CM Energy Tech Co., Ltd. — Interim / Quarterly Report 2012

Aug 28, 2012

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

==> picture [41 x 45] intentionally omitted <==

TSC Group Holdings Limited

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 206)

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2012

The board (the “Board”) of directors (the “Directors”) of TSC Group Holdings Limited (the “Company”or “TSC”) is pleased to announce the unaudited results of the Company and its subsidiaries (collectively the “Group”) for the six months ended 30 June 2012, together with the unaudited comparative figures for the corresponding period in 2011 as follows:

RESULTS HIGHLIGHTS

• The Group’s turnover for the six months ended 30 June 2012 reached approximately US$66.2 million, representing a decrease of approximately 15.3% from US$78.1 million for the same period for 2011;

• Gross profit amounted to approximately US$25.4 million for the six months ended 30 June 2012, representing a decrease of approximately 10.7% from US$28.5 million for the same period for 2011;

• Net profit attributed to equity shareholders of the Company amounted to approximately US$0.5 million for the six months ended 30 June 2012, representing approximately 82.7% decrease over the same period for 2011;

• Earnings per share for the six months ended 30 June 2012 were US0.07 cent, representing a decrease of 82.9% compared with US0.41 cent per share for the same period in 2011. The basis of calculating the earnings per share is detailed in note 10;

• The Directors do not recommend the payment of an interim dividend for the six months ended 30 June 2012.

1

CONDENSED CONSOLIDATED INCOME STATEMENT

Notes Turnover 3, 4 Cost of sales Gross profit Other revenue and net income 5 Selling and distribution expenses General and administrative expenses Other operating expenses Profit from operations Finance costs 6 Share of results of associates Profit before taxation 7 Income tax 8 Profit for the period Attributable to: Equity shareholders of the Company Non-controlling interests Profit for the period Earnings per share Basic 10(a) Diluted 10(b)

For the six months ended 30 June 2012 2011 (unaudited) (unaudited) US$’000 US$’000 66,169 78,081 (40,765) (49,630) 25,404 28,451 1,145 247 (4,313) (3,099) (17,364) (18,319) (1,744) (997) 3,128 6,283 (1,077) (1,030) – (10) 2,051 5,243 (1,138) (2,068) 913 3,175 488 2,812 425 363 913 3,175 US0.07 cent US0.41 cent US0.07 cent US0.41 cent

2

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Notes Profit for the period Other comprehensive income for the period: Exchange differences on translation of financial statements of subsidiaries and associates Total comprehensive income for the period Attributable to: Equity shareholders of the Company Non-controlling interests Total comprehensive income for the period	For the six months ended 30 June 2012 2011 (unaudited) (unaudited) US$’000 US$’000 913 3,175 1,511 2,909 2,424 6,084 2,035 5,832 389 252 2,424 6,084	For the six months ended 30 June 2012 2011 (unaudited) (unaudited) US$’000 US$’000 913 3,175 1,511 2,909 2,424 6,084 2,035 5,832 389 252 2,424 6,084
		6,084
		5,832 252
		6,084

3

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Notes NON-CURRENT ASSETS Property, plant and equipment 11 Interests in leasehold land held for own use under operating leases Goodwill Other intangible assets Interest in associates Prepayments Deferred tax assets CURRENT ASSETS Inventories Trade and other receivables 12 Gross amount due from customers for contract work Amount due from a related company Pledged bank deposits Cash at bank and in hand CURRENT LIABILITIES Trade and other payables 13 Bank loans Current taxation Provisions	As at 30 June 2012 (unaudited) US$’000 36,641 4,337 24,095 14,922 2,159 – 10,862 93,016 57,357 73,726 25,732 101 1,286 27,192 185,394 78,983 9,585 2,257 2,251 93,076	As at 31 December 2011 (audited) US$’000 36,660 4,401 23,854 16,013 2,159 70 10,897
		94,054
		39,596 79,455 16,517 101 1,348 34,140
		171,157
		58,734 20,538 4,179 1,769
		85,220

4

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued)

Notes NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Bank loans Deferred tax liabilities NET ASSETS CAPITAL AND RESERVES Share capital Reserves Total equity attributable to equity shareholders of the Company Non-controlling interests TOTAL EQUITY	As at 30 June 2012 (unaudited) US$’000 92,318 185,334 7,836 987 8,823 176,511 8,771 160,583 169,354 7,157 176,511	As at 31 December 2011 (audited) US$’000 85,937
		179,991
		4,921 1,349
		6,270
		173,721
		8,770 158,183
		166,953 6,768
		173,721

5

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 30 June 2012

Balance at 1 January 2011 (audited) Changes in equity for the six months ended 30 June 2011: Profit for the period Other comprehensive income Total comprehensive income Shares issued under share option schemes Equity-settled share-based transactions Balance at 30 June 2011 (unaudited) Balance at 1 January 2012 (audited) Changes in equity for the six months ended 30 June 2012: Profit for the period Other comprehensive income Total comprehensive income Shares issued under share option schemes Equity-settled share-based transactions Balance at 30 June 2012 (unaudited)			Equity attributable to equity shareholders of the Company	Equity attributable to equity shareholders of the Company	Equity attributable to equity shareholders of the Company			Total US$’000 160,277 2,812 3,020 5,832 120 674 166,903 166,953 488 1,547 2,035 6 360 169,534	Non- controlling interests US$’000 6,454 363 (111) 252 – – 6,706 6,768 425 (36) 389 – – 7,157	Total equity US$’000 166,731
	Share capital US$’000 8,727 – – – 26 – 8,753 8,770 – – – 1 – 8,771	Share premium US$’000 119,744 – – – 193 – 119,937 120,043 – – – 10 – 120,053	Merger reserve US$’000 2,161 – – – – – 2,161 2,161 – – – – – 2,161	Employee share-based Exchange compensation reserve reserve US$’000 US$’000 (3,722) 5,232 – – 3,020 – 3,020 – – (99) – 674 (702) 5,807 (1,456) 5,828 – – 1,547 – 1,547 – – (5) – 360 91 6,183	Capital Revaluation reserve reserve US$’000 US$’000 512 627 – – – – – – – – – – 512 627 512 627 – – – – – – – – – – 512 627	Reserve funds US$’000 3,281 – – – – – 3,281 3,384 – – – – – 3,384	Retained profits US$’000 23,715 2,812 – 2,812 – – 26,527 27,084 488 – 488 – – 27,572
										3,175 2,909
										6,084
										120 674
										173,609
										173,721
										913 1,511
										2,424
										6 360
										176,511

6

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW

NET CASH GENERATED FROM (USED IN) OPERATING ACTIVITIES NET CASH USED IN INVESTING ACTIVITIES NET CASH (USED IN)/GENERATED FROM FINANCING ACTIVITIES DECREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD EFFECT OF FOREIGN EXCHANGE RATE CHANGES CASH AND CASH EQUIVALENTS AT END OF PERIOD	For the six months ended 30 June 2012 2011 (unaudited) (unaudited) US$’000 US$’000 2,734 (1,271) (608) (2,080) (9,124) 3,310 (6,998) (41) 34,140 17,147 50 (259) 27,192 16,847

7

Notes:

1. CORPORATE INFORMATION

The Company was incorporated in the Cayman Islands as an exempted company with limited liability on 22 February 2005 under the Companies Law, Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands and was listed on the Main Board of the Stock Exchange of Hong Kong Limited (the “Stock Exchange”) (the “Main Board”) on 5 June 2009.

The condensed consolidated financial statements for the six months ended 30 June 2012 have not been audited by the Company’s auditors, but have been reviewed by the Company’s audit committee.

2. SIGNIFICANT ACCOUNTING POLICIES

The unaudited condensed consolidated financial statements have been prepared in accordance with the applicable disclosure requirements of the Rules Governing the Listing of Securities (the “Listing Rules”) on the Stock Exchange, the Hong Kong Accounting Standard (“HKAS”) 34 “Interim Financial Reporting” and other relevant HKASs and Interpretations and the Hong Kong Financial Reporting Standards (HKFRSs) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

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

The accounting policies used in the condensed consolidated financial statements are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 31 December 2011.

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

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

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

The adoption of the above new and revised HKFRSs had no significant financial impact on these unaudited condensed consolidated financial statements.

The Group has not applied any new or revised HKFRSs that have been issued but are not yet effective for the current accounting period.

8

3. SEGMENT REPORTING

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

• Capital equipment and packages: the design, manufacture, installation and commissioning of capital equipment and packages on land and offshore rigs

• – Oilfield expendables and supplies: the manufacturing and trading of oilfield expendables and supplies

• Engineering services: the provision of engineering services

(a) Segment results, assets and liabilities

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

Segment assets include all tangible assets, goodwill, intangible assets and current assets with the exception of interest in associates, cash balances, tax balances and other unallocated head office and corporate assets. Segment liabilities include trade and other payables and provisions attributable to the activities of the individual segment, with the exception of loans, tax balances and other unallocated head office and corporate liabilities.

Revenue and expenses are allocated to the reportable segments with reference to revenue generated by those segments and the expenses incurred by those segments or which otherwise arise from the depreciation or amortisation of assets attributable to those segments.

The measure used for reporting segment profit is “segment results” i.e. “adjusted earnings before finance costs and taxes” of individual segment. To arrive at segment results, the Group’s earnings are further adjusted for share of results of associates and items not specifically attributed to individual segment, such as directors’ and auditors’ remuneration and other head office or corporate income and expenses.

In addition to receiving segment information concerning segment results, management is provided with segment information concerning revenue (including inter-segment revenue), interest expense from borrowings managed directly by the segments, depreciation and amortisation and additions to non-current segment assets used by the segments in their operations.

9

3. SEGMENT REPORTING (continued)

(a) Segment results, assets and liabilities (continued)

Information regarding the Group’s reportable segments as provided to the Group’s most senior executive management for the purposes of resource allocation and assessment of segment performance.

The segment results for the periods ended 30 June 2012 and 2011 is set out below.

Revenue from external customers Inter-segment revenue Reportable segment revenue Reportable segment results	Capital equipment and packages Unaudited For the period ended 30 June 30 June 2012 2011 US$’000 US$’000 41,376 55,106 – – 41,376 55,106 1,880 5,511	Oilfield expendables and supplies Unaudited For the period ended 30 June 30 June 2012 2011 US$’000 US$’000 15,291 12,223 1,303 1,022 16,594 13,245 1,578 1,793	Engineering services Unaudited For the period ended 30 June 30 June 2012 2011 US$’000 US$’000 9,502 10,752 – – 9,502 10,752 1,715 2,610	Total Unaudited For the period ended 30 June 30 June 2012 2011 US$’000 US$’000 66,169 78,081 1,303 1,022 67,472 79,103 5,173 9,914	Total Unaudited For the period ended 30 June 30 June 2012 2011 US$’000 US$’000 66,169 78,081 1,303 1,022 67,472 79,103 5,173 9,914
					79,103
					9,914

The segment assets and liabilities as at 30 June 2012 and 31 December 2011 is set out below:

	Capital equipment	Capital equipment	Oilfield expendables	Oilfield expendables
	and packages		and supplies		Engineering services		Total
	As at	As at	As at	As at	As at	As at	As at	As at
	30 June31 December		30 June31 December		30 June31 December		30 June31	December
	2012	2011	2012	2011	2012	2011	2012	2011
	(unaudited)	(audited)	(unaudited)	(audited)	(unaudited)	(audited)	(unaudited)	(audited)
	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
Reportable segment assets	179,542	168,517	28,200	22,111	28,232	25,722	235,974	216,350
Reportable segment liabilities	(61,778)	(44,163)	(13,881)	(10,249)	(5,118)	(4,081)	(80,777)	(58,493)

10

3. SEGMENT REPORTING (continued)

• (b) Reconciliation of reportable segment revenue, profit, assets and liabilities

Revenue Reportable segment revenue Elimination of inter-segment revenue Condensed consolidated turnover Profit Segment results Finance costs Share of results of associates Unallocated head office and corporate income and expenses Condensed consolidated profit before taxation Assets Reportable segment assets Interest in associates Pledged bank deposits Cash at bank and in hand Deferred tax assets Unallocated head office and corporate assets Condensed consolidated total assets Liabilities Reportable segment liabilities Bank loans Current taxation Deferred tax liabilities Unallocated head office and corporate liabilities Condensed consolidated total liabilities

Unaudited For the six months ended 30 June 2012 2011 US$’000 US$’000 67,472 79,103 (1,303) (1,022) 66,169 78,081 5,173 9,914 (1,077) (1,030) – (10) (2,045) (3,631) 2,051 5,243 As at As at 30 June 31 December 2012 2011 (audited) (audited) US$’000 US$’000 235,974 216,350 2,159 2,159 102 1,348 28,376 34,140 10,862 10,897 937 317 278,410 265,211 (80,777) (58,493) (2,258) (4,179) (17,420) (25,459) (987) (1,349) (457) (2,010) (101,899) (91,490)

11

3. SEGMENT REPORTING (continued)

(c) Geographic information

The following table sets out information about the geographical locations of (i) the Group’s revenue from external customers and (ii) the Group’s property, plant and equipment, interest in leasehold land held for own use under operating lease, goodwill, other intangible assets and interest in associates (“specified non-current assets”). The geographical location of customers is based on the location of the customers. The geographical location of the specified non-current assets is based on the physical location of the assets, in the case of property, plant and equipment, interest in leasehold land held for own use under operating leases and the location of the operations to which they are allocated, in the case intangible assets and goodwill, and the location of operations, in the case of interest in associates.

Hong Kong Mainland China North America South America Europe Singapore Others (Other part of Asia, India, Russia etc.)	Revenue from external customers For the For the six months six months ended ended 30 June 30 June 2012 2011 (unaudited) (unaudited) US$’000 US$’000 349 458 28,612 28,115 11,316 23,609 5,799 5,641 7,696 8,614 661 5,407 11,736 6,237 66,169 78,081	Specified non-current assets As at As at 30 June 31 December 2012 2011 (unaudited) (audited) US$’000 US$’000 9 14 41,630 41,519 6,191 6,129 1,204 756 30,758 31,128 7 11 2,355 3,600 82,154 83,157	Specified non-current assets As at As at 30 June 31 December 2012 2011 (unaudited) (audited) US$’000 US$’000 9 14 41,630 41,519 6,191 6,129 1,204 756 30,758 31,128 7 11 2,355 3,600 82,154 83,157
			83,157

12

4. TURNOVER

The principal activities of the Group are the design, manufacture, installation and commissioning capital equipment and packages on land and offshore rigs (including rig electrical control system and other rig equipment) and oilfield expendables and supplies and the provision of engineering services.

Turnover represents the invoiced value of goods supplied to customers, revenue from construction contracts and revenue from engineering services. The amount of each significant category of revenue recognised in turnover during the period is as follows:

Capital equipment and packages – Construction contracts revenue – Sales of rig electrical control system – Sales of other rig equipment Oilfield expendables and supplies – Sales of expendables and supplies Engineering services – Service fee income 5. OTHER REVENUE AND NET INCOME Interest income Reversal of impairment loss on derivative financial instruments Others	Unaudited For the six months ended 30 June 2012 30 June 2011 US$’000 US$’000 25,861 41,573 4,182 8,025 11,333 5,508 41,376 55,106 15,291 12,223 9,502 10,752 66,169 78,081 Unaudited For the six months ended 30 June 2012 30 June 2011 US$’000 US$’000 89 90 892 – 164 157 1,145 247	Unaudited For the six months ended 30 June 2012 30 June 2011 US$’000 US$’000 25,861 41,573 4,182 8,025 11,333 5,508 41,376 55,106 15,291 12,223 9,502 10,752 66,169 78,081 Unaudited For the six months ended 30 June 2012 30 June 2011 US$’000 US$’000 89 90 892 – 164 157 1,145 247
		247

13

6. FINANCE COSTS

FINANCE COSTS
		Unaudited
		For the six	months ended
	30	June 2012	30 June 2011
		US$’000	US$’000
Interest on bank loans wholly repayable within five years		994	943
Interest on other bank loan		83	87
		1,077	1,030

7. PROFIT BEFORE TAXATION

Profit before taxation is arrived at after charging/(crediting):

Amortisation of intangible assets Net foreign exchange loss/(gain) Net provision/(reversal) of impairment losses on doubtful debts 8. INCOME TAX Current tax Provision for the period – United States (“US”) corporation income tax – People’s Republic of China (“PRC”) enterprise income tax – Other corporation income tax Deferred tax Origination and reversal of temporary differences	Unaudited For the six months ended 30 June 2012 30 June 2011 US$’000 US$’000 1,444 1,362 9 493 161 (549) Unaudited For the six months ended 30 June 2012 30 June 2011 US$’000 US$’000 147 2,451 824 493 464 609 1,435 3,553 (297) (1,485) 1,138 2,068	Unaudited For the six months ended 30 June 2012 30 June 2011 US$’000 US$’000 1,444 1,362 9 493 161 (549) Unaudited For the six months ended 30 June 2012 30 June 2011 US$’000 US$’000 147 2,451 824 493 464 609 1,435 3,553 (297) (1,485) 1,138 2,068
		3,553
		(1,485)
		2,068

No provision for Hong Kong Profits Tax has been made in the condensed consolidated income statement as the Group had no assessable profit subject to Hong Kong Profits Tax for the period. Taxation for subsidiaries in other jurisdictions is charged at the appropriate current rates of taxation ruling in the relevant jurisdictions. During both periods, certain PRC subsidiaries were subject to tax at reduced rates of 12.5% to 15% under the relevant PRC tax rules and regulations.

14

9. DIVIDENDS

The Board does not recommend the payment of an interim dividend for the six months ended 30 June 2012 (six months ended 30 June 2011: Nil).

10. EARNINGS PER SHARE

(a) Basic earnings per share

The calculation of the basic earnings per share for the six months ended 30 June 2012 are based on the profit attributable to ordinary equity shareholders of the Company of approximately 488,000 (six months ended 30 June 2011: US$2,812,000) and the weighted average number of 681,984,000 (six months ended 30 June 2011: 679,530,000) ordinary shares in issue during the period.

(b) Diluted earnings per share

The calculation of diluted earnings per share for the six months ended 30 June 2012 are based on the profit attributable to ordinary equity shareholders of the Company of approximately 488,000 (six months ended 30 June 2011: US$2,812,000) and the weighted average number of 687,030,000 (six months ended 30 June 2011: 690,904,000) ordinary shares after adjusting for the effects of all dilutive potential ordinary shares under the Company’s share option schemes.

11. PROPERTY, PLANT AND EQUIPMENT

During the period, additions to property, plant and equipment amounted to approximately US$1,597,000 (six months ended 30 June 2011: US$5,198,000).

12. TRADE AND OTHER RECEIVABLES

Trade debtors and bills receivable Less: allowances for doubtful debts Other receivables, prepayments and deposits	As at 30 June 2012 US$’000 (unaudited) 55,815 (2,720) 53,095 20,631 73,726	As at 31 December 2011 US$’000 (audited) 76,919 (4,126) 72,793 6,662 79,455

The credit terms offered by the Group to its customers differ with each product/service. The credit terms offered to customers of oilfield expendables and supplies and engineering services are normally 30 to 90 days. The credit terms offered to customers of capital equipment and packages are negotiated on a case-by-case basis. Deposits ranging from 10% to 30% of the contract sum are usually required. The balance of 60% to 85% would be payable upon contract milestones being completed. The remaining 5% to 10% of the contract sum represents the retention money and is payable within up to 18 months after delivery of the products or 1 year after completion of the onsite testing, whichever is earlier.

15

12. TRADE AND OTHER RECEIVABLES (continued)

Included in trade and other receivables are trade debtors and bills receivable (net of allowance for doubtful debts) with the following ageing analysis as of the balance sheet date:

Current Less than 1 month past due 1 to 3 months past due More than 3 months but within 12 months past due More than 12 months past due Amounts past due 13. TRADE AND OTHER PAYABLES Trade creditors and bills payable Other payables and accrued charges Gross amount due to customers for contract work Advances received in relation to construction contracts Derivative financial instrument – foreign exchange instrument	As at 30 June 2012 US$’000 (unaudited) 22,869 5,272 2,899 10,134 14,641 32,946 55,815 As at 30 June 2012 US$’000 (unaudited) 31,309 13,085 32,608 1,981 – 78,983	As at 31 December 2011 US$’000 (audited) 24,933
		14,996 5,650 21,604 5,610
		47,860
		72,793
		As at 31 December 2011 US$’000 (audited) 32,094 15,163 10,432 250 795
		58,734

Included in trade and other payables are trade creditors and bills payable with the following ageing analysis as of the balance sheet date:

Within 1 month More than 1 month but within 3 months More than 3 months but within 12 months More than 12 months but within 24 months More than 24 months	As at 30 June 2012 US$’000 (unaudited) 13,613 9,273 4,606 1,856 1,961 31,309	As at 31 December 2011 US$’000 (audited) 13,820 8,942 5,618 1,641 2,073
		32,094

16

MANAGEMENT DISCUSSION AND ANALYSIS

OVERVIEW

TSC is a global product and service provider serving both the offshore and land drilling rig industry worldwide. These principal activities remained unchanged for the first half of 2012.

Our Capital Equipment and Packages segment comprises the designing, manufacturing, installing and commissioning of capital equipment for land and offshore rigs. Our equipment is highly engineered and automated for drilling operations and includes mechanical handling, solids control, power control and drives, tensioning and compensation systems for various offshore drilling rigs, completion, intervention and workover vessels for oil, gas wells as well as for land rigs.

Our rig Maintenance, Repair and Operations (MRO) segments comprise two business units. The MRO Supplies business unit comprises the manufacture and sales of oilfield expendables and supplies. The MRO Services business unit provides a comprehensive range of engineering and maintenance services for our products as well as equipment manufactured by other suppliers.

INDUSTRY REVIEW

During the six months, oil price, which influences the demand for our products and services and capital spending budgets of our customers, fluctuated from the high of US$120 per barrel in March 2012 down to a low of US$90 per barrel in June 2012 (Brent Crude Oil). The demand for offshore rigs (Jack Ups, Semi-Submersibles and Drillships) and land rigs are further influenced by longer term factors such as government policies on oil production levels, national oil company policies, rig owner capital expenditure plans, charter rates and other factors such as financing availability and production capacity. In general, rig utilization decreased during the first half of 2012 mainly due to lower oil prices. However, the Brent Crude benchmark has since recovered to above US$115 per barrel in August 2012. TSC operates in a relatively stable market environment for its range of products.

BUSINESS REVIEW

The Group continues in its strategy to build up its base of core products in the MRO (Maintenance, Repair and Operations) Supplies and Services segments. These core products and services provide a firm base from which our longer term strategies can be executed. The Group continues to establish strong alliances with key players in several fast growing emerging markets to develop a base for its rig equipment solutions. Together with its wide base of engineering and technological capabilities developed through significant research and development efforts and accumulated over the years through several acquisitions, the Group is at a pivotal stage in which it is well positioned to take on significant growth. TSC has also established key alliances with business partners with whom it will be able to meet the requirements of the various needs of customers in different markets.

17

Our strength lies in the comprehensive range of products, innovative technology and expertise which we integrate to offer our customers high value solutions, safe and high quality products and services at cost effective rates. These strengths are being applied on innovative strategies to leverage us towards higher growth in the future as the price of oil recovers to a consistent sustainable price around US$100 per barrel. Demand is expected to continue to grow as discussed in the section below on outlook.

FINANCIAL REVIEW

FINANCIAL REVIEW
	30 June 2012	30 June 2011	Decrease
	(unaudited)	(unaudited)
	US$’000	US$’000	US$’000	%
Turnover	66,169	78,081	(11,912)	(15.3%)
Gross profit	25,404	28,451	(3,047)	(10.7%)
Gross profit margin	38.4%	36.4%
Profit from operations	3,128	6,283	(3,155)	(50.2%)
Profit for the period	913	3,175	(2,262)	(71.3%)
Earnings per share (Basic)	US0.07 cent	US0.41 cent
Earnings per share (Diluted)	US0.07 cent	US0.41 cent

Turnover for the first six months of 2012 decreased 15.3% to US$66.2 million from US$78.1 million in 2011. The net profit for the first six months of 2012 was US$0.9 million, representing a drop of 71.3% from the previous year of US$3.2 million. The decrease in net profit was mainly due to the revenue drop whilst the Company had to maintain overhead expenditure levels to implement our long term strategies. R&D initiatives were similarly continued to position for potential opportunities in the market. We also faced some delays in completion of the H212 Project which also resulted in increase in cost to complete. These costs have been factored into the reduction in net profit for first half year of 2012.

Segment Information by business segments

Turnover Capital Equipment and Packages Oilfield Expendables and Supplies Engineering services Total	30 June 2012 US$’000 % of total 41,376 63% 15,291 23% 9,502 14% 66,169 100%	30 June 2011 US$’000 % of total 55,106 70% 12,223 16% 10,752 14% 78,081 100%	Increase/(Decrease) US$’000 % (13,730) (24.9%) 3,069 25.1% (1,250) (11.6%) (11,912) (15.3%)	Increase/(Decrease) US$’000 % (13,730) (24.9%) 3,069 25.1% (1,250) (11.6%) (11,912) (15.3%)
				(15.3%)

18

Capital Equipment and Packages

The turnover of the Capital Equipment and Packages segment decreased from US$55.1 million in first half year of 2011 to US$41.4 million in first half year of 2012. This was mainly due to a lower number of new projects starting in the year. The Gross Profit ratio of this segment increased from 29.8% in the first half year of 2011 to 35.3% in first half year of 2012 mainly due to improved operational efficiencies.

Oilfield Expendables and Supplies (MRO Supplies)

The increase of 25.1% from US$12.2 million in the first half year of 2011 compared to US$15.3 million in the first half year of 2012 in Oilfield Expendables and Supplies (MRO Supplies) turnover came from the further expansion of the Group’s distribution network with established drilling contractors and the development of products for Original Equipment Manufacturers. Revenue from two new branches in the State of Texas contributed to US$878,000 increase during the first half year of 2012. The general improvement in drilling activity also provided the base for the good growth in this segment.

Engineering Services (MRO Services)

The decrease of 11.6% in Engineering Services turnover from US$10.8 million in the first half year of 2011 to US$9.5 million in the first half year of 2012 was in line with the overall decrease in capital investment in the industry, which led to less demand for engineering personnel.

Gross Profit and Gross Profit Margins

Gross Profit decreased slightly by 10.7% from US$28.5 million to US$25.4 million with the decrease of 15.3% in Group’s turnover. Gross profit margin improved slightly to 38.4% in first half year of 2012 which remained fairly consistent with the previous year margin of 36.4%.

Other Revenue

The increase in Other Revenue and net income from US$0.2 million to US$1.1million was mainly derived from the reversal of fair value loss in our USD/CNY Non Deliverable Forward contract which was provided for last year.

Operating Expense and Profit Attributable to Equity Holders of the Company

General & Administrative Expenses

General & Administration expense decreased by 5% from US$18.3 million in first half year of 2011 to US$17.4 million in the first half year of 2012. The decrease of US$0.9 million came mainly from decreased staff cost, legal and operating expenses.

Selling & Distribution Expenses

Selling & Distribution expense increased 38.7% by US$1.2 million from US$3.1 million in first half year of 2011 to US$4.3 million in first half year of 2012, with implementation of marketing and sales strategies which involved extensive domestic and oversea travelling. Another factor which contributed to the increase was recruitment of new sales staff.

19

Other Operating Expenses

The increase in Other Operating Expenses from US$1 million in first half year of 2011 to US$1.7 million in first half year of 2012 was mainly due to foreign exchange currency losses and increase in amortization in intangible assets.

Finance Costs

Finance Costs, primarily interest on bank loans, amounted to approximately US$1 million compared to US$1.1 million in first half year of 2011. No significant change in finance costs as the overall bank borrowings remained around the same level.

Group’s Liquidity and Capital Resources

As at 30 June 2012, the Group had intangible assets of approximately US$15 million (31 December 2011 – US$16 million). As at 30 June 2012, the Group carried fixed assets of approximately US$41 million (31 December 2011 – US$41 million) comprising property, plant and equipment, property under development and interest in leasehold land held for own use under operating leases.

As at 30 June 2012, the Group had interest in associates and deferred tax assets of approximately US$2.2 million (31 December 2011 – US$2.2 million) and approximately US$10.9 million (31 December 2011 – US$10.9 million), respectively.

As at 30 June 2012, the Group had current assets of approximately US$185.4 million (31 December 2011 – US$171.2 million). Current assets mainly comprised cash and bank balances of approximately US$27.2 million (31 December 2011 – US$34.1 million), and pledged bank deposits of approximately US$1.3 million (31 December 2011 – US$1.3 million), inventories of approximately US$57.4 million (31 December 2011 – US$39.6 million), trade and other receivables of approximately US$99.5 million (31 December 2011 – US$96 million) and amount due from a related company of approximately US$0.1 million (31 December 2011 – US$0.1 million).

As at 30 June 2012, current liabilities amounted to approximately US$93 million (31 December 2011 – US$85 million), mainly comprising trade and other payables of approximately US$79 million (31 December 2011 – US$58.7 million), bank loans of approximately US$9.6 million (31 December 2011 – US$20.5 million), current tax payables of approximately US$2.3 million (31 December 2011 – US$4.2 million).

As at 30 June 2012, the Group had non-current liabilities of approximately US$8.8 million (31 December 2011 – US$6.3 million), comprising bank loans of approximately US$7.8 million (31 December 2011 – US$4.9 million) and deferred tax liabilities of approximately US$1 million (31 December 2011 – US$1.3 million). Gearing ratio was 37%, as compared to 35% in 2011.

During the first half of 2012, the Group obtained a new revolving bank loan in an aggregate amount up to US$15 million from Standard Chartered bank. To secure the revolving bank loan, the account receivables from several material projects, from TSC Manufacturing and Supply LLC and Emer International Ltd, has been pledged. As at 30 June 2012, the revolving bank loan has not been used.

20

Significant Investments and Disposals

There were no other significant investments or disposals during the first half year of 2012.

Capital Structure

At the beginning of the year at 1 January 2012, there were 681,892,204 shares in issue (the “Shares”) and the Company carried a share capital of approximately US$8,770,000.

During the first six months in year 2012, the Company issued 120,000 shares to option holders who exercised their options under the Company employee share option schemes. At 30 June 2012, the Company had 682,012,204 Shares in issue, and a paid up capital of approximately US$8,771,302.

Foreign Currency Exchange Exposures

The Group is exposed to currency risk primarily through sales and purchases that are denominated in a currency other than the functional currency of the operations to which they relate. The Group has foreign exchange exposure as most of the Group’s subsidiaries in the PRC carried out production locally with Renminbi while approximately 45% of the Group’s turnover was denominated in United States dollars. As at 30 June 2012, no related hedges were made by the Group.

In order to mitigate that foreign exchange exposure, we may utilize foreign currency forward contracts to better match the currency of our revenues and associated costs in the future. However, we do not use foreign currency forward contracts for trading or speculative purposes. The Group will actively explore ways to hedge or reduce currency exchange risk in future.

Contingent Liabilities

As at 30 June 2012, the Company has outstanding guarantees issued to banks in respect of banking facilities granted to a subsidiary. The Directors do not consider it probable that a claim will be made against the Company under any of the guarantees. The maximum liability of the Company at the end of the reporting period under the guarantees issued is the facilities drawn down by a subsidiary of US$Nil (2011: US$Nil).

Employees and Remuneration Policy

As at 30 June 2012, the Group had approximately 1,135 full-time staff in the USA., the United Kingdom (“UK”), Brazil, United Arab Emirates, Russia, Singapore, Hong Kong and the PRC. The Group’s remuneration policy is basically determined by the performance of individual employee and the market condition. The Group also provides other benefits to its employees, including medical schemes, pension contributions and share option schemes.

21

Business and Market Review

Although oil price dropped during the first half year of 2012, it has since recovered to above US$100 per barrel which is a good level for supporting Capital Equipment investment decisions affecting TSC businesses. The combination of economic concerns in developed countries in the Euro Zone in particular and lower growth in emerging countries dampened the pace of recovery in 2012. Focus is concentrated on new discoveries in regions like Brazil and West Africa as well as in mature offshore drilling markets like the North Sea, mid-water Gulf of Mexico, certain parts of Asia, the Middle East and the Caspian Sea region. In the United States the market for high pressure pumping and land drilling for shale oil and gas continues to grow which offers new opportunities for TSC’s MRO Supplies products. Market conditions continue to be favourable to TSC’s business strategies.

Future Plans for Material Investments, Capital Assets and Capital Commitment

TSC China intends to purchase new land use rights in Qingdao, China to consolidate operations and increase production capacity and efficiency. The new facilities will also be able to meet increased R&D needs and production capacity.

TSC continues to explore plans to acquire expertise and expand capabilities by way of purchasing assets or acquisition of equity interest in companies with such expertise and or capability.

Strategy, Prospects and Order Book

Strategies

TSC continues to execute is 3-tier business strategy which can be visualized as a pyramid where the base comprises our “cash cow” business of MRO Supplies and Services (which include Repair, Engineering, Training, Installation and Commissioning), Rack Cutting, Solids Control and other developed range of equipment. The mid section of the pyramid, which we call “revenue boosters”, comprises our individual sales of the wide range of products such as Deck Cranes, Mechanical Handling, Mud Pumps, Jacking Systems, Jack-up Rack and Chord, Electrical Controls and Drives. These are equipment which we design and supply individually. The top section of our strategy pyramid, our “growth engine”, where we tailor our range of products as an “Integrated Solution”, addressing customers needs by leveraging TSC’s product range, engineering capability, project execution and financial needs taken together as one product offering.

This 3-tier business strategy is complemented with marketing and operational strategies which as a whole serves to meet our vision to transform TSC into a formidable player in the global oil and gas service and equipment industry. We also adopt a “3D” approach where our teams are Customer-Driven, Service-Driven and Solution-Driven in everything we do. This enables us to achieve the penetration into the markets that we want to win as well as to deliver our products and services on time, on quality and within budget.

22

Prospects

TSC’s strategies are also tied in with the strategies of our partners and alliances with synergistic and complementary capabilities to form the bigger picture that TSC needs in order to implement the growth path we have set. As execution of this long term strategy unfolds, we can witness the successful transformation of TSC business profile to higher level of penetration and participation in the global demand for our products The feedback that we have received from prospective customers are encouraging. Our customers, in the emerging markets that we choose to establish our presence, highly appreciate our approach which is unique in the market compared to what is currently available in the market. We are optimistic about our long term prospects.

Order Book

As at 30 June 2012, the Group as a whole carried an order backlog of approximately US$144.3 million, of which US$113 million relates to Capital Equipment and Packages, US$25.5 million relates to MRO Services and US$5.8 million relates to MRO Supplies.

Formation of a Joint Venture Company

On 18 April 2012, the Company entered into the joint venture agreement (“JV Agreement”) with a third party, Independence Drilling S.A. (“ID”), for the formation of a joint venture company which will be incorporated in accordance with the laws of Colombia. The JVC will create a strategic alliance between ID and the Company to merchandise, procure and distribute the products in the most cost efficient and effective manner. Both parties desire to provide for the joint exploration, evaluation, and implementation of practices and procedures to reduce total supply chain costs and allow each party to equitably share the benefits of such practices and procedures. Both ID and the Company are desirous of entering into operations joint venture for the Country of Colombia or other geographical areas in order to provide a base for operations to jointly develop the market in which both parties would mutually benefit from.

The registered capital of the JVC will be US$2,000,000, in which the Company will subscribe 60% equity interests of the JVC for a cash consideration of US$1,200,000 and ID will subscribe 40% equity interests of the JVC for a cash consideration of US$800,000. The subscription money of US$1,200,000 in cash payable by the Company will be funded from the Company’s internal resources.

The JVC will be classified as a subsidiary in the financial statements of the Company. The subscription money payable by each of the parties to the JV Agreement will be used as the initial working capital of the JVC.

As all of the applicable percentage ratios represented by the size of the financial commitment for the Company in connection with the above joint venture transaction are less than 5%, the formation of the JVC is exempt from the reporting requirement of under Chapter 14 of the Listing Rules.

23

Non-Exempt Continuing Connected Transaction

In view of the expiry of the old master agreement on 31 December 2011, the Company (as seller) entered into a new master agreement (the “New Master Agreement”) with CIMC Raffles Offshore (Singapore) Limited (formerly known as Yantai Raffles Shipyard Limited) (“CIMC Raffles”) (as buyer) on 24 April 2012 in relation to the sale of the products (which include the equipment used on offshore platforms including but not limited to power control package, jacking system, BOP handling and transport, burner boom, etc. and the project(s) or others related to offshore platforms including (i) cantilever and drill floor projects; (ii) rack material cutting projects; (iii) other material processing projects; and (iv) design, engineering and consulting service projects) by the Company to CIMC Raffles for the three years ending 31 December 2014 (the “Transaction”). Pursuant to the New Master Agreement, the annual caps for each of the three years ending 31 December 2014 are US$200 million (equivalent to approximately HK$1,560 million (the “Annual Caps”).

Since the applicable percentage ratios as defined under Rule 14.07 of the Listing Rules for each of the Annual Caps exceed 25%, the Transaction constitutes non-exempt continuing connected transaction for the Company under Chapter 14A of the Listing Rules and is subject to the reporting, annual review, announcement and independent shareholders’ approval requirements.

Accordingly, China International Marine Containers (Group) Co., Limited, China International Marine Containers (Hong Kong) Limited, Mr. Brian Chang, Mr. Yu Yuqun and their respective associates had abstained from voting on the approval of the New Master Agreement and the Annual Caps at the extraordinary general meeting (“EGM”). On 4 June 2012, the New Master Agreement and the Annual Caps were approved by the independent shareholders by poll at the EGM. Details of the Transaction were announced on 24 April 2012 and in the circular dated 14 May 2012 which were all published on the websites of the Stock Exchange and the Company.

Subsequent Events

Save as disclosed in this announcement, no subsequent events occurred after 30 June 2012 which may have significant effects on the assets and liabilities of future operations of the Group.

24

DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES

As at 30 June 2012, the interests and short positions of the Directors and Chief Executives of the Company in the Shares, underlying Shares and debentures 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 notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) contained in the Listing Rules, were as follows:

Long positions in ordinary Shares and underlying Shares of the Company:

Name of Directors Mr. Zhang Menggui_(Note 1) Mr. Jiang Bing Hua(Note 1) Mr. Jiang Longsheng Mr. Brian Chang(Note 2)_ Mr. Chan Ngai Sang, Kenny Mr. Bian Junjiang Mr. Guan Zhichuan

Number of underlying Shares (in respect of share options Approximate granted under percentage of Number of issued ordinary Shares of HK$0.10 each in the Company the Refreshment the Company’s Personal Family Corporate Other of the Post– issued share interests interests interests interests Total IPO Scheme) capital (Note 3) 4,056,000 – 106,871,200 – 110,927,200 600,000 16.35% 4,056,000 – 106,871,200 – 110,927,200 600,000 16.35% – – – – – 400,000 0.06% – – 66,072,800 – 66,072,800 – 9.69% – – – – – 500,000 0.07% – – – – – 350,000 0.05% 120,000 – – – 120,000 180,000 0.04%

Notes:

1. Global Energy Investors, LLC. is the beneficial owner of 106,871,200 Shares. The entire share capital of Global Energy Investors, LLC. is beneficially owned as to 50% each by Mr. Zhang Menggui and Mr. Jiang Bing Hua, both are the executive Directors of the Company. Accordingly, both Mr. Zhang Menggui and Mr. Jiang Bing Hua are deemed to be interested in the 106,871,200 Shares beneficially owned by Global Energy Investors, LLC. under Part XV of the SFO.

25

1. Mr. Brian Chang indirectly holds 66,072,800 shares through Windmere International Limited which is his wholly-owned company. Accordingly, he is deemed to be interested in the shares held by Windmere International Limited under Part XV of the SFO.

2. Please refer to the section “Share Option Schemes” below for details of share options held by the Directors and Chief Executives of the Company.

Save as disclosed above, as at 30 June 2012, none of the Directors or Chief Executives of the Company had any interest or short position in the Shares, underlying Shares or debentures of the Company or any of its associated corporations as recorded in the register required to be kept under Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code contained in the Listing Rules.

SUBSTANTIAL SHAREHOLDERS’ AND OTHER PERSONS’ INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES

As at 30 June 2012, the following persons had interests or short positions in the Shares and underlying Shares of the Company as recorded in the register of interests required to be kept by the Company pursuant to Section 336 of the SFO:

(i) Long positions in ordinary Shares and underlying Shares of the Company:

			Approximate
			percentage of
		Number of	the Company’s
	Capacity and	Shares/underlying	issued share
Name	nature of interest	Shares held	capital
Madam Chen Fengying_(Note 1)_	Interest of the spouse	110,927,200 Shares and	16.35%
		600,000 share options
Madam Zhang Jiuli_(Note 2)_	Interest of the spouse	110,927,200 Shares and	16.35%
		600,000 share options
Global Energy Investors, LLC.	Corporate	106,871,200 Shares	15.67%
(Note 3)
Windmere International Limited	Corporate	66,072,800 Shares	9.69%
(Note 4)
China International Marine	Corporate	92,800,000 Shares	13.61%
Containers (Group) Company
Limited_(Note 5)_
China International Marine Containers	Corporate	92,800,000 Shares	13.61%
(Hong Kong) Limited_(Note 5)_
Harmony Master Fund_(Note 6)_	Corporate	34,094,800 Shares	5.00%

26

Notes:

1. These interests represent the same block of Shares and share options held by Mr. Zhang Menggui as shown in the above section headed “DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES”. Since Madam Chen Fengying is the spouse of Mr. Zhang Menggui, she is deemed to be interested in the Shares and share options held by him under Part XV of the SFO.

2. These interests represent the same block of Shares and share options held by Mr. Jiang Bing Hua as shown in the above section headed “DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES”. Since Madam Zhang Jiuli is the spouse of Mr. Jiang Bing Hua, she is deemed to be interested in the Shares and share options held by him under Part XV of the SFO.

3. This interest represents the same block of corporate interest held by Mr. Zhang Menggui and Mr. Jiang Bing Hua as shown in the above section headed “DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES”.

4. Mr. Brian Chang indirectly holds 66,072,800 Shares through Windmere International Limited which is his wholly-owned company. Mr. Brian Chang’s interest is shown in the above section headed “DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES”. Accordingly, he is deemed to be interested in the shares held by Windmere International Limited under Part XV of the SFO.

5. China International Marine Containers (Hong Kong) Limited (“CIMC HK”) is the beneficial owner of 92,800,000 Shares. CIMC HK is a wholly-owned subsidiary of China International Marine Containers (Group) Company Limited (“CIMC Group”). Therefore, CIMC Group is deemed to be interested in the 92,800,000 Shares of the Company held by CIMC HK under Part XV of the SFO.

6. Harmony Master Fund (“Harmony Fund”) is a long-only equity fund registered in the Cayman Islands. Harmony Fund is managed by DM Fund Management Limited, a company registered in Cayman Island and a subsidiary of DM Capital Limited, a company incorporated in British Virgin Islands. DM Capital Limited is principally engaged in equity research and investment, venture investment and merger & acquisition advisory with offices located in China, Hong Kong and New York.

27

(ii) Long positions in Shares of a subsidiary of the Company:

	Name of	Percentage of
Name of subsidiary	substantial shareholder	shareholding
TSC Deepwater Systems, LLC.	Mr. Doug E. Wheeler	29%
Jurun Limited	Xingbo Limited	49%

Save as disclosed above, as at 30 June 2012, no persons (other than the Directors and Chief Executives of the Company whose interests are set out under the paragraph headed “DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITION IN SHARES, UNDERLYING SHARES AND DEBENTURES” above and the section headed “SHARE OPTION SCHEMES” below), had an interest or short position in the Shares or underlying Shares of the Company as recorded in the register to be kept under Section 336 of the SFO.

SHARE OPTION SCHEMES

Pursuant to written resolutions of all shareholders of the Company on 19 and 20 October 2005, the Company adopted a Pre-IPO Share Option Scheme (the “Pre-IPO Scheme”) and a Post-IPO Share Option Scheme (the “Post-IPO Scheme”) respectively.

The Pre-IPO Scheme ceased to be effective on 21 November 2005 save for the unexercised portion of the options granted and accepted during its life time, of which a total of 432,000 share options remain valid and outstanding as at 30 June 2012.

Pursuant to the Post-IPO Scheme, the Directors granted (i) 7,280,000 share options at HK$2.43 each to 14 employees of the Group on 10 May 2007, (ii) 9,700,000 share options at HK$5.60 each to 51 employees and 2 consultants of the Group on 12 November 2007, (iii) 2,000,000 share options at HK$5.23 each to 3 employees of the Group on 15 January 2008, (iv) 5,000,000 share options at HK$2.32 each to 6 employees of the Group on 12 August 2008 and (v) 16,050,000 share options at HK$0.54 each to 8 Directors and 38 employees of the Group on 29 December 2008.

Based on a valuation report done by an independent valuer, Jones Lang LaSalle Sallmanns, the value of the options granted on 10 May 2007, 12 November 2007, 15 January 2008, 12 August 2008 and 29 December 2008 under the Post-IPO Scheme were HK$7,252,000, HK$21,812,000, HK$4,166,000, HK$4,736,000 and HK$3,499,200 respectively.

The closing prices of the Company’s Shares on the preceding option granted on 9 May 2007, 9 November 2007, 14 January 2008, 11 August 2008 and 24 December 2008 under the Post-IPO Scheme were HK$2.50, HK$5.58, HK$5.18, HK$2.22 and HK$0.50 respectively.

28

On 4 November 2008, the refreshed scheme mandate limit of 54,890,800 Shares in respect of the granting of share options under the Post-IPO Scheme (the “Refreshment”) was approved at the extraordinary general meeting duly convened and held. On 13 November 2008, the Stock Exchange has granted the listing of, and permission to deal in, the Shares which may fall to be issued and allotted upon the exercise of any options that may be granted under the Refreshment.

The Post-IPO Scheme including the Refreshment, was conditionally terminated by the Board on 6 May 2009. Upon the transfer of the listing of shares of the Company from the GEM to the Main Board on 5 June 2009, the termination of the Post-IPO Scheme became effective. Thereafter, no further option had been offered or granted under the Post-IPO Scheme. Pursuant to the Post-IPO Scheme, options previously granted but unexercised under the Post-IPO Scheme will remain valid and exercisable in accordance with their terms of issue, of which a total of 25,932,000 share options remain valid and outstanding as at 30 June 2012.

On 5 August 2009, the adoption of the new Share Option Scheme up to 56,254,040 Shares (the “New Scheme”) which complies with the Listing Rules was approved at the extraordinary general meeting duly convened and held. On 10 August 2009, the Stock Exchange has granted the listing of, and permission to deal in, the Shares which may fall to be issued and allotted upon the exercise of any options that may be granted under the New Scheme. Pursuant to the New Scheme, the Directors granted (i) 20,295,000 share options at HK$2.06 each to 82 employees of the Group on 18 September 2009, (ii) 9,070,000 share options at HK$1.27 each to 29 employees of the Group on 1 September 2010, and (iii) 2,400,000 share options at HK$1.97 each to 2 employees of the Group on 21 February 2011. Based on a valuation report done by an independent valuer, Jones Lang LaSalle Sallmanns, the value of the options granted on 18 September 2009, 1 September 2010 and 21 February 2011 under the New Scheme were HK$18,701,000, HK$4,602,100 and HK$1,973,100 respectively. The closing price of the Company’s Shares on the preceding option granted on 17 September 2009, 31 August 2010 and 18 February 2011 under the New Scheme were HK$1.85, HK$1.23 and HK$1.92 respectively. Save as disclosed above, no option had been granted or agreed to be granted by the Company pursuant to the New Scheme.

The total number of Shares available for issue under all the share option schemes as at the date of this announcement is 24,489,040 Shares, representing 3.59% of the issued share capital of the Company.

29

Details of the movement of options under the Pre-IPO Scheme for the six months ended 30 June 2012 were as follows:

Exercise Name or category Date of Exercisable price of participant grant period per share (Notes 1 & 2) (Notes 1, 2 & 3) HK$ Employees 19.10.2005 29.11.2005 to 0.2383 18.10.2015 Total		Number of share options	Number of share options	Number of share options
	Balance as at 01.01.2012 432,000 432,000	Exercised during the period (Notes 4) – –	Cancelled during the period (Note 4) – –	Lapsed during the period (Note 4) – –	Balance as at 30.06.2012 432,000
					432,000

Notes:

1. All dates are shown day, month, year.

2. The vesting period of the options is 5 years and starts from the date of grant and becomes vested at stepped semi-annual increments of 10% of the total options originally granted subject to any adjustment due to a bonus issue, for a period of 5 years from the date of grant.

3. These grants are exercisable, starting from the first anniversary of the listing date at stepped semiannual increments of 10% of the total options originally granted subject to any adjustment due to the bonus issue, for a period not later than 10 years from the date of grant.

4. The period refers to the six months ended 30 June 2012.

30

Details of movement of options under the Post-IPO Scheme including the Refreshment, for the six months ended 30 June 2012 were as follows:

Exercise Name or category of price participant Date of grant Exercisable period per share (Notes 1 & 2) (Notes 1, 2 & 3) HK$ (i) Employees 10.05.2007 10.11.2007 to 09.05.2017 2.43 Sub-total (ii) Employees 12.11.2007 12.05.2008 to 11.11.2017 5.60 Consultants 12.11.2007 12.05.2008 to 11.11.2017 5.60 Sub-total (iii) Employees 15.01.2008 15.07.2008 to 14.01.2018 5.23 Sub-total (iv) Employees 12.08.2008 12.02.2009 to 11.08.2018 2.32 Sub-total (v) Directors: Mr. Zhang Menggui 29.12.2008 29.06.2009 to 28.12.2018 0.54 Mr. Jiang Bing Hua 29.12.2008 29.06.2009 to 28.12.2018 0.54 Mr. Jiang Longsheng 29.12.2008 29.06.2009 to 28.12.2018 0.54 Mr. Chan Ngai Sang, Kenny 29.12.2008 29.06.2009 to 28.12.2018 0.54 Mr. Bian Junjiang 29.12.2008 29.06.2009 to 28.12.2018 0.54 Mr. Guan Zhichuan 29.12.2008 29.06.2009 to 28.12.2018 0.54 Employees and other 29.12.2008 29.06.2009 to 28.12.2018 0.54 Sub-total Total			Number of share options	Number of share options
	Balance as at 01.01.2012 5,582,000 5,582,000 7,760,000 200,000 7,960,000 2,000,000 2,000,000 1,700,000 1,700,000 600,000 600,000 400,000 500,000 350,000 180,000 2,630,000 6,640,000 9,270,000 26,512,000	Granted during the period (Note 4) – – – – – – – – – – – – – – – – – – –	Exercised during the period (Note 4) – – – – – – – – – – – – – – – – (120,000) (120,000) (120,000)	Cancelled during the period (Note 4) – – – – – – – – – – – – – – – – – – –	Lapsed during the period (Note 4) – – (360,000) – (360,000) – – – – – – – – – – – (100,000) (100,000) (460,000)	Balance as at 30.06.2012 5,582,000
						5,582,000
						7,400,000 200,000
						7,600,000
						2,000,000
						2,000,000
						1,700,000
						1,700,000
						600,000 600,000 400,000 500,000 350,000 180,000
						2,630,000
						6,420,000
						9,050,000
						25,932,000

31

Notes:

1. All dates are shown day, month, year.

2. The vesting period of the options is 5 years and starts from the date of grant and becomes vested at stepped semi-annual increments of 10% of the total options granted for a period of 5 years from the date of grant.

3. These grants are exercisable, starting from the first anniversary of the listing date at stepped semiannual increments of 10% of the total options granted, for a period not later than 10 years from the date of grant.

4. The period refers to the six months ended 30 June 2012.

Details of movement of options under the New Scheme for the six months ended 30 June 2012 were as follows:

Exercise Balance Name or category of price participant Date of grant Exercisable period per share (Notes 1 & 2) (Notes 1, 2 & 3) HK$ (i) Employees 18.09.2009 18.03.2010 to 17.09.2019 2.06 (ii) Employees 01.09.2010 01.03.2011 to 31.08.2020 1.27 (iii) Employees 21.02.2011 21.08.2011 to 20.02.2021 1.97 Total			Number of share options	Number of share options
	Granted as at 01.01.2012 16,950,000 7,770,000 2,400,000 27,120,000	Exercised during the period (Note 4) – – – –	Cancelled during the period (Note 4) – – – –	Lapsed during the period (Note 4) – – – –	Balance during the period (Note 4) (450,000) – – (450,000)	as at 30.06.2012 16,500,000 7,770,000 2,400,000
						26,670,000

Notes:

1. All dates are shown day, month, year.

2. The vesting period of the options is 5 years and starts from the date of grant and becomes vested at stepped semi-annual increments of 10% of the total options granted for a period of 5 years from the date of grant.

3. These grants are exercisable, starting from the first anniversary of the listing date at stepped semiannual increments of 10% of the total options granted, for a period not later than 10 years from the date of grant.

4. The period refers to the six months ended 30 June 2012.

Save as disclosed above, none of the Directors or their spouses and children under the age of 18 had any right to subscribe for the securities of the Company, or had exercised any such right for the six months ended 30 June 2012.

32

COMPETITION AND CONFLICT OF INTERESTS

None of the Directors, the management shareholders or substantial shareholders of the Company or any of their respective associates (as defined under the Listing Rules) has engaged in any businesses that competes or may compete, either directly or indirectly, with the business of the Group, or has any other conflict of interests with the Group during the six months period ended 30 June 2012.

AUDIT COMMITTEE

The Company established an audit committee on 20 October 2005 with terms of reference in compliance with Rules 3.21 of the Listing Rules. The primary duties of the audit committee are to review and supervise the financial reporting process and internal controls of the Group.

The audit committee comprises three members, namely Mr. Chan Ngai Sang, Kenny (being the chairman of the audit committee), Mr. Bian Junjiang and Mr. Guan Zhichuan. All of them are independent non-executive Directors. The audit committee of the Company has reviewed the unaudited results of the Group for the six months ended 30 June 2012 and are of the opinion that the preparation of such results complied with the applicable accounting standards and requirements and that adequate disclosures have been made.

DIRECTORS’ INTERESTS IN CONTRACTS

No contract of significance to which the Company or any of its subsidiaries was a party, and in which a Director had a direct and indirect material interest, subsisted during or at the end of the six months ended 30 June 2012.

COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted the Model Code set out in Appendix 10 to the Listing Rules as its own code of conduct for dealings in securities of the Company by Directors. All Directors of the Company have confirmed, following specific enquiry by the Company, that they have complied with the required standard set out in the Model Code during the six months ended 30 June 2012.

COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE PRACTICES

The Company is committed to maintaining a high standard of corporate governance practices to ensure transparency so that the interests of our shareholders and the cooperative development among customers, employees and the Group can be safeguarded. The Company has adopted the Code on Corporate Governance Practices of the Stock Exchange.

33

During the period, the Company has complied with the code provisions (“CG Codes”) of the Code on Corporate Governance Practices during the period from 1 January 2012 to 31 March 2012 and the Corporate Governance Code during the period from 1 April 2012 to 30 June 2012 as set out in Appendix 14 to Listing Rules at that time except for the deviation from CG Code A.6.7 where one executive director, three independent nonexecutive directors and three non-executive directors were absent from the last annual general meeting and extraordinary general meeting of the Company both held on 4 June 2012 as they were away from Hong Kong due to other important engagements at the time of those meetings.

PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES OF THE COMPANY

For the six months ended 30 June 2012, neither the Company nor any of its subsidiaries purchased, redeemed or sold any of the Company’s listed securities.

DISCLOSURE OF INFORMATION ON THE WEBSITE OF THE STOCK EXCHANGE

An interim report for the six months ended 30 June 2012 containing all the information required by Appendix 16 to the Listing Rules will be dispatched to shareholders of the Company and published on the website of the Stock Exchange (http://www.hkex.com. hk) and the website of the Company (http://www.tsc-holdings.com) in due course.

ACKNOWLEDGEMENT

The Directors would like to take this opportunity to express our sincere thanks to all the shareholders for their continuous support and to all our staff for their dedication and contribution to the Group during the reporting period.

By Order of the Board TSC Group Holdings Limited Jiang Bing Hua Executive Chairman

Hong Kong, 28 August 2012

As of the date of this announcement, the Board comprises 2 executive Directors, namely Mr. Jiang Bing Hua and Mr. Zhang Menggui; 3 non-executive Directors, namely Mr. Jiang Longsheng, Mr. Brian Chang and Mr. Yu Yuqun; and 4 independent non-executive Directors, namely Mr. Chan Ngai Sang, Kenny, Mr. Bian Junjiang, Mr. Guan Zhichuan and Mr. Robert William Fogal Jr.

34