London Hong Kong - FORTUNE OIL · 76 Buckingham Palace Road London SW1W 9TQ United Kingdom Tel: +44...

Fortune Oil PLCinterim report forthe six months ended 30 September 2014

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London

Registered Office:6/F., Belgrave House76 Buckingham Palace RoadLondon SW1W 9TQUnited Kingdom

Tel: +44 (0)20 7096 9580Fax: +44 (0)20 7628 5725

Hong Kong

Suite 2307, 23/FOffice TowerConvention Plaza1 Harbour RoadWanchai, Hong Kong

Tel: +852 2802 8300Fax: +852 2802 8322

BankersStandard Chartered Bank (Hong Kong) LimitedStandard Chartered Bank Building4 – 4A Des Voeux Road, CentralHong Kong

CITIC Bank International Limited80 Fl. International Commerce Centre 1 Austin Road WestKowloon, Hong Kong

Malayan Banking Berhad18/F., CITIC Tower1 Tim Mei Avenue, CentralHong Kong

Morgan Stanley Asia LimitedLevel 46 International Commerce Centre1 Austin Road WestKowloon, Hong Kong

DBS Bank (Hong Kong) Limited16th Floor, The Center99 Queen’s Road CentralCentral, Hong Kong

Ping An Bank Co Ltd1F Xinyuan Building,No.898,Tianhebei Road,Guangzhou,China, 510898

Barclays Bank plc30 Sloane SquareLondon SW1W 8AFUnited Kingdom

Corporate ConsultantS.Goschalk Limited41 MeadwayLondon NW11 7AXUnited Kingdom

Corporate AdviserVSA Capital LimitedFourth FloorNew Liverpool House15-17 Eldon StreetLondon EC2M 7LDUnited Kingdom

SolicitorsJun He Law OfficesSuite 2208, 22/F., Jardine HouseOne Connaught PlaceCentral, Hong Kong

Reed Smith LLPThe Broadgate Tower20 Primrose StreetLondon EC2A 2RSUnited Kingdom

Woo Kwan Lee & LoRoom 2801 & 3238Sun Hung Kai Centre30 Harbour RoadWanchai, Hong Kong

DirectorsQIAN BenyuanChairman (Non-executive)

Daniel CHIUExecutive Vice-Chairman

TIAN JunActing Chief Executive

LI Ching (Ms)Executive Director

Frank ATTWOODSenior Independent Director

LIN XizhongMAO TongDennis CHIULouisa HO (Ms)Ian TAYLORWANG JinjunYUAN JunNon-executive Directors

Company SecretarySandi CHOI (Ms)

Registered Office6/F., Belgrave House76 Buckingham Palace RoadLondon SW1W 9TQUnited Kingdom

Registered Number2173279

AuditorDeloitte LLP2 New Street SquareLondon EC4A 3BZUnited Kingdom

company information

Financial £ million H1 FY2015 H1 FY2014 Change %

Revenue including share of jointly controlled entities and associates 582.5 452.7 28.7

Profit after tax 8.9 225.2 (96.0)

Profit attributable to owners of the parent 8.9 223.2 (96.0)

Profit attributable to owners of the parent excluding other gain 8.9 8.3 7.7

Net Assets 360.2* 343.2** 5.0

Net Assets attributable to the owners of the parent 357.8* 340.8** 5.0

Shareholders

Issued Shares, millions of shares 2,587* 2,587** –

Earnings per Share (pence) 0.36p 11.73p (96.9)

* 30 September 2014. ** 31 March 2014.

summary of unaudited results

Our goal is to find attractive value enhancing investment opportunities and to manage the investments made to

extract value for our shareholders. We work with our investee companies’ management to improve their competitive

financial performance and increase the value for our shareholders.

Group revenues including share of jointly controlled entities and associates increased by 28.7 per cent to £582.5

million (H1 FY2014: £452.7 million). This was largely driven by the inclusion of the share in China Gas Holdings

Limited (“CGH”) revenue post the completion of the Fortune Gas Investment Holdings Limited (“FGIH”) transaction,

growth in the trading businesses and the establishment of the new Maoming Single Point Mooring (“SPM”)

joint venture, offsetting the decrease due to exclusion of Fortune Oil’s natural gas business after completion

of the FGIH transaction.

Group revenues from all operations excluding jointly controlled entities and associates increased to £162.6 million

(H1 FY2014: £149.3 million).

Net profit attributable to owners of the parent decreased 96.0 per cent to £8.9 million (H1 FY2014: £223.2 million).

The decrease is due to the inclusion of other gains and losses of £214.9 million in H1 FY2014 in respect of gain on

disposal of subsidiaries and the gain on revaluation of CGH shares on the date of treating CGH as an associate.

Basic earnings per share was 0.36p (H1 FY2014: 11.73p) and basic earnings per share, excluding other gains and

losses (including share of other gains in jointly controlled entities) was 0.36p (H1 FY2014: 0.44p). Basic earnings

per share from continuing operations decreased to 0.36p (H1 FY2014: 5.17p).

Net assets further increased to £360.2 million as at 30 September 2014 (31 March 2014: £343.2 million).

The Company increased its interest in CGH through the acquisition of 13,252,000 shares from China Petroleum

& Chemicals Corporation (“Sinopec Corp.”) as part of a share placement. The shares were initially allotted to

First Level Holdings Limited (“FLH”), a substantial shareholder of the Company and have been subsequently been

transferred to the Company at cost (i.e. no profit or loss). The acquisition represented 0.26 per cent of the issued

capital of CGH.

The Company is principally an investment holding company with dividend income from each of its business units

as the core cash inflow to the Company. The actual dividend income received is expected to be substantially lower

than the “Profit for the year/period”. Furthermore, our future dividend payments will be dependent on dividend

income from each business unit. Their dividend policy and the amount of dividends to be paid are subject to the

decision made by the board of each of these business units.

group performance

interim report for the six months ended 30 September 2014 (“H1 FY2015”)(The six months ended 30 September 2013 is referred to as “H1 FY2014”)

1 Fortune Oil PLC interim report for the six months ended 30 September 2014

oil businessAVIATION REFUELLING – BLUESKY

Our performance• The Group’s share of joint venture revenues increased

to £283.3 million (H1 FY2014: £277.9 million).• The Group’s share of net profit increased 12.5 per cent

to £6.3 million (H1 FY2014: £5.6 million).• Sales volumes increased 11.9 per cent to 1.9 million

tonnes (H1 FY2014: 1.7 million tonnes), driven by the continued increase in domestic and international air travel demand.

Outlook• The China aviation market is expected to continue to

grow driven both by increased business travel but also by increased leisure travel by an increasingly wealthy and mobile population.

• Bluesky is required to keep sufficient storage to supply jet fuel at each of its airports for approximately two weeks to ensure that operations remain uninterrupted. Recent significant changes in the crude oil prices can have a negative impact on the value of the jet fuel storage and Bluesky continues to take steps to mitigate against any potential stock related risk but not all stock risk can be hedged against.

MAOMING SPM

Our Performance• Fortune Oil’s share of net profit was £0.5 million.

For the comparable period in 2014 there were no profits attributable to the Maoming SPM due to the expiry of the previous joint venture agreement which meant that after February 2013 the Company had no effective financial interest in the operations of the SPM until the new joint venture became effective from 1 January 2014.

• Sales volumes were 5.2 million tonnes. Sales volumes are unavailable for the comparable period in 2014 as a result of the expiry of the previous joint venture agreement which meant that after February 2013 the Company had no effective financial interest in the operations of the SPM until the new joint venture became effective from 1 January 2014.

• The Maoming SPM facility continues to operate efficiently and with an accident-free and spill-free record.

Outlook• The slow down in China’s economic growth is impacting

on China’s blended energy consumption in Q3 2014 which increased by only 3.4 per cent year on year was 2.8 per cent lower than Q2 2014 indicating a slow down in crude oil demand and associated refined products.

WEST ZHUHAI JETTY AND STORAGE TERMINAL

Our Performance• The Group’s share of revenues remained at £1.3 million

(H1 FY2014: £1.3 million).• Fortune Oil’s share of net profit decreased 4.9 per cent

to £0.38 million (H1 FY2014: £0.40 million).• Throughput and storage volumes decreased 6.6 per cent

to 1.1 million tonnes (H1 FY2014: 1.2 million tonnes).

Outlook• Growth in autosales has slowed significantly and only

rose by 1.7 per cent in September 2014 compared to the same month a year earlier as Chinese consumers purchased only 1.7 million cars in the month. Autosales are still expected to reach 23 million units in 2014, an increase of 4.6 per cent year on year, although lower than the previous forecast of 8.3 per cent by the China Association of Automobile Manufacturers. The slowdown in autosales will impact on future demand growth for petrol and diesel.

trading businessOur Performance• Revenues increased 36.5 per cent to £162.6 million

(H1 FY2014: £119.1 million).• Profit from operations increased 16.1 per cent to

£1.0 million (H1 FY2014: £0.8 million).• Sales volumes increased 89.7 per cent to 261,800

tonnes (H1 FY2014: 138,000 tonnes) principally 63,800 tonnes of mixed aromatics and other petrochemical products, 36,000 tonnes of base oil and 129,200 tonnes of fuel oil.

Outlook• Established a new company in Shenzhen to expand

the Company’s domestic trading operations through the Shenzhen Qianhai Economic Zone.


• The Chinese government is proactively implementing new policies to promote the use of natural gas to improve air quality. China’s General Office of the State Council has announced that natural gas supply is expected to reach over 400 billion cubic metres by 2020 which will increase the availability of natural gas to CGH city gas concessions.

resources• Iron ore prices have decreased by around 40 per cent

in 2014 as a flood of new supply from the world’s biggest and lowest-cost producers has hit the market at the same time as fears about slowing demand in China, the world’s biggest consumer of seaborne iron ore, have intensified.

• The Group continues to assess whether there is an economically viable investment case to develop the Armenian iron ore deposits. The Group has continued to evaluate options to improve the economic viability of these assets and is in discussions with customers in the neighbouring countries and with potential investment partners interested in developing the assets. The Group will not make any material investment in the development of this project unless there is a long term economically viable investment case.

financial reviewDisposal Group Held for Sale and Discontinued OperationsThe comparative figures of H1 FY2014, reflect the decision to dispose of the Group’s natural gas business FGIH to CGH (the “FGIH Transaction”) and the old Maoming SPM joint venture being in dissolution procedure following the expiration of the joint venture contract in February 2013. Hence, the results of the Group’s natural gas business in respect of the period before its disposal to CGH and the old Maoming SPM business are presented as discontinued operations in the income statement and cash flow statement for the six months ended 30 September 2013.

In order to provide a more comprehensive review of all of the Group’s operations, on a basis comparable with that provided to shareholders in previous period, the discussion of financial results below relates to continuing operations and discontinued operations combined. The income statement distinguishes the results of discontinued operations from those of continuing operations.

china gas holdings limitedFortune Oil and CGHFortune Oil’s investment in CGH is managed and reported as a separate segment under IFRS. CGH became an associate in August 2013, and since then, equity accounting has been adopted.

• CGH contributed £6.7 million to the Group’s operating profit through its share of profit from jointly controlled entities and associates (H1 FY2014: £1.0 million).

• China Gas Group Limited (“CGG”), the joint venture company in which the Group has a 50 per cent interest, owns 744,602,000 CGH shares, representing 14.69 per cent of CGH total issued shares as at 27 November 2014. As at 27 November 2014 the Group and CGG together held 941,973,463 shares in CGH representing 18.8 per cent of CGH total issued shares of 5,021,048,561, as per CGH’s latest public information.

CGH Performance – Summary for the six Month Period ended 30 September 2014*• CGH revenues for the period including share of jointly

controlled entities and associates increased by 49 per cent to HK$15.6 billion (£1.2 billion) (H1 FY2014: HK$10.5 billion (£0.9 billion)).

• Net profit from all operations attributable to owners of the parent increased 31 per cent to HK$1.9 billion (£150.8 million) (H1 FY2014: HK$1.5 billion (£123.7 million)).

• During H1 FY2015 CGH sold a total of 4.1 billion cubic metres of natural gas, an increase of 16.8 per cent over the same period of the previous year (H1 FY2014: 3.5 billion cubic metres).

* The operational and financial information of CGH for

the H1 FY2015 is based on operational and financial results

published by CGH.

Outlook• China’s government raised natural gas prices around

20 per cent on 1 September 2014 in line with the policy to bring China’s natural gas price in line with international market prices. This on-going policy has the potential to adversely impact on demand for natural gas.

• The continued slowdown in China’s property market is expected to lead to a reduction in the connection rate and associated connection fees in the city gas concessions.


Accounting Treatments

Investment in CGHAs a result of having significant influence through holding and exercising the nomination rights of managing director and an additional executive director in CGH granted at the FGIH Transaction together with the CGH shares hold directly or indirectly by Fortune Oil, CGH has been treated as an associate of the Group and equity accounting has been adopted since Completion.

The investment in CGH is divided into two layers: (i) direct holding by wholly owned subsidiaries; and (ii) indirect holding by CGG, a jointly controlled entity between the Company and Mr Liu Minghui. The accounting treatments in these layers are discussed as follows:

Treatments from the Group’s wholly owned subsidiariesFollowing Completion, the Group has applied equity accounting by recognising CGH’s net profit according to the Group’s shareholding percentage into the income statement (See the summary in “Profit contribution from investment in CGH” under “Revenue and Expenditure” below for details).

As at 30 September 2014, Fortune Oil directly held 197,371,463 CGH shares via Fortune Oil PRC Holdings Limited, Fortune Oil Holdings Limited and First Marvel Limited, all of which are wholly owned subsidiaries of the Company. Since CGH is an associate of the Group, and thus accounted for under the equity method, the market value of the investment in CGH is no longer directly reflected in the Group’s balance sheet, however, any future decrease in CGH’s share price, which is significant and prolonged, is objective evidence of impairment, which would be charged to the income statement directly in the relevant future period.

Treatments in CGGFollowing Completion, CGG has applied equity accounting by recognising CGH’s net profit according to CGG’s shareholding percentage in the income statement. During H1 FY2014, CGG’s income statement also recognised a gain in fair value of CGG’s investment in CGH, previously recognised in equity up to the date when CGH became an associate, which is disclosed separately as “Other Gains” under the “Share of results of Jointly Controlled Entities”, and accrued administrative expenses and finance costs to compute its net profit. Since Fortune Oil has a 50 per cent shareholding in CGG, the Group treats CGG as its jointly controlled entity and recognises 50 per cent of CGG’s net profit by adopting equity accounting for the Group. In terms of cash flow, cash received from dividends declared by CGH has covered the finance costs and other administrative expenses incurred by CGG (See the summary in “Profit contribution from investment in CGH” for details).

As at 30 September 2014, CGG holds 737,374,000 CGH shares, representing 14.7 per cent of CGH’s total issued share capital. As discussed above, since CGH is an associate to CGG and CGG is a jointly controlled entity of the Group, and thus accounted for under the equity method, the market value of the investment in CGH is no longer directly reflected in the Group’s balance sheet, however, any future decrease in CGH’s share price, which is significant and prolonged, is objective evidence of impairment which would be charged to the income statement of CGG directly in the relevant future period.

Treatment of Maoming SPMDue to the expiry of the previous joint venture agreement, the Company had no effective financial interest in the operations of the SPM until the new joint venture became effective from 1 January 2014.

The new joint venture is an associate of the Group, and equity accounting has been adopted from when the joint venture became effective. It has been reclassified to “Others” of Segmental Reporting (note 3 to the accounts as page 14 for detail).

Revenue and ExpenditureRevenue from all operations including the Group’s share of jointly controlled entities and associates increased by 28.7 per cent to £582.5 million for the six months ended 30 September 2014 from £452.7 million for the H1 FY2014. This was largely driven by the inclusion of the share in CGH’s revenue since Completion and the growth in the Group’s trading business, netted off by the exclusion of revenue from the natural gas business after the Completion. Group revenue from all operations excluding jointly controlled entities and associates has also increased slightly to £162.6 million for the six months ended 30 September 2014 from £149.3 million for the H1 FY2014.

Profit from operations before Other Gains (see below for discussion), decreased 11.2 per cent to £13.1 million for the six months ended 30 September 2014, compared with £14.8 million for the H1 FY2014. Following Completion, most of the consolidated earnings are generated by the Group’s jointly controlled entities and associates.

The net profit attributable to owners of the parent was £8.9 million for the six months ended 30 September 2014, a decrease of 96.0 per cent compared with £223.2 million for the H1 FY2014. Earnings per share from all operations decreased to 0.36 pence for the six months ended 30 September 2014, compared with 11.73 pence for the H1 FY2014. The sharp decrease is mainly due to the combined effect of the exclusion of “Other Gains” to be further discussed below (totalling of £214.9 million for the H1 FY2014), netted off against the inclusion of the share of results of CGH.


Profits contribution from investment in CGHCGH became an associate in August 2013, and since then, equity accounting has been adopted. Based on the accounting treatments discussed above, the profit contribution from the investments in CGH for the H1 FY2015 can be summarised in the following table:

Group’s wholly owned subsidiaries 100% of CGG

Number of CGH shares held* 197,371,463 737,374,000

At single companies’ level

Percentage held in CGH* % 3.9% 14.7%Dividend received in cash from CGH £’000 1,501 5,604

Share of results

Share of results of CGH as an associate** £’000 3,307 12,822Other income, net in CGG £’000 Unallocated 85Finance costs in CGG £’000 Unallocated (2,920)Loss on dilution of associate, included the share of results of jointly controlled entity and associates**** £’000 (522) (2,076)

Total £’000 2,785 7,911

At consolidated level

Effective percentage held in CGH* % 3.9% 7.3%Profit from operations £’000 2,785 3,956

Total (see note 3 to accounts) £’000 – 6,741

Valuation of CGH shares for the Group*

Book value £’000 – 402,704Market value*** £’000 – 598,281

* Based on the CGH shares held as at 30 September 2014.

** Share of results of CGH as an associate were based on different shareholding percentages in CGH during the 6 months ended

30 September 2014.

*** Based on closing price of CGH as at 30 September 2014.

**** Represents the loss incurred on dilution of the Group’s effective interest at the time of issue of new shares in CGH. This resulted

in a reduction in the Group’s share of the net assets of CGH and recognition of an associated loss.

Disposal of natural gas businessFor the comparative figures of H1 FY2014, the results of natural gas business have been consolidated and classified as discontinuing operation until the completion of the FGIH Transaction in August 2013 (the “Completion”), which was also the date that FGIH and its sub-group ceased to be subsidiaries of the Group. Please refer to “Natural Gas” of Segmental Reporting (note 3 to the accounts at page 14) for detail.

Other Gains (including share of other gains in jointly controlled entities)There were no other gains (including share of other gains in jointly controlled entities) in H1 FY2015. The £214.9 million of other gains recognised in H1 FY2014 consisted of: (i) the gain on disposal of the Group’s natural gas business of £119.7 million; and (ii) the gain on revaluation of CGH shares on the date of treating CGH as an associate of £95.3 million).

Other Comprehensive Income/LossOther comprehensive income was £7.9 million for H1 FY2015 which was due to exchange differences arising on translation of foreign operations of the Group.

The other comprehensive loss of £83.1 million for H1 FY2014 was mainly due to the exchange losses arising on translation of foreign operations of the Group of £13.2 million; the share of net gain in fair value of available-for-sale investments in jointly controlled entity of £25.4 million; and the cumulative gains in fair value of CGG’s investment in CGH being reclassified from equity to the income statement on the date when CGH became an associate of £95.3 million.


Cash PositionNotwithstanding the steady historical dividend pay-out ratio of its jointly controlled entities and associates, the Group’s cash inflow from operating activities heavily relies on the future dividends received from these entities, which will be affected by their own profitability.

As a result of the possible uneven timing of distribution of dividends received, Fortune Oil will require careful treasury management in order to avoid future cash shortfalls.

Financial PositionThe net assets of the Group as at 30 September 2014 were £360.2 million, compared with £343.2 million as at 31 March 2014. The increase was mainly due to the total comprehensive income of £16.8 million generated in the H1 FY2015. The net borrowing position as at 30 September 2014 was £36.8 million compared with £50.6 million as at 31 March 2014. With a cash balance of £152.1 million as at 30 September 2014, and the expected positive cash flow generated from operations, the Group envisages no difficulties in meeting both current loan repayment obligations and investment commitments. The net gearing ratio (after deduction of cash) for the Group further decreased to 10.2 per cent as at 30 September 2014 against 14.8 per cent as of 31 March 2014.

Finance Costs and TaxFinance costs for the Group from all operations were £4.3 million in the reporting period, compared with £2.2 million for the last reporting period. It was mainly due to the increase of the Group borrowing from the full draw down of the syndicated loan by US$180 million (£113 million) in April 2014.

The Group’s total tax charge in the Reporting Period from all operations was £0.8 million (for six months ended 30 September 2013: £3.2 million) representing an effective tax rate of 8.7 per cent, compared with 23.7 per cent (after excluding non-taxable capital gains and losses of £214.9 million) for the six months ended 30 September 2013. The decrease in the effective tax rate was mainly the result of the exclusion of the income tax charge of the Group’s natural gas business after the completion of the FGIH Transaction and because profits of jointly controlled entities and associates are included in the income statement net of tax.

Foreign ExchangeThe revenues and expenses of the Group are mainly denominated in China’s renminbi (RMB). The remaining expenses are denominated either in pounds sterling (£), Hong Kong dollars (HK$), which is pegged to the US dollar, or in US dollars (US$). On average for H1 FY2015, the RMB depreciated against the US$ by 1.1 per cent and the pounds sterling appreciated by 8.1 per cent against the US$, hence there was an overall 9.3 per cent appreciation of the pounds sterling against the RMB.

This currency movement has had the effect of decreasing our profits as measured in pounds sterling.

The assets and liabilities of the Group are also primarily denominated in RMB. The remaining balance, which represents a small proportion of the assets and liabilities, is denominated in US$, pounds sterling and HK$. As at 30 September 2014, the closing pounds sterling rate depreciated against the RMB and US$ by 2.9 per cent and 2.5 per cent, respectively.

The Group does not have a policy to hedge currency risk and therefore any changes in the RMB/£ exchange rate are likely to affect the Groups’ results which are presented in pounds sterling.

Capital StructureMost of the Group’s investments and expenses take place in the PRC and are held through Fortune Oil PRC Holdings Limited, a wholly owned subsidiary of the Company incorporated in Hong Kong. To facilitate inter-company restructuring, most of the investments in China are held through subsidiary Hong Kong registered companies. The Group’s UK operations consist only of local representation as a direct expense to the Company.

RefinancingIn October 2013, Fortune Oil PRC Holdings Limited, a wholly-owned subsidiary of Fortune Oil, signed a US$300 million (£184 million) loan agreement. The facility is denominated in US$ with a term of three years and an interest rate payable at a margin of 2.75 per cent over LIBOR was fully drawn in April 2014. The facility is guaranteed by Fortune Oil PLC and secured by share charges over its various Hong Kong subsidiaries.

The purpose of this refinancing was to maximise the borrowing capacity and to lock-in low-cost financing at then prevailing levels. This new facility, which has been partly used to repay the previous syndicated loan of US$180 million (£113 million) signed in April 2011, will provide the Company with working capital, and finance new investment.

DividendIt is not the Company’s policy to pay interim dividends. A special dividend of 2.36 pence per ordinary share was paid to shareholders on 25 October 2013, in respect of the FY2014.

principal risk and uncertaintiesOur business is supplying China with energy and resources, principally oil and natural gas. We face many risks and whilst we can manage some, we have to accept others


as part of doing business. There are a number of potential risks and uncertainties which could have a material impact of the Group’s performance over the remaining six months of the financial year and could cause actual result to different materially from expected and historical results. These risks have not changed since the date of Annual Report 2014, where the principal risks and uncertainties, their effects and our management strategy are detailed on pages 23 and 24 of that report.

The principal risks and uncertainties facing Fortune Oil’s operations include: the group does not have control of all of its investments, concentration risks, exposure to underlying result of CGH, profit guarantee risk, pricing risks, regulatory and relationships risks, health, safety and the environment, attraction and retention of key employees, development risks and uninsured risks.

going concern statementThe Group’s business activities and associated opportunities and risks are set out above in the “Business Review” and “Principal Risks and Uncertainties”. The financial position of the Group, its cash flows and liquidity position is described in the Financial Review. In the management of liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Group’s operation and mitigate the effects of fluctuations in cash flows. The Group expects to meet its capital expenditure requirements from medium term loan facilities and the cash dividend received from its jointly controlled entities and associates.

The current economic conditions may create uncertainty over:

• The level of demand for the Group’s products and services

• International exchange rates that affect commodity prices and hence the Group’s revenues in China as denominated in US dollars or pound sterling

• The availability of bank or equity finance in the foreseeable future

• Counterparty credit risk

As at 30 September 2014, the Group had a cash balance of £152.1 million and a net borrowing position of £36.8 million. With the expected positive cash flow generated from operations, the Group’s current forecasts and projections and adjusting for possible changes in trading conditions, show that the Group will be able to repay the interest and principal payments in a timely manner in accordance with loan agreements and to operate within the required covenants.

As part of the FGIH Transaction, the Group will compensate CGH on a dollar for dollar basis where the net profits for

the natural gas business for the twelve months ended 31 December 2014 are less than HK$400 million (approximately £32 million). As Management believe the FGIH business within CGH should be on target to meet the profit guarantee and the possibility of the compensation is unlikely, no liability for compensation has been recognised when considering this going concern exercise.

The Directors believe that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, Fortune Oil continues to adopt the going concern basis in preparing the interim report and accounts.

responsibility statement pursuant to DTR 4.2The names and functions of the Directors of Fortune Oil are listed in the Company’s Annual Report for 2014. We confirm that, to the best of each person’s knowledge:

1. The condensed set of financial statements, which have been prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Group, or the undertakings included in the consolidation as a whole as required by DTR 4.2.4R;

2. The interim management report includes a fair review of important events that have occurred during the first six months of the financial year, and their impact on these six months financial report and a description of the principal risks and uncertainties for the remaining six months of the financial year in accordance with DTR 4.2.7R; and

3. The interim management report includes a fair review of disclosures of related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or the performance of the Group during that period and any changes in the related party transactions described in the last annual report that could have a material effect on the financial position or performance of the Group in the first six months of the current financial year in accordance with DTR 4.2.8 R.

These interim results have not been audited nor reviewed.

By order of the Board



6 months ended

Amount in £’000 Notes

6 months ended

30.09.14(Unaudited)

Continuing operations

30.09.13 (Unaudited)

Discontinued operations

30.09.13(Unaudited)

Total30.09.13

(Unaudited)

Revenue including share of

jointly controlled entities

and associates 3 582,518 417,956 34,770 452,726

Share of revenue of


and associates 3 (419,904) (298,825) (4,634) (303,459)

Group revenue 3 162,614 119,131 30,136 149,267

Cost of sales (160,989) (117,507) (18,158) (135,665)

Gross profit 1,625 1,624 11,978 13,602

Distribution expenses – – (2,011) (2,011)

Administrative expenses (2,484) (5,103) (1,382) (6,485)

Share of results of


excluding other gain 10 10,685 8,986 716 9,702

Share of other gain in

jointly controlled entities – 95,251 – 95,251

Share of results of associates 11 3,294 – (39) (39)

Profit from operations 13,120 100,758 9,262 110,020

Other gains 4 – – 119,655 119,655

Finance costs (4,257) (1,919) (286) (2,205)

Investment revenue 867 772 136 908

Profit before tax 9,730 99,611 128,767 228,378

Income tax charge 5 (845) (1,301) (1,895) (3,196)

Profit for the period 8,885 98,310 126,872 225,182

Attributable to

Owners of the parent 8,918 98,350 124,833 223,183

Non-controlling interests (33) (40) 2,039 1,999

8,885 98,310 126,872 225,182

Earnings per share

Basic 7 0.36p 5.17p 6.56p 11.73p

Diluted 7 0.35p 5.12p 6.50p 11.62p

interim report financial statementsconsolidated income statement


interim report financial statementsconsolidated statement of comprehensive income

Amount in £’000

6 months ended

30.09.14(Unaudited)

6 months ended

30.09.13(Unaudited)

Profit for the period 8,885 225,182

Exchange differences arising on translation of foreign operations 7,893 (13,211)

Share of net gain in fair value of available for sale financial assets

in jointly controlled entities – 25,376

Reclassification of available for sale financial assets

in jointly controlled entities to interest in associates – (95,251)

Other comprehensive income/(loss) for the period 7,893 (83,086)

Total comprehensive income for the period 16,778 142,096

Attributable to

Owners of the parent 16,796 144,662

Non-controlling interests (18) (2,566)

16,778 142,096


interim report financial statementsconsolidated statement of financial position

Amount in £’000 Notes30.09.14

(Unaudited)31.03.14(Audited)

Assets

Non-current assets

Property, plant and equipment 8 1,855 1,861

Intangible assets 9 370 360

Investments in jointly controlled entities 10 226,443 240,704

Investments in associates 11 152,384 131,576

Available for sale investments 1,986 1,937

383,038 376,438

Current assets

Trade and other receivables 12 51,759 79,624

Cash and cash equivalents 152,057 58,338

203,816 137,962

Total Assets 586,854 514,400

Liabilities

Current liabilities

Borrowings 13 16,227 40,819

Trade and other payables 14 27,668 52,048

Current tax liabilities 285 278

44,180 93,145

Non-current liabilities

Borrowings 13 172,673 68,156

Deferred tax liabilities 1,462 1,791

Other non-current liabilities 8,334 8,062

182,469 78,009

Total Liabilities 226,649 171,154

Net Assets 360,205 343,246

Equity

Capital and reserves

Ordinary shares 15 25,871 25,871

Treasury shares (781) (578)

Share premium 50,969 50,969

Other reserves 33,488 33,488

Foreign currency translation reserve 957 (6,921)

Retained earnings 247,249 237,947

Equity attributable to owners of the parent 357,753 340,776

Non-controlling interests 2,452 2,470

Total Equity 360,205 343,246



6 months ended

30.09.14(Unaudited)

6 months ended

30.09.13(Unaudited)

Net cash from operating activities 17 1,659 2,841

Interest received 867 136

Dividend received from jointly controlled entities 10 12,141 13,484

Dividend received from associates 11 1,501 –

Payment for property, plant and equipment (172) (3,519)

Payment for exploration and evaluation assets – (205)

Receipt from disposal of subsidiary undertakings – 82,642

Consideration paid on acquisition of additional interests in a subsidiary – (1,390)

Receipt from disposal of property, plant and equipment – 68

Acquisition of investments in associates 11 (15,181) –

Loan to jointly controlled entities – (3,232)

Repayment from jointly controlled entities 10 17,952 –

Net cash from investing activities 17,108 87,984

Interest paid (3,577) (1,885)

Dividend payment to owners of the parent – 485

Repayment of loans to non-controlling shareholders – (1,254)

Net proceeds from issue of new borrowings 116,323 7,417

Repayment of borrowings (38,385) (52,095)

Net cash from/(used in) financing activities 74,361 (47,332)

Increase in cash and cash equivalents 93,128 43,493

Cash and cash equivalents at beginning of the period 58,338 61,019

Cash flow effect of foreign exchange rate changes 591 3,820

Net cash and cash equivalents at end of the period 152,057 108,332

interim report financial statementsconsolidated cash flow statement


Amount in £’000

Issued capitalShare

premiumOther

reserves

Foreign currency

translation reserve

Retained earnings

Attributable to owners

of the parent

Non- controlling

interests TotalOrdinary

sharesTreasury

shares

Balance at 1 April 2013 19,875 (678) 10,129 69,889 31,893 95,607 226,715 56,452 283,167

Profit for the period – – – – – 223,183 223,183 1,999 225,182

Exchange differences arising on translation of foreign operations – – – – (8,646) – (8,646) (4,565) (13,211)

Share of net gain in fair value of available for sale financial assets in jointly controlled entities – – – 25,376 – – 25,376 – 25,376

Reclassification of available for sale financial assets in jointly controlled entities to interest in associates – – – (95,251) – – (95,251) – (95,251)

Total comprehensive income for the period – – – (69,875) (8,646) 223,183 144,662 (2,566) 142,096

Payment of dividends to non-controlling interests – – – – – – – (1,815) (1,815)

Dividend paid to owners of the parent – – – – – (3,056) (3,056) – (3,056)

Transfer – – – 2,166 – (2,166) – – –

Share of capital contribution on acquisition of available for sale financial assets – – – 33,610 – – 33,610 – 33,610

Adjustment arising from changes in non-controlling interest – – – (292) – – (292) (1,102) (1,394)

Net capital contribution from non-controlling interest – – – – – – – 2,685 2,685

Dissolution of a subsidiary – – – – (2,268) – (2,268) (10,773) (13,041)

Disposal of subsidiaries – – – (1,874) (10,347) – (12,221) (43,429) (55,650)

Balance at 30 September 2013 (Unaudited) 19,875 (678) 10,129 33,624 10,632 313,568 387,150 (548) 386,602

Balance at 1 April 2014 25,871 (578) 50,969 33,488 (6,921) 237,947 340,776 2,470 343,246

Profit for the period – – – – – 8,918 8,918 (33) 8,885

Exchange differences arising on translation of foreign operations – – – – 7,878 – 7,878 15 7,893

Total comprehensive income for the period – – – – 7,878 8,918 16,796 (18) 16,778

Movement in treasury shares – (203) – – – 184 (19) – (19)

Share-based payments – – – – – 200 200 – 200

Balance at 30 September 2014 (Unaudited) 25,871 (781) 50,969 33,488 957 247,249 357,753 2,452 360,205

interim report financial statementsconsolidated statement of changes in equity


notes

1. Basis of preparation

The condensed financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting, as adopted by the European Union.

The comparative figures included in financial statements and the notes to the accounts for the six months ended 30 September 2013 (H1 FY2014) has not previously been published, however it has been prepared on the same basis described in this note and under the same accounting policies outlined in note 2.

The financial information for the six months ended 30 September 2014 was neither audited nor reviewed by the auditors. The information for the year ended 31 March 2014 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor’s report on these accounts was not qualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of no less than twelve months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements. Detail of the factors that which have been taken into account in assessing the Group’s going concern status are set out on page 7.

2. Significant accounting policies

The condensed financial statements have been prepared under the historical cost convention, except for the revaluation of certain properties and financial instruments.

The same accounting policies, presentation and methods of computation have been followed in these condensed financial statements as were applied in the preparation of the Group’s financial statements for the year ended 31 March 2014, with the following exceptions. In the current year, the Group has applied, for the first time, the following new and revised Standards and Interpretations, which are effective for the Group’s financial year beginning 1 April 2014, but have not had any significant impact on the financial statements for the six months to 30 September 2014.

IFRS 10 Consolidation financial statementsIFRS 11 Joint arrangementsIFRS 12 Disclosure of interests in other entitiesIAS 27 (revised) Separate financial statementsIAS 28 (revised) Investments in associates and joint ventures


notes

3. Segmental Reporting

The Group has adopted IFRS 8 Operating Segments to identify eight operating segments on the basis of internal reports about components of the Group which are reviewed regularly by the chief operating decision maker in order to allocate resources to the segment and to assess its performance.

The Group has classified the operating divisions and the reportable segments under IFRS 8 as “Investment in China Gas Holdings Ltd”, “Natural Gas”, “Single point mooring facility”, “Aviation Refuelling”, “Trading”, “Products Terminal”, “Resources” and “Others”.

Information regarding these segments is presented below.

a) Operating segments

Oil

Investment in CGH**** Aviation Refuelling Trading Products Terminal Resources Others**


Single point mooring facility Natural Gas

Discontinuing operations Group

Amount in £’000 Sep 14 Sep13 Sep 14 Sep 13 Sep 14 Sep 13 Sep 14 Sep 13 Sep 14 Sep 13 Sep 14 Sep 13 Sep 14 Sep 13 Sep 14 Sep 13 Sep 14 Sep 13 Sep 14 Sep 13 Sep 14 Sep 13

Revenue including share of jointly controlled entities and associates 133,671 17,442 283,276 277,921 162,614 119,131 1,262 1,339 – – 1,695 2,123 582,518 417,956 – – – 34,770 – 34,770 582,518 452,726

Share of revenue of jointly controlled entities and associates (133,671) (17,442) (283,276) (277,921) – – (1,262) (1,339) – – (1,695) (2,123) (419,904) (298,825) – – – (4,634) – (4,634) (419,904) (303,459)

Group revenue – – – – 162,614 119,131 – – – – – – 162,614 119,131 – – – 30,136 – 30,136 162,614 149,267

Profit from operations before office overheads 6,741 96,201 6,331 5,630 953 821 386 406 (184) (70) 505 80 14,732 103,068 – – – 9,262 – 9,262 14,732 112,330

Office overheads* (1,612) (2,310) – – – – – – (1,612) (2,310)

Profit from operations 13,120 100,758 – – – 9,262 – 9,262 13,120 110,020

Other gains – – – – – – – – – – – – – – – – – 119,655 – 119,655 – 119,655

Finance costs (4,257) (1,919) – (286) (4,257) (2,205)

Investment revenue 867 772 – 136 867 908

Profit before taxation 9,730 99,611 – 128,767 9,730 228,378

Taxation (845) (1,301) – (1,895) (845) (3,196)

Profit for the period 8,885 98,310 – 126,872 8,885 225,182

Attributable to

Owners of the parent 8,918 98,350 – 124,833 8,918 223,183

Non-controlling interests (33) (40) – 2,039 (33) 1,999


notes

3. Segmental reporting continued

Oil

Investment in CGH**** Aviation Refuelling Trading Products Terminal Resources Others**


Single point mooring facility Natural Gas

Discontinuing operations Group

Amount in £’000 30.09.14 31.03.14 30.09.14 31.03.14 30.09.14 31.03.14 30.09.14 31.03.14 30.09.14 31.03.14 30.09.14 31.03.14 30.09.14 31.03.14 30.09.14 31.03.14 30.09.14 31.03.14 30.09.14 31.03.14 30.09.14 31.03.14

Net assets: by class of business

Assets

Segment assets 330,454 320,016 36,309 35,228 129,923 131,876 7,017 6,456 6,655 6,621 13,666 12,845 524,024 513,042 802 782 – – 802 782 524,826 513,824

Unallocated assets 62,028 576 – – – – – – 62,028 576

Consolidated total assets 586,052 513,618 802 782 – – 802 782 586,854 514,400

Liabilities

Segment liabilities – – (8) (8) (24,590) (48,916) – – (8,429) (8,231) (2,353) (2,287) (35,380) (59,442) – – – – – – (35,380) (59,442)

Unallocated liabilities*** (191,269) (111,712) – – – – – – (191,269) (111,712)

Consolidated total liabilities (226,649) (171,154) – – – – – – (226,649) (171,154)

359,403 342,464 802 782 – – 802 782 360,205 343,246

* Includes overheads in UK/HK/PRC offices.** Others include retail and distribution in 2014. In 2015, SPM has been reclassified to “Others”.*** Includes bank loan, deferred tax and dividend withholding tax.**** Investment in CGH includes the Group’s directly held associate interest together with that held through CGG. It also includes the Group’s

50% share of other gains and losses of CGG, including CGG’s finance cost.

b) Analysis of group revenue

Amount in £’000

6 months ended

30.09.14

6 months ended

30.09.13

Sales of goods 162,409 141,830Income from gas connection contracts – 6,702Rental income – 5Others 205 730

162,614 149,267Investment revenue 867 908

163,481 150,175

4. Other gains

Amount in £’000 30.09.14

(Unaudited)30.09.13

(Unaudited)

Gain on disposal of subsidiaries – 119,655

– 119,655


notes

5. Income tax charge

Interim period income tax is accrued based on the average effective income tax rate of 8.7 per cent (six months ended 30 September 2013: 23.7 per cent after excluding non-taxable capital gains and losses of £214.9 million).

The Group tax charge does not include corporate income tax for jointly controlled entities and associates, whose results are disclosed in the statement of comprehensive income net of tax.

Please refer to the financial review for discussion on the tax charges during the period.

6. Dividends6 months ended Year ended

Amount in £’000 30.09.14 30.09.13 31.03.14

Amounts recognised as distributions to equity holders in the period:Final dividend for the year ended 31 December 2012 of 0.16p per share – 3,056 3,056Special dividend of 2.36p (2012: nil) per share – – 45,101

– 3,056 48,157

Proposed final dividend for the year ended 31 March 2014 –

The Directors do not recommend the payment of an interim dividend in respect of the six months ended 30 September 2014.

7. Earnings per share

Earnings per share has been calculated by dividing earnings attributable to the shareholders by the weighted average number of shares in issue during the respective periods, as indicated below:

30.09.14No.

’000 penceTotal

(Unaudited) (Unaudited)

Basic 2,509,044 0.36

Share option adjustment 16,472 –

Diluted 2,525,516 0.35

30.09.13No.

’000 penceNo.

’000 penceNo.

’000 penceContinuing operations Discontinued operations Total

(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)

Basic 1,906,476 5.17 1,906,476 6.56 1,906,476 11.73

Share option adjustment 13,380 – 13,380 – 13,380 –

Diluted 1,919,856 5.12 1,919,856 6.50 1,919,856 11.62

31.03.14No.

’000 penceNo.

’000 penceNo.

’000 penceContinuing operations Discontinued operations Total

(Audited) (Audited) (Audited) (Audited) (Audited) (Audited)

Basic 2,141,508 3.11 2,141,508 5.97 2,141,508 9.08Share option adjustment 15,937 – 15,937 – 15,937 –

Diluted 2,157,445 3.08 2,157,445 5.93 2,157,445 9.01


notes

8. Property, plant and equipment

During the period, the Group spent approximately £0.2 million on assets consisting of motor vehicles and fixture and fittings.

The depreciation charge for the period was £0.2 million (six months ended 30 September 2013: £0.3 million).

9. Intangible assets

During the period, the Group spent nil (September 2013: £1 million) on exploration and evaluation assets in Armenia.

10. Investments in jointly controlled entities

There were no acquisition during the period and the movement is mainly due to share of the profit, dividend received, repayment of loan to the jointly controlled entities and exchange gains. Details are as follows:

Jointly controlled entities Amount in £’000

Interest in jointly

controlled entities

Net loans to jointly

controlled entities

Total jointly

controlled entities

Share of net assets/costAt 1 April 2014 165,870 74,834 240,704Exchange rate difference 3,854 1,293 5,147Repayment of loans – (17,952) (17,952)Dividend (12,141) – (12,141)Share of profit 10,685 – 10,685

At 30 September 2014 168,268 58,175 226,443

11. Investments in associates

Associates Amount in £’000

Interest in associates

Share of net assets/costAt 1 April 2014 131,576Exchange rate difference 3,834Acquisition 15,181Dividend (1,501)Share of profit 3,294

152,384

In August 2014, the Group acquired a further 13.3 million shares in CGH. The acquisition represented 0.26 per cent of the issued capital of CGH. The fair value of the investment in CGH at 30 September 2014 is £201.7 million, based on the market share price at that date of £1.02 (HK$12.88).


notes

12. Trade and other receivables

The significant decrease in trade and other receivables was mainly due to reduction in deposits made in respect to trading transactions amounting to £6.0 million at 30 September 2014 (31 March 2014: £30.2 million).

Included in trade and other receivables is an amount of £0.8 million that represents the net amount expected to be recovered on dissolution of the joint venture in Maoming King Ming Petroleum Company Limited that was dissolved on 5 February 2013. From this date control has been lost and therefore consolidation is no longer appropriate.

13. Borrowings

On 7 August 2013, the Company issued the Loan notes of £7.5 million (US$12 million) to Fortune Dynasty Holdings Limited in order to fund the Group’s near-term capital expenditure, particularly the capital expenditure relating to FGIH, and to provide additional general working capital. The Loan Notes were settled by way of the issue of the 99,373,000 ordinary shares of the Company, with the balance of approximately US$80,000 of principal and all accrued interest paid in cash in October 2013.

During April 2014, a further £110 million (US$180 million) which was the remaining balance of the existing loan facility of £184 million (US$300 million) entered in October 2013, was drawn down by the Group. The loan is with a term of three years and a margin of 2.75 per cent above LIBOR. The loan has been used to repay the existing syndicated loan, provide the Group with working capital, and finance new investment. The facility is guaranteed by the Company and secured by share charges over its various Hong Kong subsidiaries.

In addition, trading loans of £6 million and £38 million had been drawn and repaid respectively during the period.

14. Trade and other payables

The significant decrease in trade and other payables was mainly due to reduction in deposits made in respect to trading transactions amounting to £2.4 million received from trading customers at 30 September 2014 (31 March 2014: £37.6 million).

15. Issued capital

Issued capital as at 30 September 2014 amounted to £25.9 million. There were no movements in the issued capital of the Company during the period.


notes

16. Financial instruments’ fair value disclosures

Financial instruments that are measured subsequent to initial recognition at fair value are grouped into levels 1 to 3 based on the degree to which the fair value is observable:

• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• Level 3 fair value measurements are those derived from valuation techniques that included inputs for the asset or liabilities that are not based on observable market date (unobservable inputs).

During the period ended 30 September 2014, there were no transfers between levels (31 March 2014: nil).

30.09.14(Unaudited)

31.03.14(Audited)

Amount in £’000 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Financial assetsAvailable for sale investments – quoted – – – – – – – –Available for sale investments – unquoted – – 1,986 1,986 – – 1,937 1,937

– – 1,986 1,986 – – 1,937 1,937

Available for sale investments

Amount in £’000

Balance at 1 April 2014 1,937Exchange difference 49

Balance at 30 September 2014 1,986

Profit guaranteeAs part of the FGIH Transaction, the Group will compensate CGH on a dollar for dollar basis where the net profits for the natural gas business for FY2013 are less than HK$200 million (approximately £16 million) or are less than HK$400 million (approximately £32 million) in 2014. This compensation agreement is not subject to any cap.

As Management believe the FGIH business within CGH is on target to meet the profit guarantee and the possibility of the compensation is unlikely, and the fair value of the obligation has been estimated on the basis of the weighted average of the possible outcomes to be immaterial, no liability has been recognised as at 30 September 2014.


notes

17. Note to cashflow statement


6 months ended

30.09.14 (Unaudited)

6 months ended

30.09.13(Unaudited)

Net cash from operating activitiesProfit for the period 8,885 225,182Adjustments for: Share of post-tax results of jointly controlled entities 10 (10,685) (104,953) Share of post-tax results of associates 11 (3,294) 39 Taxation 845 3,196 Amortisation – 29 Depreciation 219 313 Loss on disposal of property, plant and equipment – (19) Gain on disposal of subsidiary undertakings – (119,655) Share-based payments 200 – Investment revenue (867) (908) Finance costs 4,257 2,205Decrease in inventories – 328Decrease/(increase) in trade and other receivables 29,964 (61,557)(Decrease)/increase in trade and other payables (27,036) 61,170

Net cash from operations 2,488 5,370Taxation paid (829) (2,529)

Net cash from operating activities 1,659 2,841

Cash and cash equivalentsCash and bank balances 152,057 108,332

18. Related party transactions and significant contracts

The Group’s related parties, the nature of the relationship and the extent of transactions with them are summarised below:

Amount in £’000 Sub notes30.09.14

(Unaudited) 30.09.13

(Unaudited)31.03.14 (Audited)

Loans to equity non-controlling interests in a subsidiary 1 – 3,708 3,606Shareholder loans to jointly controlled entities 2 58,175 55,729 74,834Sales of goods to jointly controlled entities 3 – 1,601 2,845Purchase of goods from jointly controlled entities 3 – 905 1,650Current account with Vitol Energy (Bermuda) 3 – (483) –


notes

18. Related party transactions and significant contracts continued

Sub notes1. Loans of £3,606,000 comprised mainly loans to the non-controlling shareholders in March 2014 (September 2014: £nil). A £3,606,000

loan balance at March 2014 (September 2014: £nil) to the non-controlling shareholders of Bounty Resources Armenia Limited was guaranteed, interest bearing at a margin of 4% over LIBOR p.a. and was repaid in June 2014.

2. The shareholder loans are part of shareholders’ investment in the jointly controlled entities. These are common methods of making an investment in jointly controlled entities in the PRC.

£58,030,000 (March 2014: £74,692,000), of which £2.5 million are unsecured, interest bearing of HIBOR plus 4.72% p.a. and repayable on October 2015, was loaned to CGG which is established in Hong Kong and £145,000 (March 2014: £148,000) was due from Zhuhai Special Economic Zone South China Petroleum Company Limited.

3. Purchase from jointly controlled entity – Jining Qufu New Fu Hong Gas Limited amounted to £nil (September 2013: £905,000). Sales from Group’s subsidiary, Xinyang Fortune Gas Company Limited and Beijing Fuhua Natural Gas Limited to Group’s jointly controlled entity, Xinyang Fortune Vehicle Gas Company Limited and Beijing Fuhua Natural Gas Logistics Limited, amounted to £nil (September 2013: £1,524,000 and £77,000) respectively.

4. Fortune Max Holdings Limited (“FMH”) is a private company controlled and beneficially owned by Mr Daniel Chiu. During 2012, FMH has entered into arrangements with lenders to finance the purchase of CGH shares, and then entered into a verbal understanding to sell any such CGH shares to CGG, at all cost associated with the purchase and financing of any CGH shares acquired as and when these are transferred to CGG, and any losses arising on the CGH shares acquired by FMH. In April 2013, CGG has acquired all the 207,968,000 CGH shares previously purchased by FMH by its own financing capacity. Under the terms of the agreement with CGG, FMH generated neither profit nor incurred any loss from its transaction in CGH shares, however, CGG recognised a gain in equity of over £67 million based on the market value at the date of transfer, with the Group’s share being £33.5 million.

5. On 7 August 2013, the Group entered into a conditional sale and purchase agreement to purchase the entire issued share capital of First Marvel Investment Limited (“First Marvel”) which had been incorporated for the purpose of acquiring Wilmar International Limited’s US$60 million interest in the total US$400 million consideration receivable as a result of the FGIH Transaction (the “Wilmer consideration”). First Marvel was wholly-owned subsidiary of Fortune Dynasty Holdings Limited (“FDH”), a joint venture company then owned 55 per cent by First Level Holdings Limited (“FLH”), which is in turn controlled by Mr Daniel Chiu, an executive director of the Company.

The conditional sale and purchase agreement included consideration of £39.1 million (US$60 million), and an unsecured fixed rate loan note instrument with FDH. Under the Loan Instrument, FDH was agreed to subscribe in cash at par for £7.9 million (US$12 million) nominal amount of fixed rate unsecured loan notes issued by the Group (the “Loan Notes”). Interest was payable on the Loan Notes at a rate of 7% per annum until they were settled through the subscription for shares.

On 25 September 2013, the Company announced that the acquisition of First Marvel and the amendment of the loan received from FDH amounting to US$12 million were approved by shareholders in the General Meeting, such that it would be repayable in shares in Fortune Oil (the “Loan Settlement”) with the balance of approximately US$80,000 of principal and all accrued interest paid in cash. On 3 October 2013, Fortune Oil issued 599,639,580 new ordinary shares of the Company for the acquisition of First Marvel and the Loan Settlement.

6. Certain assets included in property, plant and equipment of £1.6 million were transferred at cost by way of trust & deed from two companies controlled and beneficially owned by Mr Daniel Chiu on January 2014.

7. Included in trade and other receivables is an amount of £0.8 million that represents the net amount expected to be recovered on dissolution of the joint venture in Maoming King Ming Petroleum Company Limited that was dissolved on 5 February 2013. From this date control has been lost and therefore consolidation is no longer appropriate.

8. The investment in CGH is divided into two layers: (i) direct holdings by wholly owned subsidiaries of the Company; and (ii) indirect holding by CGG, a jointly controlled entity between the Group and Mr Liu Ming Hui. In October 2013, the Group loaned £21.5 million to CGG to further purchase 30,000,000 ordinary shares of CGH from Mr Liu Ming Hui. The loan balance as 30 September 2014 was £2.5 million.

9. By virtue of their directly and indirectly held shareholding of 51.2%, FLH is considered to be the ultimate controlling party of the Group.

10. In August 2014, the Group has increased its interest in CGH through an acquisition of 13,252,000 shares (the “Acquired Shares”). The shares were acquired from the China Petroleum & Chemical Corporation (Sinopec Corp.) as part of a share placement. The shares were acquired at a price of HK$14.80, a 5.1% discount to the closing price on the date the acquisition was made on 13 August 2014.

Due to logistical constraints on the date the acquisition was made, the Acquired Shares were allotted to FLH, a substantial shareholder of the Company and private company controlled and beneficially owned by Mr Daniel Chiu, an executive director of the Company.

During August 2014, FLH transferred all the allotted shares at cost (i.e. no profit or loss) to the Company. The Company has indemnified FLH against all costs associated with the acquisition, financing and transfer of any Acquired Shares.


notes

19. Litigation

In April 2012, an action was commenced in the High Court of Hong Kong by Caspian Resources Development Pte Limited (“CRDPL”) against Fortune Oil, Giant Global Development Limited (“GGDL”), a wholly owned subsidiary of Fortune Oil, and George Howard Richmond (“Mr Richmond”) in relation to the validity of the sale and purchase of a 16.7 per cent shareholding in Caspian Bounty Steel Limited (“CBSL”) by Mr Richmond to GGDL in January 2011. CBSL is the company through which Fortune Oil holds part of its interests in an iron ore mining project located in Armenia. A writ of summons was served on GGDL in April 2012 and on Fortune Oil in March 2013. GGDL and Fortune Oil will strenuously defend the action. GGDL successfully applied in September 2012 to the High Court of Hong Kong for security for costs to be given by CRDPL. Fortune Oil will similarly seek security for costs.

Fortune is currently unable to quantify the potential damages that could arise from this claim. However, the Directors believe that the Group and GGDL have reasonable prospects in successfully defending the action and that therefore no provision has been made in the financial statements as this claim is not expected to result in any material loss to the Group. At 31 March 2014, the carrying value of the assets in the Armenia iron ore project has been fully impaired.

20. Approval of the interim financial statements

The interim of financial statements for six months ended 30 September 2014 were approved by the board of directors on 28 November 2014.


shareholder information

RegistrarEnquiries and notifications concerning dividends, share certificates, transfers and address change, replacement share certificate should be addressed to the Company’s Registrar, whose address is:

Capita Asset ServicesThe Registry34 Beckenham RoadBeckenhamKent BR3 4TU

Shareholders’ Helpline:UK: 0871 664 0300 (Calls to this number cost 10p per minute plus any network extras. Lines are open from 9am-5.30pm, Monday-Friday)International: + 44 (0) 20 8639 3399

By email: [email protected]

In any correspondence with the registrars, please refer to Fortune Oil PLC and state clearly the registered name and address of the shareholder.

Online share portalRegistered shareholders can register and access information regarding their shareholdings by using the Shareholder Portal at www.capitashareportal.com Shareholders will need their investor code (IVC) which can be found on their share certificate(s). The share portal allows shareholders to:

• view their holding• update address details• arrange to have dividends paid into their bank account• view dividend payment history• make dividend payment choices• buy and sell shares and access a wealth of stock market

news and information• register their proxy voting instruction• download a stock transfer form• view transaction history• elect to participate in the dividend reinvestment plan• register for ecommunications allowing Fortune Oil to

notify shareholders by email that certain documents are available to view on its website.

Share Dealing ServiceShare dealing services are available for shareholders to either sell or buy Fortune Oil shares.

UK shareholders only – Capita Asset Services www.capitadeal.com (on-line dealing)

0871 664 0454 (telephone dealing – Calls to this number cost 10p per minute plus any network extras. Lines are open from 8am-4.30pm, Monday-Friday)

To deal online or by telephone all you need is your surname, Investor Code reference number, full postcode and your date of birth. Your investor code can be found on a recent share certificate, statement or tax voucher. Please have the appropriate documents to hand when you log on or call, as this information will be needed before you can buy or sell shares.

Full terms, conditions and risks apply and are available on request or by visiting www.capitadeal.com.

This is not a recommendation to buy or sell shares. The price of shares can go down as well as up, and you are not guaranteed to get back the amount that you originally invested.

Capita Asset Services is a trading name of Capita IRG Trustees Limited which is authorised and regulated by the Financial Conduct Authority.

Share Price InformationThe current share price of Fortune Oil PLC is available on the interactive FT Cityline service on 09058 171 690 and listen to current FTSE 100 index, then simply say “Fortune Oil”. Calls are charged at 75p per minute from a BT landline. Average call duration will be 1 minute per stock. Cost from other networks and mobile phones, may be higher.

Warning to shareholders

Unsolicited mailFortune Oil PLC is obliged by law to make its share register publicly available and, as a consequence, some shareholder may receive unsolicited mail. If you wish to limit the receipt of unsolicited mail, you may do so by contacting the Mailing Preference Service, an independent organisation whose services are free to you.

Mailing Preference Service (MPS)MPS FREEPOST 29LON20771London W1E 0ZT

MPS Registration Line: 0845 703 4599

Or via their website at www.mpsonline.org.uk

Unsolicited calls or correspondenceWe are aware that a small number of shareholders have received unsolicited telephone calls concerning their investment in Fortune Oil PLC. These calls are from overseas based organisations who offer to buy Fortune Oil PLC shares for considerably more than the current market price. In some cases the caller has suggested that there is currently a takeover offer for Fortune Oil PLC. There is no such offer and we suspect that the calls were bogus.


shareholder information

Shareholders are advised to be very wary of any unsolicited investment advice, offers of free company reports. Operations, commonly known as “boiler rooms”, are targeting UK shareholders are callers can be very persistent and extremely persuasive. We are aware that they attempt to persuade individuals to provide email addresses or other personal information; shareholders are strongly advised not to provide any such details.

If you receive any unsolicited investment advice:

• check that they are properly authorised by the Financial Conduct Authority by visiting http://www.fsa.gov.uk/register/home.do and contacting the firm using the details on the register;

• report any suspicions to the FCA either by calling 0800 111 6768 or by completing an online form at http://www.fca.org.uk/consumers/scams/ investment-scams/share-fraud-and-boiler-room- scams/reporting-form; or

• inform Capita Asset Services on 0871 664 0300 (Calls cost 10p per minute plus network extras. Lines are open from 9am-5.30pm, Monday-Friday) or email [email protected]. They are not able to investigate such incidents themselves but will record the details and pass them on to us; and

• if the calls persist, hang up.

If you deal with an unauthorised firm, you will not be eligible to receive payment under the Financial Services Compensation Scheme.

Details of any share dealing facilities that the Company endorses is available on www.capitadeal.com

More detailed information on this or similar activity can be found on the FCA website http://www.fca.org.uk/consumers/scams/investment-scams

Electronic and web communicationsAt the annual general meeting of the Company held on 15 June 2010, resolutions were passed, whereby shareholders’ consent was obtained and the new articles of association were adopted, to enable the Company to communicate with shareholders by electronic communications further to the web communication since July 2007.

The Companies Act 2006 permits UK registered companies to send, or make available to their shareholders, their annual reports and accounts, notices of general meetings and other communications (the “Company communication”) by electronic means rather than by means of hard copies sent through the postal service (except to those who have specifically elected to receive a paper copy). Receiving your communications electronically offers advantages in terms of speed and convenience and is a secure method of obtaining your shareholder documentation, which also allows the Company to communicate in a more environmentally friendly and effective way.

Notices of general meetings and the Reports and Accounts, in Adobe Acrobat Portable Document Format (PDF), are supplied via the Company’s website (www.fortune-oil.com) to shareholders who have not requested a hard copy of these documents.

Relating to beneficial owners of shares with “information rights”Please note that beneficial owners of shares who have been nominated by the registered holder of those shares to receive information rights under section 146 of the Companies Act 2006 are required to direct all communications to the registered holder of their shares rather than to the Company’s registrar, Capita Asset Services, or to the Company directly.


BankersStandard Chartered Bank (Hong Kong) LimitedStandard Chartered Bank Building4 – 4A Des Voeux Road, CentralHong Kong

CITIC Bank International Limited80 Fl. International Commerce Centre 1 Austin Road WestKowloon, Hong Kong

Malayan Banking Berhad18/F., CITIC Tower1 Tim Mei Avenue, CentralHong Kong

Morgan Stanley Asia LimitedLevel 46 International Commerce Centre1 Austin Road WestKowloon, Hong Kong

DBS Bank (Hong Kong) Limited16th Floor, The Center99 Queen’s Road CentralCentral, Hong Kong

Ping An Bank Co Ltd1F Xinyuan Building,No.898,Tianhebei Road,Guangzhou,China, 510898

Barclays Bank plc30 Sloane SquareLondon SW1W 8AFUnited Kingdom

Corporate ConsultantS.Goschalk Limited41 MeadwayLondon NW11 7AXUnited Kingdom

Corporate AdviserVSA Capital LimitedFourth FloorNew Liverpool House15-17 Eldon StreetLondon EC2M 7LDUnited Kingdom

SolicitorsJun He Law OfficesSuite 2208, 22/F., Jardine HouseOne Connaught PlaceCentral, Hong Kong

Reed Smith LLPThe Broadgate Tower20 Primrose StreetLondon EC2A 2RSUnited Kingdom

Woo Kwan Lee & LoRoom 2801 & 3238Sun Hung Kai Centre30 Harbour RoadWanchai, Hong Kong

DirectorsQIAN BenyuanChairman (Non-executive)

Daniel CHIUExecutive Vice-Chairman


LI Ching (Ms)Executive Director

Frank ATTWOODSenior Independent Director

LIN XizhongMAO TongDennis CHIULouisa HO (Ms)Ian TAYLORWANG JinjunYUAN JunNon-executive Directors

Company SecretarySandi CHOI (Ms)

Registered Office6/F., Belgrave House76 Buckingham Palace RoadLondon SW1W 9TQUnited Kingdom

Registered Number2173279

AuditorDeloitte LLP2 New Street SquareLondon EC4A 3BZUnited Kingdom

company information

Fortune Oil PLCinterim report forthe six months ended 30 September 2014

202 4

London

Registered Office:6/F., Belgrave House76 Buckingham Palace RoadLondon SW1W 9TQUnited Kingdom

Tel: +44 (0)20 7096 9580Fax: +44 (0)20 7628 5725

Hong Kong

Suite 2307, 23/FOffice TowerConvention Plaza1 Harbour RoadWanchai, Hong Kong

Tel: +852 2802 8300Fax: +852 2802 8322

London Hong Kong - FORTUNE OIL · 76 Buckingham Palace Road London SW1W 9TQ United Kingdom Tel: +44...

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