Enterprise Development Holdings Limited — Interim / Quarterly Report 2012

Sep 4, 2012

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2012 INTERIM REPORT

CONTENTS

	PAGE(S)
CORPORATE INFORMATION	2
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME	3
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION	5
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	7
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS	8
NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT	9
MANAGEMENT DISCUSSION AND ANALYSIS	41
OTHER INFORMATION	47

Enterprise Development Holdings Limited Interim Report 2012

1

CORPORATE INFORMATION

Board of Directors

Executive Directors

King Pak Fu (Chairman) Jia Bowei (Chief Executive Officer) Tsang To Lam Kwan Sing

Independent Non-executive Directors

Lam Ting Lok Hu Gin Ing Zhang Xiaoman

Company Secretary Chan Yuen Ying, Stella ACIS, ACS, HKIoD

Authorised Representatives

Tsang To Chan Yuen Ying, Stella ACIS, ACS, HKIoD

Audit Committee

Lam Ting Lok (Chairman) Hu Gin Ing Zhang Xiaoman

Remuneration Committee

Lam Ting Lok (Chairman) Tsang To Hu Gin Ing Zhang Xiaoman

Nomination Committee

Lam Ting Lok (Chairman) Tsang To Hu Gin Ing Zhang Xiaoman

Auditors

Registered Office

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

Principal Place of Business in Hong Kong Room 1502, 15th Floor The Chinese Bank Building 61-65 Des Voeux Road Central Hong Kong

Principal Share Registrar and Transfer Office Butterfield Fund Services (Cayman) Limited Butterfield House 68 Fort Street P.O. Box 705 Grand Cayman Cayman Islands British West Islands

Hong Kong Branch Share Registrar and Transfer Office Computershare Hong Kong Investor Services Limited Shops 1712-1716, 17th Floor Hopewell Centre 183 Queen’s Road East Wanchai Hong Kong

Principal Banker The Bank of East Asia Limited

Stock Code

1808

HLB Hodgson Impey Cheng Limited

Company Website Address www.1808.com.hk

Enterprise Development Holdings Limited Interim Report 2012

2

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2012 (Expressed in Renminbi Yuan)

The board (the “Board”) of directors (the “Directors”) of Enterprise Development Holdings Limited (the “Company”) announces the unaudited consolidated financial results of the Company and its subsidiaries (the “Group”) for the six months ended 30 June 2012 together with comparative figures for the corresponding period in 2011. The unaudited interim financial report has not been audited but has been reviewed by the Company’s audit committee (the “Audit Committee”).

Notes	Six months ended 30 June 2012 2011 RMB’000 RMB’000 59,838 65,861 (50,128) (48,097) 9,710 17,764 10 17 (22,749) (598) (5,769) (5,361) (11,345) (8,375) (12) (14) (30,155) 3,433 (63) (43) (30,218) 3,390 (1,119) (1,578) (31,337) 1,812
Continuing operations Turnover 4 Cost of sales Gross profit Other revenue Other net loss 5 Distribution expenses General and administrative expenses Other operating expenses (Loss)/profit before operations Finance costs 6(i) (Loss)/profit before taxation 6 Income tax expenses 7 (Loss)/profit from continuing operations	59,838 (50,128) 9,710 10 (22,749) (5,769) (11,345) (12) (30,155) (63) (30,218) (1,119) (31,337)

Enterprise Development Holdings Limited Interim Report 2012

3

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (continued) For the six months ended 30 June 2012

(Expressed in Renminbi Yuan)

Notes	Six months ended 30 June 2012 2011 RMB’000 RMB’000	Six months ended 30 June 2012 2011 RMB’000 RMB’000
Discontinued operations Loss from discontinued operations (net of income tax) 8 Loss for the period Other comprehensive income for the period (after tax) Exchange difference on translation of overseas operations Cash flow hedge: net movement in the hedging reserve Total comprehensive (expense)/ income for the period attributable to equity holders of the Company Basic and diluted (loss)/earnings per share (RMB) 10 – from continuing and discontinued operations – from continuing operations – from discontinued operations	– (31,337) 319 – 319 (31,018) (0.029) (0.029) –	(8,243)
		(6,431)
		163 17,884
		18,047
		11,616
		(0.0085)
		0.0024
		(0.0109)

The notes on pages 9 to 40 form part of this unaudited interim financial report.

Enterprise Development Holdings Limited Interim Report 2012

4

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2012 (Expressed in Renminbi Yuan)

Notes	30 June 2012 RMB’000	31 December 2011 RMB’000
Non-current assets Property, plant and equipment 11 Intangible assets 12 Goodwill 13 Deferred tax assets Current assets Inventories 14 Trade and other receivables 15 Derivative financial instruments 16 Held for trading investments 17 Cash and cash equivalents 18 Current liabilities Trade and other payables 19 Bank borrowing 20 Income tax payables Net current assets Total assets less current liabilities	2,804 6,796 19,541 346 29,487 2,807 73,888 – 25,895 16,198 118,788 14,034 10,000 963 24,997 93,791 123,278	3,284 8,349 19,541 346
		31,520
		3,122 48,128 4,263 – 10,338
		65,851
		5,975 – 1,953
		7,928
		57,923
		89,443

Enterprise Development Holdings Limited Interim Report 2012

5

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued) As at 30 June 2012

(Expressed in Renminbi Yuan)

Notes	30 June 2012 RMB’000	31 December 2011 RMB’000
Non-current liabilities Promissory note 21 Net assets Capital and reserves Share capital 22 Reserves Total equity	– 123,278 13,109 110,169 123,278	59,658
		29,785
		7,740 22,045
		29,785

The unaudited interim financial report on pages 3 to 40 were approved and authorised for issue by the Board of Directors on 24 August 2012.

King Pak Fu	Tsang To
Director	Director

The notes on pages 9 to 40 form part of this unaudited interim financial report.

Enterprise Development Holdings Limited Interim Report 2012

6

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2012 (Expressed in Renminbi Yuan)

Attributable to owners of the Company

	Share capital RMB’000 (Note 22)	Share premium RMB’000	Merger reserve RMB’000	PRC statutory reserve RMB’000	Exchange reserve RMB’000	Hedging reserve RMB’000	Retained earnings/ (accumulated losses) RMB’000	Total RMB’000
At 1 January 2011 Loss for the period Total other comprehensive income Special dividend by way of Distribution In Specie Subscription of new shares At 30 June 2011 At 1 January 2012 Loss for the period Total other comprehensive income Shares issued under placing Share issue expenses At 30 June 2012	5,962 – – – 1,778 7,740 7,740 – – 5,369 – 13,109	213,003 – – (213,003) 8,890 8,890 8,890 – – 123,496 (4,354) 128,032	386,600 – – (386,600) – – – – – – – –	27,785 – – (26,259) – 1,526 1,741 – – – – 1,741	935 – 163 (930) – 168 76 – 319 – – 395	(1,193) – 17,884 (16,691) – – – – – – – –	76,470 (6,431) – (72,811) – (2,772) 11,338 (31,337) – – – (19,999)	709,562 (6,431) 18,047 (716,294) 10,668
								15,552
								29,785 (31,337) 319 128,865 (4,354)
								123,278

The notes on pages 9 to 40 form part of this unaudited interim financial report.

Enterprise Development Holdings Limited Interim Report 2012

7

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2012 (Expressed in Renminbi Yuan)

Note	Six months ended 30 June 2012 2011 RMB’000 RMB’000	Six months ended 30 June 2012 2011 RMB’000 RMB’000
Cash used in operating activities PRC income tax paid Net cash used in operating activities Net cash used in investing activities Net cash generated from financing activities Effect of foreign exchange rate changes on cash Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of period Cash and cash equivalents at the end of period 18	(16,563) (2,109) (18,672) (32,330) 56,556 306 5,860 10,338 16,198	(258,124) (9,387)
		(267,511)
		(230,711)
		297,111
		163
		(200,948) 222,760
		21,812

The notes on pages 9 to 40 form part of this unaudited interim financial report.

Enterprise Development Holdings Limited Interim Report 2012

8

NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT

(Expressed in Renminbi Yuan)

1. BASIS OF PREPARATION

This unaudited interim financial report has been prepared in accordance with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, including compliance with International Accounting Standard (“IAS”) 34 “Interim Financial Reporting” issued by the International Accounting Standards Board (“IASB”).

The unaudited interim financial report has been prepared in accordance with the same accounting policies adopted in the 2011 audited annual financial statements, except for the new and revised International Financial Reporting Standards (“IFRSs”) that are expected to be reflected in the 2012 audited annual financial statements. Details of the new and revised IFRSs are set out in note 2.

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

This unaudited interim financial report contains condensed consolidated financial statements and selected explanatory notes. The notes include an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the 2011 audited annual financial statements. The condensed consolidated financial statements and notes thereon do not include all of the information required for full set of financial statements prepared in accordance with IFRSs. IFRSs include all applicable individual International Financial Reporting Standards, International Accounting Standards and related interpretations.

The financial information relating to the financial year ended 31 December 2011 that is included in this unaudited interim financial report as being previously reported information does not constitute the Company’s audited annual financial statements for that financial year but is derived from those financial statements. The Group’s audited annual financial statements for the year ended 31 December 2011 are available from the Company’s registered office. The auditors have expressed an unqualified opinion on those financial statements in their report dated 16 March 2012.

Enterprise Development Holdings Limited Interim Report 2012

9

NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT (Expressed in Renminbi Yuan)

2. NEW AND REVISED IFRSs

The IASB has issued a number of amendments to IFRSs that are first effective for the current accounting period of the Group. Of these, the following amendments are relevant to the Group’s financial statements:

• Amendments to IFRS 7, Financial Instruments: Disclosures – Transfers of financial assets

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

The adoption of these amendments to IFRSs has no material impact on the Group’s result and financial position for the current or prior periods. The Group has not applied any new standard or amendment that is not yet effective for the current accounting period.

3. SEGMENT REPORTING

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

Continuing operations:

• Software business: Provision of integrated business software solutions in the People’s Republic of China (the “PRC”).

• Trading and investment business: Trading of securities listed on the Hong Kong Stock Exchange.

Enterprise Development Holdings Limited Interim Report 2012

10

NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT

(Expressed in Renminbi Yuan)

3. SEGMENT REPORTING (continued)

Discontinued operations:

• Bare copper wires: The manufacturing and sale of bare copper wires and provision of processing services of copper wires.

• Magnet wires: The manufacturing and sale of magnet wires.

(a) Segment results, assets and liabilities

For the purposes of assessing segment performance and allocating resources between segments, the Board monitors the results, assets and liabilities attributable to each reportable segment on the following bases:

Segment assets include all tangible, intangible assets and current assets with the exception of interest in associate, deferred tax assets and other corporate assets. Segment liabilities include trade creditors, accruals and bills payable attributable to the manufacturing and sales activities of the individual segments and bank borrowings managed directly by the segments.

Revenue and expenses are allocated to the reportable segments with reference to sales 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/(loss) is the “adjusted profit/(loss) before taxation”. To arrive at adjusted profit/(loss) before taxation, the Group’s (loss)/earnings are adjusted for items not specifically attributed to individual segments, such as share of profits less losses of an associate, directors’ and auditors’ remuneration and other head office or corporate administration costs. Inter-segment sales are priced with reference to prices charged to external parties for similar orders.

Enterprise Development Holdings Limited Interim Report 2012

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NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT (Expressed in Renminbi Yuan)

3. SEGMENT REPORTING (continued)

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

Information regarding the Group’s reportable segments as provided to the Board for the purpose of resources allocation and assessment of segment performance for the six months ended 30 June 2012 is set out below.

	Software business Six months ended 30 June 2012 2011 RMB’000 RMB’000	Trading and investment business Six months ended 30 June 2012 2011 RMB’000 RMB’000	Bare copper wires (Discontinued) Six months ended 30 June From 1 January 2011 to 11 February 2012 2011 RMB’000 RMB’000	Magnet wires (Discontinued) Six months ended 30 June From 1 January 2011 to 11 February 2012 2011 RMB’000 RMB’000	Consolidated
					Six months ended 30 June 2012 2011 RMB’000 RMB’000
Revenue from external customers Investment income and net loss Inter-segment revenue Reportable segment revenue Reportable segment profit/(loss) (adjusted profit/(loss) before taxation)	66,191 65,861 – – – – 66,191 65,861 4,886 6,928	– – (6,353) – – – (6,353) – (6,481) –	– 522,904 – – – 204,165 – 727,069 – (13,945)	– 277,355 – – – – – 277,355 – 4,520	66,191 866,120 (6,353) – – 204,165 59,838 1,070,285 (1,595) (2,497)

	Software business 30 June 31 December 2012 2011 RMB’000 RMB’000	Trading and investment business 30 June 31 December 2012 2011 RMB’000 RMB’000	Bare copper wires (Discontinued) 30 June 31 December 2012 2011 RMB’000 RMB’000	Magnet wires (Discontinued) 30 June 31 December 2012 2011 RMB’000 RMB’000	Consolidated
					30 June 31 December 2012 2011 RMB’000 RMB’000
Reportable segment assets Additions to non-current segment assets during the period/year Reportable segment liabilities	92,162 70,684 94 2,581 24,784 7,072	26,081 – – – – –	– – – 371 – –	– – – 6 – –	118,243 70,684 94 2,958 24,784 7,072

The Group’s operations are mostly located in the PRC. During the six months ended 30 June 2011, a substantial proportion of the Group’s products from discontinued operations were sold to its customers for further processing and eventual export to overseas countries.

Enterprise Development Holdings Limited Interim Report 2012

12

NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT

(Expressed in Renminbi Yuan)

3. SEGMENT REPORTING (continued)

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

	Six months ended 30 June 2012 2011 RMB’000 RMB’000 59,838 1,070,285 – (204,165) – (800,259) 59,838 65,861 (1,595) (2,497) – 2,144 (1,595) (353) – 75 (28,623) (3,631) – 7,299 (30,218) 3,390
Revenue Reportable segment revenue Elimination of inter-segment revenue Discontinued operations Total (Loss)/profit before taxation Reportable segment loss before taxation Elimination of inter-segment loss Reportable segment loss derived from the Group’s external customers Share of profit of associate Unallocated head office and corporate expenses Profit from discontinued operations Total	59,838 – – 59,838 (1,595) – (1,595) – (28,623) – (30,218)

Enterprise Development Holdings Limited Interim Report 2012

13

NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT (Expressed in Renminbi Yuan)

3. SEGMENT REPORTING (continued)

(b) Reconciliation of reportable segment revenue, profit/(loss), assets and liabilities (continued)

	30 June 2012 RMB’000	31 December 2011 RMB’000
Assets Reportable segment assets Deferred tax assets Unallocated head office and corporate assets Total Liabilities Reportable segment liabilities Unallocated head office and corporate liabilities Total	118,243 346 29,686 148,275 24,784 213 24,997	70,684 346 26,341
		97,371
		7,072 60,514
		67,586

Enterprise Development Holdings Limited Interim Report 2012

14

NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT

(Expressed in Renminbi Yuan)

3. SEGMENT REPORTING (continued)

(c) Geographic information

The following table sets out information about the geographical location of (i) the Group’s revenue from external customers and (ii) the Group’s property, plant and equipment, intangible assets and goodwill (“specified non-current assets”). The geographical location of customers is based on the location at which the services were provided or the goods delivered. The geographical location of the specified non-current assets is based on the physical location of the asset in the case of property, plant and equipment, and the location of the operation to which they are allocated in the case of goodwill and intangible assets.

	Revenue from external customers Specified non-current assets Six months ended 30 June Six months ended 30 June 2012 31 December 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000	Revenue from external customers Specified non-current assets Six months ended 30 June Six months ended 30 June 2012 31 December 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000	Revenue from external customers Specified non-current assets Six months ended 30 June Six months ended 30 June 2012 31 December 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000	Revenue from external customers Specified non-current assets Six months ended 30 June Six months ended 30 June 2012 31 December 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000
Hong Kong PRC	(6,353) 66,191 59,838	– 65,861 65,861	128 29,013 29,141	128 31,046
				31,174

Enterprise Development Holdings Limited Interim Report 2012

15

NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT (Expressed in Renminbi Yuan)

4. TURNOVER

The principal activities of the Group are the provision of integrated business software solutions, trading and investment business, manufacturing and sale of bare copper wires and magnet wires and provision of processing services in the PRC.

The amount of each significant category of revenue recognised during the period is set out as follows:

Continuing operations

	Six months ended 30 June 2012 2011 RMB’000 RMB’000	Six months ended 30 June 2012 2011 RMB’000 RMB’000
Software maintenance and other services Sales of software products and others Fair value losses on held for trading investments	64,475 1,716 (6,353) 59,838	64,419 1,442 –
		65,861

Enterprise Development Holdings Limited Interim Report 2012

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NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT

(Expressed in Renminbi Yuan)

4. TURNOVER (continued)

Discontinued operations

	Six months ended 30 June 2012 2011 RMB’000 RMB’000	Six months ended 30 June 2012 2011 RMB’000 RMB’000
Sales of bare copper wires Sales of magnet wires Processing services	– – – –	522,166 277,355 738
		800,259

5. OTHER NET (LOSS)/INCOME

Continuing operations

	Six months ended 30 June 2012 2011 RMB’000 RMB’000	Six months ended 30 June 2012 2011 RMB’000 RMB’000
Net loss on derivative financial instruments Change in fair value of promissory note Loss on early redemption of promissory note Net exchange loss	(4,263) – (18,234) (252) (22,749)	(501) (89) – (8)
		(598)

Enterprise Development Holdings Limited Interim Report 2012

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NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT (Expressed in Renminbi Yuan)

5. OTHER NET (LOSS)/INCOME (continued)

Discontinued operations

	Six months ended 30 June 2012 2011 RMB’000 RMB’000	Six months ended 30 June 2012 2011 RMB’000 RMB’000
Net exchange gain Loss on sales of scrap materials Net gain on derivative financial instruments	– – – –	1,297 (314) 518
		1,501

6. (LOSS)/PROFIT BEFORE TAXATION

(Loss)/profit before taxation is arrived at after charging:

(i) Finance costs

Continuing operations

	Six months ended 30 June	Six months ended 30 June
	2012	2011
	RMB’000	RMB’000
Interest expenses	63	43

Enterprise Development Holdings Limited Interim Report 2012

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NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT

(Expressed in Renminbi Yuan)

6. (LOSS)/PROFIT BEFORE TAXATION (continued)

• (i) Finance costs (continued)

Discontinued operations

	Six months ended 30 June 2012 2011 RMB’000 RMB’000	Six months ended 30 June 2012 2011 RMB’000 RMB’000
Interest expenses Letter of credit charges	– – –	9,883 1,141
		11,024

(ii) Staff costs

Continuing operations

	Six months ended 30 June 2012 2011 RMB’000 RMB’000	Six months ended 30 June 2012 2011 RMB’000 RMB’000
Salaries, wages and other benefits Contributions to defined contribution retirement schemes	5,072 651 5,723	5,532 903
		6,435

Enterprise Development Holdings Limited Interim Report 2012

19

NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT (Expressed in Renminbi Yuan)

6. (LOSS)/PROFIT BEFORE TAXATION (continued)

(ii) Staff costs (continued)

Discontinued operations

	Six months ended 30 June 2012 2011 RMB’000 RMB’000	Six months ended 30 June 2012 2011 RMB’000 RMB’000
Salaries, wages and other benefits Contributions to defined contribution retirement schemes	– – –	3,942 398
		4,340

(iii) Other items

Continuing operations

	Six months ended 30 June	Six months ended 30 June
	2012	2011
	RMB’000	RMB’000
Cost of inventories	1,140	756
Depreciation	562	385
Amortisation of intangible assets	1,553	2,136
Operating lease charges in respect of
properties	1,760	1,469

Enterprise Development Holdings Limited Interim Report 2012

20

NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT

(Expressed in Renminbi Yuan)

6. (LOSS)/PROFIT BEFORE TAXATION (continued)

• (iii) Other items (continued)

Discontinued Operations

	Six months ended 30 June	Six months ended 30 June
	2012	2011
	RMB’000	RMB’000
Cost of inventories	–	791,922
Depreciation	–	2,369
Amortisation of lease prepayments	–	320
Operating lease charges in respect of
properties	–	49

7. INCOME TAX EXPENSES

	Continuing operations Discontinued operations Six months ended 30 June 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000	Continuing operations Discontinued operations Six months ended 30 June 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000	Continuing operations Discontinued operations Six months ended 30 June 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000	Continuing operations Discontinued operations Six months ended 30 June 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000
Current tax – PRC Provision for the period Deferred tax Origination and reversal of temporary differences	1,119 – 1,119	1,578 – 1,578	– – –	1,655 (711)
				944

Enterprise Development Holdings Limited Interim Report 2012

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NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT (Expressed in Renminbi Yuan)

7. INCOME TAX EXPENSES (continued)

Pursuant to the rules and regulations of the Cayman Islands, Bermuda and the British Virgin Islands, the Group is not subject to any income tax in the Cayman Islands, Bermuda and the British Virgin Islands.

No provision for Hong Kong profits tax has been made for the year as the Group does not have assessable profits subject to Hong Kong Profits Tax during the period.

The provision for PRC income tax is based on the respective corporate income tax rates applicable to the subsidiaries located in the PRC as determined in accordance with the relevant income tax rules and regulations of the PRC.

Beijing Orient LegendMaker Software Development Co., Ltd. (“Beijing OLM”) is entitled to a preferential income tax rate of 15% for 2012 and 2011 as Beijing OLM was awarded high-tech status by the respective tax authorities.

These tax rates were used to calculate the Group’s deferred tax assets and liabilities as at 30 June 2012.

Enterprise Development Holdings Limited Interim Report 2012

22

NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT

(Expressed in Renminbi Yuan)

8. DISCONTINUED OPERATIONS

Following the approval by the shareholders of the Company in an extraordinary general meeting on 8 February 2011, the share transfer and subscription agreement dated 8 November 2010 entered into between Tai-I International (BVI) Limited (“Tai-I (BVI)”), Affluent Start Holdings Investment Limited (“Affluent Start”), Mr. Hsu ShouHsin, Mr. King Pak Fu and the Company (the “Agreement”) and the distribution by the Company of all the shares of Tai-I International Bermuda Co., Ltd’s (“Tai-I Bermuda”) to the shareholders of the Company on a pro rata basis (Distribution In Specie”) have been completed on 11 February 2011. The results of the Tai-I Bermuda and it subsidiaries (the “Tai-I Bermuda Group”) which constituted discontinued operations during the period from 1 January 2011 to 11 February 2011 are set out below:

Notes	Six months ended 30 June 2012 RMB’000	From 1 January 2011 to 11 February 2011 RMB’000 800,259 (791,922) 8,337 1,184 1,501 (2,321) (3,010) (2,041)
Turnover 4 Cost of sales Gross profit Other revenue Other net income 5 Distribution expenses General and administrative expenses Other operating expenses	– – – – – – – –

Enterprise Development Holdings Limited Interim Report 2012

23

NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT (Expressed in Renminbi Yuan)

8. DISCONTINUED OPERATIONS (continued)

Notes	Six months ended 30 June 2012 RMB’000	From 1 January 2011 to 11 February 2011 RMB’000
Profit before operations Finance costs 6(i) Share of profit of associate Loss before taxation 6 Income tax expenses 7 Loss from discontinued operations Other comprehensive income for the period (after tax) Exchange difference on translation of overseas operations Cash flow hedge: net movement in the hedging reserve Total comprehensive income for the period	– – – – – – – – –	3,650 (11,024) 75
		(7,299) (944)
		(8,243)
		331 17,884
		9,972

Enterprise Development Holdings Limited Interim Report 2012

24

NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT

(Expressed in Renminbi Yuan)

8. DISCONTINUED OPERATIONS (continued)

Analysis of the net cash flows from the Tai-I Bermuda Group during the period from 1 January 2011 to 11 February 2011 are set out below:

	Six months ended 30 June 2012 RMB’000	From 1 January 2011 to 11 February 2011 RMB’000 (278,696) (230,500) 519,029 9,833 From 1 January 2011 to 11 February 2011 RMB’000 (221,918)
Operating activities Investing activities Financing activities Net cash inflow	– – – –
	Six months ended 30 June 2012 RMB’000
Net outflow of cash and cash equivalents in respect of Distribution In Specie	–

Enterprise Development Holdings Limited Interim Report 2012

25

NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT (Expressed in Renminbi Yuan)

8. DISCONTINUED OPERATIONS (continued)

The Company distributed its equity interest in the Tai-I Bermuda to its shareholders and the net assets of the Tai-I Bermuda Group at the date of distribution on 11 February 2011 are set out below:

	11 February 2011 RMB’000
Property, plant and equipment Lease prepayments Interest in an associate Deferred tax assets Inventories Trade and other receivables Derivative financial instruments Pledged deposits Time deposits Cash and cash equivalents Assets classified as held for distribution Bank loans Trade and other payables Derivative financial instruments Income tax recoverable Liabilities classified as held for distribution Net assets distributed	406,016 30,439 18,826 20,099 341,956 1,844,831 25,542 105,904 447,646 221,918
	3,463,177
	(1,601,158) (1,128,786) (21,645) 4,706
	(2,746,883)
	716,294

Enterprise Development Holdings Limited Interim Report 2012

26

NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT

(Expressed in Renminbi Yuan)

9. DIVIDENDS

	Six months ended 30 June	Six months ended 30 June
	2012	2011
	RMB’000	RMB’000
Distribution In Specie*	–	716,294

• Pursuant to the approval by the shareholders of the Company at an extraordinary general meeting held on 8 February 2011, a non-cash special dividend satisfied by way of the Distribution In Specie was effected. Tai-I Bermuda’s shares were distributed by the Company in the proportion of one Tai-I Bermuda’s share for every ordinary share in the Company held by the shareholders recorded on the register of members of the Company as at the close of business on 8 February 2011. An aggregate of 596,158,000 Tai-I Bermuda’s shares were distributed by the Company pursuant to the Distribution In Specie.

10. BASIC AND DILUTED (LOSS)/EARNINGS PER SHARE

The calculation of basic and diluted (loss)/earnings per share for the six months ended 30 June 2012 is based on the loss attributable to equity holders of the Company of RMB31,337,000 (six months ended 30 June 2011: RMB6,431,000) and the weighted average of 1,088,378,314 (six months ended 30 June 2011: 758,588,939) shares in issue during the period, calculated as follows:

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NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT (Expressed in Renminbi Yuan)

10. BASIC AND DILUTED (LOSS)/EARNINGS PER SHARE (continued)

(i) (Loss)/profit attributable to equity holders of the Company

	Six months ended 30 June 2012 2011 RMB’000 RMB’000	Six months ended 30 June 2012 2011 RMB’000 RMB’000
(Loss)/profit for the period from continuing operations Loss for the period from discontinued operations Loss for the period attributable to equity holders of the Company	(31,337) – (31,337)	1,812 (8,243)
		(6,431)

(ii) Weighted average number of shares

	Six months ended 30 June 2012 2011 Number of Number of shares shares	Six months ended 30 June 2012 2011 Number of Number of shares shares
Ordinary shares issued at 1 January Effect of placing of new shares Effect of subscription of new shares Weighted average number of shares at 30 June	806,158,000 282,220,314 – 1,088,378,314	596,158,000 – 162,430,939
		758,588,939

There were no dilutive potential ordinary shares in issue as at 30 June 2012 (30 June 2011: Nil).

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NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT

(Expressed in Renminbi Yuan)

11. PROPERTY, PLANT AND EQUIPMENT

	Machinery, equipment and tools RMB’000	Motor vehicles and other fixed assets RMB’000	Total RMB’000 2,215 2,581 (134) 4,662 94 (247) 4,509 (575) (932) 129 (1,378) (562) 235 (1,705) 2,804 3,284
Cost At 1 January 2011 Additions Disposals At 31 December 2011 Additions Disposals At 30 June 2012 Accumulated depreciation At 1 January 2011 Charge for the year Written back on disposal At 31 December 2011 Charge for the period Written back on disposal At 30 June 2012 Net book value At 30 June 2012 At 31 December 2011	752 466 (63) 1,155 94 – 1,249 (275) (388) 58 (605) (376) – (981) 268 550	1,463 2,115 (71) 3,507 – (247) 3,260 (300) (544) 71 (773) (186) 235 (724) 2,536 2,734

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NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT (Expressed in Renminbi Yuan)

12. INTANGIBLE ASSETS

Customer relationships RMB’000	Customer contracts RMB’000	Trademarks RMB’000	Firewall patents RMB’000	Total RMB’000
Cost At 1 January 2011, 31 December 2011 and 30 June 2012 7,262 Accumulated amortisation At 1 January 2011 (557) Amortisation during the year (1,816) At 31 December 2011 (2,373) Amortisation during the period (908) At 30 June 2012 (3,281) Net book value At 30 June 2012 3,981 At 31 December 2011 4,889	3,015 (1,090) (1,346) (2,436) (579) (3,015) – 579	2,815 – – – – – 2,815 2,815	665 (156) (443) (599) (66) (665) – 66	13,757
				(1,803) (3,605)
				(5,408) (1,553)
				(6,961)
				6,796
				8,349

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NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT

(Expressed in Renminbi Yuan)

13. GOODWILL

Goodwill of approximately RMB19,541,000 was recognised in respect of the acquisition of Liang Hui Holdings Limited and its subsidiaries on 10 September 2010. No impairment loss was recognised as at 30 June 2012 (31 December 2011: Nil).

14. INVENTORIES

	30 June 2012 RMB’000	31 December 2011 RMB’000 5,396 32 5,428 (2,306) 3,122
Inventories comprise: Standard software Low value consumables Less: Stock provision	5,082 31 5,113 (2,306) 2,807

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NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT (Expressed in Renminbi Yuan)

15. TRADE AND OTHER RECEIVABLES

TRADE AND OTHER RECEIVABLES
Notes	30 June 2012 RMB’000	31 December 2011 RMB’000
Trade receivables (i) Deposits and prepayments made to suppliers (ii) Other receivables	34,098 35,874 3,916 73,888	20,419 24,551 3,158
		48,128

All of the trade and other receivables are expected to be recovered within one year.

Notes:

• (i) Included in trade and other receivables are trade receivables with the following ageing analysis as of the end of each reporting period:

Invoice date	30 June 2012 RMB’000	31 December 2011 RMB’000
Within 1 month Over 1 month but less than 3 months Over 3 months but less than 1 year Over 1 year but less than 2 years Over 2 years	9,173 16,793 7,648 436 48 34,098	7,088 9,915 3,166 164 86
		20,419

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NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT

(Expressed in Renminbi Yuan)

15. TRADE AND OTHER RECEIVABLES (continued)

Notes: (continued)

• (ii) The Group is required to make certain prepayment according to the agreement entered into with the Group’s largest supplier, Oracle (China) Software System Co., Ltd. (“Oracle”). As at 30 June 2012, prepayments made to Oracle amounted to approximately RMB33,261,000 (as at 31 December 2011: RMB24,322,000). These prepayments are unsecured, interest free and will be used to offset against future purchases from Oracle.

16. DERIVATIVE FINANCIAL INSTRUMENTS

	30 June	31 December
	2012	2011
	RMB’000	RMB’000
Put option	–	4,263

The put option was granted by Advance Mode Limited to Winsino Investments Limited (“Winsino”), a wholly-owned subsidiary of the Company. Upon exercise of the put option, Winsino is entitled to transfer to Advance Mode Limited all acquired shares and shareholder loans any time on or before the expiry of an 18 months period, and the promissory note issued (note 21) shall be returned to Winsino for cancellation. The unrealised loss of RMB501,000 for the six months ended 30 June 2011 arising from the changes in the fair value of the put opinion is recognised in the profit or loss for the period. The put option was expired during the six months ended 30 June 2012.

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NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT (Expressed in Renminbi Yuan)

17. HELD FOR TRADING INVESTMENTS

	30 June	31 December
	2012	2011
	RMB’000	RMB’000
Listed equity securities at fair value
– in Hong Kong	25,895	–

18. CASH AND CASH EQUIVALENTS

An analysis of the balance of cash and cash equivalents is set out below:

	30 June 2012 RMB’000	31 December 2011 RMB’000
Cash on hand Deposits on demand Cash and cash equivalents	271 15,927 16,198	118 10,220
		10,338

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NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT

(Expressed in Renminbi Yuan)

19. TRADE AND OTHER PAYABLES

	30 June 2012 RMB’000	31 December 2011 RMB’000
Trade creditors Non-trade payables and accrued expenses Other taxes payable	10,928 1,461 1,645 14,034	2,170 3,061 744
		5,975

All of the trade and other payables are expected to be settled within one year.

Included in trade and other payables are trade creditors with the following ageing analysis as of the end of each reporting period:

	30 June 2012 RMB’000	31 December 2011 RMB’000
Due within 3 months or on demand Due after 3 months but within 6 months Due after 6 months but within 1 year Due after 1 year but within 2 years Due after 2 years	– 10,256 11 661 – 10,928	2,170 – – – –
		2,170

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NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT (Expressed in Renminbi Yuan)

20. BANK BORROWING

	30 June	31 December
	2012	2011
	RMB’000	RMB’000
Current
Bank borrowing repayable within 3 months	10,000	–

In May 2012, the Group entered into RMB10,000,000 term-loan facility with a bank with maturity period of three months, which bears interest at 8% per annum. The loan is secured by corporate guarantee of a subsidiary of the Group.

21. PROMISSORY NOTE

In connection with the acquisition of Liang Hui Holdings Limited and its subsidiaries on 10 September 2010, Winsino issued a non-transferrable, interest free promissory note (the “Promissory Note”) with a principal amount of HK$96,000,000 to Advance Mode Limited, which is wholly owned by Mr. Lo Kai Bong, a former executive director of the Company. The Promissory Note is payable upon the expiry of a period of 18 months from the date of issuance unless the put option described in note 16 is exercised by Winsino in which event, the Promissory Note shall be returned to Winsino for cancellation.

On 31 December 2011, Advance Mode Limited and Winsino entered into an agreement, pursuant to which the maturity date of the Promissory Note was extended for a period of 24 months from 10 March 2012. No interest shall be payable on all or any portion of the Promissory Note outstanding at any time during this period.

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NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT

(Expressed in Renminbi Yuan)

21. PROMISSORY NOTE (continued)

In the financial statements for the year ended 31 December 2011, the Promissory Note has been designated by the Company as being at fair value through profit or loss on its initial recognition. The estimate of the fair value of the Promissory Note was measured by using the discounted cash flow model based on the estimated future cash flows of the Promissory Note and the applicable discount rate. The estimated future cash flows were determined based on the contracted terms of the Promissory Note while the discount rate used as of 31 December 2011 of 12.88% was estimated with reference to published rates of comparable businesses.

The fair value of the Promissory Note on the date of its issue on 10 September 2010 was approximately RMB77,137,000 and its fair value as at 31 December 2011 was approximately RMB59,658,000. The Group early redeemed the Promissory Note and recognised a loss on reversal of change in fair value of Promissory Notes in prior years due to the early redemption of approximately RMB18,234,000 for the six months ended 30 June 2012.

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NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT

(Expressed in Renminbi Yuan)

22. SHARE CAPITAL

Notes	30 June 2012 Number of Amount shares HK$	30 June 2012 Number of Amount shares HK$	31 December 2011 Number of Amount shares HK$	31 December 2011 Number of Amount shares HK$
Authorised: Ordinary shares of HK$0.01 each Increase in authorised share capital on 10 April 2012 (i) Ordinary shares at 30 June/31 December Issued and fully paid: At 1 January Shares issued under placing (ii) Subscription of new shares (iii) At 30 June/31 December	1,000,000,000 2,000,000,000 3,000,000,000 806,158,000 661,231,600 – 1,467,389,600	10,000,000 20,000,000 30,000,000 8,061,580 6,612,316 – 14,673,896 RMB equivalent 13,109,046	1,000,000,000 – 1,000,000,000 596,158,000 – 210,000,000 806,158,000	10,000,000 –
				10,000,000
				5,961,580 – 2,100,000
				8,061,580
				RMB equivalent 7,739,650

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NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT

(Expressed in Renminbi Yuan)

22. SHARE CAPITAL (continued)

Notes:

• (i) Pursuant to an ordinary resolution passed by the Company’s shareholders at an extraordinary general meeting held on 10 April 2012, the authorised share capital of the Company was increased from HK$10,000,000 to HK$30,000,000 by the creation of an additional 2,000,000,000 shares of HK$0.01 each.

• (ii) Pursuant to a placing agreement dated on 27 February 2012, a total of 661,231,600 ordinary shares of HK$0.01 each were issued at the placing price of HK$0.24 per share (the “Placing”). Shares issued under the Placing included 161,231,600 shares under general mandate and 500,000,000 shares under specific mandate.

• (iii) Following the completion of the Agreement on 11 February 2011, the Company issued 210,000,000 new shares at HK$0.06 each to Affluent Start, a holding company of the Company. The subscription has resulted in an increase in the share capital and share premium account by HK$2,100,000 (equivalent to RMB1,778,070) and HK$10,500,000 (equivalent to RMB8,890,350) respectively.

23. COMMITMENTS

(i) Capital commitments

The Group has no significant capital commitments as at 30 June 2012 and 31 December 2011.

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NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT (Expressed in Renminbi Yuan)

23. COMMITMENTS (continued)

(ii) Lease commitments

At 30 June 2012, the total future minimum lease payments under noncancellable operating leases in respect of properties were payable as follow:

	30 June 2012 RMB’000	31 December 2011 RMB’000
Less than one year Between one and two years Between two and three years	2,738 808 – 3,546	3,296 2,203 168
		5,667

The Group leased a number of properties under operating leases during the interim period. None of the leases includes contingent rentals.

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MANAGEMENT DISCUSSION AND ANALYSIS

FINANCIAL REVIEW

Turnover

For the six months ended 30 June 2012, the Group recorded a turnover of approximately RMB59,838,000 (six months ended 30 June 2011: RMB65,861,000), of which turnover from (i) software maintenance and other services amounted to approximately RMB64,475,000 (six months ended 30 June 2011: RMB64,419,000); (ii) sale of software products and others amounted to approximately RMB1,716,000 (six months ended 30 June 2011: RMB1,442,000); and (iii) fair value losses of approximately RMB6,353,000 on held for trading investments (six months ended 30 June 2011: Nil).

Gross Profit

For the six months ended 30 June 2012, the Group recorded a gross profit of approximately RMB9,710,000 (six months ended 30 June 2011: RMB17,764,000).

Other Net Loss

For the six months ended 30 June 2012, other net loss was approximately RMB22,749,000 (six months ended 30 June 2011: RMB598,000), which was mainly attributable to (i) net loss of approximately RMB4,263,000 on derivative financial instruments (six months ended 30 June 2011: RMB501,000); (ii) loss of approximately RMB18,234,000 on reversal of change in fair value of the Promissory Note in prior years due to the early redemption (six months ended 30 June 2011: Nil); and (iii) net exchange loss of approximately RMB252,000 (six months ended 30 June 2011: RMB8,000).

Finance Costs

For the six months ended 30 June 2012, finance cost of interest expenses was approximately RMB63,000 (six months ended 30 June 2011: RMB43,000).

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MANAGEMENT DISCUSSION AND ANALYSIS

Loss for the Period

For the six months ended 30 June 2012, the Group recorded a loss for the period of approximately RMB31,337,000 from continuing operations (six months ended 30 June 2011: profit of RMB1,812,000 from continuing operations).

Liquidity and Financial Resources

The Group’s working capital is funded by the cash generated by operating and financing activities. As at 30 June 2012, the Group maintained cash and cash equivalents amounted to approximately RMB16,198,000 (31 December 2011: RMB10,338,000). As at 30 June 2012, the Group’s current ratio was approximately 4.8 times (31 December 2011: 8.3 times); and the Group’s net gearing ratio at 30 June 2012 was zero as the Group had no net borrowing or debt (31 December 2011: Nil) (net debt is calculated as total borrowings less cash and cash equivalents).

Foreign Exchange

The Group’s revenue is mainly denominated in Renminbi and no related hedge is required for the time being.

Pledge of Assets

As of 30 June 2012, the Group had no pledge of assets and bank deposits in order to obtain general banking facilities or short-term bank borrowings (31 December 2011: Nil).

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MANAGEMENT DISCUSSION AND ANALYSIS

Redemption of Promissory Note

On 31 December 2011, Winsino Investments Limited (“Winsino”), a wholly-owned subsidiary of the Company, entered into an agreement with Advance Mode Limited (“Advance Mode”), a company wholly-owned by Mr. Lo Kai Bong (a former executive Director resigned on 13 February 2012), pursuant to which the Promissory Note with a principal amount of HK$96,000,000 issued by Winsino in favour of Advance Mode was extended for a period of 24 months from 10 March 2012 with no interest payable.

The Group early redeemed the Promissory Note and recognised a loss on reversal of change in fair value of the Promissory Note in prior years due to the early redemption of the Promissory Note of approximately RMB18,234,000 for the six months ended 30 June 2012. An unrealised loss of approximately RMB89,000 arising from the changes in fair value of the Promissory Note, was recognised in the profit or loss for the six months ended 30 June 2011.

Capital Structure

The Group adopts a prudent treasury policy. The current ratio (calculated as current assets divided by current liabilities) as at 30 June 2012 was 475% (30 June 2011: 84.07%) and the quick ratio (calculated as balance of current assets less inventories, divided by current liabilities multiplied by 100%) as at 30 June 2012 was 464% (30 June 2011: 80.73%). The Group continued to monitor stringent debt collection policy so as to minimise the risks of sales on credit and to ensure that funds are timely collected.

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MANAGEMENT DISCUSSION AND ANALYSIS

On 27 February 2012, the Company entered into a placing agreement with the placing agent for the placing of:–

• (i) up to 161,231,600 new shares to not less than six placees at the placing price of HK$0.24 per placing share under the general mandate to issue new shares granted to the Directors at the annual general meeting of the Company held on 16 May 2011. The said placing was completed on 5 March 2012 and the Company issued and allotted 161,231,600 new shares and raised net proceeds of approximately HK$37 million for the Group’s general working capital needs; and

• (ii) up to 500,000,000 new shares to not less than six placees at the placing price of HK$0.24 per share which is subject to the fulfillment of conditions including the passing of an ordinary resolution by the shareholders of the Company for the issue and allotment of the said shares and the increase in the authorised share capital of the Company. Shareholders’ approval was obtained pursuant to an ordinary resolution passed in the extraordinary general meeting held on 10 April 2012. Net proceeds of approximately HK$115.8 million were raised and were used to reduce the indebtedness of the Group and to finance the Group’s general working capital needs.

Pursuant to the above ordinary resolution passed by the Company’s shareholders on 10 April 2012, the authorised share capital of the Company was increased from HK$10,000,000 comprising 1,000,000,000 shares of HK$0.01 each to HK$30,000,000 divided into 3,000,000,000 shares by the creation of an additional 2,000,000,000 shares of HK$0.01 each.

Significant Investments

There were no significant investments held by the Group as at 30 June 2012.

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MANAGEMENT DISCUSSION AND ANALYSIS

Material Acquisition and Disposal of Subsidiaries or Associated Companies

For the six months ended 30 June 2012, the Group has not made any material acquisition or disposal of subsidiaries or associated companies.

Employees and Remuneration Policies

As at 30 June 2012, the Group employed 90 full time employees (30 June 2011: 90). The remuneration package of employees is determined by reference to their performance, experience, their positions, duties and responsibilities in the Group and the prevailing market conditions. The Group continued to provide retirement, medical, employment injury, employment and maternity benefits which are governed by the state-managed social welfare scheme operated by the local government of the PRC to the employees in the PRC. In addition, the Group maintains a mandatory provident fund scheme (the “MPF Scheme”) for all qualifying employees in Hong Kong.

Contingent Liabilities

As at 30 June 2012, there was no significant contingent liability (30 June 2011: Nil).

INTERIM DIVIDEND

The Directors resolved not to declare an interim dividend for the six months ended 30 June 2012 (for the six months ended 30 June 2011: Nil).

PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES OF THE COMPANY

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

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MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS REVIEW

Global economic conditions remain challenging in 2012. China, the largest economy in Asia, had its GDP growth rate dropped to 7.6% in the second quarter of 2012, reaching the slowest pace since 2009. The Group recorded a slight increase in turnover of software business segment of 0.5% from RMB65,861,000 for the six months ended 30 June 2011 to RMB66,191,000 for the six months ended 30 June 2012. The gross profit ratio decreased from 27% to 24%, which was mainly attributable to a decrease in software business segment profits before tax from RMB6,928,000 to RMB4,886,000. The Group will continue to concentrate and enhance on customized development of applications as a valueadded service to customers, and sell self-developed firewall and other software products.

OUTLOOK

Apart from the software business, we are actively searching for other business opportunities so as to diversify our business to bring returns to our shareholders.

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OTHER INFORMATION

DIRECTORS’ INTERESTS IN SHARES

As at 30 June 2012, the interests or short positions of the Directors and chief executive of the Company in the shares, underlying shares and debentures of the Company or any associated corporation (within the meaning of Part XV of the Securities and Futures Ordinance (“SFO”)) which were notified to the Company and The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO), or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 to the Rules Governing the Listing of Securities on the Stock Exchange (the “Listing Rules”), are set out below:

Interests and short positions in shares, underlying shares and debentures of the Company

				Percentage of
			Number of	the Company’s
		Long position/	ordinary	issued
Name of Director	Capacity	Shortposition	shares held	share capital
Mr. King Pak Fu	Controlled corporation	Long position	604,355,000	41.19%
			(Note)

Note: These 604,355,000 ordinary shares of the Company are held through Affluent Start Holdings Investment Limited (“Affluent Start”), a company incorporated in the British Virgin Islands with limited liability which is wholly and beneficially owned by Mr. King Pak Fu.

Save as disclosed above, none of the Directors, chief executives of the Company or their associates had any interests or short positions in any shares, underlying shares and debentures of the Company or any of its associated corporations as defined in Part XV of the SFO as recorded in the register 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.

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OTHER INFORMATION

SUBSTANTIAL SHAREHOLDERS INTERESTS IN SHARES

As at 30 June 2012, so far as is known to any Director or chief executive of the Company, the following persons (other than the Directors or chief executive of the Company) had an interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is, directly or indirectly to be interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group:

1. Aggregate long position in the shares and underlying shares of the Company

			Approximate
		Number of	percentage
		ordinary	of issued
		shares of	ordinary
		the Company	shares of
Name	Nature of interest	held	the Company
Affluent Start Holdings	Beneficial owner	604,355,000	41.19%
Investment Limited

2. Aggregate short position in the shares and underlying shares of the Company

As at 30 June 2012, the Company had not been notified of any short positions being held by any substantial shareholders in the shares or underlying shares of the Company.

Save as disclosed above, no other parties were recorded in the register of the Company required to be kept under section 336 of the SFO as having interests or short positions in the shares or underlying shares of the Company as at 30 June 2012.

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OTHER INFORMATION

SHARE OPTION SCHEME

The Company has adopted a share option scheme (the “Scheme”) on 18 December 2006. Pursuant to the Scheme, the Board may, at its discretion, grant options to any directors or eligible parties (as defined in the Scheme) for subscription of the Company’s shares as incentive to retain talents in the Group. The Company has not granted any option since adoption of the Scheme.

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted the Model Code as set out in Appendix 10 to the Listing Rules as the code of conduct regarding securities transactions by the Directors. Having made specific enquiry to all Directors, the Company confirmed that all Directors have complied with the required standards as set out in the Model Code during the six months ended 30 June 2012.

CORPORATE GOVERNANCE PRACTICES

The Company has adopted the code provisions of the Code on Corporate Governance Practices (the “Former CG Code”) contained in Appendix 14 to the Listing Rules, which came into effect on 1 January 2005 and was recently revised and renamed as Corporate Governance Code and Corporate Governance Report (the “New CG Code”) with effect from 1 April 2012, as its own code of corporate governance practices.

During the six months ended 30 June 2012, the Company was in compliance with all the code provisions under the Former CG Code and the New CG Code except for the deviations from code provisions E.1.2 and D.1.4 which are explained as follows:–

Code provision E.1.2 of the Former CG Code requires that the Chairman of the Board should attend the annual general meeting of the Company. Mr. King Pak Fu, the Chairman of the Board, did not attend the 2012 annual general meeting of the Company as he was on a business trip. However, he has actively participated in the Board meetings to get involved in the Company’s affairs.

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OTHER INFORMATION

CORPORATE GOVERNANCE PRACTICES (continued)

Under code provision D.1.4 of the New CG Code, the Company should have formal letters of appointment for directors setting out the key terms and conditions of their appointment. The Company did not have formal letters of appointment for Messrs. King Pak Fu, Jia Bowei and Tsang To. However, the Directors shall be subject to retirement by rotation at least once every three years in accordance with the Articles. In addition, the Directors have followed the guidelines set out in “A Guide on Directors’ Duties” issued by the Companies Registry and “Guidelines for Directors” and “Guide for Independent NonExecutive Directors” (if applicable) published by the Hong Kong Institute of Directors in performing their duties and responsibilities as Directors of the Company. Besides, the Directors actively comply with the requirements under statute and common law, the Listing Rules, legal and other regulatory requirements and the Company’s business and governance policies.

Save as those mentioned above and in the opinion of the Directors, the Company has met the code provisions set out in the Former CG Code and the New CG Code during the six months ended 30 June 2012.

AUDIT COMMITTEE

The Audit Committee comprises three independent non-executive Directors, namely Mr. Lam Ting Lok (as chairman), Ms. Hu Gin Ing and Mr. Zhang Xiaoman. The unaudited interim results of the Group for the six months ended 30 June 2012 have been reviewed by the Audit Committee.

By Order of the Board Enterprise Development Holdings Limited King Pak Fu

Chairman

Hong Kong, 24 August 2012

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