Bright Smart Securities & Commodities Group Limited — Interim / Quarterly Report 2012

Nov 13, 2012

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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BRIGHT SMART SECURITIES & COMMODITIES GROUP LIMITED 耀才證券金融集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(the “Company”, Stock Code: 1428)

ANNOUNCEMENT OF INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012

The board of directors (the “Board”) of the Company is pleased to announce the unaudited consolidated results of the Company and its subsidiaries (collectively referred to as the “Group”) for the six months ended 30 September 2012 together with the comparative figures for the six months ended 30 September 2011 as follows:

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 September 2012 — unaudited (Expressed in Hong Kong dollars)

		Six months	ended
		30 September
		2012	2011
	Note	$	$
Turnover	2	110,372,797	122,687,201
Other revenue	4	27,723,041	17,679,882
Other net gain	5	104,505	364,835
Staff costs		(39,736,250)	(40,765,104)
Depreciation		(6,167,952)	(5,199,052)
Other operating expenses		(49,828,469)	(46,758,342)
Profit from operations		42,467,672	48,009,420
Finance costs	6(a)	(6,824,388)	(8,694,819)
Profit before taxation	6	35,643,284	39,314,601
Income tax	7	(4,293,994)	(6,347,058)
Profit and total comprehensive income
attributable to equity shareholders
for the period		31,349,290	32,967,543
Earnings per share	8
Basic (cents)		3.98	4.85
Diluted (cents)		3.98	4.85

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 30 September 2012 — unaudited (Expressed in Hong Kong dollars)

Note Non-current assets Fixed assets Other non-current assets Total non-current assets Current assets Accounts receivable 10 Other receivables, deposits and prepayments Cash and cash equivalents Total current assets Current liabilities Accounts payable 11 Accrued expenses and other payables Bank loans Current taxation Amount due to a related company Total current liabilities Net current assets Total assets less current liabilities Non-current liabilities Deferred tax liabilities NET ASSETS EQUITY Share capital Share premium Merger reserve Share option reserve Retained profits TOTAL EQUITY	At 30 September 2012 $ 30,464,590 10,459,668 40,924,258 1,521,842,508 13,739,907 245,768,199 1,781,350,614 430,971,735 16,079,654 575,000,000 8,057,135 100,000,000 1,130,108,524 651,242,090 692,166,348 192,551 691,973,797 307,269,900 246,310,124 (19,999,991) 3,154,777 155,238,987 691,973,797	At 31 March 2012 $ 26,197,007 8,490,032 34,687,039 1,145,959,330 12,479,669 397,052,989 1,555,491,988 469,737,171 17,687,699 425,000,000 3,763,141 180,000,000 1,096,188,011 459,303,977 493,991,016 192,551 493,798,465 204,846,600 181,907,382 (19,999,991) 3,427,420 123,617,054 493,798,465

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Notes:

(Expressed in Hong Kong dollars unless otherwise indicated)

1 (a) Statement of compliance

This interim financial report for the six months period ended 30 September 2012 has been prepared in accordance with Hong Kong Accounting Standard 34, “Interim Financial Reporting”, issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). This interim financial report also complies with the applicable disclosure provisions of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited. A summary of the significant accounting policies adopted and consistently applied by the Group in the preparation of this interim financial report is set out below.

The preparation of an interim financial report in conformity with HKAS 34, “Interim Financial Reporting” requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses on a year to date basis. Actual results may differ from these estimates.

The interim financial report contains condensed consolidated financial statements and selected explanatory notes. The condensed consolidated interim financial statements and notes thereon do not include all of the information required for full set of financial statements prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”).

The interim financial report is unaudited, but has been reviewed by KPMG in accordance with the Hong Kong Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”, issued by the HKICPA.

(b) Basis of preparation of the financial statements

The interim financial statements are presented in Hong Kong Dollars (“HKD”). It is prepared on the historical cost basis.

The HKICPA has issued a few amendments to HKFRSs that are first effective for the current accounting period of the Group and the Company. Of these, the following developments are relevant to the Group’s financial statements:

• Amendments to HKFRS 7, Financial instruments: Disclosures — Transfers of financial assets

• Amendments to HKAS 12, Income taxes — Deferred tax: Recovery of underlying assets

The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period. These developments do not have a material impact on the Group’s financial statements.

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2 TURNOVER

The principal activities of the Group are securities broking, margin financing and commodities and futures broking.

Turnover represents the brokerage commission from securities, commodities and futures broking and interest income from margin and initial public offering (“IPO”) financings as follows:

Brokerage commission Interest income from margin financing Interest income from IPO financing	Six months ended 30 September 2012 2011 $ $ 88,793,632 93,423,241 21,539,498 28,564,168 39,667 699,792 110,372,797 122,687,201	Six months ended 30 September 2012 2011 $ $ 88,793,632 93,423,241 21,539,498 28,564,168 39,667 699,792 110,372,797 122,687,201
		122,687,201

3 SEGMENT REPORTING

The Group manages its businesses by divisions, which are organised by business lines. In a manner consistent with the way in which information is reported internally to the Group’s most senior executive management for the purposes of resource allocation and performance assessment, the Group has presented the following two reportable segments. No operating segments have been aggregated to form the following reportable segments.

• Securities broking — provision of broking services in securities traded in Hong Kong and overseas markets and margin financing services to those broking clients.

• Commodities and futures broking — provision of broking services in commodities and futures contracts traded in Hong Kong and selected overseas markets.

(a) Segment results, assets and liabilities

For the purposes of assessing segment performance and allocating resources between segments, the Group’s senior executive management monitors the results, assets and liabilities attributable to each reportable segment on the following bases:

Segment assets include all tangible assets and current assets with the exception of other corporate assets. Segment liabilities include trade creditors and accruals attributable to the activities of the individual segments.

The measure used for reporting segment profit is earnings before finance costs and taxes (“EBIT”). To arrive at EBIT, the Group’s earnings are further adjusted for items not specifically attributed to individual segments, such as corporate administration costs.

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(b) Segment information

Revenue from customers: — Brokerage commission — Interest income from margin financing — Interest income from IPO financing Consolidated turnover Handling and settlement fees Reportable segment revenue Reportable segment profit (EBIT) Depreciation for the period Other interest income Finance costs Additions to non-current segment assets during the period Reportable segment assets Reportable segment liabilities

Six months ended 30 September 2012 Securities broking Commodities and futures broking Total $ $ $ 50,715,568 38,078,064 88,793,632 21,539,498 — 21,539,498 39,667 — 39,667 72,294,733 38,078,064 110,372,797 13,586,230 5,850 13,592,080 85,880,963 38,083,914 123,964,877 30,919,641 11,883,690 42,803,331 (6,144,984) (3,518) (6,148,502) 11,754,328 2,033,314 13,787,642 (6,818,405) (5,983) (6,824,388) 9,852,035 — 9,852,035 At 30 September 2012 Securities broking Commodities and futures broking Total $ $ $ 1,634,356,572 215,969,431 1,850,326,003 (1,074,967,230) (110,240,131) (1,185,207,361)

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		Six months ended 30 September 2011	Six months ended 30 September 2011	Six months ended 30 September 2011
			Commodities
		Securities	and futures
		broking	broking	Total
		$	$	$
	Revenue from customers:
	— Brokerage commission	61,813,389	31,609,852	93,423,241
	— Interest income from margin financing	28,564,168	—	28,564,168
	— Interest income from IPO financing	699,792	—	699,792
	Consolidated turnover	91,077,349	31,609,852	122,687,201
	Handling and settlement fees	11,784,447	9,499	11,793,946
	Reportable segment revenue	102,861,796	31,619,351	134,481,147
	Reportable segment profit (EBIT)	25,669,962	23,872,508	49,542,470
	Depreciation for the period	(4,995,446)	(7,904)	(5,003,350)
	Other interest income	5,506,370	180,485	5,686,855
	Finance costs	(8,694,819)	—	(8,694,819)
	Additions to non-current segment assets
	during the period	9,392,980	—	9,392,980
		At 30 September 2011
			Commodities
		Securities	and futures
		broking	broking	Total
		$	$	$
	Reportable segment assets	1,217,396,743	197,387,982	1,414,784,725
	Reportable segment liabilities	(839,475,994)	(109,791,823)	(949,267,817)
(c)	Reconciliation of reportable segment profit,	assets and liabilities

Profit Reportable segment profit (EBIT) Finance costs Unallocated corporate expenses Consolidated profit before taxation	Six months ended 30 September 2012 2011 $ $ 42,803,331 49,542,470 (6,824,388) (8,694,819) (335,659) (1,533,050) 35,643,284 39,314,601

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Assets Reportable segment assets Elimination of inter-segment receivables Unallocated corporate assets Consolidated total assets Liabilities Reportable segment liabilities Elimination of inter-segment payables Current taxation Deferred tax liabilities Unallocated corporate liabilities Consolidated total liabilities 4 OTHER REVENUE Interest income from — Authorised institutions — Others Handling and settlement fees Sundry income

At 30 September 2012 At 31 March 2012 $ $ 1,850,326,003 1,587,217,871 (37,036,536) (6,137,151) 8,985,405 9,098,307 1,822,274,872 1,590,179,027 At 30 September 2012 At 31 March 2012 $ $ (1,185,207,361) (1,094,238,172) 63,207,312 1,881,968 (8,057,135) (3,763,141) (192,551) (192,551) (51,340) (68,666) (1,130,301,075) (1,096,380,562) Six months ended 30 September 2012 2011 $ $ 9,991,590 1,669,342 3,815,453 4,018,117 13,807,043 5,687,459 13,592,080 11,793,946 323,918 198,477 27,723,041 17,679,882

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5 OTHER NET GAIN

Error trades arising from securities, commodities and futures dealing Net foreign exchange gain 6 PROFIT BEFORE TAXATION Profit before taxation is arrived at after charging: (a) Finance costs Interest expense on — Bank loans for IPO financing — Other bank loans and overdrafts — Loans from related companies (b) Other operating expenses Auditors’ remuneration Advertising and promoting expenses Handling and settlement expenses Commission expense to overseas brokers Information and communication expenses Legal and professional fees Operating lease charges in respect of properties Rates and building management fees

Six months ended 30 September 2012 2011 $ $ (251,149) (435,270) 355,654 800,105 104,505 364,835 Six months ended 30 September 2012 2011 $ $ — (307,697) (4,072,230) (6,104,235) (2,752,158) (2,282,887) (6,824,388) (8,694,819) (649,998) (663,000) (3,478,286) (3,282,375) (10,072,359) (9,466,086) (2,553,363) (2,221,039) (10,271,153) (10,352,642) (1,674,099) (1,430,860) (14,363,526) (12,924,058) (1,738,651) (1,551,617)

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7 INCOME TAX

Current tax — Hong Kong Profits Tax Provision for the period Deferred tax Origination and reversal of temporary differences Actual tax expense	Six months ended 30 September 2012 2011 $ $ (4,293,994) (7,331,475) — 984,417 (4,293,994) (6,347,058)

Hong Kong Profits Tax has been provided at the rate of 16.5% (2011: 16.5%) on the estimated assessable profits for the current period.

8 EARNINGS PER SHARE

The calculation of basic earnings per share is based on the profit attributable to ordinary equity shareholders of the Company of $31,349,290 (six months ended 30 September 2011: $32,967,543) and the weighted average number of shares in issue during the period ended 30 September 2012 of 787,297,497 (six months ended 30 September 2011: 679,682,000).

There were no dilutive potential ordinary shares for the six months ended 30 September 2012 and 2011, therefore basic earnings per share equals to diluted earnings per share.

9 DIVIDEND

The Board does not recommend the payment of an interim dividend in respect of the six months ended 30 September 2012 (six months ended 30 September 2011: $Nil).

10 ACCOUNTS RECEIVABLE

Accounts receivable from — Cash clients — Margin clients — Clearing houses — Brokers and dealers Less: Allowance for doubtful debts	At 30 September 2012 $ 85,356,346 1,064,461,314 353,448,941 19,540,291 (964,384) 1,521,842,508	At 31 March 2012 $ 110,688,229 893,571,157 127,318,844 15,345,484 (964,384) 1,145,959,330

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The aging analysis of accounts receivable from cash clients as at the end of the reporting period is as follows:

Current Less than 1 month past due 1 to 3 months past due More than 3 months past due Amount past due	At 30 September 2012 $ 52,584,586 9,442,202 8,971,717 14,357,841 32,771,760 85,356,346	At 31 March 2012 $ 38,637,877
		59,540,934 6,738,631 5,770,787
		72,050,352
		110,688,229

Accounts receivable from cash clients relate to a wide range of customers for whom there was no recent history of default. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are considered fully recoverable.

Margin loans due from margin clients are current and repayable on demand. Margin clients are required to pledge securities collateral to the Group in order to obtain credit facilities for securities trading. The amount of credit facilities granted to them is determined by the discounted value of securities accepted by the Group. At 30 September 2012 and 31 March 2012, the total market value of securities pledged as collateral in respect of the loans to margin clients was approximately $3,881,801,951 and $2,941,959,839 respectively.

Accounts receivable from clearing houses, brokers and dealers are current. These represent (1) pending trades arising from the business of dealing in securities, which are normally due within a few days after the trade date and (2) margin deposits arising from the business of dealing in futures contracts.

11 ACCOUNTS PAYABLE

Accounts payable — Cash clients — Margin clients — Clearing houses — Broker	At 30 September 2012 $ 175,788,281 238,040,562 62,450 17,080,442 430,971,735	At 31 March 2012 $ 66,866,180 161,168,878 241,702,113 —
		469,737,171

All of the accounts payable are due within one month or on demand.

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MANAGEMENT DISCUSSION AND ANALYSIS

Market overview

In the six months ended 30 September 2012 (the “Period”) under review, the Hong Kong stock market continued to fluctuate. Impacted by the rumor of Greece’s possible exit from the eurozone as well as financing difficulties faced by some key countries in the eurozone, the Hang Seng Index once plunged to an all-year low of 18,056 points in early June. Fortunately, the European Union (EU) members were proactive in implementing austerity and bailout measures to slightly ease market concerns about the debt issue in Europe, and many central banks worldwide adopted loose monetary policies to spur the economic growth including the third round of quantitative easing (QE3) officially launched by the US Federal Reserve Board and the direct currency trading program launched by the European Central Bank. As a result, the market sentiment has gradually become more optimistic.

In the PRC, economic growth slowed down significantly to below 8%, but the PRC government showed no signs of stepping up its pace to ease the monetary supply. This has become the major cause of the weakening A shares as well as the restrained rally of Hong Kong shares. In conclusion, the Hang Seng Index opened at 20,662 points on 2 April 2012 and closed at 20,840 points on 28 September 2012, representing a slight increase of 0.86% in the Period.

Looking ahead to the coming six months, instead of concentrating on the European debt crisis, the Hong Kong stock market is expected to focus on how to address the “fiscal cliff” after the US presidential election as well as whether the PRC government will launch additional measures after the 18th Party Congress to stabilize the economic growth. In addition, given that many countries worldwide maintained the loose monetary policies, the Group believes that those countries will gradually pick up the momentum of economic recovery, and hopefully, the financial performance of the local listed companies will get better steadily as well. It will help the reallocation of the funds to the risk assets. Thus, the Group remains prudently optimistic about the landscape of the Hong Kong stock market.

Operating results

During the Period, the Group recorded turnover of HK$110.4 million (2011: HK$122.7 million), representing a decrease of 10.0% compared to the corresponding period of last year; whereas, the net profit amounted to HK$31.3 million (2011: HK$33.0 million), approximately at a similar level as compared to the corresponding period of last year with a slight drop of 4.9%. Basic earnings per share is HK Cents 3.98 (2011: HK Cents 4.85). The Board does not recommend the payment of an interim dividend for the Period.

The turnover and net profit saw a decline, mainly resulting from a decrease in commission income from securities brokerage due to the weak trading volume in the market during the Period. However, the Group has been more resistant to downturn than its counterparts in the industry, and despite the general unsatisfactory performance in the market (a 31.3% period-toperiod drop in the total transaction value recorded by HKEx), it still recorded healthy growth in total number of clients by implementing the strategic expansion of branches as well as a series of strong marketing strategies.

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Turnover

Contrary to the adverse market trend, the Group continued its expansion during the Period, opening branches in Wan Chai, Mei Foo, Hung Hom, and Kowloon City. By the end of September 2012, the total number of branches has increased to 17 (excluding the head office in Central), of which 13 selected branches are opened for business seven days a week. The number of new client accounts opened (after deducting the number of client accounts closed) reached 13,595, representing an increase of 22.0% as compared to the corresponding period last year (2011: 11,143). Of the new client accounts opened, 12,551 and 1,044 were attributable to the branches and the head office respectively, accounting for 92.3% and 7.7%. As at 30 September 2012, the Group’s total number of client accounts jumped by 22.5% to 74,072 from 60,477 as at 31 March 2012, breaking through the 70,000 marks.

Number of New Client Accounts Opened

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----- Start of picture text -----

20,000
15,000
13,595
11,143
10,000
5,000
0
2011/12 2012/13
6 months ended 30 September
22.0%
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Total Number of Client Accounts

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80,000
74,072
70,000
60,477
60,000
50,000
43,524
40,000
30,000
9/11 3/12 9/12
Month/Year
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During the Period, the turnover attributable to the branches was HK$66.3 million (2011: HK$52.0 million), representing an increase of 27.5% as compared to the corresponding period last year. The percentage of total turnover attributable to the branches was 60.0% (2011: 42.4%), representing an increase of 41.5% as compared to the corresponding period last year.

Turnover Distribution from Head Office and Branches

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42.4% Branches 60.0%
57.6% Head Office 40.0%
2011/12 2012/13
6 months ended 30 September
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A summary of the revenue from different business segments of the Group is set out below:

Commission income from: — Securities brokerage — Hong Kong futures and options brokerage — Global futures brokerage — IPO brokerage — Stock options brokerage Interest income from margin financing Interest income from IPO financing	6 months ended 30 September 2012 Proportion of total turnover 2011 Proportion of total turnover HK$’000 % HK$’000 % 48,900 44.3% 57,681 46.9% 28,279 25.6% 23,780 19.4% 9,799 8.9% 7,830 6.4% 349 0.3% 2,710 2.2% 1,467 1.3% 1,422 1.2% 21,539 19.5% 28,564 23.3% 40 0.1% 700 0.6% 110,373 100% 122,687 100%	Increase/ (decrease) % (15.2%) 18.9% 25.1% (87.1%) 3.2% (24.6%) (94.3%) (10.0%)

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I. Securities brokerage

During the Period, the HKEx recorded a total transaction value of HK$6,028.7 billion (2011: HK$8,768.6 billion), representing a period-to-period drop of 31.3%. However, the Group has been relatively more resistant to downturn than its counterparts in the industry, and the commission income from securities brokerage amounted to HK$48.9 million (2011: HK$57.7 million), representing a decrease of only 15.2% as compared to the corresponding period last year, and comprising 44.3% (2011: 46.9%) of the total turnover.

II. Hong Kong futures and options brokerage

During the Period, the Group’s Hong Kong futures and options brokerage segment delivered commission income of HK$28.3 million (2011: HK$23.8 million), representing an increase of 18.9% as compared to the corresponding period last year, and comprising 25.6% (2011: 19.4%) of the total turnover.

III. Global futures brokerage

During the Period, the commission income from global futures brokerage was HK$9.8 million (2011: HK$7.8 million), up 25.1% from the corresponding period last year, accounting for 8.9% (2011: 6.4%) of the total turnover.

• IV. Stock options brokerage

During the Period, the Group’s trading service for stock options recorded an income of HK$1.5 million (2011: HK$1.4 million), accounting for 1.3% (2011: 1.2%) of the total turnover. Stock option is a highly leveraged investment product. The Group closely monitored the margin levels maintained in the stock option accounts and adjusted according to market conditions to ensure proper risk control.

• V. Margin financing

During the Period, the Group’s interest income generated from margin financing was HK$21.5 million (2011: HK$28.6 million), representing a decrease of 24.6% from the corresponding period last year, accounting for 19.5% (2011: 23.3%) of the total turnover.

VI. IPO brokerage and IPO financing

Impacted by the fluctuating market, the market sentiment for new shares was quite inactive. According to the HKEx’s figures, the amount of funds raised by way of IPO decreased significantly by 80.3% compared to the corresponding period last year. Investors showed lukewarm interest in subscription. During the Period, the Group’s commission income from IPO brokerage was HK$0.3 million (2011: HK$2.7 million), representing a period-to-period decrease of 87.1%, while the interest income from IPO financing declined by 94.3% to HK$40 thousand (2011: HK$700 thousand).

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Operating expenses

During the Period, the Group’s operating expenses was HK$102.6 million (2011: HK$101.4 million), representing a slight increase of 1.1% as compared to the corresponding period last year. The Group will continually implement effective cost control measures to enhance profitability. A summary of the operating expenses is set out below:

Staff costs Depreciation Finance costs Advertising and promotion expenses Handling and settlement expenses Commission expenses to overseas brokers Information and communication expenses Rentals, rates and building management fee Legal and professional fees Miscellaneous expenses	6 months ended 30 September 2012 2011 Increase/ (decrease) HK$’000 HK$’000 % 39,736 40,765 (2.5%) 6,168 5,199 18.6% 6,824 8,695 (21.5%) 3,478 3,282 6.0% 10,072 9,466 6.4% 2,553 2,221 14.9% 10,271 10,353 (0.8%) 16,102 14,476 11.2% 1,674 1,431 17.0% 5,679 5,529 2.7% 102,557 101,417 1.1%

Future plans

In line with the accelerated process of RMB internationalization, RMB treasury bonds and RMB-denominated products are currently listed in Hong Kong. During the Period, the HKEx even introduced the first RMB deliverable currency futures in Hong Kong, thus gradually sharpening the competitive edges of the Hong Kong stock market. Despite uncertain factors looming over the global economic outlook, the Group will still actively cope with a series of HKEx development strategies, seize the immediate opportunities, and continue to grow into a more powerful enterprise.

The Group will continue to implement the operating policy of “low commission, good service, and speedy execution”. In keeping with its active expansion strategies, the Group will continue to explore the potential regions for new branches, and continue to attract new clients to further capture market share. The Kowloon head office, located at the intersection of the Nathan Road, Kansu Street and Woosung Street, is expected to commence operation in early 2013.

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To meet clients’ needs, the Group has been vigorously developing various types of financial products. Apart from the introduction of the US securities margin loan service in April 2012, the Group is planning to roll out the leveraged forex and the bullion businesses, etc. The Group has a unique price quoting system (capable of displaying price depth and clients can use the system to inquire the real-time price of the precious metal products). This will provide clients with high transparency, real fairness, justice, and openness in the bullion trading service. It is believed that the introduction of such services will generate a new source of considerable income for the Group.

In the PRC, the Group will use “Bright Smart Finance Channel” (耀才財經台) as the flagship promotion tool to enhance the marketing effects. The Group’s celebrity stock commentator, Mr. Kwok Sze Chi (Executive Director and Marketing Director of the Group) will conduct seminars in the PRC regularly to promote communication between the Group and the Mainland investors and, at the same time, share with them the latest information of the Hong Kong stock market. Furthermore, the Group’s powerful and reliable online trading platform enables the Group to offer one-stop financial services to Mainland investors. Moreover, the Group adheres to its favorable commission policy which also helps attract more customers from China.

Looking forward, through ongoing implementation of progressive marketing and development strategies, the Group will realize constant growth in the business and take the lead in the industry. Following its diversification into new businesses with a growing variety of financial products, the Group, with all-out efforts, provides one-stop financial services to its clients, sharpens its competitive edges, solidifies its clientele and captures greater market share. As for cost control, the Group will implement effective measures to control costs to enhance its overall profitability and operational efficiency, and seek optimal returns for its shareholders.

CAPITAL STRUCTURE, LIQUIDITY AND FINANCIAL RESOURCES

As at 30 September 2012, the net current assets of the Group increased by HK$191.9 million or 41.8% to HK$651.2 million (31 March 2012: HK$459.3 million). The Group’s current ratio, which is current assets divided by current liabilities, was 1.58 as at 30 September 2012 (31 March 2012: 1.42).

The Group’s bank deposits, bank balances and cash amounted to HK$245.8 million as at 30 September 2012 (31 March 2012: HK$397.1 million), a decrease of 38.1% compared to that as at 31 March 2012.

The Group had total bank borrowings of HK$575 million as at 30 September 2012 (31 March 2012: HK$425 million) which are primarily at fixed rates. The bank borrowings were primarily collateralised by its margin clients’ securities pledged to the Group. As at 30 September 2012, unutilised facilities amounted to HK$1,568 million (31 March 2012: HK$1,648 million). The Group’s gearing ratio, which is total bank borrowings divided by the total shareholders’ equity, was 83.1% (31 March 2012: 86.1%).

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CAPITAL MANAGEMENT

The Group actively and regularly reviews and manages its capital structure and adjusts it in light of changes in economic conditions. For the licensed subsidiaries, the Group ensures each of them maintains a liquid capital level adequate to support the level of activities with a sufficient buffer to accommodate increases in liquidity requirements arising from potential increases in the level of business activities. During the Period, all the licensed subsidiaries complied with the liquid capital requirements under the Securities and Futures (Financial Resources) Rules (“FRR”).

RISK MANAGEMENT

Credit risk

The Group’s credit risk is primarily attributable to accounts receivable due from clients, brokers and clearing houses. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis.

In respect of accounts receivable due from clients, individual credit evaluations are performed on all clients including cash and margin clients. Cash clients are required to place deposits as prescribed by the Group’s credit policy before execution of any purchase transactions. Receivables due from cash clients are due within the settlement period commonly adopted by the relevant market convention, which is usually within a few days from the trade date. Because of the prescribed deposit requirements and the short settlement period involved, the credit risk arising from the accounts receivable due from cash clients is considered low. The Group normally obtains liquid securities and/or cash deposits as collateral for providing margin financing to its clients. Margin loans due from margin clients are repayable on demand. For commodities and futures broking, an initial margin is required before opening a trading position. Market conditions and adequacy of securities collateral and margin deposits of each margin account and futures account are monitored by management on a daily basis. Margin calls and forced liquidation are made where necessary.

In respect of accounts receivable from brokers and clearing houses, credit risks are considered low as the Group normally enters into transactions with brokers and clearing houses which are registered with regulatory bodies and have sound reputation in the industry.

The Group has no significant concentration of credit risk as credits are granted to a large population of clients.

The Group does not provide any other guarantees which would expose it to credit risk.

Liquidity risk

Individual operating entities within the Group are responsible for their own cash management, including the raising of loans to cover expected cash demands, and ensuring compliance with FRR. The Group’s policy is to regularly monitor its liquidity requirement and its compliance with lending covenants, to ensure that it maintains sufficient cash reserves and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and long term.

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Interest rate risk

The Group charges interest to its margin clients on the basis of its cost of funding plus a markup. Financial assets such as margin loans and deposits with banks, and financial liabilities such as bank loans and loan from a related company are primarily at fixed rates. The Group’s income and operating cash flows are not subject to significant interest rate risk.

Foreign currency risk

The Group is exposed to currency risk primarily arising from financial instruments that are denominated in United States dollars (“USD”) and Renminbi (“RMB”). As the Hong Kong dollar (“HKD”) is pegged to the USD, the Group considers the risk of movements in exchange rates between the HKD and the USD to be insignificant. In respect of financial instruments denominated in RMB, the Group ensures that the net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates where necessary to address short-term imbalances. Management monitors all foreign currency positions on a daily basis.

EMPLOYEES AND REMUNERATION POLICIES

As at 30 September 2012, the Group had a work force of 245 employees (31 March 2012: 236 employees). The Group’s remuneration policy aims to offer competitive remuneration packages to recruit, retain and motivate competent employees. The Group believes the remuneration packages are reasonable and competitive and in line with market trends. The Group has put in place a share option scheme and a bonus scheme for its executives and employees in a bid to provide a competitive remuneration package for the Group’s long term growth and development. The Group also provides appropriate training and development programs to its employees to enhance the staff’s skills and personal effectiveness.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S SHARES

During the Period, neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company’s listed securities other than as an agent for clients of the Company or its subsidiaries.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE

The Board is committed to ensuring high standards of corporate governance practices. During the Period, the Company fully complied with the mandatory code provisions set out in the Corporate Governance Code contained in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) set out in Appendix 10 of the Listing Rules as its own code of conduct regarding securities transactions by the Directors. The Company has made a specific enquiry to all Directors regarding any non-compliance with the Model Code. All the Directors confirmed that they have fully complied with the required standard set out in the Model Code during the Period.

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AUDIT COMMITTEE

The primary duties of the Audit Committee of the Company are to review and supervise the financial reporting process and internal control procedures of the Company. The Audit Committee, together with the external auditor of the Group, KPMG, had reviewed the accounting principles and practices adopted by the Group and discussed internal controls and financial reporting matters concerning the unaudited consolidated results of the Group for the six months ended 30 September 2012.

PUBLICATION OF THE RESULTS ANNOUNCEMENT AND INTERIM REPORT

This results announcement is published on the website of Hong Kong Exchanges and Clearing Limited at www.hkexnews.hk and the website of the Company at www.bsgroup.com.hk. The Interim Report 2012/2013 will be despatched to the shareholders of the Company and published on the above websites in due course.

By order of the Board Bright Smart Securities & Commodities Group Limited Chan Kai Fung Executive Director and Chief Executive Officer

Hong Kong, 13 November 2012

As at the date of this announcement, the Board comprises Messrs. Yip Mow Lum (Chairman), Chan Kai Fung (Chief Executive Officer), Kwok Sze Chi, Chan Wing Shing, Wilson, Yu Yun Kong, Szeto Wai Sun and Ling Kwok Fai, Joseph*.

• Independent Non-executive Directors

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