SHK Hong Kong : 2015 Interim Results Announcement

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

(Incorporated in Hong Kong with limited liability)

(Stock Code: 666)

The Board of Directors (the "Board") of SHK Hong Kong Industries Limited (the "Company") announces the unaudited interim condensed consolidated results of the Company and its subsidiaries (the "Group") for the six months ended 30th June, 2015 as below:

For the six months ended 30th June, 2015

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For the six months ended 30th June, 2015

HK$'000 HK$'000

Profit for the period 146,998 35,797

Change in fair value of available-for-sale financial assets 12,883 5,065
Share of other comprehensive income of joint ventures 21 - Share of other comprehensive income/(expenses)
of an associate 3 (64) Reclassification adjustment for realisation upon redemption/

disposal of available-for-sale financial assets (201) (14,688)

Owners of the Company 159,758 26,820

Non-controlling interests (54) (710)
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As at 30th June, 2015

31st December,
2014

Notes HK$'000 HK$'000

Interests in joint ventures - 519
Interests in associates 2,810 2,673
Amount due from an associate 9,126 9,393
Available-for-sale financial assets 11 201,991 281,956

Trade and other receivables and prepayment 12 31,069 30,981
Amounts due from joint ventures 14,866 38,881
Financial assets at fair value through profit or loss 13 1,123,310 816,467
Security deposits 1,042 461
Cash and cash equivalents 145,553 244,608

Trade and other payables and accrued expenses 14 13,864 12,115
Amount due to a holding company 160 316
Amount due to a fellow subsidiary 6,258 27,045
Financial liabilities at fair value through profit or loss 15 14,301 9,866

Share capital 918,978 918,978
Reserves 575,577 456,936

Non-controlling interests 629 683

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The unaudited interim condensed consolidated financial statements for the six months ended 30th June,

2015 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 of Hong Kong Limited ("Listing Rules") and with the Hong Kong Accounting Standard ("HKAS") 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA").

The unaudited interim condensed consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments, which are stated at fair value, as appropriate.

The accounting policies adopted in the unaudited interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31st December, 2014, except for the adoption of the revised Hong Kong Financial Reporting Standards ("HKFRSs") (which include individual Hong Kong Financial Reporting Standards, HKASs and Interpretations) as disclosed below.

In the current period, the Group has applied for the first time the following revised HKFRSs issued by the HKICPA, which are relevant to and effective for the Group's financial statements for the annual financial period beginning on 1st January, 2015.

HKFRSs (Amendments) Annual Improvements to HKFRSs 2010-2012 Cycle

HKFRSs (Amendments) Annual Improvements to HKFRSs 2011-2013 Cycle

The adoption of these revised HKFRSs has no significant impact on the Group's unaudited interim condensed consolidated financial statements.

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Turnover of the Group is the revenue from the investments in listed and unlisted financial instruments.

Under HKFRS 8, reported segment information is based on internal management reporting information that is regularly reviewed by the Executive Directors. The Executive Directors assess segment profit or loss using a measure of operating profit. The measurement policies the Group used for segment reporting under HKFRS 8 are the same as those used in its HKFRS financial statements.

Based on the regular internal financial information reported to the Group's Executive Directors for their decisions about resources allocation to the Group's business components and review of these components' performance, the Group has identified only one operating segment, financial instrument investments. Accordingly, segment disclosures are not presented.

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HK$'000 HK$'000

Profit before income tax is arrived at after charging:

Management fee 11,127 10,151

Employee benefit expenses (including Directors' emoluments) 1,398 1,323

Impairment on amounts due from joint ventures 24,015 - Impairment on interest in an associate - 1,535

No Hong Kong profits tax has been provided for the six months ended 30th June, 2015 as the estimated assessable profits of the Group were offset by tax losses brought forward.

During the six months ended 30th June, 2014, Hong Kong profits tax had been provided at the rate of

17.5% on the under-estimated assessable profits arising in prior years.

The calculation of basic earnings per share for the six months ended 30th June, 2015 is based on the profit attributable to the owners of the Company of approximately HK$147,053,000 (2014: approximately HK$36,479,000) and on the weighted average number of 4,111,704,320 (2014: 4,111,704,320) ordinary shares in issue during the period.

Diluted earnings per share for the six months ended 30th June, 2015 and 2014 is same as the basic earnings per share as the Group had no dilutive potential ordinary shares during the period.

At a Board meeting held on 20th August, 2015, the Board resolved not to declare an interim dividend for the period (2014: Nil).

HK$'000 HK$'000

Dividend recognised as distribution during the period

- 2014 final dividend of HK1 cent

(2013 final dividend: HK1 cent) per share 41,117 41,117

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31st December,

2014

HK$'000 HK$'000

Non-current

Unlisted equity securities, at fair value 87,133 68,442

Unlisted debt securities, at fair value 49,964 149,746

Debt securities

- Listed in Hong Kong 19,455 20,082

- Listed outside Hong Kong 14,431 12,662

Fair value of listed debt securities 33,886 32,744

Unlisted equity securities, at cost 31,008 31,024

31st December,

2014

HK$'000 HK$'000

Trade receivables (Note a) 9,963 9,419

Other receivables 21,106 21,113

Prepayment - 449

Note a:

There are no specific credit terms granted and the Group allows a credit period up to the settlement dates of their respective transactions. The following is an ageing analysis of the trade receivables, based on the date of contract note, at the reporting date:

31st December,

2014

HK$'000 HK$'000

Within one year 9,963 9,419

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31st December,

2014

HK$'000 HK$'000

Equity securities held for trading

- Listed in Hong Kong 1,057,433 719,433

- Listed outside Hong Kong 65,150 94,812

Market value of listed securities 1,122,583 814,245

Derivative financial instruments

- Warrants listed outside Hong Kong 727 2,222

31st December,

2014

HK$'000 HK$'000

Trade payables 13,000 10,272

Other payables and accrued expenses 864 1,843

The following is an ageing analysis of the trade payables, based on the date of contract note, at the reporting date:

31st December,

2014

HK$'000 HK$'000

Within one year 13,000 10,272

31st December,

2014

HK$'000 HK$'000

Derivative financial instruments

- Call options embedded in bonds and notes, at fair value 12,200 9,368

- Equity forward contracts, at fair value 2,101 498

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The Group's major income for the six months ended 30th June, 2015 (the "2015 Interim Period") comprised mainly profits from disposal of and fair value gain on equities, dividend received and bonds interest income.
The Group recorded a net profit attributable to the owners of the Company of approximately
HK$147.1 million for the 2015 Interim Period (2014: approximately HK$36.5 million).
Amidst an advance of the Hang Seng Index and Hang Seng China Enterprises Index by
11.2% and by 8.3% respectively over the 2015 Interim Period, the Group's net asset value attributable to the owners of the Company increased by 11.6% (after taking into account the HK$41.1 million dividend payment) to HK$1.49 billion at the end of the 2015 Interim Period.

As at 30th June, 2015, the Group's major investments were as follows:

Listed Equities and Warrants HK$1,123.3 million of a portfolio of listed shares and warrants in 38 companies
Fixed Income HK$71.7 million of fixed income instruments issued by four companies listed in Hong Kong and overseas
Investment Funds HK$118.1 million in six investment funds
Indirect Investment in Listed
Equity
HK$14.9 million in one indirect investment in overseas listed equity
Direct Investment in Unlisted
Equities
HK$11.3 million in three direct investments in unlisted equities
Equity Forward Contracts 11 equity forward contracts, the underlying stocks of which include Agricultural Bank of China Limited, AIA Group Limited, Anhui Conch Cement Company Limited, Bank of China Limited, Brilliance China Automotive Holdings Limited, China Shenhua Energy Company Limited, Hong Kong Exchanges and Clearing Limited, Hysan Development Co. Ltd. and Shougang Fushan Resources Group Limited
The Group's portfolio of investments comprised securities in Hong Kong, Taiwan, Malaysia, United States, Japan, Singapore and the People's Republic of China. The value of our portfolio increased in the first half of 2015.
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The Shanghai-Hong Kong Stock Connect and the increased liquidity in China were amongst the catalysts for the Hong Kong stock market in the first half of 2015, causing speculation of liberalization of A-share market in China. The abrupt tightening of liquidity in the equity market in China in July triggered off a collapse of the Hong Kong stock market reversing the profit we made during the first half. On balance, we remain cautiously optimistic about the equity market in Hong Kong in the second half of 2015, and still aiming at another year of profit for 2015.

As at 30th June, 2015, the Group had cash and cash equivalents of approximately HK$145.6 million (at 31st December, 2014: approximately HK$244.6 million) and security deposits of approximately HK$1.0 million (at 31st December, 2014: approximately HK$0.5 million), totalling approximately HK$146.6 million (at 31st December, 2014: approximately HK$245.1 million), investments of approximately HK$1,337.2 million (at 31st December, 2014: approximately HK$1,139.3 million) and no bank borrowings as at 30th June, 2015 and
31st December, 2014. The liquidity position of the Group enables us to respond to further investment opportunities that are expected to generate better returns for the shareholders of the Company. The Group's gearing ratio, calculated by reference to the ratio of total borrowings to total equity attributable to the owners of the Company as at 30th June, 2015, was 0% (at
31st December, 2014: 0%).

As at 30th June, 2015, the majority of the Group's investments was either denominated in Hong Kong dollars or United States dollars. Exposures to foreign currency exchange rates still arise as the Group has certain overseas investments which are primarily denominated in New Taiwan dollars, Renminbi, Malaysian ringgit, Thai baht, Singapore dollars and Japanese yen. The Group at present does not have any contracts to hedge against its foreign exchange risks. Should the Group consider that its exposure to foreign currency risk justifies hedging, the Group may use forward or hedging contracts to reduce the risks.

In view of the market collapse in July and its uncertain outlook, the Board resolved not to declare an interim dividend for the 2015 Interim Period (2014: Nil).

The Company has given guarantees to financial institutions to secure banking facilities available to its wholly-owned subsidiaries in the amount not exceeding HK$140.0 million as at 30th June, 2015 (at 31st December, 2014: HK$140.0 million).

The Group's total staff costs (including Directors' emoluments) for the 2015 Interim Period amounted to approximately HK$1.4 million (2014: approximately HK$1.3 million).
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The Company had an Audit Committee established in accordance with Rule 3.21 of the Listing
Rules.
The Audit Committee has reviewed financial reporting matters including a general review of the unaudited interim condensed consolidated financial statements for the six months ended
30th June, 2015. In carrying out this review, the Audit Committee has relied on a review conducted by the Group's external auditor 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 HKICPA and representations from management. The Audit Committee has not undertaken detailed independent audit checks.

The Company has applied the principles and complied with all the applicable code provisions of the Corporate Governance Code as set out in Appendix 14 to the Listing Rules, during the
2015 Interim Period.

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") set out in Appendix 10 to the Listing Rules as the code of conduct regarding securities transactions by the Directors. Having made specific enquiry of all Directors, the Company confirmed that all Directors have complied with the required standard set out in the Model Code during the 2015 Interim Period.

Neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the
Company's listed securities during the 2015 Interim Period.
By Order of the Board

Company Secretary

Hong Kong, 20th August, 2015

As at the date of this announcement, the composition of the Board is as follows: Mr. Warren Lee Wa Lun (Chairman) and Mr. Mark Wong Tai Chun are Executive Directors; Mr. Arthur George Dew is Non-Executive Director; and Mr. Albert Ho, Mr. Peter Lee Yip Wah and Mr. Louie Chun Kit are Independent Non-Executive Directors.

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