PegBio Co., Ltd. — Interim / Quarterly Report 2019

Aug 26, 2019

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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CMBC CAPITAL HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 1141)

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2019

The board (the “ Board ”) of directors (the “ Directors ”) of CMBC Capital Holdings Limited (the “ Company ”) is pleased to announce the unaudited condensed consolidated results of the Company and its subsidiaries (collectively referred to as the “ Group ”) for the six months ended 30 June 2019 (the “ Reporting Period ”) together with comparative figures as follows:

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CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

For the six months ended 30 June 2019

Notes Revenue 4 Net gains/(losses) on financial assets at fair value through profit or loss Net losses on financial assets at fair value through other comprehensive income Other income 5 Other gains and losses 6 Impairment losses 7 Staff costs Depreciation and amortisation Other operating expenses Finance costs 8 Profit before taxation 9 Taxation 10 Profit for the period attributable to owners of the Company Earnings per share attributable to owners of the Company (HK cents) 11 – Basic – Diluted

Six months ended 30 June 2019 30 June 2018 HK$’000 HK$’000 (Unaudited) (Unaudited) 447,101 344,075 22,177 (44,560) (10,714) (5,257) 3,017 3,311 (4,823) 3,829 (22,642) (19,186) (45,738) (33,472) (15,897) (1,344) (29,540) (28,454) (167,234) (109,423) 175,707 109,519 (25,392) (9,114) 150,315 100,405 0.32 0.22 0.32 0.22

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CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended 30 June 2019

Profit for the period attributable to owners of the Company Other comprehensive income/(loss) Item that will not be reclassified to profit or loss: – Equity investments at fair value through other comprehensive income – net movement in fair value reserve (non-recycling) Item that may be reclassified subsequently to profit or loss: – Financial assets at fair value through other comprehensive income – net movement in fair value reserve (recycling) Other comprehensive income/(loss) for the period, net of tax Total comprehensive income/(loss) for the period attributable to owners of the Company

Six months ended 30 June 2019 30 June 2018 HK$’000 HK$’000 (Unaudited) (Unaudited) 150,315 100,405 41,642 (47,119) 158,248 (221,761) 199,890 (268,880) 350,205 (168,475)

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CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 30 June 2019

Notes Non-current assets Property, plant and equipment Right-of-use asset Goodwill Loans and advances 13 Intangible assets Deferred tax assets Other assets Current assets Accounts receivable 14 Prepayments, deposits and other receivables Interest receivable Amount due from an intermediate holding company Loans and advances 13 Financial assets at fair value through other comprehensive income 15 Financial assets at fair value through profit or loss 16 Cash and bank balances – Segregated accounts – House accounts	As at 30 June 2019 HK$’000 (Unaudited) 12,043 128,463 16,391 463,077 4,160 620 10,079 634,833 715,992 19,399 95,622 – 2,486,173 4,963,638 1,144,569 40,405 361,210 9,827,008	As at 31 December 2018 HK$’000 (Audited) 3,130 – 16,391 880,260 4,845 922 10,183 915,731 1,228,278 30,383 67,648 243 3,114,777 3,006,050 1,056,979 134,047 887,579 9,525,984

– 4 –

Notes Current liabilities Accounts payable 17 Other payables and accruals Amount due to an intermediate holding company Bank and other borrowings 18 Notes payable Financial assets sold under repurchase agreements 19 Financial liabilities at fair value through profit or loss 20 Lease liabilities Dividend payable Tax payable Net current assets Total assets less current liabilities Non-current liabilities Lease liabilities Notes payable Deferred tax liabilities Net assets Capital and reserves Share capital 21 Reserves Total equity	As at 30 June 2019 HK$’000 (Unaudited) 71,501 102,359 4,001 5,367,668 99,634 2,337,551 22,526 19,400 95,407 47,002 8,167,049 1,659,959 2,294,792 107,370 50,000 7,885 165,255 2,129,537 477,036 1,652,501 2,129,537	As at 31 December 2018 HK$’000 (Audited) 369,693 58,683 – 6,653,340 99,216 1,170,680 130,149 – – 25,925 8,507,686 1,018,298 1,934,029 – 50,000 7,953 57,953 1,876,076 477,059 1,399,017 1,876,076

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NOTES:

1 BASIS OF PREPARATION

This interim financial report has been prepared in accordance with the applicable disclosure provisions of the Rules Governing the Listing of Securities of The Stock Exchange of Hong Kong Limited (the “ Listing Rules ”), including compliance with Hong Kong Accounting Standard 34 (“ HKAS 34 ”), interim financial reporting, issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”). It was authorised for issue on 26 August 2019.

The interim financial report has been prepared in accordance with the same accounting policies adopted in the 2018 annual financial statements, except for the accounting policy changes that are expected to be reflected in the 2019 annual financial statements. Details of any changes in accounting policies are set out in note 2.

2 CHANGES IN ACCOUNTING POLICIES

(a) Overview

The HKICPA has issued a new HKFRS, HKFRS 16 Leases , and amendments to the HKFRSs that are first effective for the current accounting period of the Group. The Group has adopted HKFRS 16 retrospectively from 1 January 2019, but has not restated comparatives for the 2018 reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening condensed consolidated statement of financial position on 1 January 2019.

Other than the above, none of the new HKFRSs have material impact on the Group’s condensed consolidated financial statements. The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period.

(b) HKFRS 16, Leases

On adoption of HKFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principles of HKAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of 1 January 2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 4.5%.

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(i) Adjustments recognized on adoption of HKFRS 16

The measurement of lease liabilities is as follows:

Operating lease commitments disclosed as at 31 December 2018 Discounted using the lessee’s incremental borrowing rate at the date of initial application Less: short-term leases recognised on a straight-line basis as expense Lease liabilities recognised as at 1 January 2019 Of which are: Current lease liabilities Non-current lease liabilities	2019 HK$’000 163,522
	140,925 (5,783)
	135,142
	21,840 113,302
	135,142

The change in accounting policy affected the following items in the condensed consolidated statement of financial position on 1 January 2019:

• right-of-use asset – increase by HK$140,142,000

• lease liabilities – increase by HK$135,142,000

• other payables and accruals – increase by HK$5,000,000

(ii) The Group’s leasing activities and how these are accounted for

The Group leases various offices and office rental contracts are typically made for fixed periods of 3 to 6 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.

Until the 2018 financial year, leases of property were classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line basis over the period of the lease.

From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.

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Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value fixed payments (including in-substance fixed payments), less any lease incentives receivable.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.

Right-of-use assets are measured at cost comprising the following:

• the amount of the initial measurement of lease liability;

• any lease payments made at or before the commencement date less any lease incentives received;

• any initial direct costs, and

• restoration costs.

Payments associated with short-term leases are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.

3 SEGMENT INFORMATION

In a manner consistent with the way in which information is reported internally to the Group’s management, being the chief operating decision makers, for the purpose of resources allocation and assessment of segment performance focusing on types of services provided:

• the securities segment representing the business line of provision of brokerage services, securities margin financing services, futures and options contracts dealing services to clients and securities underwriting/placing;

• the investment and financing segment representing investment and trading activities in equity securities, futures, bonds, funds and provision of loan financing services; and

• the asset management, corporate finance and advisory segment representing provision of asset management services, sponsorship, financial advisory and financial arrangement services to clients.

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Disaggregation of revenue

Disaggregation of revenue from contracts with customers by service lines is as follows:

Revenue from contracts with customers within the scope of HKFRS 15 Disaggregated by service lines – Commission income from brokerage and related services – Commission income from underwriting, sub-underwriting, placing and sub-placing – Financing advisory, sponsorship, arrangement fee and other service income – Asset management fee income Revenue from other sources – Interest income from debt securities investments – Interest income from FVTPL investments – Interest income from provision of finance and securities margin financing – Dividend income and other investment income

Six months ended 30 June 2019 30 June 2018 HK$’000 HK$’000 937 1,447 23,610 15,155 33,509 107,251 15,252 9,635 73,308 133,488 127,940 81,945 26,190 – 194,667 98,418 24,996 30,224 373,793 210,587 447,101 344,075

The Group’s revenue from continuing operation from external customers are located in Hong Kong.

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Disaggregation of revenue

Disaggregation of revenue is set out below.

For the six months ended Disaggregated by timing of revenue recognition within the scope of HKFRS 15 Point in time Over time Revenue from other sources – Interest income from debt securities investments – Interest income from FVTPL investments – Interest income from provision of finance and securities margin financing – Dividend income and other investment income Reportable segment revenue	Securities 30 June 2019 30 June 2018 (Restated) HK$’000 HK$’000 23,272 19,958 4,359 11,484 27,631 31,442 – – – – 33,973 26,559 – – 33,973 26,559 61,604 58,001	Investment and financing 30 June 2019 30 June 2018 (Restated) HK$’000 HK$’000 – – – – – – 127,940 81,945 26,190 – 160,694 71,859 24,996 30,224 339,820 184,028 339,820 184,028	Asset management, corporate finance and advisory 30 June 2019 30 June 2018 HK$’000 HK$’000 29,637 91,641 16,040 10,405 45,677 102,046 – – – – – – – – – – 45,677 102,046	Total 30 June 2019 30 June 2018 (Restated) HK$’000 HK$’000 52,909 111,599 20,399 21,889 73,308 133,488 127,940 81,945 26,190 – 194,667 98,418 24,996 30,224 373,793 210,587 447,101 344,075	Total 30 June 2019 30 June 2018 (Restated) HK$’000 HK$’000 52,909 111,599 20,399 21,889 73,308 133,488 127,940 81,945 26,190 – 194,667 98,418 24,996 30,224 373,793 210,587 447,101 344,075
					133,488
					81,945 – 98,418 30,224
					210,587
					344,075

Certain amounts for the prior period have been restated to reclassify revenues generated from other sources in relation to the securities segment and the investment and financing segment.

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Segment revenue and results

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

Segment revenue and investment gains/(losses) – Revenue from external customers – Net gains on financial assets at fair value through profit or loss – Net losses on financial assets at fair value through other comprehensive income Segment results Unallocated other income Unallocated other gains and losses Unallocated expenses Unallocated finance costs Profit before taxation Taxation Profit for the period	Six months ended 30 June 2019	Six months ended 30 June 2019	Six months ended 30 June 2019
	Securities Investment and financing Asset management, corporate finance and advisory			Total
	HK$’000	HK$’000	HK$’000	HK$’000
	61,604	339,820	45,677	447,101
	–	22,177	–	22,177
	–	(10,714)	–	(10,714)
	61,604	351,283	45,677	458,564
	42,778	156,182	17,513	216,473
				989
				(4,623)
				(27,926)
				(9,206)
				175,707
				(25,392)
				150,315

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Six months ended 30 June 2018

Segment revenue and investment gains/(losses) – Revenue from external customers – Net losses on financial assets at fair value through profit or loss – Net losses on financial assets at fair value through other comprehensive income Segment results Unallocated other income Unallocated other gains and losses Unallocated expenses Unallocated finance costs Profit before taxation Taxation Profit for the period	Securities HK$’000 58,001 – – 58,001 22,905	Investment and financing HK$’000 184,028 (44,560) (5,257) 134,211 21,183	Asset management, corporate finance and advisory HK$’000 102,046 – – 102,046 84,352	Total HK$’000 344,075 (44,560) (5,257) 294,258 128,440 256 5,655 (11,204) (13,628) 109,519 (9,114) 100,405

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Segment assets and liabilities

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

Assets Segment assets Unallocated assets – Property, plant and equipment – Right-of-use asset – Prepayments, deposits and other receivables – Cash and bank balances Total Liabilities Segment liabilities Unallocated liabilities – Other payables and accruals – Notes payable – Deferred tax liabilities – Lease liabilities – Tax payable – Dividend payable Total	As at 30 June 2019
	Securities Investment and financing Asset management, corporate finance and advisory	Total
	HK$’000 HK$’000 HK$’000	HK$’000
	937,957 9,239,018 54,150	10,231,125
		11,929
		128,463
		17,457
		72,867
		230,716
		10,461,841
	537,082 7,374,817 12,646	7,924,545
		29,423
		149,634
		1,858
		126,770
		4,667
		95,407
		407,759
		8,332,304

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As at 31 December 2018

As at 31 December 2018
Securities Investment and financing Asset management, corporate finance and advisory HK$’000 HK$’000 HK$’000 Assets Segment assets 1,744,932 8,396,156 62,630 Unallocated assets – Property, plant and equipment – Prepayments, deposits and other receivables – Amount due from an intermediate holding company – Cash and bank balances Total Liabilities Segment liabilities 861,710 7,519,121 13,971 Unallocated liabilities – Other payables and accruals – Notes payable – Deferred tax liabilities – Tax payable Total	Total HK$’000 10,203,718 2,897 19,617 243 215,240
	237,997
	10,441,715
	8,394,802 15,028 149,216 1,926 4,667
	170,837
	8,565,639

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4 REVENUE

Commission income from brokerage and related services Commission income from underwriting, sub-underwriting, placing and sub-placing Interest income from debt securities investments Interest income from FVTPL investments Interest income from provision of finance and securities margin financing Dividend income and other investment income Financing advisory, sponsorship, arrangement fee and other service income Asset management fee income

Six months ended 30 June 2019 30 June 2018 HK$’000 HK$’000 937 1,447 23,610 15,155 127,940 81,945 26,190 – 194,667 98,418 24,996 30,224 33,509 107,251 15,252 9,635 447,101 344,075

5 OTHER INCOME

Bank interest income Office sharing fee income Other income	Six months ended 30 June 2019 30 June 2018 HK$’000 HK$’000 424 1,283 740 – 1,853 2,028 3,017 3,311

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6 OTHER GAINS AND LOSSES

Loss on disposal of property, plant and equipment Net exchange (loss)/gain	Six months ended 30 June 2019 30 June 2018 HK$’000 HK$’000 (134) – (4,689) 3,829 (4,823) 3,829

7 IMPAIRMENT LOSSES

Impairment losses – Loans and advances – Accounts receivable – Financial assets at fair value through other comprehensive income	Six months ended 30 June 2019 30 June 2018 HK$’000 HK$’000 642 6,324 – 1,708 22,000 11,154 22,642 19,186

8 FINANCE COSTS

Interest expense on: Notes payable Bank borrowings Loans from an intermediate holding company Financial assets sold under repurchase agreements Lease liabilities	Six months ended 30 June 2019 30 June 2018 HK$’000 HK$’000 4,137 4,118 2,027 9,510 131,892 84,223 26,137 11,572 3,041 – 167,234 109,423

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9 PROFIT BEFORE TAXATION

The Group’s profit before taxation is arrived at after charging: Depreciation of property, plant and equipment Depreciation of right-of-use asset Amortisation of intangible assets Minimum lease payments in respect of land and buildings	Six months ended 30 June 2019 30 June 2018 HK$’000 HK$’000 3,533 658 11,678 – 686 686 6,043 6,043

10 TAXATION

Current period – Hong Kong Profits Tax Deferred tax (provided)/credited for the period	Six months ended 30 June 2019 30 June 2018 HK$’000 HK$’000 (25,181) (9,630) (211) 516 (25,392) (9,114)

Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profit for both periods.

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11 EARNINGS PER SHARE

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

Earnings Profit attributable to owners of the Company for the purpose of basic and diluted earnings per share Number of shares Weighted average number of ordinary shares for the purpose of basic and diluted earnings per share	Six months ended 30 June 2019 30 June 2018 HK$’000 HK$’000 150,315 100,405 Six months ended 30 June 2019 30 June 2018 ’000 ’000 47,705,863 45,778,756

The denominators used are the same as those detailed above for the basic and diluted earnings per share.

12 DIVIDENDS

The Board of Directors does not recommend the payment of interim dividend for the six months ended 30 June 2019 (30 June 2018: Nil).

The final dividend of HK0.2 cents per share for the year ended 31 December 2018 had been approved by the shareholders of the Company on 28 June 2019 and was paid on 26 July 2019 in an aggregated amount of approximately HK$95,407,000.

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13 LOANS AND ADVANCES

Loans and advances Less: Allowance for expected credit losses Less: Amount due within one year shown under current assets Amount shown under non-current assets Analysed as: Loans and advances (non-current) Less: Allowance for expected credit losses Loans and advances (current) Less: Allowance for expected credit losses	As at 30 June 2019 HK$’000 2,978,081 (28,831) 2,949,250 (2,486,173) 463,077 463,352 (275) 463,077 2,514,729 (28,556) 2,486,173	As at 31 December 2018 HK$’000 4,023,226 (28,189) 3,995,037 (3,114,777) 880,260 883,044 (2,784) 880,260 3,140,182 (25,405) 3,114,777

At 30 June 2019, loans and advances included loans to independent third parties with effective interest rates ranging from 6% to 14% (31 December 2018: 5% to 13%) per annum. Certain loans and advances were secured and/or backed by guarantees or collaterals. Regular reviews on these loans are conducted by the risk management department based on the latest status of these loans, and the latest available information about the borrowers and the underlying collaterals held.

During the period ended 30 June 2019, allowance for expected credit losses of HK$642,000 was recognised (for the six months ended 30 June 2018: HK$6,324,000) in the condensed consolidated statement of profit or loss. One of the borrowers has been assessed by management to be individually impaired and an allowance for expected credit losses of HK$24,837,000 has been provided at 30 June 2019 (31 December 2018: HK$24,187,000).

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14 ACCOUNTS RECEIVABLE

Accounts receivable arising from the ordinary course of business of securities brokerage, futures and options dealing services: – Clearing houses – Cash clients – Margin clients Accounts receivable arising from the ordinary course of business of securities underwriting Accounts receivable arising from the ordinary course of business of advisory services Less: Allowance for expected credit losses	As at 30 June 2019 HK$’000 3,068 – 700,032 703,100 11,937 3,000 718,037 (2,045) 715,992	As at 31 December 2018 HK$’000 119 235,100 971,772 1,206,991 20,915 2,417 1,230,323 (2,045) 1,228,278

Accounts receivable arising from the business of dealing in securities

The normal settlement terms of accounts receivable from clients and clearing houses, except for accounts receivable due from margin clients, arising from the ordinary course of business of securities brokerage services are two trading days after the trade date. No ageing analysis is disclosed as, in the opinion of directors of the Company, an ageing analysis does not give additional value in view of the nature of this business. As at 30 June 2019, the Group has concentration risk on its accounts receivable as the balance with the largest client represent 30% (31 December 2018: 17%) of the total accounts receivable from cash and margin clients. The Group has no other significant concentration risk.

Accounts receivable due from margin clients are repayable on demand and carry interest ranging from Hong Kong Prime Rate to Hong Kong Prime Rate plus 12.75% per annum during the six months ended 30 June 2019 (during the year ended 31 December 2018: Hong Kong Prime Rate to Hong Kong Prime Rate plus 12.75%). The fair values of the pledged securities as at 30 June 2019 approximately at HK$1,434,319,000 (31 December 2018: HK$3,477,924,000).

As at 30 June 2019, approximately 97% (31 December 2018: approximately 100%) of the margin clients receivable balance were secured by sufficient collaterals on an individual basis. During the period ended 30 June 2019, no allowance for expected credit losses was recognised (for the six months ended 30 June 2018: HK$1,708,000) in the condensed consolidated statement of profit or loss.

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Accounts receivable arising from the business of dealing in futures and options contracts

Under the settlement arrangement with clearing houses, all open positions held at clearing houses are treated as if they were closed out and re-opened at the relevant closing quotation as determined by clearing houses. Profits or losses arising from this “mark-to-market” settlement arrangement are included in accounts receivables with clearing houses.

Accounts receivable from clearing houses represents transactions arising from the business of dealing and are not past due. No ageing analysis is disclosed as, in the opinion of directors of the Company, an ageing analysis does not give additional value in view of the nature of this business.

Accounts receivable arising from the businesses of securities underwriting and advisory services

Ageing of accounts receivable arising from the ordinary course of businesses of securities underwriting and advisory services, based on the due date, is as follows:

Neither past due nor impaired Less than 31 days past due 31 – 60 days past due 61 – 90 days past due Over 90 days past due Allowance for expected credit losses Total	As at 30 June 2019 HK$’000 7,541 4,797 1,593 352 654 14,937 – 14,937	As at 31 December 2018 HK$’000 21,530 – 1,802 – –
		23,332 –
		23,332

The Group applies HKFRS 9 simplified approach to measure the expected credit losses for accounts receivable arising from the business of securities underwriting and advisory services. The management assessed the loss allowance was insignificant.

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15 FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

Listed debt investments, at fair value_(Note)_ Listed equity instruments, at fair value	As at 30 June 2019 HK$’000 4,515,634 448,004 4,963,638	As at 31 December 2018 HK$’000 2,570,780 435,270
		3,006,050

• Note: The Group has further recognised expected credit losses amounted to HK$22,000,000 in the condensed consolidated statement of profit or loss during the period (for the six months ended 30 June 2018: HK$11,154,000). As at 30 June 2019, allowance for expected credit losses amounted HK$47,521,000 (31 December 2018: HK$25,521,000) has been included in fair value reserve (recycling).

16 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Listed equity investments Unlisted equity investments Listed debt investments Unlisted investment funds Unlisted convertible promissory note Unlisted convertible debt investments	As at 30 June 2019 HK$’000 51,805 223,543 99,066 348,826 – 421,329 1,144,569	As at 31 December 2018 HK$’000 4,311 224,601 129,398 193,135 23,495 482,039
		1,056,979

The fair values of the listed equity investments were determined based on the quoted market prices.

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17 ACCOUNTS PAYABLE

Accounts payable arising from the ordinary course of business of securities brokerage, futures and options dealing services: – Cash clients – Margin clients – Clearing houses – Broker	As at 30 June 2019 HK$’000 63,901 7,600 – – 71,501	As at 31 December 2018 HK$’000 127,446 6,712 578 234,957
		369,693

Accounts payable arising from the business of dealing in securities

The accounts payable balances arising from the ordinary course of business of securities brokerage services are normally settled in two trading days after the trade date except for the money held on behalf of clients at the segregated bank accounts which are repayable on demand. No ageing analysis is disclosed as, in the opinion of directors of the Company, an ageing analysis does not give additional value in view of the nature of this business.

Accounts payable arising from the business of dealing in futures and options contracts

Settlement arrangements with clients follow the same settlement mechanism with clearing house or brokers as disclosed in note 14 and profits or losses arising from mark-to-market settlement arrangement were included in accounts payable with clients. Accounts payable to clients are non-interest bearing. The settlement terms of accounts payable are one day after trade day. No ageing analysis is disclosed as, in the opinion of directors of the Company, an ageing analysis does not give additional value in view of the nature of this business.

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18 BANK AND OTHER BORROWINGS

Unsecured bank loans Loans from an intermediate holding company The carrying amounts of the above borrowings are repayable: Within one year	As at 30 June 2019 HK$’000 – 5,367,668 5,367,668 5,367,668	As at 31 December 2018 HK$’000 234,957 6,418,383
		6,653,340
		6,653,340

As at 30 June 2019, the Group had loans amounting to approximately HK$5,132,261,000 (31 December 2018: HK$6,314,421,000) from CMBC International Holdings Limited, an intermediate holding company and interest payable amounting to approximately HK$235,407,000 (31 December 2018: HK$103,962,000). The loans bear interests at 4% to 4.13% per annum (31 December 2018: 4% per annum) and are repayable within one year.

During the period ended 30 June 2019, all bank borrowings from China Minsheng Banking Corp., Ltd. Hong Kong Branch (“CMBC HK Branch”), a branch of the ultimate holding company, had been repaid in full and no outstanding amount as at 30 June 2019 (31 December 2018: bank borrowings of HK$234,957,000 from CMBC HK Branch with variable interest rate carried at 4.5% per annum).

19 FINANCIAL ASSETS SOLD UNDER REPURCHASE AGREEMENTS

Bonds	As at 30 June 2019 HK$’000 2,337,551	As at 31 December 2018 HK$’000 1,170,680

As at 30 June 2019, the Group entered into repurchase agreements with financial institutions to sell bonds recognised as financial assets at fair value through other comprehensive income and financial assets at fair value through profit or loss with aggregate carrying amount of approximately HK$4,237,995,000 (31 December 2018: HK$2,063,196,000), which is subject to the simultaneous agreements to repurchase these investments at the agreed dates and prices.

Sales and repurchase agreements are transactions in which the Group sells bonds and simultaneously agrees to repurchase them (or assets that are substantially the same) at the agreed dates and prices. The repurchase prices are fixed and the Group is still exposed to substantially all the credit risks, market risks and rewards of those bonds sold. The bonds are not derecognised from the condensed consolidated financial statements but regarded as “collaterals” for the liabilities because the Group retains substantially all the risks and rewards of the bonds.

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20 FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

Payables to interest holder of unlisted consolidated investment fund, designated at FVTPL	As at 30 June 2019 HK$’000 22,526	As at 31 December 2018 HK$’000 130,149

As at 30 June 2019, the Company held 60% (31 December 2018: 60%) interest of CMBCC Co-High Medical Investment Fund SP (the “Medical Fund”). As the Group has control over the Medical Fund, it is accounted for as a subsidiary. Accordingly, the interests of the non-controlling shareholder are classified as financial liabilities designated as at fair value through profit or loss of approximately HK$22,526,000 as at 30 June 2019 (31 December 2018: HK$22,930,000).

As at 31 December 2018, the Company also held 70% interests in New China OCT Fund 2 Segregated Portfolio (“the Segregated Portfolio”) as a Class A shareholder and an independent third party held 30% interests in the Segregated Portfolio as a Class B shareholder. As the Group had control over the Segregated Portfolio as at 31 December 2018, it was accounted for as a subsidiary. Pursuant to the appendix of the placing memorandum of New China OCT Fund SPC for the segregated portfolio, Class A shareholder is subject to a maximum priority expected return of up to 7.5% per annum and Class B shareholder is subject to a maximum subordinate expected return before deduction of performance fee. Any excess beyond Class B expected return after payment of other fees and expenses, shall be paid to the fund manager in the form of performance fees, where available. Accordingly, the interests of the non-controlling shareholder were classified as financial liabilities designated as at fair value through profit or loss of approximately HK$107,219,000 as at 31 December 2018.

During the period ended 30 June 2019, the Company had received full amount of the cash dividends distributable to itself in accordance with the placing memorandum of New China OCT Fund SPC for the Segregated Portfolio, and all Class A shares held by the Company had been redeemed. For details, please refer to the Company’s announcement dated 18 March 2019.

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21 SHARE CAPITAL

Notes Authorised: Ordinary shares of HK$0.01 each Issued and fully paid: At the beginning of the period/year Issue of shares (i) Placing of shares (ii) Cancellation for shares repurchased (iii) At the end of the period/year	Number of shares As at 30 June 2019 As at 31 December 2018 ’000 ’000 100,000,000 100,000,000 47,705,978 45,778,758 – 1,350,000 – 577,220 (2,300) – 47,703,678 47,705,978	Amount As at 30 June 2019 As at 31 December 2018 HK$’000 HK$’000 1,000,000 1,000,000 477,059 457,787 – 13,500 – 5,772 (23) – 477,036 477,059

Notes:

• (i) Pursuant to the subscription agreement entered into on 3 July 2018, the Company has conditionally agreed to allot and issue, and CMBC International Investment Limited has conditionally agreed to subscribe for 1,350,000,000 new shares, at the price of HK$0.363 per new share. The subscription was completed on 15 October 2018.

• (ii) Pursuant to the placing agreement entered into on 3 July 2018, the Company has conditionally agreed to place, through placing agents, up to 830,000,000 new shares to not less than six placees at the placing price of HK$0.363 per new share. The placing of 577,220,000 new shares was completed on 20 July 2018.

• (iii) During the period ended 30 June 2019, the Company repurchased an aggregate of 2,300,000 ordinary shares of the Company on market at the highest and lowest price of HK$0.2170 and HK$0.2070 per share, respectively. These shares were cancelled in June 2019.

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BUSINESS REVIEW

During the Reporting Period, the Group’s profit attributable to the owners of the Company has increased to approximately HK$150.3 million, representing an increase of approximately 49.7% when compared to profit for the six months ended 30 June 2018 (the “ Previous Period ”) of approximately HK$100.4 million. The Group’s basic earnings per share were HK0.32 cents (30 June 2018: HK0.22 cents) and diluted earnings per share were HK0.32 cents (30 June 2018: HK0.22 cents).

Revenue

The Group’s revenue increased by approximately 29.9% to approximately HK$447.1 million during the Reporting Period, compared to approximately HK$344.1 million in the Previous Period. The increase was mainly due to the contribution from the investment and financing segment during the Reporting Period. The table below presents the breakdown of segment revenue (including net gains or losses from investment) and segment results during the Reporting Period:

Securities Investment and Financing Asset management, corporate finance and advisory Total	Segment Revenue For the 6 months ended 30 June 2019 30 June 2018 HK$’000 HK$’000 61,604 58,001 351,283 134,211 45,677 102,046 458,564 294,258	Segment Results For the 6 months ended 30 June 2019 30 June 2018 HK$’000 HK$’000 42,778 22,905 156,182 21,183 17,513 84,352 216,473 128,440	Segment Results For the 6 months ended 30 June 2019 30 June 2018 HK$’000 HK$’000 42,778 22,905 156,182 21,183 17,513 84,352 216,473 128,440
			128,440

Securities segment

The Group’s securities business mainly includes the provision of brokerage services, securities margin financing services, futures and options contracts dealing services and securities underwriting/placing services to clients.

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During the Reporting Period, the revenue and profit contributed by securities segment were approximately HK$61.6 million and approximately HK$42.8 million, respectively, compared to the revenue and profit of approximately HK$58.0 million and approximately HK$22.9 million, respectively in the Previous Period. The increase in segment revenue and profit was mainly attributable to the growth of the Group’s securities business which led to more interest income from securities margin financing and underwriting income when compared to the Previous Period.

Investment and financing segment

During the Reporting Period, the segment revenue, which included coupon, dividend and distribution income from listed bonds, listed equities, unlisted funds, unlisted convertible notes and debt investments, as well as interest income from loans, amounted to approximately HK$339.8 million as compared to approximately HK$184.0 million in the Previous Period. The segment profit increased from approximately HK$21.2 million in the Previous Period to segment profit of approximately HK$156.2 million in the Reporting Period. The increase in segment profit was mainly attributable to the improvement of market condition and the increase in the size of the investment portfolio.

The following table sets out the breakdown of investment and financing portfolio:

Investment Listed equities Unlisted equity interests Listed bonds (measured at FVOCI) Listed bonds (measured at FVTPL) Unlisted funds Unlisted convertible notes Unlisted convertible debt investments Total Financing Loans and advances	30 June 2019 HK$’000 51,805 223,543 4,963,638 99,066 348,826 – 421,329 6,108,207 2,949,250	31 December 2018 HK$’000 4,311 224,601 3,006,050 129,398 193,135 23,495 482,039 4,063,029 3,995,037

The Group’s investment portfolio mainly consisted of listed bonds, listed equities, unlisted equity investments, unlisted funds and unlisted convertible debt investments, covering a wide range of sectors such as industrial, pharmaceuticals, technology, consumer goods, real estate and finance.

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As at 30 June 2019, the assets of the proprietary investment of the Company amounted to approximately HK$6.1 billion (31 December 2018: HK$4.1 billion), including bonds investment of approximately HK$5.1 billion (31 December 2018: HK$3.1 billion). During the Reporting Period, the Group’s total investment portfolio increased by approximately HK$2.0 billion. This was mainly due to the net purchase of listed bonds (measured at FVOCI and FVTPL) and unlisted funds and the fair value gain recognised in the Reporting Period. Benefited from the favourable performance of the bond market, such portfolio delivered excellent results during the Reporting Period and achieved significant capital return and interest income. The future performance of such portfolio will depend on many factors, including development trends and investor sentiment in the economic development in both Hong Kong and mainland China.

During the Reporting Period, the investment portfolio generated income in an aggregate amount of approximately HK$179.1 million, including interest income from debt securities investments of approximately HK$127.9 million, interest income from FVTPL investments of approximately HK$26.2 million and dividend income and other investment income of approximately HK$25.0 million.

For investments classified as financial assets measured at FVOCI and FVTPL, the Group recorded a net gain during the Reporting Period which comprised, (i) fair value gain through other comprehensive income recognised in fair value reserve, (ii) net gains/(losses) recognised in the condensed consolidated statement of profit or loss and (iii) net losses not recycled through profit or loss upon disposal of financial assets measured at FVOCI.

The Company maintains a solid proprietary bonds investment style and is committed to a revenue-based (including charging fixed contractual interest income and receiving gains on disposal) trading strategy. Adopting a consistent top-down/bottom-up approach in its investment analysis, the Company pursues investment with high-level and sustainable revenue with limited volatility. It implements a prudent risk management strategy to strike a balance between risk management and revenue generation and diversify investment to a broad portfolio. Position in any single bond shall not account for more than 5% of the overall position and is diversified by various issuers with operation in a wide range of sectors, thereby avoiding the risk of substantial market adjustment.

At the same time, the unlisted direct investment business of the Group, including investment in equity interests, funds and convertible debt investments projects, mainly focused on trending industries, such as high-end technology, great healthcare and artificial intelligence, and recorded stable growth in terms of overall value of investment projects held during the Reporting Period.

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Through the selection of quality customers and projects and focus on short-to-mid term financing, the loan business maintained the assets liquidity of the Group. Loans were granted to market players in various industries, such as finance, technology, medical and healthcare, sports and well-being, education and real estate, which created a diversified loan portfolio. Concentration, maturity profile and risk-to-revenue ratio of the asset portfolio were under constant monitoring. Thorough pre-, peri- and post-investment management were implemented to put in place practicable and effective measures to manage the credit risk of the Group.

Asset management, corporate finance and advisory segment

The Group’s asset management, corporate finance and advisory segment recorded revenue of approximately HK$45.7 million during the Reporting Period as compared to approximately HK$102.0 million in the Previous Period and segment profit of approximately HK$17.5 million during the Reporting Period as compared to approximately HK$84.4 million in the Previous Period. The segment revenue and profit decreased due to the decrease in the number of advisory projects as compared to the Previous Period. However, the expansion of asset management business and corporate finance services relating to IPOs have brought a more diversified source of revenue to the segment. During the Reporting Period, benefited from the newly increased subscription of the Group’s funds and a good investment performance, the Group’s assets under management amounted to approximately US$1.16 billion, fueling a significant period-onperiod growth in management fee income by approximately 58.3% to approximately HK$15.3 million.

Administrative expenses and finance costs

Administrative expenses and finance costs for the Reporting Period amounted to approximately HK$258.4 million in aggregate as compared to approximately HK$172.7 million in the Previous Period. The analysis is set out below:

Staff costs Depreciation and amortisation Other administrative expenses Finance costs Total	For the 6 months ended 30 June 2019 30 June 2018 HK$’000 HK$’000 45,738 33,472 15,897 1,344 29,540 28,454 167,234 109,423 258,409 172,693	For the 6 months ended 30 June 2019 30 June 2018 HK$’000 HK$’000 45,738 33,472 15,897 1,344 29,540 28,454 167,234 109,423 258,409 172,693
		172,693

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The increase in staff costs was mainly due to the investment in more human resources to support business expansion.

The increase in depreciation and amortisation was mainly due to recognition of depreciation for right-of-use asset during the Reporting Period with the adoption of HKFRS 16.

The increase in finance costs was mainly due to the expansion of the size of investment portfolio which resulted in the increase in borrowings (including bank and other borrowings) and financial assets sold under repurchase agreements.

INTERIM DIVIDEND

The Board does not recommend the payment of interim dividend for the six months ended 30 June 2019 (Previous Period: Nil).

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

Capital Structure

As at 30 June 2019, the total number of the issued share capital with the par value of HK$0.01 each was 47,703,677,729 (31 December 2018: 47,705,977,729) and total equity attributable to shareholders was approximately HK$2,129.5 million (31 December 2018: HK$1,876.1 million).

During the Reporting Period, 2,300,000 shares have been repurchased by the Company and cancelled.

During the Reporting Period, no shares have been purchased or granted to the selected persons of the Group under the share award scheme adopted by the Company in 2016 or the share option scheme adopted by the Company in 2012.

Liquidity and Financial Resources

The Group primarily financed its operations with internally generated cash flows, borrowings, and by its internal resources and shareholder’s equity.

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As at 30 June 2019, the Group had current assets of approximately HK$9,827.0 million (31 December 2018: HK$9,526.0 million) and liquid assets comprising cash (excluding segregated bank accounts) and investments in listed equity securities and listed debt securities totaling approximately HK$5,475.7 million (31 December 2018: HK$4,027.3 million). The Group’s current ratio, calculated based on current assets of approximately HK$9,827.0 million (31 December 2018: HK$9,526.0 million) over current liabilities of approximately HK$8,167.0 million (31 December 2018: HK$8,507.7 million), was at a ratio of approximately 1.2 at the end of the Reporting Period (31 December 2018: 1.1).

The Group’s finance costs for the Reporting Period represented the effective interest on notes payable of approximately HK$4.1 million (Previous Period: HK$4.1 million), interest on bank borrowings of approximately HK$2.0 million (Previous Period: HK$9.5 million), interest on loans from an intermediate holding company of approximately HK$131.9 million (Previous Period: HK$84.2 million), interest on financial assets sold under repurchase agreements of approximately HK$26.1 million (Previous Period: HK$11.6 million) and interest on lease liabilities of approximately HK$3.0 million (Previous Period: Nil).

As at 30 June 2019, the Group’s indebtedness comprised loans from an intermediate holding company, notes payable and financial assets sold under repurchase agreements of approximately HK$7,619.4 million (31 December 2018: HK$7,869.3 million). The loans from an intermediate holding company of approximately HK$5,132.3 million (31 December 2018: HK$6,314.4 million) were denominated in Hong Kong dollars and United States dollars and borne interests at 4% to 4.13% per annum and were repayable within one year. The notes payable in the aggregate principal amount of HK$150 million (31 December 2018: HK$150 million) was denominated in Hong Kong dollars, due on the seventh anniversary from the respective issue dates of the notes, and borne interests at 5% fixed rate per annum.

The Group’s gearing ratio, calculated on the basis of total indebtedness divided by the sum of total indebtedness and equity attributable to the Company’s owners, was at a ratio of approximately 78.2% (31 December 2018: 80.7%).

With the amount of liquid assets on hand, the management is of the view that the Group has sufficient financial resources to meet its ongoing operational requirements.

PLEDGE OF ASSETS

Except as otherwise disclosed, as at 30 June 2019, the Group had no other pledge or charge on assets (31 December 2018: Nil).

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CONTINGENT LIABILITY

As at 30 June 2019, the Group had no significant contingent liability (31 December 2018: Nil).

CAPITAL COMMITMENT

As at 30 June 2019, the Group had no significant capital commitment (31 December 2018: HK$5,200,000).

SIGNIFICANT INVESTMENTS HELD

For the Reporting Period, the Group did not hold any single significant investment which accounted for over 5% of the total assets.

MATERIAL ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES AND ASSOCIATES

For the Reporting Period, the Group had no material acquisitions or disposals of subsidiaries and associates.

FOREIGN CURRENCY RISK MANAGEMENT

The Group’s revenue is mainly denominated in United States dollars and Hong Kong dollars while its expenditure is mainly denominated in Hong Kong dollars. The Group’s foreign exchange exposure is mainly from the translation of assets and liabilities denominated in United States dollars. As Hong Kong dollars are pegged to United States dollars, the Directors believe that the Group’s foreign exchange exposure is manageable and the Group will closely monitor this risk exposure from time to time.

HUMAN RESOURCES AND REMUNERATION POLICY

As at 30 June 2019, the Group had about 80 (30 June 2018: about 75) employees including Directors. For the Reporting Period, total staff costs, including Directors’ remuneration, was approximately HK$45.7 million (Previous Period: HK$33.5 million). Remuneration packages for employees and Directors are structured by reference to market terms and individual competence, performance and experience. Benefits plans maintained by the Group include mandatory provident fund scheme, subsidised training programme, share option scheme, share award scheme and discretionary bonuses.

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PROSPECTS AND DEVELOPMENT STRATEGIES

Prospect

The trade dispute between China and the United States has had a profound impact on the economies of both countries. Since Hong Kong has long been the gateway into China for businesses and a trade conduit between the two countries, Hong Kong is also adversely affected by the trade dispute. In addition, the future of the Hong Kong economy has become increasingly uncertain, and the Hong Kong government has recently lowered its forecast for the economic growth of this year. As a result, both the global and domestic economy have been facing downside risks.

Although the Group has achieved satisfactory results for the Reporting Period and is optimistic about the long-term continuous growth of both Hong Kong and Mainland China’s economies, and even though the Group strives to further develop its business, it is believed that the Group should act cautiously and be mindful about the risk which the Group may face for the second half of the year. Hence, the Group will adopt the following development strategy.

Development Strategy

The Company will continue to enhance its profitability by developing the investment and financing business, the corporate finance and advisory and asset management business. In particular, the Group will adopt the following measures, inter alia :

• (1) improving the structure of the investment and financing business. The Company will continue to refine the client selection criterion according to the economic and market condition with a focus on developing high quality clients that are coming from the industries with a good prospect;

• (2) further developing the services on sponsorship and advisory. The Company will continue to explore its client base, including leveraging on the extensive client base of China Minsheng Banking Corp., Ltd. (“ China Minsheng ”) in search for clients that may need cross-border listing and advisory services;

• (3) promoting the asset management business through offering innovative products and services;

• (4) enhancing the Group’s development. The Group will pay closer attention to any potential investment targets or partners of China Minsheng which are able to create synergy with the Group. The Company intends to promote its development through building a close relationship with these targets or partners; and

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• (5) strengthening risk management. The Group will continue to improve its risk management and internal control by acting cautiously in selecting projects, monitoring its projects on a regular basis, assessing the risk associated with the projects frequently, taking any prompt action in response to any change of circumstances and improving its internal control procedure.

The Group will continue to adhere to its upgraded version of the principal strategy of “one body with two wings”, optimizing and upgrading the principal strategy from “one body with two wings” to “optimizing one body and emphasizing two wings”. Optimizing “one body” means to further optimize its investment and financial business products and client structure; while emphasizing “two wings” means to strive for higher revenue and a stronger market position in the investment banking and assets management sectors.

EVENTS AFTER THE REPORTING PERIOD

As disclosed in the Company’s announcement dated 23 July 2019, the Company (for itself and on behalf of other members of the Group) entered into a service agreement (the “ Service Agreement ”) with China Minsheng (for itself and on behalf of other members of China Minsheng and its subsidiaries, excluding the members of the Group (“ China Minsheng Group ”)), pursuant to which, among other things:

• (a) the Group agreed to provide the asset management services, investment advisory services and ancillary services to China Minsheng Group, its associates or any third parties who are deemed to be connected with the Company under Rule 14A.20 of the Listing Rules;

• (b) China Minsheng Group agreed to provide the distribution services to the Group;

• (c) China Minsheng Group agreed to provide the underwriting referral services to the Group pursuant to the Service Agreement; and

• (d) the Group agreed to provide the underwriting services for securities (including but not limited to securities issued by China Minsheng Group) to China Minsheng Group.

The Service Agreement and the services to be provided thereunder (including the proposed annual caps for the services) are subject to the approval by the independent shareholders of the Company at a special general meeting which will be held in due course.

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RISK MANAGEMENT CAPABILITIES

The Board recognises risk management as one of the key elements to the success of the Company and endeavours to improve risk management system to align with its business development strategically. The Group takes a pragmatic approach to manage different risks including credit risks, market risks, operation risks, legal and compliance risk, reputation, liquidity, IT and country risk. As at the date of this announcement, the Group has improved various risk management policies and procedures covering different business sectors. The Group has also established centralised internal control and compliance management system to effectively monitor the Group’s operation and dealings. The Group will continue to enhance the risk management practices and internal control system and adopt a stringent governance framework with reference to the best practices in the market.

CORPORATE GOVERNANCE

The Company has complied with all the applicable provisions of the Corporate Governance Code (the “ CG Code ”) as set out in Appendix 14 to the Listing Rules throughout the Reporting Period except for the following deviation with reasons as explained:

Appointment of Directors

Code Provision A.4.1

Under the code provision A.4.1, non-executive directors should be appointed for a specific term and subject to re-election.

Deviation

All the non-executive Directors were not appointed for a specific term. Notwithstanding such deviation, all Directors are subject to the retirement by rotation according to the provisions of the bye-laws of the Company. As such, the Company considers that sufficient measures have been taken to ensure that the Company’s corporate governance practices are no less exacting than those in the CG Code.

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules (the “ Model Code ”) as its own code of conduct regarding securities transactions by the Directors of the Company. In response to specific enquiry made by the Company, all Directors confirmed that they have fully complied with the required standards as set out in the Model Code throughout the Reporting Period.

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AUDIT COMMITTEE

The unaudited condensed consolidated financial statements of the Company for the Reporting Period have been reviewed by the audit committee of the Company and the Company’s independent auditor, Messrs. PricewaterhouseCoopers, 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, whose independent review report is included in the interim report to be sent to shareholders of the Company.

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

On 12 June 2019, the Company repurchased an aggregate of 2,300,000 Shares pursuant to the general mandate to repurchase shares granted by the shareholders of the Company at the annual general meeting held on 29 June 2018 on market, which were subsequently cancelled in the Reporting Period.

Save as disclosed above, during the Reporting Period, 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 CMBC Capital Holdings Limited Li Jinze Chairman

Hong Kong, 26 August 2019

As at the date of this announcement, the executive Directors are Mr. Li Jinze, Mr. Ding Zhisuo and Mr. Ng Hoi Kam, the non-executive Directors are Mr. Ren Hailong and Mr. Liao Zhaohui, and the independent non-executive Directors are Mr. Lee, Cheuk Yin Dannis, Mr. Wu Bin and Mr. Wang Lihua.

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