Contents 02 Company Information 06 Financial Highlights 07 Management Discussion and Analysis 20 Consolidated Statement of Comprehensive Income 21 Con

Transcription

1 2017 Interim Report

2 Contents 02 Company Information 06 Financial Highlights 07 Management Discussion and Analysis 20 Consolidated Statement of Comprehensive Income 21 Consolidated Statement of Financial Position 23 Consolidated Statement of Changes in Equity 25 Condensed Consolidated Cash Flow Statement 27 Notes to the Unaudited Interim Financial Report 55 Review report to the board of directors 57 Other Information Interim Report

3 Company Information BOARD OF DIRECTORS Executive Directors Mr. Chan Chart Man Mr. Chan Kai Ho Edward (Chairman and Chief Executive Officer) Ms. Chan Mei Fong Ms. Chan Ying Yu Non-executive Director Mr. Chan Kai Kow Macksion Independent Non-executive Directors Mr. Chan Wing Lee (Resigned and effective from 31 March 2017) Dr. Leung Shiu Ki Albert Dr. Yip Ngai Mr. Lam On Tai (Appointed and effective from 1 April 2017) BOARD COMMITTEES Audit Committee Dr. Yip Ngai(Chairman) Mr. Chan Wing Lee (Resigned and effective from 31 March 2017) Dr. Leung Shiu Ki Albert Mr. Lam On Tai (Appointed and effective from 1 April 2017) Remuneration Committee Mr. Chan Wing Lee (Resigned and effective from 31 March 2017) Mr. Lam On Tai (Chairman) (Appointed and effective from 1 April 2017) Mr. Chan Kai Ho Edward Dr. Leung Shiu Ki Albert 2 Oi Wah Pawnshop Credit Holdings Limited

4 Company Information Nomination Committee Dr. Leung Shiu Ki Albert (Chairman) Mr. Chan Kai Ho Edward Mr. Chan Wing Lee (Resigned and effective from 31 March 2017) Mr. Lam On Tai (Appointed and effective from 1 April 2017) COMPANY SECRETARY Mr. Cheng Yiu Hang HKICPA AUTHORISED REPRESENTATIVES Mr. Chan Kai Ho Edward Ms. Chan Ying Yu REGISTERED OFFICE Clifton House, 75 Fort Street, P.O. Box 1350 Grand Cayman, KY Cayman Islands HEADQUARTERS AND PRINCIPAL PLACE OF BUSINESS IN HONG KONG Rooms Kwan Chart Tower No. 6 Tonnochy Road, Wanchai Hong Kong HKICPA Clifton House, 75 Fort Street, P.O. Box 1350 Grand Cayman, KY Cayman Islands Interim Report

5 Company Information STOCK CODE CAYMAN ISLANDS SHARE REGISTRAR AND TRANSFER OFFICE Estera Trust (Cayman) Ltd. Clifton House, 75 Fort Street P.O. Box 1350 Grand Cayman KY Cayman Islands HONG KONG SHARE REGISTRAR Boardroom Share Registrars (HK) Limited 31/F, 148 Electric Road North Point Hong Kong AUDITORS KPMG LEGAL ADVISERS As to Hong Kong law: Keith Lam Lau & Chan As to Cayman Islands law: Appleby Estera Trust (Cayman) Ltd. Clifton House, 75 Fort Street P.O. Box 1350 Grand Cayman KY Cayman Islands Appleby 4 Oi Wah Pawnshop Credit Holdings Limited

6 Company Information PRINCIPAL BANKERS Wing Lung Bank Limited The Bank of East Asia, Limited Fubon Bank (Hong Kong) Limited Cathay Bank Hong Kong Branch COMPANY WEBSITE Interim Report

7 Financial Highlight FINANCIAL PERFORMANCE Revenue increased by 3.6% to approximately HK$110.5 million Revenue from mortgage loan receivables increased by 6.5% to approximately HK$77.4 million Profit attributable to the equity shareholders increased by 1.2% to approximately HK$54.4 million Net profit margin slightly decreased by 1.2 percentage points to 49.3% Basic earnings per shares is HK$2.5 cents Gross loan receivables slightly decreased by 1.1% to approximately HK$1,280.4 million Gross mortgage loan receivables slightly decreased by 0.9% to approximately HK$1,141.2 million BUSINESS PERFORMANCE Total amount of new pawn loans granted decreased by 7.6% to approximately HK$278.1 million Average amount of new pawn loans granted increased by 1.6% to approximately HK$6,200 Total amount of new mortgage loans granted decreased by 8.9% to approximately HK$432.4 million Net interest margin for pawn loan increased by 0.1 percentage points to 40.6% Net interest margin for mortgage loan decreased by 0.6 percentage points to 10.4% 3.6%110,500, % 77,400, % 54,400, % % 1,280,400, % 1,141,200, % 278,100, % 6, % 432,400, % % 6 Oi Wah Pawnshop Credit Holdings Limited

8 Management Discussion and Analysis BUSINESS REVIEW Oi Wah Pawnshop Credit Holdings Limited (the Company or our Company ), and its subsidiaries (together with the Company collectively referred to as the Group or our Group ) is a financing service provider in Hong Kong operating under the brand name of Oi Wah, principally engaged in providing secured financing, including mortgage loans and pawn loans. MORTGAGE LOAN BUSINESS For the six months ended 31 August 2017 ( FP2018 ), the mortgage loan business remained a major source of income of the Group. During the period, the interest income increased by approximately HK$4.7 million or 6.5% from approximately HK$72.7 million for the six months ended 31 August 2016 ( FP2017 ) to approximately HK$77.4 million in FP2018, which was mainly due to the average month end balance for the gross mortgage loans receivables from March to August increased from approximately HK$1,033.9 million in FP2017 to approximately HK$1,136.7 million in FP2018 with total new mortgage loans granted of approximately HK$432.4 million during FP2018. In FP2018, the Company was committed to improve the mortgage loan portfolio of the Group. During FP2018, the loan-to-value ratio for first mortgage decreased by approximately 2.9% from approximately 51.3% to approximately 48.4%, while the overall loan-to-value ratio for subordinary mortgage decreased by approximately 2.0% from approximately 56.0% 72,700,000 4,700, % 77,400,000 1,033,900,000 1,136,700, ,400, % 2.9% 48.4% Interim Report

9 Management Discussion and Analysis to approximately 54.0%, of which, loan-to-value ratio of subordinate mortgage that the Group participated in increased by approximately 1.3% from approximately 18.8% to approximately 20.1%. Furthermore, the management are doing their best to attract high quality customers during FP2018, resulting in a substantial improvement in minimising the occurrence of overdue issues. The mortgage loan receivables that were past due for one month or more decreased from approximately HK$48.9 million as at 28 February 2017 (which is approximately 4.25% of the mortgage loan portfolio of the Group) to approximately HK$10.5 million as at 31 August 2017 (which is approximately 0.92% of the mortgage loan portfolio of the Group), representing a decrease of approximately HK$38.4 million or 78.5%. PAWN LOAN BUSINESS During FP2018, pawn loan business remains steady and revenue from that reached HK$33.1 million, with HK$30.0 million interest income from pawn loan receivables and HK$3.1 million from gain on disposal. Average loan amount reached approximately HK$6,200 per transaction (FP2017: HK$6,100 per transaction) with the aggregate new loan amount slightly decreased by 7.8% to HK$278.1 million (FP2017: HK$300.9 million). During the period, the luxurious market has seen a rebound and the Group is confident of the demand for the pawn loan business. The Group will continue to channel resources to advertising and promotion to enhance the Group s brand awareness. 56.0% 2.0% 54.0% 18.8% 1.3% 20.1% 48,900, % 38,400, % 10,500, % 33,100,000 30,000,000 3,100,000 6,200 6, % 278,100, ,900,000 8 Oi Wah Pawnshop Credit Holdings Limited

10 Management Discussion and Analysis INDUSTRY OVERVIEW In FP2018, the demand and prices of luxurious goods have seen a rebound, especially gold and high-end watches. It is believed that luxurious market has bottomed and the Group is optimistic about the demand for the pawn loan business. During the period, the local first-hand property market remains active despite the government s close monitoring on irrational purchases. Meanwhile, developers continue to launch new projects throughout the period which keeps pushing property values up. However, transaction volume of the second-hand market is relatively low. Given the increasing risk of overheating in the market, the Directors are of the view that the Hong Kong property market remains unpredictable. The Group will continue to implement a prudent strategy and to maintain its focus on high net worth customers and remain cautious when granting mortgage loans. In addition, the implementation of more stringent conditions for Money Lenders Ordinance to combat the rise in illegal loans since the end of 2016 has enhanced the competition of the industry. Currently, small and medium-sized finance companies, which rely heavily on intermediaries referral in the past, offer lower interest to attract customers, affecting overall interest rate level of the industry. Being one of the few listed financial institutions in Hong Kong, it is believed that the Group will be more competitive in capturing the opportunity to expand its market share in the industry. Interim Report

11 Management Discussion and Analysis FINANCIAL REVIEW Revenue Our Group s revenue increased from approximately HK$106.6 million in FP2017 to approximately HK$110.5 million in FP2018, representing an increase of approximately HK$3.9 million or 3.6%. The increase was mainly attributable to an increase in our interest income from mortgage business by approximately HK$4.7 million or 6.5% from approximately HK$72.7 million in FP2017 to approximately HK$77.4 million in FP2018, which was mainly due to the continuous expansion of our mortgage loan portfolio in FP2018. The average month end balance for the gross mortgage loans receivables from March to August increased from approximately HK$1,033.9 million in FP2017 to approximately HK$1,136.7 million in FP2018 with total new mortgage loans granted of approximately HK$432.4 million during FP2018. Our pawn loan business remained stable during FP2018. Revenue from our pawn loan business slightly decreased by approximately HK$0.8 million or 2.4% from approximately HK$33.9 million in FP2017 to approximately HK$33.1 million in FP2018. The decrease was attributable to the decrease in our interest income earned on our loan receivables by approximately HK$1.6 million or 5.1% from approximately HK$31.6 million in FP2017 to approximately HK$30.0 million in FP2018 and the increase in gain on disposal of repossessed assets by approximately HK$0.8 million or 106,600,000 3,900, % 110,500,000 72,700,000 4,700, % 77,400,000 1,033,900,000 1,136,700, ,400,000 33,900, , % 33,100,000 31,600,000 1,600, % 30,000, Oi Wah Pawnshop Credit Holdings Limited

12 Management Discussion and Analysis 34.8% from approximately HK$2.3 million in FP2017 to approximately HK$3.1 million in FP2018. The decrease in our interest income earned on our pawn loan receivables was primarily attributable to a slight decrease in the aggregated amount of total new pawn loans granted from approximately HK$300.9 million in FP2017 to approximately HK$278.1 million in FP2018; and offset by the increase in the average amount of pawn loans granted from approximately HK$6,100 per transaction in FP2017 to approximately HK$6,200 per transaction in FP2018. Revenue from disposal of repossessed assets represents the gain/(loss) we received as we sold the repossessed assets in the event of default in repayment of our pawn loans. The increase in our gain on disposal of repossessed assets in FP2018 was mainly due to (i) the rebound in the second-hand market in branded watches; and (ii) the increase in gold price per ounce from approximately US$1,200 in February 2017 to US$1,300 in July Since every pawn loan has a loan term of four lunar months, the revenue increased with the appreciation of gold price and branded watches in FP2018 and thus a better result in gain on disposal of repossessed assets was recorded in FP2018. Other revenue Other revenue increased from approximately HK$1.8 million in FP2017 to approximately HK$1.9 million in FP2018, representing an increase of approximately HK$0.1 million or 2,300, , % 3,100, ,900, ,100,000 6,100 6,200 (i) (ii) 1,200 1,300 1,800, , % 1,900,000 Interim Report

13 Management Discussion and Analysis 5.6%, which was mainly due to the increase in our credit-related fee income by approximately HK$0.3 million representing early repayment fees and handling charges from our mortgage loan customers. Operating expenses Operating expenses slightly increased by approximately HK$0.7 million or 2.5% from approximately HK$28.0 million in FP2017 to approximately HK$28.7 million in FP2018. Staff costs remained relatively stable during FP2018 and slightly increased by approximately HK$0.1 million or 0.9% from approximately HK$10.9 million in FP2017 to approximately HK$11.0 million in FP2018. No significant change is noted during FP2018. Rental expenses increased by approximately HK$0.2 million or 3.4% from approximately HK$5.9 million in FP2017 to approximately HK$6.1 million in FP2018. The increase was mainly due to the effect of the increase in the rental expenses under the terms in the rental agreements for several pawnshops during FP2018. Excluding the staff costs and rental expenses of approximately HK$16.8 million and HK$17.1 million in FP2017 and FP2018 respectively as mentioned above, other operating expenses increased by approximately HK$0.4 million or 3.6% from approximately HK$11.2 million in FP2017 to approximately HK$11.6 million in FP2018, which was mainly due to the increase in advertising expenses and legal and professional fee by approximately HK$ ,000 28,000, , % 28,700,000 10,900, , % 11,000,000 5,900, , % 6,100,000 16,800,000 17,100,000 11,200, , % 11,600, Oi Wah Pawnshop Credit Holdings Limited

14 Management Discussion and Analysis million and HK$0.1 million respectively, offset by the decrease of commission fee paid by approximately HK$0.5 million. Finance costs The finance costs increased by approximately HK$2.6 million or 16.4% from approximately HK$15.9 million in FP2017 to approximately HK$18.5 million in FP2018 after netting off with the decrease in other loans by approximately HK$34.8 million in FP2018. The increase was mainly due to the increase in bank loans and overdrafts and debt securities issued in FP2018 for funding our mortgage loan portfolios. Credited to impairment losses on loan receivables The impairment losses on loan receivables released to profit or loss in FP2018 of approximately HK$141,000 was attributable to the net effect of (i) the subsequent reassessment on the recoverability of previously impaired loan receivables that were individually assessed being charged to profit or loss of approximately HK$8,000; and (ii) the impairment losses on loan receivables that were collectively assessed being released to profit or loss of approximately HK$149,000. In FP2017, the impairment losses on loan receivables released to profit or loss in FP2017 of approximately HK$36,000 was attributable to the net effect of (i) the subsequent reassessment on the recoverability of previously impaired loan receivables that were individually assessed being released to profit or loss of approximately HK$4,000; and 600, , ,000 34,800,000 15,900,000 2,600, % 18,500, ,000 (i) 8,000 (ii) 149,000 36,000 (i) Interim Report

15 Management Discussion and Analysis (ii) the impairment losses on loan receivables that were collectively assessed being released to profit or loss of approximately HK$32,000. Income tax expenses Our Group s effective tax rate was approximately 16.5% in FP2017 and FP2018. No material change is noted. Profit and total comprehensive income for the period Our Group s profit for FP2018 increased to approximately HK$54.4 million from approximately HK$53.8 million in FP2017, representing an increase of approximately HK$0.6 million or 1.2%. The increase was mainly attributable to the increase in revenue amounting to approximately HK$3.9 million, netting off with the increase in rental expenses, advertising expenses and finance costs amounting to HK$0.2 million, HK$0.6 million and HK$2.6 million respectively. LIQUIDITY AND FINANCIAL RESOURCES As at 31 August 2017, cash and cash equivalents, after netting off with the bank overdraft, amounted to approximately HK$64.8 million, representing a net increase of approximately HK$22.1 million as compared to the position as at 28 February For FP2018, net cash inflow from operating activities of our Group amounted to approximately HK$77.4 million. It is mainly due to the cash inflow from the revenue amounting to approximately HK$83.9 million 4,000 (ii) 32, % 53,800, , % 54,400, , ,000 2,600,000 3,900,000 64,800,000 22,100,000 77,400,000 83,900, Oi Wah Pawnshop Credit Holdings Limited

16 Management Discussion and Analysis during FP2018. The net cash outflow from financing activities of our Group amounted to approximately HK$34.7 million for FP2018 which was mainly the dividend paid and repayments from other loans and loans from ultimate holding company during FP2018 amounting to approximately HK$14.8 million, HK$34.9 million and HK$22.0 million respectively, offset by proceeds for bank loans and proceeds from debt securities which amounted to approximately HK$44.1 million and HK$14.9 million respectively. Pledge of assets At 31 August 2017, the Group had pledged its mortgage loan receivables with net book value of HK$454.5 million (28 February 2017: HK$446.5 million) for the purpose of obtaining facilities from an independent third party and a bank. Contingent liabilities There were no significant contingent liabilities for the Group as at 31 August KEY FINANCIAL RATIOS 34,700,000 14,800,000 34,900,000 22,000,000 44,100,000 14,900, ,500, ,500,000 As at 31 August 2017 As at 28 February 2017 Current ratio (1) (1) 3x 3x Gearing ratio (2) (2) 77.3% 80.8% Interim Report

17 Management Discussion and Analysis For the six months ended 31 August 2017 For the six months ended 31 August 2016 Return on total (3) assets (3) 7.8% 8.3% Return on equity (4) (4) 14.1% 15.3% Net profit margin (5) (5) 49.3% 50.5% Net interest margin (6) (6) 13.8% 14.9% pawn loan services 40.6% 40.5% mortgage loan services 10.4% 11.0% Notes: (1) Current ratio is calculated by dividing current assets by current liabilities as at the respective period/year end. (2) Gearing ratio is calculated by dividing total borrowings (summation of bank loans, bank overdrafts, loans from ultimate holding company, obligations under finance leases, other loans and debt securities issued) by total equity as at the respective period/year end. (3) Return on total assets is calculated by dividing annualised profit for the period by the total assets as at the respective period end. (4) Return on equity is calculated by dividing annualised profit for the period by the total equity as at the respective period end. (1) (2) (3) (4) 16 Oi Wah Pawnshop Credit Holdings Limited

18 Management Discussion and Analysis (5) Net profit margin is calculated by dividing profit for the period by the revenue for the respective period. (6) Net interest margin during the period refers to our interest income in respect of our pawn loans and mortgage loan less our finance costs, divided by the average of monthend gross loan receivables balances of the corresponding loans during the period. (5) (6) Current ratio Our Group s current ratio remained stable at approximately 3 times as at 28 February 2017 and 31 August 2017, which was mainly due to the decrease in current loan receivables from approximately HK$1,202.2 million as at 28 February 2017 to approximately HK$1,186.6 million as at 31 August 2017 or by approximately 1.3%, offset by the decrease in other loans amounting to HK$34.9 million. Gearing ratio Our Group s gearing ratio slightly decreased from at approximately 80.8% as at 28 February 2017 to approximately 77.3% as at 31 August 2017, which was mainly due to the decrease in other loans and loans from ultimate holding company amounting to approximately HK$34.9 million and HK$22.0 million respectively, offset by the increase in bank loans and overdrafts amounted to approximately HK$43.7 million. 3 1,202,200, % 1,186,600,000 34,900, % 77.3% 34,900,000 22,000,000 43,700,000 Interim Report

19 Management Discussion and Analysis Return on total assets and return on equity Our return on total assets and return on total equity slightly decreased from approximately 8.3% and 15.3% in FP2017 to 7.8% and 14.1% in FP2018 respectively, which was mainly due to the decrease in net interest margin from 14.9% in FP2017 to 13.8% in FP2018. Net profit margin There was a slight decrease in our net profit margin from approximately 50.5% in FP2017 to 49.3% in FP2018. The reason for the decrease was mainly due to the decrease in net interest margin of our mortgage loan services as a result of obtaining more mortgage loans with lower loan-to-value ratio during FP2018, which led to relatively lower interest rates charged as compared to those in FP2017. Net interest margin The net interest margin decreased from approximately 14.9% in FP2017 to approximately 13.8% in FP2018 since a greater proportion of our revenue was earned from mortgage loan business in FP2018, from which we generally charged comparatively lower interest rate than that charged for our pawn loans. For FP2017 and FP2018, revenue from mortgage loan business contributed approximately 68.2% and 70.1% to our total revenue respectively, resulted from the expansion of our mortgage loan business during FP % 15.3% 7.8% 14.1% 14.9% 13.8% 50.5% 49.3% 14.9% 13.8% 68.2% 70.1% 18 Oi Wah Pawnshop Credit Holdings Limited

20 Management Discussion and Analysis PROSPECTS In FP2018, the Group adopted a cautious and prudent approach when granting loans by increasing the proportion of first mortgage loans in the Group s portfolio and maintaining its focus on high net worth customers, in order to remain a healthy risk level. Looking forward, with the potential impact of the Fed s balance sheet reduction and further US rate hikes, as well as housing policies outlined in The Chief Executive s 2017 Policy Address, such as the Starter Homes scheme, increase supply of units under the Green Form Subsidised Home Ownership Scheme (GSH) and the Interim Scheme of Extending the Home Ownership Scheme (HOS), the Group is of the view that the Hong Kong property market remains unpredictable. Meanwhile, the Directors are aware that peers are actively diversifying their lending business such as granting private loans and providing online money lending services. However, in response to the uncertainties of the local property market and the global economy, the Group will maintain its focus on secured loans to ensure effective risk management. In regard to the pawn loan business, the Board is of the view that luxurious goods market has bottomed and that its pawn loan business will remain stable. The Group will actively diversify its collaterals to other luxurious items, such as automobiles and yachts, and will continue to broaden its customer base. Interim Report

21 Consolidated Statement of Comprehensive Income for the six months ended 31 August 2017 unaudited (Expressed in Hong Kong dollars) Six months ended 31 August Note $ 000 $ 000 Revenue 5 110, ,597 Other revenue 6 1,942 1,757 Operating income 112, ,354 Operating expenses (28,799) (28,008) Release of impairment losses on loan receivables 7(b) Profit from operations 83,756 80,382 Finance costs 7(a) (18,543) (15,943) Profit before taxation 65,213 64,439 Income tax 8 (10,778) (10,647) Profit and total comprehensive income for the period 54,435 53,792 Profit and total comprehensive income for the period attributable to shareholders 54,435 53,792 Earnings per share (in HK cents) The notes on pages 27 to 54 form part of this interim financial report Oi Wah Pawnshop Credit Holdings Limited

22 Consolidated Statement of Financial Position as at 31 August 2017 unaudited (Expressed in Hong Kong dollars) 31 August February 2017 Note $ 000 $ 000 Non-current assets Property, plant and equipment 1,002 1,268 Loan receivables 10 92,637 90,709 Trade and other receivables 11 2,805 2,458 Deferred tax assets ,662 94,665 Current assets Repossessed assets 7,404 8,081 Loan receivables 10 1,186,579 1,202,165 Trade and other receivables 11 33,054 32,182 Cash and cash equivalents 12 69,791 27,450 1,296,828 1,269,878 Current liabilities Accruals and other payables 14 8,103 6,780 Bank loans and overdrafts 13 81,387 37,667 Obligations under finance leases Loans from ultimate holding company 15 91, ,500 Current taxation 12,822 22,533 Other loans , , , ,334 Interim Report

23 Consolidated Statement of Financial Position as at 31 August 2017 unaudited (Expressed in Hong Kong dollars) 31 August February 2017 Note $ 000 $ 000 Net current assets 829, ,544 Total assets less current liabilities 925, ,209 Non-current liabilities Debt securities issued , ,476 Obligations under finance leases , ,773 NET ASSETS 774, ,436 CAPITAL AND RESERVES 18 Capital 21,278 21,376 Reserves 752, ,060 TOTAL EQUITY 774, ,436 The notes on pages 27 to 54 form part of this interim financial report Oi Wah Pawnshop Credit Holdings Limited

24 Consolidated Statement of Changes in Equity for the six months ended 31 August 2017 unaudited (Expressed in Hong Kong dollars) Paid-in capital/ share capital Share premium Capital reserve Capital redemption reserve Other reserve Retained profits Total Note $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 At 1 March , ,137 44,963 12, , ,594 Change in equity for the six months ended 31 August 2016 Profit and total comprehensive income Dividends approved in respect of the previous year Special dividends with scrip dividend option approved in respect of the previous year 53,792 53,792 18(b)(ii) (13,780) (13,780) 18(c) 176 (1,538) (1,362) At 31 August , ,819 44,963 12, , ,244 At 1 September , ,819 44,963 12, , ,244 Change in equity for the six months ended 28 February 2017 Profit and total comprehensive income Interim dividends approved in respect of the current year At 28 February ,438 49,438 18(b)(i) (16,246) (16,246) 21, ,573 44,963 12, , ,436 Interim Report

25 Consolidated Statement of Changes in Equity for the six months ended 31 August 2017 unaudited (Expressed in Hong Kong dollars) Paid-in capital/ share capital Share premium Capital reserve Capital redemption reserve Other reserve Retained profits Total Note $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 At 1 March , ,573 44,963 12, , ,436 Change in equity for the six months ended 31 August 2017 Profit and total comprehensive income Dividends approved in respect of the previous year 54,435 54,435 18(b)(ii) (14,750) (14,750) Purchase of own shares 18(d) (98) (4,050) 98 (4,050) At 31 August , ,773 44, , , ,071 The notes on pages 27 to 54 form part of this interim financial report Oi Wah Pawnshop Credit Holdings Limited

26 Condensed Consolidated Cash Flow Statement for the six months ended 31 August 2017 unaudited (Expressed in Hong Kong dollars) Six months ended 31 August Note $ 000 $ 000 Operating activities Operating profit before changes in working capital Decrease/(increase) in loan receivables Other cash flows generated from operations 83,890 80,351 13,799 (174,195) 232 1,753 Cash generated from/ (used in) operations 97,921 (92,091) Hong Kong Profits Tax paid (20,476) (3,964) Net cash generated from/(used in) operating activities 77,445 (96,055) Investing activities Payment for the purchase of property, plant and equipment Other cash flows generated from investing activities (8) (268) 1 1 Net cash used in investing activities (7) (267) Financing activities (Decrease)/increase in loans from the ultimate holding company (22,000) 25,000 Interim Report

27 Condensed Consolidated Cash Flow Statement for the six months ended 31 August 2017 unaudited (Expressed in Hong Kong dollars) Six months ended 31 August Note $ 000 $ 000 Proceeds from debt securities issued, net of issuing expenses 14,925 4,975 Finance costs paid (17,940) (15,892) (Repayments for)/proceeds from other loans (34,888) 142,910 Proceeds from/ (repayments for) bank loans 44,096 (55,684) Dividends paid (14,750) (15,142) Payments for purchase of own shares (4,050) Other cash flows used in financing activities (114) (114) Net cash (used in)/ generated from financing activities (34,721) 86,053 Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of period 42,717 (10,269) 22,040 48,985 Cash and cash equivalents at the end of period 12 64,757 38,716 The notes on pages 27 to 54 form part of this interim financial report Oi Wah Pawnshop Credit Holdings Limited

28 notes to the unaudited interim Financial Report (Expressed in Hong Kong dollars unless otherwise indicated) 1 GeneRAL information Oi Wah Pawnshop Credit Holdings Limited (the Company ) was incorporated in the Cayman Islands and is listed on the Main Board of the Stock Exchange of Hong Kong Limited (the Stock exchange ). The Company and its subsidiaries (together referred to as the Group ) are principally engaged in secured financing business in Hong Kong, including pawn loans and mortgage loans. 2 BASiS of PRePARAtion This interim financial report has been prepared in accordance with the applicable disclosure provisions of the Rules Governing the Listing of Securities on the Stock Exchange, including compliance with Hong Kong Accounting Standard ( HKAS ) 34, Interim financial reporting, issued by the Hong Kong Institute of Certified Public Accountants ( HKiCPA ). It was authorised for issue on 30 October The interim financial report has been prepared in accordance with the same accounting policies adopted in the year ended 28 February 2017 annual financial statements, except for the accounting policy changes that are expected to be reflected in the year ending 28 February 2018 annual financial statements. Details of any changes in accounting policies are set out in note Interim Report

29 notes to the unaudited interim Financial Report (Expressed in Hong Kong dollars unless otherwise indicated) 2 BASiS of PRePARAtion (Continued) The preparation of an interim financial report in conformity with HKAS 34 requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses on a year to date basis. Actual results may differ from these estimates. The interim financial report contains condensed consolidated financial statements and selected explanatory notes. The notes include an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the year ended 28 February 2017 annual financial statements. The condensed consolidated interim financial statements and notes thereon do not include all of the information required for full set of financial statements prepared in accordance with Hong Kong Financial Reporting Standards ( HKFRSs ). The interim financial report for the period ended 31 August 2017 is unaudited, but has been reviewed by KPMG in accordance with Hong Kong Standard on Review Engagements 2410, Review of interim financial information performed by the independent auditor of the entity, issued by the HKICPA. KPMG s independent review report to the Board of Directors is included on page 55 and Oi Wah Pawnshop Credit Holdings Limited

30 notes to the unaudited interim Financial Report (Expressed in Hong Kong dollars unless otherwise indicated) 2 BASiS of PRePARAtion (Continued) The financial information relating to the financial year ended 28 February 2017 that is included in the interim financial report as comparative information does not constitute the Company s statutory annual consolidated financial statements for that financial year but is derived from those financial statements. Statutory financial statements for the year ended 28 February 2017 are available from the Company s registered office. The Company s auditor have expressed an unqualified opinion on those financial statements in their report dated 25 May CHAnGeS in ACCountinG PoLiCieS The HKICPA has issued several amendments to HKFRSs that are first effective for the current accounting period of the group. None of these developments has had a material effect on how the group s results and financial position for the current or prior periods have been prepared or presented in this interim financial report. The group has not applied any new standard or interpretation that is not yet effective for the current accounting period. 4 SeGMent RePoRtinG The Group has one reportable segment, which is the provision of secured financing business in Hong Kong, including pawn loans and mortgage loans. Therefore, no additional reportable segment and geographical information has been presented Interim Report

31 notes to the unaudited interim Financial Report (Expressed in Hong Kong dollars unless otherwise indicated) 5 ReVenue The principal activities of the Group are the granting of pawn loans and mortgage loans in Hong Kong. Revenue represents interest income earned on pawn loans and mortgage loans and gain on disposal of repossessed assets. The amount of each significant category of revenue recognised during the period is as follows: 5 Six months ended 31 August $ 000 $ 000 Revenue from pawn loan business Interest earned on loan receivables Gain on disposal of repossessed assets 29,940 31,542 3,135 2,304 Total revenue from pawn loan business Revenue from mortgage loan business Interest earned on loan receivables 33,075 33,846 77,397 72,751 Total 110, , Oi Wah Pawnshop Credit Holdings Limited

32 notes to the unaudited interim Financial Report (Expressed in Hong Kong dollars unless otherwise indicated) 5 ReVenue (Continued) Cost of repossessed assets disposed for the six months ended 31 August 2017 amounted to $22.2 million (six months ended 31 August 2016: $27.8 million). The Group s customer base is diversified and includes two customers (six months ended 31 August 2016: one customer) with whom transactions have exceeded 10% of the Group s revenues. During the six months ended 31 August 2017, revenues from interest earned on mortgage loan receivables from the two customers (six months ended 31 August 2016: one customer), including interest earned from entities which are known to the Group to be under common control with these customers, amounted to approximately $20.0 million and $12.3 million respectively (six months ended 31 August 2016: $15.3 million). 5 22,200,000 27,800,000 10% 20,000,000 12,300,000 15,300,000 Interim Report

33 notes to the unaudited interim Financial Report (Expressed in Hong Kong dollars unless otherwise indicated) 6 other ReVenue 6 Six months ended 31 August $ 000 $ 000 Rental income Interest earned on unsecured loans Credit related fee income Bank interest income 1 1 Others ,942 1,757 7 PRoFit BeFoRe taxation Profit before taxation is arrived at after charging/(crediting): 7 Six months ended 31 August $ 000 $ 000 (a) Finance costs (a) Finance charges on obligations under finance leases 8 11 Interest on loans from ultimate holding company 2,600 2,941 Interest on bank loans and overdrafts 1, Interest on other loans 9,927 8,279 Interest on debt securities issued 4,617 3,953 18,543 15, Oi Wah Pawnshop Credit Holdings Limited

34 notes to the unaudited interim Financial Report (Expressed in Hong Kong dollars unless otherwise indicated) 7 PRoFit BeFoRe taxation (Continued) 7 Six months ended 31 August $ 000 $ 000 (b) other items (b) Depreciation Release of impairment losses on loan receivables (141) (36) Staff costs 11,015 10,930 Premises and equipment expenses excluding depreciation 6,091 5,861 Advertising expenses 6,095 5,500 Auditor s remuneration Legal and professional fees 1,361 1,236 Others 3,412 3,669 28,658 27,972 Interim Report

35 notes to the unaudited interim Financial Report (Expressed in Hong Kong dollars unless otherwise indicated) 8 income tax in the ConSoLidAted StAteMent of CoMPReHenSiVe income taxation in the consolidated statement of comprehensive income represents: 8 Six months ended 31 August $ 000 $ 000 Current tax Hong Kong Profits Tax 10,766 10,592 Deferred taxation ,778 10,647 Pursuant to the rules and regulations of the Cayman Islands and the British Virgin Islands, the Group is not subject to any income tax in the Cayman Islands and the British Virgin Islands. The provision for Hong Kong Profits Tax is calculated by applying the estimated annual effective tax rate of 16.5% (six months ended 31 August 2016: 16.5%) to the estimated assessable profits for the six months ended 31 August % 16.5% 34 Oi Wah Pawnshop Credit Holdings Limited

36 notes to the unaudited interim Financial Report (Expressed in Hong Kong dollars unless otherwise indicated) 9 earnings PeR SHARe Basic earnings per share The calculation of basic earnings per share is based on the profit attributable to the equity shareholders of the Company of $54.4 million (six months ended 31 August 2016: $53.8 million) and the weighted average of 2,136.8 million ordinary shares (six months ended 31 August 2016: 2,120.1 million ordinary shares) in issue during the interim period. Weighted average number of ordinary shares 9 54,400,000 53,800,000 2,136,800,000 2,120,100, August August Issued ordinary shares at 1 March Effect of scrip dividend issued (note 18(c)) Effect of purchase of own shares (note 18(d)) 2,137,624 2,120,000 18(c) 96 18(d) (776) Weighted average number of ordinary shares at 31 August 2,136,848 2,120,096 No dilutive earnings per share is presented as there was no potential dilutive ordinary shares in issue during both periods. Interim Report

37 notes to the unaudited interim Financial Report (Expressed in Hong Kong dollars unless otherwise indicated) 10 LoAn ReCeiVABLeS August February 2017 $ 000 $ 000 Pawn loans 139, ,140 Mortgage loans 1,141,203 1,151,053 Gross loan receivables 1,280,394 1,294,193 Less: Impairment allowance (note 10(a)) Individually assessed Collectively assessed 10(a) (1,034) (1,025) (144) (294) (1,178) (1,319) Net loan receivables 1,279,216 1,292,874 Current portion included under current assets (1,186,579) (1,202,165) Amounts due after one year included under non-current assets 92,637 90, Oi Wah Pawnshop Credit Holdings Limited

38 notes to the unaudited interim Financial Report (Expressed in Hong Kong dollars unless otherwise indicated) 10 LoAn ReCeiVABLeS (Continued) (a) 10 Movement in impairment losses (a) Six months ended 31 August individual Collective total Individual Collective Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 At 1 March 1, , Impairment losses charged/ (released) to profit or loss 9 (150) (141) (4) (32) (36) At 31 August 1, , (b) Ageing analysis Ageing analysis is prepared based on contractual due date. (b) Pawn loans Mortgage loans total $ 000 $ 000 $ August 2017 Neither past due nor impaired 134,216 1,083,849 1,218,065 Less than 1 month past due 1 4,477 46,854 51,331 1 to less than 3 months past due ,000 4,498 3 to less than 6 months past due months to 1 year past due 6 1 Over 1 year past due 1 6,500 6, ,191 1,141,203 1,280, February 2017 Neither past due nor impaired 136,378 1,065,246 1,201,624 Less than 1 month past due 1 6,081 36,873 42,954 1 to less than 3 months past due ,934 18,535 3 to less than 6 months past due months to 1 year past due ,000 10,000 Over 1 year past due 1 21,000 21, ,140 1,151,053 1,294,193 Interim Report

39 notes to the unaudited interim Financial Report (Expressed in Hong Kong dollars unless otherwise indicated) 10 LoAn ReCeiVABLeS (Continued) (b) Ageing analysis (Continued) Of these mortgage loans which have been past due for one month or above, except for one mortgage loan amounted to $1.5 million which an individually assessed impairment loss had been recognised, the respective valuations of the collateral can fully cover the outstanding balances and the related interest receivables (see note 11(b)) of these loans as at 31 August In respect of the mortgage loans which have been past due for less than one month, the amounts mainly represent occasional delay in repayment and are not an indication of significant deterioration of credit quality of these mortgage loans. 10 (b) 1,500,000 11(b) 38 Oi Wah Pawnshop Credit Holdings Limited

40 notes to the unaudited interim Financial Report (Expressed in Hong Kong dollars unless otherwise indicated) 11 trade And other ReCeiVABLeS August February 2017 $ 000 $ 000 Trade receivables 147 1,055 Interest receivables 18,921 21,959 19,068 23,014 Deposits and payments in advance 16,689 11,524 Others ,859 34,640 Non-current portion of deposits and payments in advance included under non-current assets (2,805) (2,458) Amounts due within one year included under current assets 33,054 32,182 Trade receivables are due within 60 days from the date of billing. All of the trade and other receivables are not impaired and expected to be recovered within one year, except for prepayment amounting to $2.8 million (28 February 2017: $2.5 million) that is expected to be recovered over one year. 60 2,800,000 2,500,000 Interim Report

41 notes to the unaudited interim Financial Report (Expressed in Hong Kong dollars unless otherwise indicated) 11 trade And other ReCeiVABLeS (Continued) (a) Ageing analysis of trade receivables The ageing analysis of trade receivables that are neither individually nor collectively considered to be impaired is as follows: 11 (a) 31 August February 2017 $ 000 $ 000 Neither past due nor impaired Less than 1 month past due 1 to less than 3 months past due 3 to less than 6 months past due 147 1, ,055 Receivables that were neither past due nor impaired relate to a wide range of customers for whom there was no recent history of default. 40 Oi Wah Pawnshop Credit Holdings Limited

42 notes to the unaudited interim Financial Report (Expressed in Hong Kong dollars unless otherwise indicated) 11 trade And other ReCeiVABLeS (Continued) (b) Ageing analysis of interest receivable The ageing analysis of interest receivables that are neither individually nor collectively considered to be impaired is as follows: 11 (b) Pawn loans Mortgage loans total $ 000 $ 000 $ August 2017 Neither past due nor impaired 9,398 6,020 15,418 Less than 1 month past due ,025 1 to less than 3 months past due to less than 6 months past due months to 1 year past due 6 1 Over 1 year past due 1 2,200 2,200 9,960 8,961 18, February 2017 Neither past due nor impaired 9,415 4,899 14,314 Less than 1 month past due ,058 1 to less than 3 months past due to less than 6 months past due months to 1 year past due 6 1 2,127 2,127 Over 1 year past due 1 3,988 3,988 10,108 11,851 21,959 Interim Report

43 notes to the unaudited interim Financial Report (Expressed in Hong Kong dollars unless otherwise indicated) 12 CASH And CASH equivalents Cash and cash equivalents comprise: August 28 February $ 000 $ 000 Cash in hand 5,080 4,884 Cash at banks 64,711 22,566 Cash and cash equivalents in the consolidated statements of financial position 69,791 27,450 Bank overdrafts (note 13) 13 (5,034) (5,410) Cash and cash equivalents in the consolidated cash flow statements 64,757 22, Oi Wah Pawnshop Credit Holdings Limited

44 notes to the unaudited interim Financial Report (Expressed in Hong Kong dollars unless otherwise indicated) 13 BAnK LoAnS And overdrafts The details of the bank loans and overdrafts were as follows: August February 2017 $ 000 $ 000 Unsecured bank overdrafts (note 13(a)) 13(a) 5,034 5,410 Bank loans, secured (note 13(b)) Bank loans, unsecured (note 13(c)) 13(b) 47,000 15,200 13(c) 29,353 17,057 76,353 32,257 Total bank loans and overdrafts repayable within 1 year or on demand 1 81,387 37,667 (a) At 31 August 2017, unsecured bank overdraft facilities of $11.5 million (28 February 2017: $11.5 million) were provided to the subsidiaries and utilised to the extent as disclosed above. (a) 11,500,000 11,500,000 Interim Report

45 notes to the unaudited interim Financial Report (Expressed in Hong Kong dollars unless otherwise indicated) 13 BAnK LoAnS And overdrafts (Continued) (b) At 31 August 2017, uncommitted secured revolving bank loan facilities of the lower of $50 million (28 February 2017: $50 million) and a certain percentage of the aggregate principal amount of the mortgage loan receivables of a subsidiary which are then charged to the bank were obtained. The tenor for the facilities ranged from one month, two months, three months or six months as selected by the subsidiary. As at 31 August 2017, the available uncommitted banking facilities after taking into consideration of the drawdown was approximately $3 million (28 February 2017: $12.7 million). These uncommitted secured revolving bank loan facilities were secured by loan receivables with a carrying value of approximately $112.3 million (28 February 2017: $55.7 million). 13 (b) 50,000,000 50,000,000 3,000,000 12,700, ,300,000 55,700,000 (c) At 31 August 2017, unsecured bank loan facilities of $49.4 million (28 February 2017: $17.1 million) were provided to the subsidiaries and utilised to the extent as disclosed above. (c) 49,400,000 17,100, During the period, the Group had fulfilled all the financial covenants, if any, under the Group s banking facilities and all banking facilities were guaranteed by the Company. Oi Wah Pawnshop Credit Holdings Limited

46 notes to the unaudited interim Financial Report (Expressed in Hong Kong dollars unless otherwise indicated) 14 ACCRuALS And other PAYABLeS August February 2017 $ $ Accrued interest expense 3,643 3,096 Accrued expenses 3,221 2,109 Provision for long services payment Other payable and deposits received ,103 6,780 All of the accruals and other payables are expected to be settled or recognised as income within one year or are repayable on demand. 15 LoAnS FRoM ultimate HoLdinG CoMPAnY The loans from ultimate holding company are unsecured, interest bearing at Prime Rate less 0.25% (currently 5%) per annum and repayable within one year % 5% Interim Report

47 notes to the unaudited interim Financial Report (Expressed in Hong Kong dollars unless otherwise indicated) 16 other LoAnS The Group obtained uncommitted secured revolving loan facilities from an independent third party. The limit of the facilities is the lower of $458.6 million (28 February 2017: $400 million) and a certain percentage of the aggregate principal amount of the mortgage loan receivables of the subsidiaries which are then sub-charged/sub-mortgaged to the independent third party. The tenor for these facilities are one year. As at 31 August 2017, the available uncommitted loan facilities after taking into consideration of the drawdown was approximately $Nil (28 February 2017: $Nil). These uncommitted secured revolving loan facilities were secured by mortgage loan receivables for the Group with carrying value of $342.2 million (28 February 2017: $390.8 million). 17 debt SeCuRitieS issued The debt securities are unsecured, denominated in HKD, interest-bearing at 6% per annum with interest coupon being paid semi-annually and will be matured in between 2021 and All debt securities issued are measured at amortised cost ,600, ,000, ,200, ,800, % 46 Oi Wah Pawnshop Credit Holdings Limited

48 notes to the unaudited interim Financial Report (Expressed in Hong Kong dollars unless otherwise indicated) 18 CAPitAL, ReSeRVeS And dividends (a) Share Capital 18 (a) Note Par value no of shares nominal value of ordinary shares $ 000 $ 000 Authorised: At 29 February/31 August 2016 and 28 February/ 31 August ,000,000 1,000,000 issued and fully paid: At 1 March ,120,000 21,200 Scrip dividend issued 18(c) 17, At 31 August 2016 and 28 February ,137,624 21,376 At 1 March ,137,624 21,376 Purchase of own shares 18(d) 0.01 (9,784) (98) At 31 August ,127,840 21,278 Interim Report

49 notes to the unaudited interim Financial Report (Expressed in Hong Kong dollars unless otherwise indicated) 18 CAPitAL, ReSeRVeS And dividends (Continued) (b) dividends (i) Dividend payable to equity shareholders of the Company attributable to the six months ended 31 August 2017: 18 (b) (i) Six months ended 31 August $ 000 $ 000 Interim dividend declared after the interim period of $0.78 cents per ordinary share (2016: $0.76 cents per ordinary share) ,501 16, Oi Wah Pawnshop Credit Holdings Limited

50 notes to the unaudited interim Financial Report (Expressed in Hong Kong dollars unless otherwise indicated) 18 CAPitAL, ReSeRVeS And dividends (Continued) (b) dividends (ii) Dividends payable to equity shareholders of the Company attributable to the previous financial year, approved and paid during the interim period: 18 (b) (ii) Final dividend in respect of the previous financial year, approved and paid during the following interim period, of $0.69 cents per ordinary share (Six months ended 31 August 2016: $0.65 cents per ordinary share) Six months ended 31 August $ 000 $ ,750 13,780 Special dividend with scrip dividend option in respect of the previous financial year, approved and paid during the following interim period, of $Nil per ordinary share (Six months ended 31 August 2016: $0.43 per ordinary share) ,116 Interim Report