China Starch : PRELIMINARY ANNOUNCEMENT OF ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2020

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.

CHINA STARCH HOLDINGS LIMITED 中國澱粉控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 3838)

PRELIMINARY ANNOUNCEMENT OF ANNUAL RESULTS

FOR THE YEAR ENDED 31 DECEMBER 2020

Financial highlights:

2020	2019
RMB'000	RMB'000	Change
Revenue	8,892,261	6,750,401	+31.7%
Gross profit	559,775	353,004	+58.6%
Operating profit	261,500	105,392	+148.1%
Profit for the year	207,039	98,096	+111.1%
Profit attributable to shareholders	190,120	96,847	+96.3%
Basic earnings per share (RMB)	0.0317	0.0162	+95.7%
Proposed final dividend per share (HK cents)	0.90	0.62	+45.2%

The board (the "Board") of directors (the "Directors") of China Starch Holdings Limited (the "Company") is pleased to announce the audited consolidated results of the Company and its subsidiaries (collectively referred to as the "Group") for the year ended 31 December 2020, together with the comparative figures for the year ended 31 December 2019.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the year ended 31 December 2020

2020	2019
Notes	RMB'000	RMB'000
Revenue	2	8,892,261	6,750,401
Cost of sales	(8,332,486)	(6,397,397)
Gross profit	559,775	353,004
Distribution expenses	(184,229)	(153,939)
Administrative expenses	(194,917)	(164,621)
Impairment losses on financial assets	8	-	(13,777)
Other net income	3	80,871	84,725
Operating profit	261,500	105,392
Finance income	15,084	19,540
Finance expenses	(5,346)	(1,661)
Profit before income tax	4	271,238	123,271
Income tax expense	5	(64,199)	(25,175)
Profit and total comprehensive income
for the year	207,039	98,096
Attributable to:
Owners of the Company	190,120	96,847
Non-controlling interests	16,919	1,249
207,039	98,096
Earnings per share attributable
to owners of the Company
Basic and diluted earnings per share (RMB)	6	0.0317	0.0162

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2020

2020	2019
Notes	RMB'000	RMB'000
ASSETS
Non-current assets
Property, plant and equipment	2,007,661	2,085,992
Right-of-use assets	429,830	400,543
Deposits for acquisition of property,
plant and equipment	-	27,218
Investments in equities	1,940	-
Deferred tax assets	64,230	79,435
Total non-current assets	2,503,661	2,593,188
Current assets
Inventories	811,107	538,777
Trade and other receivables	8	896,338	841,983
Security deposit for land auction	10,401	-
Pledged bank deposits	4,353	5,669
Fixed deposits	-	260,000
Cash and cash equivalents	341,632	185,357
Total current assets	2,063,831	1,831,786
Total assets	4,567,492	4,424,974
EQUITY
Equity attributable to owners of the Company
Share capital	532,500	532,656
Other reserves	379,221	368,526
Retained earnings	2,065,586	1,920,058
2,977,307	2,821,240
Non-controlling interests	156,826	139,907
Total equity	3,134,133	2,961,147

2020	2019
Notes	RMB'000	RMB'000
LIABILITIES
Non-current liabilities
Deferred income	303,043	349,074
Deferred tax liabilities	58,311	38,104
Lease liabilities	497	1,218
Total non-current liabilities	361,851	388,396
Current liabilities
Trade and other payables	9	547,742	691,914
Advances from customers	331,522	172,375
Income tax payable	40,710	35,430
Borrowings	126,849	151,354
Employee housing deposits	23,741	23,741
Derivative financial instruments	341	-
Lease liabilities	603	617
Total current liabilities	1,071,508	1,075,431
Total liabilities	1,433,359	1,463,827
Total equity and liabilities	4,567,492	4,424,974

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

• 1. BASIS OF PREPARATION

  The consolidated financial statements of the Company have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards ("HKFRSs") (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards ("HKASs") and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the "Stock Exchange") and by the Hong Kong Companies Ordinance.

  The consolidated financial statements have been prepared on a historical cost basis, as modified by the revaluation of certain financial assets and financial liabilities measured at fair value.

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

  The following new amendments to standards have been adopted by the Group for the first time for the current financial year:

  Amendments to HKAS 1	Definition of Material
  and HKAS 8
  Amendments to HKFRS 3	Definition of a Business
  Amendments to HKFRS 9,	Interest Rate Benchmark Reform
  HKAS 39 and HKFRS 7

  The adoption of these new and amended standards and interpretation does not have any significant impact to the results and financial position of the Group.

• 2. REVENUE AND SEGMENT INFORMATION

  The Group's operating segments are as follows:

  Upstream products	-	the manufacture and sale of cornstarch and ancillary
  corn-refined products
  Fermented and	-	the manufacture and sale of lysine, starch-based sweetener,
  downstream products	modified starch and other products

  The operating segments are identified in accordance with the economic similarity and distinction of our products. For the purpose of assessing segment performance and allocating resources between segments, the chief operating decision maker assesses and monitors the segment revenues, margins and results attributable to each reportable segment. Inter-segment sales or provision of materials to other segments is not measured.

Interest income and expense are not included in the result for each operating segment as these are managed on a group basis and are not allocated to reportable segments.

Unallocated income and expenses mainly consist of certain government grants and corporate costs respectively which cannot be allocated to individual segments.

Sales between segments are charged at cost or with reference to the selling prices used for sales made to third parties at the then prevailing market prices. The revenue from external parties reported to the management is measured in a manner consistent with that in the consolidated statement of profit or loss and other comprehensive income.

Fermented and

Upstream products RMB'000

downstream products RMB'000

Unallocated

RMB'000

Total RMB'000

2020

Sales to external customers Inter-segment sales

6,738,510 236,911

2,153,751

-

8,892,261

- - 236,911

Reportable segment results

436,538

109,446 - 545,984

Unallocated income 45,485

Unallocated expenses Finance income Finance expenses

(329,969)

15,084 (5,346)

Profit before income tax 271,238

Other segment information:

Depreciation

89,857

94,282

66,875 251,014

Upstream products RMB'000

Fermented and downstream products RMB'000

Unallocated

RMB'000

Total RMB'000

2019

Sales to external customers Inter-segment sales

5,317,150 216,700

1,433,251

-

6,750,401

- - 216,700

Reportable segment results

280,915

51,734 - 332,649

Unallocated income 46,954

Unallocated expenses Finance income Finance expenses

(274,211)

19,540 (1,661)Profit before income tax 123,271

Other segment information:

Depreciation and amortisation

85,211

54,976

38,854 179,041

During the years ended 31 December 2020 and 2019, all source of revenue are recognised at a point in time.

Based on the place of the operation of external customers, revenue attributed to the People's Republic of China (the "PRC") and other countries is RMB8,119,899,000 and RMB772,862,000 (2019: RMB6,077,523,000 and RMB672,878,000) respectively.

The Group's assets, liabilities and capital expenditures are predominately attributable to a single geographical region, which is the PRC. Therefore, no analysis by geographical regions is presented.

• 3. OTHER NET INCOME

• 4. PROFIT BEFORE INCOME TAX

  2020	2019
  RMB'000	RMB'000
  Amortisation of government grants	58,821	56,981
  Gain on sale of scrap materials	11,521	10,401
  Electricity and related services	4,348	147
  Accounts payable written back	3,996	-
  Gain on futures contracts	2,524	328
  Government grants (note)	1,543	2,824
  (Loss)/gain on disposals of property, plant and equipment	(1,231)	12,570
  Net foreign exchange loss	(4,036)	(1,534)
  Others	3,385	3,008
  80,871	84,725
  Note:

• For the year ended 31 December 2020, the government grants mainly represented a subsidy of approximately RMB1,176,000 from local government for supporting employment. For the year ended 31 December 2019, the government grants mainly represented a subsidy of approximately RMB2,136,000 from local government for supporting business development.

  The government grants were granted at the discretion of the government and were not recurring in nature.

• The major expenses of the Group are as follows:

2020	2019
RMB'000	RMB'000
Salaries, wages and other benefits	180,065	189,099
Pension scheme contributions	10,392	18,725
Depreciation of property, plant and equipment	241,313	171,446
Depreciation of right-of-use assets	9,701	7,595
Research and development expenses (note)	28,899	32,635
Auditor's remuneration
- Audit service	766	788
- Non-audit service	271	274

Note:

Research and development expenses include staff costs and depreciation, which are included in the above respective expenses, in the Research and Development Department of the Group.

5. INCOME TAX EXPENSE

2020	2019
RMB'000	RMB'000
Current income tax
- PRC Enterprises Income Tax ("EIT")	32,451	16,397
- Over-provision in prior years	(3,998)	(3,904)
- Other PRC withholding tax	334	-
Deferred tax	35,412	12,682
64,199	25,175

The Group's major business is in the PRC. Under the law of the PRC on EIT and its Implementation Regulation, the tax rate of the PRC subsidiaries is 25% for both years, except for one subsidiary of the Group which is recognised as high technology enterprise is entitled to enjoy a preferential EIT rate of 15% (2019:15%).

No provision for Hong Kong profits tax has been made as the Group entities' profit neither arose in nor was derived from Hong Kong during both years.

Pursuant to the PRC EIT and its Implementation Regulation, non-PRC resident enterprises are levied withholding tax at 10% (unless reduced by tax treaties/arrangements) on dividends receivable from PRC enterprises for profits earned since 1 January 2008. The Group adopted the 10% withholding tax rate for

PRC withholding tax purposes during the year ended 31 December 2020 and 2019.

• 6. EARNINGS PER SHARE

  The calculation of the basic earnings per share attributable to the owners of the Company is based on the following data:

  2020	2019
  Profit attributable to owners of the Company (RMB'000)	190,120	96,847
  Weighted average number of ordinary shares in issue
  (thousands)	5,995,591	5,995,892

  The basic and diluted earnings per share for the years ended 31 December 2020 and 2019 were the same because there was no dilutive potential ordinary share.

• 7. DIVIDENDS

  Dividend payable to shareholders attributable to the previous financial year, approved and paid during the year:

  2020	2019
  RMB'000	RMB'000
  2019 final dividend of HK0.62 cents per share
  (2018: HK1.20 cents)	33,850	63,292

  Subsequent to 31 December 2020, the Directors proposed a final dividend of HK0.90 cents (2019: HK0.62 cents) per share, amounting to HK$53,947,000 (2019: HK$37,175,000). The final dividend proposed after the end of the reporting period is subject to approval by shareholders in forthcoming general meeting and has not been recognised as a liability as at 31 December 2020.

8.

TRADE AND OTHER RECEIVABLES

2020 RMB'000

2019 RMB'000

Trade receivables Less: Loss allowanceBank acceptance bills

Prepayments and other tax receivables Others

210,032 (13,845)

196,187 142,059

374,065 493,111

313,541 204,441

12,545 2,372

896,338 841,983

The carrying amounts of trade and other receivables are mainly denominated in Renminbi.

The movement in the loss allowance for trade receivables during the year is as follows:

2020 RMB'000

155,904 (13,845)

2019 RMB'000

At 1 January

13,845

9,698

Amounts written off - (9,630)

Impairment losses recognised - 13,777

At 31 December

13,845 13,845

The Group normally grants credit period ranging from 0 to 90 days (2019: 0 to 150 days) to customers.

At the end of the reporting period, the ageing analysis of trade receivables based on the invoice date and net of loss allowance is as follows:

2020	2019
RMB'000	RMB'000
0 - 30 days	153,344	125,634
31 - 60 days	32,072	11,400
61 - 90 days	6,248	2,274
Over 90 days	4,523	2,751
196,187	142,059
At the end of the reporting period, the bank acceptance bills consist of:
2020	2019
RMB'000	RMB'000
Bills on hand	152,040	228,344
Endorsed bills	171,266	176,682
Discounted bills	50,759	88,085
374,065	493,111

The bank acceptance bills are normally with maturity period of 180 days (2019: 180 days). There is no recent history of default on bank acceptance bills.

As at 31 December 2020, bank acceptance bills of RMB4,256,000 (2019: RMB4,100,000) and discounted bills of RMB50,759,000 (2019: RMB88,085,000) were pledged to banks for securing bills payables and bank borrowings respectively.

9. TRADE AND OTHER PAYABLES

2020	2019
RMB'000	RMB'000
Trade payables	180,991	129,606
Bills payables	8,574	9,747
Total trade and bills payables	189,565	139,353
Payable for construction and equipment	219,969	345,319
Accrued expenses	71,518	135,470
Payroll and welfare payables	26,949	33,035
Other tax payables	13,156	16,559
Earnest money	15,429	12,196
Sales commission	4,576	4,378
Others	6,580	5,604
547,742	691,914

As at 31 December 2020, bills payables are secured by bank acceptance bills of RMB4,256,000 (2019: RMB4,100,000) and bank deposits of RMB4,353,000 (2019: RMB5,669,000).

The following is the ageing analysis for the trade and bills payables based on invoice date at the end of the reporting period:

2020	2019
RMB'000	RMB'000
0 - 60 days	123,630	94,293
61 - 90 days	31,355	10,098
Over 90 days	34,580	34,962
189,565	139,353

The average credit period on purchases is 80 days (2019: 80 days). The Group has financial risk management policies in place to ensure that all payables are paid within the credit time frame.

The carrying amounts of trade and other payables are mainly denominated in Renminbi.

MANAGEMENT DISCUSSION AND ANALYSIS

INDUSTRY OVERVIEW AND COMPANY DEVELOPMENT

Overview

The production capacity of the Group leapt to a new platform in 2020. Going back to 2014 and 2017, the Group announced the relocation of production site in Shouguang and the establishment of a joint venture company, Shouguang Golden Corn Biotechnology Limited ("Golden Corn Biotech"), respectively. As time passed, the above projects completed gradually in 2019 and the Group started full-scale cornstarch and lysine production in the Shouguang production complex in 2020. Our annual production capacity of cornstarch and lysine is 2,600,000 tonnes and 300,000 tonnes respectively. Thank you for the support of our staff, suppliers and customers, we have confidence to progress a flourishing future with this new platform.

As the People's Republic of China (the "PRC") government implemented effective measures on controlling the spread of COVID-19, the economic impact of COVID-19 in the PRC was not as much serious as the US and European countries and resumed quickly during the year under review. The cornstarch and its deep-processing industry was not materially affected by COVID-19 directly.

Our industry experienced keen competition for many years and there were many small to medium size market players left the industry. We believe that the consolidation of market participants will continue in the future. We spend much effort to improve our production efficiency in return to keep minimal production cost and increase profitability. Therefore, we could still record profit and maintain a strong balance sheet during difficult time. In the future, our expansion and development strategy will focus on the development of new products.

BUSINESS DEVELOPMENT

The Group's enterprise resources planning system (the "ERP") as disclosed in the 2019 annual report was about to complete at the end of 2020. The ERP was in the final adjustment stage and it would replace the existing system in the first quarter of 2021.

The Group's future expansion and development strategy will focus on the development of new products. The Group announced the establishment of a joint venture company (Shouguang Juneng Musashino Biotechnology Co., Ltd or "Juneng Musashino") with a Japanese leading lactic acid and lactic acid derivatives company (Musashino Chemical Laboratory, Ltd) in August 2020. The Group has 75% equity interest of Juneng Musashino. The principal activities of Juneng Musashino are research, development, production and sale of lactate and other related products. The first phase construction plan includes lactic production facilities of 5,000 tonnes per annum. As at the date of this announcement, the Group is still working closely with the related department of Shouguang Municipal Government for the selection of suitable production location for Juneng Musashino.

In addition, the Group has acquired two pieces of land in December 2020 and March 2021 respectively, which the area of these lands is approximately 148,000 square metres. The land will be used for the construction of lactate acid and polylactic acid production facilities. Total investment sum would be not more than RMB212 million (including the land and plant and machineries) and it will be financed by internal resources of the Group. The annual production capacity of these new facilities will include 20,000 tonnes lactic acid and 5,000 tonnes polylactic acid respectively. As at the date of this announcement, the construction of these facilities has started and we expect that it will be completed by the end of 2021. Details of the acquisition of these two pieces of land were set out in the announcements of the Company dated 12 March 2021 and 15 March 2021 respectively.

Other than the above two construction projects, in March 2020, the Group has entered into a research and development investment agreement with Tianjin Institute of Industrial Biotechnology (a non-profit national research institute established jointly by the Chinese Academy of Sciences and Tianjin Municipal Government) and became one of the investment partners in a newly established company, Tiangong Biotechnology (Tianjin) Limited ("Tiangong"). The principal activities of Tiangong are to carry out research and development of corn derivatives and transfer its research outcomes to market. The Group's capital contribution commitment to Tiangong was RMB10 million which represented 10% equity interest of the company. As at the date of this announcement, the Group has contributed capital of RMB2 million to Tingong.

BUSINESS REVIEW

Upstream Products

The business performance of upstream products, representing cornstarch and its by-products, was satisfactory. During the COVID-19 pandemic (especially February to May 2020), our operation was not materially affected. Our facilities were still running in full capacity despite the delivery of products between cities had a short-term influence. The market condition in the third quarter of 2020 was worse than expected. First, the corn kernel cost increased substantially during this period and, second, such cost pressure could not be shifted to our customers at the same pace. The Group took strict measures on controlling costs and adjusted production plan to maintain the profitability. The market atmosphere was improved in the fourth quarter of 2020 due to the increasing economic activities approaching to the year end and the slow increase in corn kernel price subsequent to harvest.

We are confident that we are a capable leading market player to manage different challenges. Although the cost of our corn kernel did not increase in the same pace with its selling price during the year under review, we still recorded a growth in gross profit for this business segment. In addition, our additional production capacity was fully absorbed in the market and without backlog.

Fermented and Downstream Products

Fermented and downstream products refer to the products derived from cornstarch. Our fermented and downstream products can be used in the different industries, such as animal feeding and breeding, paper manufacturing, food and beverage and chemicals.

During the year under review, the new lysine production facilities operated by Golden Corn Biotech started to contribute addition lysine production capacity of 150,000 tonnes per annum. Although the animal feeding and breeding market was affected by the serious oversupply problem and COVID-19, our products were successfully absorbed in the market. The market price adjustment lagged behind the increased cost during the year under review. The Group currently does not have any expansion plan for lysine products.

Starch-based sweetener is mainly used in food and beverage industry and, to certain extent, is a substitute of cane sugar. Starch-based sweetener business performance was also affected by the excessive supply. The Group mainly monitored the production plan and adjusted the production mix throughout the year in order to maintain our profitability.

Modified starch is mainly used for manufacturing and production of paper, food and beverage and chemicals. As modified starch has many applications, the business performance is not easily affected by one single end-user market. The business performance during the year under review was relatively stable as compared with other products of the Group.

Other fermented and downstream products represented new biobased materials which are environmental-friendly and harmless to the society. The characteristic of these products is that the usage is relatively small but the market price is higher than the upstream products. The entry barrier is mainly the knowhow of production. During the year under review, the major fermented and downstream product was lactic acid. The Group, in the long run, will deploy more resources in the development of different biobased materials.

FINANCIAL PERFORMANCE

Overview

During the year under review, the Group recorded a total revenue of approximately RMB8,892 million (2019: RMB6,750 million). Gross profit of the Group increased significantly by 58.6% to approximately RMB560 million (2019: RMB353 million).

Profit after taxation increased significantly to RMB207 million (2019: RMB98 million). Basic earnings per share of the Company was RMB0.0317 per share based on the weight average number of 5,995,591,000 ordinary shares (2019: RMB0.0162 per share based on the weight average number of 5,995,892,000 ordinary shares).

Segment Performance

Upstream products

2020	2019
RMB'000	RMB'000
Revenue	6,738,510	5,317,150
Gross profit	418,556	265,129
Gross profit margin	6.2%	5.0%

Revenue of upstream products increased significantly by 26.7% to RMB6,739 million (2019: RMB5,317 million). The gross profit margin of this business segment increased by 1.2 percentage point to 6.2%. Benefited from the full year operation effect contributed by Golden Corn Biotech, the sales volume of cornstarch increased to approximately 1,915,794 tonnes (2019: 1,705,177 tonnes). During the year under review, cornstarch and certain of its by-product market prices were suppressed by the poor market condition. As a result, the Group could not easily shift the increased corn kernel cost to the customers. The average selling price of corn starch was about RMB2,347 (2019: RMB2,162) per tonne.

Fermented and downstream products

2020	2019
RMB'000	RMB'000
Revenue
- Lysine	1,442,844	748,439
- Starch-based sweetener	357,781	340,287
- Modified starch	312,025	305,423
- Others	41,101	39,102
Total	2,153,751	1,433,251
Gross profit	141,219	87,875
Gross profit margin	6.6%	6.1%

Revenue of fermented and downstream products increased substantially to RMB2,154million (2019: RMB1,433 million).

Benefited from the additional lysine production capacity contributed by Golden Corn Biotech, revenue of lysine products increased significantly by 92.8% to approximately RMB1,443 million (2019: RMB749 million). The sales volume for overseas and domestic market increased by 115.2% and 74.9% respectively. During the year under review, our marketing team spent much effort to develop business with new customers. The average selling price and sales volume of lysine products was about RMB5,230 (2019: RMB4,953) per tonne and 275,875 tonnes (2019: 151,116 tonnes) respectively.

Revenue of starch-based sweetener was approximately RMB358 million (2019: RMB340 million). The average selling price and sales volume of starch-based sweetener was about RMB2,201 (2019: RMB2,115) per tonne and 162,586 tonnes (2019: 160,868 tonnes) respectively.

Revenue of modified starch was RMB312 million (2019: RMB305 million).

Other fermented and downstream products sales represented new generation and environmental-friendly products. The production scale and the size of domestic market were comparatively smaller than other businesses of the Group. Revenue of these products was approximately RMB41 million (2019: RMB39 million).

Cost of sales and gross profit

As consistent with previous year, the major cost components for the year ended 31 December 2020 mainly consisted of corn kernel and utilities expenses. As the corn kernel market price increased significantly during the year under review, the percentage of corn kernel cost to total cost of sales increased to about 87.3% (2019: 83.9%). The average purchase price of cornstarch was RMB2,032 (2019: RMB1,767) per tonne, net of value added tax.

The Group did not enter into any forward/futures contract to hedge the price fluctuation of corn kernel during the year under review. The Group makes purchases from the spot market in accordance with its production schedule.

Review of Other Operations

Distribution and administrative expenses

Distribution expenses for the year ended 31 December 2020 increased significantly because of the increase in sales volume.

The following tables showed the major expenses in distribution and administrative expenses respectively.

2020	2019
RMB'000	RMB'000
Distribution expenses:
Delivery and logistics	160,786	134,098
Marketing expenses	14,279	10,346
Staff costs	6,384	6,620
Others	2,780	2,875
184,229	153,939
2020	2019
RMB'000	RMB'000
Administrative expenses:
Staff costs	93,835	73,729
Research and development costs	28,899	32,635
Depreciation and amortisation expenses	24,098	14,959
Government levies	21,145	16,621
Others	26,940	26,677
194,917	164,621

Other net income

The other net income decreased to RMB81 million (2019: RMB85 million). The major items of other net income are set out below:

2020	2019
RMB'000	RMB'000
Amortisation of government grants	58,821	56,981
Gain on sales of scrap materials	11,521	10,401
Electricity and related service	4,348	147
Accounts payable written back	3,996	-
Gain on futures contracts	2,524	328
Government grants (one-off)	1,543	2,824
(Loss)/gain on disposals of property, plant and equipment	(1,231)	12,570
Net foreign exchange loss	(4,036)	(1,534)
Others	3,385	3,008
80,871	84,725

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

The key financial performance indicators of the Group for the year ended 31 December are set out below:

Units	2020	2019
Debtors turnover	days	25	26
Creditors turnover	days	7	8
Inventories turnover	days	30	27
Current ratio	times	1.9	1.7
Quick ratio	times	1.2	1.2
Gearing ratio (note 1)	%	2.8	3.4
Total shareholder return (note 2)	%	13.3	-8.3

Notes:
(1)	Gearing ratio is calculated as the borrowings to total assets.
(2)	Total shareholder return combines share price appreciation and dividends paid to show the total return to
shareholders.

The Group recorded a significant increase in advances from customers as at 31 December 2020. The Group has strict credit control on the accounts of customers. Most of our customers are required to provide down payments before delivery. As our production capacity increased significantly as compared with last year, advances from customers also increased.

The Directors are of the opinion that the working capital available to the Group is sufficient for its present requirements. As at 31 December 2020, borrowings of approximately RMB101 million and RMB26 million were denominated in Renminbi and Hong Kong Dollar respectively. These borrowings were carried interest at fixed rates and with a maturity within one year. The Group's cash and cash equivalents were mostly denominated in Renminbi. The decrease in borrowings was mainly attributable to the improved profitability during the year under review.

PLEDGE OF ASSETS

As at 31 December 2020, bills payables were secured by bank acceptance bills of RMB4,256,000 and bank deposits of approximately RMB4,353,000. As at 31 December 2020, the Group did not pledge any leasehold land and building to secure banking facilities.

CONTINGENT LIABILITIES

The Group did not have any significant contingent liabilities as at 31 December 2020.

ANNUAL GENERAL MEETING AND CLOSURE OF REGISTER OF MEMBERS

The annual general meeting (the "2021 AGM") will be held on 18 May 2021. The notice of 2021 AGM, which constitutes part of the circular to the shareholders of the Company, will be sent together with the 2020 annual report. For determining the entitlement to attend and vote at the 2021 AGM, the register of members of the Company will be closed from 13

May 2021 to 18 May 2021 (both days inclusive), during which period no transfer of shares will be registered. In order to qualify for attending and voting at the 2021 AGM, all transfer documents accompanied by the relevant share certificates must be lodged with the Company's share register and transfer office, Tricor Investor Services Limited at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong by 4:30 p.m. on 12 May 2021.

FINAL DIVIDEND

The Board is pleased to recommend the payment of a final dividend of HK0.90 cents per share for the year ended 31 December 2020 ("2020 Final Dividend"), subject to the approval of the shareholders of the Company in the 2021 AGM. The proposed final divided is expected to be paid on or around 14 July 2021 to the shareholders whose name appear on the register of members on 10 June 2021. For determining the entitlement to 2020 Final Dividend, the register of members of the Company will be closed from 9 June 2021 to 10 June 2021 (both days inclusive), during which period no transfer of shares will be registered. In order to qualify for the entitlement of 2020 Final Dividend, all transfer documents accompanied by the relevant share certificates must be lodged with the aforementioned share registrar and transfer office by 4:30 p.m. on 8 June 2021.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES

During the year ended 31 December 2020, the Company repurchased 1,760,000 shares of the Company on the Stock Exchange. These repurchased shares were cancelled prior to 31

December 2020 and the total number of shares of the Company in issue has been reduced accordingly. Details of the repurchases were as follows:

Price per share

Aggregate

2020	Number of shares	Highest	Lowest	price paid
HK$	HK$	HK$'000
September	235,000	0.150	0.148	35
October	200,000	0.134	0.134	27
November	1,325,000	0.131	0.127	171
1,760,000	233

The Directors considered that the repurchases could lead to an enhancement of the Company's earnings per share. Save as disclosed above, at no time during the year ended 31 December 2020 was there any purchase, sale or redemption by the Company, or any of its subsidiaries, of the Company's shares.

CORPORATE GOVERNANCE

The Company had complied with the applicable code provisions as set out in the Corporate Governance Code contained in Appendix 14 of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the "Listing Rules") and had applied the principles as laid down with the aim of achieving a high level of governance, except that Mr. Tian Qixiang (the chairman of the Board) did not attend the 2020 annual general meeting because of his other business engagement.

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted its own Securities Dealing Code (the "Dealing Code") on terms no less exacting than the Model Code for Securities Transactions by Directors of Listed Issuers set out in the Appendix 10 of the Listing Rules. The Dealing Code applies to all Directors and to all employees who are informed that they are subject to its provisions. The Company has made specific enquiry of all Directors and that all the Directors confirmed their compliance with the required standard set out in the Dealing Code throughout the year under review.

SCOPE OF WORK OF SHINEWING (HK) CPA LIMITED

The figures in respect of the Group's consolidated statement of financial position, consolidated statement of profit or loss and other comprehensive income and the related notes thereto for the year ended 31 December 2020 as set out in this announcement have been agreed by the Group's auditor, SHINEWING (HK) CPA Limited, to the amounts set out in the Group's audited consolidated financial statements for the year. The work performed by SHINEWING (HK) CPA Limited in this respect did not constitute an assurance engagement in accordance with Hong Kong Standards on Auditing, Hong Kong Standards on Review Engagements or Hong Kong Standards on Assurance Engagements issued by the Hong Kong Institute of Certified Public Accountants and consequently no assurance has been expressed by SHINEWING (HK) CPA Limited on this announcement.

REVIEW OF ANNUAL RESULTS

The Group's audited consolidated results for the year ended 31 December 2020 have been reviewed by the audit committee of the Board.

ANNUAL REPORT

The 2020 annual report containing all the information required by the Listing Rules will be made available on the Stock Exchange website and the Company's website (www.chinastarch.com.hk) on or about 14 April 2021.

By order of the Board

CHINA STARCH HOLDINGS LIMITED

Tian Qixiang

Chairman

Shouguang, The People's Republic of China, 19 March 2021

As at the date of this announcement, the directors of the Company are:

Executive Directors:	Independent non-executive Directors:
Mr. Tian Qixiang (Chairman)	Professor Hua Qiang
Mr. Gao Shijun (Chief Executive Officer)	Mr. Sun Mingdao
Mr. Yu Yingquan	Mr. Yue Kwai Wa, Ken
Mr. Liu Xianggang