Central Development Holdings Limited — Interim / Quarterly Report 2015

Dec 18, 2014

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Incorporated in the Cayman Islands with limited liability Stock Code : 00475

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Interim Report

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Contents

Contents
Corporate Information	2
Management Discussion and Analysis	3
Corporate Governance and Other Information	5
Report on Review of Condensed Consolidated Financial Statements	9
Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income	10
Condensed Consolidated Statement of Financial Position	11
Condensed Consolidated Statement of Changes in Equity	12
Condensed Consolidated Statement of Cash Flows	13
Notes to the Condensed Consolidated Financial Statements	14

CORPORATE INFORMATION

Board of Directors

Executive Directors

Mr. Wu Hao (Chairman) Mr. Hu Yangjun Mr. Hu Yishi Mr. Chan Wing Yuen, Hubert (Chief Executive) Ms. Kwong Wai Man, Karina (Chief Financial Officer)

Non-executive Director

Mr. Li Wei Qi, Jacky

Independent non-executive Directors

Mr. Wu Chi Keung Mr. Heung Chee Hang, Eric Ms. Kwok Pui Ha

Audit Committee

Mr. Wu Chi Keung (Chairman) Mr. Heung Chee Hang, Eric Ms. Kwok Pui Ha

Remuneration Committee

Mr. Wu Chi Keung (Chairman) Mr. Chan Wing Yuen, Hubert Mr. Heung Chee Hang, Eric

Nomination Committee

Mr. Wu Chi Keung (Chairman) Mr. Chan Wing Yuen, Hubert Ms. Kwok Pui Ha

Company Secretary

Mr. Ng Kwok Kit

Head Office and Principal Place of Business in Hong Kong

23/F., Chinachem Century Tower 178 Gloucester Road Wanchai Hong Kong

Registered Office

Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Principal Share Registrar

Royal Bank of Canada Trust Company (Cayman) Limited 4th Floor, Royal Bank House 24 Shedden Road, George Town Grand Cayman KY1-1110 Cayman Islands

Hong Kong Branch Share Registrar and Transfer Office

Tricor Investor Services Limited Level 22, Hopewell Centre 183 Queen’s Road East Hong Kong

Principal Bankers

The Hong Kong and Shanghai Banking Corporation Limited Hang Seng Bank Limited

Legal Advisers

K&L Gates Angela Ho & Associates

Auditor

Deloitte Touche Tohmatsu

Company Website

www.475hk.com

Stock Code

00475

2 ZHONG FA ZHAN HOLDINGS LIMITED

MANAGEMENT DISCUSSION AND ANALYSIS

Operating Results

Zhong Fa Zhan Holdings Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) recorded a drop in revenue for the six months ended 30 September 2014 (the “Review Period”). The sales turnover of the Group decreased by 7.8% from HK$41.2 million to HK$38.0 million for the Review Period. The Group maintained a similar level of gross profit margin of 10.8% for the Review Period as compared to the 10.4% of last reporting period; while the gross profit reduced slightly by 4.7% from HK$4.3 million to HK$4.1 million. The Group recorded a net loss of HK$9.1 million for the six months ended 30 September 2014 (2013: net loss of HK$7.2 million). Basic loss per share were 3.2 HK cents (2013: basic loss per share were 2.7 HK cents).

Business Review

The Group focused on jewelry wholesale business in domestic market of the People Republic of China (the “PRC”) for the Review Period. We were able to keep our gross profit margin at approximately 10% by sustaining our cost control measures but the tough operating environment has diminished our turnover further. The competition remained intense during the Review Period, posing a great challenge to our business. The relatively small scale of the Group’s business has put us in a difficult position where we find it harder year by year to bargain for favourable terms; hence placing the odds on our competitors in terms of pricing and cost saving. As a result, our sales turnover has decreased by 7.8% to HK$38.0 million during the Review Period owing to the decline in overall demand of fine jewelry of the Group.

Future Prospects

Going forward, the Group expects the global economy to be still volatile and unstable. Moreover, the diminishing spending momentum in the PRC may further drive down the demand for fine jewelry and therefore bringing us a more challenging future ahead. To cope with these challenges, we will optimize our resources allocation and adopt a prudent approach to operate our business in the PRC to attain a more satisfactory result.

The Group will also closely monitor and review our business operations and financial position for the purposes of formulating business plans and strategies for the future business development of the Group. Should suitable investment or business opportunities arise, the Group may consider diversifying its business with an objective to broaden its income source; in this regard, the Group will also consider whether corresponding financing arrangements are needed to cope with such diversification. Currently no such investment or business opportunities had been identified nor had the Group entered into any agreement, arrangements, understandings, intention or negotiation in relation to the injection of any assets or business into the Group.

Liquidity and Financial Resources

As at 30 September 2014, the Group’s net current assets and current ratio stood at HK$35.6 million and 2.7 respectively (31 March 2014: HK$13.5 million and 1.5 respectively). Net gearing ratio (total interest bearing borrowings net of bank balances and cash as a percentage of total equity) was nil as at 30 September 2014 (31 March 2014: Nil).

As at 30 September 2014, the Group had no bank borrowings (31 March 2014: Nil) and no banking facilities (31 March 2014: Nil). As at 30 September 2014, the Group’s bank balances and cash amounted to HK$24.7 million (31 March 2014: HK$13.4 million).

Charges on Group Assets

As at 30 September 2014, the Group did not have any charges on the Group’s assets (31 March 2014: Nil).

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2014/15 Interim Report

MANAGEMENT DISCUSSION AND ANALYSIS (Continued)

Capital Structure

For the six months ended 30 September 2014, the Group financed its liquidity requirements through cash flows as generated from operation and loan from a controlling shareholder.

Dividend

The board (the “Board”) of directors (the “Directors”) of the Company has resolved not to recommend the payment of an interim dividend for the six months ended 30 September 2014.

Capital Commitment and Contingent Liabilities

As at 30 September 2014, the Group did not have any capital commitments (31 March 2014: Nil) and had HK$2.8 million of operating lease commitments (31 March 2014: HK$4.2 million). As at 30 September 2014, the Group did not have any significant contingent liabilities (31 March 2014: Nil).

Staff and Remuneration Policy

As at 30 September 2014, the Group had a total of 48 employees (31 March 2014: 51). Staff costs for the Review Period was HK$7.8 million, representing an increase of 8.3% as compared to the corresponding period ended 30 September 2013 of HK$7.2 million. The Group remunerates its employees based on their performance and work experience and the prevailing market rates. Salaries of employees are maintained at competitive levels while bonuses are granted by reference to the performance of the Group and individual employees.

The Group also provides internal training to its employees when necessary and other benefits including share option scheme and contribution to statutory mandatory provident fund scheme to its employees in Hong Kong and the statutory central pension schemes to its employees in the PRC.

Foreign Exchange Fluctuation and Hedges

Currently, the Group was principally based in the PRC and was not significantly exposed to foreign exchange risk. Foreign exchange risk arises from future commercial transaction and recognized assets and liabilities. While the Group would closely monitor the volatility of the RMB exchange rate, the Directors considered that the Group’s risk exposure to foreign exchange rate fluctuation remained minimal currently.

As at 30 September 2014, no forward foreign currency contracts are designated in hedging accounting relationships (31 March 2014: Nil).

4 ZHONG FA ZHAN HOLDINGS LIMITED

CORPORATE GOVERNANCE AND OTHER INFORMATION

Share Option Scheme

The Group has approved and adopted a share option scheme on 26 February 2007 for the Directors, its employees and other eligible participants with a view to provide an incentive to or as a reward for their contribution to the Group.

Details of the movements of share options granted, exercised or cancelled/lapsed during the period under review and outstanding as at 30 September 2014 are as follows:

	Number of share options Closing price immediately before the date of grant At 1 April 2014 Granted during the period Exercised during the period Cancelled/ lapsed during the period Outstanding as at 30 September 2014 Exercise period (both dates inclusive) Exercise price HK$ HK$
Directors: Mr. Wu Hao Mr. Hu Yangjun Mr. Hu Yishi Mr. Chan Wing Yuen, Hubert Mr. Li Wei Qi, Jacky Mr. Wu Chi Keung Mr. Heung Chee Hang, Eric Ms. Kwok Pui Ha	2,736,000 – (2,736,000) – – 27 June 2012 to 30 December 2016 1.53 1.53 2,736,000 – (2,736,000) – – 27 June 2012 to 30 December 2016 1.53 1.53 2,736,000 – (2,736,000) – – 27 June 2012 to 30 December 2016 1.53 1.53 2,736,000 – – – 2,736,000 27 June 2012 to 30 December 2016 1.53 1.53 2,736,000 – (2,736,000) – – 27 June 2012 to 30 December 2016 1.53 1.53 270,000 – – – 270,000 27 June 2012 to 30 December 2016 1.53 1.53 270,000 – – – 270,000 27 June 2012 to 30 December 2016 1.53 1.53 270,000 – – – 270,000 27 June 2012 to 30 December 2016 1.53 1.53
Total Directors	14,490,000 – (10,944,000) – 3,546,000
Employees	4,150,000 – (3,800,000) (50,000) 300,000 27 June 2012 to 30 December 2016 1.53 1.53
Total Employees	4,150,000 – (3,800,000) (50,000) 300,000
Other Grantees	5,400,000 – (5,400,000) – – 27 June 2012 to 30 December 2016 1.53 1.53
Total Other Grantees	5,400,000 – (5,400,000) – –
Total All Categories	24,040,000 – (20,144,000) (50,000) 3,846,000

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2014/15 Interim Report

CORPORATE GOVERNANCE AND OTHER INFORMATION (Continued)

Directors’ Interests and Short Positions in Shares

As at 30 September 2014, the interests and short positions of the Directors and their associates in the shares and underlying shares of the Company (“Shares”) as recorded in the register to be kept under Section 352 of the Securities and Futures Ordinance (“SFO”) were as follows:

Long Positions

Ordinary Shares of HK$0.01 each

		Number of issued	Percentage of the issued
		ordinary Shares held	ordinary share capital
Name of Director	Capacity	(Including underlying Shares)	of the Company
		(Note 1)
Mr. Hu Yangjun	(Note 2)	207,454,000	70.62%
Mr. Hu Yishi	(Note 3)	207,454,000	70.62%
Mr. Wu Hao		2,736,000	0.93%
Mr. Chan Wing Yuen, Hubert	(Note 4)	2,736,000	0.93%
Mr. Li Wei Qi, Jacky		2,736,000	0.93%
Mr. Wu Chi Keung	(Note 5)	270,000	0.09%
Mr. Heung Chee Hang, Eric	(Note 5)	270,000	0.09%
Ms. Kwok Pui Ha	(Note 5)	270,000	0.09%

Notes:

• (1) The share options granted by the Company to Directors which are outstanding as shown under the section “Share Option Scheme” of this interim report have been included in the long positions of respective Directors.

• (2) Mr. Hu Yangjun had a direct interest of 2,736,000 Shares and a deemed interest of 204,718,000 Shares held by Resources Rich Capital Limited (“Resources Rich”), a company 50% owned by Mr. Hu Yangjun, within the meaning of Part XV of the SFO.

• (3) Mr. Hu Yishi had a direct interest of 2,736,000 Shares and a deemed interest of 204,718,000 Shares held by Resources Rich, a company 50% owned by Mr. Hu Yishi, within the meaning of Part XV of the SFO.

• (4) Mr. Chan Wing Yuen, Hubert had a direct interest of 2,736,000 Shares which are outstanding share options granted by the Company to subscribe for 2,736,000 Shares at exercise price of HK$1.53 per Share.

• (5) Each of Mr. Wu Chi Keung, Mr. Heung Chee Hang, Eric and Ms. Kwok Pui Ha had a direct interest of 270,000 Shares which are outstanding share options granted by the Company to subscribe for 270,000 Shares at exercise price of HK$1.53 per Share.

Save as disclosed above, as at 30 September 2014, no interests and short position in the Shares or underlying Shares were held or deemed or taken to be held under Part XV of the SFO by any Director or chief executives of the Company or any of their respective associates which are required pursuant to Section 352 of the SFO to be entered in the register referred to therein.

6 ZHONG FA ZHAN HOLDINGS LIMITED

CORPORATE GOVERNANCE AND OTHER INFORMATION (Continued)

Substantial Shareholders’ Interests in Shares

As at 30 September 2014, the register of substantial shareholders maintained by the Company pursuant to Section 336 of the SFO shows that other than the interests disclosed above in respect of Directors and their associates, the following shareholders have notified the Company of relevant interests in the issued share capital of the Company:

Long Positions

Ordinary Shares of HK$0.01 each

			Percentage of the issued
		Number of issued	ordinary share capital
Name of Shareholder	Capacity	ordinary Shares held	of the Company
Resources Rich	(Note 1)	204,718,000	69.69%
Ms. Zhang Qi	(Note 2)	207,454,000	70.62%
Ms. Lin Min	(Note 3)	207,454,000	70.62%

Notes:

• (1) 50% of the entire issued share capital of Resources Rich is owned by Mr. Hu Yangjun while the other 50% is owned by Mr. Hu Yishi. Mr. Hu Yangjun and Mr. Hu Yishi are deemed to be interested in all the Shares in which Resources Rich is interested by virtue of the SFO.

• (2) Ms. Zhang Qi is the spouse of Mr. Hu Yangjun. Accordingly, she is deemed to be interested in the 207,454,000 Shares which Mr. Hu Yangjun is interested in pursuant to the SFO.

• (3) Ms. Lin Min is the spouse of Mr. Hu Yishi. Accordingly, she is deemed to be interested in the 207,454,000 Shares which Mr. Hu Yishi is interested in pursuant to the SFO.

Save as disclosed above, as at 30 September 2014, no other parties, other than the Directors whose interests are set out in the section “Directors’ Interests and Short Positions in Shares” above, had registered an interest or short position in the Shares or underlying shares of the Company that was required to be recorded pursuant to Section 336 of the SFO.

Corporate Governance Practices

The Company has adopted the code provisions set out in the Code on Corporate Governance Practices (the “Code”) contained in Appendix 14 to the Rules Governing the Listing Rules (the “Listing Rules“) on the Stock Exchange of Hong Kong Limited. The Company has applied the principles and complied with all the applicable code provisions set out in the Code throughout the six months ended 30 September 2014.

Model Code for Securities Transactions

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 to the Listing Rules as its own code of conduct regarding securities transactions by the Directors. Having made specific enquiry of all Directors, they confirmed that they have complied with the required standard set out in the Model Code throughout the six months ended 30 September 2014.

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2014/15 Interim Report

CORPORATE GOVERNANCE AND OTHER INFORMATION (Continued)

Audit Committee and Independent Review by External Auditor

The Company has established an audit committee with written terms of reference in compliance with the code provisions under the Code set out in Appendix 14 to the Listing Rules. The audit committee comprises three independent non-executive Directors, namely Mr. Wu Chi Keung, Mr. Heung Chee Hang, Eric and Ms. Kwok Pui Ha.

The Group’s unaudited interim results for the six months ended 30 September 2014 have been reviewed by the audit committee at an audit committee meeting held on 27 November 2014.

The Group’s external auditor, Deloitte Touche Tohmatsu, has been appointed to review the interim financial information. On the basis of their review, they are not aware of any material modifications that should be made to the interim financial information for the six months ended 30 September 2014.

Purchase, Sale or Redemption of the Company’s Listed Shares

Neither the Company, nor any of its subsidiaries purchased, redeemed or sold any of the Company’s listed Shares during the six months ended 30 September 2014.

Change in Information of Director

Mr. Chan Wing Yuen, Hubert (also known as Mr. Hubert Chan), executive director of the Company, has been appointed as the executive director and chief executive officer of Noble House (China) Holdings Limited (stock code: 8246) with effect from 15 August 2014 and 3 October 2014 respectively. Mr. Hubert Chan has also been appointed as the independent non-executive director of Tian Ge Interactive Holdings Limited (stock code: 1980) with effect from 16 June 2014.

Ms. Kwong Wai Man, Karina (also known as Ms. Karina Kwong), executive director of the Company, has been appointed as the executive director of Noble House (China) Holdings Limited (stock code: 8246) with effect from 15 August 2014. Ms. Karina Kwong has resigned as the executive director of Sheng Yuan Holdings Limited (stock code: 851) with effect from 1 August 2014.

Mr. Wu Chi Keung (also known as Mr. Edward Wu), independent non-executive director of the Company, has been appointed as the independent non-executive director of Link Holdings Limited (stock code: 8237) with effect from 20 June 2014. Mr. Edward Wu has resigned as the independent non-executive director of GreaterChina Professional Services Limited (stock code: 8193), China Renji Medical Group Limited (stock code: 648) and Link Holdings Limited (stock code: 8237) with effect from 2 July 2014, 15 July 2014 and 3 October 2014 respectively.

On behalf of the Board

Wu Hao

Chairman and Executive Director

Hong Kong, 27 November 2014

8 ZHONG FA ZHAN HOLDINGS LIMITED

REPORT ON REVIEW OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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TO THE BOARD OF DIRECTORS OF ZHONG FA ZHAN HOLDINGS LIMITED

(Incorporated in the Cayman Islands with limited liability)

Introduction

We have reviewed the condensed consolidated financial statements of Zhong Fa Zhan Holdings Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) set out on pages 10 to 20, which comprise the condensed consolidated statement of financial position as of 30 September 2014 and the related condensed consolidated statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the six-month period then ended, and certain explanatory notes. The Main Board Listing Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 “Interim Financial Reporting” (“HKAS 34”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”). The directors of the Company are responsible for the preparation and presentation of these condensed consolidated financial statements in accordance with HKAS 34. Our responsibility is to express a conclusion on these condensed consolidated financial statements based on our review, and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Scope of Review

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA. A review of these condensed consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial statements are not prepared, in all material respects, in accordance with HKAS 34.

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong 27 November 2014

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2014/15 Interim Report

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended 30 September 2014

		Six months ended 30 September	Six months ended 30 September
		2014	2013
	NOTES	HK$’000	HK$’000
		(unaudited)	(unaudited)
Revenue	3	38,009	41,177
Cost of sales		(33,932)	(36,924)
Gross profit		4,077	4,253
Other income		58	103
Other gains and losses	4	201	485
Distribution costs		(2,590)	(2,698)
Administrative expenses		(10,845)	(9,570)
Finance costs	5	(4)	(8)
Loss before taxation		(9,103)	(7,435)
Income tax credit	6	–	198
Loss for the period	7	(9,103)	(7,237)
Other comprehensive (expense) income
Item that will not be reclassified to profit or loss:
Exchange differences arising on translation		(230)	210
Total comprehensive expense for the period		(9,333)	(7,027)
Loss per share	8
Basic and diluted (HK cents)		(3.22)	(2.65)

10 ZHONG FA ZHAN HOLDINGS LIMITED

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 30 September 2014

		At	At
		30 September	31 March
		2014	2014
	NOTES	HK$’000	HK$’000
		(unaudited)	(audited)
Non-current assets
Property, plant and equipment	10	2,752	3,278
Rental deposits		396	501
		3,148	3,779
Current assets
Inventories		14,998	14,578
Trade receivables	11	15,913	12,235
Deposits, prepayments and other receivables		1,220	1,402
Bank balances and cash		24,717	13,372
		56,848	41,587
Current liabilities
Trade payables	12	10,198	8,840
Other payables and accruals		4,978	3,631
Loan from a controlling shareholder	13	6,043	15,605
		21,219	28,076
Net current assets		35,629	13,511
Total assets less current liabilities		38,777	17,290
Capital and reserves
Share capital	14	2,938	2,736
Reserves		35,839	14,554
Equityattributable to owners of the Company		38,777	17,290

2014/15 Interim Report 11

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 September 2014

		Share	Share
	Share	premium	options	Revaluation	Exchange	Accumulated
	capital	account	reserve	reserve	reserve	losses	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
At 1 April 2014 (audited)	2,736	32,243	16,347	–	8,047	(42,083)	17,290
Loss for the period	–	–	–	–	–	(9,103)	(9,103)
Other comprehensive expense
for the period	–	–	–	–	(230)	–	(230)
Total comprehensive expense
for the period	–	–	–	–	(230)	(9,103)	(9,333)
Transfer upon lapse of share options	–	–	(34)	–	–	34	–
Exercise of share options	202	30,618	–	–	–	–	30,820
At 30 September 2014 (unaudited)	2,938	62,861	16,313	–	7,817	(51,152)	38,777
At 1 April 2013 (audited)	2,736	32,243	16,381	551	7,410	(22,676)	36,645
Loss for the period	–	–	–	–	–	(7,237)	(7,237)
Other comprehensive income
for the period	–	–	–	–	210	–	210
Total comprehensive income (expense)
for the period	–	–	–	–	210	(7,237)	(7,027)
Transfer between reserves upon
disposal of the property	–	–	–	(551)	–	551	–
Transfer upon lapse of share options	–	–	(34)	–	–	34	–
At 30 September 2013 (unaudited)	2,736	32,243	16,347	–	7,620	(29,328)	29,618

12 ZHONG FA ZHAN HOLDINGS LIMITED

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 September 2014

	Six months ended 30 September	Six months ended 30 September
	2014	2013
	HK$’000	HK$’000
	(unaudited)	(unaudited)
Net cash used in operating activities	(9,878)	(9,365)
Net cash (used in) from investing activities
Interest received	14	6
Purchases of property, plant and equipment	(60)	(3,038)
Proceeds on disposal of property, plant and equipment	–	11,998
	(46)	8,966
Net cash from financing activities
Advance from a controlling shareholder	3,000	10,956
Repayment to a controlling shareholder	(12,333)	–
Proceeds from exercise of share options	30,820	–
	21,487	10,956
Net increase in cash and cash equivalents	11,563	10,557
Cash and cash equivalents at beginning of the period	13,372	7,552
Effect of foreign exchange rate changes	(218)	63
Cash and cash equivalents at end of the period	24,717	18,172

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2014/15 Interim Report

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the six months ended 30 September 2014

1. Basis of Preparation

The condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) as well as with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

2. Principal Accounting Policies

The condensed consolidated financial statements have been prepared on the historical cost basis.

The accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30 September 2014 are the same as those followed in the preparation of the Group’s annual financial statements for the year ended 31 March 2014.

In addition, in the current interim period, the Group has applied, for the first time, the following new interpretation and amendments to Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the HKICPA that are relevant for the preparation of the Group’s condensed consolidated financial statements.

Amendments to HKFRS 10, Investment entities HKFRS 12 and HKAS 27 Amendments to HKAS 32 Offsetting financial assets and financial liabilities Amendments to HKAS 36 Recoverable amount disclosures for non-financial assets Amendments to HKAS 39 Novation of derivatives and continuation of hedge accounting HK(IFRIC) – INT 21 Levies

The application of the above new interpretation and amendments to HKFRSs in the current interim period has had no material effect on the amounts reported in these condensed consolidated financial statements and/or disclosures set out in these condensed consolidated financial statements.

14 ZHONG FA ZHAN HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the six months ended 30 September 2014

3. Revenue and Segment Information

Revenue

Revenue represents the amounts received and receivable for goods sold in the normal course of business, net of discounts and sales related taxes.

Segmental information

The Group’s revenue and result is solely derived from a single business operation of jewelry manufacturing and wholesale business in the People Republic of China (the “PRC”) (the “Wholesale Business”). The financial information for the Wholesale Business as a whole is regularly reviewed by the executive directors of the Company and used for the purposes of assessment of performance and resource allocation. Accordingly, the Wholesale Business as a whole constitute the sole operating segment for the purpose of segment information presentation under HKFRS 8. Accordingly, no segment information was disclosed.

4. Other Gains and Losses

	Six months ended 30 September	Six months ended 30 September
	2014	2013
	HK$’000	HK$’000
	(unaudited)	(unaudited)
Gain on disposal of property, plant and equipment	–	419
Net foreign exchange gain	201	66
	201	485

5. Finance Costs

Finance Costs
	Six months ended 30 September
	2014	2013
	HK$’000	HK$’000
	(unaudited)	(unaudited)
Bank charges	4	8

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2014/15 Interim Report

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the six months ended 30 September 2014

6. Income Tax Credit

The income tax credit for the six months ended 30 September 2013 represented the release of deferred tax liability upon disposal of leasehold land and building.

No provision for Hong Kong Profits Tax has been made as there were no assessable profits generated in Hong Kong for both periods.

No provision for PRC Enterprise Income Tax has been made for the Group’s PRC subsidiary as the PRC subsidiary has no assessable profits for both periods.

7. Loss for the Period

Loss for the period has been arrived at after charging:

	Six months ended 30 September	Six months ended 30 September
	2014	2013
	HK$’000	HK$’000
	(unaudited)	(unaudited)
Cost of inventories recognised as expense	33,932	36,924
Depreciation of property, plant and equipment	574	372
Staff cost (including directors’ remuneration)	7,784	7,182
Auditor’s remuneration	142	120

16 ZHONG FA ZHAN HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the six months ended 30 September 2014

8. Loss Per Share

The calculation of the basic and diluted loss per share attributable to owners of the Company is based on the following data:

	Six months ended 30 September	Six months ended 30 September
	2014	2013
	HK$’000	HK$’000
	(unaudited)	(unaudited)
The Group’s loss for the period attributable to owners
of the Company for the purposes of basic and
diluted earnings per share calculation	(9,103)	(7,237)
	’000	’000
Weighted average number of ordinary shares
for the purpose of basic and diluted loss per share	282,306	273,610

The computation of diluted loss per share for the six months ended 30 September 2014 and 30 September 2013 does not assume the exercise of the Company’s outstanding share options as their exercise would result in a decrease in loss per share.

9. Dividends

No dividends were paid, declared or proposed during the interim period. The directors have determined that no dividend will be paid in respect of the current interim period (2013: nil).

10. Movements in Property, Plant and Equipment

During the current interim period, there was no significant addition or disposal of property, plant and equipment.

During the last interim period, the Group disposed of a property with carrying amount of approximately RMB9.1 million (equivalent to HK$11.6 million) for net cash proceeds of RMB9.4 million (equivalent to HK$12 million), resulting in a gain on disposal of RMB329,000 (equivalent to HK$419,000).

In addition, during the last interim period, the Group paid approximately HK$3,038,000 for decoration and purchases of furniture, fixture and equipment for a new office premise.

17

2014/15 Interim Report

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the six months ended 30 September 2014

11. Trade Receivables

The credit terms granted by the Group to its customers normally range from 60 to 180 days.

The following is an analysis of the Group’s trade receivables by age, presented based on the invoice date, which approximated the revenue recognition date.

	At	At
	30 September	31 March
	2014	2014
	HK$’000	HK$’000
	(unaudited)	(audited)
Within 1 month	4,506	3,627
Over 1 month but within 3 months	8,588	7,396
Over 3 months but within 6 months	2,819	683
Over 6 months	–	529
	15,913	12,235

12. Trade Payables

The following is an analysis of the Group’s trade payables by age, presented based on the invoice date.

	At	At
	30 September	31 March
	2014	2014
	HK$’000	HK$’000
	(unaudited)	(audited)
Within 1 month	1,881	5,165
Over 1 month but within 3 months	7,432	3,642
Over 3 months but within 6 months	881	29
Over 6 months	4	4
	10,198	8,840

13. Loan from a Controlling Shareholder

The loan is unsecured, interest-free and repayable within 60 days upon the receipt of written notice of repayment.

18 ZHONG FA ZHAN HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the six months ended 30 September 2014

14. Share Capital

	Number
	of shares	Amount
	’000	HK$’000
Ordinary shares with nominal value of HK$0.01 each
Authorised:
At 31 March 2014, 30 September 2013 and 30 September 2014	10,000,000	100,000
Issued and fully paid:
At 1 April 2013 (audited), 30 September 2013 (unaudited)
and 1 April 2014 (audited)	273,610	2,736
Exercise of share options	20,144	202
At 30 September 2014 (unaudited)	293,754	2,938

15. Share Option Scheme

The Company’s share option scheme was adopted pursuant to a resolution passed on 26 February 2007 for the primary purpose of providing incentives to directors, employees and other eligible participants.

On 27 June 2012, 24,090,000 share options were granted. The options granted were all vested at the date of grant and exercisable during the period from 27 June 2012 to 30 December 2016. The fair value of the options determined at the date of grant using the Binomial model was approximately HK$16,381,000.

The table below discloses movement of the Company’s share options held by the directors, employees and other eligible participants.:

	Number of
	share options
Outstanding as at 1 April 2014	24,040,000
Lapsed during the period	(50,000)
Exercised during the period	(20,144,000)
Outstandingas at 30 September 2014	3,846,000

No options were granted during the current interim period.

2014/15 Interim Report 19

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the six months ended 30 September 2014

16. Operating Leases Commitments

As lessee

At the end of the reporting period, the Group had commitments for future minimum lease payments under noncancellable operating leases which fall due as follows:

	At	At
	30 September	31 March
	2014	2014
	HK$’000	HK$’000
	(unaudited)	(audited)
Within one year	1,645	2,132
In the second to fifth year	958	1,798
Later than five years	169	224
	2,772	4,154

17. Related Party Transactions

Apart from the loan from a controlling shareholder as disclosed in note 13, the Group had entered into the following related party transactions during the period:

Compensation of key management personnel

The remuneration of directors and other members of key management during the period was as follows:

	2014	2013
	HK$’000	HK$’000
	(unaudited)	(unaudited)
Short-term employee benefits	4,798	2,657
Post-employment benefit	210	72
	5,008	2,729

Other than as disclosed above, there was no material related party transaction during the current interim period.

18. Fair Value Measurement of Financial Instruments

The directors of the Company consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the condensed consolidated financial statements approximate their fair values.

20 ZHONG FA ZHAN HOLDINGS LIMITED