Winshine Science : ANNUAL REPORT 2018

For identification purpose only

A N N U A L R E P O R T

2 0 18

CONTENTS

Abbreviations	2
Corporate Information	3
Chairman's Statement	4
Management Discussion and Analysis	5
Environmental, Social and Governance Report	11
Biographical Details of Directors	24
Report of the Directors	27
Corporate Governance Report	34
Independent Auditor's Report	44
Consolidated Statement of Profit or Loss	51
Consolidated Statement of Profit or Loss and Other Comprehensive Income	52
Consolidated Statement of Financial Position	53
Consolidated Statement of Changes in Equity	55
Consolidated Statement of Cash Flows	56
Notes to the Consolidated Financial Statements	58
Five Years Financial Summary	158

ANNUAL REPORT 2018

1

ABBREVIATIONS

In this annual report, the following abbreviations have the following meanings unless otherwise specified:

"Board"	the Board of Directors of the Company
"Company"	Winshine Science Company Limited
"Directors"	the directors of the Company
"Group"	the Company and its subsidiaries
"Listing Rules"	the Rules Governing the Listing of Securities on the Stock
	Exchange
"PRC"	the People's Republic of China, for the purpose of this report,
	excluding Hong Kong, Macau and Taiwan
"SFO"	the Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong)
"Stock Exchange"	The Stock Exchange of Hong Kong Limited
"HK$" and "HK cents"	Hong Kong dollars and cents
"RMB"	Renminbi
"US$"	United States dollars
"%"	per cent.

2	WINSHINE SCIENCE COMPANY LIMITED

BOARD OF DIRECTORS

Executive Directors

Mr. Zhao Deyong (Chairman)

  (appointed on 16 May 2019)

Mr. Liu Michael Xiao Ming (Chief Executive Officer) (appointed on 10 May 2019)

Mr. Luo Lianjun (appointed on 10 May 2019)

Mr. Xing Wei (Chairman)

  (removed on 10 May 2019)

Mr. Wei Guo (Chief Executive Officer) (removed on 10 May 2019)

Non-executive Director

Mr. Lin Shaopeng

Independent Non-executive Directors

Mr. Kwok Kim Hung Eddie

• (appointed on 7 March 2019) Mr. Ng Wai Hung
• (appointed on 21 May 2019) Ms. Shi Xiaolei
• (appointed on 21 May 2019) Mr. Li Fang
• (resigned on 7 March 2019) Mr. Lau Shun Pong Johnson
• (resigned on 10 April 2019) Mr. Lai Ming Wai
• (resigned on 11 April 2019)

AUDIT COMMITTEE

Mr. Kwok Kim Hung Eddie (Chairman)

Mr. Ng Wai Hung

Ms. Shi Xiaolei

REMUNERATION COMMITTEE

Ms. Shi Xiaolei (Chairman)

Mr. Kwok Kim Hung Eddie

Mr. Ng Wai Hung

NOMINATION COMMITTEE

Mr. Ng Wai Hung (Chairman)

Mr. Kwok Kim Hung Eddie

Ms. Shi Xiaolei

COMPANY SECRETARY

Mr. Lau On Kwok

• (resigned on 13 November 2018) Mr. Shoom Chin Wan
• (appointed on 10 December 2018 and
• resigned on 7 March 2019)

Mr. Yip Chun Chung

  (appointed on 7 March 2019)

CORPORATE INFORMATION

TRADING OF SHARES

The Stock Exchange of Hong Kong Limited (Stock Code: 209)

REGISTERED OFFICE

Clarendon House

2 Church Street

Hamilton HM 11

Bermuda

HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS IN HONG KONG

Rooms 2202-2203, 22/F.

Harbour Centre

25 Harbour Road

Wanchai, Hong Kong

PRINCIPAL BANKERS

The Hongkong and Shanghai Banking

Corporation Limited

Bank of Communications Co. Ltd.

• Hong Kong Branch Guangdong Development Bank
• Zhongshan Branch

AUDITOR

Moore Stephens CPA Limited

PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE

MUFG Fund Services (Bermuda) Limited 4th floor North, Cedar House,

41 Cedar Avenue, Hamilton HM 12, Bermuda

HONG KONG BRANCH SHARE

• REGISTRAR AND TRANSFER OFFICE
  Tricor Tengis Limited Level 54, Hopewell Centre 183 Queen's Road East, Hong Kong

WEBSITE

http://www.winshine.com

http://www.tricor.com.hk/webservice/000209

ANNUAL REPORT 2018

3

CHAIRMAN'S STATEMENT

Dear follow shareholders:

The board (the "Board") of directors (the "Directors") of Winshine Science Company Limited (the "Company") herein presents the audited annual results of the Company and its subsidiaries (together, the "Group") for the financial year ended 31 December 2018. The Group mainly engages in the existing businesses of manufacturing and trading of toys, securities investment and research and development in medical and health products.

We had a challenging year in 2018 as the Group's equity position was further eroded by the losses from a significant asset impairment due to the legacy issues that we had to resolve to meet the accounting rules and prepare for a more profitable future. In addition, our toys division continues to face headwinds as intense industry competition and trade wars render the business less profitable.

PROSPECTS

The Company is having significant changes in the year 2019 in terms of board of directors and the financial statements. The board of directors were all newly appointed in the year 2019 and the new board immediately implemented policies to set the Company in a right direction. The new board is looking for different business opportunity to diversify our principal business activities. Cost cutting measures were put in place to reduce operating costs. The Board appointed an independent investigator to look into the allegations made by previous auditor and determine the appropriate action to follow up. The new Board engaged an independent consultant to review and eliminate potential internal control weakness. On our financial statements, the Company cleared long outstanding debt and obtained new extension of loans to give the Company a better financial position to meet the future challenge.

The toys division is expected to continue to perform satisfactorily. Due to the trade conflict between the US and China, and the related customs duty increase, customers are cautious to place orders. Besides, customers are actively looking for productions bases outside China to alleviate the possible tariffs and possible lower cost of production. Those trends may cause extreme pressure on product margins and turnover, in particular the first half in 2019. However, stabilized RMB and lower material cost will be favorable in 2019.

Looking forward, we are cautiously optimistic as our toys division continues to perform successfully in the marketplace and the new Board sets to start to explore new business opportunity on a much lower management cost.

Zhao Deyong

Chairman

4	WINSHINE SCIENCE COMPANY LIMITED