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

ETERNITY INVESTMENT LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 764)

INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2023

The board of directors (the "Board") of Eternity Investment Limited (the "Company") announces the unaudited condensed consolidated results of the Company and its subsidiaries (collectively, the "Group") for the six months ended 30 June 2023 together with the comparative figures for 2022 as follows:

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

	Notes	For the six months ended 30 June
		2023 HK$’000 (Unaudited)	2022 HK$’000 (Unaudited)
Revenue	4	81,665	81,529
Cost of sales		(46,547)	(44,482)
Gross profit		35,118	37,047
Investment and other income	5	19,830	6,322
Other gains and losses	6	(3,971)	(18,702)
Selling and distribution expenses		(2,182)	(1,635)
Allowance for expected credit losses on financial assets	7	(1,662)	(2,436)
Administrative expenses		(57,780)	(55,465)
Share of results of associates		(7,342)	(3,936)
Loss from operations		(17,989)	(38,805)
Finance costs	8	(34,361)	(28,659)
Loss before taxation		(52,350)	(67,464)
Income tax credit	9	1,325	1,233
Loss for the period	10	(51,025)	(66,231)

	For the six months ended 30 June
	2023
HK$’000
(Unaudited)	2022
HK$’000
(Unaudited)
Loss for the period attributable to:
Owners of the Company	(51,025)	(66,229)
Non-controlling interests	—	(2)
	(51,025)	(66,231)
Interim dividend	11	—
Loss per share	12	(1.38)
Basic (Hong Kong cents)		(1.38)
Diluted (Hong Kong cents)		(1.38)

	For the six months ended 30 June
	2023	2022
	HK$'000	HK$'000
	(Unaudited)	(Unaudited)
Loss for the period	(51,025)	(66,231)
Other comprehensive (expense)/income for the period, net of income tax,
Items that will not be reclassified to profit or loss:
Fair value loss on equity instruments at fair value through other comprehensive income	(2,880)	(9,500)
	(2,880)	(9,500)
Items that may be reclassified subsequently to profit or loss:
Exchange differences arising on translating foreign operations	(37,077)	(60,597)
Share of other comprehensive income/(expense) of associates, net of related income tax	65	(34)
	(37,012)	(60,631)
Other comprehensive expense for the period, net of income tax	(39,892)	(70,131)
Total comprehensive expense for the period	(90,917)	(136,362)
Total comprehensive (expense)/income for the period attributable to:
Owners of the Company	(91,096)	(136,636)
Non-controlling interests	179	274
	(90,917)	(136,362)

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	Notes	At 30 June 2023	At 31 December 2022
		HK$’000 (Unaudited)	HK$’000 (Audited)
ASSETS
Non-current assets
Property, plant and equipment		891,292	907,374
Right-of-use assets		208,844	222,318
Investment properties		235,506	233,991
Intangible assets		639,977	673,975
Goodwill		237,630	245,268
Interests in associates		19,035	35,918
Deferred tax assets		92,760	93,154
Equity instruments at fair value through other comprehensive income		9,335	12,215
Financial assets at fair value through profit or loss		9,716	9,527
Finance lease receivables		158,036	142,632
Prepayments and other receivables		1,374	3,194
		2,503,505	2,579,566
Current assets
Inventories		36,993	36,024
Loan receivables	13	413,867	412,069
Trade receivables	14	32,664	32,841
Deposits, prepayments and other receivables		129,416	167,229
Finance lease receivables		22,820	31,435
Financial assets at fair value through profit or loss		109,117	125,910
Derivative financial instruments		—	—
Pledged bank deposits		149	779
Restricted bank deposits		17,650	—
Cash and cash equivalents		52,217	34,765
		814,893	841,052
Assets classified as held for sale		31,255	36,852
		846,148	877,904
Total assets		3,349,653	3,457,470

– 4 –

	Notes	At 30 June 2023 HK$’000 (Unaudited)	At 31 December 2022 HK$’000 (Audited)
EQUITY
Share capital		38,196	38,196
Share held for share award plan		(24,455)	(24,455)
Reserves		1,694,336	1,785,432
Equity attributable to owners of the Company		1,708,077	1,799,173
Non-controlling interests		(5,578)	(5,757)
Total equity		1,702,499	1,793,416
LIABILITIES
Current liabilities
Trade payables	15	27,257	32,948
Deposits received, accruals and other payables		203,038	246,069
Receipts in advance		64,018	87,221
Tax payables		83,074	79,944
Bank borrowings		196,319	200,020
Other borrowings		263,778	266,789
Lease liabilities		6,646	6,849
Guaranteed secured notes		197,000	197,000
Amounts due to directors		47,499	1,000
Amounts due to associates		6,666	1,961
Derivative financial instruments		—	—
		1,095,295	1,119,801
Non-current liabilities
Deposit received and other payables		95,072	64,060
Lease liabilities		270,474	284,698
Deferred tax liabilities		186,313	195,495
		551,859	544,253
Total liabilities		1,647,154	1,664,054
Total equity and liabilities		3,349,653	3,457,470
Net current liabilities		(249,147)	(241,897)
Total assets less current liabilities		2,254,358	2,337,669

Notes:

1. Basis of preparation

The condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard (“HKAS”) 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) and the applicable disclosure requirements set out in Appendix 16 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Group for the year ended 31 December 2022. Except as described in note 2 below, the accounting policies and methods of computation used in the condensed consolidated financial statements are the same as those presented in the audited consolidated financial statements for the year ended 31 December 2022.

Going concern

During the six months ended 30 June 2023, the Group incurred a loss for the period attributable to owners of the Company of HK$51,025,000, certain bank accounts of the Group in the amount of approximately RMB16,273,000 (equivalent to HK$17,650,000) have been frozen by a civil ruling issued by a court in the People’s Republic of China (the “PRC”), and, as of that date, the Group’s current liabilities exceeded its current assets by HK$249,147,000. These events or conditions indicate that a material uncertainty exists that may cast significant doubts on the Group’s ability to continue as a going concern.

In view of such circumstances, the directors of the Company have given careful consideration to the future liquidity, operating performance of the Group and its available sources of financing, and are of the opinion that the cash flow generated from operating activities, together with certain appropriate financing activities, will enable the Group to meet the funding needs of operations and repay the outstanding borrowings. In order to improve the Group’s financial position, the directors of the Company have been implementing various measures as follows:

taking active measures to collect loan receivables to improve operating cash flows and its financial position;
formulating various sale and marketing initiatives to increase the occupancy rate of the residential serviced apartments in Beijing, the PRC;
negotiating with respective lenders to renew and extend the existing borrowings upon their maturities;
negotiating with various financial institutions and identifying various options for financing the Group’s working capital in the foreseeable future;
reviewing its investments and actively considering the realisation of certain financial assets at fair value through profit or loss (“FVTPL”) in order to enhance the cash flow position of the Group whenever it is necessary;
6 -

implementing active cost-saving measures to control administrative costs through various ways to improve operating cash flows at a level sufficient to finance the working capital requirements of the Group; and
two executive directors of the Company have undertaken to provide continuous financial support to the Group to enable it to have sufficient liquidity to finance its operation.

The directors of the Company have carried out a detailed review of the Group’s cash flow projection prepared by management. The cash flow projection covers a period of not less than twelve months from the date hereof. In preparing the cash flow projection, the directors of the Company have considered the historical cash requirements of the Group as well as other key factors, including the availability of the loan finance which may impact on the operations of the Group during the next twelve-month period. After taking into account the above-mentioned improvement measures, the directors of the Company are of the opinion that the Group would have sufficient working capital to finance its operations and to meet its financial obligations as and when they fall due within the next twelve months from the date of approval of the condensed consolidated financial statements.

Accordingly, the directors of the Company are of the opinion that it is appropriate to prepare the condensed consolidated financial statements for the six months ended 30 June 2023 on a going concern basis. Notwithstanding the above, significant uncertainties exist as to whether the management of the Group is able to achieve its plans and measures as described above. Whether the Group will be able to continue as a going concern would depend upon the Group’s ability to generate adequate financing and operating cash flows through achieving the plans and measures above. Should the Group be unable to continue as a going concern, adjustments would have to be made to the condensed consolidated financial statements to adjust the value of the Group’s assets to their recoverable amounts, to provide for any further liabilities that might arise and to reclassify non-current assets and liabilities as current assets and liabilities, respectively. The effects of these adjustments have not been reflected in the condensed consolidated financial statements prepared on a going concern basis.

2. Principal accounting policies

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

Other than additional accounting policies resulting from application of amendments to Hong Kong Financial Reporting Standards (“HKFRSs”), the accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30 June 2023 are the same as those presented in the Group’s audited consolidated financial statements for the year ended 31 December 2022.

– 7 –

Application of amendments to HKFRSs

In the current interim period, the Group has applied the following amendments to HKFRSs issued by the HKICPA, for the first time, which are mandatorily effective for the Group’s annual periods beginning on or after 1 January 2023 for the preparation of the condensed consolidated financial statements:

| HKFRS 17 (including the
October 2020 and February 2022
Amendments to HKFRS 17) | Insurance Contracts |
| --- | --- |
| Amendments to HKAS 1 and
HKFRS Practice Statement 2 | Disclosure of Accounting Policies |
| Amendments to HKAS 8 | Definition of Accounting Estimates |
| Amendments to HKAS 12 | Deferred Tax related to Assets and Liabilities arising from a
Single Transaction |
| Amendments to HKAS 12 | International Tax Reform — Pillar Two Model Rules |

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

3. Operating segments

The Group’s operating segments have been determined based on the information reported to the Chairman of the Board, being the chief operating decision maker, that are used for performance assessment and to make strategic decisions. The Group’s operating businesses are structured and managed separately according to the nature of their operations and the products and services they provide. Each of the Group’s operating segments represents a strategic business unit that offers products and services which are subject to risks and returns that are different from those of other operating segments. The Group currently has four operating segments:

(a) Property investment Leasing of rental properties and property management
(b) Sale of financial assets Sale of financial assets at FVTPL
(c) Money lending Money lending
(d) Sale of jewelry products Design and sale of jewelry products

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

For the six months ended 30 June 2023

	Property investment HK$'000 (Unaudited)	Sale of financial assets HK$'000 (Unaudited)	Money lending HK$'000 (Unaudited)	Sale of jewelry products HK$'000 (Unaudited)	Consolidated HK$'000 (Unaudited)
Segment revenue	20,785	529	16,383	43,968	81,665
Segment profit/(loss)	1,992	(4,823)	2,771	1,074	1,014
Interest income on bank deposits					59
Unallocated corporate income					201
Unallocated corporate expenses					(11,921)
Finance costs					(34,361)
Share of results of associates					(7,342)
Loss before taxation					(52,350)
Income tax credit					1,325
Loss for the period					(51,025)

– 9 –

For the six months ended 30 June 2022

| | Property investment
HK$’000
(Unaudited) | Sale of financial assets
HK$’000
(Unaudited) | Money lending
HK$’000
(Unaudited) | Sale of jewelry products
HK$’000
(Unaudited) | Consolidated
HK$’000
(Unaudited) |
| --- | --- | --- | --- | --- | --- |
| Segment revenue | 18,641 | (493) | 23,959 | 39,422 | 81,529 |
| Segment (loss)/profit | (12,027) | (24,454) | 7,096 | (1,321) | (30,706) |
| Interest income on bank deposits | | | | | 28 |
| Unallocated corporate expenses | | | | | (4,191) |
| Finance costs | | | | | (28,659) |
| Share of results of associates | | | | | (3,936) |
| Loss before taxation | | | | | (67,464) |
| Income tax credit | | | | | 1,233 |
| Loss for the period | | | | | (66,231) |

Segment revenue reported above represents revenue generated from external customers. There were no inter-segment sales in both periods.

Segment results represent profit earned/(loss incurred) by each segment without allocation of central administrative expenses including directors' emoluments, share of results of associates, certain investment and other income, certain other gains and losses, finance costs and income tax credit. This is the measure reported to the Chairman of the Board for the purposes of resource allocation and assessment of segment performance.

10 -

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

At 30 June 2023

	Property investment HK$'000 (Unaudited)	Sale of financial assets HK$'000 (Unaudited)	Money lending HK$'000 (Unaudited)	Sale of jewelry products HK$'000 (Unaudited)	Consolidated HK$'000 (Unaudited)
Segment assets
— Hong Kong	340,967	118,533	489,726	67,067	1,016,293
— The PRC	2,251,290	—	—	—	2,251,290
	2,592,257	118,533	489,726	67,067	3,267,583
Unallocated corporate assets					82,070
Consolidated total assets					3,349,653
Segment liabilities
— Hong Kong	(100,102)	(118,388)	(4,348)	(53,394)	(276,232)
— The PRC	(890,098)	—	—	—	(890,098)
	(990,200)	(118,388)	(4,348)	(53,394)	(1,166,330)
Unallocated corporate liabilities					(480,824)
Consolidated total liabilities					(1,647,154)

At 31 December 2022

	Property investment HK$’000 (Audited)	Sale of financial assets HK$’000 (Audited)	Money lending HK$’000 (Audited)	Sale of jewelry products HK$’000 (Audited)	Consolidated HK$’000 (Audited)
Segment assets
— Hong Kong	343,621	138,833	491,482	67,024	1,040,960
— The PRC	2,316,567	—	—	—	2,316,567
	2,660,188	138,833	491,482	67,024	3,357,527
Unallocated corporate assets					99,943
Consolidated total assets					3,457,470
Segment liabilities
— Hong Kong	(103,238)	(117,827)	(1,884)	(52,855)	(275,804)
— The PRC	(954,720)	—	—	—	(954,720)
	(1,057,958)	(117,827)	(1,884)	(52,855)	(1,230,524)
Unallocated corporate liabilities					(433,530)
Consolidated total liabilities					(1,664,054)

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

all assets are allocated to operating segments other than interests in associates, certain financial assets at FVTPL, certain deposits, prepayments, other receivables, and cash and cash equivalents that are not attributable to individual segments. Assets used jointly by individual segments are allocated on the basis of the revenues earned by individual segments; and
all liabilities are allocated to operating segments other than certain bank borrowings, certain other borrowings, guaranteed secured notes, certain accruals and other payables, certain tax payables, amounts due to associates, and amounts due to directors that are not attributable to individual segments. Liabilities for which segments are jointly liable are allocated in proportion to segment assets.

The following is an analysis of the Group's other selected segment information:

For the six months ended 30 June 2023

	Property investment HK$'000 (Unaudited)	Sale of financial assets HK$'000 (Unaudited)	Money lending HK$'000 (Unaudited)	Sale of jewelry products HK$'000 (Unaudited)	Consolidated HK$'000 (Unaudited)
Amounts included in the measure of segment profit/(loss) and segment assets
Additions to property, plant and equipment	24,580	—	—	23	24,603
Allowance for expected credit losses (“ECL”) on loan receivables	—	—	(2,018)	—	(2,018)
Allowance for ECL on trade receivables	—	—	—	(12)	(12)
Amortisation of intangible assets	(8,762)	—	—	—	(8,762)
Depreciation of property, plant and equipment	(12,921)	—	—	(6)	(12,927)
Depreciation of right-of-use assets	(2,955)	—	—	(155)	(3,110)
Dividend income	—	734	—	—	734
Finance income on finance lease receivables	9,432	—	—	—	9,432
Gain arising on change in fair value of investment properties	3,700	—	—	—	3,700
Gain on disposals of residential serviced apartments	7,993	—	—	—	7,993
Interest income on other receivables	414	—	—	—	414
Loss arising on change in fair value of financial assets at FVTPL	—	(6,008)	—	—	(6,008)
Membership income	8,613	—	—	—	8,613
Reversal of allowance for ECL on other receivables	368	—	—	—	368
Written-off property, plant and equipment	(50)	—	—	—	(50)

For the six months ended 30 June 2022

	Property investment HK$’000 (Unaudited)	Sale of financial assets HK$’000 (Unaudited)	Money lending HK$’000 (Unaudited)	Sale of jewelry products HK$’000 (Unaudited)	Consolidated HK$’000 (Unaudited)
Amounts included in the measure of segment (loss)/profit and segment assets
Additions to property, plant and equipment	79,968	—	—	3	79,971
Allowance for ECL on loan receivables	—	—	(2,573)	—	(2,573)
Allowance for ECL on trade receivables	—	—	—	(16)	(16)
Amortisation of intangible assets	(10,552)	—	—	—	(10,552)
Depreciation of property, plant and equipment	(10,831)	—	—	(5)	(10,836)
Depreciation of right-of-use assets	(3,160)	—	—	(154)	(3,314)
Dividend Income	—	11	—	—	11
Gain arising on change in fair value of derivative financial instruments	—	3,266	—	—	3,266
Gain arising on change in fair value of investment properties	5,000	—	—	—	5,000
Interest income on other receivables	567	—	—	—	567
Loss arising on change in fair value of financial assets at FVTPL	—	(26,961)	—	—	(26,961)
Loss of inventories	—	—	—	(1,534)	(1,534)
Membership income	5,054	—	—	—	5,054
Reversal of allowance for ECL on other receivables	153	—	—	—	153
Written-off of property, plant and equipment	(7)	—	—	—	(7)

The following is an analysis of the Group's revenue from external customers and information about its non-current assets by geographical location:

	Revenue from external customer		Non-current assets
	For the six months ended 30 June 2023 HK$’000 (Unaudited)	2022 HK$’000 (Unaudited)	At 30 June 2023 HK$’000 (Unaudited)	At 31 December 2022 HK$’000 (Audited)
Australia	415	649	—	—
Europe	4,292	6,387	—	—
Hong Kong	58,411	58,165	359,629	378,478
North America	36	—	—	—
The PRC	18,511	16,328	1,874,029	1,943,560
	81,665	81,529	2,233,658	2,322,038

Note:

Non-current assets excluded deferred tax assets, equity instruments at fair value through other comprehensive income, financial assets at FVTPL and finance lease receivables.

The following is an analysis of the Group's major customers contributing over 10% of the total revenue of the Group:

	For the six months ended 30 June
	2023	2022
	HK$’000 (Unaudited)	HK$’000 (Unaudited)
Customer 1^{1}	18,896	21,036
Customer 2^{2}	15,268	16,328
Customer 3^{1}	9,429	—
Customer 4^{3}	9,058	10,219

Revenue from sale of jewelry products.
Revenue from property investment.
Revenue from money lending.

Revenue

	For the six months ended 30 June
	2023 HK$'000 (Unaudited)	2022 HK$'000 (Unaudited)
Disaggregation of revenue from contracts with customers within the scope of HKFRS 15
Disaggregated by types of goods and services
— sale of jewelry products	43,968	39,422
— property management	738	—
	44,706	39,422
Revenue from other sources
— sale of financial assets at FVTPL, net	529	(493)
— interest income on loans	16,383	23,959
— rental income	20,047	18,641
Total revenue	81,665	81,529
Timing of revenue recognition
— a point in time	43,968	39,422
— over time	738	—
Revenue from contracts with customers	44,706	39,422

Set out below is the reconciliation of the revenue from contracts with customers with the amounts disclosed in the segment information.

	For the six months ended 30 June
	2023 HK$'000 (Unaudited)	2022 HK$'000 (Unaudited)
Sale of jewelry products	43,968	39,422
Property management	738	—
Revenue from contracts with customers	44,706	39,422
Sale of financial assets at FVTPL, net	529	(493)
Interest income on loans	16,383	23,959
Rental income	20,047	18,641
Total revenue	81,665	81,529

16 -

Revenue from sale of financial assets at FVTPL is recorded on a net basis, details of which are as follows:

	For the six months ended 30 June
	2023	2022
	HK$'000 (Unaudited)	HK$'000 (Unaudited)
Proceeds from sale of financial assets at FVTPL	19,339	44,408
Carrying amounts of financial assets at FVTPL sold plus transaction costs	(18,810)	(44,901)
	529	(493)

5. Investment and other income

	For the six months ended 30 June
	2023	2022
	HK$'000 (Unaudited)	HK$'000 (Unaudited)
Dividend income	935	11
Finance income on finance lease receivables	9,432	—
Government grants	—	384
Interest income on bank deposits	59	28
Interest income on other receivables	414	567
Membership income	8,613	5,054
Sundry income	377	278
	19,830	6,322

During the six months ended 30 June 2022, the Group recognised government grants of HK$384,000 in respect of COVID-19 related subsidy which was related to the Employment Support Scheme under the Anti-epidemic Fund provided by the Hong Kong government. There were no unfulfilled conditions and other contingencies attached to these government grants.

18 -

6. Other gains and losses

	For the six months ended 30 June
	2023
HK$'000
(Unaudited)	2022
HK$'000
(Unaudited)
Gain arising on change in fair value of derivative financial instruments	—	3,266
Gain arising on change in fair value of investment properties	3,700	5,000
Gain on disposals of residential serviced apartments	7,993	—
Impairment loss on interests in associates	(9,606)	—
Loss arising on change in fair value of financial assets at FVTPL	(6,008)	(26,961)
Written-off of property, plant and equipment	(50)	(7)
	(3,971)	(18,702)

Gain on disposals of residential serviced apartments is recorded on a net basis, details of which are as follows:

	For the six months ended 30 June
	2023
HK$'000
(Unaudited)	2022
HK$'000
(Unaudited)
Discounted proceeds from disposals of residential serviced apartments (net of value-added tax)	24,874	—
Related assets of residential serviced apartments recorded in property, plant and equipment, intangible assets, and right-of-use assets disposed of	(16,881)	—
	7,993	—

19 -
Allowance for expected credit losses on financial assets

	For the six months ended 30 June
	2023
HK$'000
(Unaudited)	2022
HK$'000
(Unaudited)
(Reversal of allowance)/allowance for ECL on loan receivables:
— 12 months ECL	(109)	(1,241)
— lifetime ECL not credit-impaired	(482)	—
— lifetime ECL credit-impaired	2,609	3,814
	2,018	2,573
Reversal of allowance for ECL on other receivables:
— 12 months ECL	(368)	(153)
Allowance for ECL on trade receivables	12	16
	1,662	2,436

Finance costs

	For the six months ended 30 June
	2023
HK$'000
(Unaudited)	2022
HK$'000
(Unaudited)
Interest on amount due to an associate	140	—
Interest on bank borrowings	4,255	1,421
Interest on other borrowings	10,596	10,529
Interest on lease liabilities	7,134	7,694
Imputed interest on guaranteed secured notes	16,607	13,658
	38,732	33,302
Less: interest on lease liabilities capitalised in the cost of qualifying assets	(4,371)	(4,643)
	34,361	28,659

20 -

9. Income tax credit

	For the six months ended 30 June
	2023	2022
	HK$'000 (Unaudited)	HK$'000 (Unaudited)
Hong Kong Profits Tax
— current tax	—	—
PRC Enterprise Income Tax
— current tax	(2,049)	(1,743)
Deferred taxation credit	3,374	2,976
	1,325	1,233

Under the two-tiered profits tax rates regime of Hong Kong, the first HK$2,000,000 of profits of the qualifying group entity will be taxed at 8.25%, and profits above HK$2,000,000 will be taxed at 16.5%. The profits of group entities not qualifying for the two-tiered profits tax rates regime will continue to be taxed at a flat rate of 16.5%.

Accordingly, the Hong Kong Profits Tax is calculated at 8.25% on the first HK$2,000,000 of the estimated assessable profits and at 16.5% on the estimated assessable profits above HK$2,000,000 for both periods.

Under the Law of the PRC on Enterprise Income Tax (the "EIT Law") and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25% for both periods.

21 -

10. Loss for the period

Loss for the period has been arrived at after charging/(crediting):

	For the six months ended 30 June
	2023	2022
	HK$'000 (Unaudited)	HK$'000 (Unaudited)
Amortisation of intangible assets
(included in administrative expenses)	8,762	10,552
Cost of inventories sold	37,728	35,050
Depreciation of property, plant and equipment	12,927	10,836
Depreciation of right-of-use assets	3,110	3,314
Loss of inventories (included in administrative expenses)	—	1,534
Net foreign exchange loss/(gain)	7	(3)
Staff costs (including directors’ emoluments):
— salaries and allowances	31,461	26,739
— contributions to retirement benefits scheme	201	202
	31,662	26,941
Gross rental income from investment properties and operating rights	(20,047)	(18,641)
Less: direct operating expenses incurred for investment properties and operating rights that generated rental income during the period	8,819	9,432
	(11,228)	(9,209)

11. Interim dividend

No interim dividend was paid, declared or proposed during the six months ended 30 June 2023 (2022: Nil). The Board has determined that no interim dividend will be paid in respect of the six months ended 30 June 2023 (2022: Nil).

22 -

12. Loss per share

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

| | For the six months
ended 30 June | |
| --- | --- | --- |
| | 2023 | 2022 |
| | HK$'000 | HK$'000 |
| | (Unaudited) | (Unaudited) |
| Loss for the purpose of basic and diluted loss per share | | |
| Loss for the period attributable to owners of the Company | (51,025) | (66,229) |
| | For the six months
ended 30 June | |
| | 2023 | 2022 |
| | '000 | '000 |
| | (Unaudited) | (Unaudited) |
| Number of ordinary shares | | |
| Weighted average number of ordinary shares less weighted
average number of shares held for share award plan
for the purpose of basic and diluted loss per share | 3,695,296 | 3,726,456 |

The computation of diluted loss per share does not assume the exercise of the Company's share options because the exercise price of those share options was higher than the average market price for shares for the six months ended 30 June 2023 and 2022.

13. Loan receivables

| | At
30 June
2023
HK$'000
(Unaudited) | At
31 December
2022
HK$'000
(Audited) |
| --- | --- | --- |
| Loans to customers | 969,809 | 974,891 |
| Accrued interest receivables | 68,010 | 59,112 |
| | 1,037,819 | 1,034,003 |
| Less: accumulated allowance for ECL | (623,952) | (621,934) |
| | 413,867 | 412,069 |

All loans are denominated in Hong Kong dollars. The loan receivables carry effective interest ranging from 8% to 20% per annum (31 December 2022: 8% to 20% per annum). Loans contain a repayable on demand clause and are classified under current assets. A maturity profile of the loan receivables (net of accumulated allowance for ECL) at the end of the reporting period, based on the maturity date is as follows:

	At 30 June 2023 HK$’000 (Unaudited)	At 31 December 2022 HK$’000 (Audited)
Within one year	156,396	154,684
More than one year but not exceeding two years	257,471	257,385
	413,867	412,069

During the six months ended 30 June 2023, an allowance for ECL on loan receivables of HK$2,018,000 (2022: HK$2,573,000) was recognised.

At 30 June 2023, seven loans in the aggregate outstanding principal amount of HK$554,340,000 are secured by corporate guarantees, one loan in the outstanding principal amount of HK$165,000,000 is secured by a corporate guarantee, a share charge of a private company, and a share pledge over certain participating shares of a closed-end private fund, and one loan in the outstanding principal amount of HK$15,132,000 is secured by a share charge.

Included in the carrying amount of loan receivables at 30 June 2023 is an accumulated allowance for ECL of HK$623,952,000 (31 December 2022: HK$621,934,000).

Movements in the accumulated allowance for ECL are as follows:

	12 months ECL HK$’000 (Unaudited)	Lifetime ECL not credit-impaired HK$’000 (Unaudited)	Lifetime ECL credit-impaired HK$’000 (Unaudited)	Total HK$’000 (Unaudited)
At 1 January 2022	8,238	—	446,442	454,680
Transfer to lifetime ECL not credit-impaired	(1,577)	1,577	—	—
Allowance for ECL (reversed)/recognised	(4,811)	13,135	158,930	167,254
At 31 December 2022 (audited) and 1 January 2023	1,850	14,712	605,372	621,934
Transfer to lifetime ECL credit-impaired	—	(758)	758	—
Allowance for ECL (reversed)/recognised	(109)	(482)	2,609	2,018
At 30 June 2023	1,741	13,472	608,739	623,952

14. Trade receivables

| | At 30 June 2023
HK$'000
(Unaudited) | At 31 December 2022
HK$'000
(Audited) |
| --- | --- | --- |
| Trade receivables | 33,544 | 33,709 |
| Less: accumulated allowance for ECL | (880) | (868) |
| | 32,664 | 32,841 |

The following is an aging analysis of trade receivables (net of accumulated allowance for ECL) at the end of the reporting period presented based on the invoice dates:

| | At 30 June 2023
HK$'000
(Unaudited) | At 31 December 2022
HK$'000
(Audited) |
| --- | --- | --- |
| 0 — 30 days | 6,040 | 6,928 |
| 31 — 60 days | 8,426 | 7,707 |
| 61 — 90 days | 6,466 | 5,453 |
| 91 — 120 days | 3,375 | 3,469 |
| 121 — 180 days | 2,314 | 2,286 |
| Over 180 days | 6,043 | 6,998 |
| | 32,664 | 32,841 |

The Group allows credit period ranging from 0 to 270 days to its customers. The directors assess the credit status and impose credit limits for customers in accordance with the Group's credit policy. The credit limits are closely monitored and subject to periodic reviews.

During the six months ended 30 June 2023, an allowance for ECL on trade receivables of HK$12,000 (2022: HK$16,000) was recognised.

Included in the carrying amount of trade receivables at 30 June 2023 is an accumulated allowance for ECL of HK$880,000 (31 December 2022: HK$868,000).

25 -

15. Trade payables

The following is an aging analysis of trade payables at the end of the reporting period presented based on the invoice dates:

	At 30 June 2023 HK$’000 (Unaudited)	At 31 December 2022 HK$’000 (Audited)
0 — 30 days	2,019	10,506
31 — 60 days	471	4,358
61 — 90 days	335	2,196
91 — 120 days	70	179
Over 120 days	24,362	15,709
	27,257	32,948

The average credit period on purchase of goods and services is 120 days. The Group has financial risk management policies in place to ensure that all payables are settled within the credit time frame.

– 26 –

INTERIM DIVIDEND

The Board does not recommend the payment of an interim dividend for the six months ended 30 June 2023 (2022: Nil).

MANAGEMENT DISCUSSION AND ANALYSIS

Financial Review

Results of operations

During the six months ended 30 June 2023, the Group recorded a revenue of HK$81,665,000, a 0.2% increase from HK$81,529,000 for the previous period. Of the total revenue, HK$16,383,000 was generated from money lending, HK$43,968,000 was generated from the sale of jewelry products, HK$20,785,000 was generated from property investment, and a trading gain of HK$529,000 was generated from the sale of financial assets.

Loss for the period attributable to owners of the Company amounted to HK$51,025,000, a 23% improvement from HK$66,229,000 in the six months ended 30 June 2022. This improvement was mainly attributable to (i) a HK$20,953,000 decrease in loss arising on change in fair value of financial assets at fair value through profit or loss ("FVTPL"), (ii) the recognition of finance income on finance lease receivables of HK$9,432,000, and (iii) the recognition of gain on disposals of residential serviced apartments of HK$7,993,000, which were partially offset by (i) the recognition of an impairment loss of HK$9,606,000 on interests in associates, (ii) a HK$2,315,000 increase in administrative expenses, (iii) a HK$3,406,000 increase in share of losses of associates, and (iv) a HK$5,702,000 increase in finance costs.

The gross profit for the sale of jewelry products increased by 43% from HK$4,372,000 in the six months ended 30 June 2022 to HK$6,240,000 in the six months ended 30 June 2023. The gross profit margin for the sale of jewelry products also increased from 11% in the six months ended 30 June 2022 to 14% in the six months ended 30 June 2023. These increases in gross profit and gross profit margin are discussed in the "Sale of jewelry products business" section under "Operations Review" below.

The gross profit for property investment increased by 22% from HK$9,209,000 in the six months ended 30 June 2022 to HK$11,228,000 in the six months ended 30 June 2023. In addition, the gross profit margin for property investment increased from 49% in the six months ended 30 June 2022 to 56% in the six months ended 30 June 2023. These increases in gross profit and gross profit margin are discussed in the "Property investment business" section under "Operations Review" below.

Investment and other income increased by 214% from HK$6,322,000 in the six months ended 30 June 2022 to HK$19,830,000 in the six months ended 30 June 2023. This increase was mainly due to (i) the recognition of finance income on finance lease receivables of HK$9,432,000 resulting from the delivery of the vacant possession of the properties erected on the Subject Land (as defined below) under long-term lease agreements in the third quarter of 2022 and (ii) a HK$3,559,000 increase in membership income from the initiation fees for joining the Club (as defined below).

Significant items of other gains and losses recorded by the Group are as follows:

(a) At the end of the reporting period, the Group measured the investment property portion of the Shun Tak Property (as defined below) at fair value based on a valuation prepared by an independent qualified valuer and recognised a gain of HK$3,700,000 arising on change in fair value of investment properties.

(b) During the six months ended 30 June 2023, the vacant possession of two residential serviced apartments was delivered to lessees under long-term lease agreements. In accordance with the applicable accounting standards, the residential serviced apartments delivered under the long-term lease agreement were treated as disposals instead of recognising their rental income over the lease term. As a result, the Group recognised a gain on disposals of residential serviced apartments of HK$7,993,000. Please refer to the "Property investment business" section under "Operations Review" below for accounting treatment for leasing of the properties erected on the Subject Land (as defined below) under long-term lease agreements.

(c) At the end of the reporting period, the carrying amount of the Group’s investment in China Healthwise Holdings Limited (“China Healthwise”), a 21.50% owned associate of the Company, was tested for impairment. As the carrying amount of the Group’s investment in China Healthwise exceeded its fair value, the impairment loss of HK$9,606,000 was recognised against the carrying amount of China Healthwise.

(d) At the end of the reporting period, the Group measured its Hong Kong listed-equity securities at fair value and recognised a loss of HK$6,008,000 arising on change in fair value of financial assets at FVTPL.

Selling and distribution expenses mainly represent staff costs and commission of the sales team, overseas travelling expenses, freight charges, and exhibition expenses incurred by the Group’s sale of jewelry products business. Selling and distribution expenses increased by 33% from HK$1,635,000 in the six months ended 30 June 2022 to HK$2,182,000 in the six months ended 30 June 2023. This increase was mainly attributable to the increase in overseas travelling expenses for business development.

Allowance for expected credit losses (“ECL”) on financial assets decreased by 32% from HK$2,436,000 in the six months ended 30 June 2022 to HK$1,662,000 in the six months ended 30 June 2023. This decrease is discussed in the “Money lending business” section under “Operations Review” below.

Administrative expenses increased by 4% from HK$55,465,000 in the six months ended 30 June 2022 to HK$57,780,000 in the six months ended 30 June 2023. This increase was mainly attributable to (i) a HK$4,665,000 increase in salaries and allowances mainly resulting from the bonuses paid to the Group’s marketing team for leasing activities and two directors of a subsidiary and (ii) a HK$2,599,000 increase in general administration expenses resulting from the commencement of property investment operations on the Subject Land (as defined below) in the third quarter of 2022, which were partially offset by a HK$4,736,000 decrease in legal and professional fees.

27 -

Share of losses of associates amounted to HK$7,342,000 for the six months ended 30 June 2023, representing (i) the share of loss of HK$492,000 from Elite Prosperous Investment Limited (“Elite Prosperous”), a 49% owned associate of the Company, and (ii) the share of loss of HK$6,850,000 from China Healthwise.

Finance costs increased by 20% from HK$28,659,000 in the six months ended 30 June 2022 to HK$34,361,000 in the six months ended 30 June 2023. This increase was due to the rise in the interest rate from 13% per annum to 17% per annum in extending the Guaranteed Secured Notes due 2023 (as defined below) in September 2022 and the increase in the Hong Kong Interbank Offered Rate (“HIBOR”) since the third quarter of 2022.

The Group recorded a tax credit of HK$1,325,000 for the six months ended 30 June 2023. The tax credit derived from the recognition of (i) deferred tax credit of HK$3,708,000 resulting from the movements in the deferred tax liabilities recognised for the fair value adjustments on the acquisition of Smart Title Limited in October 2015, (ii) the reversal of deferred tax credit of HK$92,000 arising from the allowance of ECL made on the Group’s other receivables, and (iii) the reversal of deferred tax credit of HK$242,000 resulting from movement in deferred tax assets related to lease contracts. The deferred tax credit was partially offset by the current period’s tax expense of HK$2,049,000.

Liquidity and financial resources

During the six months ended 30 June 2023, the Group funded its operations through a combination of cash generated from operations, equity attributable to owners of the Company, and borrowings. Equity attributable to owners of the Company decreased from HK$1,799,173,000 at 31 December 2022 to HK$1,708,077,000 at 30 June 2023. This decrease was due to the loss incurred by the Group for the six months ended 30 June 2023 and a decrease in exchange reserve arising from the translation of the Group’s foreign operations.

At 30 June 2023, the cash and cash equivalents of the Group amounted to HK$52,217,000 (31 December 2022: HK$34,765,000).

At 30 June 2023, the Group had outstanding borrowings of HK$704,596,000 (31 December 2022: HK$664,809,000) representing:

(a) the outstanding principal amount of the 17% guaranteed secured notes due 2023 issued by the Company on 29 December 2022 (the “Guaranteed Secured Notes due 2023”) of HK$197,000,000, which is interest-bearing at 17% per annum, secured by (i) a share charge over 100% issued shares in Eternity Investment (China) Limited, a wholly-owned subsidiary of the Company and the principal assets of which are (1) the rights to construct and operate the club facilities of a membership golf club and resort (the “Club”) in Beijing, Mainland China and (2) the rights to develop and operate a piece of 580 Chinese acre land adjacent to the Club (the “Subject Land”) and the rights to manage the properties erected on the Subject Land, and (ii) the personal guarantees given by Mr. Lei Hong Wai, the Chairman of the Board and an executive director, and Mr. Cheung Kwok Wai Elton, an executive director, and maturing on 23 September 2023;

– 28 –

(b) the banking facilities in the aggregate principal amount of HK$196,319,000, comprising (i) an instalment loan of HK$99,515,000, which is interest-bearing at 1% per annum over one-month HIBOR or 3% per annum below the prime rate quoted by the bank from time to time, whichever is lower, secured by (1) a first legal charge over the Group’s properties located at Unit Nos. 1201, 1202, 1203, 1209, 1210, 1211 & 1212 and the corridor on the 12th Floor, Shun Tak Centre, West Tower, 168-200 Connaught Road Central, Hong Kong (the “Shun Tak Property”) and (2) a charge/mortgage over the cash deposit, structured investment products, stocks, the key management personnel life insurance policy, and other securities held by a wholly-owned subsidiary of the Company, guaranteed by the Company and two wholly-owned subsidiaries of the Company, and repayable by 177 equal monthly instalments ending on 18 March 2038, (ii) a term loan in the principal amount of HK$38,152,000, which is interest-bearing at 1% per annum over one-month HIBOR, secured by (1) the first legal charge over the Shun Tak Property and (2) a charge/mortgage over the cash deposit, structured investment products, stocks, the key management personnel life insurance, and other securities held by the wholly-owned subsidiary of the Company, guaranteed by the Company and two wholly-owned subsidiaries of the Company, and repayable by 225 equal monthly instalments ending on 10 March 2042, (iii) a term loan in the principal amount of US$1,261,000 (equivalent to HK$9,899,000), which is interest-bearing at 1% per annum over one month bank’s cost of funds on the outstanding amount, secured by (1) the first legal charge over Shun Tak Property and (2) the charge/mortgage over the cash deposit, structured investment products, stocks, the key management personnel life insurance policy, and other securities held by a wholly-owned subsidiary of the Company, guaranteed by the Company, and two wholly-owned subsidiaries of the Company, and repayable by 230 equal monthly instalments ending on 25 August 2042, (iv) two advances of HK$5,000,000 and HK$20,000,000 under a revolving term loan, which is interest-bearing at HIBOR plus 2% per annum, secured by (1) the first legal charge over the Shun Tak Property and (2) the charge/mortgage over the key management personnel life insurance policy, guaranteed by the Company and a wholly-owned subsidiary of the Company, and maturing on 9 September 2023 and 30 September 2023 respectively, and (v) various advances in the aggregate principal amount of HK$23,753,000 under the account payable financing facilities, which are interest-bearing at 2% per annum over HIBOR, secured by (1) the first legal charge over the Shun Tak Property and (2) the charge/mortgage over the key management personnel life insurance policy, guaranteed by the Company and a wholly-owned subsidiary of the Company, and maturing within three months commencing from July 2023;

(c) a loan of HK$200,000,000 granted by a finance company, which is interest-bearing at 8% per annum, secured by (i) the post-dated cheques drawn in favour of the finance company for payment of the principal and the interests stipulated under the loan agreement and (ii) a personal guarantee given by Mr. Lei Hong Wai, and maturing on 24 May 2024;

(d) a loan of HK$1,593,000 granted by a company, which is interest-bearing at the prime rate plus 3% per annum, unsecured, and maturing on 21 March 2024;

(e) the securities margin financing facilities of HK$47,316,000 granted by a securities brokerage firm, which is interest-bearing at the prime rate plus 3% per annum and secured by the Group’s Hong Kong-listed equity securities held in the margin securities trading account and a personal guarantee provided by Mr. Lei Hong Wai;

29 -

(f) the securities margin financing facilities of HK$14,869,000 granted by a securities brokerage firm, which is interest-bearing at a fixed rate of 6% per annum and secured by the Group’s Hong Kong-listed equity securities held in the margin securities trading account and a personal guarantee provided by Mr. Lei Hong Wai;

(g) a cash advance of HK$31,199,000 made by Mr. Lei Hong Wai to the Group for financing its short-term funding needs. The cash advance is non-interest bearing, unsecured, and repayable on demand;

(h) a cash advance of HK$14,800,000 made by Mr. Cheung Kwok Wai Elton to the Group for financing its short-term funding needs. The cash advance is non-interest bearing, unsecured, and repayable on demand; and

(i) a cash advance of HK$1,500,000 made by Mr. Cheung Kwok Fan, an executive director, to the Group for financing its short-term funding needs. The cash advance is non-interest bearing, unsecured.

Gearing ratio

At 30 June 2023, the gearing ratio calculated as a percentage of total borrowings over equity attributable to owners of the Company was 41% (31 December 2022: 37%).

Net current liabilities and current ratio

At 30 June 2023, the Group’s net current liabilities and current ratio were HK$249,147,000 (31 December 2022: HK$241,897,000) and 0.77 (31 December 2022: 0.78) respectively.

Capital structure

During the six months ended 30 June 2023, there was no change in the Company’s capital structure.

Material acquisitions of subsidiaries, associates, and joint ventures

During the six months ended 30 June 2023, the Group did not have any material acquisitions of subsidiaries, associates, and joint ventures.

Material disposals of subsidiaries, associates, and joint ventures

During the six months ended 30 June 2023, the Group did not have any material disposals of subsidiaries, associates, and joint ventures.

30 -

31 -

Pledge of assets

At 30 June 2023, the following Group’s assets were pledged:

(a) the Shun Tak Property with a carrying amount of HK$334,153,000 (31 December 2022: HK$333,951,000), of which HK$166,653,000 (31 December 2022: HK$170,151,000) classified under “property, plant and equipment” and HK$167,500,000 (31 December 2022: HK$163,800,000) classified under “investment properties”, for securing the banking facilities granted to the Group;

(b) the 100% issued shares in Eternity Investment (China) Limited with the unaudited combined net assets of HK$1,361,192,000 (31 December 2022: HK$1,361,847,000) after adjusting for purchase price allocation for securing the Guaranteed Secured Notes due 2023;

(c) the Group’s Hong Kong-listed equity securities with a fair value of HK$102,022,000 (31 December 2022: HK$132,920,000), of which HK$88,791,000 (31 December 2022: HK$102,049,000) is related to the Group’s financial assets at FVTPL and HK$13,231,000 (31 December 2022: HK$30,871,000) is related to a part of the Group’s listed investment in an associate, for securing the margin financing facilities and the banking facilities granted to the Group;

(d) a bank deposit of HK$149,000 (31 December 2022: HK$779,000) for securing the banking facilities granted to the Group; and

(e) the key management personnel life insurance of HK$9,716,000 (31 December 2022: HK$9,527,000) for securing the banking facilities granted to the Group.

Material commitments

At 30 June 2023, the Group had a total commitment of HK$184,937,000 (31 December 2022: HK$234,191,000) relating to the development costs for the Subject Land, which were contracted but not provided for.

Exchange risk and hedging

The majority of the Group’s transactions, assets, and liabilities are denominated in Hong Kong dollars and Renminbi. The Group is exposed to exchange risk with respect mainly to Renminbi which may affect its performance. The directors closely monitor statements of financial position and cash flow exchange risk exposures and, where considered appropriate, use financial instruments, such as forward exchange contracts, foreign currency options, and forward rate agreements, to hedge this exchange risk. During the six months ended 30 June 2023, no financial instruments for hedging purposes were used by the Group.

Contingent liabilities

(a) On 6 May 2021, a Beijing law firm as plaintiff filed a civil claim to the People’s Court in Chaoyang District, Beijing, Mainland China against four defendants, one of the four defendants is 北京北湖九號商務酒店有限公司 (Beijing Bayhood No. 9 Business Hotel Company Limited, “Bayhood No. 9 Co.”), a wholly-owned subsidiary of the Company, for an unsettled legal fee of RMB31,000,000 (equivalent to HK$33,623,000) (excluding overdue interest) regarding an engagement of such law firm by the four defendants to resolve a civil dispute brought against them by an independent third party in relation to a property transaction in 2010. Details of the civil claim are disclosed in the Company’s announcement dated 6 August 2021.

The Group has been advised by a Mainland Chinese legal adviser that the possibility of Bayhood No. 9 Co. being required to pay the unsettled legal fee is remote. Accordingly, no provision for any liability has been made in respect of the civil claim.

(b) On 13 January 2023, certain bank accounts of Bayhood No. 9 Co. have been frozen by a civil ruling (the “Civil Ruling”) (民事裁定書) dated 13 January 2023 issued by 北京市海淀區人民法院 (Haidian District People’s Court of Beijing Municipality) (the “Court”) against Bayhood No. 9 Co. in relation to an alleged unsettled liability before the acquisition of the entire issued share capital of Smart Title Limited on 6 October 2015 (the “Acquisition”), the principal and the interest of which amounted to approximately RMB44,000,000 (equivalent to HK$47,722,000) as at 1 January 2023 (the “Alleged Liability”).

Based on the findings, the directors noted that the Civil Ruling is related to a civil filing (the “Civil Filing”) filed by a plaintiff (the “Plaintiff”) to the Court on 9 January 2023. Pursuant to the Civil Filing, Bayhood No. 9 Co., together with other three defendants to the Civil Filing, were alleged that (i) they had entered into an agreement in 2019 (the “Settlement Agreement”) with the Plaintiff in relation to the settlement of the property pre-sale agreements (the “Pre-Acquisition Agreements”) which were entered into before the Acquisition; and (ii) they did not repay the Alleged Liability in relation to the Settlement Agreement.

None of the directors of the Company and the directors of Bayhood No. 9 Co. has any knowledge or was aware of any information in relation to the Pre-Acquisition Agreements and the Settlement Agreement before the Civil Filing came to their attention, nor had they authorised the entering into of the Settlement Agreement. There has been no relevant information regarding Pre-Acquisition Agreements and the Settlement Agreement shown in the books and records of Bayhood No. 9 Co. since the consolidation of its accounts into that of the Group upon completion of the Acquisition. In view of the above matters, on 4 February 2023, the Company reported to 北京市公安局朝陽分局 (Chaoyang Branch Bureau of Beijing Municipal Public Security Bureau) regarding the forgery of the relevant documents and the company seal of Bayhood No. 9 Co..

On 28 March 2023, one of the defendants (the “Responsible Defendant”) entered into an undertaking agreement with the other defendants, including Bayhood No. 9 Co., pursuant to which the Responsible Defendant has agreed to undertake the repayment obligation to the Plaintiff and in the case that the other defendants incur losses due to the claim, the Responsible Defendant will indemnify them in full.

32 -

The Group’s Mainland Chinese legal adviser is of the view that on the basis of the relevant documents and the company chop of Bayhood No. 9 Co. are fraudulent, the Plaintiff’s statute of limitations for applying to the Court for the protection of civil rights has expired, i.e. over three years, and the Court would reject the claim of the Plaintiff by virtue of the law. Based on the view of the Mainland Chinese legal adviser and the indemnity given by the Responsible Defendant on 28 March 2023, the directors of the Company are of the view that the possibility of Bayhood No. 9 Co. being required to pay the Alleged Liability is remote. Accordingly, no provision was made in respect of the claims on the Alleged Liability.

Employees and remuneration policy

At 30 June 2023, the headcount of the Group was 103 (2022: 100). Staff costs (including directors’ emoluments) amounted to HK$31,662,000 in the six months ended 30 June 2023 (2022: HK$26,941,000). The increase in staff costs was mainly attributable to the payment of bonuses to the Group’s marketing team for leasing activities and two directors of a subsidiary. In addition to basic salaries, contributions to the retirement benefits scheme, and discretionary bonuses, staff benefits include a medical scheme, share options, and share awards.

Operations Review

Sale of financial assets business

During the six months ended 30 June 2023, the Group’s sale of financial assets business reported a segment loss (before taxation) of HK$4,823,000, an 80% improvement compared to HK$24,454,000 for the previous period. This improvement in segment loss (before taxation) was mainly due to the HK$20,953,000 decrease in loss arising on change in fair value of financial assets at FVTPL.

During the six months ended 30 June 2023, the Group acquired two Hong Kong-listed equity securities with an aggregate acquisition cost of HK$7,958,000 and made the trading gain of HK$529,000 by selling three Hong Kong-listed equity securities in the aggregate carrying amounts of HK$18,743,000 at the aggregate net sale proceeds of HK$19,272,000. At the end of the reporting period, the Group measured its Hong Kong-listed equity securities at fair value based on the closing prices quoted on The Stock Exchange of Hong Kong Limited (the “Exchange”) and recognised the loss of HK$6,008,000 arising on change in fair value of financial assets at FVTPL.

Movements in the carrying amount of the Hong Kong-listed equity securities held by the Group recorded as “financial assets at FVTPL” during the six months ended 30 June 2023 and 2022 are as follows:

| | 2023
HK$’000 | 2022
HK$’000 |
| --- | --- | --- |
| Carrying amount at 1 January | 125,910 | 255,954 |
| Add: acquisitions | 7,958 | 16,798 |
| Less: disposals | (18,743) | (44,737) |
| loss arising on change in fair value recognised | (6,008) | (26,961) |
| Carrying amount at 30 June | 109,117 | 201,054 |

Details of the Hong Kong-listed equity securities held by the Group recorded as “financial assets at FVTPL” at 30 June 2023 are as follows:

Name of Hong Kong-listed equity securities	Number of shares held at 30 June 2023	Fair value at 30 June 2023 HK$’000	Fair value as compared to the consolidated total assets of the Group at 30 June 2023	Dividend received/ receivable in the six months ended 30 June 2023 HK$’000	Gain/(loss) arising on change in fair value recognised in the six months ended 30 June 2023 HK$’000
Brockman Mining Ltd. (stock code: 159)	78,223,000	11,890	0.36%	—	(469)
China Treasures New Materials Group Ltd. (stock code: 2439)	11,000,000	6,380	0.19%	—	(1,390)
Frontier Services Group Ltd. (stock code: 500)	47,807,000	10,039	0.30%	—	(5,737)
Global Mastermind Holdings Ltd. (stock code: 8063)	94,497,000	5,292	0.16%	—	(1,323)
Huanxi Media Group Ltd. (stock code: 1003)	27,100,000	31,165	0.93%	—	1,355
Huayi Tencent Entertainment Company Ltd. (stock code: 419)	16,122,649	2,193	0.07%	—	(145)
KuangChi Science Ltd. (stock code 439)	1,100,000	174	0.01%	—	(13)
Lajin Entertainment Network Group Ltd. (stock code: 8172)	32,640,000	1,795	0.04%	—	(2,546)
Nimble Holdings Company Ltd. (stock code: 186)	83,673,268	25,102	0.75%	—	2,510
Ocean Line Port Development Ltd. (stock code: 8502)	12,096,000	3,689	0.11%	726	786
SuperRobotics Holdings Ltd. (stock code: 8176)	8,925,000	2,678	0.08%	—	714
Town Health International Medical Group Ltd. (stock code: 3886)	7,100,000	2,307	0.07%	8	(391)
Yunfeng Financial Group Ltd. (stock code: 376)	5,344,000	6,413	0.19%	—	641
		109,117		734	(6,008)

The directors believe that the future performance of the Hong Kong-listed equity securities held by the Group is primarily affected by economic factors, investor sentiment, demand and supply balance of an investee company’s shares, and fundamentals of an investee company, such as the investee company’s news, business fundamentals and development, financial performance, and prospects. Accordingly, the directors closely monitor the above factors, particularly the fundamentals of each investee company in the Group’s portfolio, proactively adjust the Group’s portfolio mix from time to time, and realise the Hong Kong-listed equity securities into cash as and when appropriate.

Money lending business

During the six months ended 30 June 2023, the Group’s money lending business generated interest income on loans amounting to HK$16,383,000, a 32% decrease from HK$23,959,000 in the previous period, and reported a segment profit (before taxation) of HK$2,771,000, a 61% decrease from HK$7,096,000 in the six months ended 30 June 2022.

The 32% decrease in the interest income on loans was mainly due to the non-recognition of further interest income on two loan receivables in the aggregate outstanding principal amount of HK$265,000,000 classified under stage 3 (credit-impaired) as a result of the customers’ failure to repay the loans on the final repayment date.

The 61% decrease in segment profit (before taxation) was mainly attributable to a HK$7,576,000 decrease in interest income on loans, which was partially offset by a HK$2,708,000 decrease in legal and professional fees and a HK$555,000 decrease in allowance for ECL on loan receivables.

During the six months ended 30 June 2023, no new loan was granted, and the final repayment dates of two loans in the aggregate outstanding principal amount of HK$25,000,000 were extended. In addition, no customer made drawings from the existing loans, and three customers repaid HK$5,081,000 to the Group.

At 30 June 2023, 14 loans granted by the Group’s money lending business remained outstanding. Six loan and interest receivables with an aggregate gross balance of HK$281,275,000 were classified under stage 1 (initial recognition), one loan and interest receivable with a gross balance of HK$42,140,000 was classified under stage 2 (significant increase in credit risk), and seven loan and interest receivables with an aggregate gross balance of HK$714,404,000 were classified under stage 3 (credit-impaired). During the six months ended 30 June 2023, there was a loan and interest receivable with a gross balance of HK$15,132,000 reclassified from stage 2 (significant increase in credit risk) to stage 3 (credit-impaired) due to the failure by Customer N (as referred to on pages 360 and 366 of the Company’s annual report for the year ended 31 December 2022) in repaying the outstanding principal amount of the loan and the accrued and unpaid interest thereon on the final repayment date. The loan owed by Customer N was secured by a share charge over 100% issued shares in a Hong Kong company engaged in investment holdings and the provision of security services business. The Group is currently negotiating with Customer N with a view to entering into a binding settlement agreement. As at the date of this results announcement, the negotiation was still ongoing.

35 -

At the end of the reporting period, the directors performed an ECL assessment on the Group’s loan receivables with reference to a valuation prepared by an independent professional valuer. The valuation measured allowance for ECL on loan receivables using the general approach, which is often referred to “three-stage model” under Hong Kong Financial Reporting Standard 9 Financial Instruments. Based on the valuation, an allowance for ECL on loan receivables of HK$2,018,000 was made in the six months ended 30 June 2023, representing a HK$555,000 decrease compared to the six months ended 30 June 2022.

Of the total allowance for ECL, HK$109,000 was reversed for the loan receivables classified under stage 1 (initial recognition), HK$482,000 was reversed for the loan receivable classified under stage 2 (significant increase in credit risk), and HK$2,609,000 was recognised for the loan receivables classified under stage 3 (credit-impaired). The reversals of allowance for ECL for stage 1 (initial recognition) and stage 2 (significant increase in credit risk) resulted from improved market data used in the regression models to develop the probability of default. Of the allowance for ECL recognised for the loan receivables under stage 3 (credit-impaired), HK$1,179,000 was made for the loan receivable with a gross balance of HK$15,132,000 reclassified from stage 2 (significant increase in credit risk) to stage 3 (credit-impaired), and an additional allowance of HK$1,430,000 was made for two existing loan receivables classified under stage 3 (credit-impaired).

Reference is made to the loan receivables classified under stage 3 (credit-impaired) as referred to on pages 360 to 366 of the Company’s annual report for the year ended 31 December 2022. Set out below is the latest development of the recovery of these loan receivables:

(a) Customer D

The Group has been in negotiation with Customer D on the repayment of the two loan receivables in the aggregate outstanding principal amount of HK$234,293,000 with a view to entering into a binding settlement agreement.

In July 2023, the Group received a reply from Customer D proposing to repay the outstanding principal amount of the two loans and the accrued interest in installments. In response to the reply, the Group is trying to contact Customer D to counter-propose a shorter repayment schedule and requesting Customer D to finalise the settlement proposal in accordance with its proposed terms.

(b) Customer I

In September 2021, Customer I procured one of the guarantors to enter into an agreement (the “Debt Assignment Agreement”) to assign a debt in the face value of HK$117,000,000 owned by the guarantor (the “Assigned Debt”) to the Group to enable the Group to demand payment and liquidate the Assigned Debt and to apply the proceeds, if any, from the recovery of the Assigned Debt to offset the loan due by Customer I.

36 -

After establishing dialogues with the representative of the debtor of the Assigned Debt, the Group decided to abort the recovery action on the Assigned Debt and revert to pursuing Customer I and the guarantors on the original loan due by Customer I. In August 2022, the Group terminated the Debt Assignment Agreement. On 31 October 2022, the Group issued the writ of summons and the statement of claim against Customer I and the guarantors seek to recover the outstanding principal amount of the original loan together with the accrued and unpaid interest thereon.

Subsequently, the Group was notified by its legal adviser that the writ of summons and the statement of claim delivered to Customer I and the guarantors were returned to the Group’s legal adviser and could not be served personally on them. The Group’s legal adviser is currently applying to the High Court for an order for substituted service for serving the writ of summons and the statement of claim against Customer I and the guarantors.

The Group has commenced civil proceedings in Mainland China against Customer J, the guarantor, and the shareholders of the guarantor for recovering the outstanding principal amount of HK$25,000,000 together with the accrued and unpaid interest thereon. The first hearing of the civil proceedings took place on 17 March 2022. On 21 March 2022, the court handed down the first instance judgement ordering, among others, Customer J to repay the outstanding principal amount of the loan of HK$25,000,000, the unpaid interest of HK$748,000, and the default interest to the Group within ten days from the effective date of the first instance judgement and ordering the guarantor to guarantee the above payment obligations of Customer J.

On 15 June 2022, the Group received a notice from the court that a civil appeal was lodged by Customer J in respect of the first instance judgment. As advised by the Group’s legal adviser, the case had been transferred from the first instance court to the appellate court, and the hearing of the civil appeal lodged by Customer J was scheduled to be held on 12 September 2023.

(d) Customer H

In March 2021, the Group engaged a legal adviser to commence civil proceedings in Mainland China against Customer H for recovering the loan in the outstanding principal amount of HK$137,617,000 together with the accrued and unpaid interest thereon. In November 2021, the Group obtained an asset preservation order from the court to freeze certain assets of Customer H in Mainland China with an aggregate value of RMB126,180,000 (equivalent to HK$136,855,000). The first court hearing was held on 16 May 2022, when Customer H raised a defense regarding the authenticity of his signature on the loan agreement. The Group was informed by its legal adviser that the court engaged an expert to verify Customer H’s signature, and the next court hearing would be fixed after the court’s expert opinion was ready. In October 2022, the court retrieved 14 sets of documents previously signed and submitted by Customer H to various administrative departments in Mainland China to verify the authenticity of his signatures.

37 -

On 13 March 2023, the second court hearing was held. On 24 July 2023, the court handed down the first instance judgement ordering Customer H to repay the outstanding principal amount of the loan and the accrued and unpaid interest thereon to the Group within 30 days from the effective date of the first instance judgement. If Customer H does not repay the outstanding principal amount of the loan and the accrued and unpaid interest to the Company in accordance with the first instance judgment, the Company intends to seek advice from its legal adviser to explore the prospect of applying for compulsory enforcement on the asset preservation order over certain of Customer H's assets in Mainland China.

(e) Customer F

On 7 September 2021, the Group obtained a corporate guarantee provided by a private company owned by Customer F and her spouse (the "Customer F Guarantor") to secure all of Customer F's obligations of the loan of HK$165,000,000 under the loan agreement. The major assets of Customer F Guarantor include 150,000 participating shares in a closed-end private fund (the "Fund Interests") and a commercial property located in Mainland China (the "Property of Customer F Guarantor"). On the same date, the Group also obtained a share charge over the entire issued share capital of Customer F Guarantor and a share pledge over the Fund Interests as collateral for the loan. On 16 September 2021, Customer F Guarantor entered into another guarantee contract in favour of the Group, pursuant to which Customer F Guarantor, on top of the corporate guarantee already given, further designated the Property of Customer F Guarantor as collateral to fortify the repayment obligations of Customer F in respect of the loan of HK$165,000,000. In October 2021, the Group engaged a legal adviser to commence civil proceedings in Mainland China with the view to enforcing the guarantee given by Customer F Guarantor and demanding Customer F Guarantor repay the loan owed by Customer F.

In February 2023, the court handed down the arbitral award ordering Customer F Guarantor to pay the Group the loan of HK$165,000,000 together with the outstanding interest plus the accrued interest up to and until the payment date.

In June 2023, the Group instructed its legal adviser to make an application for compulsory enforcement to the court in Mainland China for enforcing directly on the Property of Customer F Guarantor. The application for compulsory enforcement is pending review by the court. In the meantime, the Group is seeking advice from its legal adviser to seek to commence concurrent legal proceedings against Customer F in Hong Kong to recover the outstanding principal amount of the loan receivable and the accrued and unpaid interest.

At 30 June 2023, the Group's loan receivables, together with accrued interest receivables (after accumulated allowance for ECL), amounted to HK$413,867,000 (31 December 2022: HK$412,069,000).

Information on the Group's money lending business, including business model, internal control system, and the basis of determination of the allowance for ECL on loan receivables, was already disclosed in the Company's annual report for the year ended 31 December 2022.

38 -

39 -

Sale of jewelry products business

During the six months ended 30 June 2023, the Group’s sale of jewelry products business generated revenue of HK$43,968,000, a 12% increase from HK$39,422,000 for the previous period, and reported a segment profit (before taxation) of HK$1,074,000. In contrast, a segment loss (before taxation) of HK$1,321,000 was reported in the previous period. The improvement in the segment results was due to a HK$1,868,000 increase in gross profit and the non-recurrence of the one-off loss of inventories of HK$1,534,000 in the previous period.

Since the second half of 2022, the Group has seen a slowdown in sales orders for its jewelry products due to the erosion of buying intention of jewelry products resulting from the depreciation of the Euro and a surge in inflation. The significant increase in diamond prices has also further worsened the buying intention of jewelry products. In response to the slowdown in sales orders for its jewelry products, the Group put more effort into obtaining sales orders for jewelry accessories. Due to the significant increase in diamond prices, the Group has increased the selling prices of its jewelry products in line with other jewelry producers in the market. Such an increase resulted in the 12% increase in revenue in the six months ended 30 June 2023. In addition, there was a HK$1,152,000 decrease in moulding costs for jewelry products contributing to the improvements in gross profit and gross profit margin in the six months ended 30 June 2023.

To cope with the sluggish market condition and the surge in diamond prices, the Group is planning to expand its product category by developing other stone-type jewelry products, which are of a lower price range than diamond jewelry products, to solicit more sales orders. The Group intends to launch its other stone-type jewelry products in the fourth quarter of 2023. Jewellery & Gem World Hong Kong, one of the industry’s signature trade shows, is set to return for the first time since 2019 and is scheduled to take place in September 2023. The Group will participate in the trade show to market and exhibit its jewelry products to attract new businesses.

At the end of the reporting period, the directors performed an ECL assessment on the Group’s trade receivables with reference to a valuation prepared by the independent professional valuer. Based on the valuation, an allowance for ECL on trade receivables of HK$12,000 was made.

At 30 June 2023, the Group’s inventories of jewelry products, including raw materials, work-in-progress and finished goods, amounted to HK$33,242,000 (31 December 2022: HK$32,153,000), and the Group’s sale of jewelry products business had undelivered sales orders amounting to HK$1,498,000 (31 December 2022: HK$587,000).

40 -

Property investment business

During the six months ended 30 June 2023, the Group’s property investment business generated a turnover of HK$20,785,000, a 12% increase from HK$18,641,000 for the six months ended 30 June 2022, and recorded a segment profit (before taxation) of HK$1,992,000, whereas a segment loss (before taxation) of HK$12,027,000 was recorded for the six months ended 30 June 2022.

Of the total turnover, HK$15,268,000 was rental income generated from the assets of the Club, HK$2,274,000 was rental income generated from the investment property portion of the Shun Tak Property, HK$2,505,000 was rental income generated from the residential serviced apartments under short-term lease agreements, and HK$738,000 was derived from property management. Following the delivery of the vacant possession of the residential serviced apartments to lessees upon completion of three blocks of residential serviced apartments in the third quarter of 2022, rental income is generated from the residential serviced apartments under short-term lease agreements and property management fees are charged to the delivered residential serviced apartments, which contributed to the increase in turnover and the improvement in gross profit and gross profit margin.

The turnaround in segment results was mainly attributable to (i) the recognition of the gain on disposals of residential serviced apartments of HK$7,993,000 and (ii) the recognition of finance income on finance lease receivables of HK$9,432,000, which were partially offset by the increase in general administrative expenses and the payment of bonuses to the Group’s marketing team for leasing activities and two directors of a subsidiary.

The Company’s indirect wholly-owned subsidiary, Bayhood No. 9 Co., owns (i) the rights to construct and operate the club facilities of the Club, and (ii) the rights to develop and operate the Subject Land and the rights to construct and manage properties (each a “Property” and collectively, the “Properties”) erected on the Subject Land (the “Management Rights”) for around 39 years until 30 January 2062. As disclosed previously in the Company’s annual report for the year ended 31 December 2020, due to the unprecedented impact of the COVID-19 pandemic on the hotel industry, the Company modified its business strategy for the second and third phases of the Subject Land such that the Properties were constructed for leasing on a long-term or short-term lease basis.

The second and third phases of the Subject Land have been developed into seven blocks of three-storey residential serviced apartments comprising 279 residential serviced apartments with an aggregate gross floor area of 45,165 square meters (with individual apartments of sizes ranging from approximately 88 to 459 square meters), together with two blocks of three-storey office buildings each having a gross floor area of approximately 6,300 square meters with total construction costs of RMB730,000,000 (equivalent to HK$791,758,000). The residential serviced apartments and the office premises are offered for lease by Bayhood No. 9 Co..

While all the lease agreements entered into with the lessees of the Properties are negotiated by the marketing staff of Bayhood No. 9 Co. in Mainland China on arm's length basis in the Group's ordinary course of business with each lessee separately at different times by way of genuine standalone transactions, Bayhood No. 9 Co. endeavours to include the following key terms in the lease agreements: (i) the lease term may be long-term or short-term depending on the lessee's preference, but in any event shall not exceed the remaining tenure of the Management Rights; (ii) the payment terms (the "Payment Terms") of the total rental income for the entire lease term (the "Total Rental Income") may range from one-off payment or payment by instalments; (iii) the title of the Properties remains to be owned by Bayhood No. 9 Co., and the lessees are required to surrender the Properties back to Bayhood No. 9 Co. unconditionally and without receiving any compensation at the end of the lease term; and (iv) the lessees are liable to pay a break fee on default of the lease agreements, which is equivalent to 15% of the Total Rental Income. The Company will comply with Chapters 14 and 14A of the Rules Governing the Listing of Securities on the Exchange (the "Listing Rules") if the applicable ratios for any of these lease agreements exceed the relevant percentage thresholds or any of the lessees (and the ultimate beneficial owners of the corporate lessees) is a connected person of the Company (as defined in the Listing Rules).

Under the applicable accounting standards, long-term lease agreements are treated as finance leases as the lease term substantially covers the remaining period of the Management Rights. On the delivery of vacant possession of a Property to a lessee under a long-term lease agreement, the Total Rental Income discounted at the interest rate implicit in the long-term lease agreement is recognised as "finance lease receivables", the relevant value-added tax ("VAT") based on the discounted Total Rental Income at the current applicable tax rate is recognised as "VAT payable", and the related assets of the Property recorded in "property, plant and equipment", "intangible assets", and "right-of-use assets" are derecognised. A gain or loss calculated at the discounted Total Rental Income minus the VAT payable and the derecognised related assets of the relevant Property is recognised as "gain or loss on disposal" in the "Other gains and losses" line item in the statement of profit or loss. For a signed long-term lease agreement that a Property is expected to deliver within 12 months, the related assets of the Property are classified as "assets classified as held for sale" under current assets in the statement of financial position until the vacant possession of the Property is delivered.

On the other hand, short-term lease agreements are treated as operating leases. The Group recognises the Total Rental Income (net of VAT) as rental income on a straight-line basis over the term of a short-term lease agreement commencing on the delivery of vacant possession of a Property to a lessee. Upon commencement of a short-term lease agreement, the related assets of the relevant Property recorded in "property, plant and equipment", "intangible assets", and "right-of-use assets" are transferred to "investment properties". At the end of each reporting period, such investment properties are measured at fair value.

During the six months ended 30 June 2023, one long-term lease agreement for residential serviced apartments was signed, no lease agreement for office premises was signed, and the vacant possession of two residential serviced apartments was delivered under long-term lease agreements. As a result, the Group recognised the gain on disposals of residential serviced apartments of HK$7,993,000 in the six months ended 30 June 2023.

41 -

At 30 June 2023, there were eight signed long-term lease agreements for residential serviced apartments remaining undelivered.

Despite a sign showing that the Mainland Chinese economy is slowing down, the Group’s Mainland Chinese marketing team for leasing activities will strive to achieve a high level of occupancy rate through a competitive pricing policy compared to similar properties in adjacent areas and flexible Payment Terms to provide incentives to interested lessees. The Group has also established a performance-linked remuneration system to incentivise its Mainland Chinese marketing team. Through the efforts of its staff, the Group is hopeful of benefiting from the continuous income stream derived from the annual rental income of the Properties for the remaining period of the Management Rights.

The applicable ratios calculated in respect of each of the lease agreements entered into by Bayhood No. 9 Co. were under 5%, and none of them constituted a notifiable transaction to the Company under Chapter 14 of the Listing Rules. To the best of the directors’ knowledge, information, and belief, having made all reasonable enquiries, all the lessees (and the ultimate beneficial owners of the corporate lessees) are third parties independent of the Company and its connected persons (as defined in the Listing Rules).

At the end of the reporting period, the directors performed an impairment test for the goodwill arising from the acquisition of Smart Title Limited, the property investment cash-generating unit (“CGU”) in Beijing, Mainland China. In addition to the goodwill, the property, plant and equipment, the intangible assets, and the right-of-use assets relating to (i) the rights to construct and operate the club facilities of the Club and (ii) the rights to develop and operate the Subject Land and the Management Rights that generates cash flow were also included in the property investment CGU for impairment testing. The recoverable amount of the property investment CGU was determined based on a value-in-use calculation. As the recoverable amount of the property investment CGU exceeded its carrying amount, no impairment loss was required.

At the end of the reporting period, the directors measured the investment property portion of the Shun Tak Property at fair value. Based on the property valuation report prepared by an independent qualified valuer, the fair value of the investment property portion of the Shun Tak Property increased from HK$163,800,000 at 31 December 2022 to HK$167,500,000 at 30 June 2023. Accordingly, the Group recognised the gain of HK$3,700,000 arising on change in fair value of investment properties.

On 3 April 2023, Bayhood No. 9 Co. received an advance notice from the lessee to terminate the lease agreement relating to the assets of the Club by 5 October 2023. Upon the termination, the Group will operate and manage the Club on its own. The directors consider that the termination of the lease agreement has no material adverse impact on the financial position and the existing business operations of the Group.

42 -

43 -

Investments in associates

Elite Prosperous is an investment holding company whose principal asset was 47,643 ordinary shares in the unlisted investment holding company, representing 2.65% of the entire issued share capital of the unlisted investment holding company. The principal subsidiaries of the unlisted investment holding company are engaged in (i) agency payment services, (ii) currency exchange services, and (iii) provision of online, mobile, and cross-border payment services. At the end of the reporting period, Elite Prosperous measured its investment in the unlisted investment holding company at fair value. Based on a valuation report prepared by an independent professional valuer, the fair value of the investment decreased from HK$11,259,000 at 31 December 2022 to HK$10,255,000 at 30 June 2023. Accordingly, Elite Prosperous recognised a loss of HK$1,004,000 arising on change in fair value of its investment in the unlisted investment holding company. During the six months ended 30 June 2023, Elite Prosperous reported a loss of HK$1,004,000, and accordingly, the Group shared a loss of HK$492,000 from Elite Prosperous.

China Healthwise is an investment holding company, and its subsidiaries are principally engaged in sales of Chinese health products, money lending business, and investment in financial instruments. During the six months ended 30 June 2023, China Healthwise reported a loss of HK$31,862,000, a 110% increase from HK$15,176,000 for the previous period, and the Group shared a loss of HK$6,850,000 from China Healthwise. The deterioration in China Healthwise’s results for the six months ended 30 June 2023 was due to a significant increase in impairment loss on its loan receivables. At the end of the reporting period, the carrying amount of the Group’s investment in China Healthwise was tested for impairment. As the carrying amount of the Group’s investment in China Healthwise exceeded its fair value, the impairment loss of HK$9,606,000 was recognised against the carrying amount of China Healthwise in the six months ended 30 June 2023.

Future Prospects

The global economy performed well at the start of the year, supported by factors such as falling energy prices, strong consumer balance sheets, and the reopening of the Mainland Chinese economy. However, the leading economic and financial market indicators are continuing to signal a probability of a slowdown in the global economy in the coming quarters. In addition, some key risks remain, including core inflation persistently above central banks’ target, a slowdown of the Mainland Chinese economy, a further deterioration in the United States and Mainland China relations, and a further escalation of the ongoing war in Ukraine. With this backdrop, the directors expect uncertainty in the global macroeconomic environment for the remainder of 2023.

The directors will closely monitor the Hong Kong equity market, particularly the fundamentals of each investee company in the Group’s portfolio, proactively adjust the Group’s portfolio mix from time to time, and realise the Hong Kong-listed equity securities into cash as and when appropriate.

Given the global macroeconomic environment is expected to be uncertain, the directors intend to maintain the size of the Group’s loan portfolio in the second half of 2023. As a result, the interest income on loans generated from the Group’s money lending business in the second half of 2023 is expected to be more or less the same as in the first half of 2023. Nevertheless, the directors will closely monitor the performance of the Group’s loan portfolio, especially in each customer’s repayment and financial condition, and make every effort to recover the overdue loan receivables.

Owing to the slowdown in sales orders for its jewelry products, the Group has planned to broaden its overseas customer base by allocating more resources to overseas sales trips and promoting its products through its online business-to-business sales portal. The Group has also been developing a new product line, other stone-type jewelry products, with a view to soliciting more sales orders. The directors expect the performance of the Group’s sale of jewelry product business may underperform in the second half of 2023 compared to the first half of 2023 due to the sluggish market condition.

Although there is a sign showing that the Mainland Chinese economy is slowing down, the directors will put more effort and resources into marketing and leasing activities to achieve a high level of occupancy rate in order to build up the continuous income stream derived from rental income of the properties erected on the Subject Land. In addition, the directors will put more effort and resources into completing the remaining four blocks of residential serviced apartments and two blocks of office buildings as planned. As the lease agreement relating to the assets of the Club is terminated by the lessee on 5 October 2023, the directors expect that the rental income of the Group’s property investment business will decrease in the second half of 2023 compared to the first half of 2023. However, the Group will operate and manage the Club on its own upon the termination, and a new operating segment for operating golf club and resort will be commenced in the fourth quarter of 2023.

Due to the global macroeconomic environment expected to be uncertain in the remaining 2023, the directors remain cautious and watchful over the key risks and their impact and commit to leading the Group to weather the challenges and continue to monitor the business environment cautiously and strengthen the Group’s business foundation by focusing on its existing businesses.

Events after the End of the Reporting Period

The Group did not have any material events after the reporting period and up to the date of this results announcement.

COMPLIANCE WITH CORPORATE GOVERNANCE CODE

In the opinion of the Board, the Company complied with the code provisions of the Corporate Governance Code (the “Code”) as set out in Part 2 of Appendix 14 of the Listing Rules throughout the six months ended 30 June 2023, except for code provision C.2.1.

Code provision C.2.1 of the Code requires that the roles of chairman and chief executive officer should be separate and should not be performed by the same individual. During the six months ended 30 June 2023, Mr. Lei Hong Wai has taken up the roles of the Chairman of the Board and the Chief Executive Officer of the Company. Mr. Lei possesses essential leadership skills and has extensive experience in corporate management and business development. The Board is of the view that currently vesting the roles of the Chairman and the Chief Executive Officer in the same person provides the Group with strong and consistent leadership and allows for more effective and efficient business planning and decisions as well as execution of long-term business strategies.

44 -

COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 of the Listing Rules for securities transactions by the directors of the Company. Having made specific enquiry, all directors confirmed that they had complied with the required standard as set out in the Model Code throughout the six months ended 30 June 2023.

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

During the six months ended 30 June 2023, neither the Company nor any of its subsidiaries purchased, redeemed or sold any of the Company’s listed securities.

REVIEW OF FINANCIAL INFORMATION

The Audit Committee of the Board has reviewed the 2023 interim report and the condensed consolidated financial statements for the six months ended 30 June 2023 and agreed to the accounting policies and practices adopted by the Company.

By Order of the Board
Eternity Investment Limited
Cheung Kwok Wai Elton
Executive Director

Hong Kong, 29 August 2023

As at the date of this announcement, the Board comprises three executive directors, namely, Mr. Lei Hong Wai, Mr. Cheung Kwok Wai Elton, and Mr. Cheung Kwok Fan; and three independent non-executive directors, namely, Mr. Wan Shing Chi, Mr. Ng Heung Yan, and Mr. Wong Tak Chuen.

– 45 –