National Investments Fund Limited (Incorporated in the Cayman Islands with limited liability) ( ) (Stock Code : 1227) INTERIM REPORT 2018

Transcription

1 National Investments Fund Limited (Incorporated in the Cayman Islands with limited liability) () (Stock Code : 1227) INTERIM REPORT 2018

2 CONTENTS Pages Corporate Information 2 Management Discussion and Analysis 4 Other Information 12 Condensed Consolidated Statement of Financial Position 27 Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income 29 Condensed Consolidated Statement of Changes in Equity Condensed Consolidated Statement of Cash Flows Notes to the Condensed Consolidated Financial Statements Interim Report

3 CORPORATE INFORMATION BOARD OF DIRECTORS Executive Directors Mr. Wong Danny F. (Chairman) Mr. Wu Tse Wai, Frederick (resigned on 12 September 2018) Mr. Fong Chi Wah (resigned on 31 August 2018) Independent Non-executive Directors Mr. Char Shik Ngor, Stephen Mr. Liu Jin Mr. Law Tze Lun (resigned on 21 September 2018) AUDIT COMMITTEE Mr. Law Tze Lun (Chairman) (resigned on 21 September 2018) Mr. Char Shik Ngor, Stephen Mr. Liu Jin REMUNERATION COMMITTEE Mr. Liu Jin (Chairman) Mr. Law Tze Lun (resigned on 21 September 2018) NOMINATION COMMITTEE Mr. Char Shik Ngor, Stephen (Chairman) Mr. Liu Jin Mr. Law Tze Lun (resigned on 21 September 2018) CHIEF EXECUTIVE OFFICER Mr. Feng Wen (resigned on 27 June 2018) COMPANY SECRETARY Mr. Law Kim Fai AUDITORS HLB Hodgson Impey Cheng Limited Certified Public Accountants PRINCIPAL BANKERS OCBC Wing Hang Bank Limited Industrial and Commercial Bank of China (Asia) Limited 2 National Investments Fund Limited

4 REGISTERED OFFICE Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY Cayman Islands PRINCIPAL PLACE OF BUSINESS Unit 10, 11/F., Nan Fung Commercial Centre, 19 Lam Lok Street, Kowloon Bay, Hong Kong INVESTMENT MANAGER Avia Asset Management Limited Unit A, Level 9, Fortis Tower Gloucester Road Wanchai, Hong Kong CUSTODIAN Bank of Communications Trustee Limited 1st Floor, Far East Consortium Building 121 Des Voeux Road Central Hong Kong HONG KONG BRANCH SHARE REGISTRAR AND TRANSFER OFFICE Tricor Tengis Limited Level 22 Hopewell Centre 183 Queen s Road East Hong Kong STOCK CODE The Stock Exchange of Hong Kong Limited: 1227 WEBSITE Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY Cayman Islands A Interim Report

5 MANAGEMENT DISCUSSION AND ANALYSIS The board of directors (the Board ) of National Investments Fund Limited (the Company ) is pleased to present the unaudited condensed consolidated interim results of the Company and its subsidiaries (collectively, the Group ) for the six months ended 30 June 2018 (the Review Period ). The unaudited condensed consolidated interim financial statements have not been audited by the auditors of the Company but have been reviewed by the audit committee of the Company (the Audit Committee ). BUSINESS REVIEW The Company is an investment company and the Group is principally engaged in investments in a diversified portfolio of listed and unlisted companies. For the Review Period, the Group s revenue recorded a net gain of approximately HK$8,492,000 (for the six months ended 30 June 2017 ( Last Corresponding Period ): net gain of approximately HK$1,884,000), mainly source from dividend income of approximately HK$7,350,000. 8,492,000 1,884,000 7,350,000 For the Review Period, the loss attributable to owners of the Company was approximately HK$21,002,000 (Last Corresponding Period: approximately HK$39,012,000). The loss was primarily attributable to (i) Other operating expenses of approximately HK$26,350,000 (Last Corresponding Period: HK$32,261,000) and (ii) finance costs of approximately HK$3,572,000 (Last Corresponding Period: approximately HK$7,509,000). 21,002,000 39,012,000 (i) 26,350,000 32,261,000 (ii) 3,572,000 7,509,000 4 National Investments Fund Limited

6 PROSPECT In the year of 2018, the world s economy continues to fill with challenges and uncertainties. Affected by the global economy (in particular the economy of China), the financial market in Hong Kong was confronted with numerous challenges and uncertainties. Recently the Government of the United States adopted trade protectionist measures against China which may affect China s normal trade relations with the United States and cause uncertainty to the global economy due to trade war threats between the world s two biggest nations. China is also confronted with various internal issues, such as its domestic debt, which may affect its economic growth. The uncertainties may hinder the investor s confidence in financial market and it is expected that the stock market may remain volatile. The Group will continue to implement a diversified investment strategies and to identify suitable investment opportunities with potential assets appreciation that will furtherance our Company s investment objectives and policies and also to generate better returns for the Group and the shareholders of the Company. Despite the difficult market conditions, the Group would endeavor to bring positive returns under our investment portfolio to the shareholders of the Company. INTERIM DIVIDEND The Board does not recommend the payment of interim dividend for the Review Period (Last Corresponding Period: Nil). Interim Report

7 FINANCIAL REVIEW Liquidity and Financial Resources The Group had cash and cash equivalents of approximately HK$805,000 as at 30 June 2018 (31 December 2017: approximately HK$34,794,000). 805,000 34,794,000 As at 30 June 2018, the Company had issued promissory notes in the aggregate amount of HK$110,000,000. Eleven promissory notes in the denomination of HK$10,000,000 each were issued to eleven independent third parties. Each promissory note bears interest at a rate of 5% per annum with a maturity period of seven years from the date of issue. The net proceeds were used for investment in securities and as general working capital of the Group. 110,000,000 10,000,000 5% The net current liabilities held by the Group as at 30 June 2018 amounted to approximately HK$16,515,000 (31 December 2017: net current liabilities of approximately HK$49,332,000). Save and except the above, the Group had no other outstanding credit facility from other financial institution as at 30 June As all cash and cash equivalents were maintained in Hong Kong Dollars accounts with banks in Hong Kong, exposure to exchange fluctuation is considered minimal. The gearing ratio, calculated on the basis of total debt over total equity as at 30 June 2018, was not applicable (31 December 2017: not applicable). 16,515,000 49,332,000 6 National Investments Fund Limited

8 The Company has entered into a loan agreement with Enhanced Finance Limited ( Enhanced ) on 14 January 2016 for a loan facility in the total amount of HK$65,000,000 (the Enhanced Facility ). On 20 June 2016, the Company, Enhanced and Hansom Finance Limited ( Hansom ) entered into a deed of assignment ( Deed of Assignment ) whereas Enhanced, as the assignor, assigned the outstanding principal (i.e. HK$15,000,000) of the Enhanced Facility to Hansom (the Assigned Loan ). 5,000,000 15,000,000 Prior to the date of the Deed of Assignment, the Company has entered into two respective loan agreements with Hansom on 8 April 2016 and 16 May 2016 for loan facilities in the total amount of HK$5,000,000 (the First Facility ) and HK$5,000,000 (the Second Facility ) respectively. 5,000,000 5,000,000 In order to extend the repayment dates, the Company and Hansom agreed to enter into a deed of promissory note (the PN Deed ) on 20 June 2016 to merge the First Facility, the Second Facility, the Assigned Loan and the outstanding interest accrued on the Assigned Loan into a single debt so that such merged debt shall be payable and secured by in accordance with the terms and conditions of the PN Deed. Pursuant to the PN Deed, the Company covenanted to repay the debt to Hansom on or before 19 December 2016 with an interest at the rate of 3% per month commencing from 20 June The Company charged its assets by way of floating charge as well as the interest its wholly owned subsidiaries in favour of Hansom as security of the debt. Interim Report

9 Pursuant to the deed of assignment made between Hansom and Citizens Money Lending Corporation Limited ( Citizens ) on 19 July 2016, Hansom assigned all its rights, title, benefits and interest in the debt under the PN Deed to Citizens. On 2 January 2018, the Company completed a rights issue and issued 1,201,130,456 new ordinary shares of HK$0.01 each at a subscription price of HK$0.035 each. The Company has applied part of the net proceeds from the rights issue to fully settle the indebtedness owed to Citizens ,201,130, On 8 January 2018, the Company has fully settled the loan entered with Citizens Money Lending Corporation Limited with cash of approximately HK$39,233,000. The Share Charges of the Group s wholly owned subsidiaries in favour of Massive Shine Limited, Old Peak Limited, Eighty Riches Limited, Union Power Holdings Limited and Fine East Trading Limited have been released on 8 January 2018 and the relevant registration procedures for the release of the Share Charge will be completed in due course. 39,233,000 Massive Shine Limited Old Peak Limited Eighty Riches Limited Union Power Holdings Limited Fine East Trading Limited The Company entered into a loan agreement with Freeman Opto Money Lending Corporation Limited amounted to HK$1,500,000 on 12 October The loan was repayable on the date of one month from the date of loan agreement with interest rate of 2% per month. Freeman Opto Money Lending Corporation Limited 1,500, On 2 January 2018, the Company has fully settled the loan entered with Freeman Opto Money Lending Corporation Limited with cash of approximately HK$1,580,000. 1,580,000 Freeman Opto Money Lending Corporation Limited 8 National Investments Fund Limited

10 Capital Structure and Fund Raising Activities On 2 January 2018, the Company completed a rights issue and issued 1,201,130,456 new shares with par value of HK$0.01 each at a subscription price of HK$0.035 per rights share on the basis of two rights shares for every one then existing share held, and the net proceeds of the Rights Issue, after deducting the related expense, were approximately HK$40,280,000 which were mainly used to repay the principal amount and interests of Group s loans including the Citizens Money Lending Corporation Limited. Details of the rights issue were disclosed in the announcements of the Company dated 21 November 2017, 28 November 2017, 2 January 2018 and the prospectus of the Company 7 December ,201,130, ,280,000 As at 30 June 2018, the total number of issued ordinary shares of the Company was 3,603,391,369 shares (31 December 2017: 2,402,260,913 shares). 3,603,391,369 2,402,260,913 EMPLOYEES As at 30 June 2018, the Group had 20 employees (31 December 2017: 26 employees), including executive directors and independent non-executive directors. The total employment costs incurred during the Review Period were approximately HK$14,200,000 (31 December 2017: approximately HK$20,813,000). The Group s remuneration policies are in line with the prevailing market practice and are determined based on the performance, level of responsibility and experience of individual employees ,200,000 20,813,000 Interim Report

11 CAPITAL COMMITMENTS As at 30 June 2018, the Group did not have any material capital commitments (31 December 2017: Nil). CHARGES ON THE GROUP S ASSETS AND CONTINGENT LIABILITIES On 26 March 2018, the Company received a petition from Medisun Holdings Limited (the Petitioner ) in the matter of the Companies (Winding Up and Miscellaneous Provision) Ordinance from the High Court of The Hong Kong Special Administrative Region (the High Court ) that the Company may be wound up by the High Court on the ground that the Company is unable to pay its debts of approximately HK$7,143,000 (the Petition ). On 29 March 2018, the Company also received a notice from Carley Company S.A. (the Creditor ), a creditor of the Company, that it intends to appear on the hearing of the Petition and to support such Petition. Please refer to the Company s announcements dated 26 March 2018, 27 March 2018, 29 March 2018, 11 May 2018, 28 May 2018, 30 May 2018, 4 June 2018, 7 June 2018, 19 June 2018 and 20 August 2018 for further details of the Petition. 7,143,000 Carley Company S.A. 10 National Investments Fund Limited

12 As at 30 June 2018, no bank deposits (31 December 2017: HK$2,070,000) were pledged to a bank as the Group does not have any trade credit facilities. 2,070,000 Save as disclosed above, there were no charges over any of the Group s assets or significant contingent liabilities as at 30 June FOREIGN EXCHANGE EXPOSURE The investments of the Group were mainly denominated in Hong Kong Dollars and Renminbi ( RMB ). During the Review Period, transactions and balances in RMB were not significant and the exposure to RMB is insignificant. The Group manages and monitors foreign exchange exposures to ensure appropriate measures are implemented on a timely and effective manner. Interim Report

13 OTHER INFORMATION DIRECTORS RIGHTS TO ACQUIRE SHARES OR DEBT SECURITIES Save and except the disclosure made under Interests in Share Options below, at no time during the Review Period was the Company a party to any arrangement to enable the directors or chief executives of the Company (including their spouses or children under 18 years of age) to have any right to subscribe for securities of the Company or any or its associated corporations as defined in the Securities and Futures Ordinance (the SFO ) or to acquire benefits by means of acquisition of shares in, or debentures of, he Company or any other corporate. DIRECTORS AND CHIEF EXECUTIVE S INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES As at 30 June 2018, the interests or short positions of the directors and chief executive in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which were notified to the Company and The Stock Exchange of Hong Kong Limited (the Stock Exchange ) pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO), or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which were required to be notified to the Company and the Stock Exchange, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers ( Model Code ) were as follows: XV XV National Investments Fund Limited

14 Approximate percentage of Name of Director Capacity Number of ordinary shares held the Company s issued share capital Mr. Wong Danny F. Interest of controlled corporation/beneficial owner 296,338,637 (1) 8.22% All of the above interests in the Company held by the directors were long positions. Notes: (1) These represent beneficial interests in shares owned by CCM Asia Investment Corporation, a company incorporated in the British Virgin Islands with limited liability and the entire issued share capital of which is indirectly held by Mr. Wong Danny F., the Chairman and an executive director of the Company. These shares have been charged in favour of a secured lender. (1) CCM Asia Investment Corporation CCM Asia Investment Corporation Save as disclosed above, none of the directors, chief executive or their associates had any interests and short positions in any shares, underlying shares and debentures of the Company or any of its associated corporations as defined in Part XV of the SFO as recorded in the register to be kept under section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code. XV 352 Interim Report

15 INTERESTS IN SHARE OPTIONS The Company operates a share option scheme for Directors and employees of the Group. The share option scheme adopted on 27 August 2007 (the Old Scheme ) has expired and was replaced by a new share option scheme approved by the shareholders of the Company on 30 June 2017 (the Share Option Scheme ). No further option can be granted under the Old Scheme upon its expiration, but all options granted previously will remain exercisable in accordance with the terms of the Old Scheme and the relevant letters of offers to the respective grantees. The Share Option Scheme had a life of ten years and is due to expire on 29 June Pursuant to the terms and conditions of the Share Option Scheme, the purpose of the Share Option Scheme, in principle, is to enable the Company to motivate participants for their significant contributions to the growth of the Company and to retain and maintain on-going business relationship with such participants whose contributions are or will be beneficial to the long-term growth of the Company. It is important for the Company to provide them, where appropriate, with an additional incentive by offering them an opportunity to obtain an ownership interest in the Company and to reward them for contributing to the Company s long-term success and prosperity. The principal terms of the Share Option Scheme are as follows: 14 National Investments Fund Limited

16 (i) The total number of shares which may be issued upon exercise of all options to be granted under the Share Option Scheme and any options to be granted under any other scheme must not in aggregate exceed 10% of the aggregate of the shares in issue as at the adoption date unless refreshed by the shareholders. However, the total number of shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and all outstanding options granted and yet to be exercised under any other scheme should not exceed 30% of the shares in issue from time to time. (i) 10% 30% (ii) The total number of shares in respect of which options may be granted to each eligible participant in any 12-month period must not exceed 1% of the issued share capital of the Company for the time being. (ii) 1% (iii) The subscription price shall be a price determined by the Board, but shall not be less than the highest of (i) the closing price of the shares as stated in the Stock Exchange s daily quotations on the date of grant, which must be a business day; (ii) the average closing price of the shares as stated in the Stock Exchange s daily quotations for the five business days immediately preceding the date of grant; and (iii) the nominal value of the share. (iii) (i) (ii) (iii) Interim Report

17 (iv) An option may be accepted by an eligible participant within 28 days from the date of offer of the option. Upon acceptance of the option, the grantee shall pay HK$1.00 to the Company by way of consideration for the grant of the option. (iv) 1.00 (v) The Share Option Scheme will remain valid for a period of ten years commencing on 30 June (v) No share option was granted, exercised or cancelled in accordance with the terms of the Share Option Scheme during the period. Save as disclosed above, none of the Company s directors and chief executive, or their spouses or children under the age of 18, had any rights to subscribe for the securities of the Company, or had exercised any such rights during the Review Period. 16 National Investments Fund Limited

18 SUBSTANTIAL SHAREHOLDERS AND OTHER PERSONS INTERESTS IN SECURITIES As at 30 June 2018, so far as is known to the directors, the following shareholders (other than the directors and chief executive of the Company) had interests or short positions in the shares and underlying shares of the Company as recorded in the register required to be kept under section 336 of the SFO: 336 Name of shareholder Capacity Number of ordinary shares held Percentage of the Company s issued share capital CCM Asia Investment Corporation (Note 1) Beneficial owner 296,338, % CCM Asia Investment Corporation 1 CCM Financial Corporation (Note 1) Corporate owner 296,338, % CCM Financial Corporation 1 Sino Portfolio International Limited (Note 2) Security owner 296,338, % Sino Portfolio International Limited 2 Ms. Angela Chen (Note 3) Interest through controlled corporation 296,338, % Angela Chen 3 All of the above interests in the Company held by shareholders were long positions. Interim Report

19 Notes: 1. Mr. Wong Danny F., the Chairman and an executive director of the Company, is the sole shareholder of CCM Financial Corporation which in turn is the sole shareholder of CCM Asia Investment Corporation. CCM Financial Corporation and Mr. Wong Danny F. are therefore deemed to be interested in the shares and underlying shares of the Company held by CCM Asia Investment Corporation under the SFO. 1. CCM Financial Corporation CCM Asia Investment Corporation CCM Financial Corporation CCM Asia Investment Corporation 2. Sino Portfolio International Limited, a company incorporated in the Republic of Seychelles ( Sino Portfolio ), has a security interest in 296,338,637 shares of the Company. 2. Sino Portfolio International Limited Sino Portfolio 296,338, Sino Portfolio is wholly-owned by Ms. Angela Chen. Ms. Angela Chen is therefore deemed to be interested in 296,338,637 shares of the Company which Sino Portfolio has a security interest in under the SFO. 3. Sino Portfolio Angela Chen Angela Chen Sino Portfolio 296,338,637 Other than disclosed above, the Company has not been notified of any other interests or short positions in the shares and underlying shares of the Company representing 5% or more of the issued share capital of the Company as at 30 June % PURCHASE, SALE OR REDEMPTION OF THE COMPANY S LISTED SECURITIES During the Review Period, the Company has not purchased, sold or redeemed any of its listed securities. 18 National Investments Fund Limited

20 CONNECTED TRANSACTIONS Subscription Agreement The Company and Premium Castle Limited ( Premium Castle ), a company incorporated under the laws of British Virgin Islands, entered into a new subscription agreement the New Subscription Agreement ), pursuant to which the Company has conditionally agreed to subscribe for and Premium Castle has conditionally agreed to issue a convertible note in the principal amount of HK$18,600,000, being the outstanding principal amount of HK$17,000,000 under the 2011 Convertible Note and the outstanding interest in the sum of approximately HK$1,600,000 accrued under the 2010 Convertible Note and the 2011 Convertible Note (collectively Debt ), with maturity period of five years and coupon rate of 2% (the Subscription ). The New Subscription Agreement constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules as the applicable percentage ratios as defined under Rule of the Listing Rules are more than 5% but less than 25%. The New Subscription Agreement also constitutes a connected transaction under Chapter 14A of the Listing Rules as the major shareholder of Premium Castle is Mr. Wong Danny F., the Chairman and an executive director of the Company, Premium Castle is therefore a connected person of the Company. Accordingly, the New Subscription Agreement is subject to Premium Castle Limited Premium Castle Premium Castle 18,600,000 17,000,000 1,600, % 25% Premium Castle Premium Castle A Premium Castle Interim Report

21 the reporting, announcement and independent Shareholders approval requirements under the Listing Rules. Mr. Wong Danny F., who is the Chairman and an executive director of the Company and a major shareholder of Premium Castle, is regarded as having a material interest in the New Subscription Agreement and therefore he abstained from voting at the meeting of the Board at which the resolution approving the New Subscription Agreement was passed and Mr. Wong Danny F. and his associates were required to abstain from voting on the resolution approving the New Subscription Agreement passed at the extraordinary general meeting of the Company held on 25 February Details of the Subscription were disclosed in the circular of the Company dated 7 February The New Subscription Agreement has been approved at the extraordinary general meeting and was completed on the same day. Upon completion of the Subscription on 25 February 2014, the obligation of Premium Castle to pay the Debt has been released and the Debt, which was previously recorded as current assets of the Company, was reclassified as financial asset in the Company s consolidated statement of financial position. Premium Castle 20 National Investments Fund Limited

22 CONTINUING CONNECTED TRANSACTIONS Investment Management Agreement The investment management agreement dated 1 November 2016 was entered into between the Company and Avia Asset Management Limited ( New Investment Management Agreement ). Under the New Investment Management Agreement, Avia Asset Management Limited agreed to provide investment management services to the Company from 1 November 2016 unless and until terminated by either party by serving not less than 6 months notice in writing to the other party with a fixed management fee of HK$55,000 per month. Pursuant to Rule 14A.08 of the Listing Rules, an investment manager is deemed to be connected person of the Company. The entering into of the New Investment Management Agreement with Avia Asset Management Limited constitutes a continuing connected transaction for the Company under Chapter 14A of the Listing Rules but is exempted from the reporting, announcement and independent shareholders approval requirements under the Listing Rules. 55,000 14A.08 A Interim Report

23 Custodian Agreement Commencing from 11 March 2005, the Company appointed the Bank of Communications Trustee Limited as its custodian for the provision of custody services. The Bank of Communications Trustee Limited has agreed to provide the Company with securities services including the safe custody and physical settlement of the securities in the investment portfolio of the Company, and the collection of dividends and other entitlements in respect of such securities. The custodian agreement between the parties (the Custodian Agreement ) will continue be in force until being terminated by either the Company or the custodian by the giving to the other party of not less than 90 days notice in writing at any time. Pursuant to Rule 14A.08 of the Listing Rules, a custodian shall be regarded as a connected person of the Company. Therefore, the provision of services by the Bank of Communications Trustee Limited under the Custodian Agreement constitutes continuing connected transactions for the Company under Chapter 14A of the Listing Rules. 14A.08 A The Board, including the independent non-executive directors, is of the view that the above continuing connected transactions have been entered into (1) on normal commercial terms; (2) on an arm s length basis; and (3) in the ordinary and usual course of business of the Company, and that the terms of the above continuing connected transactions were fair and reasonable to the shareholders and the Company as a whole. (1) (2) (3) 22 National Investments Fund Limited

24 The Company confirms that it has received written confirmation from its auditors confirming the matters stated under Rule 14A.56 of the Listing Rules. 14A.56 PUBLIC FLOAT Based on the information that is publicly available to the Company and within the knowledge of the directors at the date of this interim report, there is a sufficient prescribed public float of the issued shares of the Company under the Listing Rules. CORPORATE GOVERNANCE PRACTICES The Board acknowledges the importance of corporate governance as the Board believes that effective corporate governance practices are fundamental to enhancing the shareholders value and safeguarding interest of the shareholders. Accordingly, the Company has adopted sound corporate governance principles that emphasize an effective internal control and accountability to all shareholders of the Company. The Company had complied with all applicable provisions of the Corporate Governance Code as set out in Appendix 14 (the CG Code ) to the Listing Rules during the Review Period, save for the deviation from Code Provision E.1.2, which is explained in more details below. E.1.2 Interim Report

25 According to Code Provision E.1.2 of the CG Code, the chairman of the board should attend the annual general meeting. Mr. Wong Danny F., the chairman of the Board, was not able to attend the annual general meeting of the Company held on 20 June 2018 due to an important business meeting which was pre-scheduled for the same date. E.1.2 Under the code provision A.2.1, the roles of Chairman and chief executive should be separate and should not be performed by the same individual. Mr. Feng Wen has been resigned as the Chief Executive Officer of the Company ( CEO ) on 27 June Whilst the Company is in the course of identifying suitable candidate for this position, Mr. Wong Danny F., an executive director and chairman of the Company, will temporarily assume such duties. The Board is of the view that such arrangement will provide strong and consistent leadership for the development of the Group during this transitional period and does not constitute a deviation from the CG Code. A.2.1 The Company periodically reviews its corporate governance practices to ensure that the Company meets the requirements of the CG Code. CHANGES IN THE COMPOSITION OF THE BOARD AND THE SENIOR MANAGEMENT During the Review Period, the Board approved the following changes to the composition of the Board and the senior management: Mr. Feng Wen has been resigned as the CEO of the Company on 27 June National Investments Fund Limited

26 COMPLIANCE WITH 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 for dealing in securities by the directors. Based on specific enquiry with the directors, all directors confirmed that they had complied with the required standards as set out in the Model Code throughout the Review Period. AUDIT COMMITTEE The audit committee of the Company comprising three independent non-executive directors, together with the management of the Company, have reviewed the Group s unaudited interim financial statements for the Review Period including the accounting principles and practices adopted by the Group and discussed auditing, internal control and financial reporting matters. EVENTS AFTER THE END OF THE REPORTING PERIOD On 26 March 2018, the Company received a petition (the Petition ) from Medisun Holdings Limited issued from the High Court of the Hong Kong Special Administrative Region (the High Court ) that the Company may be wound up by the High Court on the ground that the Company is unable to pay its debts of approximately HK$7,143,000. On 29 March 2018, the Company also received a notice from Carley Company S.A., a creditor of the Company, that it intends to appear on the hearing of the Petition and to support such Petition. 7,143,000 Carley Company S.A. Interim Report

27 On 20 August 2018, the High Court adjourned the hearing of the Petition to 8 October Please refer to the Company s announcements dated 26 March 2018, 27 March 2018, 29 March 2018, 11 May 2018, 28 May 2018, 30 May 2018, 4 June 2018, 7 June 2018, 19 June 2018 and 20 August 2018 for further details of the Petition. APPRECIATION On behalf of the Board, I would like to express my sincere gratitude to our shareholders and business partners for their unfailing support. I would also like to thank our management and staff for their dedication and hard work. On behalf of the Board Wong Danny F. Chairman Hong Kong, 31 August National Investments Fund Limited

28 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2018 As at 30 June 2018 (Unaudited) As at 31 December 2017 (Audited) Notes HK$ 000 HK$ 000 ASSETS Non-current assets Property, plant and equipment ,432 Other tangible assets 1,575 17,583 Financial assets at fair value through other comprehensive income 5 88,930 Available-for-sale financial assets 5 88,200 Conversion options embedded in convertible notes , ,222 Current assets Financial assets at fair value through other comprehensive income 5 21,535 Available-for-sale financial assets 5 20,487 Prepayments, deposits and other receivables 5,484 7,428 Cash and bank balances ,794 27,824 62,709 Total assets 119, ,931 Interim Report

29 As at 30 June 2018 (Unaudited) As at 31 December 2017 (Audited) Notes HK$ 000 HK$ 000 EQUITY Capital and reserves attributable to owners of the Company Share capital 7 36,034 24,023 Reserves (70,592) (71,466) Total equity (34,558) (47,443) LIABILITIES Current liabilities Short-term loans 14,729 6,833 Accrued charges and other payables 29, ,649 Obligations under finance leases , ,041 Non-current liabilities Promissory notes 109, ,310 Obligations under finance leases 1, , ,333 Total liabilities 153, ,374 Total equity and liabilities 119, ,931 Net current liabilities (16,515) (49,332) Total assets less current liabilities 74,924 62,890 Approved by the Board of Directors on 31 August 2018 and signed on its behalf by: Wong Danny F. Director Wu Tse Wai, Frederick Director The accompanying notes form an integral part of these condensed consolidated financial statements. 28 National Investments Fund Limited

30 CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the six months ended 30 June 2018 Six months ended 30 June (Unaudited) (Unaudited) Notes HK$ 000 HK$ 000 Revenue 8 8,492 1,884 Other income Change in fair value of conversion options embedded in convertible notes (64) (726) Impairment loss of other tangible assets (8) (1,000) Other operating expenses (26,350) (32,261) Finance costs 10 (3,572) (7,509) Loss before income tax (21,002) (39,012) Income tax expense 11 Loss for the period 12 (21,002) (39,012) Interim Report

31 Six months ended 30 June (Unaudited) (Unaudited) Notes HK$ 000 HK$ 000 Other comprehensive loss, net of income tax Items that will not be reclassified to profit and loss: Net loss on revaluation of financial assets at fair value through other comprehensive income Items that may be reclassified subsequently to profit or loss: Net loss on revaluation of available-for-sale financial assets Other comprehensive loss for the period, net of income tax (6,470) 5 (4,638) (6,470) (4,638) Total comprehensive loss for the period (27,472) (43,650) Loss for the period attributable to: Owners of the Company (21,002) (39,012) Total comprehensive loss attributable to: Owners of the Company (27,472) (43,650) (restated) Loss per share: Basic and diluted (HK cents) 14 (0.58) (1.55) 30 National Investments Fund Limited

32 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 30 June 2018 Share capital Share premium Share option reserve (Note (i)) Available-forsale financial assets equity reserve (Note (ii)) Accumulated losses Total equity (i) (ii) HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 At 1 January 2017 (Audited) 21, ,704 2,193 (3,518) (747,955) 43,747 Loss for the period (39,012) (39,012) Other comprehensive loss for the period (4,638) (4,638) Total comprehensive loss for the period (4,638) (39,012) (43,650) Placing 2,700 28,920 31,620 Placing expenses (948) (948) At 30 June 2017 (Unaudited) 24, ,676 2,193 (8,156) (786,967) 30,769 At 1 January 2018 (Audited) 24, ,675 (1,786) (869,355) (47,443) Loss for the period (21,002) (21,002) Net loss on revaluation of financial assets at fair value through other comprehensive income (6,470) (6,470) Total comprehensive income for the period (6,470) (21,002) (27,472) Right issue 12,011 28,346 40,357 At 30 June 2018 (Unaudited) 36, ,021 (8,256) (890,357) (34,558) Interim Report

33 Notes: (i) Share option reserve relates to share options granted under the Company s share option scheme and which are reclassified to share capital and share premium when the share options were exercised, and to accumulated losses when the share options were lapsed or expired. (i) (ii) Available-for-sale financial assets equity reserve relates to the cumulative gains or losses arising on the change in fair value of available-for-sale financial assets that have been recognised in other comprehensive income, net of amounts reclassified to profit or loss when those financial assets are disposed or impaired. (ii) (iii) Exchange reserve relates to the net assets of the Group s associates foreign operations from their functional currency to the associates presentation currency. (iii) 32 National Investments Fund Limited

34 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS For the six months ended 30 June 2018 For the six months ended 30 June (Unaudited) (Unaudited) HK$ 000 HK$ 000 Net cash outflow from operating activities (29,753) (32,877) Cash flows from investing activities Purchase of property, plant and equipment (2,731) Proceeds from disposal of property, plant and equipment 1,407 Proceeds from disposal of other tangibles assets 16,000 Net cash inflow/(outflow) from investing activities 17,407 (2,731) Cash flows from financing activities Proceeds from placing 31,620 Placing expenses (948) Rights issue expenses (22) Proceeds from obligations under finance leases 2,081 Repayments for obligations under finance leases (1,629) (229) Proceeds from short-term loans 8,874 Repayments for short-term loans (28,716) Interest paid (150) Net cash (outflow/)inflow from financing activities (21,643) 32,524 Net decrease in cash and cash equivalents (33,989) (3,084) Cash and cash equivalents at the beginning of the period 34,794 7,401 Cash and cash equivalents at the end of the period 805 4,317 Analysis of the balances of cash and cash equivalents Cash and bank balances 805 4,317 Interim Report

35 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the six months ended 30 June CORPORATE INFORMATION The Company was incorporated on 28 June 2002 as an exempted company with limited liability in the Cayman Islands under the Companies Law, Cap.22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands. Its substantial shareholder is CCM Financial Corporation, a company incorporated in the British Virgin Islands. The shares of the Company were listed on The Stock Exchange of Hong Kong Limited (the Stock Exchange ) with effect from 27 September CCM Financial Corporation The principal activity of the Group is investment in listed and unlisted companies. These condensed consolidated interim financial statements have not been audited. 34 National Investments Fund Limited

36 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES The unaudited condensed consolidated interim financial statements have been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on the Stock Exchange (the Listing Rules ) and Hong Kong Accounting Standard (the HKAS ) 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants (the HKICPA ) The unaudited condensed consolidated interim financial statements are presented in Hong Kong dollars, which is also the functional currency of the Company. All values are rounded to the nearest thousand (HK$ 000) except otherwise indicated. The unaudited condensed consolidated interim financial statements have been prepared under the historical cost basis except for certain financial assets and financial liabilities that are measured at fair value. The unaudited condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements for the year ended 31 December 2017, which has been prepared in accordance with Hong Kong Financial Reporting Standards (the HKFRSs ). Interim Report

37 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES Except for the adoption of new and revised HKFRSs issued by the HKICPA, which are effective for the Group s financial year beginning on 1 January 2018, the significant judgement in applying accounting policies and the key sources of accounting estimates used in the unaudited condensed consolidated interim financial statements are consistent with those applied in the preparation of the Group s consolidated financial statements for the year ended 31 December The application of the new and revised HKFRSs did not have any material impact on how the results and financial positions of the Group for the current or prior accounting periods have been prepared and presented. Accordingly, no prior period adjustment has been required. 2. The Group has not early applied the new and revised HKFRSs that have been issued by the HKICPA but are not yet effective. The Group is in the process of assessing the potential impact of these new and revised HKFRSs upon initial application but is not yet in a position to state whether these new and revised HKFRSs will have a significant impact on the Group s results of operations and financial position. 36 National Investments Fund Limited

38 3. APPLICATION OF NEW AND REVISED HKFRSs In the current period, the Group has applied for the first time, the following new and revised standards, amendments and interpretations ( New HKFRSs ) issued by the HKICPA, which are effective for the Group s financial year beginning on 1 January HKFRS 9 HKFRS 15 Financial Instruments Revenue from Contracts with Customers and the related Amendments 9 15 The adoption of the revised HKFRSs has had no significant financial effect on these interim financial statements and there have been no significant changes to the accounting policies applied in these interim Financial Statements. Based on the Group s financial instruments as at 30 June 2018, the application of HKFRS 9 in the future is not expected to have material impact in the Group s future financial position and performance. 9 The new and amendments to HKFRSs have been applied in accordance with the relevant transition provisions in the respective standards and amendments which results in changes in accounting policies, amounts reported and/or disclosures as described below. Interim Report

39 3. APPLICATION OF NEW AND REVISED HKFRSs 3. (a) Impacts and changes in (a) accounting policies of application 9 of HKFRS 9 Financial Instruments In the current period, the Group has applied HKFRS 9 Financial Instruments and the related 9 consequential amendments to other HKFRSs. HKFRS 9 introduces new requirements for 1) the classification 9 and measurement of financial (1) assets and financial liabilities, 2) expected credit losses ( ECL ) for (2) financial assets and 3) general hedge accounting. (3) The Group has applied HKFRS 9 in accordance with the transition 9 provisions set out in HKFRS 9 i.e. applied the classification 9 and measurement requirements (including impairment) retrospectively to instruments that have not been derecognised as at 1 January 2018 (date of initial application) with the cumulative effect of initial application recognised at the date of initial application and has not applied the requirements to instruments that have already been derecognised as at 1 January National Investments Fund Limited

40 3. APPLICATION OF NEW AND REVISED HKFRSs 3. (a) Impacts and changes in accounting policies of application of HKFRS 9 Financial Instruments (a) 9 Accordingly, certain comparative information may not be comparable as comparative information was prepared under HKAS 39 Financial Instruments: Recognition and Measurement. 39 Key changes in accounting policies resulting from application of HKFRS 9 9 Classification and measurement Trade receivables arising from contracts with customers are initially measured in accordance with HKFRS All recognised financial assets that are within the scope of HKFRS 9 are subsequently measured at amortised cost or fair value, including unquoted equity investments measured at cost less impairment under HKAS Interim Report

41 3. APPLICATION OF NEW AND REVISED HKFRSs 3. (a) Impacts and changes in accounting policies of application of HKFRS 9 Financial Instruments (a) 9 Key changes in accounting policies resulting from application of HKFRS 9 9 Classification and measurement Debt instruments that meet the following conditions are subsequently measured at fair value through other comprehensive income ( FVTOCI ): the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets; and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. 40 National Investments Fund Limited

42 3. APPLICATION OF NEW AND REVISED HKFRSs 3. (a) Impacts and changes in (a) accounting policies of application 9 of HKFRS 9 Financial Instruments Key changes in accounting policies resulting from application of HKFRS 9 9 Classification and measurement All other financial assets are subsequently measured at fair value through profit or loss ( FVTPL ), except that at the date of initial application/initial recognition of a financial asset the Group may irrevocably elect to present subsequent changes in fair value of an equity investment in other 3 comprehensive income ( OCI ) if that equity investment is neither held for trading nor contingent consideration recognised by an acquirer in a business combination to which HKFRS 3 Business Combinations applies. In addition, the Group may irrevocably designate a debt investment that meets the FVTOCI criteria if doing so eliminates or significantly reduces an accounting mismatch. Interim Report

43 3. APPLICATION OF NEW AND REVISED HKFRSs (a) Impacts and changes in accounting policies of application of HKFRS 9 Financial Instruments Key changes in accounting policies resulting from application of HKFRS 9 Classification and measurement Debt instruments classified as at FVTOCI Subsequent changes in the carrying amounts for debt instruments classified as at FVTOCI as a result of interest income calculated using the effective interest method are recognized in profit or loss. All other changes in the carrying amount of these debt instruments are recognised in OCI and accumulated under the heading of revaluation reserve. Impairment allowance are recognised in profit or loss with corresponding adjustment to OCI without reducing the carrying amounts of these debt instruments. The amounts that are recognised in profit or loss are the same as the amounts that would have been recognised in profit or loss if these debt instruments had been measured at amortised cost. When these debt instruments are derecognised, the cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss. 3. (a) National Investments Fund Limited

44 3. APPLICATION OF NEW AND REVISED HKFRSs 3. (a) Impacts and changes in accounting policies of application of HKFRS 9 Financial Instruments (a) 9 Key changes in accounting policies resulting from application of HKFRS 9 9 Classification and measurement Financial assets at FVTPL Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI or designated as FVTOCI are measured at FVTPL. Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognised in profit or loss. The net gain or loss recognised in profit or loss excludes any dividend or interest earned on the financial asset and is included in the revenue line item. Interim Report

45 3. APPLICATION OF NEW AND REVISED HKFRSs 3. (a) Impacts and changes in accounting policies of application of HKFRS 9 Financial Instruments (a) 9 Key changes in accounting policies resulting from application of HKFRS 9 9 Classification and measurement Financial assets at FVTPL The Group s available-for-sale financial assets that are not held for trading and are currently stated at cost less impairment. The Group will make an irrevocable election to present in other comprehensive income the changes in fair value. For other financial assets and financial liabilities, the directors of the Company expect to continue recognize initially at fair value for other financial assets which are subsequently measured at amortised costs. The directors of the Company anticipate that the adoption of HKFRS 9 will not have a material impact on the classification and measurement of the financial assets National Investments Fund Limited

46 3. APPLICATION OF NEW AND REVISED HKFRSs (a) Impacts and changes in accounting policies of application of HKFRS 9 Financial Instruments Key changes in accounting policies resulting from application of HKFRS 9 Impairment under ECL model The Group recognises a loss allowance for ECL on financial assets which are subject to impairment under HKFRS 9 (including other receivables). The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition. Lifetime ECL represents the ECL that will result from all possible default events over the expected life of the relevant instrument. In contrast, 12-month ECL ( 12m ECL ) represents the portion of lifetime ECL that is expected to result from default events that are possible within 12 months after the reporting date. Assessments are made based on the Group s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current conditions at the reporting date as well as the forecast of future conditions. 3. (a) Interim Report