China Public Procurement : Interim Report 2020

Interim Report

2020

CONTENTS

Corporate Information	2
Management Discussion and Analysis	4
Condensed Consolidated Statement of Profit or Loss	12
Condensed Consolidated Statement of Profit or Loss and
Other Comprehensive Income	13
Condensed Consolidated Statement of Financial Position	14
Condensed Consolidated Statement of Changes in Equity	16
Condensed Consolidated Statement of Cash Flows	18
Notes to the Condensed Consolidated Financial Statements	20
General Information	40
Corporate Governance	43

2 2020 Interim Report

CORPORATE INFORMATION

DIRECTORS

Executive Directors

Mr. Zheng Jinwei, EMBA, BEng

• (Chairman and Chief Executive)
  Ms. He Qian, CPA (PRC), EMBA, BAcc

Non-executive Directors

Mr. Chen Limin, Solicitor (PRC), LLB

Mr. Zhang Jianguo, EMBA, BEng

Mr. Xu Peng, EMBA

Independent Non-executive Directors

Mr. Deng Xiang, CPA (PRC), BSc, BEcon

Mr. Jiang Jun, BAcc

Mr. Wang Shuai, BEcon

BOARD COMMITTEES

Audit Committee

Mr. Deng Xiang (Chairman)

Mr. Chen Limin

Mr. Jiang Jun

Remuneration Committee

Mr. Jiang Jun (Chairman)

Mr. Deng Xiang

Mr. Zheng Jinwei

Nomination Committee

Mr. Zheng Jinwei (Chairman)

Mr. Jiang Jun

Mr. Deng Xiang

AUTHORISED REPRESENTATIVES

Mr. Zheng Jinwei

Miss Ng Weng Sin, FCPA (HK), EMBA, MCF, MPA

COMPANY SECRETARY

Miss Ng Weng Sin

PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE

MUFG Fund Services (Bermuda) Limited 4th Floor North

Cedar House

41 Cedar Avenue

Hamilton HM12 Bermuda

HONG KONG BRANCH 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

REGISTERED OFFICE

Clarendon House, 2 Church Street Hamilton HM11, Bermuda

China Public Procurement Limited

3

	CORPORATE INFORMATION
HEAD OFFICE AND PRINCIPAL	PRINCIPAL BANKERS
PLACE OF BUSINESS
	Hang Seng Bank Limited
Unit 501, 5/F	China Merchant Bank Co., Ltd.
Tower Two, Lippo Centre
89 Queensway	STOCK CODE
Admiralty, Hong Kong
	1094
AUDITOR	WEBSITE
RSM Hong Kong
	www.cpphk1094.com
LEGAL ADVISORS
As to Hong Kong law
Fangda Partners
As to Bermuda law
Conyers Dill & Pearman
As to PRC law
Li & Partners (Beijing Office)
Dewell & Partners

4 2020 Interim Report

MANAGEMENT DISCUSSION AND ANALYSIS

1. BUSINESS REVIEW

During the six months ended 30 June 2020 (the "Period"), China Public Procurement Limited (the "Company") and its subsidiaries (collectively, the "Group") had four operating business segments, namely, public procurement, trading business, provision of corporate IT solution and rental income.

Public procurement

During the Period, the Group continued to promote the development of procurement electronic trading platform for governments and state-owned enterprises, the government procurement management system and the electronic procurement platform for universities and colleges. We have witnessed further growth on the number of customers and suppliers and the volume of transactions from Hubei Province, the Inner Mongolia Autonomous Region, Tianjin City, Hainan Province, Qinghai Province, Shenzhen City and the Ningxia Hui Autonomous Region.

Following the Group's participation in the initiation of the establishment of research group for "Procurement Management Standards and Operation Standards for State- owned Enterprises", our "Guocai Government Procurement Electronic Trading System" (「國採政府採購電子化交易系統」) developed by a China-based subsidiary of the Group, was being referred by China Government Procurement and China Government Procurement Service Information Platform (《中國政府採購網》及《中國政府購買服務 信息平台》) of www.ccgp.gov.cn during the Period, which laid a good foundation for developing state-owned enterprise customers and seizing a place in the state-owned enterprise electronic procurement.

Trading business

Our trading business is conducted on a "demand and supply" basis. The Group has been seeking trading opportunities from its potential customers and suppliers. During the Period, no trading business has been concluded.

China Public Procurement Limited

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MANAGEMENT DISCUSSION AND ANALYSIS

Provision of corporate IT solution

The Group has been generating income from providing corporate IT solutions by the development of software and provision of maintenance services to customers. Supported by the government procurement policies and the Group's accumulation of information, technology and experience in the field, this business segment developed continuously during the Period.

Rental income

During the Period, the Group has generated income from leasing a commercial building it owned, located in Donghu New Technology Development Zone, Wuhan, Hubei Province, the PRC. The recurrent rental income generated stable cash inflow to the Group and funded part of the operation and development expenses of the Group. Rental income included rent received from tenants, property management fee, water, electricity and utilities fee we charged.

1. FINANCIAL REVIEW

Operational Performance

1. Revenue

Revenue for the Period was HK$13,864,000, representing an increase of HK$2,542,000 or 22.5% as compared to HK$11,322,000 for the same period of last year.

The revenue included revenue from public procurement of HK$3,923,000, accounting for 28.3% of the total revenue; revenue from provision of corporate IT solution of HK$2,993,000, accounting for 21.6% of the total revenue; and rental income of HK$6,948,000, accounting for 50.1% of the total revenue.

The Group experienced an increase in revenue for each segment for the Period, including a slight increase in revenue from public procurement and provision of corporate IT solution due to the increase in market demand, and an obvious increase in rental income resulting from the increase in facility and property management fee due to an increased occupancy rate of our commercial building in Wuhan, Hubei Province, the PRC and an increase in rental prices of renewal/ new tenancy agreements of such property.

6 2020 Interim Report

MANAGEMENT DISCUSSION AND ANALYSIS

1. Cost of sales
   Cost of sales for the Period was HK$5,210,000, representing an increase of HK$1,640,000 or 45.9% as compared to HK$3,570,000 for the same period of last year. Cost of sales mainly comprised technical staff cost, relevant fixed assets depreciation, cost of authentication key, water, electricity and utility cost incurred by leased properties, direct surtax and costs of appointment of a property management company.
   Such increase was mainly due to an increase in the direct cost of leased properties such as utility cost resulting from its increased occupancy rate and an increase in direct cost resulting from the appointment of property management company to replace certain administrative staffs to manage on commercial building.
2. Gross profit
   Gross profit for the Period was HK$8,654,000, representing an increase of HK$902,000 or 11.6% as compared to HK$7,752,000 for the same period of last year. Gross profit margin for the Period was 62.4%, representing a decrease of 6.1 percentage point as compared to the gross profit margin of 68.5% for the same period of last year. The decrease in gross profit margin was mainly due to the increase in the direct cost of rental income.
3. Other income and gains
   Other income and gains for the Period was HK$1,102,000, representing a decrease of HK$860,000 or 43.8% as compared to HK$1,962,000 for the same period of last year. Other income and gains mainly comprised of interest income and government grants. The decrease was primarily due to the decrease in the amount of loan granted during the Period leading to the decrease in interest income.

China Public Procurement Limited

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MANAGEMENT DISCUSSION AND ANALYSIS

1. Administrative expenses
   The administrative expenses for the Period was HK$18,059,000, representing a decrease of HK$10,370,000 or 36.5% as compared to HK$28,429,000 for the same period of last year. The administrative expenses mainly comprised of staff cost and benefits, office expenses, rental expenses and professional fees. The decrease in administrative expenses was mainly due to the decrease in staff cost and professional fees, and the decrease in rental expenses as a result of the relocation of offices.
2. Finance costs
   Finance costs for the Period was HK$1,037,000, representing a decrease of HK$34,000 or 3.2% as compared to HK$1,071,000 for the same period of last year. The finance costs decreased mainly due to the repayment of bank borrowing of HK$2,201,000 during the Period.
3. Income tax credit
   Income tax credit for the Period amounted to HK$807,000, as compared to HK$1,673,000 for the same period of last year. The tax credit mainly arose from the entitlement of additional tax allowance of land appreciation tax on our commercial building located in Wuhan City, Hubei Province, the PRC.
4. Loss for the period
   The loss for the Period was HK$8,462,000, representing a decrease of HK$1,761,000 or 17.2% as compared to HK$10,223,000 for the same period of last year. The loss decreased primarily due to the increase in revenue and strict control on administrative expenses recorded during the Period.

8 2020 Interim Report

MANAGEMENT DISCUSSION AND ANALYSIS

Financial Position

1. Liquidity and capital resources
   As at 30 June 2020, the Group maintained bank and cash balances of HK$11,217,000, representing a decrease of HK$10,914,000 or 49.3% as compared to HK$22,131,000 as at 31 December 2019. During the Period, the net cash used in operating activities amounted to HK$4,477,000; the net cash used in investing activities amounted to HK$3,804,000; and the net cash used in financing activities amounted to HK$3,703,000.
2. Capital structure
   As at 30 June 2020, the total assets of the Group amounted to HK$316,168,000, the total equity amounted to HK$173,894,000, and the total liabilities amounted to HK$142,274,000. The assets-liabilities ratio (total assets over total liabilities) was 2.22:1 (31 December 2019: 2.25:1), the current ratio (current assets over current liabilities) was 0.27:1 (31 December 2019: 0.36:1) and the gearing ratio (total bank borrowing over total equity) was 0.18:1 (31 December 2019: 0.18:1).

China Public Procurement Limited

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MANAGEMENT DISCUSSION AND ANALYSIS

1. OTHER ISSUES
2. 1. Material investment, material acquisition and disposal of subsidiaries and future material investment or capital and assets acquisition plan
      The Group did not have any material investment and material acquisition or disposal of subsidiaries during the Period.
   2. Pledge of assets
      As at 30 June 2020, the Group has obtained a credit facility of RMB80,000,000 (equivalent to approximately HK$87,704,000) from a bank in the PRC by pledging the Group's properties. Bank borrowing as at 30 June 2020 and 31 December 2019 was secured by a charge over the Group's investment properties, part of right-of-use assets, and part of property and trade receivables. As at 30 June 2020, facilities of RMB28,000,000 (equivalent to approximately HK$30,696,000) have been utilised by the Group.
   3. Litigation and contingent liabilities
      In November 2019, Beijing Dongcheng District People's Court (北京市東城區人 民法院) published an announcement regarding a summons issued to Gongcai Network Technology Limited (公採網絡科技有限公司) ("Gongcai Network"), a wholly-owned subsidiary of the Company, in respect of a civil case relating to a license fee income recognised as other income by the Group during 2012 (the "Legal Proceedings"). The plaintiff claimed that the concerned work and services mentioned in the services contracts entered into between the plaintiff, Gongcai Network and other parties in 2012, including several supplemental contracts, were not performed by Gongcai Network in due course. As a result, the plaintiff claimed for a refund of RMB13,500,000 (approximately of HK$14,800,000) paid on 6 January 2013 together with accrued interests for the period from 4 January 2014 to 4 September 2019 of RMB7,506,000 (approximately of HK$8,229,000). Due to the outbreak of coronavirus disease 2019 ("COVID-19"), the hearing in the district court which had been scheduled to be conducted on 17 February 2020 was postponed. Based on a legal opinion of the Group's PRC lawyer, the directors of the Company (the "Directors") are of the view that the case is still at an early stage to predict any probability of success or loss.

10 2020 Interim Report

MANAGEMENT DISCUSSION AND ANALYSIS

As a result, no provision has been made in the consolidated financial statements of the Group for the year ended 31 December 2019 and for the six months ended 30 June 2020 as the amount of obligation cannot be reasonably measured as at the date of this report. As at the date of this report, no hearing date of the legal proceedings has been fixed due to COVID-19 pandemic.

Other than the above, the Group did not have any contingent liabilities.

1. Foreign exchange exposure
   For the six months ended 30 June 2020, the Group mainly earned revenue in RMB and incurred costs in HK$ and RMB. Although the Group currently does not have any foreign currency hedging policies, it does not foresee any significant currency exposure in the near future. However, any permanent or significant changes in RMB against HK$ may have impact on the Group's results and financial positions.
2. Staff and remuneration policy
   The Group determines staff remuneration in accordance with market terms, individual qualifications and performances. Staff recruitment and promotion is based on individuals' merit and their development potential for the positions offered. As at 30 June 2020, the Group employed approximately 130 employees, and the total remuneration of employees (including the Directors), was approximately HK$12,546,000. The Company maintains a share option scheme, pursuant to which share options are granted to selected Directors or employees of the Group, with a view to attract and retain quality personnel and to provide them with incentive to contribute to the business and operations of the Group.
3. Purchase, sale or redemption of the Company's listed securities
   Neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company's listed securities during the Period.

China Public Procurement Limited

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MANAGEMENT DISCUSSION AND ANALYSIS

7. Event after the reporting period

On 27 July 2020, the Company and a subscriber entered into a subscription agreement under the general mandate, pursuant to which the subscriber has agreed to subscribe for, and the Company agreed to allot and issue 34,897,000 shares (being approximately 16.67% of the existing issued share capital of the Company as at the date of the agreement, being approximately 14.29% of the issued share capital of the Company as enlarged by the allotment and issue of the subscription shares) at the subscription price of HK$0.142. The net proceeds from the subscription are approximately HK$4.9 million. The proceeds would be issued to replenish the general working capital of the Group to support its day-to-day operation. The subscription of new shares was completed on 24 August 2020.

(IV) BUSINESS PROSPECTS

The COVID-19 pandemic has caused great loss to lives and health in the world and led to global economic pressure. During the Period, the China's economy is also facing challenges.

However, the restrictions on going out and face-to-face contact for epidemic prevention stimulate demands for electronic and online services to grow. The market demand on the Group's business segments of "public procurement electronic platform" and "provision of corporate IT solution" increased. In response to government policies and benefiting from the introduction by the official website of China Government Procurement Network (www.ccgp.gov.cn) under the Ministry of Finance, the Group's public procurement platform may usher in greater business opportunities and stimulate the business of providing corporate IT solutions, thus achieving the mutual promotion effects.

For the commercial building located at Donghu New Technology Development Zone and held by the Group, although the China's economy has been affected by the COVID-19 pandemic, the rental income from the commercial building is expected to be immune from the negative impact owing to the agreement contained in the contracts.

12 2020 Interim Report

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

		Six months ended 30 June
		2020	2019
	Notes	HK$'000	HK$'000
		(Unaudited)	(Unaudited)
Revenue	6	13,864	11,322
Cost of sales		(5,210)	(3,570)
Gross profit		8,654	7,752
Other income and gains	7	1,102	1,962
Administrative expenses		(18,059)	(28,429)
Reversal of impairment loss for amounts
due from an ex-substantial shareholder
and its subsidiaries		-	2,781
Reversal of impairment loss for loan
receivables		-	5,097
Reversal of impairment loss for trade and
other receivables		71	12
Loss from operations		(8,232)	(10,825)
Finance costs	8	(1,037)	(1,071)
Loss before tax		(9,269)	(11,896)
Income tax credit	9	807	1,673
Loss for the period	10	(8,462)	(10,223)
Attributable to:
Owners of the Company		(7,581)	(9,853)
Non-controlling interests		(881)	(370)
		(8,462)	(10,223)
Loss per share	11
Basic (HK cents per share)		(3.62)	(5.65)
Diluted (HK cents per share)		N/A	N/A

China Public Procurement Limited

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CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2020

	Six months ended 30 June
	2020	2019
	HK$'000	HK$'000
	(Unaudited)	(Unaudited)
Loss for the period	(8,462)	(10,223)
Other comprehensive income:
Item that may be reclassified to profit or loss:
Exchange differences on translating foreign
operations	(2,537)	(2,486)
Other comprehensive income for the period,
net of tax	(2,537)	(2,486)
Total comprehensive income for the period	(10,999)	(12,709)
Attributable to:
Owners of the Company	(9,848)	(12,509)
Non-controlling interests	(1,151)	(200)
	(10,999)	(12,709)

14 2020 Interim Report

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 30 JUNE 2020

		30 June	31 December
		2020	2019
	Notes	HK$'000	HK$'000
		(Unaudited)	(Audited)
ASSETS
Non-current assets
Property, plant and equipment	13	3,541	3,882
Right-of-use assets	14	13,038	14,433
Investment properties		265,140	270,219
Intangible assets		8,748	8,976
Interests in associates		-	-
Total non-current assets		290,467	297,510
Current assets
Inventories - raw materials		205	235
Trade and other receivables	15	7,308	9,797
Loan receivables	16	3,726	-
Amount due from an associate		66	-
Financial assets at fair value
through profit or loss ("FVTPL")		3,179	2,626
Bank and cash balances		11,217	22,131
Total current assets		25,701	34,789
TOTAL ASSETS		316,168	332,299
EQUITY AND LIABILITIES
Share capital	17	20,939	20,939
Reserves		161,475	171,323
Equity attributable to owners of the
Company		182,414	192,262
Non-controlling interests		(8,520)	(7,369)
Total equity		173,894	184,893

		China Public Procurement Limited	15
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
			AT 30 JUNE 2020
		30 June	31 December
		2020		2019
	Notes	HK$'000	HK$'000
		(Unaudited)	(Audited)
LIABILITIES
Non-current liabilities
Deferred income		3,961		4,176
Lease liabilities		2,575		3,709
Deferred tax liabilities		40,981		42,615
Total non-current liabilities		47,517		50,500
Current liabilities
Bank borrowing	18	30,696		33,519
Trade and other payables	19	24,393		23,919
Contract liabilities		2,412		2,234
Lease liabilities		2,129		1,677
Amounts due to an ex-substantial
shareholder and its subsidiaries	20	2,572		2,622
Current tax liabilities		32,555		32,935
Total current liabilities		94,757		96,906
TOTAL EQUITY AND LIABILITIES		316,168		332,299
Net current liabilities		(69,056)		(62,117)
Total assets less current
liabilities		221,411		235,393

16 2020 Interim Report

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2020

						(unaudited)
					Attributable to owners of the Company
							Foreign
					Share-based		currency					Non-
	Share	Share	Contribution	Merge	payments	Statutory	translation	Revaluation	FVTOCI	Retained		controlling	Total
	capital	premium	surplus	reserve	reserve	reserve	reserve	reserve	reserve	profits	Total	interests	equity
	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
At 31 December 2019 (audited)	20,939	12,752	(114,233)	8,390	1,574	15,778	132,596	8,278	-	106,188	192,262	(7,369)	184,893
Total comprehensive income for the period	-	-	-	-	-	-	(2,267)	-	-	(7,581)	(9,848)	(1,151)	(10,999)
Transfer of reserve upon lapse
of share options	-	-	-	-	(314)	-	-	-	-	314	-	-	-
Changes in equity for the period	-	-	-	-	(314)	-	(2,267)	-	-	(7,267)	(9,848)	(1,151)	(10,999)
At 30 June 2020 (unaudited)	20,939	12,752	(114,233)	8,390	1,260	15,778	130,329	8,278	-	98,921	182,414	(8,520)	173,894

China Public Procurement Limited

17

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2020

						(unaudited)
					Attributable to owners of the Company
							Foreign
					Share-based		currency					Non-
	Share	Share	Contribution	Merge	payments	Statutory	translation	Revaluation	FVTOCI	Accumulated		controlling	Total
	capital	premium	surplus	reserve	reserve	reserve	reserve	reserve	reserve	losses	Total	interests	equity
	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
At 31 December 2018 (audited)	174,490	7,158,101	-	8,390	-	15,778	139,068	3,492	(2,537)	(7,307,540)	189,242	(5,252)	183,990
Total comprehensive income for the period	-	-	-	-	-	-	(2,656)	-	-	(9,853)	(12,509)	(200)	(12,709)
Acquisition of additional equity interests in
subsidiaries	-	-	-	-	-	-	755	-	-	2,602	3,357	(3,357)	-
Changes in fair value	-	-	-	-	-	-	-	-	2,700	-	2,700	-	2,700
Transfer of FVTOCI reserve upon the
disposal	-	-	-	-	-	-	-	-	(163)	163	-	-	-
Share-based payments	-	-	-	-	463	-	-	-	-	-	463	-	463
Capital reorganization	(157,041)	(7,153,619)	(114,233)	-	-	-	-	-	-	7,424,893	-	-	-
Changes in equity for the period	(157,041)	(7,153,619)	(114,233)	-	463	-	(1,901)	-	2,537	7,417,805	(5,989)	(3,557)	(9,546)
At 30 June 2019 (unaudited)	17,449	4,482	(114,233)	8,390	463	15,778	137,167	3,492	-	110,265	183,253	(8,809)	174,444

18 2020 Interim Report

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

	Six months ended 30 June
	2020	2019
	HK$'000	HK$'000
	(Unaudited)	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax	(9,269)	(11,896)
Adjustments for:
Depreciation of property, plant and equipment	293	508
Depreciation of right-of-use assets	1,154	-
Equity-settledshare-based payments	-	463
Reversal of impairment loss of amounts due from an
ex-substantial shareholder and its subsidiaries	-	(2,781)
Reversal of impairment loss of loan receivables	-	(5,097)
Reversal of impairment loss of trade and other
receivables	(71)	(12)
Other operating activities	3,416	(2,104)
NET CASH USED IN OPERATING ACTIVITIES	(4,477)	(20,919)
CASH FLOWS FROM INVESTING ACTIVITIES
Loans advanced	(3,741)	-
Loans refunded	-	5,232
Repayment from an ex-substantial shareholder and
its subsidiaries	-	3,392
Other investing activities	(63)	110
NET CASH (USED IN)/GENERATED FROM
INVESTING ACTIVITIES	(3,804)	8,734
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of bank borrowing	(2,201)	(2,275)
Other financing activities	(1,502)	196
NET CASH USED IN FINANCING ACTIVITIES	(3,703)	(2,079)

China Public Procurement Limited

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

	Six months ended 30 June
	2020	2019
	HK$'000	HK$'000
	(Unaudited)	(Unaudited)
NET DECREASE IN CASH AND CASH
EQUIVALENTS	(11,984)	(14,264)
Effect of foreign exchange rate changes	1,070	(1,581)
CASH AND CASH EQUIVALENTS AT 1 JANUARY	22,131	26,344
CASH AND CASH EQUIVALENTS AT 30 JUNE	11,217	10,499
ANALYSIS OF CASH AND CASH EQUIVALENTS
Bank and cash balances	11,217	10,499

20 2020 Interim Report

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

1. GENERAL INFORMATION

The Company was incorporated in Bermuda with limited liability. The address of its registered office is Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda. The address of its principal place of business is Unit 501, 5/F., Tower Two, Lippo Centre, 89 Queensway, Admiralty, Hong Kong. The Company's shares are listed on the Main Board of The Stock Exchange of Hong Kong Limited (the "Stock Exchange").

The Company is an investment holding company. The principal activities of its subsidiaries are provision of public procurement services, trading of different products, development of software, provision of maintenance services and leasing of the Group's investment properties located in Wuhan, Hubei Province, the People's Republic of China (the "PRC").

2. BASIS OF PREPARATION

These condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants (the "HKICPA") and the applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange (the "Listing Rules").

These condensed consolidated financial statements should be read in conjunction with the 2019 annual financial statements. The accounting policies and methods of computation used in the preparation of these condensed consolidated financial statements are consistent with those used in the annual consolidated financial statements for the year ended 31 December 2019.

The Group incurred a net loss and net operating cash outflows of approximately HK$8,462,000 and HK$4,477,000, respectively, during the six months ended 30 June 2020, the Group had net current liabilities of approximately HK$69,056,000 as at 30 June 2020. These conditions indicate the existence of a material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern. Therefore, the Group may be unable to realise its assets and discharge its liabilities in normal course of business.

In order to improve the Group's financial position, liquidity and cash flows, the Directors have adopted or in the process of adopting the following measures:

1. The Group has been taking stringent cost controls;
2. The Group has obtained the credit facilities of RMB80,000,000 (equivalent to approximately HK$87,704,000) from a bank in the PRC by pledging the Group's non-current assets. As at 30 June 2020, facilities of RMB28,000,000 (equivalent to approximately HK$30,696,000) has been utilised by the Group; and

China Public Procurement Limited

21

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

2. BASIS OF PREPARATION (Continued)

1. The Company will continue to adopt the equity financing approach to strengthen the financial position of the Group and to raise additional funds for the Group to replenish its working capital.

Taking into account the above measures and after assessing the Group's current and future cash flow positions, the directors of the Company are satisfied that the Group will be able to meet their financial obligations when they fall due. Accordingly, the Directors are of the opinion that it is appropriate to prepare the condensed consolidated financial statements on a going concern basis. Should the Group be unable to continue in business as a going concern, adjustments would have to be made to write down the carrying amounts of assets to their estimated recoverable amounts, to reclassify non-current assets and liabilities as current assets and liabilities respectively, and to provide for any further liabilities which may arise.

3. ADOPTION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

In the current period, the Group has adopted all the new and revised Hong Kong Financial Reporting Standards ("HKFRSs") issued by the HKICPA that are relevant to its operations and effective for its accounting year beginning on 1 January 2020. HKFRSs comprise Hong Kong Financial Reporting Standards ("HKFRS"), Hong Kong Accounting Standards ("HKAS"), and Interpretations. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

The accounting policies applied in these financial statements are the same as those applied in the Group's consolidated financial statements as at and for the year ended 31 December 2019. A number of new or amended standards are effective from 1 January 2020 but do not have a material effect on the Group's financial statements.

22 2020 Interim Report

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

4. FAIR VALUE MEASUREMENTS

The carrying amounts of the Group's financial assets and financial liabilities as reflected in the condensed consolidated statement of financial position approximate their respective fair values.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following disclosures of fair value measurements use a fair value hierarchy that categorises into three levels the inputs to valuation techniques used to measure fair value:

Level 1 inputs:	quoted prices (unadjusted) in active markets for identical assets or liabilities that
	the Group can access at the measurement date.
Level 2 inputs:	inputs other than quoted prices included within level 1 that are observable for the
	asset or liability, either directly or indirectly.
Level 3 inputs:	unobservable inputs for the asset or liability.

The Group's policy is to recognise transfers into and transfers out of any of the three levels as to the date of the event or change in circumstances that caused the transfer.

The following table shows the carrying amounts and fair value of financial assets, including their levels in the fair value hierarchy. It does not include fair value information for financial assets not measured at fair value of the carrying amount is a reasonable approximation of fair value. Further, for the current period the fair value disclosure of lease liabilities is also not required.

1. Disclosures of level in fair value hierarchy at 30 June 2020:

(Unaudited)

Fair value measurements as at 30 June 2020

DescriptionLevel 1 Level 2 Level 3 Total

HK$'000 HK$'000 HK$'000 HK$'000

Recurring fair value
measurements:
Financial assets
Financial assets at FVTPL
- structured deposits	-	3,179	-	3,179
Investment properties
Commercial units situated
in the PRC	-	-	265,140	265,140
Total	-	3,179	265,140	268,319

China Public Procurement Limited

23

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

4. FAIR VALUE MEASUREMENTS (Continued)

1. Disclosures of level in fair value hierarchy at 30 June 2020: (Continued)

(Audited)

Fair value measurements as at 31 December 2019

DescriptionLevel 1 Level 2 Level 3 Total

HK$'000 HK$'000 HK$'000 HK$'000

Recurring fair value
measurements:
Financial assets
Financial assets at FVTPL
- structured deposits	-	2,626	-	2,626
Investment properties
Commercial units situated
in the PRC	-	-	270,219	270,219
Total	-	2,626	270,219	272,845

1. Reconciliation of assets measured at fair value based on level 3:

	Investment properties
	Six months ended 30 June
	2020	2019
	HK$'000	HK$'000
	(Unaudited)	(Unaudited)
At the beginning of the period	270,219	266,776
Exchange differences	(5,079)	(1,307)
At the end of the period	265,140	265,469
Total gains recognised in profit or loss for assets held at
end of the reporting period	-	-

24 2020 Interim Report

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

4. FAIR VALUE MEASUREMENTS (Continued)

1. Disclosure of valuation process used by the Group and valuation techniques and inputs used in fair value measurements at 30 June 2020:
   The Group's chief financial officer is responsible for the fair value measurements of assets and liabilities required for financial reporting purpose, including level 3 fair value measurements. The chief financial officer reports directly to the Board of Directors for these fair value measurements. Discussion of valuation processes and results are held between the chief financial officer and the board of directors of the Company at least once a year.
   For level 3 fair value measurements, the Group will normally engage external valuation experts with the recognised professional qualifications and recent experience to perform the valuations.
   Level 2 fair value measurements

							Fair value as at
							30 June 31 December
Description		Valuation Technique	Inputs			2020		2019
							HK$'000	HK$'000
Assets						(Unaudited)	(Audited)
Structured deposits	Market comparison	Price per unit of		3,179		2,626
			approach	investment
Level 3 fair value measurements
					Effect on
					fair value for	Fair value as at
	Valuation		Unobservable		increase of	30 June	31 December
Description	technique	inputs	Range	inputs	2020		2019
							HK$'000	HK$'000
Assets							(Unaudited)	(Audited)
Commercial	Income		Terminal yield	7.0%	Decrease	265,140		270,219
units located	capitalisation	(2019: 7.0%)
in the PRC
			Reversionary yield	7.5%	Decrease
				(2019: 7.5%)
			Monthly rental	35-130	Increase
			(RMB/square metre)	(2019: 35-130)

There were no changes in the valuation techniques used during the six months ended 30 June 2020.

China Public Procurement Limited

25

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

5. SEGMENT INFORMATION

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker ("CODM"). CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive directors of the Company that makes strategic and operating decisions.

The Group has four operating segments as follows:

Public procurement	-	provision of public procurement services
Trading business	-	trading of different products
Provision of corporate IT solution	-	development of software and provision of maintenance
		services to customers
Rental income	-	leasing of the Group's investment properties located
		in Wuhan, Hubei Province, the PRC

The Group's reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies.

26 2020 Interim Report

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

5. SEGMENT INFORMATION (Continued)

				Provision of
		Public	Trading	corporate	Rental
		procurement	business	IT solution	income	Total
		HK$'000	HK$'000		HK$'000	HK$'000	HK$'000
		(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
Six months ended 30 June 2020:
Revenue from external customers		3,923	-	2,993	6,948	13,864
Intersegment revenue		-	-		-		-	-
Segment profit		3,351	-	1,746	3,619	8,716
As at 30 June 2020:
Segment assets		8,043	-	2,908	265,295	276,246
Segment liabilities		4,427	-	2,392	4,806	11,625
Six months ended 30 June 2019:
Revenue from external customers	3,738	-	2,648	4,936	11,322
Intersegment revenue	-	-		-		-	-
Segment profit	3,565	-	964	3,235	7,764
		(Audited)	(Audited)		(Audited)	(Audited)	(Audited)
As at 31 December 2019:
Segment assets	8,220	-	5,507	270,603	284,330
Segment liabilities	3,483	-	2,234	5,131	10,848
					Six months ended 30 June
						2020		2019
						HK$'000	HK$'000
					(Unaudited)	(Unaudited)
Reconciliations of reportable segment profit or loss:
Total profit of reportable segments					8,716		7,764
Administrative expenses					(18,059)		(28,429)
Finance costs					(1,037)		(1,071)
Other income and gains					1,102		1,962
Reversal of impairment loss for amounts due from an
ex-substantial shareholder and its subsidiaries			-		2,781
Reversal of impairment loss for loan receivables				-		5,097
Reversal of impairment loss for trade and other receivables			9		-
Consolidated loss before tax					(9,269)		(11,896)

China Public Procurement Limited

27

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

6.	REVENUE
	An analysis of the Group's revenue for the period is as follows:
		Six months ended 30 June
		2020	2019
		HK$'000	HK$'000
		(Unaudited)	(Unaudited)
	Provision of public procurement services	3,923	3,738
	Provision of corporate IT solution services	2,993	2,648
	Rental income	6,948	4,936
		13,864	11,322

Disaggregation of revenue from contracts with customers by services and the timing of revenue recognition for the period are as follow:

	Six months ended 30 June
	2020	2019
	HK$'000	HK$'000
	(Unaudited)	(Unaudited)
Revenue from contracts with customers within
the scope of HKFRS 15
Recognised at point in time
- Provision of public procurement services	3,923	3,738
- Sales of online procurement software	1,297	747
Recognised over time
- Licensing online procurement platform income	426	524
- Provision of maintenance services	1,270	1,377
	6,916	6,386
Revenue from other source
- Rental income	6,948	4,936
	13,864	11,322

28 2020 Interim Report

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

6. REVENUE (Continued)

The following table provides information about receivables and contract liabilities from contracts with customers:

	30 June	31 December
	2020	2019
	HK$'000	HK$'000
	(Unaudited)	(Audited)
Receivables, which are included in "Trade and
other receivables"	3,014	5,841
Contract liabilities	(2,412)	(2,234)

The amount of approximately HK$1,033,000 recognised in contract liabilities at the beginning of the period has been recognised as revenue for the six months ended 30 June 2020.

7.	OTHER INCOME AND GAINS
		Six months ended 30 June
		2020	2019
		HK$'000	HK$'000
		(Unaudited)	(Unaudited)
	Bank interest income	18	24
	Dividend income	-	4
	Exchange gain	25	3
	Gains on disposals of financial assets at FVTPL	12	15
	Government grants - amortisation of deferred income	138	145
	Government grants (Note)	358	362
	Interest income on loan receivables	376	1,227
	Sundry income	175	182
		1,102	1,962

Note:

The government grants represented financial subsidies for compensating expenses already incurred or giving immediate financial support to the Group. There are no unfulfilled conditions or contingencies in relation to the grants and the grants were determined at the sole discretion of relevant government authorities in the PRC.

China Public Procurement Limited

29

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

8.	FINANCE COSTS
		Six months ended 30 June
		2020	2019
		HK$'000	HK$'000
		(Unaudited)	(Unaudited)
	Interest on bank borrowing	893	1,057
	Interest on lease liabilities	144	14
		1,037	1,071

9.	INCOME TAX CREDIT
		Six months ended 30 June
		2020	2019
		HK$'000	HK$'000
		(Unaudited)	(Unaudited)
	Current tax - the PRC
	Provision for the year	30	9
	Underprovision in prior years	-	6
	Deferred tax - the PRC	(837)	(1,688)
		(807)	(1,673)

No provision for Hong Kong Profits Tax is required since the Group has no assessable profits for the six months ended 30 June 2020 (six months ended 30 June 2019: Nil).

Pursuant to relevant laws and regulations in the PRC, the PRC Enterprise Income Tax rate of subsidiaries registered in the PRC is 25% (six months ended 30 June 2019: 25%).

30 2020 Interim Report

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

10. LOSS FOR THE PERIOD

The Group's loss for the period is stated after charging the following:

	Six months ended 30 June
	2020	2019
	HK$'000	HK$'000
	(Unaudited)	(Unaudited)
Staff costs
- Directors' emoluments	1,290	1,821
- Salaries, bonuses and allowances	11,089	13,343
- Retirement benefits scheme contributions	167	846
- Equity-settledshare-based payments	-	463
Total staff costs	12,546	16,473
Amortisation of intangible assets (included in administrative
expenses)	58	65
Depreciation of property, plant and equipment	293	508
Depreciation of right-of-use assets	1,154	-
Operating leases charges - land and buildings	-	1,211

11. LOSS PER SHARE

Basic loss per share

The calculation of basic loss per share attributable to owners of the Company is based on the loss for the period attributable to owners of the Company of approximately HK$7,581,000 (unaudited) (six months ended 30 June 2019: approximately HK$9,853,000 (unaudited)) and the weighted average number of ordinary shares of approximately 209,387,000 (unaudited) (six months ended 30 June 2019: approximately 174,490,000 (unaudited)) for both periods.

Diluted loss per share

There were no dilutive potential ordinary shares for the Company's share options for the six months ended 30 June 2020 and 2019.

China Public Procurement Limited

31

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

12. DIVIDEND

The Directors do not recommend the payment of any dividend for the six months ended 30 June 2020 (six months ended 30 June 2019: Nil).

13. PROPERTY, PLANT AND EQUIPMENT

During the six months ended 30 June 2020, additions to the Group's property, plant and equipment were approximately HK$75,000 (unaudited) (six months ended 30 June 2019: approximately HK$550,000 (unaudited)).

14. RIGHT-OF-USE ASSETS

During the six months ended 30 June 2020, there were no new leases entered by the Group (six months ended 30 June 2019: the Group entered into a new lease agreement for use of property for 3 years). The Group makes fixed payments depending on the usage of the asset during the contract period. On lease commencement, the Group recognised approximately HK$1,913,000 and HK$1,826,000 of right-of-use assets and lease liabilities, respectively. As at 30 June 2020, the right- of-use assets' carrying amount was approximately HK$13,038,000 (unaudited) (31 December 2019: approximately HK$14,433,000 (audited)).

32 2020 Interim Report

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

15. TRADE AND OTHER RECEIVABLES

	30 June	31 December
	2020	2019
	HK$'000	HK$'000
	(Unaudited)	(Audited)
Trade receivables	3,181	6,069
Provision for impairment loss	(167)	(228)
	3,014	5,841
Other receivables	1,499	1,318
Provision for impairment loss	(397)	(401)
	1,102	917
Compensation income receivable	8,473	8,473
Provision for impairment loss	(8,473)	(8,473)
	-	-
Prepayments for goods	67,413	68,552
Provision for impairment loss	(67,413)	(68,552)
	-	-
Other prepayments	8,641	8,508
Provision for impairment loss	(6,742)	(6,780)
	1,899	1,728
Deposits	1,311	1,329
Provision for impairment loss	(18)	(18)
	1,293	1,311
	7,308	9,797

China Public Procurement Limited

33

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

15. TRADE AND OTHER RECEIVABLES (Continued)

Reconciliation of provision for impairment loss for trade and other receivables:

	30 June	31 December
	2020	2019
	HK$'000	HK$'000
	(Unaudited)	(Audited)
At the beginning of the period/year	84,452	86,068
Reversal of provision for impairment loss for the period/year	(71)	(185)
Exchange differences	(1,171)	(1,431)
At the end of the period/year	83,210	84,452

At 30 June 2020, the carrying amount of trade receivables charged as security for the Group's bank borrowing amounted to approximately HK$163,000 (unaudited) (31 December 2019: HK$413,000 (audited)).

Rental income is paid in accordance with the terms of respective agreements. For provision of public procurement services and corporate IT solution services, the Group mainly requires customers to pay certain of the contract sum in advance and settle the remaining balances within 30 days from the date of acceptance. The Group seeks to maintain strict control over its outstanding receivables. Overdue balances are reviewed regularly by the directors of the Company.

The ageing analysis of trade receivables, based on the invoice date, and net of allowance, is as follows:

	30 June	31 December
	2020	2019
	HK$'000	HK$'000
	(Unaudited)	(Audited)
0 to 90 days	1,211	5,735
91 to 180 days	1,775	23
181 to 365 days	2	32
Over 365 days	26	51
	3,014	5,841

34 2020 Interim Report

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

16. LOAN RECEIVABLES

		30 June	31 December
		2020	2019
		HK$'000	HK$'000
		(Unaudited)	(Audited)
Loan receivables (Note)		121,758	118,377
Provision for impairment loss		(118,032)	(118,377)
		3,726	-
Reconciliation of provision for impairment loss for loan receivables:
		30 June	31 December
		2020	2019
		HK$'000	HK$'000
		(Unaudited)	(Audited)
At the beginning of the period/year		118,377	120,857
Reversal of impairment loss for the period/year		-	(2,174)
Exchange differences		(345)	(306)
At the end of the period/year		118,032	118,377

Note:

As at 30 June 2020, loan receivables included a loan of HK$100,000,000 (unaudited) (31 December 2019: HK$100,000,000 (audited)) of which accumulated impairment of HK$100,000,000 (unaudited) (31 December 2019: HK$100,000,000 (audited)) was made. The loan was unsecured, interest-free and repayable in June 2015 and correlated to a cooperation arrangement with an independent third party. Pursuant to the cooperation arrangement, the independent third party had undertaken to engage the Group for procurement services for a transaction volume of not less than RMB950 million during the year ended 31 December 2014 at an agreed service charge of 1.5%. Further details of such were set out in the Company's announcement dated 5 June 2014.

As at 30 June 2020, loan receivables also included loans of approximately HK$21,268,000 (31 December 2019: HK$17,877,000) in aggregate, with impairment of approximately HK$17,542,000 (31 December 2019: HK$17,877,000) in aggregate. These loans were unsecured, interest bearing at a range of 0.3% to 0.6% per month and repayable in 2020 and 2021 respectively.

The remaining loan receivable of approximately HK$490,000 (31 December 2019: HK$500,000)

with impairment of HK$490,000 (31 December 2019: HK$500,000) was unsecured and repayable on demand.

China Public Procurement Limited

35

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

17. SHARE CAPITAL

	Number of
	shares	Amount
	'000	HK$'000
Authorised share capital
Ordinary shares
At 31 December 2019 (audited), 1 January 2020 and
30 June 2020 (unaudited) (HK$0.1 each)	400,000	40,000
Preference shares
At 31 December 2019 (audited), 1 January 2020 and
30 June 2020 (unaudited) (HK$0.1 each)	100,000	10,000
Total authorised share capital at 31 December 2019 (audited),
1 January 2020 and 30 June 2020 (unaudited)
(HK$0.1 each)	500,000	50,000
Issued and fully paid:
Ordinary shares
At 31 December 2019 (audited), 1 January 2020 and
30 June 2020 (unaudited) (HK$0.1 each)	209,387	20,939
Preference shares
At 31 December 2019 (audited), 1 January 2020 and
30 June 2020 (unaudited) (HK$0.1 each)	-	-
Total issued and fully paid at 31 December 2019 (audited),
1 January 2020 and 30 June 2020 (unaudited)
(HK$0.1 each)	209,387	20,939

36 2020 Interim Report

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

18. BANK BORROWING

	30 June	31 December
	2020	2019
	HK$'000	HK$'000
	(Unaudited)	(Audited)
Bank borrowing	30,696	33,519
The borrowing is repayable as follows:
	30 June	31 December
	2020	2019
	HK$'000	HK$'000
	(Unaudited)	(Audited)
Within one year	30,696	33,519
Less: Amount due for settlement within 12 months (shown under
current liabilities)	(30,696)	(33,519)
Amount due for settlement after 12 months	-	-

The carrying amounts of the Group's borrowing is denominated in RMB.

The effective interest rates of borrowing were as follows:
	30 June	31 December
	2020	2019
	(Unaudited)	(Audited)
Bank borrowing	5.39%	5.39%

Bank borrowing at 30 June 2020 and 31 December 2019 was secured by a charge over the Group's investment properties, part of right-of-use assets, part of property, plant and equipment, trade receivables and bank and cash balances.

During the year 2019 and up to the date of this report, Gongcai Network Technology Limited ("Gongcai Network"), a wholly-owned subsidiary, breached a clause of a bank loan agreement in relation to placing all monies collected from rental income from the investment properties into a designated bank account. As a result, the bank loan of approximately HK$30,696,000 (31 December 2019: HK$33,519,000) is subject to an early repayment option and/or a withholding of granting the unused portion of bank loan by the bank. Such bank loan is classified as a current liability as at 30 June 2020 and 31 December 2019. As at the date of this report, the bank has not requested for the early repayment of the bank loan.

China Public Procurement Limited

37

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

19. TRADE AND OTHER PAYABLES

	30 June	31 December
	2020	2019
	HK$'000	HK$'000
	(Unaudited)	(Audited)
Trade payables	162	167
Accruals	8,016	8,177
Security deposits	2,382	1,438
Receipt in advance	1,501	1,659
Other payables	10,468	10,579
Payables for acquisition of intangible assets	1,864	1,899
	24,393	23,919
The ageing analysis of trade payables, based on the invoice date, is as follows:
	30 June	31 December
	2020	2019
	HK$'000	HK$'000
	(Unaudited)	(Audited)
0 to 90 days	5	8
Over 365 days	157	159
	162	167

The carrying amounts of the Group's trade payables are denominated in RMB.

20. AMOUNTS DUE TO AN EX-SUBSTANTIAL SHAREHOLDER AND ITS SUBSIDIARIES

The amounts are unsecured, interest-free and repayable on demand.

38 2020 Interim Report

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

21. PLEDGE OF ASSETS

At the end of the reporting period, the Group had pledged or charged the following assets to secure the credit facilities granted by bank and independent third parties:

	30 June	31 December
	2020	2019
	HK$'000	HK$'000
	(Unaudited)	(Audited)
Property, plant and equipment - building	2,142	2,262
Right-of-use assets	8,649	8,928
Investment properties	265,140	270,219
Trade receivables - rental receivables	163	413
Bank and cash balances	53	1,294
	276,147	283,116

22. CAPITAL COMMITMENTS

Capital commitments contracted for at the end of the reporting period but not yet incurred are as follows:

	30 June	31 December
	2020	2019
	HK$'000	HK$'000
	(Unaudited)	(Audited)
Acquisition of intangible assets	7,453	7,595
Acquisition of property, plant and equipment	-	11
Further capital injection to an associate (note)	18,856	19,218
	26,309	26,824

Note:

The due date of the capital injection to an associate is 30 June 2020.

China Public Procurement Limited

39

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

23. LITIGATIONS AND CONTINGENT LIABILITIES

In November 2019, Beijing Dongcheng District People's Court published an announcement regarding a summons issued to Gongcai Network, a wholly-owned subsidiary of the Company, in respect of a civil case relating to a license fee income recognised as other income by the Group during 2012. The plaintiff claimed that the concerned work and services mentioned in the services contracts entered into between the plaintiff, Gongcai Network and other parties in 2012, including several supplemental contracts, were not performed by Gongcai Network in due course. As a result, the plaintiff claimed for a refund of RMB13,500,000 (approximately HK$14,800,000) paid on 6 January 2013 together with accrued interests for the period from 4 January 2014 to 4 September 2019 of RMB7,506,000 (approximately HK$8,229,000). Due to the outbreak of coronavirus disease 2019 ("COVID-19"), the hearing in the district court which had been scheduled to be conducted on 17 February 2020 was postponed. Based on a legal opinion obtained from the Group's PRC lawyer, the Directors are of the view that the case is still at an early stage to predict the probability of success or loss.

As a result, no provision has been made in the consolidated financial statements of the Group for the year ended 31 December 2019 and for the six months ended 30 June 2020 as the amount of obligation cannot be reasonably measured as at the date of this report. As at the date of this report, no hearing date of the legal proceedings has been fixed due to COVID-19 pandemic.

Other than the above, the Group did not have any contingent liabilities.

24. RELATED PARTY TRANSACTIONS

The key management personnel represented solely the Directors and the compensation paid to them is disclosed in Note 10.

25. EVENT AFTER THE REPORTING PERIOD

On 27 July 2020, the Company and a subscriber entered into a subscription agreement under the general mandate, pursuant to which the subscriber has agreed to subscribe for, and the Company agreed to allot and issue 34,897,000 shares (being approximately 16.67% of the existing issued share capital of the Company as at the date of the agreement, being approximately 14.29% of the issued share capital of the Company as enlarged by the allotment and issue of the subscription shares) at the subscription price of HK$0.142. The net proceeds from the subscription are approximately HK$4.9 million. The proceeds would be issued to replenish the general working capital of the Group to support its day-to-day operation. The subscription of new shares was completed on 24 August 2020.

26. APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the board of directors of the Company on 31 August 2020.

40 2020 Interim Report

GENERAL INFORMATION

SHARE OPTION SCHEME

The Company adopted the share option scheme pursuant to the ordinary resolution passed by the shareholders of the Company on 13 June 2013 (the "Scheme"). On 9 May 2019, a total of 17,400,000 share options to subscribe for 17,400,000 shares, representing approximately 9.97% of the issued share capital of the Company on the same date were granted by the Company to 10 employees under the Scheme. None of the grantees is a director, chief executive or substantial shareholders (as defined under the Listing Rules) of the Company, nor an associate (as defined under the Listing Rules) of any of them.

At the annual general meeting ("AGM") held on 28 June 2019, a resolution was duly passed that 17,448,972 share options, being 10% scheme limit on the number of shares issued as at the date of AGM, which may be allotted and issued upon exercise of the options to be granted under the Scheme.

Details of the share options movements during the six months ended 30 June 2020 under the Scheme are as follows:

				Number of share options
		Balance					Balance
	Date of	as at	Granted	Exercised	Lapsed	Cancelled	as at
	grant of	1 January	during	during	during	during	30 June	Vesting	Exercise	Exercise
Name of category	share options	2020	the Period	the Period	the Period	the Period	2020	period	period	price
										(HK$)
Employees	9 May 2019	17,400,000	-	-	(3,480,000)	-	13,920,000	-	9 May 2019 to	0.416
									8 May 2021

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GENERAL INFORMATION

DIRECTORS' AND CHIEF EXECUTIVE'S INTERESTS AND SHORT POSITIONS IN THE SHARES OR DEBENTURES OF THE COMPANY OR ITS ASSOCIATED CORPORATIONS

As at 30 June 2020, the interests and short positions of the Directors and the chief executive of the Company in the shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the "SFO")) (i) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") contained in the Listing Rules, were as follows:

Long positions in shares of the Company

				Total interests
				as to percentage of
				the issued
			Number of	share capital of
		Class of	shares	the Company
Name of Director	Capacity	shares	in the Company	as at 30 June 2020
				(approximately)
Zheng Jinwei	Corporate interest	Ordinary	600,000	0.29%
			(Note 1)

Notes:

1. These 600,000 shares are held by Samway International Enterprise Limited which is incorporated in the British Virgin Islands with limited liability and wholly-owned by Mr. Zheng Jinwei.
2. As at 30 June 2020, the issued share capital of the Company was 209,386,725 shares.

Save as disclosed above, as at 30 June 2020, none of the Directors, the chief executives of the Company nor their associates had any interests or short positions in any shares or debentures of the Company or any of its associated corporations within the meaning of Part XV of the SFO, as recorded in the register maintained by the Company pursuant to Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.

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GENERAL INFORMATION

SUBSTANTIAL SHAREHOLDERS' INTERESTS AND SHORT POSITIONS IN SHARES OF THE COMPANY

As at 30 June 2020, according to the register of interests required to be kept by the Company under Section 336 of the SFO, the following persons, other than the Directors or chief executives of the Company, had an interest or short position in the shares of the Company which would fall to be disclosed to the Company under Divisions 2 and 3 of Part XV of the SFO:

Long positions in shares of the Company

			Percentage of
		Number of	the issued
		shares	share capital
Name of Shareholders	Capacity	interested	as at 30 June 2020
			(approximately)
Huang Gegeng (Note)	Corporate interest	34,897,000	16.67%
Zhao Liuqing	Beneficial interest	26,858,600	12.83%

Note:

These 34,897,000 shares are held by Mostly Benefit Limited which is incorporated in the British Virgin Islands with limited liability and wholly-owned by Mr. Huang Gegeng.

Save as disclosed above, the Company had not been notified of any other person (other than a Director or chief executive of the Company) who had an interest (whether direct or indirect) in 5% or more of the shares comprised in the relevant share capital or a short position which were required to be recorded in the register kept by the Company pursuant to Section 336 of the SFO as at 30 June 2020.

DIVIDEND

The Directors do not recommend the payment of any dividend for the six months ended 30 June 2020 (30 June 2019: Nil).

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CORPORATE GOVERNANCE

1. CHANGE OF DIRECTORS

There was no change in Directors during the six months ended 30 June 2020.

2. COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE

During the Period, the Company has complied with the code provisions of the Corporate Governance Code as set out in Appendix 14 to the Listing Rules (the "CG Code") except for the following deviation.

According to code provision A.2.1, the roles of chairman and chief executive should be separate and should not be performed by the same individual. Being aware of the said deviation from code provision A.2.1, but in view of the current rapid development of the Group, the Board believes that with the support of the management, vesting the roles of both chairman and chief executive in Mr. Zheng Jinwei can facilitate execution of the Group's business strategies and boost effectiveness of its operation. In addition, under the supervision by the Board which consists of three independent non-executive Directors, the interests of the Shareholders will be adequately and fairly represented. The Company will 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 in future.

3. AUDIT COMMITTEE

As at the date of this report, the Audit Committee comprises three members, namely, Mr. Deng Xiang (Chairman), Mr. Chen Limin and Mr. Jiang Jun. Mr. Chen Limin is a non-executive Director whereas Mr. Deng Xiang and Mr. Jiang Jun are independent non-executive Directors. The Audit Committee has reviewed the accounting principles and practices adopted by the Group and discussed with the management in respect to the financial reporting matters, including review of the unaudited interim results of the Group for the six months ended 30 June 2020, and is of the opinion that such statements comply with the applicable accounting standards and the Listing Rules and that adequate disclosures have been made.

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CORPORATE GOVERNANCE

4. MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted the Model Code as set out in Appendix 10 to the Listing Rules as its code of conduct for securities transactions by Directors and the relevant employees of the Group. The Company, having made specific enquiry of all Directors, confirmed that all Directors have complied with the required standard of dealings set out therein throughout the six months ended 30 June 2020.

By order of the Board

CHINA PUBLIC PROCUREMENT LIMITED

Zheng Jinwei

Chairman

Hong Kong, 31 August 2020