PegBio Co., Ltd. - Interim / Quarterly Report 2021

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(Incorporated in Bermuda with limited liability) (Stock Code: 1141)

INTERIM REPORT 2021

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Contents
	Page
Abbreviations	2
Corporate Information	3
Management Discussion and Analysis	4
Other Information	16
Report on Review of Condensed Consolidated
Financial Statements	21
Condensed Consolidated Statement of Profit or Loss	23
Condensed Consolidated Statement of Profit or Loss
and Other Comprehensive Income	24
Condensed Consolidated Statement of Financial Position	25
Condensed Consolidated Statement of Changes in Equity	27
Condensed Consolidated Statement of Cash Flows	28
Notes to the Condensed Consolidated
Financial Statements	29

Abbreviations

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

“Board” Board of Directors

“China Minsheng” China Minsheng Banking Corp., Ltd. (中國民生銀行股份有限公司), a joint stock limited company incorporated in the PRC with limited liability, the H shares of which are listed on the Stock Exchange (stock code: 1988) and the A shares of which are listed on the Shanghai Stock Exchange (stock code: 600016)

“CMBCI” CMBC International Holdings Limited “CMBCI Investment” CMBC International Investment Limited “CMBCI Investment HK” CMBC International Investment (HK) Limited “Company” CMBC Capital Holdings Limited “Directors” Directors of the Company “Group” the Company and its subsidiaries “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange “PRC” People’s Republic of China “Previous Period” the six months ended 30 June 2020 “Reporting Period” the six months ended 30 June 2021 “Shareholders” holder(s) of the Share(s) “Shares” the shares of the Company “SFO” Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “Share Option Scheme” the share option scheme adopted by the Company on 24 September 2012 “Share Award Scheme” the share award scheme adopted by the Company on 19 February 2016 “Stock Exchange” The Stock Exchange of Hong Kong Limited “HK$” and “cents” Hong Kong dollars and cents “%” per cent

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED 3

Corporate Information

BOARD OF DIRECTORS

Executive Directors

Mr. Li Jinze (Chairman) Mr. Ding Zhisuo Mr. Ng Hoi Kam

Non-executive Directors

Mr. Yang Kunpeng (appointed as a non-executive Director on 29 June 2021) Mr. Li Wenshi (appointed as a non-executive Director on 29 June 2021)

Mr. Ren Hailong (retired as a non-executive Director on 29 June 2021) Mr. Liao Zhaohui (retired as a non-executive Director on 29 June 2021)

Independent Non-executive Directors

Mr. Lee, Cheuk Yin Dannis Mr. Wu Bin Mr. Wang Lihua

AUDIT COMMITTEE

Mr. Lee, Cheuk Yin Dannis (Chairman) Mr. Wu Bin Mr. Wang Lihua

REMUNERATION COMMITTEE

Mr. Wu Bin (Chairman) Mr. Li Wenshi Mr. Wang Lihua

NOMINATION COMMITTEE

Mr. Wu Bin (Chairman) Mr. Li Wenshi Mr. Wang Lihua

COMPANY SECRETARY

Mr. Ho Yau Cheung

TRADING OF SHARES

The Stock Exchange of Hong Kong Limited

STOCK CODE

REGISTERED OFFICE

Clarendon House 2 Church Street Hamilton HM 11 Bermuda

HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS IN HONG KONG

45/F, One Exchange Square, 8 Connaught Place, Central, Hong Kong

PRINCIPAL BANKERS

China Minsheng Banking Corp., Ltd Industrial and Commercial Bank of China Limited Shanghai Pudong Development Bank Co., Ltd CMB Wing Lung Bank Limited

LEGAL ADVISER

Howse Williams

AUDITOR

PricewaterhouseCoopers Certified Public Accountants Hong Kong Registered Public Interest Entity Auditor

PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE

MUFG Fund Services (Bermuda) Limited 4th Floor North, Cedar House 41 Cedar Avenue Hamilton HM 12 Bermuda

HONG KONG BRANCH SHARE R E G I S T R A R A N D T R A N S F E R OFFICE

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

WEBSITE

http://www.cmbccap.com

1141

Management Discussion and Analysis

BUSINESS REVIEW

The Group is currently licensed to engage in Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities, the licensed money lending business, market-making business and has all material licenses required for services provided to most of its existing and potential clients at the current stage.

During the Reporting Period, the Group recorded revenue of approximately HK$461.0 million, representing a year-on-year decrease of approximately 8.1%. The net profit amounted to approximately HK$201.2 million, representing an increase of approximately 21.6% compared to the Previous Period. During the Reporting Period, the Group continued to seize market opportunities while striking a balance between the development of various business segments with a watchful eye on risk management.

Investment and Financing

During the Reporting Period, in the face of the adverse environment brought by the global economic fluctuations to industrial investment, the Group had appraised the situation and made a timely adjustment to the investment and financing strategy. The Group had adapted to the changes in the market and risk environment. During the Reporting Period, the proprietary investments of the Group achieved rapid premium appreciation and maintained a sustainable and sound growth momentum.

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED

Management Discussion and Analysis

BUSINESS REVIEW (continued)

Securities

During the Reporting Period, the offshore bond underwriting of the Group achieved steady and healthy development, and the amount and scale of bonds underwritten had a significant increase compared to the Previous Period. At the same time, the bonds denominated in multiple currencies were issued, including United States dollar, Hong Kong dollar, offshore Renminbi, Singapore dollar and Euro. With a steady growth of its bond underwriting, the Group strictly controls the underwriting risks and fosters and maintains a high-quality issuers base, covering issuers such as banks, non-banking financial institutions, central government-owned enterprises, large local state-owned enterprises, urban investment enterprises with a good rating, with investment-grade bond issuance accounting for over 50% of the total underwriting volume.

Asset Management

During the Reporting Period, facing a complex and changeable capital market, the Group paid a closer attention to the development and improvement of its investing and trading ability while putting more efforts in the research on the fundamentals of investment targets, and managed to make investments while being “sensitive to market, loyal to trends, skilled at trading, ready to assume responsibility and strictly self-disciplined”, responded to the market, constantly optimised investment portfolio, to achieve long-term stable performance returns for our clients. During the Reporting Period, the first public bond fund of the Group - CMBC Aggregate Greater China Select Bond Fund - hit a new record high in net value, and has had positive return performance for six consecutive months. As of 30 June 2021, the net value of the fund are 2.89% (Class I USD), 2.59% (Class R USD) and 2.61% (Class R HKD). The fund had been favored and trusted by all kinds of investors because of its stable performance. The Group had focused on research and development of new products and market expansion, thereby gradually diversifying its client source and the product structure, and further enhancing the brand and influence of the Group’s asset management business.

Management Discussion and Analysis

BUSINESS REVIEW (continued)

Corporate Finance and Advisory

During the Reporting Period, the global economy was faced with great uncertainties due to the adverse impact of the recurrent outbreaks of the COVID-19 pandemic, and the political and economic events such as Sino-US relations. Despite the unfavorable market atmosphere, the Group had overcome the difficulties and completed the listing of two companies on the Main Board of the Stock Exchange during the Reporting Period. Also, the Group had submitted applications to the Stock Exchange for the listing on the Main Board for three sponsor projects during the Reporting Period. The industries covered by these projects include chip research and development and manufacturing, artificial intelligence data analysis, digital marketing, paper making, blanket manufacturing, and E-commerce. The Group expects that the stock market may continue to fluctuate in the second half of the year, and it will continue to make solid preparations and plans ahead. In addition to the sponsor projects, the Group also acted as financial advisor to the listed companies in the asset sales project, and financial advisor to the listed companies in the spin-off listing project. With respect to stock underwriting, despite the unstable market environment, the Group, with its excellent underwriting ability, completed a total of 9 stock underwriting projects during the Reporting Period, and these projects covered the industries that have attracted investors’ attention recently, such as Internet finance, 5G communication products, property management and big health.

PROSPECTS AND DEVELOPMENT STRATEGIES

Prospects

With the improvement in global economic conditions and the slowdown of local COVID-19 pandemic, Hong Kong’s economy is on the road to recovery, with the real local Gross Domestic Product (GDP) recording a solid year-on-year growth of approximately 7.8% in the first half of 2021 as a whole. Looking ahead, it is believed that the recovery of the global economy, the stabilisation of the local COVID-19 pandemic and the launch of the consumer voucher scheme will help stimulate local consumption, and in the short term will continue to support the economic improvement of Hong Kong. However, the recent spread of the more contagious COVID-19 new variants in many countries has added further uncertainties to the global economic outlook for the rest of 2021. Other risk factors, such as Sino-US relations, geopolitical tensions, and changes in the monetary policy by the major central banks, will also impact the future of the local economy.

Although the Group is optimistic about the long-term sustainable economic growth in Hong Kong and Mainland China, and that the Group has committed itself to further developing its business, it should continue to act cautiously and keep an eye on the possible risks in the second half of the year. For these reasons, the Group will adopt the following development strategies.

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED 7

Management Discussion and Analysis

PROSPECTS AND DEVELOPMENT STRATEGIES (continued)

Development Strategies

The Company is globally oriented with the focus on Asia, and aims to build a leading comprehensive international investment banking platform focusing on investment banking and wealth management and serving China Minsheng and its clientele. Specifically, the Group will adopt the following measures, inter alia:

(1) actively promoting the development of listing sponsor and stock underwriting businesses, strengthening the business synergy and the channel for acquiring new clients, optimising the business synergy system mechanism, assisting targeted clients in gaining access to the Hong Kong investment banking business, expanding client resources and exploring potential project cooperation opportunities;
(2) further strengthening the high-quality bond business, increasing cooperation with leading financial institutions, the domestic branches and business units, developing new client resources, further enhancing the bond sales capacity and gradually building a professional sales team;
(3) with the three core orientations of creating an efficient sales model, accurate product development and providing quality services, the Group will seize the magnificent development opportunities of the integration of the Greater Bay Area to build a comprehensive and diversified asset management platform;
(4) developing market-making business with the focus on high-quality urban investment bonds, financial bonds and real estate bonds;
(5) building an offshore wealth management center, overseas service center and product center to provide customized offshore investment and wealth management service solutions for high-net-worth individuals and wealth management clients; and
(6) to continuously strengthen and improve risk management and internal control, the Group will select projects carefully, monitor the status regularly, assess the risks frequently, promptly respond to any environmental change and improve its internal control procedures.

Management Discussion and Analysis

PROSPECTS AND DEVELOPMENT STRATEGIES (continued)

Development Strategies (continued)

In addition, the Group will continue to adhere to the upgraded basic strategy of “one body and two wings” with “one body” optimised, which is to further optimize the investment and financing business products and client structure; and “two wings” emphasised, which is to fully commit to improving the revenue and market position of investment banking and asset management businesses. Further, the Group focuses on both business development and compliance risk control, advocating the improvement of the three abilities of all staff, namely, compliance and risk control ability, marketing and communication ability and investment and trading ability, while emphasising the adherence to the principle of “three bottom lines”, namely, legality and compliance bottom line, risk control bottom line and company interest bottom line, in order to comprehensively improve the sustainability and market image of the Company.

FINANCIAL RESULTS

During the Reporting Period, the Group’s profit attributable to the owners of the Company increased to approximately HK$201.2 million, representing an increase of approximately 21.6% as compared to approximately HK$165.5 million in the Previous Period. The Group’s basic and diluted earnings per share were HK0.42 cents (30 June 2020: HK0.35 cents).

Revenue

The Group’s revenue decreased by approximately 8.1% to approximately HK$461.0 million during the Reporting Period, as compared to approximately HK$501.6 million in the Previous Period. The decrease was mainly due to the risk appetite adjustment and an increase in the size of highly-rated assets which led to the decrease in the interest income from investment and financing 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:

	Segment Revenue and Net Gains or Losses from Investment For the six months ended 30 June	Segment Revenue and Net Gains or Losses from Investment For the six months ended 30 June	Segment Results For the six months ended 30 June	Segment Results For the six months ended 30 June
	2021 HK$’000	2020 HK$’000	2021 HK$’000	2020 HK$’000
Securities Fixed-income Direct Investment Other Investment and Financing Asset Management Corporate Finance and Advisory Others	65,311 122,527 146,853 69,587 27,797 –	33,664 267,451 153,565 62,226 23,801 –	41,936 33,409 90,067 55,420 14,586 (1,610)	18,315 47,195 103,494 42,914 9,850 (21,600)
Total	432,075	540,707	233,808	200,168

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED 9

Management Discussion and Analysis

FINANCIAL RESULTS (continued)

Securities Segment

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

During the Reporting Period, the revenue and profit contributed by the securities segment increased to approximately HK$65.3 million and HK$41.9 million, respectively, compared to the revenue and profit of approximately HK$33.7 million and HK$18.3 million, respectively in the Previous Period. The increase of the segment revenue and profit was mainly due to the growth of the bond underwriting.

Investment and Financing Segment

In terms of investment, the Group is globally oriented and focuses on the Greater China region. It actively identifies enterprises with prominent core advantages and strong growth ability and profitability in the industries that are on the growth or expansion phase of the cycle, focuses on strategic industries and provides value-added services for enterprises. The Group also aims at high-tech innovative enterprises, medical and healthcare enterprises, and other enterprises that have large growth potential.

With respect to financing, the Group is committed to providing comprehensive financing solutions with different structures and forms according to customer needs, and providing transactional structural design, financing distribution and other services. The specific products include but not limited to asset-secured loans, M&A loans, convertible bond financing, equity pledge financing, and bridge financing.

During the Reporting Period, in the face of the adverse environment brought by the global economic fluctuations to industrial investment, the Group had appraised the situation constantly and made timely and reasonable adjustment to the investment and financing strategy. The Group had adapted to the changes in the market and risk environment. During the Reporting Period, the proprietary investments of the Group achieved rapid premium appreciation and maintained a sustainable and healthy growth momentum.

Management Discussion and Analysis

FINANCIAL RESULTS (continued)

Investment and Financing Segment (continued)

Fixed-income Direct Investment

During the Reporting Period, revenue and net investment losses from the fixed-income direct investment segment, which included but not limited to coupons from the listed bonds under direct investment, amounted to an aggregate of approximately HK$122.5 million as compared to approximately HK$267.5 million in the Previous Period. The segment profit decreased from approximately HK$47.2 million in the Previous Period to approximately HK$33.4 million in the Reporting Period. The decrease in segment profit was mainly attributable to risk appetite adjustment and increase in the size of highlyrated assets which led to the decrease in interest income from bond investment as well as the exchange loss incurred during the Reporting Period.

Other Investment and Financing

During the Reporting Period, revenue and net investment gains from the other investment and financing segment, which included but not limited to coupons, dividends and distribution income from listed bonds (other than those under fixedincome direct investment), listed equities, unlisted equity interests, unlisted funds, and unlisted notes, as well as interest income from loans, amounted to an aggregate of approximately HK$146.9 million as compared to approximately HK$153.6 million in the Previous Period. The segment profit decreased from approximately HK$103.5 million in the Previous Period to approximately HK$90.1 million in the Reporting Period. The decrease in segment profit was mainly attributable to the decrease in interest income from loans and the increase in the segment expenses.

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

	30 June 2021 HK$’000	31 December 2020 HK$’000
Investment Listed equities Unlisted equity interests Listed bonds (measured at fair value through other comprehensive income (“FVOCI”)) Listed bonds (measured at fair value through profit or loss (“FVTPL”)) Listed bonds (measured at amortised cost) Unlisted funds Derivative financial instrument – credit derivative	208,620 302,769 8,137,320 966,164 61,906 841,130 –	– 230,715 6,835,510 241,417 77,272 700,113 68,563
Total	10,517,909	8,153,590
Financing Loans and advances	774,234	1,485,217

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED

Management Discussion and Analysis

FINANCIAL RESULTS (continued)

Investment and Financing Segment (continued)

Other Investment and Financing (continued)

As at 30 June 2021, the Group’s investment portfolio mainly included but not limited to listed equity, listed bonds, unlisted equity interests and unlisted funds, covering a wide range of sectors such as industry, pharmaceuticals, technology, consumer goods, real estate and finance.

As at 30 June 2021, the assets of the proprietary investment of the Group amounted to approximately HK$10.5 billion (31 December 2020: approximately HK$8.2 billion), including bonds investment of approximately HK$9.2 billion (31 December 2020: approximately HK$7.2 billion). During the Reporting Period, the Group’s total investment portfolio increased by approximately HK$2.3 billion, which was mainly due to the net purchase of listed bonds and listed equity. The future performance of such a portfolio will depend on many factors, including uncertainties of the financial markets, the economic development trend in both Hong Kong and Mainland China and investors’ sentiment.

During the Reporting Period, the Group’s investment portfolio generated an income of approximately HK$244.4 million (Previous Period: HK$288.0 million) in total, including interest income of approximately HK$150.9 million (Previous Period: HK$238.0 million) from debt securities investments, interest income of approximately HK$17.1 million (Previous Period: HK$8.1 million) from FVTPL investments and dividend income and other investment income of approximately HK$76.3 million (Previous Period: HK$41.9 million).

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

The Group maintains a consistent robust principle for its proprietary bond investment, and adopts a revenue-based (including charging fixed contractual interest and receiving gains on disposal) trading strategy. Adopting a top-down/bottom-up approach in its investment analysis, the Group is committed to identifying investment opportunities with sustainable and high-level revenue within limited volatility. The Group adopts prudent risk management strategy and makes a reasonable risk estimate for its investments in order to strike a balance between risk management and revenue generation. At the same time, the Group adheres to the principle of diversified investment and has established explicit guidelines which stipulate that the position in any single bond shall not account for more than 5% of the overall position, and the portfolio shall be diversified by investing in various issuers in a wide range of sectors, thereby avoiding the risk of adjustment in any particular industry.

Management Discussion and Analysis

FINANCIAL RESULTS (continued)

Investment and Financing Segment (continued)

Other Investment and Financing (continued)

The unlisted direct investment business of the Group, which included equity interests and funds, mainly focuses on high-tech innovative enterprises and medical and healthcare enterprises that have large growth potential. The unlisted direct investment projects the Group held achieved rapid premium appreciation and maintained a sustainable and healthy growth momentum during the Reporting Period.

The loan business of the Group focuses on short-to-mid term financing so as to maintain the liquidity of the Group’s assets. During the Reporting Period, loans were granted to market players in various industries, such as finance, technology, healthcare, sports, education and real estate, which diversified the risk of the loan portfolio. The Group implements pre-, peri- and post-investment management and put in place practicable and effective risk control measures. Each client and each project are subject to rigorous risk reviews and the Group’s overall credit and operation risk are controllable. The Group constantly monitors concentration, maturity profile and risk to revenue ratio of the asset portfolio to strike a balance between the overall risk and revenue generation.

Asset Management Segment

The Group’s asset management represents the provision of asset management services to clients. The Group’s asset management segment recorded revenue of approximately HK$69.6 million during the Reporting Period as compared to approximately HK$62.2 million in the Previous Period and segment profit of approximately HK$55.4 million during the Reporting Period as compared to approximately HK$42.9 million in the Previous Period. The segment revenue and profit increased due to the increase in the asset management portfolio.

Corporate Finance and Advisory Segment

During the Reporting Period, the Group’s revenue of approximately HK$27.8 million and profit of approximately HK$14.6 million were recorded for the corporate finance and advisory segment, as compared to revenue of approximately HK$23.8 million and profit of approximately HK$9.9 million in the Previous Period. The segment revenue and profit increased due to the increase in the number of sponsor projects as compared to the Previous Period.

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED

Management Discussion and Analysis

FINANCIAL RESULTS (continued)

Administrative Expenses and Finance Costs

Administrative expenses and finance costs for the Reporting Period amounted to approximately HK$170.2 million in aggregate as compared to approximately HK$236.5 million in the Previous Period. The analysis is set out below:

	For the six months ended	For the six months ended
	30 June 2021 HK$’000	30 June 2020 HK$’000
Staff costs Depreciation and amortisation Other administrative expenses Finance costs	38,552 13,875 25,852 91,879	33,553 13,856 25,942 163,167
Total	170,158	236,518

The increase in staff costs was mainly due to the increase in the number of staff.

The decrease in finance costs was mainly due to the decrease in loan interest rate.

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

Capital Structure

As at 30 June 2021, the total number of the issued share capital with the par value of HK$0.01 each was 47,553,717,729 (31 December 2020: 47,627,927,729) and the total equity attributable to the Shareholders was approximately HK$2,738.4 million (31 December 2020: HK$2,600.0 million).

During the Reporting Period, the Company repurchased an aggregate of 79,930,000 Shares. Of these repurchased Shares, 71,030,000 Shares were cancelled during the Reporting Period, and the remaining 8,900,000 repurchased Shares were cancelled on 30 July 2021.

During the Reporting Period, no Shares had been purchased or granted to the selected persons of the Group under the Share Award Scheme or no share options had been granted under the Share Option Scheme.

Management Discussion and Analysis

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE (continued)

Liquidity and Financial Resources

The Group primarily financed its operations with internally-generated cash flows, borrowings and Shareholder’s equity.

As at 30 June 2021, the Group had current assets of approximately HK$14,242.2 million (31 December 2020: HK$ 10,955.1 million) and liquid assets comprising cash (excluding cash held on behalf of clients), investment in listed equity securities and listed debt investments (other than those measured at amortised cost) totaling approximately HK$10,253.2 million (31 December 2020: HK$7,455.1 million). The Group’s current ratio, calculated based on current assets of approximately HK$14,242.2 million (31 December 2020: HK$10,955.1 million) over current liabilities of approximately HK$11,642.0 million (31 December 2020: HK$8,427.8 million), was approximately 1.2 on 30 June 2021 (31 December 2020: 1.3).

The Group’s finance costs for the Reporting Period mainly represented the interest on notes payable of approximately HK$5.2 million (Previous Period: HK$1.5 million), interest on loans from an intermediate holding company of approximately HK$65.6 million (Previous Period: HK$119.0 million), interest on financial assets sold under repurchase agreements of approximately HK$18.4 million (Previous Period: HK$40.0 million) and interest on lease liabilities of approximately HK$2.2 million (Previous Period: HK$2.7 million).

As at 30 June 2021, the Group’s indebtedness comprised loans from an intermediate holding company, notes payable and financial assets sold under repurchase agreements of approximately HK$10,690.7 million (31 December 2020: HK$7,735.0 million). The loans principal from an intermediate holding company of approximately HK$4,102.4 million (31 December 2020: HK$4,344.2 million) were denominated in Hong Kong dollars and United States dollars and borne interests at 3.5% per annum (2020: 4% per annum) and were repayable within one year. The notes payable in the aggregate principal amount of US$180.0 million (31 December 2020: Nil) were denominated in the United States dollars, due within one year from the respective issue dates of the notes, and borne interest at 1% to 1.8% 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 approximately 79.6% (31 December 2020: 74.8%).

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.

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED

Management Discussion and Analysis

PLEDGE OF ASSETS

Except as otherwise disclosed, as at 30 June 2021, the Group had no other pledge or charge on assets (31 December 2020: Nil).

CONTINGENT LIABILITY

As at 30 June 2021, the Group had no significant contingent liability (31 December 2020: Nil).

CAPITAL COMMITMENT

As at 30 June 2021, the Group had no significant capital commitment (31 December 2020: Nil).

SIGNIFICANT INVESTMENTS HELD

During 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

During 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 2021, the Group had 85 (30 June 2020: about 69) employees including the Directors. For the Reporting Period, the total staff costs, including the Directors’ remuneration, was approximately HK$38.6 million (Previous Period: HK$33.6 million). Remuneration packages for the employees and the Directors are structured by reference to market terms, individual competence, performance and experience. Benefits plans maintained by the Group include the mandatory provident fund scheme, subsidised training program, share option scheme, share award scheme and discretionary bonuses.

Other Information

EVENTS AFTER THE REPORTING PERIOD

Save as disclosed in this interim report, no major subsequent events affecting the Group had occurred since the end of the Reporting Period and up to the date of this report.

RISK MANAGEMENT CAPABILITIES

The Board recognises risk management as one of the key elements to the success of the Company, and endeavors to improve the 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 risks, reputation, liquidity, IT and country risks. As at the date of this report, the Group has improved various risk management policies and procedures covering different business sectors. The Group has also established a 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 the internal control system and to adopt a stringent governance framework with reference to the best practices in the market.

INTERIM DIVIDEND

The Board does not recommend the payment of interim dividend for the six months ended 30 June 2021 (Previous Period: Nil).

SHARE OPTION SCHEME

The existing Share Option Scheme was adopted by the Company at the annual general meeting of the Company held on 24 September 2012. 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 Group to attract, retain and motivate talented participants to strive for future development and expansion of the Group. The Share Option Scheme shall provide an incentive to encourage participants to perform their best in achieving the goals of the Group and allow the participants to enjoy the results of the Company attained through their efforts and contributions.

Pursuant to the ordinary resolution passed by the shareholders of the Company at the annual general meeting held on 8 September 2017 (the “2017 AGM“), the total number of Shares which may be issued upon exercise of all options to be granted under the Share Option Scheme, together with all options to be granted under any other share option scheme(s) of the Company (excluding lapsed options), was refreshed such that the Directors were authorised to grant options carrying rights to subscribe for up to a maximum number of 10% of the shares in issue as at the date of the 2017 AGM approving the refreshed scheme mandate limit. As such, the Company may grant share options entitling holders thereof to subscribe for a total of 4,577,875,772 Shares (representing 10% of the Shares in issue as at the date of the 2017 AGM).

During the Reporting Period, no share options had been granted to the selected persons of the Group under the Share Option Scheme. As at 30 June 2021, there were no outstanding share options (31 December 2020: Nil).

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED

Other Information

SHARE AWARD SCHEME

The Company adopted the existing Share Award Scheme on 19 February 2016.

Pursuant to the Listing Rules and the terms of the Share Award Scheme, the maximum number of Awarded Shares (as defined under the Share Award Scheme) shall not exceed 10% of the Shares in issue on 19 February 2016 (“Share Award Scheme Mandate Limit”). By an ordinary resolution at the 2017 AGM, the Share Award Scheme Mandate Limit was refreshed and the Company was authorised to grant Awarded Shares of up to a maximum number of 4,577,875,772 Shares, representing 10% of the issued share capital of the Company as at the date of the 2017 AGM. The Company will not issue or grant any Awarded Shares under the Share Award Scheme which would result in exceeding the 30% aggregate limit for the Share Option Scheme and the Share Award Scheme.

During the Reporting Period, no Shares had been purchased or granted to the selected persons of the Group under the Share Award Scheme.

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 (and their respective associate(s)) had or was deemed to have any interests or short positions in the Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are deemed or taken to have under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO to be entered into the register referred to therein or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules, to be notified to the Company and the Stock Exchange.

DIRECTORS’ RIGHTS TO ACQUIRE SHARES OR DEBENTURES

Save as disclosed in the sections headed “Directors’ Interests and Short Positions in Shares, Underlying Shares and Debentures”, the “Share Option Scheme” and the “Share Award Scheme” above, at no time during the Reporting Period was the Company or any of its subsidiaries a party to any arrangements to enable the Directors 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 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 Reporting Period.

Other Information

I N T E R E S T S A N D S H O R T P O S I T I O N S O F S H A R E H O L D E R S DISCLOSEABLE UNDER THE SFO

As at 30 June 2021, save as disclosed below, according to the list of substantial shareholders extracted from the website of the Stock Exchange and the announcement of the Company, and as far as is known to the Directors, no person had an interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, which was recorded in the register of interests kept by the Company under section 336 of the SFO, was, directly or indirectly, interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at the general meeting of any other member of the Group or had any option in respect of such capital:

			Approximate
			percentage of
			the issued share
	Capacity in which the	Number of	capital of the	Long position/
Name of Shareholder	Shares were held	Shares held	Company	Short position
China Minsheng	Interest of controlled	30,523,539,093	64.14%	Long position
	corporation	(Note 1)
CMBCI	Interest of controlled	30,523,539,093	64.14%	Long position
	corporation	(Note 1)
CMBCI Investment HK	Interest of controlled	30,027,039,093	63.03%	Long position
	corporation	(Note 1)
CMBCI Investment	Beneficial Owner	30,027,039,093	63.03%	Long position
		(Note 1)

Note:

CMBCI Investment was beneficially and wholly-owned by CMBCI Investment HK, which was in turn beneficially and wholly-owned by CMBCI. CMBCI was beneficially and wholly-owned by China Minsheng. As such, each of CMBCI Investment HK, CMBCI and China Minsheng was deemed to be interested in the Shares held by CMBCI Investment.

CORPORATE GOVERNANCE

The Company had 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:

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED

Other Information

CORPORATE GOVERNANCE (continued)

Appointment of Directors

Code Provision A.4.1

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

Deviation

During the Reporting Period, the terms of appointment of the non-executive Directors were not for a specific term. Notwithstanding such deviation, all Directors are subject to the retirement by rotation and re-election according to the provisions of the byelaws 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 OF LISTED ISSUERS (THE “MODEL CODE”)

The Company has adopted the Model Code as set out in Appendix 10 to the Listing Rules as its own code of conduct regarding securities transactions by the Directors. In response to specific enquiry made by the Company, all Directors confirmed that they had complied with the required standards as set out in the Model Code throughout the Reporting Period.

AUDIT COMMITTEE

The 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, 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. The independent auditor, on the basis of their review, concluded that nothing has come to their attention that causes them to believe that the condensed consolidated financial statements are not prepared, in all material aspects, in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting”.

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

The Board considers that the repurchase of Shares could increase the net asset value and/or earnings per Share, so the Company repurchased a total of 79,930,000 Shares on the Stock Exchange, with a total consideration of approximately HK$8.4 million for the six months ended 30 June 2021. As at the date of this interim report, all repurchased Shares have been cancelled.

Other Information

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

Details of repurchase are as follows:

		Highest price	Lowest price	Total
	Total Shares	paid per Share	paid per Share	consideration paid
Month of repurchase	repurchased	(HK$)	(HK$)	(HK$’000)
January 2021	8,540,000	0.129	0.112	1,011
February 2021	16,160,000	0.116	0.108	1,787
March 2021	940,000	0.107	0.107	101
April 2021	9,730,000	0.108	0.103	1,034
May 2021	18,130,000	0.104	0.099	1,841
June 2021	26,430,000	0.101	0.095	2,586
Total	79,930,000	–	–	8,360

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.

FURTHER INFORMATION ON THE ANNUAL REPORT OF THE GROUP FOR THE YEAR ENDED 31 DECEMBER 2020 (“ANNUAL REPORT 2020”)

1) CONNECTED TRANSACTIONS

All related party transactions referred to in Note 41(a) to the Annual Report 2020 constitute connected transactions or continuing connected transactions defined in Chapter 14A of the Listing Rules (“Chapter 14A”). The Company has complied with the provisions of Chapter 14A for the year ended 31 December 2020.

2) RETIREMENT BENEFITS SCHEMES

For the year ended 31 December 2020, no forfeited contributions were available for utilisation by the Company to reduce the existing level of contributions.

Li Jinze Chairman

Hong Kong, 30 August 2021

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED 21

Report on Review of Condensed Consolidated Financial Statements

To the Board of Directors of CMBC Capital Holdings Limited

(incorporated in Bermuda with limited liability)

INTRODUCTION

We have reviewed the condensed consolidated financial statements set out on pages 23 to 60, which comprises the condensed consolidated statement of financial position of CMBC Capital Holdings Limited (the “Company”) and its subsidiaries (together, the “Group”) as at 30 June 2021 and the condensed consolidated statement of profit or loss, the condensed consolidated statement of profit or loss and other comprehensive income, the condensed consolidated statement of changes in equity and the condensed consolidated statement of cash flows for the six-month period then ended, and a summary of significant accounting policies and other explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on condensed consolidated financial statements to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 “Interim Financial Reporting” 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 Hong Kong Accounting Standard 34 “Interim Financial Reporting”. 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 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.

Report on Review of Condensed Consolidated Financial Statements (continued)

CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial statements of the Group are not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting”.

PricewaterhouseCoopers Certified Public Accountants

Hong Kong, 30 August 2021

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED

Condensed Consolidated Statement of Profit or Loss

For the six months ended 30 June 2021

	Six months ended	Six months ended
Notes	30 June 2021 HK$’000 (Unaudited)	30 June 2020 HK$’000 (Unaudited)
Revenue 4 Net gains on financial assets at fair value through profit or loss (“FVTPL”) Net losses on financial assets at fair value through other comprehensive income (“FVOCI”) Net gains on financial assets at amortised cost Other income 5 Other gains and losses 6 Impairment losses 7 Staff costs Depreciation and amortisation Other operating expenses Finance costs 8	461,012 77,208 (106,221) 76 6,648 11 (34,768) (38,552) (13,875) (25,852) (91,879)	501,578 48,204 (9,075) – 7,483 (3,815) (107,689) (33,553) (13,856) (25,942) (163,167)
Profit before taxation 9 Taxation 10	233,808 (32,619)	200,168 (34,718)
Profit for the period attributable to owners of the Company	201,189	165,450
Earnings per share attributable to owners of the Company (HK cents) 11 – Basic – Diluted	0.42 0.42	0.35 0.35

The notes on pages 29 to 60 form part of these condensed consolidated financial statements. Details of dividends payable to equity shareholders of the Company are set out in note 12.

Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the six months ended 30 June 2021

	Six months ended	Six months ended
	30 June 2021 HK$’000 (Unaudited)	30 June 2020 HK$’000 (Unaudited)
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)	201,189 9,202 93,346	165,450 (34,241) (83,631)
Other comprehensive income/(loss) for theperiod, net of tax	102,548	(117,872)
Total comprehensive income for the period attributable to owners of the Company	303,737	47,578

The notes on pages 29 to 60 form part of these condensed consolidated financial statements.

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED

Condensed Consolidated Statement of Financial Position

As at 30 June 2021

Notes	As at 30 June 2021 HK$’000 (Unaudited)	As at 31 December 2020 HK$’000 (Audited)
Non-current assets Property, plant and equipment Right-of-use asset Goodwill Intangible assets Loans and advances 13 Financial assets at amortised cost 15 Deferred tax assets Other assets	8,305 81,749 16,391 1,417 77,821 61,906 2,052 10,505	9,418 93,428 16,391 2,103 – 77,272 1,383 10,138
	260,146	210,133
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 16 Financial assets at fair value through profit or loss 17 Cash held on behalf of customers Cash and cash equivalents	1,496,266 244,219 165,478 12,269 696,413 8,137,320 2,318,683 230,454 941,100	502,816 35,339 119,836 – 1,485,217 6,835,510 1,240,808 357,370 378,170
	14,242,202	10,955,066

Condensed Consolidated Statement of Financial Position (continued)

As at 30 June 2021

Notes	As at 30 June 2021 HK$’000 (Unaudited)	As at 31 December 2020 HK$’000 (Audited)
Current liabilities Accounts payable 18 Other payables and accruals Amount due to an intermediate holding company Loans from an intermediate holding company 19 Notes payable 20 Financial assets sold under repurchase agreements 21 Financial liabilities at fair value through profit or loss 22 Lease liabilities Dividend payable Tax payable	268,089 276,659 – 4,270,438 1,403,126 5,190,368 345 27,388 157,001 48,563	359,441 83,147 5,927 4,446,443 – 3,390,747 93,922 27,388 – 20,831
	11,641,977	8,427,846
Net current assets	2,600,225	2,527,220
Total assets less current liabilities	2,860,371	2,737,353
Non-current liabilities Lease liabilities Deferred tax liabilities	57,426 64,583	66,670 70,715
	122,009	137,385
Net assets	2,738,362	2,599,968
Capital and reserves Share capital 23 Reserves	475,537 2,262,825	476,279 2,123,689
Total equity	2,738,362	2,599,968

The notes on pages 29 to 60 form part of these condensed consolidated financial statements.

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2021

Notes	Attributable to owners of the Company Share capital Share premium Contributed surplus Fair value reserve (recycling) Fair value reserve (non- recycling) Other reserve Accumulated profit/ (losses) Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000*
At 1 January 2021 (audited) Profit for the period Other comprehensive income	476,279 1,759,825 2,066,081 (115,278) 19,826 373 (1,607,138) 2,599,968 – – – – – – 201,189 201,189 – – – 93,346 9,202 – – 102,548
Total comprehensive income	– – – 93,346 9,202 – 201,189 303,737
Disposal of equity investments at fair value through other comprehensive income Shares repurchased but not yet cancelled Shares repurchased and cancelled 23(i) Dividend approved in respect of the previous year 12	– – – – (3,615) – 3,615# – – – – – – (847) – (847) (742) (7,140) – – – 387 – (7,495) – – (157,001) – – – – (157,001)
At 30 June 2021 (unaudited)	475,537 1,752,685 1,909,080 (21,932) 25,413 (87) (1,402,334) 2,738,362

Notes	Attributable to owners of the Company Share capital Share premium Contributed surplus* Fair value reserve (recycling) Fair value reserve (non- recycling) Other reserve Accumulated profit/ (losses) Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 January 2020 (audited) Profit for the period Other comprehensive (loss)/ income	476,792 1,766,218 2,223,351 (229,548) 3,214 479 (2,018,263) 2,222,243 – – – – – – 165,450 165,450 – – – (83,631) (38,481) – 4,240# (117,872)
Total comprehensive (loss)/income	– – – (83,631) (38,481) – 169,690 47,578
Shares repurchased and cancelled Dividend approved in respect of the previous year 12	(209) (2,694) – – – 281 – (2,622) – – (157,272) – – – – (157,272)
At 30 June 2020 (unaudited)	476,583 1,763,524 2,066,079 (313,179) (35,267) 760 (1,848,573) 2,109,927

Contributed surplus is a distributable reserve and will be used for payment of dividends.

Amounts reclassified to accumulated profit/(losses) upon disposal of equity investments at fair value through other comprehensive income.

The notes on pages 29 to 60 form part of these condensed consolidated financial statements.

Condensed Consolidated Statement of Cash Flows

For the six months ended 30 June 2021

	Six months ended	Six months ended
Note	30 June 2021 HK$’000 (Unaudited)	30 June 2020 HK$’000 (Unaudited)
Net cash used in operating activities	(567,661)	(397,882)
Net cash used in investing activities Purchases of property, plant and equipment	(397)	(432)
	(397)	(432)
Net cash generated from financing activities Repurchase of shares New borrowings raised Repayments of borrowings Issuance of notes 20 Principal and interest elements of lease payments	(8,342) 12,093,196 (12,337,273) 1,395,867 (11,412)	(2,622) 1,480,553 (864,800) – (13,693)
	1,132,036	599,438
Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Effect of foreign exchange rate changes, net	563,978 378,170 (1,048)	201,124 400,708 97
Cash and cash equivalents at the end of the period	941,100	601,929

The notes on pages 29 to 60 form part of these condensed consolidated financial statements.

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED 29

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

1 BASIS OF PREPARATION

These condensed consolidated financial statements have 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 (“HKAS”) 34, Interim Financial Reporting, issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). They were authorised for issue on 30 August 2021.

These condensed consolidated financial statements contain selected explanatory notes which include an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of CMBC Capital Holdings Limited (“the Company”) and its subsidiaries (collectively referred to as “the Group”) since the 2020 annual financial statements. The condensed consolidated financial statements and notes thereon do not include all of the information required for full set of financial statements prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”).

The condensed consolidated financial statements have been prepared in accordance with the same accounting policies adopted in 2020 annual financial statements.

The preparation of condensed consolidated financial statements in conformity with HKAS 34 requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses on a year to date basis. Actual results may differ from these estimates.

These condensed consolidated financial statements are unaudited, but have been reviewed by 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 HKICPA. PricewaterhouseCoopers’s independent review report to the Board of Directors is included on pages 21 and 22.

These condensed consolidated financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2020, which have been prepared in accordance with HKFRSs.

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

2 CHANGES IN ACCOUNTING POLICIES

A number of new or amended standards became applicable for the current reporting period, and the Group did not have to change its accounting policies or make retrospective adjustments as a result of adopting these standards.

The following amendments to accounting standards are applicable for annual reporting periods commencing on or after 1 January 2021:

Covid-19-related Rent Concessions – amendments to HKFRS 16
Interest Rate Benchmark Reform – Phase 2 – amendments to HKFRS 9, HKAS 39, HKFRS 7, HKFRS 4 and HKFRS 16

None of these is expected to have a significant effect on the condensed consolidated financial statements of the Group.

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED 31

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

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. “Investment and Financing”, which was previously presented in the 2020 condensed consolidated financial statements, has been presented as two segments “Fixed-income direct investment” and “Other Investment and financing” in 2020 annual financial statements. Therefore, the comparatives have been re-presented accordingly to align with the Group’s current internal reporting information.

the “securities” segment representing the business line of provision of brokerage services, securities margin financing services to clients and securities underwriting/placing;
the “fixed-income direct investment” segment representing direct investment and trading activities in fixed-income securities;
the “other investment and financing” segment representing investment and trading activities in equity securities, bonds and funds other than direct investment and trading activities in fixed-income securities, and provision of loan financing services;
the “asset management” segment representing provision of asset management services to clients;
the “corporate finance and advisory” segment representing provision of sponsorship, financial advisory and financial arrangement services to clients; and
the “Others” segment primarily includes head office operations as well as interest income and interest expense incurred for generating working capital for general operations.

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

3 SEGMENT INFORMATION (continued)

Disaggregation of revenue

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

	Six months ended	Six months ended
	30 June 2021 HK$’000	30 June 2020 HK$’000
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 – Financial advisory, sponsorship, arrangement fee and other service income – Asset management fee, investment advisory services fee and performance fee income	4,422 39,439 23,807 69,587	365 17,052 14,483 62,226
	137,255	94,126
Revenue from other sources Loan and financing – Interest income from provision of finance and securities margin financing Financial investments – Interest income from debt securities investments – Interest income from FVTPL investments – Dividend income and other investment income	79,365 150,942 17,144 76,306	119,490 237,962 8,125 41,875
	244,392	287,962
	461,012	501,578

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

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

3 SEGMENT INFORMATION (continued)

Disaggregation of revenue (continued)

Disaggregation of revenue is set out below:

	Securities	Securities	Fixed-income direct investment	Fixed-income direct investment	Other investment and financing	Other investment and financing	Asset management	Asset management	Corporate finance and advisory	Corporate finance and advisory	Total	Total
For the six months ended	30 June 2021 HK$’000	30 June 2020 HK$’000	30 June 2021 HK$’000	30 June 2020 (Re-presented) HK$’000	30 June 2021 HK$’000	30 June 2020 (Re-presented) HK$’000	30 June 2021 HK$’000	30 June 2020 HK$’000	30 June 2021 HK$’000	30 June 2020 HK$’000	30 June 2021 HK$’000	30 June 2020 HK$’000
Revenue from contracts with customers within the scope of HKFRS 15 Revenue from other sources Loan and financing – Interest income from provision of finance and securities margin financing Financial investments – Interest income from debt securities investments – Interest income from FVTPL investments – Dividend income and other investment income	39,871 25,440 – – –	8,099 25,565 – – –	– – 150,942 22 58,826	– – 237,962 – 37,668	– 53,925 – 17,122 17,480	– 93,925 – 8,125 4,207	69,587 – – – –	62,226 – – – –	27,797 – – – –	23,801 – – – –	137,255 79,365 150,942 17,144 76,306	94,126 119,490 237,962 8,125 41,875
	–	–	209,790	275,630	34,602	12,332	–	–	–	–	244,392	287,962
Reportable segment revenue	65,311	33,664	209,790	275,630	88,527	106,257	69,587	62,226	27,797	23,801	461,012	501,578

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

3 SEGMENT INFORMATION (continued)

Segment revenue and results

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

	Six months ended 30 June 2021
	Securities Fixed- income direct investment Other investment and financing Asset management Corporate finance and advisory Others Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Segment revenue and investment gains/(losses) – Reportable segment revenue – Net gains on financial assets at fair value through profit or loss – Net losses on financial assets at fair value through other comprehensive income – Net gains on financial assets at amortised cost	65,311 209,790 88,527 69,587 27,797 – 461,012 – 18,882 58,326 – – – 77,208 – (106,221) – – – – (106,221) – 76 – – – – 76
Other income Other gains and losses Segment expenses	65,311 122,527 146,853 69,587 27,797 – 432,075 1,880 12 – 40 256 4,460 6,648 307 (5,852) 1,299 93 – 4,164 11 (25,562) (83,278) (58,085) (14,300) (13,467) (10,234) (204,926)
Segment results	41,936 33,409 90,067 55,420 14,586 (1,610) 233,808

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED 35

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

3 SEGMENT INFORMATION (continued)

Segment revenue and results (continued)

	Six months ended 30 June 2020
	Securities Fixed- income direct investment Other investment and financing Asset management Corporate finance and advisory Others Total (Re- presented) (Re- presented) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Segment revenue and investment gains/(losses) – Reportable segment revenue 33,664 275,630 106,257 62,226 23,801 – 501,578 – Net gains on financial assets at fair value through profit or loss – 896 47,308 – – – 48,204 – Net losses on financial assets at fair value through other comprehensive income – (9,075) – – – – (9,075)
33,664 267,451 153,565 62,226 23,801 – 540,707 Other income 1,523 178 13 456 633 4,680 7,483 Other gains and losses (1,460) 9,110 (874) (328) 115 (10,378) (3,815) Segment expenses (15,412) (229,544) (49,210) (19,440) (14,699) (15,902) (344,207)
Segment results 18,315 47,195 103,494 42,914 9,850 (21,600) 200,168

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

3 SEGMENT INFORMATION (continued)

Segment assets and liabilities

	As at 30 June 2021
	Securities Fixed- income direct investment Other investment and financing Asset management Corporate finance and advisory Others Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Assets Segment assets	2,031,539 8,581,677 3,631,172 69,490 25,970 162,500 14,502,348
Liabilities Segment liabilities	1,640,331 7,015,461 2,803,279 21,239 – 283,676 11,763,986

	As at 31 December 2020
	Securities Fixed- income direct investment Other investment and financing Asset management Corporate finance and advisory Others Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Assets Segment assets	985,583 6,955,357 2,947,028 48,656 26,750 201,825 11,165,199
Liabilities Segment liabilities	776,097 6,383,045 1,236,604 14,106 – 155,379 8,565,231

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

4 REVENUE

	Six months ended	Six months ended
	30 June 2021 HK$’000	30 June 2020 HK$’000
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 Financial advisory, sponsorship, arrangement fee and other service income Asset management fee, investment advisory services fee and performance fee income	4,422 39,439 150,942 17,144 79,365 76,306 23,807 69,587	365 17,052 237,962 8,125 119,490 41,875 14,483 62,226
	461,012	501,578

5 OTHER INCOME

	Six months ended	Six months ended
	30 June 2021 HK$’000	30 June 2020 HK$’000
Bank interest income Office sharing fee income Other income	33 4,440 2,175	1,065 4,440 1,978
	6,648	7,483

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

6 OTHER GAINS AND LOSSES

	Six months ended	Six months ended
	30 June 2021 HK$’000	30 June 2020 HK$’000
Net exchange gain/(loss)	11	(3,815)
	11	(3,815)

7 IMPAIRMENT LOSSES

	Six months ended	Six months ended
	30 June 2021 HK$’000	30 June 2020 HK$’000
Impairment losses – Loans and advances (Note 13) – Accounts receivable (Note 14) – Financial assets at fair value through other comprehensive income (Note 16) – Financial assets at amortised cost (Note 15)	21,391 503 12,861 13	6,813 1,555 64,352 34,969
	34,768	107,689

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

8 FINANCE COSTS

	Six months ended	Six months ended
	30 June 2021 HK$’000	30 June 2020 HK$’000
Interest expense on: Margin loan Notes payable Bank borrowings Loans from an intermediate holding company Financial assets sold under repurchase agreements Lease liabilities	– 5,189 551 65,610 18,361 2,168	4 1,521 – 118,986 39,992 2,664
	91,879	163,167

9 PROFIT BEFORE TAXATION

	Six months ended	Six months ended
	30 June 2021 HK$’000	30 June 2020 HK$’000
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	1,510 11,679 686	1,491 11,679 686

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

10 TAXATION

	Six months ended	Six months ended
	30 June 2021 HK$’000	30 June 2020 HK$’000
Current period – Hong Kong Profits Tax Deferred tax credited/(provided) for the period	(39,420) 6,801	(17,376) (17,342)
	(32,619)	(34,718)

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

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:

	Six months ended	Six months ended
	30 June 2021 HK$’000	30 June 2020 HK$’000
Earnings Profit attributable to owners of the Company for the purpose of basic and diluted earnings per share	201,189	165,450

	Six months ended
	30 June 2021 ’000	30 June 2020 ’000
Number of shares Weighted average number of ordinary shares for the purpose of basic and diluted earnings per share	47,601,858	47,673,449

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

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

12 DIVIDENDS

The Board of Directors does not recommend the payment of interim dividend for the six months ended 30 June 2021 (30 June 2020: Nil).

The final dividend of HK0.33 cents per share (2019: HK0.33 cents per share) for the year ended 31 December 2020 had been approved by the shareholders of the Company on 29 June 2021 and was paid on 30 July 2021 in an aggregated amount of approximately HK$157,001,000 (For the year ended 31 December 2019: approximately HK$157,272,000).

13 LOANS AND ADVANCES

	As at 30 June 2021 HK$’000	As at 31 December 2020 HK$’000
Loans and advances Less: Allowance for expected credit losses	785,671 (11,437)	1,492,193 (6,976)
Less: Amount due within one year shown under current assets	774,234 (696,413)	1,485,217 (1,485,217)
Amount shown under non-current assets	77,821	–
Loans and advances (non-current) Less: Allowance for expected credit losses	77,882 (61)	– –
	77,821	–
Loans and advances (current) Less: Allowance for expected credit losses	707,789 (11,376)	1,492,193 (6,976)
	696,413	1,485,217

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

13 LOANS AND ADVANCES (continued)

At 30 June 2021, loans and advances included loans to independent third parties with effective interest rates ranging from 6% to 13% (31 December 2020: 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 2021, allowance for expected credit losses of HK$21,391,000 was recognised (for the six months ended 30 June 2020: HK$6,813,000) in the condensed consolidated statement of profit or loss.

14 ACCOUNTS RECEIVABLE

	As at 30 June 2021 HK$’000	As at 31 December 2020 HK$’000
Accounts receivable arising from the ordinary course of business of securities brokerage, futures and options dealing services: – Clearing houses – Cash clients – Margin clients – Clients for subscription of new shares in IPO	111 15,748 403,138 1,060,894	2,828 2 480,286 –
Accounts receivable arising from the ordinary course of business of securities underwriting Accounts receivable arising from the ordinary course of business of advisory services	1,479,891 9,826 9,666	483,116 12,639 9,675
Less: Allowance for expected credit losses	1,499,383 (3,117)	505,430 (2,614)
	1,496,266	502,816

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

14 ACCOUNTS RECEIVABLE (continued)

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.

Accounts receivable due from margin clients are repayable on demand and carry interest at 5% to 18% per annum during the six months ended 30 June 2021 (during the year ended 31 December 2020: accounts receivable due from margin clients are repayable on demand and carry interest at 5.25% to 18% per annum). The fair value of the pledged securities as at 30 June 2021 is approximately HK$617,737,000 (31 December 2020: HK$797,944,000).

During the period ended 30 June 2021, allowance for expected credit losses of HK$503,000 was recognised (for the six months ended 30 June 2020: HK$1,555,000) in the condensed consolidated statement of profit or loss.

Accounts receivable from clients arising from financing of IPO subscriptions are required to settle their securities trading balances on the allotment date determined under the relevant market practices or exchange rules. As at 30 June 2021, the settlement dates are in the range of 2 to 7 days.

As at 30 June 2021, the Group has concentration risk on its accounts receivable as the balance with the largest client represent 34% (31 December 2020: 41%) of the total accounts receivable from cash clients, margin clients and clients for subscription of new shares in IPO. The Group has no other significant concentration risk.

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

14 ACCOUNTS RECEIVABLE (continued)

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:

follows:
	As at 30 June 2021 HK$’000	As at 31 December 2020 HK$’000
Neither past due nor impaired 31 – 60 days past due 61 – 90 days past due Over 90 days past due	10,680 3,985 2,000 2,827	11,458 8,126 2,559 171
Allowance for expected credit losses	19,492 –	22,314 –
Total	19,492	22,314

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. The directors have assessed and considered that there is no recoverability issue.

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

15 FINANCIAL ASSETS AT AMORTISED COST

	As at 30 June 2021 HK$’000	As at 31 December 2020 HK$’000
Listed debt investments Less: Allowance for expected credit losses	62,130 (224)	77,536 (264)
	61,906	77,272

The above amount is due more than one year and shown under non-current assets.

During the period ended 30 June 2021, allowance for expected credit losses of HK$13,000 (for the six months ended 30 June 2020: HK$34,969,000) was recognised in the condensed consolidated statement of profit or loss.

16 FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

	As at 30 June 2021 HK$’000	As at 31 December 2020 HK$’000
Listed debt investments, at fair value (Note) Listed equity instruments, at fair value	5,086,190 3,051,130	5,173,757 1,661,753
	8,137,320	6,835,510

Note: The Group has further recognised expected credit losses amounted to HK$12,861,000 in the condensed consolidated statement of profit or loss during the period (for the six months ended 30 June 2020: HK$64,352,000). As at 30 June 2021, allowance for expected credit losses amounted HK$42,453,000 (31 December 2020: HK$94,597,000) has been included in fair value reserve (recycling).

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

17 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

	As at 30 June 2021 HK$’000	As at 31 December 2020 HK$’000
Listed equity investments Unlisted equity investments Listed debt investments Unlisted investment funds Derivative financial instrument – credit derivative	208,620 302,769 966,164 841,130 –	– 230,715 241,417 700,113 68,563
	2,318,683	1,240,808

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

As at 31 December 2020, the credit derivative was a non-qualified hedging derivative which comprises a total return swap held by the Group with notional value amounted to approximately HK$187.3 million. During the period ended 30 June 2021, the credit derivative was unwound.

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED 47

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

18 ACCOUNTS PAYABLE

	As at 30 June 2021 HK$’000	As at 31 December 2020 HK$’000
Accounts payable arising from the ordinary course of business of securities brokerage, futures and options dealing services: – Cash clients – Margin clients – Clearing houses – Brokers	133,234 18,608 52 116,195	221,936 54,537 82,968 –
	268,089	359,441

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.

19 LOANS FROM AN INTERMEDIATE HOLDING COMPANY

	As at 30 June 2021 HK$’000	As at 31 December 2020 HK$’000
Loans from an intermediate holding company	4,270,438	4,446,443
The carrying amounts of the above borrowings are repayable: Within one year	4,270,438	4,446,443

As at 30 June 2021, the Group had loans amounting to approximately HK$4,102,445,000 (31 December 2020: HK$4,344,207,000) from CMBC International Holdings Limited, an intermediate holding company and interest payable amounting to approximately HK$167,993,000 (31 December 2020: HK$102,236,000). The loans bear interests at 3.5% per annum (31 December 2020: 4% per annum) and are repayable within one year (31 December 2020: within one year).

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

20 NOTES PAYABLE

In 2013, the Company issued notes in the aggregate principal amount of HK$50,000,000 to independent third parties. The notes carry interest at 5% per annum and are to be redeemed on the seventh anniversary from the respective issue dates of the notes. During the year ended 31 December 2020, the note principal of HK$50,000,000 was fully repaid.

During the period ended 30 June 2021, the Company issued notes in the aggregate principal amount of US$180,000,000 to independent third parties. The notes carry variable interest at 1% to 1.8% per annum and are to be redeemed within one year.

As at 30 June 2021, the aggregate principal amount of the notes payable was US$180,000,000 (31 December 2020: Nil).

The movement of the notes payable for the period ended 30 June 2021 and for the year ended 31 December 2020 are set out below:

	As at 30 June 2021 HK$’000	As at 31 December 2020 HK$’000
At the beginning of the period/year Issuance of notes Interest charged Repayment of note principal Interest payable Exchange realignment	– 1,395,867 5,189 – – 2,070	50,000 – 2,781 (50,000) (2,781) –
At the end of the period/year	1,403,126	–
The carrying amounts of the above borrowings are repayable: Within one year	1,403,126	–

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

21 FINANCIAL ASSETS SOLD UNDER REPURCHASE AGREEMENTS

	As at 30 June 2021 HK$’000	As at 31 December 2020 HK$’000
Bonds	5,190,368	3,390,747

As at 30 June 2021, 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 amortised cost with aggregate carrying amount of approximately HK$6,859,456,000 (31 December 2020: approximately HK$4,535,946,000), which are 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.

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

22 FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

	As at 30 June 2021 HK$’000	As at 31 December 2020 HK$’000
Payables to interest holder of unlisted consolidated investment fund, designated at FVTPL Derivative financial instrument – credit derivative	345 –	– 93,922
	345	93,922

As at 30 June 2021, the Company held 60% (31 December 2020: 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$345,000 as at 30 June 2021 (31 December 2020: Nil).

As at 31 December 2020, the credit derivative was a non-qualified hedging derivative which comprises a total return swap held by the Group with notional value amounted to approximately HK$187.7 million. During the period ended 30 June 2021, the credit derivative was unwound.

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED 51

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

23 SHARE CAPITAL

	Number of shares	Number of shares	Amount	Amount
Note	As at 30 June 2021 ’000	As at 31 December 2020 ’000	As at 30 June 2021 HK$’000	As at 31 December 2020 HK$’000
Authorised: Ordinary shares of HK$0.01 each	100,000,000	100,000,000	1,000,000	1,000,000
Issued and fully paid: At the beginning of the period/year Cancellation for shares repurchased (i)	47,627,928 (74,210)	47,679,218 (51,290)	476,279 (742)	476,792 (513)
At the end of the period/year	47,553,718	47,627,928	475,537	476,279

Note:

(i) During the period ended 30 June 2021, the Company repurchased an aggregate of 79,930,000 ordinary shares of the Company on market at prices ranging from HK$0.095 to HK$0.129 per share at a total consideration of approximately HK$8,342,000 (before transaction costs). Of these repurchased shares, 71,030,000 shares were cancelled prior to period ended 30 June 2021. The premium of approximately HK$7,140,000 paid on the repurchase of shares was debited to share premium account. Subsequent to end of the reporting period, the remaining 8,900,000 repurchased shares were cancelled on 30 July 2021.

During the year ended 31 December 2020, the Company repurchased an aggregate of 52,530,000 ordinary shares of the Company on market at prices ranging from HK$0.112 to HK$0.17 per share at a total consideration of approximately HK$7,012,000 (before transaction costs). Of these repurchased shares, 49,350,000 shares were cancelled prior to year ended 31 December 2020. The premium of approximately HK$6,393,000 paid on the repurchase of such shares was debited to share premium account. Subsequent to end of the reporting period, the remaining 3,180,000 repurchased shares were cancelled on 29 January 2021.

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

24 FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS

Financial assets and liabilities measured at fair value on recurring basis

The following table provides an analysis of the Group’s financial instruments that are measured subsequent to initial recognition at fair value, grouped into Level 1 to 3 based on the degree to which the fair value is observable for the six months ended 30 June 2021:

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

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

24 FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS (continued)

Financial assets and liabilities measured at fair value on recurring basis (continued)

	Fair value Fair value hierarchy Valuation techniques Significant unobservable input	Fair value Fair value hierarchy Valuation techniques Significant unobservable input
	30 June 2021 HK$’000	31 December 2020 HK$’000
Financial assets Financial assets at fair value through profit or loss – Listed equity investments – Unlisted equity investments – Listed debt investments – Unlisted investment funds – Derivative financial instrument–credit derivative Financial assets at fair value through other comprehensive income – Listed debt investments – Listed equity instruments	208,620 302,769 966,164 841,130 – 5,086,190 3,051,130	– Level 1 Quoted market closing prices in an active market N/A 230,715 Level 3 Recent transaction price/Binomial Model Discount rate for lack of marketability/ Forward Price- to-Earnings ratio 241,417 Level 2 Quoted price from brokers/financial institution N/A 700,113 Level 3 Recent transaction price/Trending on stock price movement/Equity allocation model Stock price movement/ Scenario probability 68,563 Level 2 Quoted price from broker/financial institution N/A 5,173,757 Level 2 Quoted price from brokers/financial institution N/A 1,661,753 Level 2 Quoted price from brokers/financial institution N/A

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

24 FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS (continued)

Financial assets and liabilities measured at fair value on recurring basis (continued)

	Fair value Fair value hierarchy Valuation techniques Significant unobservable input	Fair value Fair value hierarchy Valuation techniques Significant unobservable input
	30 June 2021 HK$’000	31 December 2020 HK$’000
Financial liabilities Financial liabilities at fair value through profit or loss – Payables to interest holders of unlisted consolidated investment funds, designated at FVTPL – Derivative financial instrument–credit derivative	345 –	– Level 3 Net asset value N/A 93,922 Level 2 Quoted price from broker/financial institution N/A

During the period under review, there were no transfers among Level 1, Level 2 and Level 3.

Fair value measurements and valuation processes

The fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market closing prices. The fair value of financial assets that are not traded in active liquid markets are determined based on recent market transactions.

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

25 RELATED PARTY TRANSACTIONS

The Group had the following related party transactions for the six months ended 30 June 2021 and 2020:

(a) Compensation of key management personnel of the Group

	Six months ended 30 June 2021 30 June 2020 HK$’000 HK$’000	Six months ended 30 June 2021 30 June 2020 HK$’000 HK$’000
	30 June 2021 HK$’000
Short-term employee benefits Post-employment benefits	10,067 27	7,075 27
Total compensation to key management personnel	10,094	7,102

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

25 RELATED PARTY TRANSACTIONS (continued)

(b) Material transaction with related parties

Apart from transactions disclosed in other notes of the condensed consolidated financial statements, during the period ended 30 June 2021, the Group had the following material transactions with related parties.

	Six months ended	Six months ended
	30 June 2021 HK$’000	30 June 2020 HK$’000
Interest expense to an intermediate holding company (Note (i)) Interest income from a branch of the ultimate holding company Distribution fee to a subsidiary of an intermediate holding company and a branch of the ultimate holding company (Note (ii)) Underwriting fee income from a subsidiary of the ultimate holding company Asset management fee and investment advisory services fee income from an intermediate holding company and segregated portfolios invested by an intermediate holding company and the ultimate holding company (Note (iii)) Performance fee income from an intermediate holding company and a segregated portfolio invested by an intermediate holding company and the ultimate holding company (Note (iii)) Office sharing fee income from an intermediate holding company	65,610 – 67 1,745 53,763 15,511 4,440	118,986 1 4,500 – 44,431 17,482 4,440

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

25 RELATED PARTY TRANSACTIONS (continued)

(b) Material transaction with related parties (continued)

Notes:

(i) At 30 June 2021, an intermediate holding company provided loans in an aggregate amount of approximately HK$4,102,445,000 (31 December 2020: HK$4,344,207,000) to the Group. The loans bear annual interest rate of 3.5% (31 December 2020: 4%) and repayable within one year (31 December 2020: within one year). Interest payable of approximately HK$167,993,000 (31 December 2020: HK$102,236,000) has been accrued from the loans as at 30 June 2021.
(ii) During the period ended 30 June 2021, the Group accrued distribution fee for the distribution services provided by a branch of the ultimate holding company. During the prior period ended 30 June 2020, the Group paid distribution fee for the distribution services provided by a subsidiary of an intermediate holding company.
(iii) During the period, the Group earned asset management fee and investment advisory services fee income for services provided to an intermediate holding company and segregated portfolios invested by an intermediate holding company and the ultimate holding company, and earned performance fee income for the asset management services provided to an intermediate holding company and a segregated portfolio invested by an intermediate holding company and the ultimate holding company.

(c) Material balances with related parties

	As at 30 June 2021 HK$’000	As at 31 December 2020 HK$’000
Bank balances at a branch of the ultimate holding company – House accounts – Segregated accounts Amount due from an intermediate holding company Amount due to an intermediate holding company Loans from an intermediate holding company Accounts payable to the immediate holding company	26,921 55,806 12,269 – 4,270,438 3,822	19,686 171,207 – 5,927 4,446,443 3

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

25 RELATED PARTY TRANSACTIONS (continued)

(d) Service agreements with related parties

On 31 May 2019, the Company entered into the office sharing agreement with CMBCI, pursuant to which the Company agreed to grant CMBCI the non-exclusive right to use certain area of the office space in consideration of the sharing fees payable by CMBCI. On 31 December 2019, the Company entered into the renewed office sharing agreement with CMBCI to renew the existing office sharing agreement and also entered into the renewed deposit services agreement with CMBC HK Branch to renew the existing deposit services agreement.

On 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 Banking Corp., Ltd. (“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, (i) 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; (ii) China Minsheng Group agreed to provide the distribution services to the Group; (iii) China Minsheng Group agreed to provide the underwriting referral services to the Group pursuant to the Service Agreement; and (iv) 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 transactions contemplated thereunder, and the Proposed Annual Caps were approved at the special general meeting on 23 September 2019.

On 27 July 2020, the Company proposed to revise the annual caps of the asset management services, investment advisory services and ancillary services provided by the Group to the China Minsheng Group, and the distribution services to be provided by China Minsheng Group to the Group pursuant to the service agreement dated 23 July 2019 for the years ending 31 December 2020 and 2021. The proposed revised annual caps were approved by the independent shareholders of the Company at the special general meeting held on 26 August 2020.

During the period ended 30 June 2021, there were transactions relating to provision of distribution services, provision of underwriting services, provision of asset management and investment advisory services, provision of deposit services and office sharing (2020: transactions relating to provision of asset management and investment advisory services, provision of distribution services, provision of deposit services and office sharing).

INTERIM REPORT 2021 | CMBC CAPITAL HOLDINGS LIMITED

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

26 INVOLVEMENT WITH UNCONSOLIDATED STRUCTURED ENTITIES

	As at 30 June 2021 HK$’000	As at 31 December 2020 HK$’000
Unlisted investment funds	841,130	700,113

The Group has concluded that the unlisted investment funds in which it invests, but that it does not consolidate meets the definition of structured entities because:

the voting rights in the funds are not dominant rights in deciding who controls them as they relate to administrative tasks only;
each fund’s activities are restricted by its articles of associations; and/or
the funds have narrow and well defined objectives to provide investment opportunities to investors.

The table below describes the types of structured entities that the Group does not consolidate but in which it holds an interest:

Type of		Interest held
structured entity	Nature and purpose	by the Group
Unlisted investment	To manage assets on behalf	Acting as limited partner
funds	of third party investors

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2021

26 INVOLVEMENT WITH UNCONSOLIDATED STRUCTURED ENTITIES (continued)

The table below sets out interests held by the Group in unconsolidated structured entities. The maximum exposure to loss is the carrying amount of the financial assets held.

assets held.
	30 June 2021 Number of investment funds Carrying amount included in financial assets at fair value through profit or loss HK$’000
Unlisted investment funds	9 841,130

	31 December 2020 Number of investment funds Carrying amount included in financial assets at fair value through profit or loss HK$’000
Unlisted investment funds	5 700,113

During the six months ended 30 June 2021 and 2020, the Group did not provide financial support to the unconsolidated structured entities and has no intention of providing financial or other support.

27 IMMEDIATE AND ULTIMATE HOLDING COMPANIES

The immediate parent and ultimate controlling party are CMBC International Investment Limited, which is incorporated in British Virgin Islands and China Minsheng Banking Corp., Ltd. which is incorporated in People’s Republic of China, respectively.

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PegBio Co., Ltd. — Interim / Quarterly Report 2021

50676_rns_2021-09-28_a1231947-c27a-4288-88af-dfbd82e3c1d5.pdf

Contents

Abbreviations

Corporate Information

BOARD OF DIRECTORS

Executive Directors

Non-executive Directors

Independent Non-executive Directors

AUDIT COMMITTEE

REMUNERATION COMMITTEE

NOMINATION COMMITTEE

COMPANY SECRETARY

TRADING OF SHARES

REGISTERED OFFICE

HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS IN HONG KONG

PRINCIPAL BANKERS

LEGAL ADVISER

AUDITOR

PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE

HONG KONG BRANCH SHARE R E G I S T R A R A N D T R A N S F E R OFFICE

WEBSITE

Management Discussion and Analysis

BUSINESS REVIEW

Investment and Financing

Management Discussion and Analysis

BUSINESS REVIEW (continued)

Securities

Asset Management

Management Discussion and Analysis

BUSINESS REVIEW (continued)

Corporate Finance and Advisory

PROSPECTS AND DEVELOPMENT STRATEGIES

Prospects

Management Discussion and Analysis

PROSPECTS AND DEVELOPMENT STRATEGIES (continued)

Development Strategies

Management Discussion and Analysis

PROSPECTS AND DEVELOPMENT STRATEGIES (continued)

Development Strategies (continued)

FINANCIAL RESULTS

Revenue

Management Discussion and Analysis

FINANCIAL RESULTS (continued)

Securities Segment

Investment and Financing Segment

Management Discussion and Analysis

FINANCIAL RESULTS (continued)

Investment and Financing Segment (continued)

Fixed-income Direct Investment

Other Investment and Financing

Management Discussion and Analysis

FINANCIAL RESULTS (continued)

Investment and Financing Segment (continued)

Other Investment and Financing (continued)

Management Discussion and Analysis

FINANCIAL RESULTS (continued)

Investment and Financing Segment (continued)

Other Investment and Financing (continued)

Asset Management Segment

Corporate Finance and Advisory Segment

Management Discussion and Analysis

FINANCIAL RESULTS (continued)

Administrative Expenses and Finance Costs

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

Capital Structure

Management Discussion and Analysis

Liquidity and Financial Resources

Management Discussion and Analysis

PLEDGE OF ASSETS

CONTINGENT LIABILITY

CAPITAL COMMITMENT

SIGNIFICANT INVESTMENTS HELD

MATERIAL ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES AND ASSOCIATES

FOREIGN CURRENCY RISK MANAGEMENT

HUMAN RESOURCES AND REMUNERATION POLICY

Other Information

EVENTS AFTER THE REPORTING PERIOD

RISK MANAGEMENT CAPABILITIES

PegBio Co., Ltd. Interim / Quarterly Report 2021