DISCLOSURE PURSUANT TO RULE 13.20 OF THE LISTING RULES

As announced by the Company on 31 March 2015, financial guarantees were first granted by certain subsidiaries of the Company in respect of the indebtedness of Dajincang due to BOC during November 2010 to March 2015.

As disclosed in the joint announcement of the Company and GBT dated 8 December 2017 and the circular of the Company dated 17 January 2018, the term of the previous loan advanced by BOC to Dajincang expired in September 2017 and Dajincang still did not have sufficient financial resources to repay the Previous Supplier Loan when the same fell due. To avoid immediate demand for full repayment of the Previous Supplier Loan by the guarantors or any of them pursuant to the Previous Supplier Guarantees, Dajincang proposed to refinance the Previous Supplier Loan by entering into the new loan agreements with BOC for the New Supplier Loan. New supplier guarantees with the maximum guaranteed amount of RMB2.5 billion were granted by Dihao Foodstuff and other members of the GBT Group to BOC to guarantee the obligations of Dajincang under the New Supplier Loan.

The maximum principal amount guaranteed under the Dihao New Supplier Guarantee is RMB2.5 billion. Since the assets ratio of the guarantees provided by the Group was more than 8%, the Company was under a general disclosure obligation to disclose such financial assistance under Rules 13.13 of the Listing Rules and to comply with Rule 13.14 of the Listing Rules when there occurred a 3% or more increase in the assets ratio. The Company was also under a continuing disclosure requirement under Rule 13.20 of the Listing Rules to disclose the Dihao New Supplier Guarantee in its interim and annual reports during the relevant periods when the Dihao New Supplier Guarantee are in effect.

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SUPPLEMENTARy INFORMATION IN RELATION TO THE PERIOD UNDER REVIEW

Relocation of production facilities to the Xinglongshan site

Reference is made to the 2017 Annual Report, in relation to among others, the relocation of production facilities of the Group at Luyuan District in Changchun pending its relocation of production facilities to the Xinglongshan site.

The relocation plan of the Group will be financed by the Group’s internal resources, and the management of the Company is of the view that the existing technology know-how of the Group is sufficient for the relocation of the production facilities.

The relocation of the 60,000 mtpa glucose/maltose production facilities and the 30,000 mtpa maltodextrin production facilities were completed in April 2017 and January 2018 respectively. In respect of the other relocation projects, in view of changes in the operating environment, the Group is in the process of reviewing the relocation projects and revising the feasibility studies for submission to among others, the relevant government parties for approval. As such, the expected time for the relocation of production facilities is revised as follows:

	Production capacity of
Products of the Group to	the relevant production	Expected time for
which the production facilities	facilities to be relocated	the relocation of production
relate	(metric tonne per annum)	facilities
Crystallised glucose*	100,000	April 2019 — March 2020
Corn refinery*	600,000	April 2019 — March 2020

• The expected time for the relocation of production facilities of the projects are subject to the final decision of the management from time to time taking into account the relevant product markets and the obtaining of the approval from among others, the relevant government bodies on the feasibility studies. The timetable may thus change accordingly of which the Group shall update its investors as and when appropriate.

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FOREIGN EXCHANGE EXPOSURE

Most of the operations of the Group were carried out in the PRC in which transactions were denominated in Renminbi, while export sales accounting for 7.7% (2017: 6.0%) of the Group’s revenue in which most of these transactions were denominated in US Dollars. The management of the Company has been closely monitoring the Group’s exposure to foreign exchange fluctuations in Renminbi and is of the view that there is no material unfavourable exposure to foreign exchange fluctuation. Therefore, the Group currently does not intend to hedge its exposure to foreign exchange fluctuations in Renminbi. The Group will constantly review the economic situation, development of the Group’s business segments and its overall foreign exchange risk profile, and will consider appropriate hedging measures in future as and when necessary.

FUTURE PLANS AND PROSPECTS

In order to maintain the competitiveness of the Group, the Group will strive to maintain its market share, diversify its product mix and enhance its capability in developing high value-added products and new applications through in-house research and development efforts and strategic business alliance with prominent international market leaders.

In the short run, the Group will consolidate its resources towards the development of the Shanghai production site, leveraging on the synergistic effect with the Jinzhou production site for the supply of raw materials/ sweeteners products to serve the respective Huadong market.

In the long run, the Group will continue to strengthen its market position leveraging on its brand name and add value to the current product mix through the introduction of new high value-added products.

With respect to the financial position of the Group, the management will endeavour to overcome the challenges and adopt a prudent approach in face of the current market condition.

NUMBER AND REMUNERATION OF EMPLOyEES

As at 30 June 2018, the Group has approximately 1,105 (31 December 2017: 1,115) full time employees in Hong Kong and the PRC. The Group appreciates the correlation between human resources and its success, and recognises the value of human resources management as a source of competitive advantage in the increasingly turbulent environment. The Group places great emphasis in the selection and recruitment of new staff, on-the-job training, appraisal and rewards to its employees to align employees’ performance with the Group’s strategies. The Company also acknowledges the contribution of its employees and strives to maintain remuneration packages and career development opportunities to retain current employees. Remuneration packages include discretionary bonuses payable on a merit basis, which are in line with industrial practice. Staff benefits provided by the Group include mandatory funds, insurance schemes and discretionary bonuses.

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INTERIM DIVIDEND

The Board has resolved not to recommend any payment of interim dividend in respect of the Period (six months ended 30 June 2017: Nil).

PURCHASES, SALE OR REDEMPTION OF THE COMPANy’S LISTED SECURITIES

Neither the Company, nor any of its subsidiaries has purchased, redeemed or sold any of the Company’s listed securities during the Period.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE AND MODEL CODE

The Company is committed to ensuring a high standard of corporate governance for the interests of its shareholders and devotes considerable effort in identifying and formalising best practices.

In the opinion of the Directors, the Company has complied with all code provisions in the Corporate Governance Code (the “CG Code”) as set out in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) during the Period.

The Company has adopted a code of conduct regarding the Directors’ securities transactions on terms no less exacting than the required standard set out in the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules (the “Model Code”). Having made specific enquiry of the Directors, all Directors have confirmed to the Company that they have complied with the required standard set out in the Model Code and the Company’s code of conduct throughout the Period.

AUDIT COMMITTEE

The Audit Committee was established in accordance with the requirements of the CG Code for the purposes of, among others, reviewing and providing supervision over the Group’s financial reporting process, risk management and internal controls systems. The Audit Committee comprises all three independent non-executive Directors. As at the date of this report, the chairman of the Audit Committee is Mr. Yuen Tsz Chun, and the other members of the Audit Committee are Mr. Ho Lic Ki and Mr. Lo Kwing Yu.

The Audit Committee meets regularly with the Company’s senior management and the Company’s auditor to review the Company’s financial reporting process, the effectiveness of internal controls, audit process and risk management.

The interim results of the Group for the Period have not been audited, but have been reviewed by the Audit Committee.

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PUBLICATION OF INTERIM RESULTS ANNOUNCEMENT AND INTERIM REPORT

This announcement is published on the website of the Stock Exchange at www.hkexnews.hk and on the website of the Company at www.global-sweeteners.com under “Investor Relations”.

The interim report 2018 of the Company will be despatched to the shareholders of the Company and will be available for viewing on the aforesaid websites of the Stock Exchange and the Company in due course.

By order of the Board Global Sweeteners Holdings Limited Kong Zhanpeng Chairman

Hong Kong, 29 August 2018

As at the date of this announcement, the board of Directors comprises two executive Directors, namely, Mr. Kong Zhanpeng and Mr. Zhang Zihua; and three independent non-executive Directors, namely, Mr. Ho Lic Ki, Mr. Lo Kwing Yu and Mr. Yuen Tsz Chun.

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