Hony Media Group - Interim / Quarterly Report 2021

Interim Report 2021

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(Incorporated in Hong Kong with limited liability) (Stock Code: 235)

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3 Corporate Information
4 Management Discussion and Outlook
15 Report on Review of Interim Financial Information
16 Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income
17 Condensed Consolidated Statement of Financial Position
18 Condensed Consolidated Statement of Changes in Equity
19 Condensed Consolidated Statement of Cash Flows
20 Notes to the Condensed Consolidated Financial Statements
47 Other Information

Abbreviations

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

“Board”	Board of Directors of the Company
“Company”	China Strategic Holdings Limited
“Directors”	directors of the Company
“Group”	the Company and its subsidiaries
“Hong Kong Companies	Companies Ordinance (Chapter 622 of the Laws of Hong Kong)
Ordinance”
“Listing Rules”	Rules Governing the Listing of Securities on the Stock Exchange
“Model Code”	Model Code for Securities Transactions by Directors of Listed
	Issuers set out in Appendix 10 to the Listing Rules
“PRC”	People’s Republic of China
“RMB”	Renminbi
“SFO”	Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“HK$” and “HK cent(s)”	Hong Kong dollars and cent(s)
“US$”	United States dollars
“%”	per cent.

The Chinese version of this interim report is a translation of the English version and is for reference only , in case of any discrepancies or inconsistencies between the English version and the Chinese version, the English version shall prevail.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Corporate Information

BOARD OF DIRECTORS

Non-executive Director

COMPANY SECRETARY

Ms. Leung Siu King

Dr. Or Ching Fai SBS, JP (Chairman)

REGISTERED OFFICE

Executive Directors

Mr. Sue Ka Lok (Chief Executive Officer) Mr. Chow Kam Wah Mr. Chow Man Wai, Tony

Independent Non-executive Directors

Ms. Ma Yin Fan Mr. Chow Yu Chun, Alexander Mr. Leung Hoi Ying Mr. Lam Kin Fung, Jeffrey GBS, JP

AUDIT COMMITTEE

Ms. Ma Yin Fan (Chairlady) Mr. Chow Yu Chun, Alexander Mr. Leung Hoi Ying Mr. Lam Kin Fung, Jeffrey GBS, JP

Rooms 3206-3210, 32nd Floor China Resources Building 26 Harbour Road Wanchai, Hong Kong

PRINCIPAL BANKERS

The Hongkong and Shanghai Banking Corporation Limited Bank of China (Hong Kong) Limited Hang Seng Bank Limited Bank of Communications Co., Ltd., Hong Kong Branch Bank of Communications (Hong Kong) Limited BNP Paribas Hong Kong Branch

LEGAL ADVISERS

Reed Smith Richards Butler Stevenson, Wong & Co.

REMUNERATION COMMITTEE

Mr. Chow Yu Chun, Alexander (Chairman) Ms. Ma Yin Fan Mr. Leung Hoi Ying

NOMINATION COMMITTEE

Dr. Or Ching Fai SBS, JP (Chairman) Ms. Ma Yin Fan Mr. Leung Hoi Ying

AUDITOR

Deloitte Touche Tohmatsu Registered Public Interest Entity Auditors

SHARE REGISTRAR AND TRANSFER OFFICE

Tricor Standard Limited Level 54, Hopewell Centre 183 Queen’s Road East Wanchai, Hong Kong

EXECUTIVE COMMITTEE

Mr. Sue Ka Lok (Chairman) Mr. Chow Kam Wah Mr. Chow Man Wai, Tony

INVESTMENT & CREDIT COMMITTEE

Mr. Sue Ka Lok (Chairman) Mr. Chow Kam Wah

TRADING OF SHARES

The Stock Exchange of Hong Kong Limited (Stock Code: 235)

WEBSITE

http://www.cshldgs.com

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Management Discussion and Outlook

BUSINESS REVIEW

During the six months ended 30 June 2021 (“HY2021”), the Group continued to principally engage in the business of investment in securities, trading of merchandise, money lending as well as securities brokerage.

During HY2021, there are signs that the global pandemic situation has gradually improved and is under control following the launch of vaccination programs in many countries and regions, however, the emergence of the coronavirus variants recently and the new wave of outbreaks in some countries have created new uncertainties to the world community. There are also indicators that the conditions of major economies including China, the US and the UK have stabilised and on their recovery path from which the Group would be able to benefit, though the heightened political and economic tensions between China and the US have brought to the Group new business challenges. The Group was thus operating in an exceptionally complex business environment during HY2021 and had been cautious in managing its businesses. For HY2021, the Group recorded an increase in revenue by 127% to HK$325,476,000 (30 June 2020: HK$143,085,000), mainly due to the increase in sales of the trading operation, and a loss attributable to owners of the Company of HK$196,625,000 (30 June 2020: profit of HK$51,651,000), largely resulting from the net fair value loss on listed equity securities held by the Group.

Investment in Securities

The Group generally acquires securities listed on the Stock Exchange or other recognised stock exchanges and over-the-counter markets with good liquidity that can facilitate swift execution of securities transactions, and sometimes directly from target companies. For making investment or divestment decision on securities of individual target company, references will usually be made to the latest financial information, news and announcements issued by the target company, investment analysis reports that the Company has access to, as well as industry or macro-economic news. When deciding on acquiring securities to be held for long-term purpose, particular emphasis will be placed on the past financial performance of the target company including its sales and profit growth, financial healthiness, dividend policy, business prospects, industry and macroeconomic outlook. When deciding on acquiring securities to be held other than for long-term purpose, in addition to the factors mentioned, references will also be made to prevailing market sentiments on different sectors of the investment markets. In terms of return, for long-term securities investments, the Company mainly emphasises on return of investment in the form of capital appreciation and dividend/interest income. For securities investments other than for long-term holding, the Company mainly emphasises on return of investment in the form of trading gains.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Management Discussion and Outlook

At 30 June 2021, the Group’s securities investments comprised (i) a financial asset at fair value through profit or loss (“FVTPL”) portfolio, comprising mainly equity securities listed in Hong Kong, valued at HK$3,920,722,000 (31 December 2020: HK$4,073,317,000); and (ii) a debt instrument at fair value through other comprehensive income (“FVTOCI”) portfolio comprising listed debt securities, valued at HK$319,020,000 (31 December 2020: HK$401,813,000). As a whole, the Group’s securities investments recorded a revenue of HK$21,249,000 (30 June 2020: HK$37,190,000) and a loss of HK$148,094,000 (30 June 2020: profit of HK$291,996,000).

Financial assets at FVTPL

At 30 June 2021, the Group held a financial asset at FVTPL portfolio amounting to HK$3,920,722,000 measured at market/fair value. During HY2021, the portfolio generated a revenue of HK$271,000 (30 June 2020: HK$4,608,000) representing dividends from equity securities. The Group recognised a net loss on financial assets at FVTPL of HK$152,895,000, which comprised net unrealised loss of HK$152,895,000 for listed equity securities held by the Group at the period end (30 June 2020: net gain of HK$249,770,000, which comprised net unrealised gain and net realised loss of HK$268,385,000 and HK$18,615,000 respectively).

The net loss on financial assets at FVTPL recognised was mainly attributed to the net decrease in fair value of the Group’s listed equity securities portfolio during the interim period. Such net decrease in fair value mainly comprised the decrease in fair value of the Group’s investment in listed shares of China Evergrande New Energy Vehicle Group Limited (“Evergrande Vehicle”, HKEX stock code: 708) which amounted to HK$173,680,000 for HY2021, in contrast to the increase in fair value of HK$348,696,000 recognised in the prior period.

The Group has started to invest in Evergrande Vehicle since March 2015, including the unrealised fair value loss recognised in the current period, up to 30 June 2021, the accumulative holding gain of this investment amounted to HK$3,641,728,000 (as shown in the table below about the Group’s top two investments). At the period end, the Group held 133,600,000 ordinary shares in Evergrande Vehicle which represented approximately 1.37% of its issued shares, and the carrying value of the Group’s investment in Evergrande Vehicle amounted to HK$3,861,040,000 which represented approximately 46.96% of the Group’s total assets. Evergrande Vehicle is principally engaged in technology research and development, production and sales of new energy vehicles, as well as health management businesses including “Internet+” community health management, international hospitals, elderly care and rehabilitation. According to its latest published annual financial information, its healthcare business generated revenue of RMB15.3 billion while its new energy vehicle business recorded revenue of RMB187.5 million. Evergrande Vehicle has established a full industry chain of new energy vehicles covering automobile manufacturing, electric motor control, power batteries, vehicle sales, smart charging, shared mobility and other aspects and built advanced intelligent manufacturing bases in Tianjin, Shanghai, Guangzhou and other locations in accordance with the Industry 4.0 Standard. Evergrande Vehicle will endeavor to facilitate the mass production of the nine Hengchi models at full speed, and continue to devote itself to the innovation and application of new energy vehicle technologies and product R&D as well as to introduce additional vehicle models to enrich its product mix and elevate the smart manufacturing standards in China.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Management Discussion and Outlook

The Company noted that recently there are certain negative news about China Evergrande Group, the holding company of Evergrande Vehicle, and that the share price of Evergrande Vehicle has dropped significantly from the period end date to the date of this interim report, with the value of the Group’s investment in listed shares of Evergrande Vehicle, determined based on the closing share price of Evergrande Vehicle of HK$5.18 quoted on the Stock Exchange as at the date of this interim report, decreased by 82% to HK$692,048,000 compared to the value of the Group’s investment as at the period end of HK$3,861,040,000. Depending on a number of factors including without limitation the publicly available information about the business development and prospects of Evergrande Vehicle, prevailing market sentiments and market conditions, the Group will consider to dispose of part or all of its investment in listed shares of Evergrande Vehicle as and when the Company considers it appropriate to do so. The Company will inform shareholders as and when there is further material development of this matter.

At 30 June 2021, the Group invested in Evergrande Vehicle and other categories of companies and their weightings to the market/fair value of the Group’s financial asset at FVTPL portfolio of HK$3,920,722,000 are as below:

Name/category of companies	Approximate weighting to the market/fair value of the Group’s financial asset at FVTPL portfolio %
Evergrande Vehicle Conglomerate Property Others	98.48 0.71 0.78 0.03
	100.00

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Management Discussion and Outlook

At 30 June 2021, the weightings of the Group’s investment in Evergrande Vehicle and other investments to the market/fair value of the Group’s financial asset at FVTPL portfolio of HK$3,920,722,000 (together with other information) are as below:

Company name Approximate weighting to the market/ fair value of the Group’s financial asset at FVTPL portfolio %	Company name Approximate weighting to the market/ fair value of the Group’s financial asset at FVTPL portfolio %	Approximate weighting to the carrying amount of the Group’s total assets at 30 June 2021 % of shareholding interest % %	Acquisition costs *Acquisition** costs during the period/carrying amount at 1 January 2021 HK$’000 HK$’000**	Acquisition costs *Acquisition** costs during the period/carrying amount at 1 January 2021 HK$’000 HK$’000**	Market/fair value at 30 June 2021 *HK$’000*	Accumulated unrealised gain (loss) recognised up to 30 June 2021 *HK$’000*	Unrealised gain (loss) recognised during the period ended 30 June 2021 *HK$’000*	Dividend income recognised during the period ended 30 June 2021 *HK$’000*
Evergrande Vehicle (HKEX stock code: 708) Emperor International Holdings Limited (“Emperor”) (HKEX stock code: 163) Others	98.48 0.78 0.74 100.00	46.96 1.37 0.37 0.74 0.35 N/A 47.68	A 219,312 62,311 194,646 476,269	B 4,034,720 29,819 9,078 4,073,617	C 3,861,040 30,632 29,050 3,920,722	D = C ‐ A 3,641,728 (31,679) (165,596) 3,444,453	E = C ‐ B (173,680) 813 19,972 (152,895)	– 271 –
								271

The amount represented the costs of the securities acquired during the six months ended 30 June 2021 and/or the carrying amount of the securities brought forward from the prior financial year after accounting for additional acquisition and/or disposal of the securities (if any) during the current interim period.

The table below sets out the unrealised gain (loss) recognised for the six months ended 30 June 2021 for the financial assets at FVTPL held by the Group at 30 June 2021 together with information on financial performance of the investee companies and their future prospects. The Group is committed to closely monitor the financial performance of its financial asset at FVTPL portfolio through making investment and divestment decisions on individual securities from time to time based on, amongst others, internal assessments on prospects of individual securities and publicly available information of the investee companies.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Management Discussion and Outlook

Unrealised gain (loss) recognised for the six months ended 30 June 2021 for the financial assets at FVTPL held by the Group at 30 June 2021 together with information on financial performance of the investee companies and their future prospects

Company name/Industry #Principal activities of investee company	*Acquisition** costs during the period/carrying amount at 1 January 2021 % of shareholding interest HK$’000 %**	Market/ fair value at 30 June 2021 % to total market/ fair value of the Group’s financial asset at FVTPL portfolio Unrealised gain (loss) recognised during the six months ended 30 June 2021 #Investee company’s financial performance #Future prospects of the investee company *HK$’000* % *HK$’000*	Market/ fair value at 30 June 2021 % to total market/ fair value of the Group’s financial asset at FVTPL portfolio Unrealised gain (loss) recognised during the six months ended 30 June 2021 #Investee company’s financial performance #Future prospects of the investee company *HK$’000* % *HK$’000*	Market/ fair value at 30 June 2021 % to total market/ fair value of the Group’s financial asset at FVTPL portfolio Unrealised gain (loss) recognised during the six months ended 30 June 2021 #Investee company’s financial performance #Future prospects of the investee company *HK$’000* % *HK$’000*
*Equity securities listed in Hong Kong* Evergrande Vehicle Technology research and development, production and sales of new energy vehicles, as well as health management businesses including “Internet+” community health management, international hospitals, elderly care and rehabilitation Emperor Lease of properties, properties development and hotel and hotel related operations Others + –	4,034,720 1.37 29,819 0.74 9,078 N/A 4,073,617	3,861,040 30,632 29,050 3,920,722	98.48 0.78 0.74 100.00	(173,680) For the six months ended 30 June 2021, revenue increased by 53% to RMB6,923,244,000 while loss for the period increased by 96% to RMB4,821,626,000 as compared to the same period in 2020. The investee company will continue the effort to promote the mass production of Hengchi products, and will strive to continue to develop and expand a matrix of vehicle models with leading features and attractiveness, so as to meet the differentiated needs in various domestic and foreign automobile markets and among extensive customer groups. 813 For the year ended 31 March 2021, revenue decreased by 44% to HK$1,317,082,000 while loss for the year decreased by 75% to HK$870,286,000 as compared to the prior financial year. For property investment business, the investee company possesses a geographically balanced property portfolio which focuses on commercial buildings and quality street-level retail spaces in prominent locations. For property sales business, it pursues a strategy of providing quality residential properties with convenient access to transportation networks. 19,972 – – (152,895)

Extracted from published financial information of the investee companies.
The amount represented the costs of the securities acquired during the six months ended 30 June 2021 and/or the carrying amount of the securities brought forward from the prior financial year after accounting for additional acquisition and/or disposal of the securities (if any) during the current interim period.
- Included unlisted equity securities with fair value of HK$300,000.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Management Discussion and Outlook

Debt instruments at FVTOCI

At 30 June 2021, the Group’s debt instrument at FVTOCI portfolio of HK$319,020,000 was measured at market/fair value. During HY2021, the Group’s debt instrument at FVTOCI portfolio generated total revenue amounting to HK$20,978,000 (30 June 2020: HK$32,582,000), representing interest income from debt securities. According to the maturity of the debt securities, all debt instruments at FVTOCI were classified as non-current assets. During HY2021, the Group did not acquire any debt securities (30 June 2020: nil).

At the period end, a net fair value loss on the debt instrument at FVTOCI portfolio amounting to HK$60,376,000 (30 June 2020: HK$55,502,000) was recognised as other comprehensive expense.

During HY2021, the Group disposed of debt securities for consideration of HK$22,417,000 (30 June 2020: HK$309,172,000). A loss on disposal of HK$1,018,000 (30 June 2020: HK$965,000) was released from the Group’s investment revaluation reserve and recognised as loss during the current period.

For HY2021, the Group recognised impairment loss of HK$15,562,000 (30 June 2020: reversal of impairment loss of HK$3,220,000) on debt instruments at FVTOCI by reference to exposures at default, recovery rate and adjustments for forward looking information.

At 30 June 2021, the Group invested in debt securities of a property company with details as below:

	Approximate
	weighting
	to the	Approximate
	market/fair	weighting to			* Acquisition			Fair value loss
	value of the	the carrying			costs during		Accumulated	recognised
	Group’s debt	amount of			the period/		fair value loss	during the
	instrument	the Group’s	Yield to		carrying	Market/fair	recognised	period
	at FVTOCI	total assets at	maturity on	Acquisition	amount at	value at	up to	ended
Category of companies	portfolio	30 June 2021	acquisition	costs	1 January 2021	30 June 2021	30 June 2021	30 June 2021
	%	%	%	*HK$’000*	*HK$’000*	*HK$’000*	*HK$’000*	*HK$’000*
				A	B	C	D = C - A	E = C - B
*Debt securities listed overseas*
Property	100.00	3.88	8.75 - 9.50	436,800	380,571	319,020	(117,780)	(61,551)

The amount represented the costs of the securities acquired during the six months ended 30 June 2021 and/or the carrying amount of the securities brought forward from the prior financial year after accounting for additional acquisition and/or disposal of the securities (if any) during the current interim period.

The yield to maturity on acquisition of the debt securities which were held by the Group at the period end ranging from 8.75% to 9.50% per annum.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Management Discussion and Outlook

Trading

During HY2021, the Group’s trading operation was focused on trading of coke products. The operation reported an increase in revenue by over 63 times to HK$222,394,000 (30 June 2020: HK$3,430,000), and recorded profit of HK$244,000 (30 June 2020: HK$113,000). The increase in revenue and profit earned were principally due to the resumption of the commodities trading business resulting mainly from the improvement in conditions of the European economy in general. The management is stepping up its effort to explore new business opportunities in order to improve the results of the operation.

Money Lending

The Group’s money lending business is conducted through CS Credit Limited, U Credit (HK) Limited and Chap Yik Limited, all are wholly-owned subsidiaries of the Company. For HY2021, the operation recorded a decrease in revenue of 24% to HK$75,724,000 (30 June 2020: HK$99,116,000) and achieved a turnaround of results by recording a profit of HK$36,628,000 (30 June 2020: loss of HK$143,994,000). The decrease in revenue was mainly due to the lower average amount of loans advanced to borrowers during HY2021, and there was a reduction in net impairment allowance against loan receivables which amounting to HK$35,244,000 for the current period (30 June 2020: HK$241,265,000).

The net impairment allowance recognised primarily represented the credit risk involved in collectability of certain default and non-default loans determined under the Group’s loan impairment policy, with reference to factors including the credit history of the borrowers, the realisation value of collaterals pledged to the Group, and the prevailing economic conditions (the negative impact of the COVID-19 pandemic on the current state of the Hong Kong economy has also been considered). The Group is considering various actions for recovery of the default and non-default loans. At the period end, the balance of the impairment allowance was HK$420,303,000 (31 December 2020: HK$373,254,000).

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Management Discussion and Outlook

The outstanding principal of the Group’s loan portfolio (before impairment allowance) increased by 5% to HK$1,908,107,000 (31 December 2020: HK$1,821,549,000), during the current period, the management continued to be prudent in granting new loans in light of the prevailing economic conditions in Hong Kong. The carrying value of the loan portfolio, after impairment allowance, amounted to HK$1,487,804,000 (31 December 2020: HK$1,448,295,000) with details as follows:

Category of borrowers	Approximate weighting to the carrying amount of the Group’s loan portfolio Interest rate per annum Maturity % %
Individual Corporate Corporate	47.49 9.5 - 18.0 Within 1 year 44.78 10.0 - 18.0 Within 1 year 7.73 8.5 Over 1 year but within 2 years 100.00

At 30 June 2021, 99% (31 December 2020: 99%) of the carrying amount of the loan portfolio (after impairment allowance) is secured by collaterals and with the remaining 1% (31 December 2020: 1%) being unsecured. Before granting loans to potential customers, the Group performs credit assessment process to assess the potential borrowers’ credit quality individually and defines the credit limits granted to the borrowers. The credit limits granted to the borrowers are reviewed by the management regularly.

Securities Brokerage

The Group’s securities brokerage business is conducted through CS Wealth Securities Limited, a wholly-owned subsidiary of the Company, which is licensed by the Hong Kong Securities and Futures Commission to carry out dealing in securities activities. During HY2021, revenue of the operation increased by 82% to HK$6,109,000 (30 June 2020: HK$3,349,000) and profit increased by 114% to HK$4,139,000 (30 June 2020: HK$1,937,000). The increase in revenue of the operation was the combined effect of the increase in its brokerage income, which rose by 23% to HK$3,093,000 (30 June 2020: HK$2,507,000), mainly due to the improvement in investment sentiments of the Hong Kong stock market during the period, and the increase in its interest income from margin financing, which rose by about 5 times to HK$3,016,000 (30 June 2020: HK$505,000), due to its enlarged margin financing portfolio which amounted to HK$124,976,000 at the period end.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Management Discussion and Outlook

Overall Results

For HY2021, the Group recorded loss attributable to owners of the Company of HK$196,625,000 (30 June 2020: profit of HK$51,651,000) and basic loss per share of HK0.96 cent (30 June 2020: earnings per share of HK0.30 cent). The Group reported total comprehensive expense attributable to owners of the Company of HK$228,059,000 (30 June 2020: total comprehensive income of HK$2,361,000) which included a net fair value loss on debt securities of HK$60,376,000 (30 June 2020: HK$55,502,000). The loss results recorded by the Group were mainly attributed to the substantial overall loss recognised for the Group’s securities investments of HK$148,094,000 (30 June 2020: profit of HK$291,996,000), though the loss results were partly offset by the profit earned by the money lending operation of HK$36,628,000 (30 June 2020: loss of HK$143,994,000) and profit earned by the securities brokerage operation of HK$4,139,000 (30 June 2020: HK$1,937,000). The trading operation recorded an increased profit of HK$244,000 (30 June 2020: HK$113,000) for the current period.

FINANCIAL REVIEW

Liquidity, Financial Resources and Capital Structure

For HY2021, the Group financed its businesses mainly by cash generated from operations, credit facilities available from banks, finance company and securities brokers, and funds raised through issuance of interest bearing notes. At the period end, the Group had current assets of HK$7,709,429,000 (31 December 2020: HK$8,000,306,000) and liquid assets comprising bank balances and cash as well as financial assets at FVTPL (excluding clients’ money held relating to the Group’s securities brokerage business and pledged bank deposits) totalling HK$6,141,061,000 (31 December 2020: HK$6,314,049,000). The Group’s current ratio, calculated based on current assets over current liabilities of HK$1,600,330,000 (31 December 2020: HK$1,611,842,000), was at a ratio of about 4.8 (31 December 2020: 5.0). At 30 June 2021, the Group’s trade and other receivables amounted to HK$148,030,000 (31 December 2020: HK$175,487,000), which mainly comprised trade receivables from cash and margin clients of the securities brokerage business, and deposits placed with securities brokers. The Group had deferred tax assets amounting to HK$32,342,000 (31 December 2020: HK$27,067,000) and deferred tax liabilities of HK$396,785,000 (31 December 2020: HK$435,393,000) which were principally related to the allowance for expected credit losses for loan receivables and debt instruments at FVTOCI, net unrealised gain/loss on financial assets at FVTPL and debt instruments at FVTOCI, and unused tax losses at the period end.

At 30 June 2021, the equity attributable to owners of the Company amounted to HK$5,727,398,000 (31 December 2020: HK$5,939,048,000) and was equivalent to an amount of approximately HK28.10 cents (31 December 2020: HK29.13 cents) per share of the Company. The decrease in equity attributable to owners of the Company of HK$211,650,000 was mainly a result of the loss for the current period recognised by the Group. At 30 June 2021, the Group’s borrowings represented short-term secured borrowings that bore interests at fixed rate and were repayable within one year or on demand. The borrowings were secured by two share charges each charging over the issued share of a wholly-owned subsidiary of the Company, two debentures each incorporating a first floating charge over all the assets of a wholly-owned subsidiary of the Company, and certain debt and equity securities held by the Group.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Management Discussion and Outlook

During the second half of 2020, the Company issued four tranches of notes comprising (i) the 2-year unsecured notes with nominal value of HK$500,000,000 bearing interest of 5.5% per annum in July 2020; (ii) the 1-year unsecured notes with nominal value of HK$500,000,000 bearing interest of 3.0% per annum in August 2020; (iii) the 270-day unsecured notes with nominal value of HK$500,000,000 bearing interest of 2.0% per annum in September 2020; and (iv) the 270-day unsecured notes with nominal value of HK$200,000,000 bearing interest of 2.0% per annum in October 2020. All the four tranches of notes carry options for the Company to early redeem the notes, by giving not less than 15 days’ notice to the noteholders, in whole or in part at 100% of the principal amount outstanding, together with interest accrued and unpaid at the date fixed for redemption. In June 2021, the Company executed a supplemental deed poll to extend the maturity date of the 270-day notes issued in September 2020 with nominal value of HK$500,000,000 for 270 days to 15 March 2022.

The Group’s gearing ratio, calculated on the basis of total liabilities of HK$2,494,658,000 (31 December 2020: HK$2,542,650,000) divided by the equity attributable to owners of the Company of HK$5,727,398,000 (31 December 2020: HK$5,939,048,000), was about 44% (31 December 2020: 43%). The Group’s finance costs increased to HK$73,274,000 (30 June 2020: HK$66,635,000) were primarily a result of the increase in the average amount of borrowings during the period. With the amount of liquid assets on hand as well as credit facilities available from banks, finance company and securities brokers, the management is of the view that the Group has sufficient financial resources to meet its ongoing operational requirements.

Foreign Currency Management

The monetary assets and liabilities as well as business transactions of the Group are mainly denominated in Hong Kong dollars and United States dollars. During HY2021, the Group had not experienced any significant exposure to exchange rate fluctuations, as such, the Group had not entered into any foreign currency forward contracts, currency swaps or other financial derivatives for hedging purposes.

Contingent Liability

At 30 June 2021, the Group had no significant contingent liability (31 December 2020: nil).

Pledge of Assets

At 30 June 2021, property, plant and equipment of HK$15,443,000 (31 December 2020: HK$17,042,000), club debentures of HK$1,453,000 (31 December 2020: HK$1,453,000), debt securities of HK$319,020,000 (31 December 2020: HK$401,813,000), trade and other receivables of HK$15,999,000 (31 December 2020: HK$66,670,000), equity securities of HK$3,920,422,000 (31 December 2020: HK$4,073,317,000), bank balances and cash of HK$2,313,000 (31 December 2020: HK$109,252,000) were pledged to secure the Group’s borrowings. In addition, the Group’s credit facility for settlement of the securities brokerage activities was secured by the Group’s bank deposits of HK$3,096,000 (31 December 2020: HK$3,096,000).

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Management Discussion and Outlook

Capital Commitment

At 30 June 2021, the Group had no significant capital commitment (31 December 2020: nil).

HUMAN RESOURCES AND REMUNERATION POLICY

At 30 June 2021, the Group had 57 (30 June 2020: 53) employees including directors of the Company and staff costs (including directors’ emoluments) for the period amounted to HK$15,419,000 (30 June 2020: HK$11,513,000). The remuneration packages for directors and staff are normally reviewed annually and are structured by reference to prevailing market terms and individual competence, performance and experience. The Group operates a Mandatory Provident Fund Scheme (the “MPF Scheme”) for employees in Hong Kong. In addition, the Group provides other employee benefits including medical insurance, training subsidy, discretionary bonus and participation in the Company’s share option scheme.

The Group’s contributions to the MPF Scheme vest fully and immediately with the employees, thus there were no forfeited contributions available to the Group to reduce the existing level of contributions to the MPF Scheme.

PROSPECTS

There are signs that the conditions of major economies have stabilised and gaining the momentum to recovery, particularly for those countries like China, the US and the UK which has a high or growing vaccination coverage on the population. China has achieved positive GDP growth in the first half of 2021 and there are indicators that its economy is undergoing a stable and sustainable recovery, from which Hong Kong, being one of the nation’s major cities and gateways, is well positioned to be benefited. The pandemic situation in Hong Kong has been stabilised following the launch of the vaccination program by the government and there are strong signs that the economy is on the recovery path. However, with the emergence of the new variant virus and the new wave of outbreaks in some countries, it is difficult to predict the evolution and duration of the pandemic. Looking forward, the Group’s management will thus continue to adopt a cautious and disciplined approach in managing the Group’s businesses as well as in seizing business and investment opportunities. The Group is continuing with its evaluation process of acquiring the entire equity interests in a target company engaging in insurance business in Hong Kong, with the view to diversify the Group’s businesses and income base and to create value for shareholders. Announcements will be made to inform shareholders as and when there is further material development of this investment opportunity.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Report on Review of Interim Financial Information

TO THE BOARD OF DIRECTORS OF CHINA STRATEGIC HOLDINGS LIMITED 中策集團有限公司

(Incorporated in Hong Kong with limited liability)

Introduction

We have reviewed the condensed consolidated financial statements of China Strategic Holdings Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) set out on pages 16 to 46, which comprise the condensed consolidated statement of financial position as of 30 June 2021 and the related condensed consolidated statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the six-month period then ended, and certain explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 “ Interim Financial Reporting ” (“HKAS 34”) issued by the Hong Kong Institute of Certified Public Accountants. The directors of the Company are responsible for the preparation and presentation of these condensed consolidated financial statements in accordance with HKAS 34. Our responsibility is to express a conclusion on these condensed consolidated financial statements based on our review, and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Scope of review

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 “ Review of Interim Financial Information Performed by the Independent Auditor of the Entity ” issued by the Hong Kong Institute of Certified Public Accountants. A review of these condensed consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial statements are not prepared, in all material respects, in accordance with HKAS 34.

Deloitte Touche Tohmatsu

Certified Public Accountants

Hong Kong 26 August 2021

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended 30 June 2021

Notes	Six months ended 30 June 2021 2020 *HK$’000* HK$’000 (Unaudited) (Unaudited) 325,476 143,085 222,394 3,430 271 4,608 99,493 131,815 3,318 3,232 (222,142) (3,393) 2,420 8,604 (823) (209) (15,419) (11,513) (35,867) (16,706) (152,895) 249,770 (1,018) (965) (50,806) (238,045) (73,274) (66,635) (224,348) 63,993 27,723 (12,342) (196,625) 51,651 12,362 8,467 (60,376) (55,502) 15,562 (3,220) 1,018 965 (31,434) (49,290) (228,059) 2,361 HK(0.96) cent HK0.30 cent	Six months ended 30 June 2021 2020 *HK$’000* HK$’000 (Unaudited) (Unaudited) 325,476 143,085 222,394 3,430 271 4,608 99,493 131,815 3,318 3,232 (222,142) (3,393) 2,420 8,604 (823) (209) (15,419) (11,513) (35,867) (16,706) (152,895) 249,770 (1,018) (965) (50,806) (238,045) (73,274) (66,635) (224,348) 63,993 27,723 (12,342) (196,625) 51,651 12,362 8,467 (60,376) (55,502) 15,562 (3,220) 1,018 965 (31,434) (49,290) (228,059) 2,361 HK(0.96) cent HK0.30 cent
	2021
	*HK$’000*
	(Unaudited)
Revenue 3 Trading income Dividend income Interest income Commission, underwriting fee and others Purchases and related expenses Other income 5 Other loss 6 Staff costs Other expenses Net (loss) gain on financial assets at fair value through profit or loss 7 Loss on disposal of debt instruments at fair value through other comprehensive income Provision for impairment losses under expected credit loss model, net of reversal 10 Finance costs 8 (Loss) profit before tax Income tax credit (expense) 9 (Loss) profit for the period attributable to owners of the Company 10 Other comprehensive income (expense) Items that may be reclassified subsequently to profit or loss: Deferred tax on net fair value changes of debt instruments at fair value through other comprehensive income Net fair value loss on debt instruments at fair value through other comprehensive income Provision for (reversal of) impairment loss on debt instruments at fair value through other comprehensive income included in profit or loss 10 Release on disposal of debt instruments at fair value through other comprehensive income Other comprehensive expense for the period Total comprehensive (expense) income for the period attributable to owners of the Company (Loss) earnings per share attributable to owners of the Company – Basic 12
	325,476
		222,394
		271
		99,493
		3,318
	(222,142)
	2,420
	(823)
	(15,419)
	(35,867)
	(152,895)
	(1,018)
	(50,806)
	(73,274)

	(224,348)
	27,723

	(196,625)



	12,362
	(60,376)
	15,562
	1,018

	(31,434)

	(228,059)


	HK(0.96) cent

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Condensed Consolidated Statement of Financial Position

At 30 June 2021

Notes	At 30 June 2021 *HK$’000* (Unaudited)	At 31 December 2020 HK$’000 (Audited)
Non-current assets Property, plant and equipment 13 Right-of-use assets 13 Goodwill Club debentures Debt instruments at fair value through other comprehensive income 14 Loan receivables 15 Deferred tax assets 16 Total non-current assets Current assets Loan receivables 15 Trade and other receivables 17 Income tax recoverable Financial assets at fair value through profit or loss 18 Pledged bank deposits 19 Bank balances and cash 19 Total current assets Current liabilities Trade and other payables 20 Income tax payable Borrowings 21 Notes payable 22 Lease liabilities Total current liabilities Net current assets Total assets less current liabilities Non-current liabilities Notes payable 22 Lease liabilities Deferred tax liabilities 16 Total non-current liabilities Net assets Capital and reserves Share capital 23 Reserves Total equity	16,515 23,742 4,000 1,928 319,020 115,080 32,342 512,627 1,372,724 148,030 20,998 3,920,722 3,096 2,243,859 7,709,429 52,075 8,794 350,000 1,180,235 9,226 1,600,330 6,109,099 6,621,726 484,929 12,614 396,785 894,328 5,727,398 3,216,110 2,511,288 5,727,398	18,196 28,388 4,000 1,928 401,813 – 27,067
		481,392
		1,448,295 175,487 22,841 4,073,317 3,096 2,277,270
		8,000,306
		68,240 8,794 355,000 1,170,725 9,083
		1,611,842
		6,388,464
		6,869,856
		478,152 17,263 435,393
		930,808
		5,939,048
		3,216,110 2,722,938
		5,939,048

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2021

	Share capital *HK$’000*	Shareholder’s contribution reserve *HK$’000*	Investment revaluation reserve *HK$’000*	Retained profits *HK$’000*	Total *HK$’000* 3,369,789 51,651 8,467 (55,502) (3,220) 965 2,361 3,372,150
At 1 January 2020 (audited) Profit for the period Deferred tax on net fair value changes of debt instruments at fair value through other comprehensive income Net fair value loss on debt instruments at fair value through other comprehensive income Reversal of impairment loss on debt instruments at fair value through other comprehensive income Release on disposal of debt instruments at fair value through other comprehensive income Total comprehensive (expense) income for the period At 30 June 2020 (unaudited) At 1 January 2021 (audited) Loss for the period Deferred tax on net fair value changes of debt instruments at fair value through other comprehensive income Net fair value loss on debt instruments at fair value through other comprehensive income Provision for impairment loss on debt instruments at fair value through other comprehensive income Release on disposal of debt instruments at fair value through other comprehensive income Total comprehensive expense for the period Shareholder’s contribution_(Note 22)_ At 30 June 2021 (unaudited)	3,012,877 – – – – – – 3,012,877	– – – – – – – –	(18,918) – 8,467 (55,502) (3,220) 965 (49,290) (68,208)	375,830 51,651 – – – – 51,651 427,481
	3,216,110	71,447	(7,526)	2,659,017	5,939,048

	–	–	–	(196,625)	(196,625)
	–	–	12,362	–	12,362
	–	–	(60,376)	–	(60,376)
	–	–	15,562	–	15,562
	–	–	1,018	–	1,018

	–	–	(31,434)	(196,625)	(228,059)
	–	16,409	–	–	16,409

	3,216,110	87,856	(38,960)	2,462,392	5,727,398

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Condensed Consolidated Statement of Cash Flows

For the six months ended 30 June 2021

Notes	Six months ended 30 June 2021 2020 *HK$’000* HK$’000 (Unaudited) (Unaudited) (39,645) 1,542,996 22,417 309,172 510 – (325) (314) 45,600 3,800 – 28,973 1,432 5,130 69,634 346,761 – 71,650 (5,000) (332,099) (4,506) (4,299) – (50,000) (40,876) (69,028) (50,382) (383,776) (20,393) 1,505,981 2,240,732 135,793 2,220,339 1,641,774
Net cash (used in) from operating activities Net cash from investing activities Proceeds from disposal of debt instruments at fair value through other comprehensive income Proceeds from disposal of property, plant and equipment 13 Purchase of property, plant and equipment 13 Repayment from note receivable Withdrawal of pledged bank deposits Interest received Net cash used in financing activities New borrowings raised Repayments of borrowings Repayments of lease liabilities Redemption of notes issued 22 Interest paid Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period, represented by bank balances and cash - general accounts and cash 19	(39,645) 22,417 510 (325) 45,600 – 1,432 69,634 – (5,000) (4,506) – (40,876) (50,382) (20,393) 2,240,732 2,220,339

Notes

Six months ended 30 June
2021
2020
HK$’000
HK$’000
(Unaudited)
(Unaudited)
(39,645)
1,542,996
22,417
309,172
510
–
(325)
(314)
45,600
3,800
–
28,973
1,432
5,130
69,634
346,761
–
71,650
(5,000)
(332,099)
(4,506)
(4,299)
–
(50,000)
(40,876)
(69,028)
(50,382)
(383,776)
(20,393)
1,505,981
2,240,732
135,793
2,220,339
1,641,774

Net cash (used in) from operating activities
Net cash from investing activities
Proceeds from disposal of debt instruments at fair value
through other comprehensive income
Proceeds from disposal of property, plant and equipment
13
Purchase of property, plant and equipment
13
Repayment from note receivable
Withdrawal of pledged bank deposits
Interest received
Net cash used in financing activities
New borrowings raised
Repayments of borrowings
Repayments of lease liabilities
Redemption of notes issued
22
Interest paid
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period,
represented by bank balances and cash - general
accounts and cash
19

(39,645)
22,417
510
(325)
45,600
–
1,432
69,634
–
(5,000)
(4,506)
–
(40,876)
(50,382)
(20,393)
2,240,732
2,220,339

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements For the six months ended 30 June 2021

1. BASIS OF PREPARATION

The condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard (“HKAS”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) as well as the applicable disclosure requirements of Appendix 16 to the Listing Rules.

The financial information relating to the year ended 31 December 2020 that is included in these condensed consolidated financial statements as comparative information does not constitute the Company’s statutory annual consolidated financial statements for that year but is derived from those financial statements. Further information relating to these statutory financial statements is as follows:

The Company has delivered the financial statements for the year ended 31 December 2020 to the Registrar of Companies as required by section 662(3) of, and Part 3 of Schedule 6 to, the Hong Kong Companies Ordinance.

The Company’s auditor has reported on those financial statements. The auditor’s report was unqualified; did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report; and did not contain a statement under sections 406(2), 407(2) or (3) of the Hong Kong Companies Ordinance.

The condensed consolidated financial statements are presented in HK$ which is the functional currency of the Company. All values are rounded to the nearest thousand (HK$’000) unless otherwise indicated.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements For the six months ended 30 June 2021

2. PRINCIPAL ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared on the historical cost basis, except for certain financial instruments, which are measured at fair value.

The accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30 June 2021 are the same as those presented in the Group’s audited consolidated financial statements for the year ended 31 December 2020.

Application of amendments to Hong Kong Financial Reporting Standards (“HKFRSs”)

In the current interim period, the Group has applied the following amendments to HKFRSs issued by the HKICPA, for the first time, which are mandatorily effective for the annual periods beginning on or after 1 January 2021 for the preparation of the Group’s condensed consolidated financial statements:

Amendment to HKFRS 16 Covid-19-related rent concessions Amendments to HKFRS 9, HKAS 39, Interest rate benchmark reform - phase 2 HKFRS 7, HKFRS 4 and HKFRS 16

The application of the amendments to HKFRSs in the current interim period has had no material impact on the Group’s financial positions and performance for the current and prior periods and/or on the disclosures set out in the condensed consolidated financial statements.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

3. REVENUE

An analysis of the Group’s revenue for the period is as follows:

	Six months ended 30 June 2021 2020 *HK$’000* HK$’000 (Unaudited) (Unaudited)	Six months ended 30 June 2021 2020 *HK$’000* HK$’000 (Unaudited) (Unaudited)
Trading of coke products Sales of electronic components Arrangement fee income from money lending business Commission and handling income from securities brokerage business Underwriting fee income from securities brokerage business Revenue from contracts with customers Dividend income from financial assets at fair value through profit or loss (“FVTPL”) Interest income from debt instruments at fair value through other comprehensive income (“FVTOCI”) Interest income from securities margin financing business Interest income from money lending business	222,394 – 225 3,093 – 225,712 271 20,978 3,016 75,499 325,476	– 3,430 388 2,507 337
		6,662 4,608 32,582 505 98,728
		143,085

During the periods ended 30 June 2021 and 2020, the revenue is recognised at a point in time except for dividend income and interest income which fall outside the scope of HKFRS 15.

4. SEGMENT INFORMATION

The following is an analysis of the Group’s revenue and results by operating segments, based on information provided to the chief operating decision maker, for the purposes of allocating resources and assessment of segment performance. This is also the basis upon which the Group is arranged and organised.

The Group’s operating segments under HKFRS 8 are as follows:

(i) Investment in securities
(ii) Trading of coke products and electronic components (“Trading”)
(iii) Money lending
(iv) Securities brokerage

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

4. SEGMENT INFORMATION (continued)

Segment revenue and results

The following is an analysis of the Group’s revenue and results by operating segments:

	Investment		Money	Securities
	in securities	Trading	lending	brokerage	Total
	*HK$’000*	*HK$’000*	*HK$’000*	*HK$’000*	*HK$’000*
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
Six months ended 30 June 2021 Segment Revenue External sales/sources Results Segment results Other income Central administrative expenses Finance costs Loss before tax Income tax credit Loss for the period Six months ended 30 June 2020 Segment Revenue External sales/sources Results Segment results Other income Central administrative expenses Finance costs Profit before tax Income tax expense Profit for the period



	21,249	222,394	75,724	6,109	325,476


	(148,094)	244	36,628	4,139	(107,083)

					1,511
					(45,502)
					(73,274)

					(224,348)
					27,723

					(196,625)
	37,190 291,996	3,430 113	99,116 (143,994)	3,349 1,937	143,085 150,052 5,019 (24,443) (66,635) 63,993 (12,342) 51,651

Segment (loss) profit represents loss incurred/profit earned by each segment without allocation of certain other income, central administrative expenses, finance costs and income tax credit (expense).

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements For the six months ended 30 June 2021

4. SEGMENT INFORMATION (continued)

Segment assets and liabilities

The following is an analysis of the Group’s assets and liabilities by operating segments:

	At 30 June 2021 *HK$’000* (Unaudited)	At 31 December 2020 HK$’000 (Audited)
Segment assets Investment in securities Trading Money lending Securities brokerage Total segment assets Property, plant and equipment Right-of-use assets Bank balances and cash Other unallocated assets Consolidated assets Segment liabilities Investment in securities Trading Money lending Securities brokerage Total segment liabilities Other payables Notes payable Lease liabilities Consolidated liabilities	4,254,178 1,557 1,558,971 299,003 6,113,709 16,515 23,742 2,062,784 5,306 8,222,056 752,641 54 74 28,171 780,940 26,714 1,665,164 21,840 2,494,658	4,645,933 3,031 1,549,021 309,037
		6,507,022 18,196 28,388 1,921,585 6,507
		8,481,698
		796,621 334 1,249 40,479
		838,683 28,744 1,648,877 26,346
		2,542,650

For the purposes of monitoring segment performances and allocating resources between segments:

all assets are allocated to operating segments other than property, plant and equipment, right-of-use assets, certain bank balances and cash and certain other assets; and
all liabilities are allocated to operating segments other than certain other payables, notes payable and lease liabilities.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

5. OTHER INCOME

OTHER INCOME
	Six months ended 30 June 2021 2020 *HK$’000* HK$’000 (Unaudited) (Unaudited)
	2021
	*HK$’000*
	(Unaudited)
Bank interest income Others_(Note)_		5,130 3,474
	1,432
	988
		8,604
	2,420

Note: The amount mainly represented interest income of HK$799,000 (six months ended 30 June 2020: HK$3,189,000) from the note receivable disclosed in Note 17.

6. OTHER LOSS

	Six months ended 30 June 2021 2020 *HK$’000* HK$’000 (Unaudited) (Unaudited)	Six months ended 30 June 2021 2020 *HK$’000* HK$’000 (Unaudited) (Unaudited)
	2021
	*HK$’000*
	(Unaudited)
Exchange loss, net		209
	823

7. NET (LOSS) GAIN ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

LOSS
	Six months ended 30 June 2021 2020 *HK$’000* HK$’000 (Unaudited) (Unaudited)
	2021
	*HK$’000*
	(Unaudited)
Net unrealised (loss) gain on financial assets at FVTPL Net realised loss on sales of financial assets at FVTPL		268,385 (18,615)
	(152,895)
	–
		249,770
	(152,895)

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements For the six months ended 30 June 2021

8. FINANCE COSTS

FINANCE COSTS
	Six months ended 30 June 2021 2020 *HK$’000* HK$’000 (Unaudited) (Unaudited)
Interest on advances drawn on bill receivables discounted with full recourse Interest on borrowings Interest on notes payable_(Note 22)_ Interest on lease liabilities	28 12,167 60,713 366 73,274	– 8,204 58,261 170
		66,635

9. INCOME TAX CREDIT (EXPENSE)

INCOME TAX CREDIT (EXPENSE)
	Six months ended 30 June 2021 2020 *HK$’000* HK$’000 (Unaudited) (Unaudited)
Tax (charge) credit comprises: Current tax Deferred tax_(Note 16)_ Income tax credit (expense) recognised in profit or loss	(3,798) 31,521 27,723	2,075 (14,417)
		(12,342)

Hong Kong Profits Tax was calculated at 16.5% of the estimated assessable profits for the current interim period (six months ended 30 June 2020: 16.5%).

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

10. (LOSS) PROFIT FOR THE PERIOD

(Loss) profit for the period has been arrived at after charging (crediting) the following items:

	Six months ended 30 June 2021 2020 *HK$’000* HK$’000 (Unaudited) (Unaudited)	Six months ended 30 June 2021 2020 *HK$’000* HK$’000 (Unaudited) (Unaudited)
	2021
	*HK$’000*
	(Unaudited)
Provision for (reversal of) impairment loss on debt instruments at FVTOCI, net_(Note 14) Provision for impairment loss on loan receivables(Note 15)_ Provision for impairment losses under expected credit loss (“ECL”) model, net of reversal Depreciation of property, plant and equipment Depreciation of right-of-use assets		(3,220) 241,265
	15,562
	35,244
		238,045
	50,806
		1,663 4,657
	1,685
	4,646

11. DIVIDEND

No dividends were paid, declared or proposed during the interim period (six months ended 30 June 2020: nil). The directors of the Company have determined that no dividend will be paid in respect of the interim period.

12. (LOSS) EARNINGS PER SHARE

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

	Six months ended 30 June 2021 2020 *HK$’000* HK$’000 (Unaudited) (Unaudited)	Six months ended 30 June 2021 2020 *HK$’000* HK$’000 (Unaudited) (Unaudited)
	2021
	*HK$’000*
	(Unaudited)
(Loss) earnings: (Loss) profit for the period attributable to owners of the Company for the purpose of calculating basic (loss) earnings per share		51,651

	(196,625)

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements For the six months ended 30 June 2021

12. (LOSS) EARNINGS PER SHARE (continued)

(LOSS) EARNINGS PER SHARE (continued)
	Six months ended 30 June 2021 2020 *’000* ’000
	2021
	*’000*
Number of shares: Weighted average number of ordinary shares for the purpose of calculating basic (loss) earnings per share		16,987,714

	20,385,254

Diluted (loss) earnings per share for the six months ended 30 June 2021 and 2020 are not presented as there were no dilutive potential ordinary shares in issue during both periods.

13. PROPERTY, PLANT AND EQUIPMENT/RIGHT-OF-USE ASSETS

During the current interim period, the Group disposed of property, plant and equipment with proceeds of HK$510,000 (six months ended 30 June 2020: nil) and acquired property, plant and equipment of HK$325,000 (six months ended 30 June 2020: HK$314,000).

During the current interim period, the Group did not enter into any new lease agreement. During the six months ended 30 June 2020, the Group entered into a new lease agreement with a three-year lease term and recognised right-of-use assets of HK$5,624,000 and lease liabilities of HK$5,624,000.

At 30 June 2021, property, plant and equipment of HK$15,443,000 (31 December 2020: HK$17,042,000) were pledged as security for credit facilities granted to the Group.

14. DEBT INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

	At	At 31 December 2020 HK$’000 (Audited)
	30 June
	2021
	*HK$’000*
	(Unaudited)
Listed investments, at fair value: – Debt securities listed in overseas (31 December 2020: Hong Kong or overseas) with fixed interests ranging from 8.75% to 9.50% (31 December 2020: 5.65% to 9.50%) per annum and maturity dates ranging from 29 March 2024 to 28 June 2025 (31 December 2020: 18 January 2023 to 28 June 2025) Analysed as: Non-current portion		401,813

	319,020
		401,813

	319,020

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

14. DEBT INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (continued)

At 30 June 2021, debt instruments at FVTOCI were stated at fair values which were determined based on the quoted market closing prices available on the overseas stock exchanges.

The Group assessed the ECL for debt instruments at FVTOCI by reference to credit rating of the bond investments by rating agencies, macroeconomic factors affecting the respective industry of each issuer, corporate historical default and loss rate and exposure at default of each bond investment. The Group also considered macroeconomic factors and other forward-looking information (such as gross domestic product growth and unemployment rate with adjustment on different scenarios of economic environment prospects) affecting the respective industry of each issuer in the assessment.

The Group provided impairment allowance of HK$15,562,000 (six months ended 30 June 2020: reversal of impairment loss of HK$3,220,000) for the current interim period.

At 30 June 2021, debt securities of HK$319,020,000 (31 December 2020: HK$401,813,000) were pledged as security for credit facilities granted to the Group.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

14. DEBT INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (continued)

The following table shows reconciliation of loss allowance that have been recognised for debt instruments of FVTOCI.

	12-month (“12m”) ECL *HK$’000*	Lifetime ECL (not credit- impaired) *HK$’000*	Total *HK$’000*
At 1 January 2020 (audited) Changes due to financial instruments recognised at 1 January 2020: – Impairment losses recognised – Impairment losses reversed At 31 December 2020 and 1 January 2021 (audited) Changes due to financial instruments recognised at 1 January 2021: – Impairment losses recognised – Impairment losses reversed – Transfer to lifetime ECL At 30 June 2021 (unaudited)	16,541 25,216 (6,343) 35,414 – (1,223) (34,191) –	– – – – 16,785 – 34,191 50,976	16,541 25,216 (6,343) 35,414 16,785 (1,223) – 50,976

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

15. LOAN RECEIVABLES

LOAN RECEIVABLES
	At 30 June 2021 *HK$’000* (Unaudited)	At 31 December 2020 HK$’000 (Audited) 1,821,549 (373,254) 1,448,295 1,448,295 – 1,448,295 1,436,779 11,516 1,448,295
Fixed-rate loan receivables Less: impairment allowance Analysed as: Current portion Non-current portion Analysed as: Secured Unsecured	1,908,107 (420,303) 1,487,804 1,372,724 115,080 1,487,804 1,476,879 10,925 1,487,804

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements For the six months ended 30 June 2021

15. LOAN RECEIVABLES (continued)

At 30 June 2021, the range of interest rates and maturity dates attributed to the Group’s performing loan receivables was 8.5% to 13% (31 December 2020: 10% to 14.25%) per annum and from 4 September 2021 to 27 December 2022 (31 December 2020: 19 February 2021 to 31 May 2021) respectively.

The analysis of the Group’s fixed-rate loan receivables by their respective contractual maturity dates is as follows:

	At 30 June 2021 *HK$’000* (Unaudited)	At 31 December 2020 HK$’000 (Audited)
Fixed-rate loan receivables: Within one year or on demand In more than one year but not more than two years	1,372,724 115,080 1,487,804	1,448,295 –
		1,448,295

The Group provided impairment allowance of HK$35,244,000 (six months ended 30 June 2020: HK$241,265,000) for the current interim period.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements For the six months ended 30 June 2021

15. LOAN RECEIVABLES (continued)

The following table shows reconciliation of loss allowances that have been recognised for loan receivables.

	12m ECL *HK$’000*	Lifetime ECL (not credit- impaired) *HK$’000*	Lifetime ECL (credit- impaired) *HK$’000*	Total *HK$’000*
At 1 January 2020 (audited) Changes due to financial instruments recognised at 1 January 2020: – Impairment losses recognised – Impairment losses reversed – Transfer to lifetime ECL – Unwinding of discount_(Note)_ New financial assets originated or purchased At 31 December 2020 and 1 January 2021 (audited) Changes due to financial instruments recognised at 1 January 2021: – Impairment losses recognised – Impairment losses reversed – Transfer to credit-impaired – Unwinding of discount At 30 June 2021 (unaudited)	719 3,762 (2,117) (10) 2,009 756 5,119 – (1,119) – – 4,000	912 6,156 – – 1,795 – 8,863 – (120) (6,539) – 2,204	152,458 233,730 (39,364) 10 12,438 – 359,272 86,937 (50,454) 6,539 11,805 414,099	154,089 243,648 (41,481) – 16,242 756
				373,254 86,937 (51,693) – 11,805
				420,303

During the current interim period, the changes in loss allowance are mainly contributed by:

(i) loan receivables with gross carrying amount totalling HK$79,112,000 that have become credit-impaired for which lifetime ECL has been provided, resulted in recognition of ECL of HK$15,067,000; and
(ii) loan receivables with gross carrying amount totalling HK$1,098,060,000 that continued to be credit-impaired for which lifetime ECL has been provided, resulted in recognition of ECL of HK$71,870,000.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements For the six months ended 30 June 2021

15. LOAN RECEIVABLES (continued)

The increase in loss allowance mainly reflected the credit-impaired status of the loan receivables during the current period. There are no significant changes to estimation techniques and assumptions made during the period.

Note: During the six months ended 30 June 2020, certain loan receivables were transferred from 12m ECL or lifetime ECL (not credit-impaired) to lifetime ECL (credit-impaired). Due to the improvement of credit risks of the respective loans during the second half of 2020, the credit ratings restored to the same level at the beginning of 2020 and thus the amounts of HK$2,009,000 and HK$1,795,000 were categorised as 12m ECL and lifetime ECL (not credit-impaired) respectively at 31 December 2020 accordingly.

16. DEFERRED TAX (LIABILITIES) ASSETS

For the purpose of presentation in the condensed consolidated statement of financial position, certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances for financial reporting purposes:

	At		At 31 December 2020 HK$’000 (Audited) 27,067 (435,393) (408,326)
	30 June
	2021
	*HK$’000*
	(Unaudited)
Deferred tax assets Deferred tax liabilities
	32,342
	(396,785)

	(364,443)

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements For the six months ended 30 June 2021

16. DEFERRED TAX (LIABILITIES) ASSETS (continued)

The movement of deferred tax (liabilities) assets for the period is as follows:

	Allowance for ECL *HK$’000*	Tax losses *HK$’000*	Temporary difference related to net unrealised gain/loss on financial assets at FVTPL and debt instruments at FVTOCI *HK$’000*	Total *HK$’000*
At 1 January 2020 (audited) Credited (charged) to profit or loss Credited to the other comprehensive income At 31 December 2020 and 1 January 2021 (audited) Credited to profit or loss_(Note 9)_ Credited to the other comprehensive income At 30 June 2021 (unaudited)	8,148 21,648 3,114 32,910 5,275 2,568 40,753	129,084 49,582 – 178,666 29,908 – 208,574	(129,084) (492,912) 2,094 (619,902) (3,662) 9,794 (613,770)	8,148 (421,682) 5,208
				(408,326) 31,521 12,362
				(364,443)

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements For the six months ended 30 June 2021

17. TRADE AND OTHER RECEIVABLES

TRADE AND OTHER RECEIVABLES
	At 30 June 2021 *HK$’000* (Unaudited)	At 31 December 2020 HK$’000 (Audited)
Trade receivables of securities brokerage business: – Cash clients_(Note (i)) – Margin clients(Note (i)) Other receivables(Note (ii)) Note receivable(Note (iii))_	2,614 124,976 20,440 – 148,030	2,941 100,153 26,793 45,600
		175,487

Notes:

(i) For the securities brokerage business, the normal settlement terms of trade receivables from cash clients are two days after trade date. The trade receivables from cash clients and margin clients with carrying amounts of HK$127,590,000 (31 December 2020: HK$103,094,000) were not past due as at the end of the reporting period.

Margin clients are required to pledge securities as collateral to the Group in order to obtain the credit facilities for securities trading. The amount of credit facilities granted to them individually are determined based on a discount on the market value of securities pledged to the Group. Any excess in lending ratio will trigger margin calls for which the clients concerned have to make good the shortfall. At 30 June 2021, the market value of securities pledged by clients to the Group as collateral against margin client receivables was HK$1,681,977,000 (31 December 2020: HK$2,062,243,000).

(ii) Included in other receivables were unrestricted deposits of HK$3,674,000 (31 December 2020: HK$3,433,000) placed with securities brokers. The remaining balance of other receivables represented mainly interest receivables, prepayment and deposits for office use.
(iii) The amount represented the outstanding principal of a convertible note subscribed by the Group, which was originally due for repayment on 15 December 2019. Pursuant to a deed entered into between the relevant parties on 10 February 2020, the conversion rights under the note were removed and the note ceased to be convertible into shares of the issuer. The repayment date of the outstanding principal of the note of HK$49,400,000 was extended from 15 December 2019 to 15 May 2020 and bearing interest at the rate of 12% per annum. During the year ended 31 December 2020, outstanding principal of HK$3,800,000 was settled and the repayment date of the remaining outstanding principal had been further extended to 14 October 2020 and bearing interest at the rate of 16% per annum. The outstanding principal of the note was fully settled during the current interim period.

At 30 June 2021, trade and other receivables of HK$15,999,000 (31 December 2020: HK$66,670,000) were pledged as security for credit facilities granted to the Group.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements For the six months ended 30 June 2021

18. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

	At	At 31 December 2020 HK$’000 (Audited)
	30 June
	2021
	*HK$’000*
	(Unaudited)
Listed investments, at fair value: – Equity securities listed in Hong Kong_(Note (i)) Unlisted investments, at fair value: – Unlisted equity securities(Note (ii))_ Analysed as: Current portion		4,073,317 –

	3,920,422

	300
		4,073,317
	3,920,722
		4,073,317

	3,920,722

Notes:

(i) The fair values of the listed equity securities were determined based on the quoted market closing prices available on the Stock Exchange.

(ii) The fair value was determined with reference to the net asset value of the unlisted equity which is the deemed resale price of the investments.

At 30 June 2021, equity securities of HK$3,920,422,000 (31 December 2020: HK$4,073,317,000) were pledged as security for credit facilities granted to the Group.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements For the six months ended 30 June 2021

19. BANK BALANCES AND CASH/PLEDGED BANK DEPOSITS

	At 30 June 2021 *HK$’000* (Unaudited)	At 31 December 2020 HK$’000 (Audited)
Bank balances and cash: – General accounts and cash_(Note (i)) – Client accounts(Note (ii))_	2,220,339 23,520 2,243,859	2,240,732 36,538
		2,277,270

Notes:

(i) The accounts comprised cash and short-term bank deposits with an original maturity of three months or less held by the Group. The amounts carried interest ranging from 0.01% to 0.26% (31 December 2020: 0.01% to 0.25%) per annum.
(ii) The Group’s securities brokerage business receives and holds money deposited by clients during the course of conducting its regulated activities in its ordinary course of business. Such clients’ monies are maintained in a segregated bank account and the Group has recognised the corresponding account payable to the respective clients.

At 30 June 2021, bank balances and cash of HK$2,313,000 (31 December 2020: HK$109,252,000) were pledged as security for credit facilities granted to the Group.

Pledged bank deposits represented deposits pledged to banks to secure the banking facilities granted to the Group. At 30 June 2021, deposit amounting to HK$3,096,000 (31 December 2020: HK$3,096,000) was pledged to a bank to secure the credit facility for settlement of the securities brokerage activities. The pledged bank deposits will be released upon termination of the credit facility in relation to settlement of the securities brokerage activities and are therefore classified as current assets.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

20. TRADE AND OTHER PAYABLES

TRADE AND OTHER PAYABLES
	At 30 June 2021 *HK$’000* (Unaudited)	At 31 December 2020 HK$’000 (Audited)
Trade payables of securities brokerage business: – Cash clients_(Note) – Margin clients(Note) – Hong Kong Securities Clearing Company Limited (“HKSCC”)(Note)_ Accrued charges and other payables Interest payables	26,454 331 1,309 4,063 19,918 52,075	27,142 12,305 924 7,653 20,216
		68,240

Note: For securities brokerage business, the normal settlement terms of trade payables to cash and margin clients and HKSCC are two days after trade date.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements For the six months ended 30 June 2021

21. BORROWINGS

BORROWINGS
	At	At 31 December 2020 HK$’000 (Audited)
	30 June
	2021
	*HK$’000*
	(Unaudited)
Short-term secured borrowing_(Note)_ An analysis of the Group’s borrowings is as follows:		355,000
	350,000
		At 31 December 2020 HK$’000 (Audited)
	At
	30 June
	2021
	*HK$’000*
	(Unaudited)
Fixed-rate borrowings Variable-rate borrowings		350,000 5,000
	350,000
	–
		355,000
	350,000

Note: The amount of HK$350,000,000 (31 December 2020: HK$350,000,000) carried interest at 7% per annum and was repayable within one year. The loan agreement of the borrowings contains a repayment on demand clause. The borrowings were secured by two share charges each charging over the issued share of a wholly-owned subsidiary of the Company and two debentures each incorporating a first floating charge over all the assets of a wholly-owned subsidiary of the Company.

At 31 December 2020, the amount of HK$5,000,000 carried interest at Hong Kong Interbank Offered Rate plus certain basis points per annum and was repayable within one year. The loan agreement of the borrowings contained a repayment on demand clause. The borrowings were secured by certain debt securities and were settled during current interim period.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements For the six months ended 30 June 2021

22. NOTES PAYABLE

The movement of the unsecured notes payable for the period is as follows:

	At 30 June 2021 *HK$’000* (Unaudited)	At 31 December 2020 HK$’000 (Audited) 1,253,171 (1,250,000) 1,628,553 146,611 (129,458) – 1,648,877 1,170,725 478,152 1,648,877
At the beginning of the period/year Redemption of notes_(Note (i)) Issue of notes(Note (ii)) Effective interest charged(Note 8) Interest paid Gain on non-substantial modification(Note (ii))_ At the end of the period/year Analysed as: Current portion Non-current portion	1,648,877 – – 60,713 (28,017) (16,409) 1,665,164 1,180,235 484,929 1,665,164

Notes:

(i) In December 2016, the Company issued 2-year unsecured notes (the “2016 Notes”) with nominal value of HK$1,500,000,000 denominated in Hong Kong dollars. The interest for the 2016 Notes was 7.00% per annum and 8.00% per annum for the first and second year respectively, and the effective interest rate of the 2016 Notes was 8.57% per annum. In December 2018, the 2016 Notes of nominal value of HK$200,000,000 were redeemed. The Company executed a supplemental deed poll to extend the maturity date of the remaining 2016 Notes with nominal value of HK$1,300,000,000 for further two years to 16 December 2020. The interest for the 2016 Notes was 9.50% per annum and 10.00% per annum for the third and fourth year respectively, and the effective interest rate of the 2016 Notes was 9.74% per annum. The 2016 Notes carried option for the Company to early redeem the notes, by giving not less than 15 days’ nor more than 30 days’ notice to the noteholders on the third anniversary date and/or 16 June 2020, in whole or in part at 100% of the principal amount outstanding, together with interest accrued and unpaid at the date fixed for redemption. During the years ended 31 December 2020 and 2019, the 2016 Notes of nominal value of HK$50,000,000 and HK$250,000,000 were early redeemed, respectively. In December 2020, the remaining 2016 Notes with nominal value of HK$1,000,000,000 were redeemed at maturity.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements For the six months ended 30 June 2021

22. NOTES PAYABLE (continued)

Notes: (continued)

In August 2018, the Company issued a new tranche of 2-year unsecured notes (the “2018 Notes”) with nominal value of HK$200,000,000 denominated in Hong Kong dollars. The interest for the 2018 Notes was 9.50% per annum and 10.00% per annum for the first and second year respectively, and the effective interest rate of the 2018 Notes was 9.74% per annum. The 2018 Notes carried an option for the Company to early redeem the notes, by giving early redemption notice to the noteholders on the first anniversary date, in whole or in part at 100% of the principal amount outstanding, together with interest accrued and unpaid at the date fixed for redemption. In August 2020, the 2018 Notes with nominal value of HK$200,000,000 were redeemed at maturity.

(ii) During the year ended 31 December 2020, the Company issued a series of unsecured notes to a company controlled by a shareholder of the Company.

In July 2020, the Company issued 2-year unsecured notes with nominal value of HK$500,000,000 denominated in Hong Kong dollars. The interest for the notes was 5.50% per annum with effective interest rate of 8.56% per annum.

In August 2020, the Company issued 1-year unsecured notes with nominal value of HK$500,000,000 denominated in Hong Kong dollars. The interest for the notes was 3.00% per annum with effective interest rate of 6.98% per annum.

In September 2020, the Company issued 270-day unsecured notes with nominal value of HK$500,000,000 denominated in Hong Kong dollars. The interest for the notes was 2.00% per annum with effective interest rate of 6.56% per annum.

In October 2020, the Company issued 270-day unsecured notes with nominal value of HK$200,000,000 denominated in Hong Kong dollars. The interest for the notes was 2.00% per annum with effective interest rate of 7.48% per annum.

All four notes carry option for the Company to early redeem the notes, by giving not less than 15 days’ notice to the noteholders, in whole or in part at 100% of the principal amount outstanding, together with interest accrued and unpaid at the date fixed for redemption. Early redemption options of the Company are regarded as embedded derivatives not closely related to the host contract. The directors of the Company considered that the fair values of the early redemption options are insignificant on their respective initial recognition dates and at the end of the reporting periods. The difference between the aggregate consideration received of HK$1,700,000,000 and the aggregate fair value of the four notes of approximately HK$1,628,553,000, amounting to HK$71,447,000, was recognised as shareholder’s contribution reserve in the consolidated statement of changes in equity.

In June 2021, the Company executed a supplemental deed poll to extend the maturity date of the 270-day notes issued in September 2020 with nominal value of HK$500,000,000 for 270 days to 15 March 2022. The interest for the extended notes was 2% per annum with effective interest rate of 6.56% per annum. The extension of the abovementioned notes is considered a non-substantial modification of financial liability and a modification gain amounting to HK$16,409,000 was recognised as shareholder’s contribution reserve in the condensed consolidated statement of changes in equity.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements For the six months ended 30 June 2021

23. SHARE CAPITAL OF THE COMPANY

SHARE CAPITAL OF THE COMPANY
	Number of shares *’000*	Share capital *HK$’000* 3,012,877 203,852 (619) 3,216,110
Issued and fully paid: At 1 January 2020 and 30 June 2020 Issue of shares Transaction costs attributable to issue of shares At 1 January 2021 and30 June 2021	16,987,714 3,397,540 – 20,385,254

24. PLEDGE OF ASSETS

The fixed-rate borrowings were secured by two share charges each charging over the issued share of a wholly-owned subsidiary of the Company and two debentures each incorporating a first floating charge over all the assets of a wholly-owned subsidiary of the Company. At 30 June 2021, assets subject to the first floating charge were property, plant and equipment of HK$15,443,000 (31 December 2020: HK$17,042,000), club debentures of HK$1,453,000 (31 December 2020: HK$1,453,000), debt securities of HK$319,020,000 (31 December 2020: HK$380,571,000), trade and other receivables of HK$15,999,000 (31 December 2020: HK$66,670,000), equity securities of HK$3,920,422,000 (31 December 2020: HK$4,073,317,000) and bank balances and cash of HK$2,313,000 (31 December 2020: HK$109,252,000).

At 31 December 2020, debt securities of HK$21,242,000 were pledged for variable-rate borrowings.

In addition, as disclosed in Note 19, the Group’s credit facilities for settlement of the securities brokerage activities were secured by the Group’s bank deposits of HK$3,096,000 (31 December 2020: HK$3,096,000).

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements For the six months ended 30 June 2021

25. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

Fair value measurements and valuation processes

The directors of the Company have closely monitored and determined the appropriate valuation techniques and inputs for fair value measurements.

In estimating the fair value of an asset or a liability, the Group uses market observable data to the extent it is available.

Information about the valuation techniques and inputs used in determining the fair value of various assets are disclosed below.

Fair value of the Group’s financial assets that are measured at fair value on a recurring basis

Some of the Group’s financial assets are measured at fair value at the end of each reporting period. The fair values of these financial assets are determined (in particular, the valuation technique(s) and inputs used), as well as the level of the fair value hierarchy into which the fair value measurements are categorised (Level 1 to 3), based on the degree to which the inputs to the fair value measurements is observable.

Level 1 fair value measurements are based on quoted prices (unadjusted) in active market for identical assets;
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset that are not based on observable market data (unobservable inputs).

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements For the six months ended 30 June 2021

25. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS (continued)

			Fair value	Valuation technique(s)
Financial assets	Fair value at 30 June 31 December		hierarchy	and key input(s)
	2021	2020
	*HK$’000*	HK$’000
	(Unaudited)	(Audited)
1) Financial assets at FVTPL
Listed equity securities	3,920,422	4,073,317	Level 1	Quoted market closing prices in
				an active market
Unlisted equity securities	300	–	Level 3	The fair value was determined
				with reference to the net asset
				value of the unlisted equity
				which is the deemed resale
2) Debt instruments at FVTOCI				price of the investments_(Note)_
Listed debt securities	319,020	401,813	Level 1	Quoted market closing prices in
				an active market

Note: In the opinion of the directors of the Company, the fluctuations in the key unobservable inputs in determining the fair value of the unlisted equity securities are not significant to the Group, accordingly, no sensitivity analysis is presented.

There was no transfer between Level 1, 2 and 3 for the period ended 30 June 2021.

Fair value of financial assets and financial liabilities that are not measured at fair value on a recurring basis

The directors of the Company considered that the carrying amounts of financial assets and liabilities recognised in the condensed consolidated financial statements approximated their fair values.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Notes to the Condensed Consolidated Financial Statements For the six months ended 30 June 2021

26. RELATED PARTY DISCLOSURES

Compensation of key management personnel

The remuneration of directors, who are the key management personnel of the Group, is as follows:

	Six months ended 30 June 2021 2020 *HK$’000* HK$’000 (Unaudited) (Unaudited)	Six months ended 30 June 2021 2020 *HK$’000* HK$’000 (Unaudited) (Unaudited)
Short-term benefits Post-employment benefits	4,063 94 4,157	3,163 85
		3,248

The remuneration of directors is determined by the Remuneration Committee having regard to the competence, performance and experience of the individuals and the prevailing market terms.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Other Information

INTERIM DIVIDEND

The Board has resolved not to declare an interim dividend for the six months ended 30 June 2021 (30 June 2020: nil).

DIRECTORS’ INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES

As at 30 June 2021, none of the directors or chief executive of the Company had registered an interest or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) that was required to be recorded pursuant to section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.

SHARE OPTION SCHEME

The existing share option scheme of the Company (the “Share Option Scheme”) was adopted by the Company at the annual general meeting of the Company held on 29 June 2020 and the previous share option scheme of the Company adopted on 10 June 2011 (the “2011 Share Option Scheme”) was terminated on the same date. Unless otherwise cancelled or amended, the Share Option Scheme will be valid and effective for a period of ten years commencing on the date of adoption. The purpose of the Share Option Scheme is to enable the Company to grant options to participants as incentives or rewards for their contribution to the Company and/or subsidiaries of the Company.

In the annual general meeting of the Company held on 28 June 2021, the shareholders of the Company approved the refreshment of the scheme mandate limit (the “Scheme Mandate Limit Refreshment”). The total number of shares of the Company available for issue under the Share Option Scheme is 2,038,525,383 shares, representing approximately 10% of the issued shares of the Company as at the date of approval of the Scheme Mandate Limit Refreshment and the date of this interim report.

No share options were granted, exercised, cancelled or lapsed during the six months ended 30 June 2021 and 2020 and no share options were outstanding as at 30 June 2021 and 2020.

Further details of the Share Option Scheme and the 2011 Share Option Scheme were set out in the Company’s 2020 Annual Report and 2019 Annual Report respectively.

DIRECTORS’ RIGHTS TO ACQUIRE SHARES OR DEBENTURES

Save for the share option scheme of the Company as mentioned above, at no time during the six months ended 30 June 2021 was the Company or any of its subsidiaries a party to any arrangements to enable the directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate, and none of the directors of the Company or their spouse or minor children had any rights to subscribe for the securities of the Company, or had exercised any such rights during the period.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Other Information

INTERESTS AND SHORT POSITIONS OF SHAREHOLDERS DISCLOSEABLE UNDER THE SFO

As at 30 June 2021, the following interests of more than 5% of the issued shares of the Company were recorded in the register of interests required to be kept by the Company pursuant to section 336 of the SFO.

Long positions in the shares of the Company:

			Approximate
			percentage of
	Capacity and	Number of	the Company’s
Name of shareholder	nature of interest	shares held	issued shares
			(Note (i))
Dr. Cheng Kar-Shun, Henry_GBM, GBS_	Interest of controlled	3,397,540,000	16.67%
(“Dr. Cheng”)	corporation	(Note (ii))
Courage Star Global Limited	Beneficial owner	3,397,540,000	16.67%
(“Courage Star”)		(Note (ii))
Mr. Suen Cho Hung, Paul (“Mr. Suen”)	Interest of controlled	1,680,000,000	8.24%
	corporation	(Note (iii))
Pioneer Success Development Limited	Beneficial owner	1,680,000,000	8.24%
(“Pioneer Success”)		(Note (iii))

Notes:

(i) The approximate percentage of the Company’s issued shares was calculated on the basis of 20,385,253,835 shares of the Company in issue as at 30 June 2021.
(ii) These shares were held by Courage Star, which in turn was wholly owned by Dr. Cheng. Accordingly, Dr. Cheng and Courage Star were deemed to be interested in 3,397,540,000 shares of the Company under the SFO.
(iii) These shares were held by Pioneer Success, which in turn was wholly owned by Mr. Suen. Accordingly, Mr. Suen and Pioneer Success were deemed to be interested in 1,680,000,000 shares of the Company under the SFO.

The interests of Dr. Cheng and Courage Star in 3,397,540,000 shares of the Company referred to in Note (ii) above related to the same parcel of shares.

The interests of Mr. Suen and Pioneer Success in 1,680,000,000 shares of the Company referred to in Note (iii) above related to the same parcel of shares.

Save as disclosed above, the Company had not been notified of any other relevant interests or short positions in the shares and underlying shares of the Company as at 30 June 2021 as required pursuant to section 336 of the SFO.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Other Information

CORPORATE GOVERNANCE

The Company has complied with all the applicable code provisions of the Corporate Governance Code as set out in Appendix 14 to the Listing Rules for the six months ended 30 June 2021.

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS OF LISTED ISSUERS

The Company has adopted the Model Code as its own code of conduct regarding securities transactions by the directors of the Company. Having made specific enquiry with the directors, all of them confirmed that they have complied with the required standards set out in the Model Code during the six months ended 30 June 2021.

UPDATES ON DIRECTORS’ INFORMATION

The following is updated information of the Directors required to be disclosed pursuant to Rule 13.51B(1) of the Listing Rules since the date of the Company’s last published annual report up to 26 August 2021, being the date of this interim report:

Dr. Or Ching Fai has been appointed as an independent non-executive director of Playmates Holdings Limited (HKEX stock code: 635) (a company listed on the Main Board of the Stock Exchange) on 21 May 2021.
Mr. Sue Ka Lok resigned as an executive director of PT International Development Corporation Limited (HKEX stock code: 372) (a company listed on the Main Board of the Stock Exchange) on 6 July 2021.

REVIEW OF INTERIM FINANCIAL INFORMATION

The Group’s condensed consolidated financial statements for the six months ended 30 June 2021 have not been audited, but have been reviewed by the Audit Committee and the Company’s auditor, Deloitte Touche Tohmatsu, in accordance with Hong Kong Standard on Review Engagements 2410, “ Review of Interim Financial Information Performed by the Independent Auditor of the Entity ” issued by the Hong Kong Institute of Certified Public Accountants. The report on review of interim financial information by the auditor is set out on page 15 of this interim report.

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

Other Information

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

During the six months ended 30 June 2021, neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company’s listed securities.

By Order of the Board

Dr. Or Ching Fai Chairman

Hong Kong, 26 August 2021

CHINA STRATEGIC HOLDINGS LIMITED • 2021 INTERIM REPORT

AI assistant

Hony Media Group — Interim / Quarterly Report 2021

49204_rns_2021-09-28_359599b5-6ac2-4954-892e-bdba247ec3c5.pdf

Contents

Abbreviations

Corporate Information

BOARD OF DIRECTORS

Non-executive Director

COMPANY SECRETARY

REGISTERED OFFICE

Executive Directors

Independent Non-executive Directors

AUDIT COMMITTEE

PRINCIPAL BANKERS

LEGAL ADVISERS

REMUNERATION COMMITTEE

NOMINATION COMMITTEE

AUDITOR

SHARE REGISTRAR AND TRANSFER OFFICE

EXECUTIVE COMMITTEE

INVESTMENT & CREDIT COMMITTEE

TRADING OF SHARES

WEBSITE

Management Discussion and Outlook

BUSINESS REVIEW

Investment in Securities

Management Discussion and Outlook

Financial assets at FVTPL

Management Discussion and Outlook

Management Discussion and Outlook

Management Discussion and Outlook

Unrealised gain (loss) recognised for the six months ended 30 June 2021 for the financial assets at FVTPL held by the Group at 30 June 2021 together with information on financial performance of the investee companies and their future prospects

Extracted from published financial information of the investee companies.

Management Discussion and Outlook

Debt instruments at FVTOCI

Management Discussion and Outlook

Trading

Money Lending

Management Discussion and Outlook

Securities Brokerage

Management Discussion and Outlook

Overall Results

FINANCIAL REVIEW

Liquidity, Financial Resources and Capital Structure

Management Discussion and Outlook

Foreign Currency Management

Contingent Liability

Pledge of Assets

Management Discussion and Outlook

Capital Commitment

HUMAN RESOURCES AND REMUNERATION POLICY

PROSPECTS

Report on Review of Interim Financial Information

TO THE BOARD OF DIRECTORS OF CHINA STRATEGIC HOLDINGS LIMITED 中策集團有限公司

Introduction

Scope of review

Conclusion

Deloitte Touche Tohmatsu

Condensed Consolidated Statement of Financial Position

Condensed Consolidated Statement of Changes in Equity

Condensed Consolidated Statement of Cash Flows

1. BASIS OF PREPARATION

2. PRINCIPAL ACCOUNTING POLICIES

Application of amendments to Hong Kong Financial Reporting Standards (“HKFRSs”)

Notes to the Condensed Consolidated Financial Statements

3. REVENUE

4. SEGMENT INFORMATION

Notes to the Condensed Consolidated Financial Statements

4. SEGMENT INFORMATION (continued)

Segment revenue and results

4. SEGMENT INFORMATION (continued)

Segment assets and liabilities

Notes to the Condensed Consolidated Financial Statements

5. OTHER INCOME

6. OTHER LOSS

7. NET (LOSS) GAIN ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

8. FINANCE COSTS

9. INCOME TAX CREDIT (EXPENSE)

10. (LOSS) PROFIT FOR THE PERIOD

11. DIVIDEND

Hony Media Group Interim / Quarterly Report 2021