Kingboard Laminates : Interim Report 2020

建 滔 積 層 板 控 股 有 限 公 司

KINGBOARD LAMINATES HOLDINGS LIMITED

(Incorporated in the Cayman Islands with limited liability)

Stock Code: 1888

INTERIM REPORT

2020

LEADING

THE FUTURE

01

INTERIM RESULTS

KINGBOARD LAMINATES HOLDINGS LIMITED

The board of directors (the "Board") of Kingboard Laminates Holdings Limited (the "Company") is pleased to announce the unaudited consolidated results of the Company and its subsidiaries (collectively referred to as the "Group") for the six months ended 30 June 2020 together with the comparative figures for the corresponding period in 2019 as follows:

Condensed Consolidated Statement of Profit or Loss

			Six months ended 30 June
		2020		2019
	Notes		HK$'000		HK$'000
			(Unaudited)		(Unaudited)
Revenue	3	6,807,615		7,631,220
Cost of sales			(5,176,509)	(5,782,403)
Gross profit			1,631,106			1,848,817
Other income, gains and losses	5	10,827		7,854
Distribution costs		(170,797)	(168,811)
Administrative costs		(332,457)	(309,003)
(Loss) Gain on fair value changes of equity instruments
at fair value through profit or loss		(129,155)	22,410
Gain on disposal of debt instruments at fair value
through other comprehensive income		71,711		2,699
Finance costs	6		(39,486)	(69,289)
Profit before taxation			1,041,749			1,334,677
Income tax expense	8		(307,649)	(248,202)
Profit for the period			734,100			1,086,475
Profit for the period attributable to:
Owners of the Company		732,814		1,082,085
Non-controlling interests		1,286		4,390
			734,100			1,086,475
Earnings per share - Basic and diluted	10		HK0.238		HK$0.351

INTERIM REPORT 2020

02	KINGBOARD LAMINATES HOLDINGS LIMITED

Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income

		Six months ended 30 June
	2020		2019
		HK$'000		HK$'000
		(Unaudited)		(Unaudited)
Profit for the period	734,100		1,086,475
Other comprehensive (expense) income for the period:
Item that will not be reclassified to profit or loss:
Translation reserve:
Exchange differences arising from translation to
presentation currency	(112,239)	(242)
Items that may be reclassified subsequently to profit or loss:
Investment revaluation reserve:
Fair value (loss) gain on debt instruments
at fair value through other comprehensive income	(39,095)	510,354
Reclassify to profit or loss upon disposal of debt instruments
at fair value through other comprehensive income	(71,711)	(2,699)
	(110,806)	507,655
Other comprehensive (expense) income for the period
(net of tax)	(223,045)	507,413
Total comprehensive income for the period	511,055		1,593,888
Total comprehensive income for the period attributable to:
Owners of the Company	510,893		1,588,775
Non-controlling interests	162		5,113
	511,055		1,593,888

INTERIM REPORT 2020

03	KINGBOARD LAMINATES HOLDINGS LIMITED
Condensed Consolidated Statement of Financial Position
					31 December
			30 June
		2020		2019
	Notes		HK$'000		HK$'000
			(Unaudited)		(Audited)
Non-current assets
Investment properties		1,397,968		1,402,295
Properties, plant and equipment	11	4,885,826		4,779,863
Right-of-use assets		507,082		573,011
Equity instruments at fair value through profit or loss		96,270		376,092
Equity instruments at fair value through other
comprehensive income		6,918		6,918
Debt instruments at fair value through other
comprehensive income		554,545		3,559,196
Deposits paid for acquisition of properties,
plant and equipment		322,405		398,195
Deferred tax assets		3,884		3,076
Goodwill		238		238
		7,775,136		11,098,884
Current assets
Inventories		2,056,897		1,818,691
Trade and other receivables and prepayments	12	3,691,543		4,236,656
Bills receivables	12	2,581,332		2,844,205
Properties held for development		1,736,698		1,666,994
Equity instruments at fair value through profit or loss		194,895		5,442
Debt instruments at fair value through other
comprehensive income		770,949		791,630
Amounts due from fellow subsidiaries		402,285		424,684
Taxation recoverable		7,836		7,868
Bank balances and cash		3,307,938		2,908,117
		14,750,373		14,704,287

INTERIM REPORT 2020

04	KINGBOARD LAMINATES HOLDINGS LIMITED
					31 December
			30 June
		2020		2019
	Notes		HK$'000		HK$'000
			(Unaudited)		(Audited)
Current liabilities
Trade and other payables	13	2,513,625		2,920,282
Bills payables	13	228,988		272,604
Contract liabilities		222,463		189,050
Lease liabilities		278		549
Amounts due to fellow subsidiaries		37,110		47,203
Taxation payable		575,937		597,150
Bank borrowings - amount due within one year		1,074,789		1,291,418
		4,653,190		5,318,256
Net current assets		10,097,183		9,386,031
Total assets less current liabilities		17,872,319		20,484,915
Non-current liabilities
Lease liabilities		882		901
Deferred tax liabilities		76,855		81,089
Bank borrowings - amount due after one year		692,308		1,653,846
		770,045		1,735,836
		17,102,274		18,749,079
Capital and reserves
Share capital		308,100		308,100
Reserves		16,747,515		18,393,322
Equity attributable to owners of the Company		17,055,615		18,701,422
Non-controlling interests		46,659		47,657
Total equity		17,102,274		18,749,079

INTERIM REPORT 2020

05														KINGBOARD LAMINATES HOLDINGS LIMITED
Condensed Consolidated Statement of Changes in Equity
							Attributable to owners of Company
											Share-
							Property		Investment	based											Non-
	Share		Share	Translation	revaluation		revaluation	payments	Special	Statutory		Goodwill	Retained			controlling	Total
	capital		premium	reserve	reserve		reserve	reserve	reserve	reserve		reserve	profits	Sub-total	interests	equity
	HK$'000		HK$'000	HK$'000	HK$'000		HK$'000	HK$'000	HK$'000	HK$'000		HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
																(note a)		(note b)
Balance at 1 January 2020	308,100	1,711,849	(100,953)	7,268	137,180		96,609.00			757,689		708,053	251,384		14,824,243		18,701,422		47,657		18,749,079
Profit for the period	-		-	-	-		-	-	-	-		-	732,814		732,814		1,286		734,100
Exchange differences
arising from translation
of presentation currency	-		-	(111,115)	-		-	-	-	-		-	-	(111,115)	(1,124)	(112,239)
Fair value loss on
debt instruments at
fair value through other
comprehensive income	-		-	-	-	(39,095)	-	-	-		-	-	(39,095)	-	(39,095)
Reclassify to profit or
loss upon disposal of
debt instruments at
fair value through other
comprehensive income	-		-	-	-	(71,711)	-	-	-		-	-	(71,711)	-	(71,711)
Total comprehensive
(expense) income
for the period	-		-	(111,115)	-	(110,806)	-	-	-		-	732,814		510,893		162		511,055
Final dividend paid for
the year ended
31 December 2019	-		-	-	-		-	-	-	-		-	(2,156,700)	(2,156,700)	-	(2,156,700)
Dividend paid to non-
controlling interests	-		-	-	-		-	-	-	-		-	-	-	(1,160)	(1,160)
Transfer to reserve	-		-	-	-		-	-	-	117,535		-	(117,535)	-	-	-
	-		-	-	-		-	-	-	117,535		-	(2,274,235)	(2,156,700)	(1,160)	(2,157,860)
Balance at 30 June 2020	308,100		1,711,849	(212,068)	7,268	26,374		96,609			757,689		825,588	251,384		13,282,822		17,055,615		46,659		17,102,274

INTERIM REPORT 2020

06											KINGBOARD LAMINATES HOLDINGS LIMITED
							Attributable to owners of the Company
							Property		Investment													Non-
	Share		Share	Translation	revaluation		revaluation	Special	Statutory	Goodwill		Retained				controlling		Total
	capital		premium	reserve	reserve		reserve	reserve	reserve	reserve		profits		Sub-total	interests		equity
	HK$'000		HK$'000	HK$'000	HK$'000		HK$'000	HK$'000	HK$'000	HK$'000		HK$'000		HK$'000	HK$'000		HK$'000
													(note a)	(note b)
Balance at 1 January 2019	308,100	1,711,849	239,369	7,268	(292,627)	757,689	473,921	251,425	14,042,578	17,499,572	343,430	17,843,002
Profit for the period	-		-	-	-		-	-	-	-	1,082,085	1,082,085	4,390		1,086,475
Exchange differences arising from
translation to presentation currency	-		-	(965)	-		-	-	-	-		-	(965)	723		(242)
Fair value gain on debt instruments
at fair value through other
comprehensive income	-		-	-	-	510,354	-	-	-		-	510,354	-	510,354
Reclassify to profit or loss upon disposal
of debt instruments at fair value
through other comprehensive income	-		-	-	-	(2,699)	-	-	-		-	(2,699)	-	(2,699)
Total comprehensive (expense) income
for the period	-		-	(965)	-	507,655	-	-	-	1,082,085	1,588,775	5,113		1,593,888
Acquisition of additional interests in
a subsidiary (note c)	-		-	-	-		-	-	-	34,094		-	34,094		(293,917)	(259,823)
Final dividend paid for the year ended
31 December 2018	-		-	-	-		-	-	-	-	(1,078,350)	(1,078,350)	-	(1,078,350)
Dividend paid to non-controlling
interests	-		-	-	-		-	-	-	-		-		-	(1,878)	(1,878)
Transfer to reserve	-		-	-	-		-	-	100,119		-	(100,119)		-	-		-
	-		-	-	-		-	-	100,119		34,094	(1,178,469)	(1,044,256)	(295,795)	(1,340,051)
Balance at 30 June 2019	308,100	1,711,849	238,404	7,268	215,028	757,689	574,040	285,519	13,946,194	18,044,091	52,748	18,096,839

Notes:

1. Statutory reserve comprises statutory fund, which is non-distributable, and represents capitalisation of retained profits of certain subsidiaries established in the People's Republic of China (the "PRC") for capital re-investment in these subsidiaries and funds shall be used to (i) make up prior year losses or (ii) expand production operations.
2. Goodwill reserve represents the effect of changes in ownership in certain subsidiaries when there is no change in control.
3. During the six months ended 30 June 2019, the Group acquired additional interests in a non-wholly owned subsidiary from non-controlling shareholders. As a result of the acquisition, the difference of HK$34,094,000 between the consideration paid of HK$259,823,000 and the value of non-controlling interests acquired of HK$293,917,000 was directly recognised as equity in the goodwill reserve.

INTERIM REPORT 2020

07	KINGBOARD LAMINATES HOLDINGS LIMITED
Condensed Consolidated Statement of Cash Flows
			Six months ended 30 June
		2020		2019
			HK$'000		HK$'000
			(Unaudited)		(Unaudited)
Net cash from operating activities		1,166,772		1,152,213
Net cash from (used in) investing activities		2,608,562		(490,016)
Net cash used in financing activities		(3,375,513)	(1,778,335)
Net increase (decrease) in cash and cash equivalents		399,821		(1,116,138)
Cash and cash equivalents at the beginning of the period	2,908,117		3,803,125
Cash and cash equivalents at the end of the period,
representing bank balances and cash		3,307,938		2,686,987

INTERIM REPORT 2020

08	KINGBOARD LAMINATES HOLDINGS LIMITED

Notes:

1. Basis of preparation
   The condensed consolidated financial statements 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 ("HKICPA") as well as with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities (the "Listing Rules") on The Stock Exchange of Hong Kong Limited.
2. Principal accounting policies
   The condensed consolidated financial statements have been prepared on the historical cost basis except for certain properties and financial instruments, which are measured at revalued amounts or fair values, as appropriate.
   Other than additional accounting policies resulting from application of amendments to Hong Kong Financial Reporting Standards ("HKFRSs") and application of certain accounting policies which became relevant to the Group, the accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30 June 2020 are the same as those presented in the Group's annual financial statements for the year ended 31 December 2019.
   Application of amendments to HKFRSs
   In the current interim period, the Group has applied the Amendments to References to the Conceptual Framework in HKFRS Standards and the following amendments to HKFRSs issued by the HKICPA, for the first time, which are mandatorily effective for the annual period beginning on or after 1 January 2020 for the preparation of the Group's condensed consolidated financial statements:

Amendments to HKAS 1 and HKAS 8	Definition of Material
Amendments to HKFRS	3	Definition of a Business
Amendments to HKFRS	9, HKAS 39 and HKFRS 7	Interest Rate Benchmark Reform

Except as described below, the application of the Amendments to References to the Conceptual Framework in HKFRS Standards and the amendments to HKFRSs in the current period has had no material impact on the Group's financial positions and performance for the current and prior periods and/ or on the disclosures set out in these condensed consolidated financial statements.

INTERIM REPORT 2020

09	KINGBOARD LAMINATES HOLDINGS LIMITED

Impacts of application on Amendments to HKAS 1 and HKAS 8 "Definition of Material"

The amendments provide a new definition of material that states "information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity." The amendments also clarify that materiality depends on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements taken as a whole.

The application of the amendments in the current period had no impact on the condensed consolidated financial statements. Changes in presentation and disclosures on the application of the amendments, if any, will be reflected on the consolidated financial statements for the year ending 31 December 2020.

3. Revenue

Analysis of revenue for the period is as follows:

		Six months ended 30 June
	2020		2019
		HK$'000		HK$'000
		(Unaudited)		(Unaudited)
Revenue recognised at a point in time
Sales of glass epoxy laminates	4,312,253		4,317,259
Sales of paper laminates	888,337		981,863
Sales of upstream materials (note a)	935,539		947,627
Sales of properties	84,383		341,270
Others (note b)	466,169		633,941
Revenue recognised overtime (note c)		16,660		71,357
Revenue from contracts with customers		6,703,341			7,293,317
Interest income from debt instruments	70,917		235,159
Dividend income	742		9,563
Rental and license fee income	32,615		93,181
	6,807,615		7,631,220

INTERIM REPORT 2020

10	KINGBOARD LAMINATES HOLDINGS LIMITED

Notes:

1. Sales of upstream materials include sales of copper foil, epoxy resin, glass fabric and bleached kraft paper. The payment terms are ranged from 0 days to 120 days.
2. Others mainly includes sales of specialty resin of HK$254,107,000 (six months ended 30 June 2019: HK$390,582,000).
3. Revenue recognised overtime mainly represents income from drilling services of Nil (six months ended 30 June 2019: HK$39,874,000) and income from hotel accommodation of HK$16,660,000 (six months ended 30 June 2019: HK$31,483,000).

4. Segment information

1. HKFRS 8 "Operating Segments" requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the executive directors of the Company, who are Chief Operating Decision Maker ("CODM") in order to allocate resources to segments and to assess their performance. Specifically, the Group's reportable segments under HKFRS 8 are organised into three main operating divisions - (i) manufacturing and sale of laminates; (ii) properties; and

2. investments. The management aggregated the sales of properties, rental and hotel income business into one reportable segment because the financial performance of these businesses are affected by changes in the property market.

The accounting policies the Group used for segment reporting under HKFRS 8 are the same as those used in its HKFRS consolidated financial statements. Segment profit or loss represents the profit earned by each segment with certain items not included (unallocated corporate income and expenses and finance costs). This is the measure reported to the CODM for the purpose of resource allocation and performance assessment.

INTERIM REPORT 2020

11	KINGBOARD LAMINATES HOLDINGS LIMITED

Segment revenue and results

The following is an analysis of the Group's revenue and results by operating and reportable segments:

Six months ended 30 June 2020		Laminates	Properties		Investments	Consolidated
		HK$'000	HK$'000		HK$'000		HK$'000
		(Unaudited)	(Unaudited)		(Unaudited)		(Unaudited)
Segment revenue		6,602,298		133,658	71,659		6,807,615
Segment results
1,064,225		57,506	(10,332)	1,111,399
Unallocated corporate income								12,542
Unallocated corporate expenses								(42,706)
Finance costs								(39,486)
Profit before taxation
							1,041,749
Six months ended 30 June 2019		Laminates	Properties		Investments	Consolidated
		HK$'000	HK$'000		HK$'000		HK$'000
		(Unaudited)	(Unaudited)		(Unaudited)		(Unaudited)
Segment revenue		6,980,563		405,935		244,722			7,631,220
Segment results	981,061		186,849	244,179		1,412,089
Unallocated corporate income								18,685
Unallocated corporate expenses								(26,808)
Finance costs								(69,289)
Profit before taxation								1,334,677

For the six months ended 30 June 2020, revenue from one of the Group's customers amounted to HK$1,070,153,000 (six months ended 30 June 2019: HK$1,025,573,000), which individually accounted for more than 10% of the Group's revenue for the period.

INTERIM REPORT 2020

12	KINGBOARD LAMINATES HOLDINGS LIMITED
5.	Other income, gains and losses
			Six months ended 30 June
					2019
		2020
			HK$'000		HK$'000
			(Unaudited)		(Unaudited)
	Other income, gains and losses include:
	Interest income on bank balances and deposits	12,356		18,944
	Gain (Loss) on disposal and write off of properties,
	plant and equipment	181		(8,527)
	Others	(1,710)	(2,563)
		10,827		7,854
6.	Finance costs
			Six months ended 30 June
				2019
		2020
			HK$'000		HK$'000
			(Unaudited)		(Unaudited)
	Interest on bank borrowings	45,515		76,019
	Interest on lease liabilities	30	30
	Imputed interest on contract liabilities	317		2,137
	Less: Amounts capitalised in the construction in progress	(6,059)	(6,760)
	Less: Amounts capitalised in the properties held for development	(317)	(2,137)
		39,486		69,289

Bank and other borrowing costs capitalised during the period includes imputed interest on contract liabilities of HK$317,000 (six months ended 30 June 2019: HK$2,137,000) as well as, bank borrowing costs arising from the general borrowing pool which were calculated by applying a weighted average capitalisation rate of 2.2% (six months ended 30 June 2019: 2.7%) per annum to expenditure on qualifying assets.

7. Depreciation

During the period, depreciation of approximately HK$272.2 million (six months ended 30 June 2019: HK$273.7 million) was charged in respect of the Group's properties, plant and equipment.

INTERIM REPORT 2020

13		KINGBOARD LAMINATES HOLDINGS LIMITED
8.	Income tax expense
				Six months ended 30 June
					2019
			2020
				HK$'000		HK$'000
				(Unaudited)		(Unaudited)
	The amount comprises:
	PRC Enterprise Income Tax		304,523		204,380
	PRC Land Appreciation Tax ("LAT")		2,041		38,767
	Hong Kong Profits Tax		4,832		7,528
	Taxation arising in other jurisdiction		1,295		1,070
			312,691		251,745
	Deferred taxation
	Credit for the period		(5,042)	(3,543)
			307,649		248,202

Under the Law of the People's Republic of China on Enterprise Income Tax (the "EIT Law") and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25% from 1 January 2008 onwards.

The provision of LAT is estimated according to the requirements set forth in the relevant PRC tax laws and regulations. LAT has been levied at progressive rates ranging from 30% to 60% on the appreciation of land value, represented by the excess of sales proceeds of properties over prescribed direct costs. Prescribed direct costs are defined to include costs of land, development and construction costs, as well as certain costs relating to the property development. According to the State Administration of Taxation's official circulars, LAT shall be payable provisionally upon sales of the properties, followed by final ascertainment of the gain at the completion of the properties development.

On 21 March 2018, the Hong Kong Legislative Council passed The Inland Revenue (Amendment) (No. 7) Bill 2017 (the "Bill") which introduces the two-tiered profits tax rates regime. The Bill was signed into law on 28 March 2018 and was gazetted on the following day. Under the two-tiered profits tax rates regime, the first HK$2 million of profits of the qualifying group entity will be taxed at 8.25%, and profits above HK$2 million will be taxed at 16.5%. The profits of group entities not qualifying for the two-tiered profits tax rates regime will continue to be taxed at a flat rate of 16.5%.

The directors of the Company considered the amount involved upon implementation of the two-tiered profits tax rates regime as insignificant to the consolidated financial statements. Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profit for both periods.

Taxation arising in other jurisdiction is calculated at the rate prevailing in the relevant jurisdiction.

INTERIM REPORT 2020

14	KINGBOARD LAMINATES HOLDINGS LIMITED

1. Dividends
   The directors of the Company (the "Directors") have resolved to declare an interim dividend for the six months ended 30 June 2020 of HK$0.10 per share (2019: interim dividend of HK$0.10 per share) and a special interim dividend of HK$1.90 per share (2019: nil) to the shareholders whose names appear on the register of members of the Company on Friday, 4 December 2020. The dividend warrants will be dispatched on or around Friday, 8 January 2021.
2. Earnings per share
   The calculation of the basic earnings per share attributable to the owners of the Company is based on the following data:

		Six months ended 30 June
	2020		2019
		HK$'000		HK$'000
		(Unaudited)		(Unaudited)
Profit for the period attributable to owners of the Company	732,814		1,082,085
		Number of shares
		30 June 2020		30 June 2019
		'000		'000
Number of ordinary shares for the purpose of calculating
basic earnings per share	3,081,000		3,081,000

For the six months ended 30 June 2020, the computation of diluted earnings per share did not assume the exercise of the Company's share options because the exercise price of these share options was higher than the average market price. No diluted earnings per share for the six months ended 30 June 2019 was presented as there were no potential ordinary shares in issue for the period.

11. Additions to properties, plant and equipment

During the reporting period, the Group spent approximately HK$494.3 million (six months ended 30 June 2019: HK$312.2 million) on acquisition of properties, plant and equipment.

INTERIM REPORT 2020

15	KINGBOARD LAMINATES HOLDINGS LIMITED

12. Trade and other receivables and prepayments and bills receivables

		30 June		31 December
	2020		2019
		HK$'000		HK$'000
		(Unaudited)		(Audited)
Trade receivables	3,600,767		4,222,258
Less: Allowance for credit losses		(601,396)	(603,257)
Trade receivables, net		2,999,371			3,619,001
Advance to suppliers	223,173		203,997
Prepaid expenses and deposits	129,138		112,547
Value-added tax ("VAT") recoverable	220,896		208,155
Other receivables		118,965		92,956
		3,691,543			4,236,656
Bills receivables	2,581,332		2,844,205
	6,272,875		7,080,861

The Group allows credit periods of up to 120 days (31 December 2019: 120 days), depending on the products sold to its trade customers.

The following is an aged analysis of trade receivables net of allowance for credit losses based on invoice date at the end of the reporting period:

		30 June		31 December
	2020		2019
		HK$'000		HK$'000
		(Unaudited)		(Audited)
0-90 days	2,147,038		2,664,212
91-180 days	806,177		912,064
Over 180 days	46,156		42,725
	2,999,371		3,619,001

Bills receivables of the Group are aged within 90 days (31 December 2019: 90 days) at the end of the reporting period. All bills received by the Group are with a maturity period of less than one year.

INTERIM REPORT 2020

16	KINGBOARD LAMINATES HOLDINGS LIMITED
13.	Trade and other payables and bills payables
						31 December
			30 June
		2020		2019
			HK$'000		HK$'000
			(Unaudited)		(Audited)
	Trade payables	928,068		1,231,111
	Accrued expenses	472,139		510,884
	Payables for acquisition of properties, plant and equipment	170,995		142,351
	Other tax payables	522,723		528,770
	VAT payables	125,427		174,312
	LAT payables	179,390		182,863
	Other payables		114,883		149,991
			2,513,625			2,920,282
	Bills payables		228,988		272,604
			2,742,613			3,192,886

The following is an aged analysis of trade payables based on the invoice date at the end of the reporting period:

		30 June		31 December
	2020		2019
		HK$'000		HK$'000
		(Unaudited)		(Audited)
0-90 days	844,335		1,172,366
91-180 days	46,391		20,682
Over 180 days	37,342		38,063
	928,068		1,231,111

Bills payables of the Group are aged within 90 days (31 December 2019: 90 days) at the end of the reporting period.

INTERIM REPORT 2020

17	KINGBOARD LAMINATES HOLDINGS LIMITED

14. Share options

1. The share option scheme of the Company (the "Scheme") was approved by the shareholders of the Company and the shareholders of Kingboard Holdings Limited ("KHL") on 29 May 2017 and the Scheme took effect upon obtaining approval from the Listing Committee of the Stock Exchange on 2 November 2017. The purpose of the Scheme is to provide incentive or reward to the eligible participants of the Scheme (as listed below) for their contribution to, and continuing efforts to promote the interests of the Group.

   The Scheme is valid for a period of ten years. The Board may, at its discretion, grant options to subscribe for shares in the Company to (i) eligible participants who contribute to the long-term growth and profitability of the Company and include any employee or proposed employee (whether full-time or part-time and including any executive director), consultants or advisers of or to the Company, any of its subsidiaries or any entity ("Invested Entity") in which the Group holds an equity interest; (ii) any non-executive directors (including independent non-executive directors) of the Company, any of its subsidiaries or any Invested Entity; (iii) any supplier of goods or services to any member of the Group or any Invested Entity; (iv) any customer of the Group or any Invested Entity; (v) any person or entity that provides research, development or other technological support to the Group or any Invested Entity; and (vi) any shareholder of any member of the Group or any Invested Entity.

   The subscription price of the Company's share in respect of any option granted under the Scheme must be at least the highest of (i) the closing price of the shares of the Company as stated in the Stock Exchange's daily quotations sheet on the date of grant of the option, which must be a business day;

2. the average closing price of the shares of the Company as stated in the Stock Exchange's daily quotations sheets for the five business days immediately preceding the date of grant of the option; and (iii) the nominal value of the shares of the Company.

The option may be accepted by a participant within 28 days from the date of the offer for the grant of the option upon the payment of a consideration of HK$1. An option may be exercised at any time during a period to be determined and notified by the Directors to each grantee, and in the absence of such determination, from the date upon which the offer for the grant of the option is accepted but shall end in any event not later than ten years from the date of grant of the option subject to the provisions for early termination thereof. The Directors may, at their absolute discretion, fix any minimum period for which an option must be held, any performance targets that must be achieved and any other conditions that must be fulfilled before the options can be exercised upon the grant of an option to a participant.

The total number of shares of the Company which may be issued upon exercise of all options to be granted under the Scheme (excluding, for this purpose, options lapsed in accordance with the terms of the Scheme and any other share option scheme of the Company) must not in aggregate exceed 10% of the total number of shares of the Company in issue as at the date of approval of the Scheme by the shareholders of the Company and the shareholders of KHL (i.e. 308,100,000 shares of the Company,representing 10.0% of the total issued share capital of the Company as at the date of this report).

The maximum number of shares of the Company which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Scheme and any other share option scheme of the Company must not exceed 30% of the issued share capital of the Company from time to time.

The total number of shares of the Company issued and to be issued upon exercise of the options granted (including both exercised and outstanding options) to each participant in any 12-month period must not exceed 1% of the share capital of the Company then in issue unless approved by the shareholders of the Company and KHL in general meetings.

INTERIM REPORT 2020

18	KINGBOARD LAMINATES HOLDINGS LIMITED

A summary of movements of the number of options for the Period is as follows:

	Balance at	Exercise	Balance at
	1 January	price	30 June
Date of grant	2020	per share	2020	Exercisable period
Grant to directors
3 April 2019
Mr. Cheung Kwok Wa	6,000,000	HK$8.39	6,000,000	3 April 2019 to 2 April 2029
Mr. Cheung Kwok Keung	6,000,000	HK$8.39	6,000,000	3 April 2019 to 2 April 2029
Mr. Cheung Kwok Ping	5,000,000	HK$8.39	5,000,000	3 April 2019 to 2 April 2029
Mr. Lam Ka Po	5,000,000	HK$8.39	5,000,000	3 April 2019 to 2 April 2029
Mr. Cheung Ka Ho	2,000,000	HK$8.39	2,000,000	3 April 2019 to 2 April 2029
Mr. Leung Tai Chiu	550,000	HK$8.39	550,000	3 April 2019 to 2 April 2029
Mr. Ip Shu Kwan, Stephen	550,000	HK$8.39	550,000	3 April 2019 to 2 April 2029
Mr. Zhang Lu Fu	550,000	HK$8.39	550,000	3 April 2019 to 2 April 2029
Mr. Lau Ping Cheung,
Kaizer	550,000	HK$8.39	550,000	3 April 2019 to 2 April 2029
	26,200,000			26,200,000
Grant to employees
3 April 2019	12,800,000		HK$8.39	12,800,000		3 April 2019 to 2 April 2029
	39,000,000			39,000,000
Exercisable at
30 June 2020	39,000,000

Note:

During the year ended 31 December 2019, 39,000,000 options were granted by the Company on 3 April 2019 under the share option scheme of the Company, of which 26,200,000 options were granted to directors and 12,800,000 were granted to employees. The closing price of the Company's shares on 2 April 2019 (namely the date immediately before the aforesaid grant date) is HK$8.49. The estimated fair value of the aforesaid options was HK$96,609,000, of which HK$64,901,000 was attributable to the options granted to directors while HK$31,708,000 was attributable to the options granted to employees. The fair value of each of the abovementioned options was identical, namely HK$2.48.

Save as disclosed, there has been no option granted or outstanding under the Scheme. During the Period, no option has lapsed or has been cancelled or exercised under the Scheme.

INTERIM REPORT 2020

19	KINGBOARD LAMINATES HOLDINGS LIMITED
15. Capital and other commitments
						31 December
			30 June
		2020		2019
			HK$'000		HK$'000
			(Unaudited)		(Audited)
Capital expenditure contracted for but not provided in
the consolidated financial statements for:
- acquisition of properties, plant and equipment		11,155		14,637
Other expenditure contracted for but not provided in
the consolidated financial statements for:
- acquisition and other expenditures relating to
properties held for development		291,394		289,826
		302,549		304,463

1. Contingent liabilities
   The Group provided guarantees amounting to approximately HK$42,580,000 as at 30 June 2020 (31 December 2019: HK$127,150,000) in respect of bank mortgage loans granted to purchasers of the Group's properties. In the opinion of the Directors, the fair values of these financial guarantee contracts of the Group are insignificant at initial recognition and the Directors consider that the possibility of default of the parties involved is remote. Accordingly, no value has been recognised at the inception of the guarantee contracts and at the end of the reporting period as at 30 June 2020 and 31 December 2019.
   Guarantees are given to banks with respect to loans procured by the purchasers of the Group's properties. Such guarantees will be released by banks upon delivery of the properties to the purchasers and completion of the registration of the relevant mortgaged properties.
2. Related party transactions
   The Group entered into the following significant transactions with related parties during the period:

Six months ended 30 June

20202019

HK$'000 HK$'000

(Unaudited) (Unaudited)

1. Sales of goods and drilling services provided to

	fellow subsidiaries	1,070,153	1,025,573
(ii)	Purchases of goods from fellow subsidiaries	209,059	305,323
(iii)	Sales of laminates and copper to a shareholder with
	significant influence over the ultimate holding company	120,830	281,234

1. Purchases of drill bits and machineries from a shareholder

with significant influence over the ultimate holding
company	142,208	123,759

INTERIM REPORT 2020

20	KINGBOARD LAMINATES HOLDINGS LIMITED

BUSINESS REVIEW

On behalf of the board ("Board") of directors ("Directors") of Kingboard Laminates Holdings Limited, I am delighted to report a healthy development for the Company and its subsidiaries (the "Group") for the six months ended 30 June 2020 (the "Period"). According to the latest research report of Prismark Partners LLC, the Group is ranked as the world's top laminates producer for the fifteenth consecutive year, with a global market share of 16% in the year of 2019. During the Period, the laminates segment achieved satisfactory results despite a considerable number of unfavourable factors. Owing to the COVID-19 pandemic, the mainland electronics industry entered a temporary period of demand vacuum following a suspension of production activities. Overseas sales channels also contracted on the spread of the disease. However, the Group drove work and production resumption in an orderly manner amid the pandemic, seizing the opportunities of domestic demand growth for computers and 5G-related electronic products, which helped minimise the adverse impacts brought about by the pandemic. As the Group continued to focus on the development of its laminates business, the property segment was engaged primarily in selling the remaining units in hand during the Period, leading to a drop in its segment revenue. During the Period, fair value changes of equity instruments at fair value through profit or loss incurred a loss owing to the fluctuations of the securities market amidst the COVID-19 pandemic and the consequent development and occurrences, and interest income from debt instruments at fair value through other comprehensive income declined owing to sales of some debt instruments during the period. Therefore, the Group's revenue was down 11% year on year to HK$6,807.6 million, along with a 32% decrease in profit attributable to the owners of the Company to HK$732.8 million. On consideration of the Group's robust financial position, the Board has proposed an interim dividend of HK$0.10 per share with a special interim dividend of HK$1.90 per share to give back to the shareholders.

INTERIM REPORT 2020

21

Financial Highlights

KINGBOARD LAMINATES HOLDINGS LIMITED

	Six months ended 30 June
	2020	2019	Change
	HK$'million	HK$'million
Revenue	6,807.6	7,631.2	-11%
EBITDA	1,360.5	1,683.1	-19%
Profit before tax	1,041.7	1,334.7	-22%
Net profit attributable to owners
of the Company	732.8	1,082.1	-32%
Earnings per share	HK$0.238	HK$0.351	-32%
Interim dividend per share	HK$0.10	HK$0.10	-
Special interim dividend per share	HK$1.90	-	N/A
Net asset value per share	HK$5.54	HK$5.86	-5%
	Net Cash 1,540.8	Net gearing 14%

PERFORMANCE

Laminates division: During the Period, despite a slide in market demand for laminates as a result of the pandemic, the laminates division proactively stepped up coordinated efforts to prevent infection while securing production. As the pandemic was gradually brought under control in Mainland China, the Group reverted to full production, expanded sales coverage and actively adapted to the changes in demand, in a bid to mitigate the losses incurred by the pandemic. The laminates division reported a slight drop of 5% in revenue to HK$6,602.3 million. Meanwhile, the Group took full advantage of its vertically integrated production model as an effective means to further trim down on costs and enhance profit margin while continuing to safeguard product supply. Hence, EBITDA rose by 9% to HK$1,349.8 million. Output volume during the Period was comparable to that of last year, with its monthly average amounting to 9.5 million square metres.

Property division: The Group continued to execute a development strategy centred around the laminates business, while the property segment was engaged primarily in selling the remaining units in hand during the Period. Segment revenue slipped by 67% to HK$133.7 million, whilst EBITDA fell by 67% to HK$63.6 million.

INVESTMENTS

As at 30 June 2020, the Group held in approximately HK$1,325 million of debt instruments, representing approximately 5.9% of the total assets of the Group as at 30 June 2020, which consist of mostly bonds issued mainly by companies listed on the Main Board of the Stock Exchange. The Group acquired its debt instruments through on-market purchases. The Group will from time to time monitor the movement of prices and may adjust its investment portfolio as and when appropriate.

INTERIM REPORT 2020

2020 REPORT INTERIM

There was no securities investment in an investee company with a value of 5 per cent. or more of the Group's total assets as at 30 June

2020. The following table sets out the main investments of debt instruments held by the Group as at the end of the Period:

			Percentage of
			securities held (of		Fair value	Percentage to the
	Principal business(es) of	Number of	the securities of	Investment	as at	Group's total assets	Gain/(loss) on disposal	Unrealised gain/(loss)
Investment	underlying company	securities held	the same class)	cost	30 June 2020	as of 30 June 2020	during the Period	during the Period Investment strategy
		('000)		(HK$'000)	(HK$'000)		(HK$'000)	(HK$'000)
Bonds with fixed coupon interest	Residential property development	20,500	4.8%	159,431	170,070	0.8%	46,659	10,639 To enhance diversity of the
7.125% per annum and maturity	focusing on urbanization;							investment portfolio of the
date in January 2022 listed on	running a centralised and							Group while maintaining and
Singapore Exchange Securities	standardised business model							generating stable income; long-
Trading Limited ("SGX") issued	that comprises property							term investment for interest
by Country Garden Holdings	development, construction,							income
Company Limited ("Country	decoration, property
Garden")	investment, as well as hotel
	development and management
Bonds with fixed coupon rate of	Development and sale of	17,000	2.8%	125,394	115,566	0.5%	(30,519)	(9,828) To enhance diversity of the
5.875% per annum and maturity	properties, property investment,							investment portfolio of the
date in February 2023 listed	hotel operations and other							Group while maintaining and
on SGX by Guangzhou R&F	property development related							generating stable income; long-
Properties Co., Ltd. (Guangzhou	services in the PRC							term investment for interest
R&F)								income
Bonds with fixed coupon rate of	Development and sale of	18,500	9.3%	143,965	156,125	0.7%	16,583	12,160 To enhance diversity of the
8.875% per annum and maturity	properties, property investment,							investment portfolio of the
date in September 2021 listed	hotel operations and other							Group while maintaining and
on SGX by Guangzhou R&F	property development related							generating stable income;
	services in the PRC							long-term investment for
								interest income
Bonds with fixed coupon rate of	Property development in the	96,000	17.5%	748,800	770,949	3.4%	-	22,149 To enhance diversity of the
9.85% per annum and maturity	PRC with a leading position							investment portfolio of the
date in November 2022 listed on	in Guangzhou							Group while maintaining and
Stock Exchange issued by KWG								generating stable income;
Group Holdings Limited								long-term investment for
								interest income

22

LIMITED HOLDINGS LAMINATES KINGBOARD

23	KINGBOARD LAMINATES HOLDINGS LIMITED

Based on the announcements of Country Garden Holdings Company Limited (stock code: 2007) ("CGH") dated 20 September 2018 and 2 October 2018, the senior notes ("CGH January 2022 Senior Notes") were issued by CGH in September 2018, and due in January 2022. The CGH January 2022 Senior Notes are listed on the SGX and carries an interest of 7.125% per annum and interests are payable semi-annually. The proceeds from the CGH January 2022 Senior Notes were intended to be used for refinancing CGH's existing offshore indebtedness. According to the 2020 interim results announcement of CGH, as at 30 June 2020, its group's net gearing ratio increased from approximately 46% that as at 31 December 2019 to approximately 58%.

Based on the announcements of Guangzhou R&F Properties Co., Ltd. (stock code: 2777) ("GRFP")

dated 13 November 2017 and 19 September 2018: (i) the senior notes ("GRFP February 2023 Senior Notes") were issued by GRFP in November 2017, and due in February 2023. The GRFP February 2023 Senior Notes are listed on SGX and carries an interest of 5.875% per annum and interests are payable semi-annually. The proceeds from the GRFP February 2023 Senior Notes was intended to be used to refinance debt and for general corporate purposes of GRFP; and

1. the senior notes due September 2021 ("GRFP September 2021 Senior Notes") were issued by GRFP in September 2018, and due in September 2021. The GRFP September 2021 Senior Notes is listed on the SGX and carries an interest of 8.875% per annum and interests are payable semi-annually. The net proceeds from GRFP September 2021 Senior Notes was mainly for offshore refinancing. According to the 2020 interim results announcement of GRFP, the net debt to total equity ratio of GRFP decreased from 199% at 31 December 2019 to 177% at 30 June 2020.

Based on the announcement of KWG Group Holdings Limited (stock code: 1813) ("KWG") dated 15 November 2018, the senior notes ("KWG November 2020 Senior Notes") were issued by KWG in November 2018, and due in November 2020. The KWG November 2020 Senior Notes are listed on the Stock Exchange and carries an interest of 9.85% per annum and interests are payable semi-annually. The proceeds from the KWG November 2020 Senior Notes was intended to be used for refinancing certain of KWG's offshore debt. According to the 2020 interim results announcement of KWG, as at 30 June 2020, its net gearing ratio decreased from approximately 75% as at 31 December 2019 to approximately 59%.

For further information of the business and financial performance of the above companies, please refer to the reports and announcements referred in the above paragraphs for details. Please also refer to the respective publications of the above companies from time to time for updates on prospects and performances of the respective companies. The reports and announcements referred above do not form part of this interim report and do not constitute any publication issued by, or any opinion, advice or view of, the Company or any of its directors.

INTERIM REPORT 2020

24	KINGBOARD LAMINATES HOLDINGS LIMITED

LIQUIDITY AND CAPITAL RESOURCES

The Group's integrated financial and liquidity position remained robust. As at 30 June 2020, Group net current assets and current ratio were approximately HK$10,097.2 million (31 December 2019: HK$9,386.0 million) and 3.17 (31 December 2019: 2.76) respectively.

The net working capital cycle increased from 88 days as at 31 December 2019 to 121 days as at

30 June 2020 on the following key metrics:

• Inventories, in terms of stock turnover days, were 72 days (31 December 2019: 48 days).
• Trade receivables, including amounts due from fellow subsidiaries, in terms of debtor turnover days, were 91 days (31 December 2019: 80 days).
• Trade and bills payable (excluding bills payable for properties, plant and equipment), including amounts due to fellow subsidiaries, in terms of creditor turnover days, were 42 days (31 December 2019: 40 days).

As at 30 June 2020, net cash (bank balances and cash net of bank borrowings) was HK$1,540.8 million (31 December 2019: net gearing ratio (ratio of bank borrowings net of bank balances and cash to total equity) was 0%). The increase in net cash was mainly due to the sale of some debt instruments at fair value through other comprehensive income during the period. The proportion of short-term to long-term bank borrowings stood at 61%: 39% (31 December 2019: 44%: 56%).

The Group continued to adopt a prudent financial management policy. The Group did not enter into any material derivative financial instruments, nor did the Group enter into any hedging arrangements for hedging foreign currency risk during the Period. The Group's revenue, mostly denominated in Hong Kong dollars, RMB and US dollars, was fairly matched with the currency requirements of its operating expenses.

INTERIM REPORT 2020

25

DEBT MATURITY PROFILE

KINGBOARD LAMINATES HOLDINGS LIMITED

The maturity profile of the Group's borrowing is set out below:
				31 December
		30 June
	2020		2019
		HK$'000		HK$'000
		(Unaudited)		(Audited)
Within one year	1,074,789		1,268,918
More than one year but not more than two years	692,308		933,077
More than two years but not more than three years		-	740,769
More than three years but not more than five years		-	2,500
	1,767,097		2,945,264
Reclassification due to repayment on demand clause
Current	1,074,789		1,291,418
Non-current	692,308		1,653,846
	1,767,097		2,945,264

The Group's variable-rate bank borrowings as at 30 June 2020 carry interest ranged from HIBOR + 1.02% (31 December 2019: HIBOR + 1.02% to HIBOR + 1.50%) per annum.

The effective interest rates (which are also equal to contracted interest rates) of the Group's bank borrowings as at 30 June 2020 ranged from 1.94% to 3.73% (31 December 2019: 2.02% to 4.03%) per annum.

Included in bank borrowings are the following amounts denominated in currencies as indicated below:

30 June 31 December

2020 2019

HK$'000 HK$'000

(Unaudited) (Audited)

HK$	1,767,097	2,945,264

INTERIM REPORT 2020

26	KINGBOARD LAMINATES HOLDINGS LIMITED

CONTINGENT LIABILITIES

The Group provided guarantees amounting to approximately HK$42.6 million in aggregate as at 30 June 2020 (31 December 2019: HK$127.2 million) in respect of bank mortgage loans granted to purchasers of the Group's properties. Please refer to note 16 to the Group's unaudited condensed consolidated financial statements for the Period in this report for further details of such guarantees.

HUMAN RESOURCES

As at 30 June 2020, the Group employed a workforce of approximately 9,500 (31 December 2019: 9,600). In addition to offering competitive salary packages, the Group grants share options and discretionary bonuses to eligible employees based on the Group's overall financial achievements and employees' individual performance.

PROSPECTS

Looking forward to the second half of the year, China will continue to give impetus to its new infrastructure strategy and strengthen the construction and blueprint of its 5G network. In addition, the epidemic situation in some European countries has been brought under control with economic activities restarted. Increase in demand in the electronics industry chain, including the automotive industry, will drive business volume growth for the Group's laminates division. Output volume of laminates during exceeded 12 million square meters both in June and July 2020. Recently, the price of some upstream materials has increased, and the copper foil was in short supply. It is expected that the prices of laminates and copper foil products have room for upward adjustment. The Group, as a leading supplier of base materials for electronic appliances, will stay market-oriented and evolve around customer demands. It will seek to extend its portfolio of laminates products in accordance with market trends. The Group's high-quality development is sturdily based on a vertically integrated supply chain, continuous strengthening of core competencies, and steady revenue growth. During the first half of the year, the Group has increased its monthly copper foil capacities in Lianzhou, Guangdong Province by 300 tonnes. Plans are in the pipeline for a further increase of 900 tonnes per month in the second half. The newly built laminates plant in Shaoguan, Guangdong Province will soon complete trial production before gradually moving towards stable production, which will see an additional 480,000 square metres of glass epoxy laminates manufactured per month.

For the residential project in Kunshan, Jiangsu Province, China, the Group is carrying out sales as planned, and is currently making good progress. At present, the Group has no intention of further land-banking and will concentrate on completing the existing real estate projects.

APPRECIATION

On behalf of the Board, I would like to take this opportunity to express my sincere gratitude to our shareholders, customers, banks, the management and employees for their unreserved support to the Group during the Period.

INTERIM REPORT 2020

27	KINGBOARD LAMINATES HOLDINGS LIMITED

CLOSURE OF REGISTER OF MEMBERS

The register of members of the Company will be closed from Thursday, 3 December 2020 to Friday, 4 December 2020 (both days inclusive) during which period no transfer of shares will be registered. In order to qualify for receiving an interim dividend and a special interim dividend, the Company's shareholders are reminded to ensure all transfers of shares, accompanied by the relevant share certificates and transfer forms, must be lodged with the Company's branch share registrar in Hong Kong, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong for registration not later than 4:00 p.m. on Wednesday, 2 December 2020.

DIRECTORS' INTERESTS IN SHARES

As at 30 June 2020, the interests of the Directors (including the Managing Director of the Company) and their associates in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the "SFO")), as recorded in the register maintained by the Company pursuant to Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers, were as follows:

Long Position

1. Ordinary shares of HK$0.10 each of the Company ("Shares")

			Approximate
		Number	percentage of
		the issued
		of
		issued	share capital
Name of Director	Capacity	shares held	of the Company
			%
Mr. Cheung Kwok Wa1	Beneficial owner/	7,322,000	0.238
	Interest of spouse
Mr. Cheung Kwok Keung	Beneficial owner	352,000	0.011
Mr. Cheung Kwok Ping	Beneficial owner	1,000,000	0.032
Mr. Lam Ka Po	Beneficial owner	1,303,000	0.042
Mr. Cheung Ka Ho	Beneficial owner	2,000	0.00006
Mr. Zhang Lu Fu	Beneficial owner	10,000	0.0003

Note:

• 75,000 Shares were held by his spouse.

INTERIM REPORT 2020

28	KINGBOARD LAMINATES HOLDINGS LIMITED

1. Share options of the Company ("Share Options")

			Approximate
			percentage
			of the issued
		Interest in	share capital of
		underlying	the Company
		shares	as at the end of
		pursuant to	the Reporting
Name of Director	Capacity	Share Options	Period
			%
Mr. Cheung Kwok Wa	Beneficial owner	6,000,000	0.195
Mr. Cheung Kwok Keung	Beneficial owner	6,000,000	0.195
Mr. Cheung Kwok Ping	Beneficial owner	5,000,000	0.162
Mr. Lam Ka Po	Beneficial owner	5,000,000	0.162
Mr. Cheung Ka Ho	Beneficial owner	2,000,000	0.065
Mr. Leung Tai Chiu	Beneficial owner	550,000	0.018
Mr. Ip Shu Kwan, Stephen	Beneficial owner	550,000	0.018
Mr. Zhang Lu Fu	Beneficial owner	550,000	0.018
Mr. Lau Ping Cheung, Kaizer	Beneficial owner	550,000	0.018

1. Non-votingdeferred shares of HK$1 each of Kingboard Laminates Limited, a wholly-owned subsidiary of the Company

		Number of non-voting
Name of Director	Capacity	deferred shares held
Mr. Cheung Kwok Wa	Beneficial owner	1,058,000
Mr. Cheung Kwok Keung	Beneficial owner	529,000
Mr. Cheung Kwok Ping	Beneficial owner	952,200
Mr. Lam Ka Po	Beneficial owner	581,900

Note: None of the non-voting deferred shares of Kingboard Laminates Limited are held by the Group. Such deferred shares carry no rights to receive notice of or to attend or vote at any general meeting of Kingboard Laminates Limited and have practically no rights to dividends or to participate in any distribution on winding up.

INTERIM REPORT 2020

29	KINGBOARD LAMINATES HOLDINGS LIMITED

1. Ordinary shares of HK$0.10 each of Kingboard Holdings Limited ("KHL"), the ultimate holding company of the Company

			Approximate
		Number of	percentage of
		issued ordinary	the issued share
Name of Director	Capacity	shares held	capital of KHL
			%
Mr. Cheung Kwok Wa1	Beneficial owner/	20,700,820	1.876
	Interest of spouse
Mr. Cheung Kwok Keung	Beneficial owner	4,723,422	0.428
Mr. Cheung Kwok Ping2	Beneficial owner/	5,736,383	0.520
	Interest of spouse
Mr. Lam Ka Po	Beneficial owner	2,500,000	0.227
Mr. Cheung Ka Ho	Beneficial owner	384,000	0.035

Notes:

• 74,400 KHL's shares were held by his spouse.

1. 2 36,000 KHL's shares were held by his spouse.

2. Ordinary shares ("EEIC Shares") in the share capital of Elec & Eltek International Company Limited ("EEIC"), a fellow subsidiary of the Company

			Approximate
		Number of	percentage of
		issued EEIC	the issued share
Name of Director	Capacity	Shares held Note	capital of EEIC
			%
Mr. Cheung Kwok Wa	Beneficial owner	706,200	0.378
Mr. Cheung Kwok Ping	Beneficial owner	520,000	0.278
Mr. Lam Ka Po	Beneficial owner	486,600	0.260

Note: With the voluntary conditional cash offer in respect of these shares by GF Securities (Hong Kong) Brokerage Limited on behalf of Elec & Eletek International Holdings Limited accepted.

Other than as disclosed above, none of the Directors (including the Managing Director of the Company) nor their respective associate, had any interests or short position in any shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) as at 30 June 2020.

INTERIM REPORT 2020

30

SUBSTANTIAL SHAREHOLDERS

KINGBOARD LAMINATES HOLDINGS LIMITED

As at 30 June 2020, the register of substantial shareholders maintained by the Company pursuant to Section 336 of the SFO shows that, other than the interests disclosed above in respect of certain Directors (including the Managing Director of the Company), the following shareholders had notified the Company of their relevant interests in the issued share capital of the Company.

Shares

				Approximate
				percentage of
			Number of	the issued
			issued	share capital
Name of shareholder	Notes	Nature of interest	shares held	of the Company
				%
Hallgain Management Limited	(a) & (b)	Interest of controlled	2,204,546,500(L)	71.55
("Hallgain")		corporations
KHL		Beneficial owner	83,686,000(L)	2.71
	(c)	Interest of controlled	2,120,860,500(L)	68.84
		corporations
Jamplan (BVI) Limited		Beneficial owner	1,785,000,000(L)	57.94
("Jamplan")	(d)	Interest of controlled	335,860,500(L)	10.90
		corporation
Capital Research and		Investment manager	177,205,851(L)	5.75
Management Company

1. The letter "L" denotes a long position.

Notes:

1. At 30 June 2020, (i) no shareholder of Hallgain was entitled to exercise, or control the exercise of, directly or indirectly, one-third or more of the voting power at general meetings of Hallgain, and Hallgain and its directors are not accustomed to act in accordance with any shareholder's direction; and (ii) Messrs. Cheung Kwok Wa, Cheung Kwok Ping and Lam Ka Po, all of whom are Directors, are also directors of Hallgain.
2. The interests are held by KHL directly and indirectly. KHL is owned as to over one-third of its entire issued capital of KHL by Hallgain as at 30 June 2020.
3. The interests are held by Jamplan directly and indirectly. Jamplan is a wholly-owned subsidiary of KHL. Mr. Lam Ka Po, being a Director, is also a director of Jamplan.
4. The interests are indirectly held by Jamplan through its wholly-owned subsidiary, Kingboard Investments Limited ("KIL"). Messrs. Cheung Kwok Wa and Cheung Kwok Ping, being Directors, are also directors of KIL.

INTERIM REPORT 2020

31	KINGBOARD LAMINATES HOLDINGS LIMITED

Other than as disclosed above, the Company had not been notified of any other relevant interests or short positions which fall to be disclosed to the Company under Section 336 of the SFO in the issued share capital of the Company as at 30 June 2020.

PURCHASE, SALE OR REDEMPTION OF SHARES

During the six months ended 30 June 2020, there was no purchase, sale or redemption by the Company or any of its subsidiaries of the Company's listed securities on the Stock Exchange of Hong Kong Limited.

AUDIT COMMITTEE

The Audit Committee has reviewed with the management the accounting principles and practices adopted by the Group and discussed auditing, internal control and financial reporting matters including the review of the unaudited interim financial statements of the Group for the six months ended 30 June 2020.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE

The Company has been in compliance with the relevant code provisions of the Corporate Governance Code as set out in Appendix 14 to the Listing Rules (the "CG Code") throughout the six-month period ended 30 June 2020, save for the deviation from code A.4.1 of the CG Code, since the non-executive Director and independent non-executive Directors are not appointed for specific terms. Notwithstanding the aforesaid deviation, all the Directors (including the non- executive Director and independent non-executive Directors) are subject to retirement by rotation and re-election at the Company's annual general meeting, in accordance with the Company's Articles of Association. As such, the Company considers that steps have been taken with a view to ensuring that the Company's corporate governance practices are in line with the CG Code.

COMPLIANCE WITH THE MODEL CODE

The Company has adopted a code of conduct regarding securities transactions by Directors on terms no less exacting than the required standard of the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules (the "Model Code"). Having made specific enquiry of all Directors, each Director has confirmed that he or she has complied with the required standards as set out in the Model Code and the code of conduct regarding Director's securities transactions adopted by the Company throughout the six-month period ended 30 June 2020.

By Order of the Board

Kingboard Laminates Holdings Limited

Cheung Kwok Wa

Chairman

Hong Kong, 28 August 2020

INTERIM REPORT 2020

32	KINGBOARD LAMINATES HOLDINGS LIMITED

Board of Directors

Executive Directors

Mr. Cheung Kwok Wa (Chairman)

Mr. Cheung Kwok Keung (Managing Director)

Mr. Cheung Kwok Ping

Mr. Lam Ka Po

Mr. Cheung Ka Ho

Mr. Zhou Pei Feng

Non-executive Director

Mr. Lo Ka Leong

Independent non-executive Directors

Mr. Leung Tai Chiu

Mr. Ip Shu Kwan, Stephen

Mr. Zhang Lu Fu

Mr. Lau Ping Cheung, Kaizer

INTERIM REPORT 2020