China Fortune Investments : KEY FINDINGS OF INDEPENDENT INVESTIGATION

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(incorporated in the Cayman Islands with limited liability)

(Stock code: 8116)

KEY FINDINGS OF INDEPENDENT INVESTIGATION

Reference is made to the Company's announcements dated 5 October 2018, 16 November 2018, 8 February 2019, 8 May 2019 and 2 August 2019 in relation to, among others, the Group's operation of the P2P online platform and loan facilitation services in China (the "P2P Business") which was acquired by the Group on 28 November 2017. The Company announced on 21 December 2018 the resumption guidance issued by the Stock Exchange to the Company. On 24 January 2019 the Company announced the appointment of Zhonghui Anda Risk Services Limited as independent investigator to investigate into the financial, operational and other affairs of the OPCO and in particular, the matters set out in the Company's announcement dated 16 November 2018.

The Independent Investigator has completed the first stage of investigation in relation to the matters set out in the Company's announcement dated 16 November 2018. The key findings by the Independent Investigator in its investigation and the views of the Investigation Committee are summarised below.

This announcement is made by the Company pursuant to Rule 17.10 of the GEM Listing Rules and Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

KEY FINDINGS OF INVESTIGATION

Background

The key management of OPCO was as follows:

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On 21 July 2018 when payment difficulties happened to OPCO, the Chengdu High-tech Zone Public Security Bureau Industrial Development Branch（成都市公安局高新技術產業開發 區分局）(the "Chengdu Public Security") and Chengdu High-tech Zone Finance Bureau （成都市高新區財政金融局）immediately intervened and conducted the joint investigation work of OPCO. Chengdu High-tech Zone Public Security Bureau Economic Investigation Brigade（成都高新區 公安分局經濟偵查大隊）(the "Economic Investigation Brigade") commenced field investigation of OPCO on 28 October 2018, and then collect different kinds of documents and computer data of OPCO on several occasions in the following days. On 31 October 2018, Chengdu Public Security set up a special team to investigate the case of the OPCO which was suspected of the illegally absorbing public deposits.

In November 2018, the Company set up a working group for OPCO (the "Working Group"), the members included a designated staff, Ms. Pan Xuemei ("Ms. Pan") and the Company's PRC legal advisors, to monitor the daily operation of the OPCO and to investigate and deal with abnormal problems. According to the Working Group, they asked the legal representative and chief executive officer of OPCO, Wei Ning, for the company chop of the OPCO for the purpose of contacting a data storage supplier of the network interface of the OPCO and to extract relevant operating data. In addition, the company chop would be required for the collection of electronic files as well as different kinds of bank documents from the bank of the OPCO. However, such request was postponed and even rejected by Wei Ning many times in December 2018.

On 14 December 2018, the Company issued a circular to all management personnel of OPCO, formally stating that the Working Group had the rights to investigate and make decisions on behalf of the Company to operate OPCO. In addition, Wei Ning was required to actively cooperate with the Working Group. The legal representative chop, company chop and contract chop kept by the administration department staff at that time were asked to be handed over to Ms. Pan. However, Wei Ning refused the requests from the Working Group and the management of the Company. Wei Ning also declared that he refused to hand over the company chop unless he was removed as the legal representative of OPCO. Subsequently, the Working Group heard that Wei Ning had been detained by the Economic Investigation Brigade on 24 December 2018.

When the Independent Investigator started their field investigation in OPCO Chengdu office on 7 January 2019, they found that only a few staff of OPCO were on duty. Wei Ning and Wen Mou, the directors of OPCO, and other management personnel who were responsible for operation did not appear at OPCO's Chengdu office. Only a few staff of OPCO were on duty. The management of the Company and the Working Group could not contact Wei Ning, Wen Mou and other management personnel of OPCO. They believed that those staff who had lost contact might be under arrest. At that time, besides the staffs of OPCO who were still on duty, some people who claimed to be the investors were standing outside the OPCO's Chengdu office.

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Based on the above conditions, the Independent Investigator cannot obtain the requested documents, including statutory registration documents, business operating documents, agreements, accounting general ledgers, other supporting documents, and computer system files, etc. They can only perform their independent investigation based on what they saw at site at the beginning of January 2019, the interviews with staff of OPCO and other relevant persons, the limited documents provided by the Company and the Working Group as well as the documents from third parties and the public search system.

Fei Debt

In the civil mediation letter issued by Sichuan Province Chengdu High-tech Industrial Development Zone People's Court（四川省成都高新技術產業開發區人民法院）(the "Chengdu Court") on 23 August 2018 and related supporting documents, it included a resolution of shareholders' meeting of OPCO on 24 April 2018 which was fabricated by Wei Ning, Wen Mou and Fei Li. The said resolution claimed that 77.27% of the shareholders of the OPCO had agreed to use Room 23B01, 20/F., 2 East Third Ring Road, Chaoyang District, Beijing（北京市朝陽區東三環路丙2號20層23B01房屋）(the "Beijing Property"), Flat H, 22/F, 7 Zizhu Road, Zhuzilin, Futian District, Shenzhen（深圳市福田區竹子林紫竹七路中國 經貿大廈22H) and Flat G, 22/F, 7 Zizhu Road, Zhuzilin, Futian District, Shenzhen（深圳市福田區竹子 林紫竹七路中國經貿大廈22G) (together the "Shenzhen Properties") as the collaterals for borrowing RMB20,000,000 from Mr. Fei Xianping ("Fei Xianping").

On 4 May 2018, Fei Xianping as the lender and OPCO as the borrower entered into a loan agreement ("Fei Loan Agreement") (stamped with official seal and signed by Wei Ning), pursuant to which Fei Xianping agreed to lend OPCO RMB20,000,000, with a term from 4 May 2018 to 3 November 2018 and a loan interest rate of 2% per month (the "Fei Debt"). The Beijing Property and the Shenzhen Properties would be used as collateral. In the event that OPCO failed to repay the loan by the maturity date, it shall pay Fei Xianping 20% of the loan amount as liquidated damages, and overdue interest shall accrue at a rate 4 times the loan interest rate.

According to a letter of authorisation to collect money signed by OPCO on 4 May 2018, OPCO authorized Wen Mou to collect the loan RMB20,000,000 from Fei Xianping on behalf of OPCO.

Subsequently on 19 July 2018, Fei Xianping and the OPCO entered into a supplemental agreement, stating that the borrowing period on the Fei Loan Agreement signed on 4 May 2018 would change from 6 months to 3 months. As the OPCO did not comply with the supplemental agreement to repay the loan after 3 August 2018, Fei Xianping sued OPCO at the Chengdu Court.

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According to the agreement of mediation signed by Fei Xianping and OPCO on 22 August 2018, the parties reached settlement on the following terms: (i) within 3 days from the date of signing for the civil mediation letter issued by the Chengdu Court, the OPCO shall repay Fei Xianping RMB20,000,000 plus 2% interest per month (and the interest will be paid monthly from 15 August 2018 to the actual repayment date). If the OPCO fails to repay the abovementioned amount on time, it will need to pay a compensation fee of RMB250,000 for the Xianping's legal fee; (ii) if the OPCO fails to fulfill its repayment obligations as stated in (i), Fei Xianping has the rights to auction the Beijing Property and the Shenzhen Properties owned by OPCO and Fei Xianping will be given the priority of compensation; and (iii) the legal fee in the case should be borne by OPCO.

According to the accounting records of OPCO from January to September 2018 provided by the Company to the Independent Investigator, no receipt or payment records related to the Fei Debt were found. Since the Independent Investigator was unable to obtain the accounts or supporting documents of OPCO from 1 October 2018 to 31 December 2018, they were unable to ascertain the outstanding amount of the Fei Debt as of 31 December 2018. In addition, according to the finance manager of OPCO and the chief financial officer of the Company, no financial information relating to the receipt and payments of the Fei Debt were found in the accounting records of OPCO. From the interviews with the Company's management, it was known that when the Company's management went to Chengdu during 10-12 October 2018 and met Wei Ning and Fei Li, neither Wei Ning nor Fei Li mentioned about the Fei Debt.

From the interviews with the Company's management, OPCO staff, Working Group, PRC legal advisors and the information from the third parties and the public search system, it was known that as of 5 June 2019, the real estate title certificate of the Beijing Property was held by Fei Xianping, the ownership of this property belonged to OPCO and the property was pledged to Fei Xianping and seized by Chengdu Court. As of 20 May 2019, the two real estate title certificates of the Shenzhen Properties were held by the Company and the ownerships of these properties belonged to OPCO and these properties were pledged to Fei Xianping and seized by Chengdu Court.

Since (i) the RMB20,000,000 of the Fei Debt was directly transferred from Fei Xianping's bank account to Wen Mou's bank account; (ii) the financial documents of the OPCO have been seized by the Economic Investigation Brigade; (iii) the Chengdu Public Security has filed the case for investigation and seized the assets involved in the case according to the law; (iv) the relevant persons including Wei Ning, Wen Mou and Fei Li are said to have been under arrest or being wanted; and (v) the staff of OPCO, the management of the Company and the Independent Investigator cannot contact Fei Xianping for interview and confirmation, the Independent Investigator was unable to verify whether OPCO has repaid full or partial amount of the principal, the interest and the legal fee to Fei Xianping according to the civil mediation letter from 23 August 2018 (the date of issuance of the civil mediation letter) to 31 December 2018.

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According to the available documents, Wei Ning, Wen Mou and Fei Li were aware of the Fei Debt. But the Independent Investigator was unable to contact them and enquire about the background and purpose or cause of such loan as well as the subsequent repayment arrangements to verify the Independent Investigator's findings.

From the interviews with the directors (except the independent non-executive directors who did not take part in the daily operation of the Company), the chief financial officer and finance manager of the Company, none of the directors or management of the Company was involved in or aware of the Fei Debt.

Wei Debt

Ms. Wei Rongrong ("Wei Rongrong") was the legal representative of Sichuan Lijuren Financial Service Outsourcing Co. Ltd.（四川利巨人金融服務外包有限責任公司）("Lijuren") and the major shareholder who held 99% of Lijuren's shares. According to the terms in the loan agreement signed by Wei Rongrong and OPCO on 30 May 2018 (the "Wei Loan Agreement"), Wei Rongrong and OPCO had long-term and familiar cooperative relationship; thus no formal agreements were signed for many borrowings. The parties confirmed the loans and signed the Wei Loan Agreement based on the bank transaction advices or bank records. The major provisions of the Wei Loan Agreement are as follows: (i) up to the date of signing the Wei Loan Agreement, Wei Rongrong had already lent RMB72,000,000 to OPCO from 7 December 2015 to 28 March 2018 with a total of 19 loans; (ii) up to the date of signing of the Wei Loan Agreement, OPCO already repaid RMB9,700,000 to Wei Rongrong, including two repayments of RMB4,850,000 on 25 March 2016; (iii) the loans bear interest at the rate of 4.5% per month from the actual lending date to the date of signing of the Wei Loan Agreement; (iv) both Wei Rongrong and OPCO confirmed that based on the information above the outstanding amount of principal and interest were as the follows: RMB62,300,000 being principal the RMB49,986,246 being interest (the "Wei Debt").

According to the assignment of debt rights dated 1 June 2018 made between Wei Rongrong and Lijuren (the "Debt Assignment"), Wei Rongrong assigned part of her rights under the Wei Loan Agreement to Lijuren. Out of the aggregate principal sum and interest, Wei Rongrong assigned to Lijuren the principal amount of RMB21,000,000 and the corresponding interest amount of RMB7,357,902.

According to the accounting records of OPCO for 2017 and from January to September 2018 provided by the Company to the Independent Investigator, no records relating to the Wei Debt were found. From the interviews with the Company's management, it was known that when the Company's management went to Chengdu during 10-12 October 2018 and met Wei Ning and Fei Li, neither Wei Ning nor Fei Li mentioned about the Wei Debt.

From the interviews with the Company's management, OPCO staff, Working Group, PRC legal advisors and the information from the third parties and the public search system, no collaterals were found in relation to the Wei Debt, in particular collaterals on OPCO's real estate.

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