Kingkey Financial International : Interim Report

INTERIM REPORT 2021

KINGKEY FINANCIAL INTERNATIONAL (HOLDINGS) LIMITED

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DIRECTORS' STATEMENT

We hereby present the unaudited condensed consolidated interim results of Kingkey Financial International (Holdings) Limited (the "Company") and its subsidiaries (collectively the "Group") for the six months ended 30 September 2021.

Business Review

Although COVID-19 has been kept at bay in Hong Kong with no local confirmed cases for period of time, the Group's business in the first half of our 2021/22 financial year has not been benefited since the border is still closed. The prolonged interruption of the cross-border business interaction has continued to negatively impact the Group's revenue. However, the successful fund raising of approximately HK$448 million in early June this year has provided capital to the Group which made up the loss of business opportunity arising from the pandemic.

We provide customers with diversified and high-quality financial products and services, including securities trading and financing, insurance, asset management and wealth management. With the Group's solid foundation, a wide partner's network and a professional team, the Group aims to help investors achieve investment goals and strive for ideal returns.

The Group has actively developed a variety of financial services, providing high quality and all-rounded wealth and asset management services to professional investors, legal entities and family office customers.

Securities

The performance of our securities business was rather disappointing. Unlike the hot atmosphere of the Hong Kong stock market amid the highly contagious pandemic during the same time last year, the stock market was comparatively less popular which has dragged our commission income from underwriting, sub-underwriting, placing and sub-placing by 91.0% while our margin interest income remained stable. For the six months ended

30 September 2021, revenue decreased by approximately 26.1% to approximately HK$15.3 million (2020: approximately HK$20.7 million).

Insurance Brokerage

Kingkey Privilege Wealth Management Limited ("KKWM") is our wealth management and insurance brokerage arm, registered with the Insurance Authority ("IA") and Mandatory Provident Fund Schemes Authority ("MPFA").

As at 30 September 2021, it was operating a team of experienced insurance professionals with 135 licensed representatives under IA and 60 licensed representatives under MPFA. They act as individual financial advisers to provide quality service to their clients by adopting IFA 3.0 strategy to formulate detailed and tailor-made wealth management solutions based on the clients' needs and source appropriate investment tools with an aim to achieving desired return. Moreover, they assist their clients to grasp the most updated market information and analyse the risk and opportunities therefrom and assess their clients' portfolio regularly. For the six months ended 30 September 2021, KKWM has handled over 850 new insurance policies for about 800 clients and accumulated total Annualized First Year Premium ("AFYP") amount of over HK$78.9 million (2020: over HK$40.9 million); with total Annualized First Year Commission ("AFYC") amount of over HK$34.8 million (2020: over HK$15.5 million).

Due to the prolonged prevention measures of the COVID-19, the business was still significantly thwarted as evidenced by a decrease of revenue to approximately HK$25.4 million from approximately HK$36.0 million the same corresponding period of last year.

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INTERIM REPORT 2021

KINGKEY FINANCIAL INTERNATIONAL (HOLDINGS) LIMITED

DIRECTORS' STATEMENT

Fur

During the six months ended 30 September 2021, fur auctions houses around the world enjoyed a very good and steady price average that gave the farmers a very handsome profit margin. Also late in this summer, Danish government has started to compensate most Danish farmers including ourselves a lot of expenses involving culling some of our minks and cleaning some of our farms. For the six months ended 30 September 2021, an approximate of HK$6.9 million revenue was registered from this business, representing a decrease of approximately 63.3% or HK$11.9 million compared with last year's corresponding period.

Assets Management and Money Lending

Business of provision of asset management service remained steady. For the six months ended 30 September 2021, we recorded approximately HK$4.1 million revenue from provision of assets management business (2020: HK$4.0 million).

However, there was a big leap in money lending business. For the six months ended 30 September 2021, revenue hiked by HK$9.5 million to approximately HK$12.0 million (2020: HK$2.5 million), largely thanks to the increase in capital available to the lending business from the fund raising completed in early June 2021. Nevertheless, none of the debtors together with their associates (if any), had borrowed the amount more than 8% of the total assets of the Group in aggregate at any time.

Prospects

Unlike same time last year, the COVID-19 pandemic has been under control and many other developed economies have been back to normal. For Hong Kong, however, being highly connected with mainland China in all aspects, is still unable to reconnect with it, leading to the continuing of disruption of cross border economic activities.

For the securities business, it is largely dependent on the atmosphere of the stock market. We expect the market will not bounce back substantially but will not fall too much either. Therefore, the income from brokerage commission in the second half will not be surprisingly different from the first half of this financial year. As a result, we will put more effort on the commission income from underwriting.

For insurance brokerage and asset management, the news of re-connecting with the mainland China sheds some light on the businesses. Although there is yet a confirmed timetable, we believe that this is no longer elusive or unachievable.

For fur business, sale of fur is expected to be favourable as cold weather came early from Northern China which is the most important fur market place in the world. If it stays cold in this entire winter and with the big shortage of the Danish minks due to the Danish government's ban of mink farming in the whole year of 2022, the fur market is looking towards a very bright second half of our financial year. But most importantly, our group will keep using the best Danish lawyers to negotiate with the Danish government for our farm's compensation.

Chen Jiajun

Executive Director

Hong Kong, 26 November 2021

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