Convoy Global : RESULTS OF INTERNAL CONTROL REVIEW

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CONVOY GLOBAL HOLDINGS LIMITED

康 宏 環 球 控 股 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1019)

RESULTS OF INTERNAL CONTROL REVIEW

Reference is made to the announcements of Convoy Global Holdings Limited (the "Company", together with its subsidiaries, the "Group") dated 7 December 2017, 27 March 2018, 1 August 2018, 1 November 2018, 1 February 2019, 19 February 2019, 30 April 2019, 1 August 2019, 15 August 2019, 4 November 2019, 20 December 2019 and 24 January 2020 (collectively the "Announcements"). Unless otherwise stated, capitalised terms used in this announcement shall have the same meanings as defined in the Announcements.

This announcement is made by the Company pursuant to Rule 13.09(2) of the Listing Rules of the Stock Exchange (the "Listing Rules") and the Inside Information Provisions under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

RESULTS OF INTERNAL CONTROL REVIEW

As set out in the announcement of the Company dated 4 November 2019, the Company has engaged FTI Consulting (Hong Kong) Limited ("FTI") in October 2019 to review the internal control systems of the Company in the final phase of its preparation for resumption of trading (the "Internal Control Review"). FTI is an independent specialist global business advisory firm, and has extensive experience in reviewing and advising on the internal controls and corporate governance environments of companies listed on the Stock Exchange.

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The Internal Control Review is part of the Company's efforts in satisfying the Second Resumption Condition imposed by the Stock Exchange which states that the Company has to demonstrate that it has put in place adequate internal control systems to meet the obligations under the Listing Rules. As part of the Internal Control Review, FTI has also performed further review on the progress of remediation by the Company in relation to the Compliance Review. The Compliance Review covered the Company's then existing compliance programme with the overall aim of identifying areas of the programme that required updating or remediation (further information can be found in the Company's announcement dated 4 November 2019).

Further, as disclosed in the announcement of the Company dated 24 January 2020, the Board has received the Internal Control Report and according to the Internal Control Report, FTI did not find any indication of any material internal control weaknesses or deficiencies that have been brought to FTI's attention in its Internal Control Review. For the remaining findings which are classified as medium and low risk levels (which do not represent material weaknesses or deficiencies), the Company has already developed formal remediation plans with reference to the recommendations provided by FTI, the majority of which are expected to be remediated by March 2020. As an effort to maintain a good internal control system and for the purpose of continuous improvement, the Company has also initiated FTI conducting an additional review to verify and assess the implementation status of the remediation actions. FTI is also of the view that subject to the completion of the planned remediation actions, they would be sufficient and adequate to rectify the said non-material weaknesses or deficiencies. Regarding the further review on the progress of remediation in relation to the Compliance Review, subject to the completion of the ongoing rectification measures for the remaining weaknesses (the majority of which are expected to be completed by February 2020), FTI is satisfied that appropriate actions have been taken to sufficiently address the remaining weaknesses. As such, it is the Company's view that it has put in place adequate internal control systems and procedures without any material weakness.

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SCOPE AND PROCEDURES OF INTERNAL CONTROL REVIEW

The scope of the Internal Control Review includes, but not limited to, the following:-

• independent assessment of the internal control systems of the Company and its main operating subsidiaries at both entity-level and process-level controls;
• identification of major weaknesses, ineffectiveness of the control systems, environment and process deficiencies with reference to the forensic investigation findings;
• enquiries with the management personnel and key process owners to obtain an understanding of the remedial actions implemented by the Company from January 2018 onwards, to ensure that all significant internal control deficiencies have been properly addressed;
• walk-throughand other substantive procedures to confirm FTI's understanding of the implementation status of the remedial actions; and
• compilation of a brief report setting out main findings in relation to issues above including, where applicable, discussion of any current internal control weaknesses and remediation recommendations.

The following were the main review procedures performed by FTI for the Internal Control Review:

• meeting with key management team of the Company and its main operating subsidiaries to understand the Group's business strategy, organisational structure and functions of key staff and department;
• raising targeted enquiries with management personnel and key process owners to understand the remedial actions implemented by the Company from December 2017 onwards;
• collating and reviewing the Group's corporate policies, manuals and procedure guidelines to consider whether there are any major deficiencies, ambiguities, inconsistencies or an apparent lack of appropriate references to regulatory and/or the Listing Rules requirements;

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• performing transaction walk-throughs to understand the main business transaction cycles, the associated internal processes and the controls that are currently in place; and
• carrying out other substantive procedures (including sampling and compliance review tests) to identify whether the documented policies, manuals and procedure guidelines appear to have been adhered to by staff.

FTI also independently assessed the Group's documented policies, manuals and procedure guidelines, performed fact-findings interviews with relevant employees and management, and conducted walk-throughs and sample transaction testing of key internal processes of relevant business segments in order to identify the Group's major risk areas and the corresponding internal controls and monitoring activities imposed by senior management.

PROGRESS AND RESULTS OF INTERNAL CONTROL REVIEW

FTI conducted the Internal Control Review during the period between 1 November 2019 and 23 January 2020, under the following three phases:-

• Phase 1 - FTI conducted a targeted review of the rectification measures implemented by the current management since December 2018 and considered whether they are adequate to address the compliance and control weaknesses identified from the Compliance Review in relation to each relevant business segment. More details of the Compliance Review can be found in the Company's announcement dated 4 November 2019 (the "Phase 1 Review");
• Phase 2 - FTI independently reviewed the Group's entity-level and process-level controls and identified whether there are any major weaknesses or ineffectiveness of the control systems, environment and process deficiencies. Where appropriate, FTI also provided recommendations for rectification (the "Phase 2 Review");
• Phase 3 - FTI conducted a follow-up review to note management responses to FTI's findings based on Phase 1 and Phase 2 Review, specifically to consider whether any of the recommendations by FTI have been adopted by the Company and if so, their implementation status (the "Phase 3 Review").

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RESULTS OF THE INTERNAL CONTROL REVIEW

Results of Phase 1 Review

During the Compliance Review, FTI identified a total of 58 compliance and control weaknesses in relation to money lending, asset management and securities dealing business segments of the Company, of which the senior management had already taken rectification measures to resolve 51 of these 58 issues. Under the Phase 1 Review, FTI noted that rectification measures are ongoing in relation to the seven remaining unresolved compliance and control weaknesses related to the business segments of asset management. It is noted that the rectification measures in respect of the remaining weaknesses are being carried out and the majority of which are expected to be completed by February 2020.

Based on discussion with the Company's senior management regarding its plan to rectify the remaining compliance and control weaknesses, and subject to the completion of the ongoing rectification measures (the majority of which are expected to be completed by February 2020), FTI is satisfied that Company's management has taken appropriate actions to sufficiently address the compliance and control weakness identified from the Compliance Review.

Results of Phase 2 Review and Phase 3 Review

FTI identified certain weaknesses or deficiencies in Phase 2 and Phase 3 Review with medium and low risk level. FTI expressly explained in the Internal Control Report that medium and low risk levels do not represent material weaknesses or deficiencies in the internal control systems of the Company. FTI did not identify any high risk internal control weakness or deficiency and is satisfied that there was no indication of any material internal control weaknesses or deficiencies that has been brought to FTI's attention.

There are five weaknesses or deficiencies of medium risk nature found in reviewing the corporate-level control and three weaknesses or deficiencies of medium risk nature found in reviewing the asset management business segment.

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As to weaknesses or deficiencies of low risk nature, the following is a summary of the number of such weaknesses or deficiencies in respect of the respective review areas:

	N u m b e r o f We a k n e s s e s o r
Area of Review	Deficiencies of Low Risk Nature
Corporate Controls	8
IFA Business	5
Money Lending	1
Asset Management	7
Securities Dealing	4

FTI explained in the Internal Control Report that (i) weaknesses or deficiencies of medium risk nature represents less than material weaknesses or deficiencies of the Group's internal control systems and procedures, and is of a moderate risk/priority to the Group for business success or achievement of objectives; and (ii) weaknesses or deficiencies of low risk nature represents a lower risk/priority to the Group and has a relevant, but relatively less significant impact on business success or achievement of objectives.

The Company has already developed formal remediation plans, with reference to the recommendations provided by FTI, to address the outstanding weaknesses or deficiencies identified in the Internal Control Review.

The Company plans to remediate the majority of the medium and low risk internal control weaknesses or deficiencies by 31 March 2020 and will make continuous improvements to the internal control systems and procedures on an ongoing basis.

Following the actions and steps taken by the management team of the Group, FTI will conduct a subsequent internal control review to verify and assess the subsequent implementation status of the planned remediation actions.

Having considered the responses and actions by senior management and subject to the Company's completion of the planned remediation actions, FTI is of the view that the remediation actions would be sufficient and adequate to rectify the internal control weaknesses or deficiencies identified in Phase 2 and Phase 3 review.

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As such, it is the Company's view that it has put in place adequate internal control systems and procedures without any material weakness.

CONTINUED SUSPENSION OF TRADING

At the request of the Company, trading in the shares of the Company on the Stock Exchange was halted from 11:04 a.m. on 7 December 2017 (automatically converted to "being suspended" thereafter), and will remain suspended until further notice. The Company will keep the public informed of the latest developments by making further announcement(s) as and when appropriate.

Shareholders and potential investors should note that the resumption of trading in the shares on the Stock Exchange is subject to various conditions which may or may not be fulfilled. There is no guarantee that resumption of trading in the shares will take place. Shareholders and potential investors of the Company are reminded to exercise caution when dealing with the shares.

By Order of the Board

CONVOY GLOBAL HOLDINGS LIMITED

Johnny Chen

Chairman and Executive Director

Hong Kong, 7 February 2020

As at the date of this announcement, the executive Directors are Mr. Johnny Chen (Chairman), Mr. Ng Wing Fai, Mr. Yap E Hock and Mr. Shin Kin Man; the non-executive Director is Mr. Chen Shih-pin; and the independent non-executive Directors are Mr. Pun Tit Shan, Mrs. Fu Kwong Wing Ting, Francine, Mr. Pak Wai Keung, Martin and Mr. Yan Tat Wah. The duties of the executive Directors namely Mr. Wong Lee Man, Ms. Fong Sut Sam and Ms. Chan Lai Yee have been suspended since 8 December 2017.

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