Yangzhou Guangling District Taihe Rural Micro finance : 2020 INTERIM REPORT

Contents

2	Company Profile

1. Financial Highlights
2. Management Discussion and Analysis

12 Others

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

INTERIM REPORT 2020

Company Profile

DIRECTORS

Executive Directors

Mr. Bo Wanlin (Chairman)

Ms. Bai Li

Ms. Zhou Yinqing

Non-executive Directors

Mr. Bo Nianbin

Mr. Zuo Yuchao

Independent non-executive Directors

Mr. Bao Zhenqiang

Mr. Wu Xiankun

Mr. Chan So Kuen

Supervisors

Ms. Wang Chunhong

Mr. Zhang Yi

Ms. Li Guoyan

BOARD COMMITTEES

Audit committee

Mr. Chan So Kuen (Chairman)

Mr. Wu Xiankun

Mr. Bao Zhenqiang

Remuneration committee

Mr. Bao Zhenqiang (Chairman)

Mr. Chan So Kuen

Mr. Wu Xiankun

Nomination committee

Mr. Bo Wanlin (Chairman)

Mr. Wu Xiankun

Mr. Bao Zhenqiang

Joint company secretaries

Mr. Xu Lei

Mr. Lau Kwok Yin (HKICPA)

Authorized representatives for the Stock Exchange of Hong Kong Limited

Mr. Bo Wanlin

Mr. Xu Lei

Compliance officer

Ms. Bai Li

Headquarters and registered office in the

PRC

Beizhou Road, Lidian Town, Guangling District Yangzhou City, Jiangsu Province, the PRC

Principal place of business in Hong Kong

40th Floor, Sunlight Tower

No. 248 Queen's Road East

Wanchai, Hong Kong

Company website address

www.gltaihe.com

Stock code

1915

Auditors and reporting accountants

Ernst & Young

Certified public accountant 22/F, CITIC Tower

1 Tim Mei Avenue Central

Hong Kong

2

YANGZHOU GUANGLING DISTRICT TAIHE RURAL MICRO-FINANCE COMPANY LIMITED

Company Profile

Legal adviser as to Hong Kong law

Chungs Lawyers in association with DeHeng Law Offices

28/F, Henley Building

5 Queen's Road Central

Central

Hong Kong

Legal adviser as to PRC law

Commerce & Finance Law Offices 6/F, NCI Tower

A12 Jianguomenwai Avenue Beijing, the PRC

Principal bankers

Agricultural Bank of China

(Yangzhou Jiangwang Branch)

Room B6, Wanduwujinjidiancheng

Jiangwang Town

Hanjiang District

Yangzhou City

Jiangsu Province

PRC

Bank of Communications Co., Ltd.

Hong Kong Branch

20 Pedder Street

Central, Hong Kong

H Share registrar

Tricor Investor Services Limited

Level 54, Hopewell Centre

183 Queen's Road East

Hong Kong

3

INTERIM REPORT 2020

Financial Highlights

1. For the six months ended 30 June 2020, Yangzhou Guangling District Taihe Rural Micro-finance Company Limited (the "Company") recorded interest income of approximately RMB37.3 million, representing a decrease of approximately 32.8% as compared to approximately RMB55.5 million in the corresponding period in 2019.
2. For the six months ended 30 June 2020, profit after tax of the Company amounted to approximately RMB14.1 million, representing a decrease of approximately 53.7% as compared to approximately RMB30.4 million in the corresponding period in 2019, which was mainly due to the lower interest income and higher provisions for loan impairment losses for the Company's lending business during the on-goingCOVID-19 situation and market conditions.
3. As at 30 June 2020, the balance of outstanding loans (before allowance for impairment losses) of the Company amounted to approximately RMB921.8 million, representing an increase of approximately 2.2% as compared to approximately RMB901.6 million as at 31 December 2019.

4

YANGZHOU GUANGLING DISTRICT TAIHE RURAL MICRO-FINANCE COMPANY LIMITED

Management Discussion and Analysis

BUSINESS REVIEW

During the six months ended 30 June 2020, the Company continued to pursue business opportunities and strengthen its market position. For the six months ended 30 June 2020, the Company recorded interest income of approximately RMB37.3 million, representing a decrease of approximately 32.8% as compared to approximately RMB55.5 million in the corresponding period in 2019; and profit after tax of approximately RMB14.1 million, representing a decrease of approximately 53.7% as compared to approximately RMB30.4 million for the corresponding period in 2019, which was mainly due to the lower interest income and higher provisions for loan impairment losses for the Company's lending business during the on-goingCOVID-19 situation and market conditions. As at 30 June 2020, the Company's balance of outstanding loans (before allowance for impairment losses) amounted to approximately RMB921.8 million, representing an increase of approximately 2.2% as compared to approximately RMB901.6 million as at 31 December 2019. The total assets of the Company as at 30 June 2020 were approximately RMB894.1 million, representing an increase of approximately 1.5% as compared to approximately RMB881.0 million as at 31 December 2019, and net assets were approximately RMB875.5 million as at 30 June 2020, representing an increase of approximately 1.6%, as compared to approximately RMB861.4 million as at 31 December 2019.

The number of customers

We have a relatively broad customer base comprising primarily small and medium-sized enterprises ("SMEs"), microenterprises and individual proprietors situated or resided in Yangzhou City. Our customers are engaged in a variety of industries, and a majority of which are also under the classification of AFR (三農) of the People's Bank of China. We consider the diversity of industries and businesses of our customers, coupled with our relatively small individual loan size, serve to alleviate our risk of concentration and position us to better withstand periodic business and economic cycles of different industries. For the six months ended 30 June 2019 and 2020, we granted loans to 246 and 116 customers, respectively. The following table sets forth the number of customers to whom we have granted loans for the periods indicated:

		Six months ended 30 June
	2020		2019
	No. of		No. of
	Customers	%	Customers	%
Customer by type
SMEs and micro-enterprises	7	6.0	13	5.3
Individual proprietors	109	94.0	233	94.7
Total	116	100.0	246	100.0

5

INTERIM REPORT 2020

Management Discussion and Analysis

Loan portfolio by size

The following table sets forth our outstanding loans by size as at the dates indicated:

	As at 30 June 2020	As at 31 December 2019
	RMB'000	%	RMB'000	%
Less than or equal to RMB0.5 million
- Guaranteed loans	22,368	2.4	25,835	2.9
- Collateralized loans	4,739	0.5	8,650	1.0
	27,107	2.9	34,485	3.9
Over RMB0.5 million but less
than or equal to RMB1 million
- Guaranteed loans	131,235	14.2	112,563	12.5
- Collateralized loans	4,301	0.5	3,415	0.4
	135,536	14.7	115,978	12.9
Over RMB1 million but less than
or equal to RMB2 million
- Guaranteed loans	286,539	31.1	253,118	28.1
- Collateralized loans	8,608	0.9	10,971	1.2
	295,147	32.0	264,089	29.3
Over RMB2 million but less than
or equal to RMB3 million
- Guaranteed loans	445,739	48.4	466,018	51.6
- Collateralized loans	18,284	2.0	21,045	2.3
	464,023	50.4	487,063	53.9
Total	921,813	100.0	901,615	100.0

Loan portfolio by security

We accept (i) loans backed by guarantees, (ii) loans secured by collaterals, or (iii) loans backed and secured by both guarantees and collaterals. The following table sets forth the balance of our outstanding loans by security as at the dates indicated:

	As at 30 June 2020	As at 31 December 2019
	RMB'000	%	RMB'000	%
Guaranteed loans	885,881	96.1	857,534	95.1
Collateralized loans	35,932	3.9	44,081	4.9
included: Guaranteed and
collateralized loans	35,824	3.9	42,548	4.7
	921,813	100.0	901,615	100.0

6

YANGZHOU GUANGLING DISTRICT TAIHE RURAL MICRO-FINANCE COMPANY LIMITED

Management Discussion and Analysis

Loan portfolio by security (continued)

The following table sets forth details of the number of loans granted for the periods indicated by security:

	Six months ended 30 June
	2020	2019
Guaranteed loans	131	241
Collateralized loans	6	12
included: Guaranteed and collateralized loans	6	12
Included: Interest income on impaired loans	137	253

ASSET QUALITY

We adopt a loan classification approach to manage our loan portfolio. We categorize our loans by reference to the "Five-Tier Principle" set forth in the Guideline for Loan Credit Risk Classification (貸款風險分類指引) issued by the China Banking and Insurance Regulatory Commission ("CBIRC"). According to the "Five-Tier Principle", our loans are categorized as "normal", "special-mention", "substandard", "doubtful" or "loss" according to their levels of risk. The following table sets forth our outstanding loans by the "Five-Tier Principle" category as at the dates indicated:

	As at 30 June 2020	As at 31 December 2019
	RMB'000	%	RMB'000	%
Normal	885,059	96.0	856,767	95.0
Special-Mention	122	0.1	15,140	1.7
Substandard	1,000	0.1	12,485	1.4
Doubtful	34,524	3.7	9,728	1.1
Loss	1,108	0.1	7,495	0.8
Total	921,813	100.0	901,615	100.0

7

INTERIM REPORT 2020

Management Discussion and Analysis

ASSET QUALITY (continued)

The following table sets forth our loan quality analysis as at the dates indicated:

	As at	As at
	30 June	31 December
	2020	2019
Impaired loan ratio(1)	4.0%	3.3%
Balance of impaired loans (RMB'000)	36,632	29,708
Total amount of loans receivable (RMB'000)	921,813	901,615
	As at	As at
	30 June	31 December
	2020	2019
Allowance coverage ratio(2)	120.1%	131.0%
Allowance for impairment losses (RMB'000)(3)	43,978	38,924
Balance of impaired loans (RMB'000)	36,632	29,708
Provisions for impairment losses ratio(4)	4.8%	4.3%
	As at	As at
	30 June	31 December
	2020	2019
Balance of overdue loans (RMB'000)	55,235	44,848
Total amount of loans receivable (RMB'000)	921,813	901,615
Overdue loan ratio(5)	6.0%	5.0 %

Notes:

1. Represents the balance of impaired loans divided by the total amount of loans receivable.
2. Represents the allowance for impairment losses on all loans divided by the balance of impaired loans. The allowance for impairment losses on all loans includes provisions provided for loans which are assessed collectively and provisions provided for impaired loans which are assessed individually. Allowance coverage ratio indicates the level of allowance we set aside to cover the probable loss in our loan portfolio.
3. Allowance for impairment losses reflects our management's estimate of the probable loss in our loan portfolio.
4. Represents the allowance for impairment losses divided by the total amount of loans receivable. Provisions for impairment losses ratio measures the cumulative level of provisions.
5. Represents the overdue loans, being loans with whole or part of the principal and/or interest that was overdue for one day or more, divided by the total amount of loans receivable.

8

YANGZHOU GUANGLING DISTRICT TAIHE RURAL MICRO-FINANCE COMPANY LIMITED

Management Discussion and Analysis

FINANCIAL REVIEW

Interest income

Our interest income decreased by approximately 32.8% from approximately RMB55.5 million for the six months ended 30 June 2019 to approximately RMB37.3 million for the six months ended 30 June 2020. The Company's interest income on loans receivable is mainly affected by two factors: the daily balance of loans receivable and the effective interest rates that the Company charges to its customers. The Company's average daily balance of loans receivable increased from approximately RMB850.0 million for the six months ended 30 June 2019 to approximately RMB907.4 million for the six months ended 30 June 2020, mainly attributable to the deployment of the net profits generated by the Company during the past years to expand the Company's loan business. Meanwhile, the effective interest rate per annum decreases from 13.1% for the six months ended 30 June 2019 to 8.2% for the six months ended 30 June 2020.

Interest expense

Our interest expense was RMB147,524 and RMB118,949 for the six months ended 30 June 2019 and 2020, respectively. Interest expense for the six months ended 30 June 2019 and 2020 was accrued from an instalment loan arrangement in respect of purchasing motor vehicles at the end of 2018 and recognised lease liabilities related to the lease contracts in respect of our office as we have adopted IFRS 16 Leases since 1 January 2019.

Accrual of provision for impairment losses

We had accrual of provision for impairment losses of approximately RMB0.6 million and RMB12.0 million for the six months ended 30 June 2019 and 2020, respectively. Such increase in accrual of provision for impairment losses was mainly due to the increase of the Company's impaired loans from approximately RMB29.7 million as at 31 December 2019 to approximately RMB36.6 million as at 30 June 2020. The higher balance of impaired loans as at 30 June 2020 was primarily a result of certain clients who experienced financial difficulties because of the on-goingCOVID-19 situation and market conditions, and hence defaulted in repayment of our loans.

Accrual of provision for guarantee losses

We had accrual of provision for guarantee losses of RMB2,526 and RMB856,772 for our outstanding financing guarantee obligation for the six months ended 30 June 2019 and 2020, respectively. The increase in accrual of provision for guarantee losses was due to the increase in the outstanding exposure of financial guarantee contracts as at 30 June 2020 as compared to that as at 30 June 2019.

Administrative expenses

Our administrative expenses decreased by approximately 57.4% from approximately RMB14.5 million for the six months ended 30 June 2019 to approximately RMB6.2 million for the six months ended 30 June 2020. This decrease was primarily due to the fact that the Company did not incur any expenses for the transfer of listing (the "Transfer of Listing") from GEM to the Main Board of The Stock Exchange of Hong Kong Limited (the "Stock Exchange") during the six months ended 30 June 2020.

Other income, net

We had net other income of RMB69,523 and RMB703,614 for the six months ended 30 June 2019 and 2020 respectively. Such increase was primarily due to the increase in guarantee fee income of RMB664,241.

Income tax expense

Income tax expense decreased by approximately 51.6% from approximately RMB10.0 million for the six months ended 30 June 2019 to approximately RMB4.8 million for the six months ended 30 June 2020. Such decrease was mainly caused by the decrease in profit before tax.

9

INTERIM REPORT 2020

Management Discussion and Analysis

Profit after tax and total comprehensive income

As a result of the foregoing and in particular the lower interest income and higher provisions for loan impairment losses for the Company's lending business during the on-goingCOVID-19 situation and market conditions, our profit after tax and total comprehensive income decreased by approximately 53.7% from approximately RMB30.4 million for the six months ended 30 June 2019 to approximately RMB14.1 million for the six months ended 30 June 2020.

Significant investments

The Company has no significant investment during the six months ended 30 June 2020 and up to the date of this report.

Material acquisitions or disposals of subsidiaries and affiliated companies

The Company has no material acquisition or disposal of subsidiaries and affiliated companies during the six months ended 30 June 2020 and up to the date of this report.

Future plans for material investments or capital assets and expected sources of funding

The Company has no specific future plans for material investments or capital assets during the six months ended 30 June 2020 and up to the date of this report.

Foreign exchange risk

The Company operates principally in the PRC with only limited exposure to foreign exchange rate risk arising primarily from insignificant bank deposits denominated in HKD. The management will continue to monitor foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arises. As at 30 June 2020, the Company did not have any outstanding hedge instruments.

Liquidity, financial resources and capital structure

As at 30 June 2020, the Company had bank balances and cash of approximately RMB0.7 million (31 December 2019: approximately RMB3.8 million). As at 30 June 2020, the Company had installment loan payable which was denominated in RMB with fixed interest rate, amounting to approximately RMB213,318 (31 December 2019: RMB285,015). The gearing ratio, representing the ratio of total borrowings to total assets of the Company, was nil as at 30 June 2020 (31 December 2019: nil).

During the six months ended 30 June 2020, the Company did not use any financial instruments for hedging purposes.

Treasury policy

The Company adopts a prudent financial management strategy in implementing the treasury policy and a sound liquidity position was maintained throughout the period. The Company assesses its customers' credit and financial positions on an ongoing basis so as to minimize the credit risks. In order to control the liquidity risks, the Company would closely monitor the liquidity position of the Company to ensure its assets, liabilities and its liquidity structure would satisfy the funding needs from time to time.

Indebtedness and charges on assets

The Company entered into an installment loan arrangement in respect of purchasing motor vehicles at the end of 2018, the balance of which was RMB213,318 as at 30 June 2020. One of the Company's motor vehicles with net carrying amounts of RMB413,758 was pledged to secure the installment loan payable. Meanwhile, the Company adopted IFRS 16 Leases from 1 January 2019 and recognized the lease liability accordingly, the

10 balance of which was approximately RMB1.8 million as at 30 June 2020.

YANGZHOU GUANGLING DISTRICT TAIHE RURAL MICRO-FINANCE COMPANY LIMITED

Management Discussion and Analysis

Contingent liabilities

Contingent liabilities not provided for in the financial statements were as follows:

	As at	As at
	30 June	31 December
	2020	2019
	RMB	RMB
Financial guarantee contracts	63,450,000	34,000,000

The Company provides financial guarantee services on an occasional basis. The increase was due to the growth in customer demand.

Off-balance sheet arrangements

The Company did not have any off-balance sheet arrangements during the six months ended 30 June 2020 and up to the date of this report.

INTERIM DIVIDEND

The Board does not recommend the payment of an interim dividend for the six months ended 30 June 2020 (2019 interim: nil).

MATERIAL LITIGATION AND ARBITRATION

As at 30 June 2020, the Company was not involved in any material litigation or arbitration.

EMPLOYEES AND REMUNERATION POLICIES

As at 30 June 2020, the Company had 24 full-time employees (31 December 2019: 26 full-time employees). The quality of our employees is the most important factor in maintaining a sustained development and growth of the Company and in improving its profitability. We offer a base salary with bonuses based on our employees' performance, as well as benefits and allowances to all of our employees as an incentive. Total employees remuneration of the Company for the six months ended 30 June 2020 was approximately RMB2.0 million (for the six months ended 30 June 2019: approximately RMB2.4 million).

OUTLOOK

The objective of the Company is to become a leading regional microfinance company focusing on meeting the interim business financing needs of SMEs, micro-enterprises and individual proprietors. Looking ahead, the Board and all staff of the Company will make pioneering and innovative efforts and keep pace with the times to create greater values for our customers, employees and shareholders.

The COVID-19 pandemic has also accelerated the digitalization process of the credit industry. As a result, the Company has actively launched a digitalized and intelligent retail credit platform to satisfy its clients' needs for various credit transformations, and to provide more convenient and intelligent credit solutions to the clients.

11

INTERIM REPORT 2020

Others

DIRECTORS', SUPERVISORS' AND CHIEF EXECUTIVES' INTERESTS AND SHORT POSITIONS IN THE SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY OR ANY ASSOCIATED CORPORATION

As at 30 June 2020, interests or short positions of the directors (the "Directors"), supervisors (the "Supervisors") and the chief executive of the Company and their associates in any of the shares of the Company (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 (Chapter 571 of the Laws of Hong Kong) (the "SFO")), which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including circumstance of interests or short positions deemed or taken to have under such provisions of the SFO), or interests or short positions in the underlying shares and debt securities of the Company recorded in the register required to be kept pursuant to Section 352 of the SFO or as otherwise required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transaction by Directors of Listed Issuers (the "Model Code") contained in Appendix 10 of the Rules Governing the Listing of Securities on the Stock Exchange (the "Listing Rules") were as follows:

Shares of the Company

				Approximate
				percentage of
			Approximate	shareholding
			shareholding	in the
			percentage in	total issued
			the relevant	share capital
		Number of	class of	of the
Director	Nature of interest	Shares held(1)	Shares(2)	Company(3)
Mr. Bo Wanlin(5)	Interest in controlled	430,100,000	95.58%	71.68%
	corporation(4)	Domestic Shares (L)
Ms. Bai Li	Beneficial owner	10,000,000	2.22%	1.67%
		Domestic Shares (L)
Mr. Zuo Yuchao	Beneficial owner	2,600,000	0.58%	0.43%
		Domestic Shares (L)
Ms. Zhou Yinqing	Beneficial owner	700,000	0.16%	0.12%
		Domestic Shares (L)

Notes:

1. The letter "L" denotes a person's long position (as defined under Part XV of the SFO) in the domestic shares of the Company (the "Domestic Shares").
2. The calculation is based on the percentage of shareholding in Domestic Shares (namely, ordinary shares in the Company capital, with a nominal value of RMB 1.00 each, which are subscribed for and paid up in Renminbi by PRC nationals and/or PRC-incorporated entities).
3. The calculation is based on the total number of 600,000,000 Shares in issue.
4. Jiangsu Botai Group Co., Ltd.* (江蘇柏泰集團有限公司) ("Botai Group") is directly interested in approximately 40.03% in the Company. The disclosed interest represents the interest in the Company held by Botai Group which is in turn held as to approximately 33.33% by Mr. Bo Wanlin, approximately 25.00% by Mr. Bo Nianbin, approximately 25.00% by Ms. Bai Li and approximately 16.67% by Ms. Wang Zhengru (spouse of Mr. Bo Wanlin) as at the date of this report. Mr. Bo Wanlin and his

	spouse control more than one - third of the voting rights of Botai Group and are deemed to be interested in its interest in the
12	Company by virtue of the SFO.

• For identification purpose only

YANGZHOU GUANGLING DISTRICT TAIHE RURAL MICRO-FINANCE COMPANY LIMITED

Others

1. Jiangsu Liantai Fashion Shopping Mall Real Estate Co., Ltd.* (江蘇聯泰時尚購物廣場置業有限公司) ("Liantai Guangchang") is directly interested in approximately 31.65% in the Company. The disclosed interest represents the interest in the Company held by Liantai Guangchang, which is in turn held as to approximately 48.67% by Botai Group, approximately 26.33% by Mr. Bo Wanlin, approximately 20.00% by Mr. Bo Nianbin and approximately 5.00% by Ms. Bai Li as at the date of this report. Botai Group controls more than one-third of the voting rights of Liantai Guangchang and is deemed to be interested in its interest in the Company by virtue of the SFO, and Mr. Bo Wanlin and his spouse Ms. Wang Zhengru control more than one-third of the voting rights of Botai Group and are deemed to be interested in its interest in Liantai Guangchang and the Company by virtue of the SFO. On 12 December 2017, Botai Group and Liantai Guangchang, the controlling shareholders of the Company, pledged 45,000,000 and 35,000,000 Domestic Shares in favor of an independent commercial bank in the PRC as securities for bank facilities in the amount of RMB40,000,000 and RMB30,000,000 respectively.

Associated Corporation

			Approximate
			shareholding
			percentage
			in the relevant
			class of shares
			in the Associated
Director	Associated Corporation	Nature of interest	Corporation
Mr. Bo Wanlin	Botai Group	Beneficial owner(1)	33.33%
		Family interest of spouse(2)	16.67%
Ms. Bai Li	Botai Group	Beneficial owner(1)	25.00%
Mr. Bo Nianbin	Botai Group	Beneficial owner(1)	25.00%

Notes:

1. The disclosed interest represents the interests in Botai Group, the associated corporation which is owned as to approximately 33.33% by Mr. Bo Wanlin, approximately 25.00% by Mr. Bo Nianbin, approximately 25.00% by Ms. Bai Li and approximately 16.67% by Ms. Wang Zhengru (spouse of Mr. Bo Wanlin) as at the date of this report.
2. Mr. Bo Wanlin is the spouse of Ms. Wang Zhengru and is deemed to be interested in Ms. Wang Zhengru's interest in Botai Group by virtue of the SFO.

Save as disclosed above, as at 30 June 2020, none of the Directors, Supervisors and chief executive of the Company nor their associates had any interests or short positions in any of the Shares, underlying Shares or debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions deemed or taken to have under such provisions of the SFO), or as recorded in the register required to be kept pursuant to section 352 of the SFO, or transactions of shares and debt securities otherwise required to be notified to the Company and the Stock Exchange pursuant to the Model Code contained in Appendix 10 of the Listing Rules.

• For identification purpose only

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INTERIM REPORT 2020

Others

SUBSTANTIAL SHAREHOLDERS' AND OTHER PERSONS' INTERESTS AND SHORT POSITIONS IN THE SHARES AND UNDERLYING SHARES

As at 30 June 2020, so far as the Directors are aware, each of the following persons has an interest or short position in the Shares or underlying Shares which would be required to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or were required to be entered into the register referred to in section 336 of the SFO:

					Approximate
			Approximate	percentage of
			shareholding	shareholding in
			percentage	the total issued
		Number of	in the relevant	share capital of
Shareholders	Nature of interest	Shares held(1)	class of Shares	the Company(3)
Botai Group(8)	Beneficial owner	240,200,000	53.38% (2)	40.03%
		Domestic Shares(L)
	Interest in controlled	189,900,000	42.20%	(2)	31.65%
	corporation(4)	Domestic Shares(L)
Mr. Bo Wanlin(8)	Interest in controlled	430,100,000	95.58%	(2)	71.68%
	corporation(5)	Domestic Shares(L)
Ms. Wang Zhengru(8)	Family interest of	430,100,000	95.58%	(2)	71.68%
	spouse(6)	Domestic Shares(L)
Liantai Guangchang(8)	Beneficial owner	189,900,000	42.20%	(2)	31.65%
		Domestic Shares(L)
Mr. Suen Cho Hung, Paul(9)	Beneficial owner	17,208,000	11.47% (7)	2.87%
		H Shares(L)
Mr. Lai Ming Wai(9)	Beneficial owner	10,090,000	6.73%	(7)	1.68%
		H Shares(L)

Notes:

1. The letter "L" denotes a person's long position (as defined under Part XV of the SFO) in the Shares of the Company.
2. The calculation is based on the percentage of shareholding in the Domestic Shares.
3. The calculation is based on the total number of 600,000,000 Shares in issue after the listing.
4. As at the date of this report, Liantai Guangchang is held as to approximately 48.67% by Botai Group, approximately 26.33% by Mr. Bo Wanlin, approximately 20.00% by Mr. Bo Nianbin and approximately 5.00% by Ms. Bai Li. Botai Group controls more than one-third of the voting rights of Liantai Guangchang and is deemed to be interested in its interest in the Company by virtue of the SFO.
5. As at the date of this report, Botai Group is held as to approximately 33.33% by Mr. Bo Wanlin, approximately 25.00% by Mr. Bo Nianbin, approximately 25.00% by Ms. Bai Li and approximately 16.67% by Ms. Wang Zhengru (spouse of Mr. Bo Wanlin). Mr. Bo Wanlin and his spouse control more than one-third of the voting rights of Botai Group and are deemed to be interested in its interest in the Company by virtue of the SFO.
6. Ms. Wang Zhengru, the spouse of Mr. Bo Wanlin, is deemed to be interested in Mr. Bo Wanlin's interest in the Company by virtue of the SFO.

14

YANGZHOU GUANGLING DISTRICT TAIHE RURAL MICRO-FINANCE COMPANY LIMITED

Others

1. The calculation is based on the percentage of shareholding in the H Shares.
2. On 12 December 2017, Botai Group and Liantai Guangchang, the controlling shareholders of the Company, pledged 45,000,000 and 35,000,000 Domestic Shares in favour of an independent commercial bank in the PRC as securities for bank facilities in the amount of RMB 40,000,000 and RMB 30,000,000 respectively.
3. Both Mr. Suen Cho Hung and Mr. Lai Ming Wai are independent third parties, other than being shareholders of the Company.

Save as disclosed above, as at 30 June 2020, so far as known to the Directors, no interests or short positions of substantial shareholders of the Company and other persons in any Shares and debentures or underlying Shares of the Company were required to be notified to the Company and the Stock Exchange pursuant to Part XV of the SFO, or were required to be entered into the register referred to in section 336 of the SFO.

PLEDGE OF SHARES BY CONTROLLING SHAREHOLDERS

On 12 December 2017, Botai Group and Liantai Guangchang, the controlling shareholders (as defined in the Listing Rules), pledged 45,000,000 and 35,000,000 Domestic Shares in favour of an independent commercial bank in the PRC as securities for bank facilities in the amount of RMB40,000,000 and RMB30,000,000 respectively. The pledged Domestic Shares represent approximately 18.6% of the aggregate Domestic Shares held by Botai Group and Liantai Guangchang, approximately 17.8% of the total number of Domestic Shares in issue, and approximately 13.3% of the total issued share capital of the Company on 12 December 2017. Details are set out in the announcement of the Company dated 12 December 2017.

PUBLIC FLOAT

According to the information disclosed publicly and as far as the Directors are aware, during the six months ended 30 June 2020 and up to the date of this report, at least 25% of the issued shares of the Company are held by public shareholders and the Company has maintained the prescribed public float required by the Listing Rules.

PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES

The Company did not purchase, sell or redeem any of the Company's listed securities during the six months ended 30 June 2020.

15

INTERIM REPORT 2020

Others

INTERESTS IN COMPETING BUSINESS

Directors' and Controlling Shareholders' Interest in Competing Business

As at the date of this report, Botai Group (a controlling shareholder of our Company (as defined in the Listing Rules)) held 8% interest in Yangzhou Guangling Zhongcheng Rural Bank Co., Ltd.* (揚州廣陵中成村鎮銀行股份 有限公司) ("Zhongcheng Bank") and 10% interest in Jiangsu Hanjiang Mintai Rural Bank Co., Ltd.* (江蘇邗江民 泰村鎮銀行股份有限公司) ("Mintai Bank") in the capacity as passive investor.

Mintai Bank principally engages in certain banking business such as taking public deposit; providing short term, medium term and long term loans; domestic exchange settlement; notes acceptance and discount; interbank borrowing; debit card issuing; issuing and cashing agency, undertaking governmental bond; accounts receivable and payable agency; and other business approved by China Banking Regulatory Commission ("Banking Business") in Hanjiang District of Yangzhou, whereas Zhongcheng Bank principally engages in the Bank Business in Guangling District of Yangzhou City.

For further details on the general information of Mintai Bank and Zhongcheng Bank and the reasons that our Directors are of the view that the competition between the principal businesses of Mintai Bank and Zhongcheng Bank and the Company is limited and not extreme, please refer to the paragraph titled "Relationship with the Controlling Shareholders - other Businesses Invested by our Controlling Shareholders" in the Company's prospectus dated 24 April 2017.

Save as disclosed above, as at 30 June 2020, none of the controlling shareholders of the Company, Directors and their respective close associates has any interests in any business which directly or indirectly competes or is likely to compete with our principal business, which would require disclosure under Rule 8.10 of the Listing Rules.

AUDIT COMMITTEE

The Company established an audit committee (the "Audit Committee") on 31 January 2015 in accordance with Rules 3.21 to 3.23 of the Listing Rules. The written terms of reference of the Audit Committee was adopted in compliance with paragraphs C.3.3 and C.3.7 of the Corporate Governance Code. The primary duties of the Audit Committee are to review and supervise the Company's financial reporting, risk management and internal control systems, oversee the audit process and to provide advice and comments to the Board. The Audit Committee consists of three independent non-executive Directors, being Mr. Chan So Kuen, Mr. Bao Zhenqiang and Mr. Wu Xiankun. Mr. Chan So Kuen currently serves as the chairman of our audit committee. The Audit Committee had reviewed the 2020 interim report and the unaudited financial statements of the Company for the six months ended 30 June 2020 and was of the opinion that the preparation of such statements complied with the applicable accounting standards and requirements of the Stock Exchange and legal requirements, and that adequate disclosures have been made.

• For identification purpose only

16

YANGZHOU GUANGLING DISTRICT TAIHE RURAL MICRO-FINANCE COMPANY LIMITED

Others

CORPORATE GOVERNANCE

The Company has complied with the requirements of the Corporate Governance Code set out in Appendix 14 to the Listing Rules during the six months ended 30 June 2020 and up to the date of this report.

CODE OF CONDUCT REGARDING SECURITIES TRANSACTIONS BY DIRECTORS AND SUPERVISORS

The Company adopted a code of conduct regarding securities transactions by Directors and the Supervisors (the "Code of Conduct") on terms no less exacting than the required standard of dealings as set out in the Model Code contained in Appendix 10 of the Listing Rules. Having made specific enquiry of all Directors and Supervisors, the Directors and Supervisors have confirmed that they have complied with such Code of Conduct and required standard of dealings during the six months ended 30 June 2020 and up to the date of this report. The Company continues and will continue to ensure compliance with the Code of Conduct.

EVENT AFTER THE REPORTING PERIOD

Up to the date of this report, there has been no significant event relevant to the business or financial performance of the Company that comes to the attention of the Directors after the six months ended 30 June 2020.

By order of the Board

Yangzhou Guangling District Taihe Rural

Micro-finance Company Limited

Bo Wanlin

Chairman

Yangzhou, the PRC, 26 August 2020

As at the date of this report, the Board comprises three executive Directors, namely Mr. Bo Wanlin, Ms. Bai Li and Ms. Zhou Yinqing; two non-executive Directors, namely Mr. Bo Nianbin and Mr. Zuo Yuchao and three independent non-executive Directors, namely Mr. Bao Zhenqiang, Mr. Wu Xiankun and Mr. Chan So Kuen.

17

INTERIM REPORT 2020

Independent Review Report

To the board of directors of Yangzhou Guangling District Taihe Rural Micro-finance Company Limited

(Incorporated in the People's Republic of China with limited liability)

INTRODUCTION

We have reviewed the interim financial information set out on pages 19 to 45, which comprise the condensed statement of financial position of Yangzhou Guangling District Taihe Rural Micro-finance Company Limited (the "Company") as at 30 June 2020 and the related condensed statement of profit or loss and other comprehensive income, changes in equity and cash flows for the six-months period then ended, and explanatory notes. 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 International Accounting Standard 34 Interim Financial Reporting ("IAS 34"). The directors of the Company are responsible for the preparation and presentation of this interim financial information in accordance with IAS 34. Our responsibility is to express a conclusion on this interim financial information based on our review. Our 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.

SCOPE OF REVIEW

We conducted our review in accordance with International Standard on Review Engagements 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. 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 International 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 financial information is not prepared, in all material respects, in accordance with IAS 34.

Ernst & Young

Certified Public Accountants

Hong Kong

26 August 2020

18

YANGZHOU GUANGLING DISTRICT TAIHE RURAL MICRO-FINANCE COMPANY LIMITED

Condensed Statement of Profit or Loss and other Comprehensive Income

Six months ended 30 June 2020 (Amounts expressed in RMB unless otherwise stated)

		Six months ended 30 June
	Notes	2020	2019
		(unaudited)	(unaudited)
Interest income	4	37,299,531	55,499,995
Interest expense	4	(118,949)	(147,524)
Interest income, net	4	37,180,582	55,352,471
Accrual of provision for impairment losses		(11,971,468)	(569,072)
Accrual of provision for guarantee losses		(856,772)	(2,526)
Administrative expenses	5	(6,175,769)	(14,506,991)
Other income, net	6	703,614	69,523
PROFIT BEFORE TAX		18,880,187	40,343,405
Income tax expense	7	(4,819,626)	(9,957,988)
PROFIT AFTER TAX AND TOTAL COMPREHENSIVE
INCOME FOR THE PERIOD		14,060,561	30,385,417
EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY
EQUITY HOLDERS OF THE COMPANY	9
Basic		0.02	0.05
Diluted		0.02	0.05

19

INTERIM REPORT 2020

Condensed Statement of Financial Position

As at 30 June 2020

(Amounts expressed in RMB unless otherwise stated)

			As at
		As at	31 December
	Notes	30 June 2020	2019
		(unaudited)	(audited)
ASSETS
Cash and cash equivalents	10	732,059	3,779,385
Loans receivable	11	877,835,869	862,691,722
Property and equipment	12	5,526,027	6,277,330
Deferred tax	13	9,402,434	7,826,271
Other assets	14	600,292	429,652
TOTAL ASSETS		894,096,681	881,004,360
LIABILITIES
Deferred income		1,077,793	678,206
Income tax payable		7,620,969	7,912,322
Liabilities from guarantees	15	1,609,378	752,606
Lease liabilities	16	1,771,716	2,289,406
Other liabilities	17	6,525,940	7,941,496
TOTAL LIABILITIES		18,605,796	19,574,036
EQUITY
Share capital	18	600,000,000	600,000,000
Reserves	19	108,698,142	108,698,142
Retained earnings		166,792,743	152,732,182
TOTAL EQUITY		875,490,885	861,430,324
TOTAL EQUITY AND LIABILITIES		894,096,681	881,004,360

Bai Li	Zhou Yinqing
Director	Director

20

YANGZHOU GUANGLING DISTRICT TAIHE RURAL MICRO-FINANCE COMPANY LIMITED

Condensed Statement of Changes in Equity

Six months ended 30 June 2020 (Amounts expressed in RMB unless otherwise stated)

			Reserves
	Paid	Capital	Surplus	General	Retained
	in capital	reserve	reserve	reserve	earnings	Total
Balance as at 1 January 2019	600,000,000	54,417,191	40,279,200	8,378,145	108,236,543	811,311,079
Profit for the period and
total comprehensive income	-	-	-	-	30,385,417	30,385,417
Balance as at 30 June 2019
(unaudited)	600,000,000	54,417,191	40,279,200	8,378,145	138,621,960	841,696,496
Balance as at 1 January 2020	600,000,000	54,417,191	45,291,124	8,989,827	152,732,182	861,430,324
Profit for the period and
total comprehensive income	-	-	-	-	14,060,561	14,060,561
Balance as at 30 June 2020
(unaudited)	600,000,000	54,417,191	45,291,124	8,989,827	166,792,743	875,490,885

21

INTERIM REPORT 2020

Condensed Statement of Cash Flows

Six months ended 30 June 2020

(Amounts expressed in RMB unless otherwise stated)

		Six months ended 30 June
	Notes	2020	2019
		(unaudited)	(unaudited)
CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES
Profit before tax		18,880,187	40,343,405
Adjustments for:
Depreciation and amortisation	12	1,006,991	927,218
Accrual of provision for impairment losses		11,971,468	569,072
Accrual of provision for guarantee losses		856,772	2,526
Accreted interest on impaired loans	4	(620,661)	(157,143)
Interest expense	4	118,949	147,524
Foreign exchange loss/(gain), net	6	(13)	3
Increase in loans receivable		(26,909,819)	(21,616,917)
Decrease in other assets		101,886	53,690
Increase/(decrease) in other liabilities		(944,269)	2,251,713
Net cash flows from operating activities before tax		4,461,491	22,521,091
Income tax paid		(6,687,142)	(10,939,092)
Net cash flows from/(used in) operating activities		(2,225,651)	11,581,999
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchases of property and equipment and other long-term assets		(113,352)	(1,654,935)
Net cash flows used in investing activities		(113,352)	(1,654,935)
CASH FLOWS USED IN FINANCING ACTIVITIES
Repayment of borrowings		(71,697)	(66,124)
Repayment of lease liabilities		(383,639)	(700,679)
Interest paid on borrowings		(253,000)	(86,793)
Net cash flows used in financing activities		(708,336)	(853,596)
NET INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS		(3,047,339)	9,073,468
Cash and cash equivalents at beginning of the period		3,779,385	4,337,348
Effect of foreign exchange rate changes, net	6	13	(3)
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD	10	732,059	13,410,813

22

YANGZHOU GUANGLING DISTRICT TAIHE RURAL MICRO-FINANCE COMPANY LIMITED

Notes to the Condensed Interim Financial Statements

30 June 2020 (Amounts expressed in RMB unless otherwise stated)

1. CORPORATE INFORMATION

Yangzhou Guangling District Taihe Rural Micro-finance Company Limited (the "Company") was established as a limited liability company in the People's Republic of China (the "PRC") on 12 November 2008 based on "Su Jin Rong Ban Fa [2008] No 47" issued by the Pilot Leading Group Office for Rural Micro-finance Organisations of Jiangsu province.

According to the resolution of the shareholders' meeting on 8 August 2012 and "Yang Fu Jin [2012] No 77" approved by the Yangzhou Municipal Government Financial Office, the Company was converted from a limited liability company to a joint stock company on 10 August 2012. Upon its conversion, the Company issued 260 million shares at a par value of RMB1 each to its shareholders, based on the asset appraisal result of RMB300.48 million in respect of its net assets in the financial statements as at 31 July 2012.

In May 2017, the Company conducted a public offering of overseas listed foreign shares ("H shares"). Upon the completion of the H share offering, the issued capital was increased to RMB600 million. The Company's H shares were listed on GEM (formerly known as "Growth Enterprise Market") of The Stock Exchange of Hong Kong Limited ("Stock Exchange") and trading of its H shares commenced on 8 May 2017. Upon the approval of the Stock Exchange, the Company's H shares were listed on the Main Board by way of Transfer of Listing and delisted from GEM on 17 July 2019.

The Company obtained its business licence with Unified Social Credit No. 91321000682158920M. The legal representative of the Company is Bo Wanlin. Its registered office is located at Beizhou Road, Lidian Village, Guangling District, Yangzhou City.

The principal activities of the Company are the granting of loans to "Agriculture, Rural Areas and Farmers", provision of financial guarantees, acting as a financial institution agent and other financial businesses.

In the opinion of the directors, the holding company and the ultimate holding company of the Company is Jiangsu Botai Group Co., Ltd., which is incorporated in the People's Republic of China.

2. BASIS OF PREPARATION AND CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES

2.1 BASIS OF PREPARATION

The interim condensed financial statements for the six months ended 30 June 2020 have been prepared in accordance with IAS 34 Interim Financial Reporting.

The interim condensed financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Company's annual financial statements as at 31 December 2019.

23

INTERIM REPORT 2020

Notes to the Condensed Interim Financial Statements

30 June 2020

(Amounts expressed in RMB unless otherwise stated)

1. BASIS OF PREPARATION AND CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES (continued)
   2.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
   The accounting policies adopted in the preparation of the interim condensed financial statements are consistent with those followed in the preparation of the Company's annual financial statements for the year ended 31 December 2019. The Company has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. The newly adopted standards have no impact on the Company's financial statements.
2. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

The nature and assumptions related to the Company's accounting estimates are consistent with those adopted in the Company's financial statements for the year ended 31 December 2019.

4. INTEREST INCOME, NET

	Six months ended 30 June
	2020	2019
Interest income on:
Loans receivable	37,294,432	55,492,600
Cash at banks	5,099	5,860
Cash at a third party	-	1,535
Subtotal	37,299,531	55,499,995
Interest expense on:
Lease liabilities	(112,310)	(135,312)
Borrowing from other institutions	(6,639)	(12,212)
Subtotal	(118,949)	(147,524)
Interest income, net	37,180,582	55,352,471
Included: Interest income on impaired loans	620,661	157,143

24

YANGZHOU GUANGLING DISTRICT TAIHE RURAL MICRO-FINANCE COMPANY LIMITED

Notes to the Condensed Interim Financial Statements

30 June 2020 (Amounts expressed in RMB unless otherwise stated)

5. ADMINISTRATIVE EXPENSES
		Six months ended 30 June
		2020	2019
	Staff costs	2,044,685	2,367,189
	Tax and surcharges	221,107	303,936
	Transfer of listing expense	-	7,395,463
	Depreciation and amortisation	1,006,991	927,218
	Office expenses	43,605	92,833
	Auditor's remuneration	600,000	672,170
	Advertising and entertainment expenses	607,082	893,823
	Service fees	1,124,137	1,156,122
	Others	528,162	698,237
	Total	6,175,769	14,506,991

6. OTHER INCOME, NET

	Six months ended 30 June
	2020	2019
Other income:
Guarantee fee income	739,092	74,851
Foreign exchange gain	13	-
Others	22,358	10,000
Subtotal	761,463	84,851
Other expenses:
Foreign exchange loss	-	(3)
Fee and commission expense	(7,549)	(15,225)
Others	(50,300)	(100)
Subtotal	(57,849)	(15,328)
Other income, net	703,614	69,523

25

INTERIM REPORT 2020

Notes to the Condensed Interim Financial Statements

30 June 2020

(Amounts expressed in RMB unless otherwise stated)

7. INCOME TAX EXPENSE

	Six months ended 30 June
	2020	2019
Current income tax	6,395,789	9,737,090
Deferred income tax	(1,576,163)	220,898
	4,819,626	9,957,988

A reconciliation of the tax expense applicable to profit before tax using the statutory rate for the jurisdiction in which the Company is domiciled to the tax expense at the effective tax rate is as follows:

	Six months ended 30 June
	2020	2019
Profit before tax	18,880,187	40,343,405
Tax at the applicable tax rate	4,720,047	10,085,851
Adjustments in respect of current income tax of previous years	-	(281,875)
Expenses not deductible for tax	99,579	154,012
Total tax expense for the year at the Company's effective tax rate	4,819,626	9,957,988

8. DIVIDENDS

No dividend was paid or proposed during the six months ended 30 June 2020 and 2019.

26

YANGZHOU GUANGLING DISTRICT TAIHE RURAL MICRO-FINANCE COMPANY LIMITED

Notes to the Condensed Interim Financial Statements

30 June 2020 (Amounts expressed in RMB unless otherwise stated)

9. EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE COMPANY

The calculation of basic earnings per share is based on the profit attributable to ordinary shareholders of the Company and the weighted average number of ordinary shares in issue for the period as follows:

	Six months ended 30 June
	2020	2019
Earnings
Profit attributable to ordinary equity holders of the Company,
used in the basic earnings per share calculation	14,060,561	30,385,417
Shares
Weighted average number of ordinary shares in issue during the
period used in the basic earnings per share calculation (i)	600,000,000	600,000,000
Basic and diluted earnings per share	0.02	0.05

1. Weighted average number of ordinary shares

	Six months ended 30 June
	2020	2019
Issued ordinary shares at the beginning of the period	600,000,000	600,000,000
Weighted average number of ordinary shares
at the end of the period	600,000,000	600,000,000

There were no dilutive potential ordinary shares of the Company during the period, and therefore, diluted earnings per share of the Company are the same as the basic earnings per share.

27

INTERIM REPORT 2020

Notes to the Condensed Interim Financial Statements

30 June 2020

(Amounts expressed in RMB unless otherwise stated)

10. CASH AND CASH EQUIVALENTS

	As at	As at
	30 June	31 December
	2020	2019
Cash at a third party	5,105	3,676,788
Cash at banks	726,954	102,597
	732,059	3,779,385

At the end of the reporting period, the cash and cash equivalents of the Company denominated in RMB amounted to RMB731,287 (As at 31 December 2019: RMB3,778,222).

11. LOANS RECEIVABLE

	As at	As at
	30 June	31 December
	2020	2019
Loans receivable	921,813,445	901,615,352
Less: Allowance for impairment losses	43,977,576	38,923,630
	877,835,869	862,691,722
The types of loans receivable are as follow:
	As at	As at
	30 June	31 December
	2020	2019
Guaranteed loans	885,881,724	857,535,282
Collateral-backed loans	35,931,721	44,080,070
	921,813,445	901,615,352
Less: Allowance for impairment losses	43,977,576	38,923,630
	877,835,869	862,691,722

28

YANGZHOU GUANGLING DISTRICT TAIHE RURAL MICRO-FINANCE COMPANY LIMITED

Notes to the Condensed Interim Financial Statements

30 June 2020 (Amounts expressed in RMB unless otherwise stated)

11. LOANS RECEIVABLE (continued)

The table below shows the credit quality and the maximum exposure to credit risk based on the Company's internal credit rating system (Five-Tier Principle) and six months-end stage classification.

		30 June 2020
Internal rating grades	Stage 1	Stage 2	Stage 3	Total
Normal	885,059,740	-	-	885,059,740
Special mention	-	121,647	-	121,647
Sub-standard	-	-	1,000,000	1,000,000
Doubtful	-	-	34,524,058	34,524,058
Loss	-	-	1,108,000	1,108,000
Total	885,059,740	121,647	36,632,058	921,813,445
		31 December 2019
Internal rating grades	Stage 1	Stage 2	Stage 3	Total
Normal	856,766,734	-	-	856,766,734
Special mention	-	15,140,518	-	15,140,518
Sub-standard	-	-	12,485,000	12,485,000
Doubtful	-	-	9,727,893	9,727,893
Loss	-	-	7,495,207	7,495,207
Total	856,766,734	15,140,518	29,708,100	901,615,352

29

INTERIM REPORT 2020

Notes to the Condensed Interim Financial Statements

30 June 2020

(Amounts expressed in RMB unless otherwise stated)

11. LOANS RECEIVABLE (continued)

An analysis of changes in the outstanding exposures is as follows:

	Stage 1	Stage 2	Stage 3
			(Lifetime ECL-
	(12-month ECL)	(Lifetime ECL)	impaired)
	Collectively	Collectively	Individually
	assessed	assessed	assessed	Total
Outstanding exposure as at
31 December 2019	856,766,734	15,140,518	29,708,100	901,615,352
New exposures	198,445,410	-	-	198,445,410
Exposure derecognised	(168,737,189)	(494,553)	(2,736,450)	(171,968,192)
Transfers to Stage 2	(415,215)	415,215	-	-
Transfers to Stage 3	(1,000,000)	(14,939,533)	15,939,533	-
Amounts written off	-	-	(6,279,125)	(6,279,125)
At 30 June 2020	885,059,740	121,647	36,632,058	921,813,445
	Stage 1	Stage 2	Stage 3
			(Lifetime ECL-
	(12-month ECL)	(Lifetime ECL)	impaired)
	Collectively	Collectively	Individually
	assessed	assessed	assessed	Total
Outstanding exposure as at
31 December 2018	826,671,468	3,301,005	11,543,474	841,515,947
New exposures	869,640,354	-	-	869,640,354
Exposure derecognised	(804,088,970)	(1,277,076)	(4,174,903)	(809,540,949)
Transfers to Stage 2	(18,940,518)	18,940,518	-	-
Transfers to Stage 3	(16,515,600)	(5,823,929)	22,339,529	-
At 31 December 2019	856,766,734	15,140,518	29,708,100	901,615,352

30

YANGZHOU GUANGLING DISTRICT TAIHE RURAL MICRO-FINANCE COMPANY LIMITED

Notes to the Condensed Interim Financial Statements

30 June 2020 (Amounts expressed in RMB unless otherwise stated)

11. LOANS RECEIVABLE (continued)

An analysis of changes of the corresponding expected credit losses ("ECLs") is as follows:

	Stage 1	Stage 2	Stage 3
			(Lifetime ECL-
	(12-month ECL)	(Lifetime ECL)	impaired)
	Collectively	Collectively	Individually	Total ECL
	assessed	assessed	assessed	allowance
ECLs as at 31 December 2019	18,911,860	1,554,293	18,457,477	38,923,630
Net charge/(reversal) of
the impairment	3,345,000	(30,215)	1,002,890	4,317,675
Transfers to Stage 2	(8,362)	8,362	-	-
Transfers to Stage 3	(22,930)	(1,554,251)	1,577,181	-
Net remeasurement of ECL
arising from transfer of stage	-	34,510	7,601,547	7,636,057
Accreted interest on impaired
loans (Note 4)	-	-	(620,661)	(620,661)
Amounts written off	-	-	(6,279,125)	(6,279,125)
At 30 June 2020	22,225,568	12,699	21,739,309	43,977,576
	Stage 1	Stage 2	Stage 3
			(Lifetime ECL-
	(12-month ECL)	(Lifetime ECL)	impaired)
	Collectively	Collectively	Individually	Total ECL
	assessed	assessed	assessed	allowance
ECLs as at 31 December 2018	17,816,242	318,462	9,105,521	27,240,225
Net charge/(reversal) of
the impairment	1,858,454	(117,893)	(1,959,159)	(218,598)
Transfers to Stage 2	(407,555)	407,555	-	-
Transfers to Stage 3	(355,281)	(586,355)	941,636	-
Net remeasurement of ECL
arising from transfer of stage	-	1,532,524	10,566,649	12,099,173
Accreted interest on impaired loans	-	-	(197,170)	(197,170)
At 31 December 2019	18,911,860	1,554,293	18,457,477	38,923,630

31

INTERIM REPORT 2020

Notes to the Condensed Interim Financial Statements

30 June 2020

(Amounts expressed in RMB unless otherwise stated)

12. PROPERTY AND EQUIPMENT

		Fixtures
	Motor	and	Leasehold	Right-of-
	vehicles	furniture	improvements	use asset	Total
Cost:
At 1 January 2019	2,025,634	983,173	7,782,050	2,626,966	13,417,823
Additions	-	502,407	2,755,469	-	3,257,876
Disposals	-	(93,622)	-	-	(93,622)
At 31 December 2019	2,025,634	1,391,958	10,537,519	2,626,966	16,582,077
Additions	-	45,488	210,200	-	255,688
Disposals	-	-	(6,654,032)	-	(6,654,032)
At 30 June 2020	2,025,634	1,437,446	4,093,687	2,626,966	10,183,733
Accumulated depreciation:
At 1 January 2019	619,036	652,098	7,195,620	-	8,466,754
Depreciation charge for the year	477,970	176,901	721,061	555,683	1,931,615
Disposals	-	(93,622)	-	-	(93,622)
At 31 December 2019	1,097,006	735,377	7,916,681	555,683	10,304,747
Depreciation charge for the period	238,985	91,449	409,282	267,275	1,006,991
Disposals	-	-	(6,654,032)	-	(6,654,032)
At 30 June 2020	1,335,991	826,826	1,671,931	822,958	4,657,706
Net carrying amount:
At 31 December 2019	928,628	656,581	2,620,838	2,071,283	6,277,330
At 30 June 2020	689,643	610,620	2,421,756	1,804,008	5,526,027

As at 30 June 2020, one of the Company's motor vehicles with net carrying amounts of RMB413,758 was pledged to secure the installment loan payable of the Company (As at 31 December 2019: RMB499,363).

32

YANGZHOU GUANGLING DISTRICT TAIHE RURAL MICRO-FINANCE COMPANY LIMITED

Notes to the Condensed Interim Financial Statements

30 June 2020 (Amounts expressed in RMB unless otherwise stated)

13. DEFERRED TAX

(a) Analysed by nature

	As at 30 June 2020	As at 31 December 2019
	Deductible	Deferred	Deductible	Deferred
	temporary	income tax	temporary	income tax
	differences	assets	differences	assets
Impairment allowance	35,685,215	8,921,304	30,815,776	7,703,944
Liabilities from guarantees	1,609,378	402,345	752,606	188,152
Deferred income	1,077,793	269,448	678,206	169,551
Leases	225,885	56,471	169,213	42,303
Depreciation	(988,536)	(247,134)	(1,110,716)	(277,679)
Deferred income tax	37,609,735	9,402,434	31,305,085	7,826,271

1. The movements of deferred tax assets and liabilities are as follows: Deferred tax assets

		Liabilities
	Impairment	from	Deferred
	allowance	guarantees	income	Others	Total
At 1 January 2019	4,954,516	20,963	28,017	-	5,003,496
Recognised in profit or loss	2,749,428	167,189	141,534	42,303	3,100,454
At 31 December 2019	7,703,944	188,152	169,551	42,303	8,103,950
Recognised in profit or loss	1,217,360	214,193	99,897	14,168	1,545,618
At 30 June 2020	8,921,304	402,345	269,448	56,471	9,649,568

33

INTERIM REPORT 2020

Notes to the Condensed Interim Financial Statements

30 June 2020

(Amounts expressed in RMB unless otherwise stated)

13. DEFERRED TAX (continued)

1. The movements of deferred tax assets and liabilities are as follows: (continued) Deferred tax liabilities

	Depreciation
	of property
	and
	equipment	Total
At 1 January 2019	-	-
Recognised in profit or loss	(277,679)	(277,679)
At 31 December 2019	(277,679)	(277,679)
Recognised in profit or loss	30,545	30,545
At 30 June 2020	(247,134)	(247,134)

For presentation purposes, certain deferred tax assets and liabilities have been offset in the statement of financial position. The following is an analysis of the deferred tax balances of the Company for financial reporting purposes:

	As at	As at
	30 June	31 December
	2020	2019
Net deferred tax assets recognised in the
statement of financial position	9,402,434	7,826,271

34

YANGZHOU GUANGLING DISTRICT TAIHE RURAL MICRO-FINANCE COMPANY LIMITED

Notes to the Condensed Interim Financial Statements

30 June 2020 (Amounts expressed in RMB unless otherwise stated)

14. OTHER ASSETS

		As at	As at
		30 June	31 December
		2020	2019
Prepayments		101,089	257,643
Other receivables		966,311	1,053,981
Repossessed asset	(i)	432,600	-
Less:Allowance for doubtful debt		899,708	881,972
		600,292	429,652

Notes:

1. Repossessed asset is a property located at Yangzhou City, Jiangsu Province in the PRC. The Company plans to dispose of the repossessed assets held at June 30, 2020 by auction or transfer.

15. LIABILITIES FROM GUARANTEES

Liabilities from guarantees are provisions made for the guarantees. The table below shows the changes in the expected credit losses ("ECLs") for the outstanding exposure of guarantees.

	Stage 1
	(12-month ECL)
	Collectively
	assessed	Total
At 31 December 2018	83,852	83,852
New exposure	752,606	752,606
Exposure derecognised	(83,852)	(83,852)
At 31 December 2019	752,606	752,606
New exposure	1,299,481	1,299,481
Exposure derecognised	(442,709)	(442,709)
At 30 June 2020	1,609,378	1,609,378

35

INTERIM REPORT 2020

Notes to the Condensed Interim Financial Statements

30 June 2020

(Amounts expressed in RMB unless otherwise stated)

16. LEASE LIABILITIES

The carrying amount of lease liabilities and the movements during the year/period are as follows:

	30 June	31 December
	2020	2019
Carrying amount at 1 January	2,289,406	2,802,226
Accretion of interest recognised during the year/peirod	112,310	135,312
Payments	(630,000)	(648,132)
	1,771,716	2,289,406

17. OTHER LIABILITIES

	As at	As at
	30 June	31 December
	2020	2019
Payrolls payable	444,466	677,308
Installment loan payable	213,318	285,015
Other payables	5,868,156	6,979,173
	6,525,940	7,941,496

18. SHARE CAPITAL

	As at	As at
	30 June	31 December
	2020	2019
Issued and fully paid	600,000,000	600,000,000

No movement occurred of the Company during the period of six-months ended 30 June 2020.

36

YANGZHOU GUANGLING DISTRICT TAIHE RURAL MICRO-FINANCE COMPANY LIMITED

Notes to the Condensed Interim Financial Statements

30 June 2020 (Amounts expressed in RMB unless otherwise stated)

19. RESERVES

The amounts of the Company's reserves and the movements therein for the reporting period are presented in the statement of changes in equity.

Capital reserve

Capital reserve comprises share premium arising from the difference between the par value of the shares issued by the Company and the net asset value in the financial statements as at 31 July 2012 during the conversion of the Company into a joint stock company and the difference between the par value of the shares of the Company and the proceeds received from the issuance of the shares of the Company.

Surplus reserve

Surplus reserve represents statutory surplus reserve.

The Company is required to appropriate 10% of its profit for the year pursuant to the Company Law of the People's Republic of China and the Articles of Association of the Company to the statutory surplus reserve until the reserve balance reaches 50% of its registered capital.

Subject to the approval of the shareholders, the statutory surplus reserve may be used to offset accumulated losses of the Company, if any, and may also be converted into capital of the Company, provided that the balance of the statutory surplus reserve after such capitalisation is not less than 25% of the registered capital immediately before capitalisation.

General reserve

According to the micro-finance rural companies in Jiangsu (Trial)> (Su Cai Gui [2009] No.1), the Company is required to set aside a general reserve which is not less than 1% of the ending balance of loans receivable through equity.

37

INTERIM REPORT 2020

Notes to the Condensed Interim Financial Statements

30 June 2020

(Amounts expressed in RMB unless otherwise stated)

20. NOTES TO THE STATEMENT OF CASH FLOWS

1. Changes in liabilities used in financing activities are as follows:

	Borrowing
	from other	Lease
	institutions	liabilities	Total
At 1 January 2019	421,000	2,802,226	3,223,226
Repayment of the installment loan	(66,124)	-	(66,124)
Repayment of lease liabilities	-	(700,679)	(700,679)
Interest expense	12,212	135,312	147,524
Repayment of interest expense	(12,212)	(74,581)	(86,793)
At 30 June 2019	354,876	2,162,278	2,517,154
At 1 January 2020	285,015	2,289,406	2,574,421
Repayment of the installment loan	(71,697)	-	(71,697)
Repayment of lease liabilities	-	(383,639)	(383,639)
Interest expense	6,639	112,310	118,949
Repayment of interest expense	(6,639)	(246,361)	(253,000)
At 30 June 2020	213,318	1,771,716	1,985,034

1. Total cash outflow for leases:
   The total cash outflow for leases included in the statement of cash flows is as follows:

	Six months
	ended 30
	June 2020
Within financing activities	630,000
	630,000

38

YANGZHOU GUANGLING DISTRICT TAIHE RURAL MICRO-FINANCE COMPANY LIMITED

Notes to the Condensed Interim Financial Statements

30 June 2020 (Amounts expressed in RMB unless otherwise stated)

21. RELATED PARTY TRANSACTIONS

1. Leasing

		Six months ended 30 June
	Notes	2020	2019
Depreciation of right-of-use asset	(i)	256,708	253,887
Interest expense on lease liabilities	(i)	111,724	130,957

Notes:

1. 1. The Company entered into a lease contract in respect of the Company's office with an entity with significant influence over the Company. As at 28 November 2017, the Company agreed with the lessor and renewed the lease contract, the leasing period is from 1 January 2019 to 31 December 2020.
      The interest expense on lease liabilities and depreciation of right-of-use asset for the period of six months ended 30 June 2020 were RMB111,724 and RMB256,708, respectively (six months ended 30 June 2019: RMB130,957 and RMB253,887).
2. Key management personnel's remuneration

Six months ended 30 June

	2020	2019
Key management personnel's remuneration	874,749	792,118

(c) Outstanding balances with related parties

		As at	As at
		30 June	31 December
Amounts due to related parties	Notes	2020	2019
Entity with significant influence over the Company:
Liantai Guangchang	(i)	1,710,579	2,228,855
Total		1,710,579	2,228,855

Notes:

1. As at 30 June 2020 the Company had an outstanding balance of lease liability due to Jiangsu Liantai Fashion Shopping Mall Real Estate Co., Ltd ("Liantai Guangchang"), amounting to RMB1,710,579 (as at 31 December 2019: RMB2,228,855).

39

INTERIM REPORT 2020

Notes to the Condensed Interim Financial Statements

30 June 2020

(Amounts expressed in RMB unless otherwise stated)

22. SEGMENT INFORMATION

Almost all of the Company's revenue was generated from the provision of loans to small and medium sized and micro enterprises ("SMEs") located at Yangzhou, Jiangsu Province in the PRC during the reporting period. There is no other main segment except the loan business.

23. CONTINGENT LIABILITIES

At the end of the reporting period, contingent liabilities not provided for in the financial statements were as follows:

	As at	As at
	30 June	31 December
	2020	2019
Financial guarantee contracts	63,450,000	34,000,000

24. COMMITMENTS

The Company had the following capital commitments at the end of the reporting period:

	As at	As at
	30 June	31 December
	2020	2019
Contracted, but not provided for:
- Leasehold improvements	-	21,200
	-	21,200

40

YANGZHOU GUANGLING DISTRICT TAIHE RURAL MICRO-FINANCE COMPANY LIMITED

Notes to the Condensed Interim Financial Statements

30 June 2020 (Amounts expressed in RMB unless otherwise stated)

25. FINANCIAL INSTRUMENTS BY CATEGORY

The carrying amounts of each of the categories of financial instruments as at the end of the reporting period are as follows:

	As at	As at
	30 June	31 December
	2020	2019
Financial assets
Financial assets at amortised cost
- Cash at banks and a third party	732,059	3,779,385
- Loans receivable	877,835,869	862,691,722
- Other receivables	66,604	172,009
	878,634,532	866,643,116
	As at	As at
	30 June	31 December
	2020	2019
Financial liabilities
Financial liabilities at amortised cost
- Other payables	1,090,363	2,274,669
- Lease liabilities	1,771,716	2,289,406
	2,862,079	4,564,075

41

INTERIM REPORT 2020

Notes to the Condensed Interim Financial Statements

30 June 2020

(Amounts expressed in RMB unless otherwise stated)

26. FINANCIAL INSTRUMENTS RISK MANAGEMENT

The main risks arising from the Company's financial instruments include credit risk, foreign currency risk, interest rate risk and liquidity risk. The Company has no significant exposures to other financial risks except as disclosed below. The Board of Directors reviews and agrees policies for managing each of these risks and they are summarised below.

1. Credit risk
   The following table sets out a breakdown of the Company's overdue loans by security as of the dates indicated:

	Overdue	Overdue	Overdue
	within	more than	more than
At 30 June 2020	3 months	3 to 12 months	1 year	Total
Guaranteed loans	279,252	23,700,000	700,113	24,679,365
Collateral-backed loans	18,581,480	10,170,965	1,803,330	30,555,775
	18,860,732	33,870,965	2,503,443	55,235,140
	Overdue	Overdue	Overdue
	within	more than	more than
At 31 December 2019	3 months	3 to 12 months	1 year	Total
Guaranteed loans	12,604,553	13,300,000	2,142,019	28,046,572
Collateral-backed loans	4,566,565	5,394,454	6,841,027	16,802,046
	17,171,118	18,694,454	8,983,046	44,848,618

1. Foreign currency risk
   The following table demonstrates the sensitivity at the end of the reporting period to a reasonably possible change in the HKD exchange rate, with all other variables held constant, of the Company's profit before tax (due to changes in the fair value of monetary assets).

	As at	As at
	30 June	31 December
	2020	2019
	Impact	Impact
	on profit	on profit
Changes in HKD exchange rate	before tax	before tax
+5%	60	58
- 5%	(60)	(58)

42

YANGZHOU GUANGLING DISTRICT TAIHE RURAL MICRO-FINANCE COMPANY LIMITED

Notes to the Condensed Interim Financial Statements

30 June 2020 (Amounts expressed in RMB unless otherwise stated)

26. FINANCIAL INSTRUMENTS RISK MANAGEMENT (continued)

1. Interest rate risk
   The following table demonstrates the sensitivity as at the end of each reporting period to a reasonably possible change in interest rates, with all other variables held constant, of the Company's profit before tax (through the impact on floating rate of cash at banks and cash at a third party). The Company's equity is not affected, other than the consequential effect on retained earnings (a component of the Company's equity) affected by the changes in profit before tax.

	As at	As at
	30 June	31 December
	2020	2019
	Impact	Impact
	on profit	on profit
Changes in RMB interest rate	before tax	before tax
+ 50 basis points	3,660	18,897
- 50 basis points	(3,660)	(18,897)

1. Liquidity risk
   The tables below summarise the maturity profiles of the financial assets and financial liabilities of the Company based on undiscounted contractual cash flows:

			As at 30 June 2020
			Less than	3 to
	On demand	Past due	3 months	12 months	1 to 5 years	Total
Financial assets:
Cash at banks and a third party	732,059	-	-	-	-	732,059
Loans receivable	-	55,235,140	252,476,817	643,756,558	-	951,468,515
Other assets	966,312	-	-	-	-	966,312
Subtotal	1,698,371	55,235,140	252,476,817	643,756,558	-	953,166,886
Financial liabilities:
Other liabilities	1,800	-	843,646	237,104	65,040	1,147,590
Lease liabilities	61,137	-	-	661,500	1,423,879	2,146,516
Subtotal	62,937	-	843,646	898,604	1,488,919	3,294,106
Net	1,635,434	55,235,140	251,633,172	642,857,954	(1,488,919)	949,872,780
Off-balance sheet guarantee	-	-	9,000,000	54,450,000	-	63,450,000

43

INTERIM REPORT 2020

Notes to the Condensed Interim Financial Statements

30 June 2020

(Amounts expressed in RMB unless otherwise stated)

26. FINANCIAL INSTRUMENTS RISK MANAGEMENT (continued)

1. Liquidity risk (continued)

			As at 31 December 2019
			Less than	3 to
	On demand	Past due	3 months	12 months	1 to 5 years	Total
Financial assets:
Cash at banks and a third party	3,779,385	-	-	-	-	3,779,385
Loans receivable	-	44,848,618	77,738,364	831,025,455	-	953,612,437
Other assets	1,053,981	-	-	-	-	1,053,981
Subtotal	4,833,366	44,848,618	77,738,364	831,025,455	-	958,445,803
Financial liabilities:
Other liabilities	-	-	1,909,223	124,104	256,376	2,289,703
Lease liabilities	-	-	61,137	630,000	2,085,379	2,776,516
Subtotal	-	-	1,970,360	754,104	2,341,755	5,066,219
Net	4,833,366	44,848,618	75,768,004	830,271,351	(2,341,755)	953,379,584
Off-balance sheet guarantee	-	-	-	34,000,000	-	34,000,000

27. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Company's financial assets mainly include cash at banks and a third party and loans receivable.

The Company's financial liabilities mainly include lease liabilities and other payables.

Due to the short remaining period or periodical repricing to reflect the market price, the carrying amounts of these financial assets and liabilities approximate to their fair values.

28. EVENTS AFTER THE REPORTING PERIOD

There were no significant events of the Company after the reporting period.

29. APPROVAL OF THE FINANCIAL STATEMENTS

The interim financial statements have been approved and authorised for issue by the Company's board of directors on 26 August 2020.

44