China Information Technology Development Limited — Interim / Quarterly Report 2017

Aug 11, 2017

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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(incorporated in the Cayman Islands with limited liability) (Stock Code: 8178)

2017 INTERIM RESULTS ANNOUNCEMENT

The Board of Directors (the “ Board ”) of China Information Technology Development Limited (the “ Company ”) is pleased to announce the unaudited results of the Company and its subsidiaries for the six months ended 30 June 2017. This announcement, containing the full text of the 2017 interim report of the Company, complies with the relevant requirements of The Rules (“ GEM Listing Rules ”) Governing the Listing of Securities on The Growth Enterprises Market (“ GEM ”) of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) in relation to information to accompany preliminary announcements of interim results. Printed version of the Company’s 2017 interim report will be delivered to the shareholders of the Company and available for viewing on the websites of the Stock Exchange at www.hkexnews.hk and of the Company at www.chinainfotech.com.hk on or before 14 August 2017.

By order of the Board China Information Technology Development Limited Tse Chi Wai Executive director and Company Secretary

Hong Kong, 11 August 2017

As at the date of this announcement, the Board comprises Mr. Wong Kui Shing, Danny (Chairman and Chief Executive officer), Mr. Tse Chi Wai, Ms. Wu Jingjing and Mr. Takashi Togo as executive Directors; Mr. Wong Chi Yung as non-executive Director; Mr. Hung Hing Man, Mr. May Tai Keung, Nicholas and Dr. Chen Shengrong as independent non-executive Directors.

This announcement, for which the directors of the Company collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The directors of the Company, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief: (1) the information contained in this announcement is accurate and complete in all material respects and not misleading or deceptive; and (2) there are no other matters the omission of which would make any statement herein or this announcement misleading.

This announcement will remain on the “Latest Company Announcement” page of the GEM website (www.hkgem.com) for at least seven days from the date of its posting and on the Company’s website (www.chinainfotech.com.hk).

CHARACTERISTICS OF THE GROWTH ENTERPRISE MARKET (“GEM”) OF THE STOCK EXCHANGE OF HONG KONG LIMITED (THE “STOCK EXCHANGE”)

GEM has been positioned as a market designed to accommodate companies to which a high investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this report, 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 report.

This report, for which the Directors of the Company collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on the Growth Enterprise Market of the Stock Exchange for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this report is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this report misleading.

This report will be available on the Company’s website http://www.chinainfotech.com. hk and will remain on the “Latest Company Report” page on the GEM website at http://www.hkgem.com for at least 7 days from the date of its posting.

CONTENTS

Corporate Information	2
Summary	3
Management Discussion and Analysis	3
Condensed Consolidated Statement of Profit or Loss	8
Condensed Consolidated Statement of Profit or Loss and
Other Comprehensive Income	9
Condensed Consolidated Statement of Financial Position	10
Condensed Consolidated Statement of Changes in Equity	12
Condensed Consolidated Statement of Cash Flows	13
Notes to Condensed Consolidated Interim Financial Statements	15
General Information	30
Corporate Governance	33

1 CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017

CORPORATE INFORMATION

EXECUTIVE DIRECTORS

LEGAL ADVISOR

Mr. Wong Kui Shing, Danny (Chairman and Chief Executive Officer) Mr. Tse Chi Wai Ms. Wu Jingjing Mr. Takashi Togo

NON-EXECUTIVE DIRECTOR

Mr. Wong Chi Yung

Conyers Dill & Pearman

PRINCIPAL BANKERS

The Hongkong and Shanghai Banking Corporation Limited Public Bank (Hong Kong) Limited DBS Bank (Hong Kong) Limited Citibank, N. A.

INDEPENDENT NONEXECUTIVE DIRECTORS

HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS

Mr. Hung Hing Man Mr. May Tai Keung, Nicholas Dr. Chen Shengrong

Suite 2802, 28th Floor Prosperity Tower 39 Queen’s Road Central Hong Kong

COMPANY SECRETARY

Mr. Tse Chi Wai

COMPLIANCE OFFICER

Mr. Tse Chi Wai

AUTHORISED REPRESENTATIVES

Mr. Wong Kui Shing, Danny Mr. Tse Chi Wai

NOMINATION COMMITTEE

Mr. Hung Hing Man (Chairman) Mr. May Tai Keung, Nicholas Dr. Chen Shengrong

REMUNERATION COMMITTEE

Mr. May Tai Keung, Nicholas (Chairman) Mr. Hung Hing Man Dr. Chen Shengrong

REGISTERED OFFICE

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

PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE

SMP Partners (Cayman) Limited 3rd Floor 24 Shedden Road, P. O. Box 1586 Grand Cayman, KY1-1110 Cayman Islands

HONG KONG BRANCH SHARE REGISTRAR AND TRANSFER OFFICE

Computershare Hong Kong Investor Services Limited 17th Floor, Hopewell Centre 183 Queen’s Road East, Hong Kong

AUDIT COMMITTEE

GEM STOCK CODE

Mr. Hung Hing Man (Chairman) Mr. May Tai Keung, Nicholas Dr. Chen Shengrong

AUDITOR

8178

WEB-SITE ADDRESS

www.chinainfotech.com.hk

ZHONGHUI ANDA CPA Limited

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017

2

SUMMARY

• Revenue for the six months ended 30 June 2017 was approximately HK$24,161,000, representing an increase of 243.2% from the corresponding period in last year (2016: approximately HK$7,040,000).

• Loss attributable to owners of the Company for the six months ended 30 June 2017 amounted to approximately HK$50,885,000 (2016: approximately HK$20,382,000). The loss was mainly attributed to recognition of an equitysettled share-based payment amounted to approximately HK$43,247,000 (2016: approximately HK$19,625,000) during the period.

• Loss per share attributable to owners of the Company for the six months ended 30 June 2017 was approximately HK0.89 cent (2016: approximately HK0.46 cent).

• The Board of Director (the “Board”) does not recommend the payment of an interim dividend for the six months ended 30 June 2017 (2016: Nil).

MANAGEMENT DISCUSSION AND ANALYSIS

Business review

In 2016, the Company placed 1,830,792,000 new shares of the Company to not less than six independent placees at a price of HK$0.13 each and raised a net proceeds of approximately HK$232 million (the “Placement”). It was expected that the net proceeds raised would be utilized as follows: HK$73 million for the refurbishment of and operation of the business in the PRC properties as acquired in the acquisition of Joyunited Investments Limited on 7 April 2016 (“PRC Properties“), the Company would have approximately HK$69 million for the general working capital and approximately HK$88 million for the projects that are currently in progress. More details on the Placement had been disclosed in the relevant announcement of the Company dated 8 December 2015 and the circular dated 18 March 2016. The Placement had been completed on 9 May 2016. As at 30 June 2017, the use of net proceeds from the Placement was as follows:– (1) approximately HK$68.6 million for refurbishment and other expenses relating to the PRC Properties; (2) approximately HK$11.9 million for investment in China Holding Limited (“Macro”); (3) approximately HK$13.2 million for loans to an independent third parties to enhance yield of idle cash of the Group; (4) as a result of the loss in book value of the listed securities held by the Group, the Group has not realised those listed securities to settle part of the consideration for the PRC Properties as was planned. Instead, approximately HK$76.1 million had been applied to settle the consideration for the PRC Properties; (5) approximately HK$9.9 million for expenses relating to the Group’s Japan business and related travelling expenses; and (6) approximately HK$31.9 million for administrative expenses and other expenses incurred by the Group. The unutilized proceeds were held as cash at bank.

3 CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017

For the six months ended 30 June 2017, the Company has continued the businesses as acquired and developed in 2016, including the acquisition of 84% of the total issued share capital of Macro and its subsidiaries (“Macro Group”) and the acquisition of the entire share capital of Value Creation Finance Limited (“Value Creation Finance”), with the expectation to improve the business performance as well as to bring synergies and refinement to the whole business of the Company.

Macro Group provides comprehensive end-to-end solutions and services, ranging from (i) procurement and deployment of IT equipment and facilities; (ii) systems integration; (iii) consulting services on IT infrastructure and business solutions; and (iv) technical support and managed services. As one of the major players in the IT service management industry in Hong Kong and the PRC, Macro has strong relationships with well-renowned suppliers and large scale customers, being the subsidiary of the Group, it enjoys strong brand awareness and major presence in the Greater China region.

During the six months ended 30 June 2017, the business performance of Macro has proven that the acquisition of Macro in 2016 was an appropriate step to diversify business risk as well as to refine the whole business of the Company. In April 2017, Macro has co-operated with the Company and Huawei International Co. Ltd., a prominent and multinational telecommunications equipment manufacturer and telecommunication service provider with products and services deployed in more than 140 countries, for a seminar on the topic of big data solutions. The speakers had shared ideas, new technologies and analytical approaches appealing to both technical and business people in the seminar. Through these co-operations, not only do both the Company and Macro enjoy the synergies effects from the sharing of experiences and knowledge, it also help the Company and Macro build a brand name and network in the IT industry.

During the reporting period, Macro Group has contributed a revenue of approximately HK$21,231,000 to the Group. This encouraging results motivates the Directors and the Company to continue developing the business of Macro.

The other business acquired in 2016, Value Creation Finance, which owns a money lending license in Hong Kong under Money Lenders Ordinance, has also started business in 2017 and it also gradually brings steady income for the Group.

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED 4 INTERIM REPORT 2017

In January 2017, the Company subscribed 16.67% equity interest of FULLPAY K.K. (FULLPAY 株式會社) (“Fullpay”), which is a company incorporated in Japan under the form of a joint stock company (kabushiki kaisha), at a consideration of JPY20,000,000 (equivalent to approximately HK$1,341,000). Fullpay is principally engaged in the sourcing and provision of electronic fund transfer at point of sale (EFT-POS) terminals and peripheral devices which support WeChat Pay, as well as the provision of relevant EFT-POS installation and system support services, to vendors in Japan.

Grabbing hold of the rising popularity of mobile payment in the world, especially in China, the Directors believe that the subscription is a golden opportunity for the Company to step into the mobile payment business so as to gain relevant knowledge and bring synergy effects to the other businesses of the Company.

Other than the above, during the period under review, revenue from provision of information technology related services remained as staple income of the Group.

Outlook and Prospect

During the six months ended 30 June 2017, the Group has continued to broaden the business scope and open up new income source. The business structure of the Group has been more complete and refined upon the corporate actions.

Through the subscription of Macro, the Group can further diversify its IT business and derive addition revenue in the coming years. The Group believes that the subscription of Macro can create synergies with Macro Group to enlarge its business in Hong Kong and the PRC.

The subscription of 16.67% equity interest of Fullpay in January 2017 has demonstrated that the Group has been attentive to the market trends and is more than determined to make appropriate response to sustain, if not, to improve the business performance as well as the revenue of the Group.

Together with the experience and knowledge of the Group in the IT field, the Group believes that the acquisition and the subscriptions of Macro and Fullpay can help further to equip the Group to further expand its existing and future businesses.

Employees

The total number of full-time employees hired by the Group maintained at 96 as of 30 June 2017 (2016: 135 employees). Total expenses on employee benefits amounted to HK$57,154,000, of which HK$43,247,000 related to equity-settled share-based payment for the six months ended 30 June 2017 (2016: HK$32,449,000, of which HK$19,625,000 related to equity-settled share-based payment). The management believes the salaries offered by the Group to its employees are competitive.

5 CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017

Financial review

For the six months ended 30 June 2017, the Group recorded a revenue of approximately HK$24,161,000, an increase of 243.2% from approximately HK$7,040,000 in the corresponding period in last year. The significant increase in revenue was mainly attributable to the consolidation of the revenue of Macro into the Group during the period.

The Group had a total cost of sales and services of approximately HK$15,743,000 for the first half of year 2017, an increase of 108% compared with approximately HK$7,568,000 in the same period of year 2016. The increase was mainly due to the consolidation of the cost of services of Macro during the period.

The gross profit of the Group for the first half of year 2017 was approximately HK$8,418,000, compared with a gross loss of approximately HK$528,000 for the corresponding period of last year as a result of consolidation of Macro which can generate gross profit during the period.

During the six months ended 30 June 2017, the Group generated other income and gains of approximately HK$3,991,000 (2016: approximately HK$1,885,000) which comprised: (i) bank interest income amounted to approximately HK$2,000 (2016: approximately HK$3,000); (ii) loans interest income amounted to approximately HK$3,424,000 (2016: approximately HK$974,000); (iii) investment income from financial assets at fair value through profit or loss amounted to HK$nil (2016: approximately HK$320,000); and (iv) other income amounted to approximately HK$565,000 (2016: approximately HK$588,000).

The Group’s selling and distribution expenses for the first half of year 2017 were approximately HK$735,000, a decrease of 75.1% compared with approximately HK$2,949,000 in the corresponding period in 2016. The decrease was mainly due to the fact that Pantosoft reduced its promotion activity efforts significantly this year.

Administrative expenses for the period were approximately HK$68,517,000, an increase of 104.1% as compared to approximately HK$33,570,000 for the corresponding period last year. The increase was mainly due to the recognition of share options granted to employees and consultants for the amount of approximately HK$43,247,000 during the period (2016: approximately HK$19,625,000), the consolidation of the administrative expenses of Macro, increase in staff cost and travelling expenses to explore new market.

During the first half of 2017, the Group profited from trading of marketable securities and recorded a mark-to-market gain of approximately HK$4,195,000 (2016: approximately HK$8,211,000).

The Group’s loss attributable to owners of the Company was approximately HK$50,885,000 for the six months ended 30 June 2017 (2016: approximately HK$20,382,000).

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017

6

Financial position

As at 30 June 2017, the Group had cash and bank balances of approximately HK$50,319,000 (31 December 2016: approximately HK$80,329,000).

As at 30 June 2017, the Group’s total borrowings amounted approximately HK$76,728,000 (31 December 2016: approximately HK$81,435,000). The gearing ratio (calculated as total borrowings over total equity) of the Group was 0.14 (31 December 2016: 0.15).

As the Group carried out a major portion of its operations in the PRC and Hong Kong and substantially all of its business transactions, assets and liabilities are denominated in either Renminbi, US dollars or Hong Kong dollars, the foreign exchange risk of the Group was considered minimal thus no hedging activities were conducted.

Capital expenditure

The Group incurred a capital expenditure of approximately HK$229,000 (31 December 2016: approximately HK$2,081,000) for addition of property, plant and equipment and approximately HK$1,696,000 for refurbishment construction works of investment properties for the six months ended 30 June 2017 (31 December 2016: approximately HK$264,337,000 for addition of investment properties by acquisition of a subsidiary and refurbishment construction works).

Contingent liabilities

The Group did not have any significant contingent liabilities as at 30 June 2017 and 31 December 2016 respectively.

Capital commitment

The Group did not have any material capital commitments as at 30 June 2017 and 31 December 2016.

7 CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017

The board (the “Board”) of directors (the “Directors”) of the Company announces the unaudited results of the Company and its subsidiaries for the six months ended 30 June 2017, together with the unaudited comparative figures for the corresponding period of year 2016, as follows:

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

				Three months ended	Three months ended	Three months ended		Six months ended	Six months ended	Six months ended
				30 June				30 June
				2017		2016		2017		2016
				(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
		Notes		HK$’000		HK$’000		HK$’000		HK$’000
Revenue		4		12,761		5,172		24,161		7,040
Cost of sales and services				(8,876)		(4,563)		(15,743)		(7,568)
Gross profit/(loss)				3,885		609		8,418		(528)
Other income and gains		4		2,531		569		3,991		1,885
Selling and distribution expenses				(380)		(1,276)		(735)		(2,949)
Administrative expenses		6		(58,335)		(28,034)		(68,517)		(33,570)
Other expenses				–		–		–		(107)
Fair value (loss)/gain on financial assets at fair
value through profit or loss				(8,400)		11,957		4,195		8,211
Change in fair value of investment properties				–		(11,730)		–		(11,730)
Change in fair value of borrowings				–		2,876		–		2,876
Change in fair value of derivative financial
asset				–		(10,610)		–		(10,610)
Finance costs		5		(530)		(1,108)		(1,001)		(1,128)
Share of results of associates				(723)		250		1,557		680
Gain on disposal of an associate				–		22,827		–		22,827
LOSS BEFORE TAX		6		(61,952)		(13,670)		(52,092)		(24,143)
Income tax credit		7		–		2,933		–		2,933
LOSS FOR THE PERIOD				(61,952)		(10,737)		(52,092)		(21,210)
Attributable to:
Owners of the Company				(60,641)		(10,527)		(50,885)		(20,382)
Non-controllinginterests				(1,311)		(210)		(1,207)		(828)
				(61,952)		(10,737)		(52,092)		(21,210)
Loss per share		8
– Basic and diluted				HK(1.06) cent		HK(0.21) cent		HK(0.89) cent		HK(0.46) cent

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017

8

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

		Three months	Three months	Three months	ended		Six months ended	Six months ended	Six months ended
		30 June					30 June
		2017			2016		2017		2016
	(Unaudited)			(Unaudited)		(Unaudited)			(Unaudited)
		HK$’000		HK$’000			HK$’000		HK$’000
LOSS FOR THE PERIOD		(61,952)			(10,737)		(52,092)		(21,210)
OTHER COMPREHENSIVE INCOME/(LOSS)
FOR THE PERIOD, NET OF INCOME TAX
– Exchange differences on translation of
foreign operations		5,654			(4,729)		8,221		(4,779)
TOTAL COMPREHENSIVE LOSS FOR THE
PERIOD		(56,298)			(15,466)		(43,871)		(25,989)
Attributable to:
Owners of the Company		(54,953)			(15,369)		(42,622)		(25,172)
Non-controllinginterests		(1,345)			(97)		(1,249)		(817)
		(56,298)			(15,466)		(43,871)		(25,989)

9 CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

		As at	As at
		30 June	31 December
		2017	2016
		(Unaudited)	(Audited)
	Notes	HK$’000	HK$’000
NON-CURRENT ASSETS
Investment properties	10	324,728	313,328
Property, plant and equipment	11	12,427	13,045
Goodwill		3,865	3,865
Other intangible assets		7,877	8,268
Investment in an associate		61,604	60,048
Available-for-sale financial assets		2,341	1,000
Prepayments, deposits and other receivables	12	36,156	36,252
Deferred tax assets		1,882	1,882
Total non-current assets		450,880	437,688
CURRENT ASSETS
Inventories		1,159	464
Trade receivables	13	6,947	5,092
Prepayments, deposits and other receivables	12	31,572	83,293
Loan receivables	14	81,129	22,910
Financial assets at fair value through profit
or loss		72,464	56,164
Cash and cash equivalents		50,319	80,329
Total current assets		243,590	248,252
CURRENT LIABILITIES
Trade payables	15	10,181	7,734
Gross amount due to customers for contract
work		1,178	1,394
Other payables and accruals	16	51,476	40,086
Current tax liabilities		8,533	8,293
Bank and other borrowings	17	76,728	81,435
Total current liabilities		148,096	138,942
NET CURRENT ASSETS		95,494	109,310

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017

10

				As at		As at
				30 June	31 December
				2017		2016
				(Unaudited)		(Audited)
		Notes		HK$’000		HK$’000
TOTAL ASSETS LESS CURRENT
LIABILITIES				546,374		546,998
NON-CURRENT LIABILITIES
Deferred tax liabilities				661		661
				661		661
NET ASSETS				545,713		546,337
EQUITY
Equity attributable to owners of
the Company
Share capital		18		571,215		571,215
Reserves				(23,374)		(23,999)
				547,841		547,216
Non-controllinginterests				(2,128)		(879)
Total equity				545,713		546,337

11 CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Attributable to owners of the Company Share capital Share premium account Share-based payment reserve Foreign currency translation reserve PRC reserve funds Accumulated losses Total Non- controlling interests Total equity (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 January 2016 Loss for the period Other comprehensive loss – Exchange differences on translation of foreign operations	388,136 69,212 – 3,015 844 (101,186) 360,021 (1,306) 358,715 – – – – – (20,382) (20,382) (828) (21,210) – – – (4,790) – – (4,790) 11 (4,779)
Total comprehensive loss for the period Equity-settled share-based payment expenses Issue of new shares Transaction costs attributable to issue of new shares	– – – (4,790) – (20,382) (25,172) (817) (25,989) – – 19,625 – – – 19,625 – 19,625 183,079 54,924 – – – – 238,003 – 238,003 – (6,161) – – – – (6,161) – (6,161)
At 30 June 2016	571,215 117,975 19,625 (1,775) 844 (121,568) 586,316 (2,123) 584,193
At 1 January 2017 Loss for the period Other comprehensive income – Exchange differences on translation of foreign operations	571,215 117,975 19,625 (13,114) 844 (149,329) 547,216 (879) 546,337 – – – – – (50,885) (50,885) (1,207) (52,092) – – – 8,263 – – 8,263 (42) 8,221
Total comprehensive (loss)/income for the period Lapsed of share options Equity-settled share-based payment expenses	– – – 8,263 – (50,885) (42,622) (1,249) (43,871) – – (19,625) – – 19,625 – – – – – 43,247 – – – 43,247 – 43,247
At 30 June 2017	571,215 117,975 43,247 (4,851) 844 (180,589) 547,841 (2,128) 545,713

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED 12 INTERIM REPORT 2017

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

	For six months	ended
	30 June
	2017	2016
	(Unaudited)	(Unaudited)
	HK$’000	HK$’000
NET CASH GENERATED FROM OPERATING
ACTIVITIES	45,080	57,507
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment	(229)	(109)
Payment for construction works of
investment properties	(1,696)	(85,054)
Purchase of financial assets at fair value through
profit or loss	(12,649)	(50,999)
Acquisition of a subsidiary	–	(175,146)
Purchase of available-for-sale financial asset	(1,341)	–
Proceeds from disposal of financial assets at fair
value through profit or loss	544	80,886
Grant of loans	(65,300)	(56,000)
Repayment of loans received	10,000	31,000
Other investingitems	507	(997)
NET CASH USED IN INVESTING ACTIVITIES	(70,164)	(256,419)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of new shares	–	238,003
Transaction costs on issue of new shares	–	(6,161)
Margin loan raised	270	889
Repayment of loans	(6,794)	(2,541)
Repayment for finance leases	–	(116)
NET CASH (USED IN)/GENERATED FROM
FINANCING ACTIVITIES	(6,524)	230,074
NET (DECREASE)/INCREASE IN CASH AND
CASH EQUIVALENTS	(31,608)	31,162
Cash and cash equivalents at beginning of
the period	80,078	119,028
Effect of foreign exchange rate changes,net	1,598	323
CASH AND CASH EQUIVALENTS AT END OF
THE PERIOD	50,068	150,513

13 CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017

	For six months	ended
	30 June
	2017	2016
	(Unaudited)	(Unaudited)
	HK$’000	HK$’000
ANALYSIS OF BALANCES OF CASH AND CASH
EQUIVALENTS
Cash and bank balances other than time deposits	50,068	150,513
Time deposits	251	201
Cash and cash equivalents as stated in the
condensed consolidated statement of
financial position	50,319	150,714
Less: Time deposits with maturity of more than
three months when acquired	(251)	(201)
Cash and cash equivalents as stated in the
condensed consolidated statement of cash
flows	50,068	150,513

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED 14 INTERIM REPORT 2017

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. Accounting policies

These unaudited condensed consolidated interim financial statements for the six months ended 30 June 2017 have been prepared in accordance with Hong Kong Accounting Standard (“HKAS”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and applicable disclosure requirements of the Rules Governing the Listing of Securities on the GEM of The Stock Exchange of Hong Kong Limited.

These unaudited condensed consolidated interim financial statements should be read in conjunction with the annual consolidated financial statements for the year ended 31 December 2016, which have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”). The accounting policies and methods of computation used in the preparation of these unaudited condensed interim financial statements are consistent with those used in the annual consolidated financial statements for the year ended 31 December 2016.

2. Adoption of new and revised Hong Kong financial reporting standards

In the current period, the Group has adopted all the new and revised HKFRSs issued by the HKICPA that are relevant to its operations and effective for its accounting year beginning on 1 January 2017. HKFRSs comprise Hong Kong Financial Reporting Standards (“HKFRS”); HKAS and Interpretations. The adoption of these new and revised HKFRSs did not result in significant changes to the Group’s accounting policies, presentation of the Group’s financial statements and amounts reported for the current period and prior period.

The Group has not applied the new and revised HKFRSs that have been issued but are not yet effective. The Group has already commenced an assessment of the impact of these new and revised HKFRSs but is not yet in a position to state whether these new and revised HKFRSs would have a material impact on its results of operations and financial position.

15 CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017

3. Operating segment information

The Group has five reportable segments as follows:

• the software development and system integration segment engages in (i) the sale of computer hardware; (ii) the provision of software development services; (iii) the provision of system integration services; and (iv) the provision of technical support and maintenance services;

• the in-house developed products segment engages in the lease of in-house developed computer hardware;

• provision of IT infrastructure solutions and maintenance services (“IT solutions and maintenance”);

• money lending; and

• Securities trading (“Securities investments“).

Segment assets exclude investments in associates, available-for-sale financial asset and other unallocated head office and corporate assets.

Segment liabilities exclude income tax payables, deferred tax liabilities and other unallocated head office and corporate liabilities.

The following table presents revenue and loss for the Group’s operating segments for the six months ended 30 June 2017 and 2016 respectively.

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017 16

Loss before tax (52,092) (24,143)	Segment profit/(loss) (1,227) (6,090) – (108) 1,819 – 2,671 – 4,191 8,531 7,454 2,333 Reconciliation: Bank interest income 2 3 Loans interest income 645 974 Fair value change of investment property – (11,730) Fair value change of borrowings – 2,876 Fair value change of derivative financial asset – (10,610) Share of results of associates 1,557 680 Gain on disposal of an associate – 22,827 Unallocated gains 349 281 Corporate and other unallocated expenses (61,098) (30,649) Finance costs (1,001) (1,128)	Segment revenue: Sales to external customers 2,930 7,040 – – 21,231 – – – – – 24,161 7,040	Six months ended 30 June Software development and system integration In-house developed products IT solutions and maintenance Money lending Securities investments Total 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017

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Software development and system integration In-house developed products IT solutions and maintenance Money lending Securities investments Total 30.6.2017 31.12.2016 30.6.2017 31.12.2016 30.6.2017 31.12.2016 30.6.2017 31.12.2016 30.6.2017 31.12.2016 30.6.2017 31.12.2016 (Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	Segment assets 6,572 4,961 – – 22,354 21,648 68,643 450 103,128 94,534 200,697 121,593 Reconciliation: Corporate and other unallocated assets 493,773 564,347	Total assets 694,470 685,940	Segment liabilities (8,918) (8,612) – – (7,253) (13,588) – – (21,156) (15,823) (37,327) (38,023) Reconciliation: Corporate and other unallocated liabilities (111,430) (101,580)	Total liabilities 148,757 (139,603)	Geographical information Revenue 30.6.2017 30.6.2016 (Unaudited) (Unaudited) HK$’000 HK$’000	Hong Kong 19,992 – PRC except Hong Kong 4,169 7,040	Consolidated total 24,161 7,040	In preparing the geographical information, revenue is based on the locations of the customers.

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017

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4. Revenue, other income and gains

An analysis of revenue, other income and gains is as follows:

			Three months	Three months	Three months	ended		Six months ended	Six months ended	Six months ended
			30 June					30 June
			2017			2016		2017		2016
			(Unaudited)		(Unaudited)			(Unaudited)		(Unaudited)
			HK$’000			HK$’000		HK$’000		HK$’000
	Revenue
	Provision of software
	development and system
	integration services		1,870			5,170		2,841		7,013
	Provision of technical support
	and maintenance services		33			2		89		27
	Provision of IT infrastructure
	solutions and maintenance
	services		10,858			–		21,231		–
			12,761			5,172		24,161		7,040
	Other income and gains
	Bank interest income		1			1		2		3
	Loans interest income		2,198			378		3,424		974
	Investment income from
	financial assets at fair
	value through profit or loss		–			–		–		320
	Government grants		68			86		149		307
	Others		264			104		416		281
			2,531			569		3,991		1,885
	Finance costs
			Three months			ended		Six months ended
			30 June					30 June
			2017			2016		2017		2016
			(Unaudited)		(Unaudited)			(Unaudited)		(Unaudited)
			HK$’000			HK$’000		HK$’000		HK$’000
	Bank borrowings		9			941		68		941
	Other loan interest		2			12		3		24
	Margin loans		519			148		930		148
	Interest on finance lease		–			7		–		15
			530			1,108		1,001		1,128

5. Finance costs

19 CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017

6. Loss before tax

Loss before tax was arrived at after charging the following:

	Three months	Three months	ended	Six months ended	Six months ended
	30	June		30 June
	2017		2016	2017	2016
	(Unaudited)	(Unaudited)		(Unaudited)	(Unaudited)
	HK$’000		HK$’000	HK$’000	HK$’000
Amortisation of other
intangible assets	196		–	392	–
Depreciation	446		329	851	644
Directors’ remuneration	1,066		900	2,111	1,800
Equity-settled share based
payment**	43,247		19,625	43,247	19,625

** This item is included in “administrative expenses” of the condensed consolidated statement of profit or loss

7. Income tax credit

No provision for Hong Kong Profits Tax has been made for the six months ended 30 June 2017 as the Group has accumulated tax losses brought forward from previous year (2016: Nil).

The PRC corporate income tax provision in respect of operations in Mainland China is calculated at applicable tax rates on the estimated assessable profits for the period based on existing legislation, interpretations and practices in respect thereof. In accordance with the relevant tax rules and regulations of the PRC, certain of the Company’s subsidiaries enjoy income tax reduction by reason that these subsidiaries are certified as New and/or High Technology Enterprises in Mainland China.

No provision of the PRC corporate income tax has been made for the six months ended 30 June 2017 as the Group did not generate any assessable profits in the PRC during the period (2016: Nil).

No provision for Japan corporate income tax has been made for the six months ended 30 June 2017 since the Group did not generate any assessable profits arising in Japan during the period (2016: Nil). Tax arising in other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

For the period ended on 30 June 2016, the Group recognised a deferred tax credit of HK$2,933,000 pursuant to consolidation of the new acquired Joyunited.

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017 20

	Three months	Three months	ended	Six months ended	Six months ended
	30	June		30 June
	2017		2016	2017	2016
	(Unaudited)	(Unaudited)		(Unaudited)	(Unaudited)
	HK$’000		HK$’000	HK$’000	HK$’000
Current tax – Hong Kong	–		–	–	–
Current tax – PRC	–		–	–	–
Deferred tax credit	–		2,933	–	2,933
Total tax credit for the period	–		2,933	–	2,933

8. Loss per share

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

		Three months ended	Three months ended	Three months ended		Six months ended	Six months ended	Six months ended
		30 June				30 June
		2017		2016		2017		2016
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
		HK$’000		HK$’000		HK$’000		HK$’000
Loss for the period attributable to
owners of the Company		(60,641)		(10,527)		(50,885)		(20,382)
		Three months ended				Six months ended
		30 June				30 June
		2017		2016		2017		2016
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Weighted average number of
ordinary shares for basic and
diluted loss per share		5,712,151,908		4,927,526,765		5,712,151,908		4,404,443,337

For the six months ended 30 June 2017, diluted loss per share is the same as the basic loss per share as the computation of diluted loss per share does not assume the exercise of the Company’s share options since their exercise would result in an anti-dilutive effect on loss per share during the six months ended 30 June 2017 and 2016.

21 CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017

9. Interim dividend

The Board does not recommend the payment of any interim dividend for the six months ended 30 June 2017 (2016: Nil).

10. Investment properties

Investment properties
		As at
		30 June
		2017
		(Unaudited)
		HK$’000
Valuation
At 1 January 2017		313,328
Additions		1,696
Exchange differences		9,704
At 30 June 2017		324,728

At 30 June 2017, the carrying amount of investment properties pledged as security for the Group’s bank loans amounted to approximately HK$53,822,000 (31 December 2016: approximately HK$56,951,000).

11. Additions in property, plant and equipment

During the period for the six months ended 30 June 2017, the Company spent approximately HK$229,000 (30 June 2016: approximately HK$109,000) for additions of property, plant and equipment.

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED 22 INTERIM REPORT 2017

12. Prepayments, deposits and other receivables

		As at		As at
		30 June		31 December
		2017		2016
		(Unaudited)		(Audited)
		HK$’000		HK$’000
Prepayments		37,046		36,253
Deposits and other receivables		30,682		85,916
		67,728		122,169
Impairment		–		(2,624)
		67,728		119,545
Non-current portion:
Prepayments		35,896		34,818
Deposits and other receivables		260		1,434
		36,156		36,252
Current portion:
Prepayments		1,150		1,435
Deposits and other receivables		30,422		81,858
		31,572		83,293
		67,728		119,545

23 CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017

13. Trade receivables

An aging analysis of the trade receivables as at the end of the reporting period, based on the invoice date and net of impairment, is as follows:

	As at	As at
	30 June	31 December
	2017	2016
	(Unaudited)	(Audited)
	HK$’000	HK$’000
Within 1 month	2,728	1,287
1 to 2 months	917	1,232
2 to 3 months	–	220
Over 3 months	3,302	2,353
	6,947	5,092

The Group has granted credit terms to its customers ranging from 30 to 90 days. In certain cases, the Group would request payment in advance from the customers. The Group does not hold any collateral or other credit enhancements over its trade receivable balances. Trade receivables are non-interest bearing.

14. Loan receivables

	As at	As at
	30 June	31 December
	2017	2016
	(Unaudited)	(Audited)
	HK$’000	HK$’000
Loan receivables	81,129	22,910

Note:

Included in the amount of approximately HK$81,129,000, loan receivables of HK$3,200,000 are guaranteed by an independent third party.

All loan receivables are denominated in HK$ and carry fixed interest rate from the range of 9% to 12% per annum and with the terms ranging from 3 months to 18 months.

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017

24

15. Trade payables

An aging analysis of the trade payables as at the end of the reporting period, based on the invoice date, is as follows:

	As at	As at
	30 June	31 December
	2017	2016
	(Unaudited)	(Audited)
	HK$’000	HK$’000
Within 1 month	1,876	1,050
1 to 2 months	2,945	1,281
2 to 3 months	1,760	393
Over 3 months	3,600	5,010
	10,181	7,734

16. Other payables and accruals

	As at	As at
	30 June	31 December
	2017	2016
	(Unaudited)	(Audited)
	HK$’000	HK$’000
Accruals	1,343	5,073
Receipts in advance	854	2,146
Otherpayables	49,279	32,867
	51,476	40,086

25 CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017

17. Bank and other loans

		As at	As at
		30 June	31 December
		2017	2016
		(Unaudited)	(Audited)
	Notes	HK$’000	HK$’000
Bank loans:
Mortgage loan	(i)	53,822	56,951
Revolving loan	(ii)	–	5,000
Installment loan	(iii)	–	708
Bank overdrafts	(iv)	–	1,228
		53,822	63,887
Other loans:
Loan from a company controlled by former
management of a subsidiary	(v)	714	692
Loan from a management personnel of a
subsidiary	(v)	1,036	1,033
Margin loans	(vi)	21,156	15,823
		22,906	17,548
		76,728	81,435

Notes :

• (i) The mortgage loan has terms of 10 years until 2022 with a repayable on demand clause exercisable by a bank. The average interest rate was 5.39%.

The mortgage loan is secured by a charge over the Group’s investment properties and personal guarantee by former shareholders of a subsidiary.

• (ii) The revolving loan is charged at Hong Kong prime rate per annum, which is guaranteed by a director and a former director of a subsidiary, secured by a property owned by a director and a former director of a subsidiary and repayable on demand.

• (iii) The installment loan is charged at 4.8% per annum, guaranteed by a director of a subsidiary and a former director of the a subsidiary and repayable on demand.

• (iv) The bank overdrafts is charged at a rate of 0.75% per annum over Hong Kong prime rate during the year which is guaranteed by a director and a former director of a subsidiary, secured by a property owned by a director and a former director of a subsidiary and repayable on demand.

• (v) The loans from a company controlled by former management of a subsidiary and a management personnel of a subsidiary are unsecured, interest bearing at 10% per annum on the unpaid principal and repayable on demand.

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017

26

• (vi) The margin loans are secured by the Group’s equity securities listed in Hong Kong with fair value of HK$49,387,768 and repayable on demand. The loans of approximately HK$16,802,000 and approximately HK$4,354,000 are charged at a fixed interest rate of 8% per annum and at 3% per annum over the Honq Kong prime rate respectively.

18. Share capital

				Number of		Amount
		Notes		shares		HK$’000
Authorised:
Ordinary shares of HK$0.1 each at 31
December 2016 and 1 January 2017				8,000,000,000		800,000
Increase duringtheperiod		(a)		4,000,000,000		400,000
At 30 June 2017				12,000,000,000		1,200,000
Issued and fully paid:
Ordinary shares of HK$0.1 each at
31 December 2016 and 30 June 2017				5,712,151,908		571,215

Notes:

• (a) Pursuant to an ordinary resolution passed by the shareholders of the Company on 30 June 2017, the authorised share capital of the Company was increased from HK$800,000,000 to HK$1,200,000,000 by the creation of 4,000,000,000 ordinary shares of HK$0.10 each, those new ordinary shares rank pari passu in all respects with the existing shares of the Company.

19. Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following disclosures of fair value measurements use a fair value hierarchy that categorises into three levels the inputs to valuation techniques used to measure fair value:

Level 1 inputs:

quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date.

Level 2 inputs:

inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 inputs: unobservable inputs for the asset or liability.

The Group’s policy is to recognise transfers into and transfers out of any of the three levels as of the date of the event or change in circumstances that caused the transfer.

27 CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017

(a) Disclosures of level in fair value hierarchy:

		Fair value measurements	Fair value measurements	Fair value measurements	Fair value measurements	Fair value measurements
		as at 30 June 2017				using:			Total
Description		Level 1		Level 2		Level	3		2017
		**(Unaudited) **		**(Unaudited) **		**(Unaudited) **			(Unaudited)
		HK$’000		HK$’000		HK$’000			HK$’000
Recurring fair value measurements:
Financial assets at fair
value through profit or loss
Listed equity securities in Hong
Kong		72,464		–			–		72,464
Investment properties		–		–		324,728			324,728
		Fair value measurements
		as at 31	December 2016 using:						Total
Description		Level 1		Level 2		Level	3		2016
		(Audited)		(Audited)		(Audited)			(Audited)
		HK$’000		HK$’000		HK$’000			HK$’000
Recurring fair value measurements:
Financial assets at fair
value through profit or loss
Listed equity securities in
Hong Kong		56,164		–			–		56,164
Investment properties		–		–		313,328			313,328

20. Contingent liabilities

As at 30 June 2017, the Group did not have any significant contingent liabilities (31 December 2016: Nil).

21. Approval of the condensed consolidated interim financial statements

These condensed consolidated interim financial statements were approved and authorised for issue by the Board on 11 August 2017.

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017 28

GENERAL INFORMATION

Directors’ service contracts

At 30 June 2017, none of the Directors had any existing or proposed service contract with the Company which is not determinable by the Company within one year without payment of compensation, other than statutory compensation.

Directors’ interests in contracts

None of the directors had a material interest, either directly or indirectly, in any contract of significance to the business of the Group to which the Company, or any of its subsidiaries or fellow subsidiaries was a party during the six months ended 30 June 2017.

Directors’ interests and short positions in shares and underlying shares

At 30 June 2017, the interests and short positions of the Directors in the share capital and underlying shares of the Company or its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the “SFO”)), as recorded in the register required to be kept by the Company pursuant to section 352 of the SFO, or as otherwise required pursuant to Rules 5.46 to 5.68 of the GEM Listing Rules to be notified to the Company and the Stock Exchange were as follows:

Long positions in ordinary shares of the Company:

Name Capacity	Nature of Interest Percentage of the Company’s issued share capital (approximately %) Registered Shareholder Underlying Interest (Note)
Mr. Wong Kui Shing, Danny Through controlled corporation Beneficially owned	403,971,449 7.07% 5,688,000 0.10%

Note:

The percentage is calculated based on the total number of ordinary shares of the Company in issue as at the date of this report, which was 5,712,151,908 Shares.

Save as disclosed above and in the section headed “Share Options“, as at 30 June 2017 and as at of the date of this report, none of the Directors or chief executive had registered an interest or a short position in the shares, underlying shares or debentures of the Company or any of its associated corporations that was required to be recorded pursuant to Section 352 of the SFO, or as otherwise required pursuant to Rules 5.46 to 5.68 of the GEM Listing Rules to be notified to the Company and the Stock Exchange.

29 CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017

Directors’ rights to acquire shares or debentures

Save as disclosed in the section “Directors’ interests and short positions in shares and underlying shares” and “Share Options“, at no time during the six months ended 30 June 2017 were rights to acquire benefits by means of the acquisition of shares in or debentures of the Company granted to any Director or their respective spouses or minor children, or were any such rights exercised by them; or was the Company, or any of its subsidiaries or fellow subsidiaries a party to any arrangement to enable the Directors to acquire such rights in any other body corporate.

Substantial shareholders’ and other persons’ interests in shares

and underlying shares

At 30 June 2017, the following interests of 5% or more of the issued share capital of the Company were recorded in the register of interests required to be kept by the Company pursuant to Section 336 of the SFO:

Long positions in ordinary shares of the Company:

								Percentage of
						Number of		the Company’s
			Capacity and			ordinary		issued
Name		Notes	nature of interest			shares held		share capital
								(Note b)
Discover Wide Investments			Directly beneficially owned			403,971,449		7.07%
Limited						(Registered
						Shareholder)
Mr. Wong Kui Shing,		(a)	Through controlled			403,971,449		7.07%
Danny				corporation		(Beneficial
						Owner)
			Beneficially owned			5,688,000		0.1%
						(Underlying
						Interest)
Mr. Zhang Rong			Directly beneficially owned			364,672,000		6.38%
						(Registered
						Shareholder)

Notes:

• (a) Mr. Wong Kui Shing, Danny was deemed to be interested in the 403,971,449 shares by virtue of his controlling interests in Discover Wide Investments Limited.

• (b) The percentage is calculated based on the total number of ordinary shares of the Company in issue as at the date of this report, which was 5,712,151,908 Shares.

Save as disclosed above, as at 30 June 2017, no person, other than the Directors of the Company, whose interests are set out in the section “Directors’ interests and short positions in shares and underlying 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.

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30

Share Options

On 11 April 2017, the Company granted a total of 323,448,000 share options with rights to subscribe for 323,448,000 ordinary shares of HK$0.1 each in the share capital of the Company under the share option scheme adopted by the Company on 2 August 2012(“Share Option Scheme”). A total of 105,984,000 share options were granted to Directors of the Company. Those share options were lapsed on 10 April 2017. On 11 April 2017, the Company granted a total of 571,200,000 share options with rights to subscribe for 571,200,000 ordinary shares of HK$0.1 each in the share capital of the Company under the Share Option Scheme. A total of 160,752,000 share options were granted to Directors of the Company. Details of the share options granted are as follows:–

Name of Grantees Position held with the Company	Number of share options
	Outstanding as at 1 January 2017 Lapsed on 10 April 2017 Granted on 11 April 2017 and outstanding as at 30 June 2017
Mr. Wong Kui Shing, Danny Executive Director and substantial shareholder of the Company Mr. Tse Chi Wai Executive Director Mr. Takashi Togo Executive Director Ms. Wu Jingjing Executive Director Mr. Wong Chi Yung Non-executive Director Mr. Hung Hing Man Independent non-executive Director Mr. May Tai Keung, Nicholas Independent non-executive Director Dr. Chen Shengrong Independent non-executive Director	936,000 (936,000) 5,688,000 32,328,000 (32,328,000) 57,000,000 32,328,000 (32,328,000) 57,000,000 2,016,000 (2,016,000) 2,016,000 32,328,000 (32,328,000) 33,000,000 2,016,000 (2,016,000) 2,016,000 2,016,000 (2,016,000) 2,016,000 2,016,000 (2,016,000) 2,016,000
Sub-total	105,984,000 (105,984,000) 160,752,000
Other staff and consultants	214,464,000 (214,464,000) 410,448,000
Total	320,448,000 (320,448,000) 571,200,000

All the outstanding share options granted are exercisable during the period from date of grant to 10 April 2027 at an exercise price of HK$0.153 per share.

The closing price per share immediately before the date of grant was HK$0.145. 320,448,000 share options were lapsed on 10 April 2017. None of the outstanding share options were exercised or cancelled during the period ended 30 June 2017.

31 CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017

Purchase, sale or redemption of the Company’s listed securities

During the six months ended 30 June 2017, neither the Company, nor any of its subsidiaries purchased, sold or redeemed any of Company’s listed securities.

Competing Interests

During the period under review and up to the date of this report, none of the Directors or the management shareholders (as defined in the GEM Listing Rules) of the Company were considered to have interests in a business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

CORPORATE GOVERNANCE

Corporate governance practices

During the six months ended 30 June 2017, the Company has complied with the codes on Corporate Governance Code (the “Code“) as set out in Appendix 15 of the GEM Listing Rules, except for the followings.

Code Provision A.2.1

Code Provision A.2.1 stipulates the roles of chairman and chief executive should be separate and should not be performed by the same individual.

Mr. Wong Kui Shing, Danny (“Mr. Wong”) now serves as both the chairman (the “Chairman”) and the chief executive officer of the Company (the “Chief Executive Officer”), such practice deviates from code provision A.2.1 of the Code. The Board is of the opinion that it is appropriate and in the best interests of the Company for Mr. Wong to hold both positions as it helps maintain the continuity of the policies and the stability of the operations of the Company. The Company has been proactively recruiting candidates for the post of Chief Executive Officer through different means so as to fulfill the requirements of A.2.1 of the Code as soon as possible.

Code Provision A.4.1

Code Provision A.4.1 stipulates that non-executive directors should be appointed for a specific term.

None of the non-executive Directors is appointed for a specific term, which constitutes a deviation from Code Provision A.4.1. Nonetheless, in accordance with the articles of association of the Company, all non-executive directors are subject to retirement by rotation. The Company considers that there are sufficient measures to ensure the corporate governance standard of the Company is not less exacting than the Code.

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017 32

Non-executive Directors

The Board fulfilled the minimum requirement of appointing at least three independent non-executive Directors as required by the GEM Listing Rules. It met the requirement of having at least one of the independent non-executive Directors with appropriate professional qualifications or accounting or related financial management expertise. They have appropriate and sufficient experience and qualification to carry out their duties so as to fully represent the interests of the shareholders. None of the non-executive Directors is appointed for a specific term, which constitutes a deviation from Code Provision A.4.1 which stipulates non-executive Directors should be appointed for a specific term, subject to re-election.

In accordance with the articles of association of the Company, all non-executive Directors are subject to retirement by rotation. The Company considers that there are sufficient measures to ensure the corporate governance standard of the Company is not less exacting than the Code.

Code of conduct regarding securities transactions by Directors

The Company has adopted a code of conduct regarding Directors’ securities transactions on terms no less exacting than the required standard of dealings set out in Rules 5.46 to 5.68 of the GEM Listing Rules. Having made specific enquiry of all Directors, the Directors have complied with such code of conduct and the required Standard of dealings and its code of conduct regarding securities transactions by the Directors during the six months ended 30 June 2017.

Audit committee

The Company established an audit committee with written terms of reference in compliance with Rules 5.28 and 5.33 of the GEM Listing Rules.

The primary duties of the audit committee include supervising the financial reporting procedure and reviewing the financial statements of the Group, examining and monitoring the internal control and risk management system adopted by the Group and reviewing the relevant work of the Group’s external auditor.

The audit committee comprises three members, including Mr. Hung Hing Man (audit committee chairman), Mr. May Tai Keung, Nicholas and Dr. Chen Shengrong. All of them are independent non-executive Directors.

The Group’s unaudited condensed consolidated interim financial statements for the six months ended 30 June 2017 have been reviewed by the audit committee, which was of the opinion that the preparation of such results complied with the applicable accounting standards.

Nomination Committee

The Company established a nomination committee with written terms of reference in compliance with Code Provisions A.5.1 to A.5.6 of Appendix 15 of the GEM Listing Rules.

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The nomination committee is responsible for reviewing the structure, size and composition of the Board and making recommendations on any proposed changes to the Board to complement the Company’s corporate strategy, identifying individuals suitable qualified to become Board members and selecting or making recommendations to the board on the selection of individuals nominated for directorships, assessing the independence of independent non-executive Directors and making recommendations to the Board on the appointment, re-appointment and succession of director.

The nomination committee currently has three members, with Mr. Hung Hing Man being the chairman and Mr. May Tai Keung, Nicholas and Dr. Chen Shengrong being the members. A majority of the nomination committee are independent non-executive Directors of the Company.

Remuneration committee

The Company established a remuneration committee with written terms of reference in compliance with Rules 5.34 to 5.36 of the GEM Listing Rules.

As at the date of this report, members of the remuneration committee are Mr. May Tai Keung, Nicholas (remuneration committee chairman), Mr. Hung Hing Man and Dr. Chen Shengrong. All the remuneration committee members are independent nonexecutive Directors.

The main role and function included the determination of specific remuneration packages of all executive Directors, including benefits in kind, pension rights and compensation payments, any compensation payable for loss or termination of their office or appointment, and making recommendations to the Board on the remuneration of non-executive Directors.

The remuneration committee meets regularly to determine the policy for the remuneration of Directors and assess the performance of executive Directors and certain senior management of the Company.

Change in information of directors

Pursuant to the Rule 17.50A(1) of the GEM Listing Rules, the changes in information of Directors during the six months ended 30 June 2017 and as at the date of this report are set out below:–

Mr. Wong Kui Shing, Danny has been appointed as an executive director of Share Economy Group Limited (Stock Code: 1178) on 8 May 2017. He has also been appointed as the independent non-executive director of Far East Holdings International Limited (Stock Code: 36) on 18 July 2017.

Mr. Wong has ceased to be a non-executive director of InvesTech Holdings Limited (Stock Code: 1087) on 1 June 2017.

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Internal control and Risk management

The Board has the ultimate responsibility to maintain a sound and effective internal control and risk management systems for the Group to safeguard the shareholders’ investment and the Group’s assets and to ensure strict compliance with relevant laws rules and regulations. The Group has established a risk management framework which consists of the Board, the Audit Committee and the senior management of the Group. The Board determines the nature and extent of risks that shall be taken in achieving the Group’s strategic objectives. The Audit Committee is responsible for reviewing the effectiveness of the internal control and risk management systems and reporting to the Board, The Board, through the Audit Committee, conducts reviews of the effectiveness of such systems at least annually, covering all material controls including financial, operational and compliance controls.

By Order of the Board China Information Technology Development Limited Wong Kui Shing, Danny Chairman and Chief Executive Officer

Hong Kong, 11 August 2017

As at the date of this report, the Board comprises Mr. Wong Kui Shing, Danny (Chairman and Chief Executive Officer), Mr. Tse Chi Wai, Ms. Wu Jingjing and Mr. Takashi Togo as executive Directors; Mr. Wong Chi Yung as non-executive Director; Mr. Hung Hing Man, Mr. May Tai Keung, Nicholas and Dr. Chen Shengrong as independent non-executive Directors.

35 CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED INTERIM REPORT 2017