China Huajun : Financial Statements/ESG Information –

CHINA HUAJUN GROUP LIMITED

中國華君集團有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 377)

ANNUAL

REPORT

2023

CONTENTS

	Pages
Corporate Information	2
Chairman's Statement	4
Management Discussion and Analysis	5
Biography of Directors and Senior Management	11
Corporate Governance Report	13
Report of the Directors	32
Independent Auditor's Report	42
Consolidated Statement of Profit or Loss and Other Comprehensive Income	45
Consolidated Statement of Financial Position	47
Consolidated Statement of Changes in Equity	50
Consolidated Statement of Cash Flows	51
Notes to the Consolidated Financial Statements	54
Five Years Financial Summary	188
Summary of Properties	189

ANNUAL REPORT 2023	1

CORPORATE INFORMATION

Board of Directors

Executive Directors

Mr. Yan Ruijie (Chairman and Chief Executive Officer)

Ms. Chen Yun

Independent Non-Executive Directors

Mr. Shen Ruolei

Mr. Pun Chi Ping

Mr. Mok Yi Kwo

Audit Committee

Mr. Pun Chi Ping (Chairman)

Mr. Mok Yi Kwo

Mr. Shen Ruolei

Remuneration Committee

Mr. Mok Yi Kwo (Chairman)

Mr. Shen Ruolei

Mr. Pun Chi Ping

Mr. Yan Ruijie

Nomination Committee

Mr. Shen Ruolei (Chairman)

Mr. Mok Yi Kwo

Mr. Pun Chi Ping

Mr. Yan Ruijie

Company Secretary

Mr. Tam Ka Lung

Authorised Representatives

Mr. Yan Ruijie

Mr. Tam Ka Lung

Legal Advisers

Anthony Siu & Co. Solicitors & Notaries Ocorian Law (Bermuda) Limited

Auditor

Prism Hong Kong and Shanghai Limited

Certified Public Accountants

Registered Public Interest Entity Auditor

Principal Bankers

Bank of China (Hong Kong) Limited

Industrial and Commercial Bank of China Limited Liaoshen Bank Company Limited

Shengjing Bank Company Limited

Registered Office

Victoria Place, 5th Floor

31 Victoria Street, Hamilton Pembroke, HM10 Bermuda

Head Office and Principal

Place of Business in Hong

Kong

Suites 2404-2405, 24th Floor

Alliance Building

130-136 Connaught Road Central

Sheung Wan

Hong Kong

2	CHINA HUAJUN GROUP LIMITED

CORPORATE INFORMATION (continued)

Principal Share Registrar and Transfer Office in Bermuda

Ocorian Services (Bermuda) Limited Victoria Place, 5th Floor

31 Victoria Street, Hamilton Pembroke, HM10 Bermuda

Hong Kong Share Registrar and Transfer Office

Union Registrars Limited

Suites 3301-04, 33/F

Two Chinachem Exchange Square

338 King's Road

North Point

Hong Kong

Stock Code

377

Company Website

http://www.chinahuajungroup.com

Investor Relations Contact

Email: [e-mail]

Telephone: [phone]

Fax: [phone]

ANNUAL REPORT 2023	3

CHAIRMAN'S STATEMENT

Dear Shareholders,

I am pleased to present the annual report of China Huajun Group Limited (the "Company") and its subsidiaries (together, the "Group") for the year ended 31 December 2023 (the "Current Year") for the shareholders' perusal.

Highlights

For the Current Year, revenue was approximately RMB2,844.8 million, which represented an increase of approximately RMB1,203.6 million, or 73.3% when compared to revenue of approximately RMB1,641.2 million for the year ended 31 December 2022 (the "Last Year"). The overall increase in revenue was attributable to the increase in revenue generated from our Property Development and Investments segment. During the Current Year, a project of investment properties under development and properties held for sale of Baohua Properties Development (Shanghai) Co., Ltd * ("Baohua Shanghai") pledged for the loan were enforced to judicial auctions and the entire project was sold for a consideration of approximately RMB2,170.0 million thus the revenue of Property Development and Investments recorded a revenue of approximately RMB1,299.3 million. The increase also attributable to the increase in revenue generated from sales of properties upon delivery of certain completed property projects to customers during the Current Year.

Meanwhile Trading and Logistics segment and Printing segment continue contribute stable revenue of approximately RMB856.8 million (Last Year: approximately RMB1,035.1 million) and approximately RMB376.5 million (Last Year: approximately RMB491.3 million). Decrease in revenue of our Trading and Logistics segment was due to change in product mix to concentrate resources on trading of petrochemical products with higher profit margin. Decrease in revenue of printing business was due to strict inventory control implemented by certain major customers who deferred orders for our printing products.

Prospect

In the days to come, we shall continue to assess the situation and implement suitable plans when appropriate. The global economic prospect remains uncertain, the economic situation in the Mainland China is full of challenges. The profound changes in environment leads to new opportunities and challenges. All of us in Huajun shall adhere to the core enterprise value 'Committed to Stepping Forward'. To continue serving our shareholders and customer with the quality services. In the coming year, we shall continue to reduce the gearing ratio, accelerate disposal and sale of property assets, taking cost-saving measures and restructuring the loss making business. At the same time, we shall devote management's effort and resources to carry out offshore debts restructuring so as to maintain the Company and its business for the benefits of all shareholders, employees and other stakeholders as a whole.

Acknowledgement

Finally, on behalf of the board of directors of the Company, I would like to express my sincere gratitude to the shareholders, customers and business partners for their trust and support, and to all employees for their dedication and hard work!

Yan Ruijie

Chairman and Chief Executive Officer

Hong Kong, 28 March 2024

4	CHINA HUAJUN GROUP LIMITED

MANAGEMENT DISCUSSION AND ANALYSIS

Business Review

Our Group used to engaged in four core businesses, namely (i) Printing; (ii) Trading and Logistics; (iii) Property Development and Investments; and (iv) Financial Services. Due to volatile and weakness in capital market and continuing operating loss incurred by the financial services business, the Group has reduced its scale and disposed of the core financial services business in May 2023.

For the year ended 31 December 2023 (the "Current Year"), revenue was approximately RMB2,844.8 million, which represented an increase of approximately RMB1,203.6 million, or 73.3% when compared to revenue of approximately RMB1,641.2 million for the year ended 31 December 2022 (the "Last Year"). The overall increase in revenue was attributable to the increase in revenue generated from our Property Development and Investments segment. During the Current Year, a project of investment properties under development and properties held for sale of Baohua Properties Development (Shanghai) Co., Ltd * ("Baohua Shanghai") pledged for the loan were enforced to judicial auctions and the entire project was sold for a consideration of approximately RMB2,170.0 million thus the revenue of Property Development and Investments recorded a revenue of approximately RMB1,299.3 million. The increase also attributable to the increase in revenue generated from sales of properties upon delivery of certain completed property projects to customers during the Current Year.

Meanwhile Trading and Logistics segment and Printing segment continue contribute stable revenue of approximately RMB856.8 million (Last Year: approximately RMB1,035.1 million) and approximately RMB376.5 million (Last Year: approximately RMB491.3 million). Decrease in revenue of our Trading and Logistics segment was due to change in product mix to concentrate resources on trading of petrochemical products with higher profit margin. Decrease in revenue of printing business was due to strict inventory control implemented by certain major customers who deferred orders for our printing products.

The table below sets forth our Group's revenue by business segment for the Current Year and the Last Year:

	For the year ended			For the year ended
	31 December 2023			31 December 2022
	RMB Million	%	RMB Million	%
Printing	376.5			13.2%	491.3		29.9%
Trading and Logistics	856.8			30.1%	1,035.1		63.1%
Property Development and Investments	1,562.0			54.9%	41.3		2.5%
Others	49.5			1.8%	73.5		4.5%
	2,844.8			100%	1,641.2		100%

ANNUAL REPORT 2023	5

MANAGEMENT DISCUSSION AND ANALYSIS (continued)

The table below sets forth our Group's revenue by geographical locations based on the location by customers for the Current Year and the Last Year:

	For the year ended			For the year ended
	31 December 2023			31 December 2022
	RMB Million	%		RMB Million	%
The PRC	2,623.3			92.2%	1,288.5		78.5%
The United States	129.4			4.5%	215.0		13.1%
Hong Kong	46.2			1.6%	63.5		3.9%
European countries	25.4			0.9%	44.6		2.7%
Other countries	20.5		0.8%	29.6		1.8%
	2,844.8			100%	1,641.2		100%

Set out below are details of the financial and trading prospects of the core business segments of the Group:

Printing

New Island Printing Group Company Limited ("New Island") is one of the leading and reputable printing and packaging companies in Hong Kong and the PRC. New Island produces high quality packaging and paper products with the capability to serve our international clients in the areas of beauty and cosmetics, pharmaceutical, food and beverage globally.

As a result of inventory control implemented by customers and volatile business environment during the Current Year, the Group expects printing business will face a challenging business environment and we will devote more resources to develop new customers.

Trading and Logistics

This segment is principally engaged in the distribution and sales of petrochemical products and provision of logistics services. This segment trades a large spectrum of petrochemical products. The Group expects vast demand of petrochemical products in Hong Kong and the PRC due to our strength of strong network of suppliers which ensured stable supply of products managed by our team. Most of our customers for petrochemical products are in the PRC. During the Current Year, the Group has optimised the product mix by devoting more resources on products with higher profit margin.

Property Development and Investments

This segment consists of land consolidation and development, property development and sales, property leasing and management, and various real estate business. Leveraging on the rich resources in the PRC, the Group used to seeking investments on various development projects with asset appreciation potential for investment and enjoys asset appreciation while generating stable revenue.

6	CHINA HUAJUN GROUP LIMITED

MANAGEMENT DISCUSSION AND ANALYSIS (continued)

However, due to PRC government policies on tightening of financing of property developers, and liquidity issues on property developers in the PRC since 2022, our Property Development and Investments business also faced significant challenges and liquidity issues for our property projects. The Group is not expected to invest in or acquire new property projects, the key work in the future is to dispose of existing projects and discuss loan repayment matters with various creditors, including auctioning assets and repaying debts in kind, so as to resolve the debt crisis of the Group.

Financial Review

Revenue

The Group's revenue for the Current Year was approximately RMB2,844.8 million, representing a increase of approximately RMB1,203.6 million, or 73.3%, compared to revenue of approximately RMB1,641.2 million for the Last Year. For the Current Year, the Group's major business segments, namely (1) Printing reported a revenue of approximately RMB376.5 million (Last Year: approximately RMB491.3 million); (2) Trading and Logistics reported a revenue of approximately RMB856.8 million (Last Year: approximately RMB1,035.1 million); and (3) Property Development and Investments reported a revenue of approximately RMB1,562.0 million (Last Year: approximately RMB41.3 million). We also recorded revenue of approximately RMB49.5 million (Last Year: approximately RMB73.5 million) from other operating segments during the Current Year.

The overall increase in revenue was attributable to the increase in revenue generated from our Property Development and Investments segment. During the Current Year, a project of investment properties under development and properties held for sale of Baohua Shanghai pledged for the loan were enforced to judicial auctions and the entire project was sold for a consideration of approximately RMB2,170.0 million thus the revenue of Property Development and Investments segment recorded a revenue of approximately RMB1,299.3 million. The increase also attributable to the increase in revenue generated from sales of properties upon delivery of certain completed property projects to customers during the Current Year.

Meanwhile Trading and Logistics segment and Printing segment continue contribute stable revenue of approximately RMB856.8 million (Last Year: approximately RMB1,035.1 million) and approximately RMB376.5 million (Last Year: approximately RMB491.3 million). Decrease in revenue of our Trading and Logistics segment was due to change in product mix to concentrate resources on trading of petrochemical products with higher profit margin. Decrease in revenue of printing business was due to strict inventory control implemented by certain major customers who deferred orders for our printing products.

Gross profit (loss) and gross profit (loss) margin

Gross profit was approximately RMB92.4 million for the Current Year (Last Year: gross loss approximately

RMB344.7 million), with gross profit margin of approximately 3.2% (Last Year: gross loss margin approximately 21.0%). The Group recognised provision for write-down of properties held for sales of approximately RMB61.0 million (Last year: approximately RMB469.3 million) during the Current Year. Excluding the effect on provision for write-down of properties held for sale, the gross profit was approximately RMB153.4 million (Last Year: approximately RMB124.6 million) and the gross profit margin was 5.4% (Last Year: 7.6%).

ANNUAL REPORT 2023	7

MANAGEMENT DISCUSSION AND ANALYSIS (continued)

Selling and distribution expenses

For the Current Year, selling and distribution expenses decreased by approximately RMB10 million or 13.4% to approximately RMB64.8 million, or 2.3% of revenue for the Current Year, from approximately RMB74.8 million, or 4.6% of revenue for the Last Year. The decrease was primarily due to the decrease in commission expenses, consultancy fees and freight and insurance expenses.

Administrative expenses

For the Current Year, administrative expenses decreased by approximately RMB48.8 million or 21.0% to approximately RMB184.0 million or 6.5% of revenue of the Current Year, from approximately RMB232.8 million, or 14.2% of revenue for the Last Year, was due to decrease in staff costs, professional fees and other expenses.

Finance costs

Finance costs for the Current Year was approximately RMB879.8 million (Last Year: approximately RMB1,305.5 million). The decrease was primarily due to the decrease in interest on bank borrowings and borrowings from financial institutions following the Baohua Jiangsu Liquidation and Huajun Wuxi Liquidation as well as repayment of RMB1,652.6 million to China Great Wall Asset Management Co., Ltd - Shanghai Branch as disclosed in note

31. As a result of the above, certain bank borrowings, interest expenses and relevant interest penalties were derecognized by the Group for the year ended 31 December 2023 and 2022.

Change in fair value of investment properties

During the Current Year, the Group recorded loss on changes in fair value of investment properties of approximately RMB910.4 million compared to a loss of approximately RMB1,187.1 million in the Last Year as a result of the decrease in fair value of investment properties held by the Group as at 31 December 2023.

Impairment loss of property, plant and equipment

The Group conducted a review of the Group's property, plant and equipment and determined that a number of assets were impaired, primarily due to closure of certain production lines of solar photovoltaic products because of the change in technology and less orders for products produced by such production facilities. The Group also assessed the recoverable amount of property, plant and equipment of other loss-making units and recognised total impairment losses of approximately RMB46.2 million during the Current Year (Last Year: approximately RMB207.3 million).

Loss for the year

As a combined effect of the above, during the Current Year, the Group recorded a loss attributable to shareholders of the Company of approximately RMB2,679.4 million, as compared to a loss of approximately RMB2,822.3 million for the Last Year.

8	CHINA HUAJUN GROUP LIMITED

MANAGEMENT DISCUSSION AND ANALYSIS (continued)

Liquidity, financial resources and capital structure

Shareholders' funds

Total shareholders' funds had recorded deficiency of approximately RMB6,314.2 million as at 31 December 2023, as compared to deficiency of approximately RMB3,667.1 million as at 31 December 2022.

Financial position

As at 31 December 2023, the Group had current assets of approximately RMB2,344.5 million (Last Year: approximately RMB5,560.6 million) comprising cash and cash equivalents of approximately RMB65.4 million (Last Year: approximately RMB59.7 million), and current liabilities of approximately RMB11,798.2 million (Last Year: approximately RMB14,547.7 million). The Group's current ratio (defined as current assets divided by current liabilities) was 0.20 (Last Year: 0.38).

Our gearing ratio, expressed as a percentage of interest-bearing liabilities to total assets, was at 89.9% as at 31 December 2023 as compared to 61.4% as at 31 December 2022.

Cash and cash equivalents

As at 31 December 2023, our Group had cash and cash equivalents of approximately RMB65.4 million (31 December 2022: approximately RMB59.7 million), most of which were denominated in Renminbi.

Borrowings

As at 31 December 2023, the Group had interest-bearing bank borrowings and other borrowings of approximately RMB4,976.7 million (31 December 2022: approximately RMB6,724.1 million). Of these borrowings, approximately RMB4,971.7 million (31 December 2022: approximately RMB6,575.9 million) were secured by the Group's assets. Most of the borrowings were denominated in Renminbi.

Capital expenditure

For the Current Year, the Group's capital expenditure mainly represents additions to investment properties, property, plant and equipment and right-of-use assets totaling of approximately RMB18.0 million (Last Year: approximately RMB116.6 million).

Pledge of assets

As at 31 December 2023, the Group's property, plant and equipment, right-of-use assets, property held for sale, investment properties, inventories, pledged bank deposits and restricted bank balances with carrying amounts of approximately RMB297.0 million, RMB197.2 million, RMB550.0 million, RMB1,652.0 million, RMB10.0 million, RMB0.4 million and RMB16.0 million, respectively, were pledged to secure certain banking and credit facilities of the Group.

ANNUAL REPORT 2023	9