King Fook : Interim Report for the six months ended 30th September, 2019

Contents

2 Management Commentary

11 Report on Review of Interim Financial Information

1. Condensed Consolidated Statement of Profit or Loss and   Other Comprehensive Income
2. Condensed Consolidated Statement of Financial Position
3. Condensed Consolidated Statement of Changes in Equity
4. Condensed Consolidated Statement of Cash Flows
5. Notes to the Unaudited Interim Condensed Consolidated Financial Statements

Management Commentary

The Board of Directors (the "Board") of King Fook Holdings Limited (the "Company") presents their report together with the unaudited interim condensed consolidated financial statements of the Company and its subsidiaries (collectively referred to as the "Group") for the six months ended 30 September 2019. The condensed consolidated statement of profit or loss and other comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cash flows of the Group for the six months ended 30 September 2019, and the condensed consolidated statement of financial position as at 30 September 2019 of the Group, all of which are unaudited, along with selected explanatory notes, are set out on pages 13 to 52 of this report.

INTERIM DIVIDEND

The Board of the Company has resolved not to declare an interim dividend for the year ending 31 March 2020 (for the year ended 31 March 2019: Nil) to shareholders.

MANAGEMENT DISCUSSION AND ANALYSIS

Group Results Overview

The Group is principally engaged in gold ornament, jewellery, watch and gift retailing, bullion trading and diamond wholesaling. More than 90% of the Group's revenue is derived from activities in Hong Kong.

For the six months ended 30 September 2019, the Group recorded total revenue of HK$322.0 million, representing an increase of HK$57.7 million or 21.8% from HK$264.3 million for the last corresponding period. The Group has made a turnaround and recorded an unaudited consolidated profit attributable to owners of the Company of HK$2.4 million for such period as compared to an attributable consolidated loss of HK$5.0 million for the same period last year. Such improvement was primarily due to an increase in revenue in the retail business of the Group during such period.

2 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Management Commentary (Continued)

MANAGEMENT DISCUSSION AND ANALYSIS (Continued)

Business Review

The Group operated six retail shops in Hong Kong as at 30 September 2019. Both of the Group's revenue and gross profit achieved a double-digit growth during such period.

The revenue of the Group's retailing business for the six months ended

30 September 2019 increased by HK$57.5 million or 21.9% to HK$320.0 million from HK$262.5 million for the same period last year. Such increase was mainly attributable to growth in sales to high end local customers. Same store sales growth was 28.0% as compared to the same period last year. The gross profit of the Group also rose to HK$82.1 million as compared to HK$71.9 million for the last correspondent period although there was a slight drop in gross profit percentage from 27.2% to 25.5% mainly as a result of the change in product mix. The turnaround to profit was mainly due to the improved productivity of sales staff with enhanced training provided by the Group and continued growth of sales to local high end customers.

Outlook

Looking forward, the Group considers the global economy and retail environment would remain uncertain as a result of the trade disputes between China and the United States and the recent local social unrest. Despite the complex macroeconomic environment and local social issues are expected to continue to impact consumer sentiment negatively, the Group has confidence to face the challenges. The Group is cautiously optimistic that the demand for luxury watches and jewellery will continue. Therefore, following the opening of a new shop in Harbour City, Kowloon in November 2019, the Group will continue to explore opportunities to expand its retail network. Furthermore, the Group will keep on investing in staff development, digital marketing and creative product designs to better serve our customers.

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED

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Management Commentary (Continued)

MANAGEMENT DISCUSSION AND ANALYSIS (Continued)

Outlook (Continued)

Besides measures to enhance sales performance, the Group will take steps to improve operation efficiency, including rental negotiation, inventory management and cost control.

Financial Review

Liquidity and Financial Resources

As at 30 September 2019, the Group's current assets and current liabilities were approximately HK$686.0 million and HK$107.2 million respectively. There were cash and cash equivalents of approximately HK$180.0 million, gold loan of approximately HK$29.4 million, and no bank loan as at that date.

Based on the total borrowings of the Group of approximately HK$29.4 million and the equity attributable to owners of the Company of approximately HK$632.5 million as at 30 September 2019, the overall borrowings to equity ratio was 4.6%, which was at a healthy level.

Exposure to Fluctuation in Foreign Exchange Rates

The Group reviews its foreign currency exposure regularly and does not consider its foreign currency risk to be significant. No financial instrument had been used for hedging during the six months ended 30 September 2019.

Charge on Assets

As at 30 September 2019, there was no charge on the Group's assets.

4 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Management Commentary (Continued)

MANAGEMENT DISCUSSION AND ANALYSIS (Continued)

Financial Review (Continued)

Capital Expenditure

During the period, the Group had incurred capital expenditures of approximately HK$240,000, including the costs of leasehold improvement, and furniture and equipment.

Capital Commitments and Contingent Liabilities

As at 30 September 2019, there was capital commitments of approximately HK$1.0 million relating to leasehold improvements and no contingent liabilities or off-balance sheet obligation.

EMPLOYEES AND REMUNERATION POLICY

As at 30 September 2019, the Group had about 130 employees. The employees (including directors) are remunerated according to the nature of their jobs, experience and contribution to the Group. The Group has an incentive bonus scheme to reward employees based on their performance. It also provides training programs to employees to improve the standard of customer services and for their further advancement.

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED

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Management Commentary (Continued)

DISCLOSURE OF INTERESTS

At 30 September 2019, the interests of the directors of the Company in the share capital of the Company as recorded in the register maintained by the Company under section 352 of the Securities and Futures Ordinance (the "SFO") or as otherwise notified to the Company and The Stock Exchange of Hong Kong Limited (the "Stock Exchange") pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") set out in appendix 10 to the Rules Governing the Listing of Securities on the Stock Exchange (the "Listing Rules") were as follows:

			Number of ordinary shares held			Percentage of
	Personal		Family	Corporate	Trust	Total	shareholding
Mr. Tang Yat Sun, Richard	7,528,500		Nil	#31,571,400	Nil	39,099,900	4.28%
Mr. Ho Hau Hay, Hamilton	Nil		Nil	*6,657,000	Nil	6,657,000	0.73%
Dr. Fung Yuk Bun, Patrick	Nil		Nil	Nil	^5,856,517	5,856,517	0.64%

• These shares were held by Daily Moon Investments Limited ("Daily Moon"). As Mr. Tang has a 100% interest in Daily Moon, he is deemed to be interested in all these shares held by Daily Moon.

• These shares were held by Tak Hung (Holding) Co. Ltd. ("Tak Hung"). As Mr. Ho has a 40% interest in Tak Hung, he is deemed to be interested in all these shares held by Tak Hung.

• These shares were ultimately held by Federal Trust Co. Ltd. as trustee of The Ng Yip Shing Trust, under which Dr. Fung is a beneficiary. Dr. Fung is deemed to be interested in all these shares held by The Ng Yip Shing Trust.

Save as disclosed above, at 30 September 2019, none of the directors or chief executive of the Company had any interests or short positions in the shares or underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required 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.

6 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Management Commentary (Continued)

SUBSTANTIAL SHAREHOLDER

At 30 September 2019, the following person (other than a director or chief executive of the Company) had interest in shares of the Company as recorded in the register of substantial shareholders required to be kept by the Company under section 336 of the SFO:

		Number of
		ordinary	Nature of	Percentage of
Name of shareholder		shares held	interest	shareholding
Yeung Chi Shing Estates
Limited	554,624,457	Note	60.70%

Note: 541,688,415 shares were beneficially owned by Yeung Chi Shing Estates Limited while 12,936,042 shares were of its corporate interest.

Save as disclosed above, at 30 September 2019, according to the register of interests required to be kept by the Company under section 336 of the SFO, there was no person who had any interest or short position in the shares or underlying shares of the Company.

PURCHASE, SALE OR REDEMPTION OF SHARES

Neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company's shares during the six months ended 30 September 2019.

MODEL CODE

The Company has adopted a code of conduct regarding directors' securities transactions on the terms of the Model Code. Having made specific enquiry of all the directors of the Company, all of them had complied with the required standard set out in the Model Code regarding directors' securities transactions throughout the six months ended 30 September 2019.

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED

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Management Commentary (Continued)

CORPORATE GOVERNANCE PRACTICES

The Company had complied with all the code provisions of the Corporate Governance Code (the "Code") set out in appendix 14 to the Listing Rules throughout the six months ended 30 September 2019 except the deviations as explained below:

Code provision A.4.1

In respect of code provision A.4.1 of the Code, the non-executive directors of the Company were not appointed for a specific term, but each of them is subject to retirement by rotation at annual general meeting of the Company at least once every 3 years in accordance with the Articles of Association of the Company. The retiring directors shall be eligible for re-election.

Code provisions A.5.1 to A.5.4

In respect of code provisions A.5.1 to A.5.4 of the Code, the Company has not established a nomination committee. In view of the current structure of the Board of the Company and the business operations of the Group, the Board of the Company believes that it is not necessary to establish a nomination committee as it considers that all directors of the Company should be involved in performing the duties set out in such code provisions.

Code provision D.1.4

As far as code provision D.1.4 of the Code is concerned, the Company does not have formal letters of appointment for directors setting out the key terms and conditions of their appointment. The Board of the Company decides on the key terms and conditions of the appointment of the directors of the Company from time to time which are recorded in the relevant board minutes.

8 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Management Commentary (Continued)

CORPORATE GOVERNANCE PRACTICES (Continued)

Code provision E.1.5

In respect of code provision E.1.5 of the Code, the Company does not have a dividend policy or any pre-determined dividend distribution ratio. The Board of the Company will decide on the declaration/recommendation of any future dividends after taking into consideration a number of factors, including the prevailing market conditions, the Company's operating results, business plans and prospects, financial position and working capital requirements, and other factors that the Board of the Company considers relevant.

REVIEW BY AUDITOR AND AUDIT COMMITTEE

The unaudited interim condensed consolidated financial statements for the six months ended 30 September 2019 set out on pages 13 to 52 have been reviewed by BDO Limited, the auditor of the Company, in accordance with Hong Kong Standard on Review Engagements 2410 issued by the Hong Kong Institute of Certified Public Accountants.

The audit committee of the Company has reviewed with the management of the Group the accounting policies and practices adopted by the Group, its system of risk management and internal control and financial reporting matters and these unaudited interim condensed consolidated financial statements for the six months ended 30 September 2019.

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED

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Management Commentary (Continued)

DISCLOSURE UNDER SECTION 436 OF THE HONG KONG COMPANIES ORDINANCE

The financial information of the Group relating to the year ended 31 March 2019 included in this report as comparative information does not constitute the Company's statutory annual consolidated financial statements for that year but is derived from those financial statements. Further information relating to these statutory financial statements required to be disclosed in accordance with section 436 of the Hong Kong Companies Ordinance is as follows:

The Company has delivered the financial statements for the year ended 31 March 2019 to the Registrar of Companies as required by section 662(3) of, and Part 3 of Schedule 6 to, the Hong Kong Companies Ordinance.

The Company's auditor has reported on those financial statements. The auditor's report was unqualified; did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report; and did not contain a statement under sections 406(2), 407(2) or 407(3) of the Hong Kong Companies Ordinance.

10 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Report on Review of Interim Financial Information

TO THE BOARD OF DIRECTORS OF KING FOOK HOLDINGS LIMITED (incorporated in Hong Kong with limited liability)

Introduction

We have reviewed the interim condensed consolidated financial statements set out on pages 13 to 52 which comprise the condensed consolidated statement of financial position of King Fook Holdings Limited and its subsidiaries (collectively referred to as the "Group") as of 30 September 2019 and the related condensed consolidated statement of profit or loss and other comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cash flows for the six-month period then ended, and a summary of significant accounting policies and other explanatory notes (the "interim condensed consolidated financial statements"). The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 "Interim Financial Reporting" ("HKAS 34") issued by the Hong Kong Institute of Certified Public Accountants (the "HKICPA"). The directors are responsible for the preparation and presentation of the interim condensed consolidated financial statements in accordance with HKAS 34.

Our responsibility is to express a conclusion on the interim condensed consolidated financial statements based on our review. This report is made solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED 11

Report on Review of Interim Financial Information (Continued)

Scope of Review

We conducted our review 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. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim condensed consolidated financial statements are not prepared, in all material respects, in accordance with HKAS 34.

BDO Limited

Certified Public Accountants

Leung Tze Wai

Practising Certificate Number P06158

Hong Kong, 22 November 2019

12 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the six months ended 30 September 2019

		Unaudited
		Six months ended
		30 September
		2019			2018
	Note	HK$'000	HK$'000
Revenue	6	321,971			264,347
Cost of sales		(239,871)		(192,456)
Gross profit		82,100			71,891
Other operating income		2,797			1,655
Distribution and selling costs		(56,613)		(55,516)
Administrative expenses		(20,229)		(20,841)
Other operating expenses		(3,656)		(707)
Operating profit/(loss)		4,399			(3,518)
Finance costs	7	(2,025)		(1,434)
Profit/(loss) before taxation	8	2,374			(4,952)
Taxation	10	-	-
Profit/(loss) for the period		2,374			(4,952)
Other comprehensive income
Item that may be reclassified subsequently to
profit or loss:
Exchange differences on translation of foreign		(514)
operations			(911)
Item that will not be reclassified to profit or
loss:
Change in fair value of investments at fair value		431
through other comprehensive income				46
Other comprehensive income for the period		(83)		(865)
Total comprehensive income for the period		2,291			(5,817)
Profit/(loss) for the period attributable to:
	2,371
- Owners of the Company				(4,955)
- Non-controlling interests		3			3
		2,374			(4,952)
Total comprehensive income for the period
attributable to:		2,288
- Owners of the Company				(5,820)
- Non-controlling interests		3			3
		2,291			(5,817)
Earnings/(loss) per share	12	HK cents	HK cents
0.3
- Basic and diluted				(0.5)

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED 13

Condensed Consolidated Statement of Financial Position

As at 30 September 2019

		Unaudited	Audited
		As at	As at
		30 September	31 March
		2019		2019
	Note	HK$'000	HK$'000
ASSETS AND LIABILITIES
Non-current assets	13	2,819
Property, plant and equipment		3,167
Right-of-use assets	14	70,398		-
Investment properties		513		529
Investments at fair value through other	15	3,267
comprehensive income		2,836
Other asset	16	356		356
Deposits	17	5,979		-
		83,332		6,888
Current assets		469,597
Inventories			477,738
Debtors, deposits and prepayments	17	36,134		41,078
Investments at fair value through profit or loss	18	265		316
Cash and cash equivalents		179,959		161,958
		685,955		681,090
Total assets		769,287		687,978
Current liabilities	19	29,330
Creditors, deposits received and other payables		31,788
Gold loan		29,403		22,494
Lease liabilities	20	48,508		-
		107,241		54,282
Net current assets		578,714		626,808
Total assets less current liabilities		662,046		633,696
Non-current liabilities		83
Provision for long service payments			53
Lease liabilities	20	29,420		-
		29,503		53
Net assets		632,543		633,643
CAPITAL AND RESERVES
21	393,354
Share capital		393,354
Other reserves		37,131		37,214
Retained profits		202,055		203,075
Equity attributable to owners of the Company		632,540		633,643
Non-controlling interests		3		-
Total equity		632,543		633,643

14 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 September 2019

													Non-
													controlling
			Equity attributable to owners of the Company			interests		Total
							Investments at
							fair value
							through other
	Share		Capital		Exchange	comprehensive		Retained
	capital		reserve		reserve	income reserve		profits	Total
	HK$'000		HK$'000		HK$'000	HK$'000		HK$'000	HK$'000	HK$'000		HK$'000
Unaudited
For the six months ended
30 September 2019
At 31 March 2019 as originally	393,354	24,753	10,074		2,387	203,075		633,643		-	633,643
presented
Change in accounting policy (note 3)	-		-		-	-	(3,391)	(3,391)	-	(3,391)
At 1 April 2019	393,354	24,753	10,074		2,387	199,684		630,252		-	630,252
Profit for the period	-		-		-	-	2,371		2,371		3	2,374
Other comprehensive income:
Exchange differences on translation	-		-	(514)	-		-	(514)	-	(514)
of foreign operations
Change in fair value of investments
at fair value through other	-		-		-	431		-	431		-	431
comprehensive income
Other comprehensive income
-		-	(514)	431		-	(83)	-	(83)
for the period
Total comprehensive income
-		-	(514)	431	2,371		2,288		3	2,291
for the period
At 30 September 2019	393,354	24,753	9,560		2,818	202,055		632,540		3	632,543
Unaudited
For the six months ended
30 September 2018
At 31 March 2018 as originally
presented	393,354	24,753	10,751		-	202,336		631,194		103	631,297
Change in accounting policy
- HKFRS 9 and HKFRS 15	-		-		-	2,148	(28)	2,120		-	2,120
At 1 April 2018	393,354	24,753	10,751		2,148	202,308		633,314		103	633,417
(Loss)/profit for the period	-		-		-	-	(4,955)	(4,955)	3	(4,952)
Other comprehensive income:
Exchange differences on translation
of foreign operations	-		-	(911)	-		-	(911)	-	(911)
Change in fair value of investments
at fair value through other
comprehensive income	-		-		-	46		-	46		-	46
Other comprehensive income
for the period	-		-	(911)	46		-	(865)	-	(865)
Total comprehensive income
for the period	-		-	(911)	46	(4,955)	(5,820)	3	(5,817)
At 30 September 2018	393,354	24,753	9,840		2,194	197,353		627,494		106	627,600

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED 15

Condensed Consolidated Statement of Cash Flows

For the six months ended 30 September 2019

		Unaudited
		Six months ended
		30 September
		2019			2018
	Note	HK$'000	HK$'000
CASH FLOWS FROM OPERATING ACTIVITIES	22(a)	31,487
Operating profit/(loss) before working capital changes			(985)
Decrease in inventories		11,493			26,497
Decrease/(increase) in debtors, deposits and		782
prepayments				(10,607)
(Decrease)/increase in creditors, deposits received and		(1,762)
other payables			3,837
Dividends received from investments at fair value		7
through profit or loss				109
Change in investments at fair value through		8
profit or loss				851
Interest received		1,350			783
Net cash generated from operating activities		43,365			20,485
CASH FLOWS FROM INVESTING ACTIVITIES
Deposits paid on purchase of property, plant and		(1,670)
equipment			-
Dividends received from investments at fair value		109
through other comprehensive income				-
Purchase of property, plant and equipment		(240)		(7)
Net cash used in investing activities		(1,801)		(7)
CASH FLOWS FROM FINANCING ACTIVITIES	22(b)	(25,150)
Payment of principal element of lease liabilities			-
Payment of interest element of lease liabilities		(1,569)		-
Interest paid on bank and gold loans		(386)		(1,776)
Proceeds from bank and gold loans		3,597			10,000
Repayment of bank loans		-	(53,000)
Net cash used in financing activities		(23,508)		(44,776)
NET INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS		18,056			(24,298)
Cash and cash equivalents at the beginning		161,958
of the period				199,582
Effect of foreign exchange rates changes, net		(55)		(48)
CASH AND CASH EQUIVALENTS AT THE END
OF THE PERIOD		179,959			175,236
ANALYSIS OF THE BALANCE OF CASH AND
CASH EQUIVALENTS		37,536
Cash and bank balances				29,298
Short term bank deposits with maturity within		142,423
three months				145,938
		179,959			175,236

16 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

For the six months ended 30 September 2019

1. GENERAL INFORMATION AND BASIS OF PREPARATION

King Fook Holdings Limited (the "Company") is a limited liability company incorporated and domiciled in Hong Kong. Its registered office is located at 9th Floor, King Fook Building, 30-32 Des Voeux Road Central, Hong Kong and its principal place of business is in Hong Kong. The Company's shares are listed on the Main Board of The Stock Exchange of Hong Kong Limited (the "Stock Exchange"). The directors of the Company consider the ultimate holding company to be Yeung Chi Shing Estates Limited ("Yeung Chi Shing"), a company incorporated in Hong Kong.

The principal activities of the Company and its subsidiaries (collectively referred to as the "Group") are gold ornament, jewellery, watch and gift retailing, bullion trading and diamond wholesaling.

These unaudited interim condensed consolidated financial statements for the six months ended 30 September 2019 have been prepared in accordance with Hong Kong Accounting Standard ("HKAS") 34, Interim Financial Reporting, issued by the Hong Kong Institute of Certified Public Accountants (the "HKICPA") and the applicable disclosure provisions of the Rules Governing the Listing of Securities on the Stock Exchange. They have been prepared with the same accounting policies adopted in the Group's annual consolidated financial statements for the year ended 31 March 2019 (the "2019 Annual Financial Statements"), except for those that relate to new standards or interpretations effective for the first time for periods beginning on or after 1 April 2019. This is the first set of the Group's financial statements in which Hong Kong Financial Reporting Standard ("HKFRS") 16, Leases, has been adopted. Details of any changes in accounting policies are set out in note 3. Except for the adoption of HKFRS 16, the adoption of the new and revised HKFRSs have no material effect on these unaudited interim condensed consolidated financial statements. The Group has not early adopted any new and revised HKFRSs that has been issued but not yet effective in the current accounting period.

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED 17

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

1. GENERAL INFORMATION AND BASIS OF PREPARATION (Continued)

The preparation of unaudited interim condensed consolidated financial statements in compliance with HKAS 34 requires the use of certain judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses on a year to date basis. Actual results may differ from these estimates. The areas where significant judgements and estimates have been made in preparing these unaudited interim condensed consolidated financial statements and their effect are disclosed in note 4.

These unaudited interim condensed consolidated financial statements are presented in Hong Kong Dollars ("HK$"), unless otherwise stated. These unaudited interim condensed consolidated financial statements contain 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 2019 Annual Financial Statements. These unaudited interim condensed consolidated financial statements and notes do not include all of the information required for a complete set of financial statements prepared in accordance with HKFRSs and should be read in conjunction with the 2019 Annual Financial Statements.

These interim condensed consolidated financial statements are unaudited, but have been reviewed by BDO Limited 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. BDO Limited's report on review of interim financial information to the Board of Directors (the "Board") is included on pages 11 to 12.

18 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

2. ADOPTION OF NEW AND REVISED HKFRSs

In the current period, the Group has applied for the first time the following new and revised HKFRSs issued by the HKICPA, which are relevant to and effective for the Group's consolidated financial statements for the annual period beginning on 1 April 2019:

Amendments to HKAS 28 Long-term Interests in Associates and

	Joint Ventures
Amendments to HKFRS 9	Prepayment Features with Negative
	Compensation
Annual Improvements to	Amendments to HKFRS 3 Business
HKFRSs 2015-2017 Cycle	Combinations, HKFRS 11 Joint
	Arrangements, HKAS 12 Income Taxes
	and HKAS 23 Borrowing Costs
HKFRS 16	Leases

HK (IFRIC) - Interpretation 23 Uncertainty over Income Tax Treatments

Save as disclosed in the changes in accounting policies for HKFRS 16 in note 3, the adoption of these new and revised HKFRSs has no significant impact on these unaudited interim condensed consolidated financial statements. The Group has not applied any new and revised HKFRSs that is not yet effective for the current accounting period.

3. SUMMARY OF THE IMPACT OF CHANGES IN ACCOUNTING POLICY

1. Impact of the adoption of HKFRS 16
   Except as described below, the accounting policies applied in these unaudited interim condensed consolidated financial statements are the same as those applied in the last annual financial statements.
   The changes in accounting policies are also expected to be reflected in the Group's consolidated financial statements as at and for the year ending 31 March 2020.
   The Group has initially adopted HKFRS 16 from 1 April 2019. A number of other new standards are effective from 1 April 2019 but they do not have a material effect on the Group's accounting policies.

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED 19

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

3. SUMMARY OF THE IMPACT OF CHANGES IN ACCOUNTING POLICY (Continued)

1. Impact of the adoption of HKFRS 16 (Continued)
   HKFRS 16 introduced a single, on-balance sheet accounting model for lessees. As a result, the Group, as a lessee, has recognised right- of-use assets representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease payments. Lessor accounting remains similar to previous accounting policies.
   The Group has applied HKFRS 16 using the modified retrospective approach, under which the cumulative effect of initially applying HKFRS 16 as an adjustment to the opening balance of retained profits at the date of initial application. The comparative information presented has not been restated and continues to be reported under HKAS 17, Leases, and related interpretations as allowed by the transition provision in HKFRS 16.
   The following table summarised the impact of transition to HKFRS 16 on consolidated statement of financial position as of 31 March 2019 to that of 1 April 2019 as follows (increase/(decrease)):
   Condensed consolidated statement of financial position as at 1 April 2019

	HK$'000
Right-of-use assets	64,515
Lease liabilities (non-current)	19,865
Lease liabilities (current)	48,240
Other payables and accruals	(199)
Retained profits	(3,391)

20 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

3. SUMMARY OF THE IMPACT OF CHANGES IN ACCOUNTING POLICY (Continued)

1. Impact of the adoption of HKFRS 16 (Continued)
   The following reconciliation explains how the operating lease commitments disclosed applying HKAS 17 as at 31 March 2019 could be reconciled to the lease liabilities at the date of initial application recognised in the unaudited condensed consolidated statement of financial position as at 1 April 2019:
   Reconciliation of operating lease commitments to lease liabilities

		HK$'000
Operating lease commitments as of 31 March 2019	74,304
Less: Commitments relating to leases exempt from
capitalisation:
- short term leases with less than 12 months
of lease term at transition	(4,529)
		69,775
Less: Total future interest charges	(1,670)
Total lease liabilities as of 1 April 2019	68,105

The weighted average lessee's incremental borrowing rate of 5% was applied to lease liabilities recognised in the unaudited condensed consolidated statement of financial position as at 1 April 2019.

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED 21

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

3. SUMMARY OF THE IMPACT OF CHANGES IN ACCOUNTING POLICY (Continued)

1. Impact of the adoption of HKFRS 16 (Continued)
   The analysis of the net book value of the Group's right-of-use assets by class of underlying asset at the end of the reporting period and at the date of transition to HKFRS 16 is as follows:

	Unaudited	Unaudited
	As at	As at
	30 September	1 April
	2019		2019
	HK$'000	HK$'000
Properties	69,250		64,370
Furniture and fixtures	1,148		145
	70,398		64,515

1. The new definition of a lease
   Under HKFRS 16, a lease is defined as a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. A contract conveys the right to control the use of an identified asset for a period of time when the customer, throughout the period of use, has both: (a) the right to obtain substantially all of the economic benefits from use of the identified asset and (b) the right to direct the use of the identified asset.

22 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

3. SUMMARY OF THE IMPACT OF CHANGES IN ACCOUNTING POLICY (Continued)

1. The new definition of a lease (Continued)
   For a contract that contains a lease component and one or more additional lease or non-lease components, a lessee shall allocate the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components, unless the lessee shall apply the practical expedient which allows the lessee to elect, by class of underlying asset, not to separate non-lease components from lease components, and instead account for each lease component and any associated non-lease components as a single lease component.
2. Accounting as a lessee
   Under HKAS 17, a lessee has to classify a lease as an operating lease or a finance lease based on the extent to which risks and rewards incidental to ownership of a lease asset lie with the lessor or the lessee. If a lease is determined as an operating lease, the lessee would recognise the lease payments under the operating lease as an expense over the lease term. The asset under the lease would not be recognised in the statement of financial position of the lessee.
   Under HKFRS 16, all leases (irrespective of they are operating leases or finance leases) are required to be capitalised in the statement of financial position as right-of-use assets and lease liabilities, but HKFRS 16 provides accounting policy choices for an entity to choose not to capitalise leases which are short term leases. The Group has elected not to recognise right-of-use assets and lease liabilities for which at the commencement date have a lease term of less than 12 months. The lease payments associated with those leases have been expensed on straight line basis over the lease term.

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED 23

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

3. SUMMARY OF THE IMPACT OF CHANGES IN ACCOUNTING POLICY (Continued)

1. Accounting as a lessee (Continued)
   The Group recognised right-of-use assets and lease liabilities at the commencement date of a lease.
   Right-of-use assets
   The right-of-use assets should be recognised at cost and would comprise: (i) the amount of the initial measurement of the lease liabilities (see below for the accounting policy to account for lease liabilities); (ii) any lease payments made at or before the commencement date, less any lease incentives received; (iii) any initial direct costs incurred by the lessee; and (iv) an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories. The Group measures the right-of-use assets applying a cost model. Under the cost model, the Group measures the right-of-use assets at cost, less any accumulated depreciation and any impairment losses, and adjusted for any remeasurement of lease liabilities.

24 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

3. SUMMARY OF THE IMPACT OF CHANGES IN ACCOUNTING POLICY (Continued)

1. Accounting as a lessee (Continued) Right-of-useassets (Continued)
   The Group assesses impairment at the end of each reporting period by evaluating conditions that may lead to impairment of right-of-use assets. Where an impairment condition exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates and assumptions about future events, which are subject to uncertainty and might materially differ from actual result. In making these key estimates and judgements, the directors of the Company take into consideration assumptions that are based on market condition existing at the end of reporting period and appropriate market and discounts rates. These estimates are regularly compared to actual market data and actual transactions entered into by the Group.
   The Group's leasehold land and buildings that were held for rental or capital appreciation purpose would continue to be accounted for under HKAS 40, Investment Property, as investment properties and would also continue to be carried at cost less accumulated depreciation and impairment loss. Leasehold land and buildings which were held for own use would continue to be accounted for under HKAS 16, Property, Plant and Equipment, as property, plant and equipment and would also continue to be carried at cost less accumulated depreciation and impairment loss. The adoption of HKFRS 16 therefore does not have any significant impact on these assets.

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED 25

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

3. SUMMARY OF THE IMPACT OF CHANGES IN ACCOUNTING POLICY (Continued)

1. Accounting as a lessee (Continued)
   Lease liabilities
   The lease liabilities should be recognised at the present value of the lease payments that are not paid at the date of commencement of the lease. The lease payments shall be discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Group shall use the Group's incremental borrowing rate.
   The following payments for the right to use the underlying asset during the lease term that are not paid at the commencement date of the lease are considered to be lease payments: (i) fixed payments less any lease incentives receivable; (ii) variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; (iii) amounts expected to be payable by the lessee under residual value guarantees; (iv) the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and (v) payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.
   Subsequent to the commencement date, a lessee shall measure the lease liabilities by: (i) increasing the carrying amount to reflect interest on the lease liabilities; (ii) reducing the carrying amount to reflect the lease payments made; and (iii) remeasuring the carrying amount to reflect any reassessment or lease modifications, e.g., a change in future lease payments arising from change in an index or rate, a change in the lease term, a change in the in substance fixed lease payments or a change in assessment to purchase the underlying asset.

26 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

3. SUMMARY OF THE IMPACT OF CHANGES IN ACCOUNTING POLICY (Continued)

1. Accounting as a lessor
   The Group has leased out its investment properties to a number of tenants. As the accounting under HKFRS 16 for a lessor is substantially unchanged from the requirements under HKAS 17, the adoption of HKFRS 16 does not have significant impact on these unaudited interim condensed consolidated financial statements.
2. Transition
   As mentioned above, the Group has applied HKFRS 16 using the modified retrospective approach and recognised all the cumulative effect of initially applying HKFRS 16 as an adjustment to the opening balance of retained profits at the date of initial application (1 April 2019). The comparative information presented has not been restated and continues to be reported under HKAS 17 and related interpretations as allowed by the transition provision in HKFRS 16.

The Group has recognised the lease liabilities at the date of 1 April 2019 for leases previously classified as operating leases applying HKAS 17 and measured those lease liabilities at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate at 1 April 2019.

The Group has elected to recognise all the right-of-use assets at 1 April 2019 for leases previously classified as operating leases under HKAS 17 as if HKFRS 16 had been applied since the commencement date, but discounted using the lessee's incremental borrowing rate at the date of initial application. For all these right-of-use assets, the Group has relied on its assessment of whether leases were onerous by applying HKAS 37, Provision, Contingent Liabilities and Contingent Assets, immediately before 1 April 2019 as an alternative to performing an impairment review.

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED 27

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

3. SUMMARY OF THE IMPACT OF CHANGES IN ACCOUNTING POLICY (Continued)

1. Transition (Continued)
2. 1. 
      The Group has applied the following practical expedients: (i) applied a single discount rate to a portfolio of leases with reasonably similar characteristics; (ii) applied the exemption of not to recognise right- of-use assets and lease liabilities for leases with term that will end within 12 months of the date of initial application (1 April 2019) and accounted for those leases as short term leases; and (iii) excluded the initial direct costs from the measurement of the right- of-use assets at 1 April 2019.
      In addition, the Group has applied the practical expedients such that:
   2. HKFRS 16 is applied to all of the Group's lease contracts that were previously identified as leases applying HKAS 17 and HK (IFRIC)
      - Interpretation 4, Determining whether an Arrangement contains a Lease, and (ii) not to apply HKFRS 16 to contracts that were not previously identified as containing a lease under HKAS 17 and HK (IFRIC) - Interpretation 4.
3. Impacts for the period
4. 
   As a result of initially applying HKFRS 16, in relation to the leases that were previously classified as operating leases, the Group recognised right-of-use assets of HK$70,398,000 and lease liabilities of HK$77,928,000 as at 30 September 2019.

Also in relation to those leases under HKFRS 16, the Group has recognised depreciation, interest charges and impairment loss, instead of operating lease charges. During the six months ended 30 September 2019, the Group had recognised depreciation charges of HK$25,490,000, interest charges of HK$1,569,000 and impairment loss of HK$3,600,000 from these leases.

28 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

1. USE OF JUDGEMENTS AND ESTIMATES
   In preparing these unaudited interim condensed consolidated financial statements, the significant judgements made by the management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the 2019 Annual Financial Statements, except for new significant judgements and key sources of estimation uncertainty related to the application of HKFRS 16 as described in note 3 above.
2. SEGMENT INFORMATION
   The Group identifies operating segments and prepares segment information based on the regular internal financial information reported to the Group's top management including executive directors and chief executive for their decisions about resources allocation to the Group's business components and for their review of these components' performance. The business components in the internal financial information reported to the top management are determined according to the Group's major product and service lines.
   Based on the above, the Group's top management determined that the Group has only one single reportable segment which is retailing, bullion trading and diamond wholesaling. Accordingly, no separate segment of analysis is presented.
   No geographical information was presented as more than 90% of the Group's revenue is derived from activities in Hong Kong (place of domicile). Also, most of the Group's non-current assets are located in Hong Kong.
   For the six months ended 30 September 2018 and 2019, no revenue from a single customer accounted for 10% or more of the total revenue of the Group.

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED 29

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

6. REVENUE

The Group is principally engaged in gold ornament, jewellery, watch and gift retailing, bullion trading and diamond wholesaling. Revenue of the Group recognised during the period comprised the following:

	Unaudited
	Six months ended
	30 September
	2019			2018
	HK$'000	HK$'000
Revenue from contracts with customers:
Gold ornament, jewellery, watch and gift
retailing	310,670			259,505
Bullion trading	9,385			3,012
Diamond wholesaling	1,916			1,755
Others	-	75
Total revenue	321,971			264,347
Timing of revenue recognition:
At a point in time	321,971			264,347

30 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

7. FINANCE COSTS
	Unaudited
	Six months ended
	30 September
	2019			2018
	HK$'000	HK$'000
Interest charges on:
Financial liabilities at amortised cost
Bank loans	-	1,035
Lease liabilities	1,569			-
Financial liability at fair value through
profit or loss
Gold loan	456			399
	2,025			1,434

8. PROFIT/(LOSS) BEFORE TAXATION

Profit/(loss) before taxation is arrived at after charging and (crediting):

Unaudited

Six months ended

30 September

20192018

HK$'000 HK$'000

Auditors' remuneration	380	380
Cost of inventories sold, including	239,819	194,666
- provision for and write down of
	inventories to net realisable value	3,002	4,503
- reversal of provision for and write
	down of inventories to net
	realisable value*	(3,496)	(1,903)
Depreciation of investment properties	16	16

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED 31

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

8. PROFIT/(LOSS) BEFORE TAXATION (Continued)

		Unaudited
		Six months ended
		30 September
		2019		2018
		HK$'000	HK$'000
Depreciation of property, plant and
587
equipment		487
Depreciation of right-of-use assets	25,490		-
Dividend income	(116)		(109)
Fair value change of investments at fair	46
value through profit or loss		570
Foreign exchange differences, net	10		101
Interest income from financial assets at	(1,509)
amortised cost		(1,108)
Loss on write off/disposal of property,	-
plant and equipment	36
Operating lease charges in respect of	-
furniture and fixtures	299
Operating lease charges in respect of	-
properties	32,576
Outgoings in respect of investment	47
properties		43
Provision for impairment loss on right-of-	3,600
use assets		-
Provision for long service payments	37
-	provided against the account		42
-	reversal of provision	(7)		(1)
Rental expenses for variable lease	1,861
payments		-
Rental expenses on short term leases in	135
respect of furniture and fixtures		-
Rental expenses on short term leases in	4,341
respect of properties		-
Rental income on owned properties	(608)		(402)
Written off of payables	(562)		-

• Reversal of provision for and write down of inventories to net realisable value mainly arose from inventories that were sold subsequently during the period.

32 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

9. EMPLOYEE BENEFIT EXPENSE
	Unaudited
	Six months ended
	30 September
	2019			2018
	HK$'000			HK$'000
Wages, salaries and other benefits	28,812			25,090
Pension costs - defined contribution
retirement schemes	1,117			1,115
Provision for long service payments	37			42
Reversal of provision for long service
payments	(7)		(1)
	29,959			26,246

Employee benefit expense as shown above includes directors' and chief executive's emoluments.

10. TAXATION

No Hong Kong profits tax has been provided for the six months ended 30 September 2019 as the Group has sufficient tax loss brought forward to set off the estimated assessable profit.

No Hong Kong profits tax has been provided for the six months ended 30 September 2018 as the Group has no estimated assessable profit.

No overseas profits tax 30 September 2018 and profit.

has been provided for the six months ended 2019 as the Group has no estimated assessable

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED 33

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

1. DIVIDEND
   At a meeting held on 22 November 2019, the Board of the Company resolved not to declare an interim dividend for the year ending 31 March 2020 (for the year ended 31 March 2019: Nil).
2. EARNINGS/(LOSS) PER SHARE
   The calculation of basic earnings/(loss) per share is based on the consolidated profit for the period attributable to owners of the Company of HK$2,371,000 (for the six months ended 30 September 2018: consolidated loss of HK$4,955,000) and the weighted average number of 913,650,465 (for the six months ended 30 September 2018: 913,650,465) ordinary shares in issue during the period.
   Diluted earnings/(loss) per share and basic earnings/(loss) per share for each of the six months ended 30 September 2018 and 2019 respectively are the same as there were no dilutive potential ordinary shares during both periods.
3. PROPERTY, PLANT AND EQUIPMENT
   During the period, the Group incurred capital expenditures of approximately HK$240,000 (for the six months ended 30 September 2018: HK$7,000) which mainly related to the purchases of leasehold improvements, and furniture and equipment.

34 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

14. RIGHT-OF-USE ASSETS

As disclosed in note 3, the Group has initially applied HKFRS 16 using the modified retrospective method and adjusted the opening balances at

1 April 2019 to recognise right-of-use assets relating to leases which were previously classified as operating leases under HKAS 17.

During the period, the Group entered into a number of lease agreements for use of properties and furniture and fixtures, and therefore recognised the additions to right-of-use assets of HK$35,390,000. Certain leases of retail stores contain variable lease payment terms that are based on sales generated from the retail stores and minimum annual lease payment terms that are fixed.

The Group performed an impairment assessment on right-of-use assets in accordance with HKAS 36, Impairment of Assets. Based on the assessment, an impairment loss of HK$3,600,000 was recognised and charged to the unaudited condensed consolidated statement of profit or loss and other comprehensive income for the six months ended 30 September 2019. The impairment provisions were made against a new lease agreement which was entered into during the period and a previous lease agreement which cash flow forecast was revised downwards based on management's assessment. The recoverable amounts of these right-of-use assets using value-in-use calculation were determined by the discounted cash flows generated from retail stores based on a management budget plan and a pre-tax discount rate of 8%.

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED 35

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

15. INVESTMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

	Unaudited	Audited
	As at	As at
	30 September	31 March
	2019		2019
	HK$'000	HK$'000
Unlisted equity securities	3,267		2,836

The fair values of these investments at 31 March 2019 and 30 September 2019 were determined by the directors of the Company. Details of the fair value measurement are set out in note 26.

16. OTHER ASSET
	Unaudited	Audited
	As at	As at
	30 September	31 March
	2019		2019
	HK$'000	HK$'000
Membership licence, at cost	356		356

Membership licence is carried at cost less any impairment. It represented cost of membership at The Chinese Gold and Silver Exchange Society.

36 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

17. DEBTORS, DEPOSITS AND PREPAYMENTS

	Unaudited	Audited
	As at	As at
	30 September	31 March
	2019		2019
	HK$'000	HK$'000
Current	2,164
Trade debtors		7,900
Other receivables	8,848		5,181
Deposits and prepayments	25,122		27,997
	36,134		41,078
Non-current
Deposits paid on purchase of property,	1,670
plant and equipment		-
Rental deposits	4,309		-
	5,979		-
	42,113		41,078

The ageing analysis of trade debtors, based on invoice date, was as follows:

	Unaudited	Audited
	As at	As at
	30 September	31 March
	2019		2019
	HK$'000	HK$'000
Within 30 days	2,088		6,628
31 - 90 days	76		1,272
	2,164		7,900

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED 37

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

18. INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

	Unaudited	Audited
	As at	As at
	30 September	31 March
	2019		2019
	HK$'000	HK$'000
Equity securities
Listed in Hong Kong	265		316

The above listed equity securities are measured at fair value through profit or loss.

Fair values of the listed equity securities have been determined by reference to their quoted bid prices at the end of the reporting period.

Details of the fair value measurement are set out in note 26.

19. CREDITORS, DEPOSITS RECEIVED AND OTHER PAYABLES

	Unaudited	Audited
	As at	As at
	30 September	31 March
	2019		2019
	HK$'000	HK$'000
Trade payables	12,382		17,363
Other payables and accruals	9,640		7,820
Contract and refund liabilities	2,288		2,510
Deposits received	5,020		4,095
	29,330		31,788

38 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

19. CREDITORS, DEPOSITS RECEIVED AND OTHER PAYABLES (Continued)

The ageing analysis of trade payables, based on invoice date, was as follows:

	Unaudited	Audited
	As at	As at
	30 September	31 March
	2019		2019
	HK$'000	HK$'000
Within 30 days	9,661		14,628
31 - 90 days	435		149
More than 90 days	2,286		2,586
	12,382		17,363

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED 39

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

20. LEASE LIABILITIES

The remaining contractual maturities of the Group's lease liabilities at the end of the reporting period and at the date of transition to HKFRS 16 are as follows:

Unaudited

Unaudited

As at

As at

30 September 2019

1 April 2019

Present value

Present value

of the

Total

of the

Total

minimum

minimum

minimum

minimum

lease

lease

lease

lease

payments

payments

payments

payments

HK$'000

HK$'000

HK$'000

HK$'000

Within 1 year

48,508

51,080

48,240

50,688

After 1 year but within

22,151

23,056

2 years

14,892

14,703

After 2 years but within

7,269

7,553

5 years

4,973

4,384

77,928

81,689

68,105

69,775

Less: Total future interest

(3,761)

charges

(1,670)

Present value of lease

77,928

liabilities

68,105

21. SHARE CAPITAL

Unaudited

Audited

As at

As at

30 September

31 March

2019

2019

HK$'000

HK$'000

Issued and fully paid:

913,650,465 (at 31 March 2019:

913,650,465) ordinary shares

393,354

393,354

40 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

22. NOTES TO THE CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

1. Reconciliation of profit/(loss) before taxation to operating profit/(loss) before working capital changes is as follows:

		Unaudited
		Six months ended
		30 September
		2019			2018
		HK$'000			HK$'000
Profit/(loss) before taxation		2,374			(4,952)
Depreciation of investment	16
properties			16
Depreciation of property, plant and	587
equipment			487
Depreciation of right-of-use assets	25,490			-
Dividend income	(116)		(109)
Fair value change of investments at	46
fair value through profit or loss			570
Interest charges	2,025			1,434
Interest income	(1,509)		(1,108)
Loss on write off/disposal of	-
property, plant and equipment	36
Provision for and write down of	3,002
inventories to net realisable value			4,503
Provision for long service payments	37			42
Provision for impairment loss on	3,600
right-of-use assets			-
Reversal of provision for and write
down of inventories to net	(3,496)
realisable value		(1,903)
Reversal of provision for long service	(7)
payments		(1)
Written off of payables	(562)		-
Operating profit/(loss) before	31,487
working capital changes			(985)

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED 41

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

22. NOTES TO THE CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)

1. Reconciliation of liabilities arising from financing activities
   The table below details changes in the Group's liabilities from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are liabilities for which cash flows were, or future cash flows will be, classified in the Group's condensed consolidated statement of cash flows as cash flows from financing activities.

	Lease	Bank	Gold	Interest
	liabilities	loans	loan	payables	Total
	HK$'000		HK$'000	HK$'000	HK$'000	HK$'000
As at 1 April 2018	-		68,000	19,805	959	88,764
Changes from cash flows:
Proceeds from borrowings	-	10,000	-	-	10,000
Interest incurred	-	-	-	1,434	1,434
Interest paid on bank and gold loans	-	-	-	(1,776)	(1,776)
Repayment	-	(53,000)	-	-	(53,000)
	-	25,000	19,805	617	45,422
Other change:
Change in fair value of gold loan*	-	-	(2,026)	-	(2,026)
As at 30 September 2018	-	25,000	17,779	617	43,396
As at 1 April 2019	68,105		-	22,494	7	90,606
Changes from cash flows:	35,390		-	-	-	35,390
Additions
Proceeds from borrowings	-	-	3,597	-	3,597
Interest incurred	1,569		-	-	456	2,025
Interest paid on gold loan	-	-	-	(386)	(386)
Payment of principal element of lease	(25,150)	-	-	-	(25,150)
liabilities
Payment of interest element of lease	(1,569)	-	-	-	(1,569)
liabilities
Remeasurement of lease liabilities	(417)	-	-	-	(417)
Other change:	77,928		-	26,091	77	104,096
-	-	3,312	-	3,312
Change in fair value of gold loan*
As at 30 September 2019	77,928		-	29,403	77	107,408

42 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

1. NOTES TO THE CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
2. 1. Reconciliation of liabilities arising from financing activities (Continued)
      Interest payables are included in creditors, deposits received and other payables presented in the condensed consolidated statement of financial position.
   2. • The change in fair value of gold loan was fully offset by the change in fair value of gold bullion held by the Group during the six months ended 30 September 2018 and 2019 and was not recognised in profit or loss separately.
3. FUTURE OPERATING LEASE RECEIVABLES
   The total future aggregate minimum lease receipts under non-cancellable operating leases in respect of investment properties are as follows:

	Unaudited	Audited
	As at	As at
	30 September	31 March
	2019		2019
	HK$'000	HK$'000
Within one year	1,189		1,185
In the second to fifth years, inclusive	566		1,129
	1,755		2,314

The Group leases out its investment properties under operating lease arrangements which run for an initial period of 1 to 3 years (at 31 March 2019: 1 to 3 years), with option to renew the lease term at expiry date.

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED 43

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

24. CAPITAL COMMITMENTS
	Unaudited	Audited
	As at	As at
	30 September	31 March
	2019		2019
	HK$'000	HK$'000
Capital expenditure contracted but not
provided for in the unaudited interim
condensed consolidated financial
statements in respect of purchase of
property, plant and equipment	1,002		-

44 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

25. RELATED PARTY TRANSACTIONS

In addition to the transactions disclosed elsewhere in these unaudited interim condensed consolidated financial statements, the Group had the following material transactions with related parties during the period:

		Unaudited
		Six months ended
		30 September
		2019			2018
	Note	HK$'000	HK$'000
Rental expenses on short term
leases/operating lease rental
on properties paid to Stanwick
Properties Limited	(a)	4,235			5,666
Rental expenses on short term
lease/operating lease rental on
furniture and fixtures paid to
Stanwick Properties Limited	(a)	114			153
Management fees and air-
conditioning charges paid to
Stanwick Properties Limited	(a)	548			548
Depreciation of right-of-use
assets for the lease with
Stanwick Properties Limited	(a)	1,549			-
Interest charges of lease
liabilities paid to Stanwick
Properties Limited	(a)	100			-
Sale of goods to:	(b)
Directors		901			708
Yeung Chi Shing		15			76

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED 45

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

25. RELATED PARTY TRANSACTIONS (Continued)

Notes:

1. The rental expenses on short term lease/operating lease rental, management fees and air- conditioning charges were paid to Stanwick Properties Limited ("Stanwick") for the office and shop premises occupied by the Group. Since 1 April 2019, the leases with Stanwick were accounted for according to HKFRS 16. As at 30 September 2019, the Group had recognised lease liabilities and right-of-use assets of approximately HK$22,969,000 and HK$23,064,000 for those leases respectively. Stanwick is a wholly owned subsidiary of Yeung Chi Shing, the ultimate holding company of the Group. Mr. Yeung Ka Shing, a director of the Company, is the son of Mr. Yeung Bing Kwong, Kenneth, who and his other family members control Yeung Chi Shing. These related party transactions were entered into on normal commercial terms.
2. It represents sale of gold ornament, jewellery and watch items net of sale discounts to both the directors and Yeung Chi Shing for the period. Discounts offered to directors is available generally to customers and the value of discounts given to Yeung Chi Shing is considered not material to the unaudited interim condensed consolidated financial statements.
3. Compensation of key management personnel
   The remuneration of directors (executive and non-executive) and other members of key management during the period was as follows:

	Unaudited
	Six months ended
	30 September
	2019			2018
	HK$'000	HK$'000
Salaries, allowances and benefits in kind	4,295			4,122
Pension costs - defined contribution
retirement schemes	27			80
	4,322			4,202

46 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

26. FAIR VALUE MEASUREMENTS

At the end of the reporting period, the financial assets and liability measured at fair value in the condensed consolidated statement of financial position are set out as follows:

Unaudited

Audited

As at 30 September 2019

As at 31 March 2019

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

Note

HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000

Financial asset at

fair value through

profit or loss

Investments at fair value

through profit or loss

- Listed equity

securities

(i)

265

-

-

265

316

-

-

316

Financial asset at

fair value through

other comprehensive

income

Investments at fair value

through other

comprehensive

income

- Unlisted equity

securities

(ii)

-

-

3,267

3,267

-

-

2,836

2,836

Financial liability at

fair value through

profit or loss

Gold loan

(i)

29,403

-

-

29,403

22,494

-

-

22,494

The Group followed HKFRS 13, Fair Value Measurement, which introduces a 3 level hierarchy for fair value measurement disclosures and additional disclosures about the relative reliability of fair value measurements.

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED 47

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

26. FAIR VALUE MEASUREMENTS (Continued)

The hierarchy groups financial assets and liability into 3 levels based on the relative reliability of significant inputs used in measuring the fair value of these financial assets and liability. The fair value hierarchy has the following levels:

Level 1: quoted prices (unadjusted) in active markets for identical asset or liability;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Notes:

1. At the end of each reporting period, the listed equity securities and gold loan are measured subsequent to initial recognition at fair value, grouped into Level 1 based on the degree to which the fair value is observable. Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical asset or liability.
2. At the end of each reporting period, the unlisted equity securities are measured subsequent to initial recognition at fair value, grouped into Level 3 based on the degree to which the fair value is unobservable. The fair value measurements of unlisted equity securities are determined by the directors of the Company.

48 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

26. FAIR VALUE MEASUREMENTS (Continued)

Notes: (Continued)

1. (Continued)
   Movement of financial assets grouped into Level 3 is as follows:

	Unaudited	Audited
	As at	As at
	30 September	31 March
Unlisted equity securities	2019		2019
	HK$'000	HK$'000
At the beginning of period/year	2,836		2,597
Fair value change recognised in other
comprehensive income	431		239
At the end of period/year	3,267		2,836

The valuations are determined based on the following significant unobservable inputs:

				Significant
		Valuation		unobservable				Sensitivity of fair value
Financial assets		technique		inputs		Range/value		to the input
Unlisted equity securities		Market		Price-to-book		0.31 to 25.40		The fair values of unlisted equity
with carrying amounts of		approach		multiple ("P/B		(at 31 March		securities	are	determined	with
HK$313,000 and				multiple")		2019: 0.50 to		reference to multiples of comparable
HK$181,000 as at					11.47)		listed companies, using the average
30 September 2019 and								of the P/B multiple of comparable.
31 March 2019								The fair value measurement is
respectively								positively correlated to the P/B
								multiple.	Had	the highest	P/B

multiple among the comparable been used as at 30 September 2019, the fair value would have increased by HK$1,792,000. Had the lowest P/B multiple among the comparable been used as at 30 September 2019, the fair value would have decreased by HK$287,000.

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED 49

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

26. FAIR VALUE MEASUREMENTS (Continued)

Notes: (Continued)

(ii)

(Continued)

Significant

Valuation

unobservable

Sensitivity of fair value

Financial assets

technique

inputs

Range/value

to the input

Unlisted equity securities

Market

Discount for

24.2% (at

The fair values of unlisted equity

with carrying amounts of

approach

lack of

31 March

securities are also determined with

HK$313,000 and

marketability

2019: 24.2%)

reference to DLOM. The fair value

HK$181,000 as at

("DLOM")

measurement is negatively correlated

30 September 2019 and

to the DLOM. Had the DLOM

31 March 2019

decreased by 5% as at 30 September

respectively

2019, the fair value would have

increased by HK$21,000. Had the

DLOM

increased

by

5%

as

at

30 September 2019, the fair value

would have decreased by HK$21,000.

Unlisted equity securities

Market

Enterprise

23.80 to

The fair values of unlisted equity

with carrying amounts of

approach

value-to-

26.06 (at

securities are

determined

with

HK$2,885,000 and

earnings before

31 March

reference to multiples of comparable

HK$2,586,000 as at

interest, taxes,

2019: 18.75

listed companies, using the average

30 September 2019 and

depreciation

to 24.74)

of

the

EV/EBITDA

multiple

of

31 March 2019

and

c o m p a r a b l e .

T h e

f a i r

v a l u e

respectively

amortisation

measurement

is

positively correlated

multiple ("EV/

to the EV/EBITDA multiple. Had the

EBITDA

highest

EV/EBITDA

multiple

among

multiple")

the

comparable been

used

as

at

30

September

2019,

the fair value

w o u l d h a v e i n c r e a s e d b y

HK$108,000. Had the lowest EV/

EBITDA

multiple

among

the

comparable

been

used

as

at

30

September

2019,

the fair value

w o u l d h a v e d e c r e a s e d b y

HK$107,000.

50 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

26. FAIR VALUE MEASUREMENTS (Continued)

Notes: (Continued)

(ii)	(Continued)
					Significant
			Valuation		unobservable				Sensitivity of fair value
	Financial assets		technique		inputs		Range/value		to the input
	Unlisted equity securities		Market		DLOM		24.2% (at		The fair values of unlisted equity
	with carrying amounts of		approach				31 March		securities are also determined with
	HK$2,885,000 and					2019: 24.2%)		reference to DLOM. The fair value
	HK$2,586,000 as at								measurement is negatively correlated
	30 September 2019 and								to the DLOM. Had the DLOM
	31 March 2019								decreased by 5% as at 30 September
	respectively								2019, the fair value would have
									increased by HK$188,000. Had the
									DLOM increased by 5%	as at
									30 September 2019, the fair	value
									w o u l d h a v e d e c r e a s e d b y
									HK$188,000.

Unlisted equity securities with carrying amounts of HK$69,000 as at both 30 September 2019 and 31 March 2019 are determined with reference to the net asset value of the unlisted equity securities. The directors of the Company determined that the reported net asset value represents the fair value of the unlisted equity securities.

There have been no transfers between levels in the reporting period.

INTERIM REPORT 2019 KING FOOK HOLDINGS LIMITED 51

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)

For the six months ended 30 September 2019

27. APPROVAL OF THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

These unaudited interim condensed consolidated financial statements were approved and authorised for issue by the Board on 22 November 2019.

By order of the Board

Tang Yat Sun, Richard

Chairman

Hong Kong, 22 November 2019

At the date of this report, the executive directors of the Company are Mr. Tang Yat Sun, Richard, Dr. Fung Yuk Bun, Patrick and Mr. Yeung Ka Shing; the non- executive director is Mr. Wong Wei Ping, Martin; and the independent non- executive directors are Mr. Cheng Kar Shing, Peter, Mr. Ho Hau Hay, Hamilton, Mr. Sin Nga Yan, Benedict and Mr. Cheng Kwok Shing, Anthony.

52 KING FOOK HOLDINGS LIMITED INTERIM REPORT 2019