Enterprise Development Holdings Limited — Interim / Quarterly Report 2016

Aug 31, 2016

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

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ENTERPRISE DEVELOPMENT HOLDINGS LIMITED 企展控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1808)

UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2016

UNAUDITED INTERIM RESULTS

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 2016 together with comparative figures for the corresponding period in 2015. The unaudited interim financial report has not been audited but has been reviewed by the Company’s audit committee (the “Audit Committee”).

– 1 –

UNAUDITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

For the six months ended 30 June 2016

(Expressed in Renminbi)

			Six months ended 30 June	Six months ended 30 June
		Notes	2016 (Unaudited) RMB’000	2015 (Unaudited) RMB’000
Turnover		4	224,661	338,692
Cost of sales			(183,852)	(111,320)
Gross profit			40,809	227,372
Other revenue			3,551	118
Distribution expenses			(10,823)	(13,280)
General and administrative expenses			(21,653)	(34,678)
Other operating expenses			(46)	(42)
Loss on early redemption of promissory notes			(1,262)	(3,340)
Provision for impairment loss on
available-for-sale securities Provision for impairment loss on goodwill			(40,382) (86,930)	– –
(Loss)/profit from operations			(116,736)	176,150
Share of loss of an associate Finance costs		5(i)	(1,910) (1,134)	– (2,244)
(Loss)/profit before taxation		5	(119,780)	173,906
Income tax expense		6	(4,260)	(2,411)
(Loss)/profit for the period			(124,040)	171,495
Attributable to:
Equity shareholders of the Company			(129,332)	168,895
Non-controlling interests			5,292	2,600
(Loss)/profit for the period			(124,040)	171,495
(Loss)/earnings per share (RMB)		7		(Restated)
Basic			(0.34)	0.76
Diluted			(0.34)	0.76

– 2 –

UNAUDITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended 30 June 2016

(Expressed in Renminbi)

	Six months ended 30 June	Six months ended 30 June
	2016 (Unaudited) RMB’000	2015 (Unaudited) RMB’000
(Loss)/profit for the period Other comprehensive (expense)/income for the period (after tax) Items that may be reclassified subsequently to profit or loss: Exchange difference on translation of financial statements of overseas operations Share of exchange difference of an associate	(124,040) (1,262) (30)	171,495 3,257 –
Total comprehensive (expense)/income for the period	(125,332)	174,752
Attributable to: Equity shareholders of the Company Non-controlling interests	(131,072) 5,740	172,146 2,606
Total comprehensive (expense)/income for the period	(125,332)	174,752

– 3 –

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2016

(Expressed in Renminbi)

		Notes	At 30 June 2016 (Unaudited) RMB’000	At 31 December 2015 (Audited) RMB’000
Non-current assets
Property, plant and equipment			3,250	3,140
Intangible assets			2,815	2,815
Goodwill		8	121,482	213,646
Interests in an associate		9	63,027	–
Available-for-sale securities			12,775	52,689
Pledged bank deposits			7,840	3,054
Deferred tax assets			381	380
			211,570	275,724
Current assets
Inventories			2,969	954
Trade and other receivables		10	265,796	199,521
Trading securities			122,308	118,031
Cash and cash equivalents			30,335	81,803
			421,408	400,309
Total assets			632,978	676,033
Current liabilities
Trade and other payables		11	82,222	100,162
Promissory notes		12	–	42,147
Borrowings		13	26,041	6,317
Current taxation			4,388	3,746
			112,651	152,372
Net current assets			308,757	247,937
Total assets less current liabilities			520,327	523,661

– 4 –

		Notes	At 30 June 2016 (Unaudited) RMB’000	At 31 December 2015 (Audited) RMB’000
Non-current liabilities
Deferred tax liability			47	46
Promissory notes		12	43,182	–
			43,229	46
Net assets			477,098	523,615
Capital and reserves
Share capital		14	35,117	24,414
Reserves			358,163	421,123
Total equity attributable to
equity shareholders of the Company			393,280	445,537
Non-controlling interests			83,818	78,078
Total equity			477,098	523,615

– 5 –

NOTES TO THE UNAUDITED INTERIM RESULTS

(Expressed in Renminbi)

1. BASIS OF PREPARATION

This unaudited interim results have 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 (the “Stock Exchange”), including compliance with International Accounting Standard (“IAS”) 34 “Interim Financial Reporting” issued by the International Accounting Standards Board (“IASB”) and were authorised for issue on 31 August 2016.

The unaudited interim results have been prepared in accordance with the same accounting policies adopted in the 2015 annual financial statements, except for the accounting policy changes that are expected to be reflected in the 2016 annual financial statements. Details of these changes in accounting policies are set out in note 2.

The preparation of an unaudited interim results 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 results contain 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 2015 annual financial statements.

The unaudited interim results set out in this announcement do not constitute the Group’s financial statements for the six months ended 30 June 2016 but are extracted from those financial statements. Statutory financial statements for the year ended 31 December 2015 are available from the Company’s principal place of business in Hong Kong. The auditors have expressed an unqualified opinion on those financial statements in their report dated 31 March 2016.

– 6 –

2. CHANGES IN ACCOUNTING POLICIES

The IASB has issued the following amendments to IFRSs 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 IFRSs, Annual Improvements to IFRS 2012–2014 Cycle

• Amendments to IAS1, Presentation of financial statements: Disclosure Initiative

The Group has not applied any new standards or interpretations that is not yet effective for the current accounting period.

3. SEGMENT REPORTING

The Group manages its businesses by divisions, which are organised by a mixture of both business lines (products and services) and geography. 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 identified three reportable segments. No operating segments have been aggregated to form the following reportable segments.

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

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

• Mobile marketing business: Provision of mobile marketing projects, consultation, creative and technological services, mobile advertising services and creation of mobile games in the PRC and Hong Kong.

(a) Segment results, assets and liabilities

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

– 7 –

The measure used for reporting segment (loss)/profit is “adjusted (loss)/profit before taxation”. To arrive at adjusted (loss)/profit before taxation, the Group’s (loss)/earnings are adjusted for items not specifically attributed to individual segments, such as directors’ and auditors’ remuneration and other head office or corporate administration costs.

In addition to receiving segment information concerning adjusted (loss)/profit before taxation, the Board is provided with segment information concerning revenue, interest income and expense from cash balances and borrowings managed directly by the segments, depreciation, amortisation and additions to non-current segment assets used by the segments in their operations.

Segment revenue reported below represents revenue generated from external customers. There were no inter-segment sales in the current period (six months ended 30 June 2015: Nil).

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 period is set out below.

	Software business	Trading and investment business	Mobile marketing business	Others	Total
	Six months ended 30 June 2016 2015 RMB’000 RMB’000	Six months ended 30 June 2016 2015 RMB’000 RMB’000	Six months ended 30 June 2016 2015 RMB’000 RMB’000	Six months ended 30 June 2016 2015 RMB’000 RMB’000	Six months ended 30 June 2016 2015 RMB’000 RMB’000
Turnover from external customers Investment income	215,824 141,663 – –	301 18,857 3,693 175,167	4,780 3,005 – –	63 – – –	220,968 163,525 3,693 175,167
Reportable segment revenue	215,824 141,663	3,994 194,024	4,780 3,005	63 –	224,661 338,692
Reportable segment (loss)/profit (adjusted (loss)/profit before taxation)	18,602 8,909	3,983 193,523	(100,525) 110	(327) –	(78,267) 202,542
Interest income from bank deposits	36 49	– –	– –	– –	36 49
Interest expenses	441 366	28 –	37 25	– –	506 391
Depreciation and amortisation for the period	506 490	– –	386 133	4 –	896 623

– 8 –

	Software business	Trading and investment business	Mobile marketing business	Others	Total
	At 30 June 2016 At 31 December 2015 RMB’000 RMB’000	At 30 June 2016 At 31 December 2015 RMB’000 RMB’000	At 30 June 2016 At 31 December 2015 RMB’000 RMB’000	At 30 June 2016 At 31 December 2015 RMB’000 RMB’000	At 30 June 2016 At 31 December 2015 RMB’000 RMB’000
Reportable segment assets Additions to non-current segment assets during the period/year Reportable segment liabilities	297,446 284,091 957 528 89,541 90,825	127,323 122,903 – – – –	112,796 207,783 91 1,641 7,329 4,591	4,793 321 – – – 5	542,358 615,098 1,048 2,169 96,870 95,421

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

	Six months ended	Six months ended	30 June
	2016		2015
	RMB’000	RMB’000
Turnover Reportable segment turnover	224,661		338,692
(Loss)/profit before taxation Reportable segment (loss)/profit derived from the Group’s external customers Share of loss of an associate Unallocated head office and corporate expenses	(78,267) (1,910) (39,603)		202,542 – (28,636)
Consolidated (loss)/profit before taxation	(119,780)		173,906

– 9 –

	At 30 June 2016 RMB’000	At 31 December 2015 RMB’000
Assets Reportable segment assets Deferred tax assets Unallocated head office and corporate assets	542,358 381 90,239	615,098 380 60,555
Consolidated total assets	632,978	676,033
Liabilities Reportable segment liabilities Deferred tax liabilities Unallocated head office and corporate liabilities	96,870 47 58,963	95,421 46 56,951
Consolidated total liabilities	155,880	152,418

(c) Geographic information

The following table sets out information about the geographical location of (i) the Group’s turnover 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.

			Specified	Specified
			non-current assets
		Six months ended	At 30	At 31
		30 June	June	December
		2016 2015	2016	2015
		RMB’000 RMB’000	RMB’000	RMB’000
PRC		215,824 146,373	23,857	23,396
Hong	Kong	8,837 192,319	103,690	196,205
		224,661 338,692	127,547	219,601

– 10 –

4. TURNOVER

The principal activities of the Group are the provision of integrated business software solutions, mobile marketing services and trading of listed securities.

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

	Six months ended 30 June	Six months ended 30 June
	2016 RMB’000	2015 RMB’000
Software maintenance and other services Sales of software products and others Net realised and unrealised gains on trading securities Mobile marketing services Others	202,423 13,401 3,994 4,780 63	138,341 3,322 194,024 3,005 –
	224,661	338,692

5. (LOSS)/PROFIT BEFORE TAXATION

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

(i) Finance costs

	Six months ended 30 June	Six months ended 30 June
	2016	2015
	RMB’000	RMB’000
Interest expenses on borrowings wholly repayable within five years Finance lease	478 –	389 2
Imputed interest expenses on promissory notes	656	1,825
Bank overdraft	–	28
	1,134	2,244

– 11 –

(ii) Staff costs

	Six months ended 30 June	Six months ended 30 June
	2016	2015
	RMB’000	RMB’000
Salaries, wages and other benefits Contributions to defined contribution retirement schemes	15,705 2,224	21,099 1,793
	17,929	22,892

Salaries, wages and benefits of approximately RMB2,760,000 (six months ended 30 June 2015: RMB1,361,000) has been expensed in cost of sales for six months period ended 30 June 2016.

(iii) Other items

	Six months ended 30 June	Six months ended 30 June
	2016 RMB’000	2015 RMB’000
Cost of inventories Depreciation of property, plant and equipment Operating lease charges in respect of properties Net loss on disposal of property, plant and equipment Provision for impairment loss on available-for-sales securities Provision for impairment loss on goodwill Provision for impairment loss on trade receivables	9,518 944 2,971 12 40,382 86,930 1,640	2,456 672 2,609 – – – –

– 12 –

6. INCOME TAX EXPENSE

	Six months ended 30 June	Six months ended 30 June
	2016	2015
	RMB’000	RMB’000
Current tax – PRC	4,260	2,411

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

No provision for Hong Kong Profits Tax has been made for the period 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. The statutory income tax rate of its PRC subsidiaries is 25%.

Beijing Orient LegendMaker Software Development Co., Ltd. is entitled to a preferential income tax rate of 15% for 2016 and 2015 as it was awarded hightechnology status by the tax authority.

These tax rates were used to calculate the Group’s deferred tax assets and liabilities as at 30 June 2016 and 2015.

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

The calculation of basic and diluted (loss)/earnings per share for the six months ended 30 June 2016 is based on the loss attributable to equity shareholders of the Company of approximately RMB129,332,000 (six months ended 30 June 2015: profit of approximately RMB168,895,000) and the weighted average of 376,235,204 ordinary shares (six months ended 30 June 2015: 220,221,167 shares (restated)) in issue during the interim period.

There were no dilutive potential ordinary shares in issue as at 30 June 2016 (30 June 2015: Nil).

– 13 –

8. GOODWILL

			Total
			RMB’000
Cost:
31 December 2015 and 1 January 2016			213,646
Exchange adjustments			4,356
At 30 June 2016			218,002
Accumulated impairment loss:
31 December 2015 and 1 January 2016			–
Impairment loss			(86,930)
Exchange adjustments			(9,590)
At 30 June 2016			(96,520)
Carrying amount:
At 30 June 2016			121,482
At 31 December 2015			213,646
	At 30		At 31
	June		December
	2016		2015
	RMB’000		RMB’000
Software business – PRC	19,541		19,541
Mobile marketing business – HK	101,941		194,105
	121,482		213,646

– 14 –

Mobile marketing business – Hong Kong

Due to the deteriorating performance and suffering significant loss in mobile marketing business, the Directors determined that there was a need for an impairment on the goodwill arising from the acquisition of mobile marketing business as the recoverable amount of cash generating unit (“CGU”) based on the valuation report by an independent valuer was calculated to be lower than their aggregate carrying amounts.

The recoverable amount of the CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using an estimated weighted average growth rate of 3% (as at 31 December 2015: 3%). The growth rates used do not exceed the long-term average growth rates for the business in which the CGU operates. The cash flows are discounted using a discount rate of 18.22% (as at 31 December 2015: 18.59%). The discount rates used are pre-tax and reflect specific risks relating to the relevant segments.

During the six months ended 30 June 2016, the impairment loss of goodwill recognised to the unaudited consolidated statement of profit or loss was approximately RMB86,930,000 (six month ended 30 June 2015: Nil).

The Directors believe that the mobile marketing business containing goodwill has been reduced to its recoverable amount. The management of the Group believes that any reasonable possible change in the key assumptions on which the recoverable amount is based would not cause the carrying amount of the unit to exceed the aggregate recoverable amount of the CGU.

– 15 –

9. INTERESTS IN AN ASSOCIATE

On 9 May 2016, the Group acquired 28% equity interests in All Treasure International Industrial Limited (the “Target Company”) from Wisdom Master Investments Limited (the “Vendor”) at a consideration of HK$71,706,600, which has been satisfied as to HK$21,706,600 in cash and HK$50,000,000 by the issue of promissory notes by the Company to the Vendor. Upon completion of the said acquisition, the Target Company has become an associate company of the Company.

	At 30	At 31
	June	December
	2016	2015
	RMB’000	RMB’000
Cost of investments, unlisted	60,116	–
Bargain purchase	3,499	–
Share of loss Exchange adjustments	(1,910) 1,322	– –
At 30 June/31 December	63,027	–

The Group’s share of the results in the associate and its aggregated assets, liabilities and revenue are shown below:

	Six months ended 30 June	Six months ended 30 June
	2016 RMB’000	2015 RMB’000
Assets	246,992	–
Liabilities	21,894	–
Revenue	755	–
Share of loss	(1,910)	–
Percentage hold	28%	–

– 16 –

10. TRADE AND OTHER RECEIVABLES

		Notes	At 30 June 2016 RMB’000	At 31 December 2015 RMB’000
Trade receivables			88,019	92,408
Less: allowance for doubtful debts			(1,764)	(124)
		(i)	86,255	92,284
Loan receivables			6,418	2,038
Less: allowance for doubtful debts			(1,912)	(1,870)
		(ii)	4,506	168
Prepayments made to suppliers		(iii)	152,255	95,627
Deposits and other receivables			22,780	11,442
			265,796	199,521

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

Notes:

(i) As of the end of the reporting period, the ageing analysis of trade debtors (which are included in trade and other receivables), based on the invoice date (or date of revenue recognition, if earlier), and net of allowance for doubtful debts, is as follows:

	At		At
	30 June	31 December
	2016		2015
Invoice date	RMB’000		RMB’000
Within 1 month	58,654		63,016
Over 1 month but less than 3 months	21,650		13,633
Over 3 months but less than 1 year Over 1 year but less than 2 years Over 2 years	2,065 2,304 1,582		7,212 7,594 829
	86,255		92,284

– 17 –

• (ii) As at the end of the reporting period, the ageing analysis of loan receivables (which are included in trade and other receivables), based on loan drawn down date and net of allowance for doubtful debt, is as follows:

	At		At
	30 June	31 December
	2016		2015
Invoice date	RMB’000		RMB’000
Within 1 month	4,335		–
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	171 – –		168 – –
	4,506		168

• (iii) These prepayments are unsecured, interest-free and will be used to offset against future purchases from suppliers.

• (iv) As at 30 June 2016, trade receivables of the Group amounting to approximately RMB1,640,000 (as at 31 December 2015: RMB124,000) were individually determined to be impaired. The individually impaired receivables were outstanding for over 365 days at the end of reporting period or were due from customers with financial difficulties. Consequently, specific allowances for doubtful debts of approximately RMB1,640,000 were recognised.

11. TRADE AND OTHER PAYABLES

	At 30 June 2016 RMB’000	At 31 December 2015 RMB’000
Trade creditors Non-trade payables and accrued expenses Other taxes payable	37,786 44,436 –	49,351 50,488 323
	82,222	100,162

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

– 18 –

As of the end of the reporting period, the ageing analysis of trade creditors (which are included in trade and other payables), based on the invoice date, is as follows:

	At 30 June 2016 RMB’000	At 31 December 2015 RMB’000
Due within 1 month or on demand Due after 1 month but within 3 months Due after 3 months but within 6 months Due after 6 months but within 1 year Over 2 years	36,968 77 40 375 326	43,640 4,354 1,010 20 327
	37,786	49,351

12. PROMISSORY NOTES

	At 30	At 31
	June	December
	2016	2015
	RMB’000	RMB’000
At 1 January Issued for the acquisition of an associate Issued for the acquisition of subsidiaries Imputed interest Redemption	42,147 41,994 – 656 (43,896)	– – 120,693 1,837 (88,713)
Loss on early redemption of promissory notes Exchange adjustments	1,262 1,019	3,950 4,380
At 30 June/31 December	43,182	42,147

– 19 –

13. BORROWINGS

	At 30	At 31
	June	December
	2016	2015
	RMB’000	RMB’000
Borrowings: Unsecured borrowings Secured bank loan	1,430 24,611	1,398 4,919
	26,041	6,317

At 30 June 2016, the secured bank loans bear interest at 4.36% to 5.75% (as at 31 December 2015: 5.68% to 6.43%) per annum and secured by corporate guarantee of a PRC subsidiary. The unsecured borrowing bears interest at 4.56% (as at 31 December 2015: 5%) per annum. The unsecured and guaranteed bank loans bear weighted average effective interest of 5.45% (as at 31 December 2015: 5.43%) per annum and guaranteed by a director of a subsidiary. All borrowings are repayable within one year or on demand.

14. SHARE CAPITAL

			30 June 2016	30 June 2016	31 December	31 December	31 December	2015
			Number of shares	Amount	Number of shares			Amount
		Notes		HK$				HK$
Authorised:
At 1 January			100,000,000,000	1,000,000,000	3,000,000,000			30,000,000
Increase on 6 August 2015			–	–	97,000,000,000			970,000,000
Share consolidation		(iii)	(90,000,000,000)	–	–			–
Ordinary shares
of HK$0.1/HK$0.01 each			10,000,000,000	1,000,000,000	100,000,000,000			1,000,000,000
Issued and fully paid:
At 1 January			2,902,259,827	29,022,598	2,110,867,520			21,108,675
Issue of consideration shares for
the acquisition of subsidiaries		(i)	–	–	307,692,307			3,076,923
Issue of placing shares		(ii)	1,276,990,000	12,769,900	483,700,000			4,837,000
Share consolidation		(iii)	(3,761,324,845)	–	–			–
At 30 June/31 December			417,924,982	41,792,498	2,902,259,827			29,022,598
				RMB				RMB
				equivalent				equivalent
				35,116,834				24,414,823

– 20 –

(i) Issue of consideration shares

Pursuant to an acquisition agreement dated on 16 February 2015, the Group has agreed to issue 307,692,307 ordinary shares of HK$0.01 each with agreed price at HK$0.13 per share as consideration shares for acquiring 20% of interest in Gravitas Group Limited from Mr. Chu Wai Kit. Upon completion of the acquisition on 14 May 2015, the consideration shares were issued and recorded at HK$0.285 per share with reference to the market price as of that date, the issue of shares has resulted an increase in the share capital and share premium by approximately HK$3,076,000 (equivalent to approximately RMB2,416,000) and approximately HK$84,615,000 (equivalent to approximately RMB66,432,000) respectively.

(ii) Issue of placing shares

Pursuant to a placing agreement dated on 28 May 2015, a total of 483,700,000 ordinary shares of HK$0.01 each were issued at the placing price of HK$0.25 per placing share. The placing has resulted in an increase in the share capital and share premium account by HK$4,837,000 (equivalent to approximately RMB3,804,000) and HK$116,088,000 (equivalent to approximately RMB91,303,000) respectively.

Pursuant to a placing agreement dated on 15 December 2015, a total of 580,450,000 ordinary shares of HK$0.01 each were issued at the placing price of HK$0.098 per placing share. The placing has resulted in an increase in the share capital and share premium account by HK$5,804,500 (equivalent to approximately RMB4,885,000) and HK$49,370,000 (equivalent to approximately RMB41,540,000) respectively.

Pursuant to a placing agreement dated on 6 April 2016, a total of 696,540,000 ordinary shares of HK$0.01 each were issued at the placing price of HK$0.057 per placing share. The placing has resulted in an increase in the share capital and share premium account by HK$6,965,400 (equivalent to approximately RMB5,818,000) and HK$31,540,000 (equivalent to approximately RMB26,350,000) respectively.

(iii) Share consolidation

At the extraordinary general meeting of the Company held on 29 June 2016, an ordinary resolution relating to share consolidation on the basis of every 10 existing ordinary share of HK$0.01 each in the issued and unissued share capital of the Company are consolidated into one consolidated share of HK$0.10 each (“Share Consolidation”) was duly passed by the shareholders of the Company and the Share Consolidation became effective on 30 June 2016.

– 21 –

MANAGEMENT DISCUSSION AND ANALYSIS

FINANCIAL REVIEW

Turnover

For the six months ended 30 June 2016, the Group recorded a turnover of approximately RMB224,661,000 (six months ended 30 June 2015: RMB338,692,000), of which turnover from (i) software maintenance and other services amounted to approximately RMB202,423,000 (six months ended 30 June 2015: RMB138,341,000); (ii) sales of software products and others amounted to approximately RMB13,401,000 (six months ended 30 June 2015: RMB3,322,000); (iii) fair value gains of approximately RMB3,994,000 on held for trading investments (six months ended 30 June 2015: RMB194,024,000); and (iv) mobile marketing services amounted to approximately RMB4,780,000 (six months ended 30 June 2015: RMB3,005,000).

Gross Profit

For the six months ended 30 June 2016, the Group recorded a gross profit of approximately RMB40,809,000 (six months ended 30 June 2015: RMB227,372,000). The gross profit ratio for the software business of the Group during the period was approximately 17% while that of the corresponding period in 2015 was approximately 23%. The reason for the decrease in gross profit ratio was that the turnover recorded during the period was mainly derived from maintenance services with lower gross profit ratio.

Finance Costs

For the six months ended 30 June 2016, finance costs was approximately RMB1,134,000 (six months ended 30 June 2015: RMB2,244,000).

Other Investment

For the six months ended 30 June 2016, an impairment loss of approximately RMB40,382,000 (six months ended 30 June 2015: Nil) was recognized on the Group’s available-for-sales securities. Taking into account the unaudited net asset value of the particular investee as at 30 June 2016, and other relevant factors, full impairment of the value of the investment was made as at 30 June 2016.

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General and Administrative Expenses

For the six months ended 30 June 2016, the general and administrative expenses of the Group were approximately RMB21,653,000, representing a decrease of approximately 38%, as compared to approximately RMB34,678,000 of the corresponding period in 2015. The decrease was mainly due to the substantial decrease of staff costs, directors’ remuneration, business travelling, entertainment and legal and professional fee.

Impairment

For the six months ended 30 June 2016, the Group recognized an impairment on its goodwill of approximately RMB86,930,000 (six months ended 30 June 2015: Nil). Due to the deteriorating performance and suffering significant loss in mobile marketing business, the Directors determined that there was a need for an impairment on the goodwill arising from the acquisition of mobile marketing business.

Loss for the Period

For the six months ended 30 June 2016, the Group recorded a loss for the period of approximately RMB124,040,000 (six months ended 30 June 2015: profit of RMB171,495,000).

Liquidity and Financial Resources

The Group’s working capital is funded by the cash generated from operating and financing activities. As at 30 June 2016, the Group maintained cash and cash equivalents amounted to approximately RMB30,335,000 (31 December 2015: RMB81,803,000). As at 30 June 2016, the Group’s current ratio was approximately 3.74 times (31 December 2015: 2.62 times); and the Group’s net gearing ratio at 30 June 2016 was not applicable (31 December 2015: not applicable), since the Group had cash in excess of interest bearing borrowings.

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 at 30 June 2016 and 31 December 2015, except for the bank deposits pledged to secure trade finance facilities to the Group, the Group had no pledge of assets and bank deposits in order to obtain general banking facilities or short-term bank borrowings.

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Capital Structure

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt, including borrowings, and equity attributable to owners of the Company, comprising issued share capital, share premium, retained earnings and other reserves. The management of the Group reviews the capital structure by considering the cost of capital and the risks associated with each class of capital. In view of this, the Group will balance its overall capital structure through the payment of dividends and new share issues as well as the redemption of existing debt. The Group’s overall strategy remains unchanged throughout the period.

On 15 December 2015, the Company entered into a placing agreement with China Rise Securities Asset Management Company Limited (the “Placing Agent”), pursuant to which the Placing Agent has conditionally agreed, on a best efforts basis, to place 580,450,000 new shares (the “First Placing Shares”) to not fewer than six placees who are independent third parties at a price of HK$0.098 per First Placing Share (the “First Placing”). The First Placing was completed on 5 January 2016 and an aggregate of 580,450,000 First Placing Shares were successfully placed to not less than six placees. The net price per First Placing Share was approximately HK$0.095. The First Placing provided a good opportunity to raise additional funds to meet the Company’s funding needs. The net proceeds from the First Placing has been used as to (i) approximately HK$52,100,000 for early redemption of promissory notes with principal amount of HK$50,000,000 together with accrued interest thereupon; and (ii) approximately HK$2,800,000 has been used for general working capital of the Group.

On 6 April 2016, the Company entered into another placing agreement with the Placing Agent, pursuant to which the Placing Agent has conditionally agreed, on a best efforts basis, to place 696,540,000 new shares (the “Second Placing Shares”) to not fewer than six placees who are independent third parties at a price of HK$0.057 per Second Placing Share (the “Second Placing”). The Second Placing was completed on 15 April 2016 and an aggregate of 696,540,000 Second Placing Shares were successfully placed to not less than six placees. The net price per Second Placing Share was approximately HK$0.054. The Second Placing provided a good opportunity to raise additional funds to meet the Company’s funding needs. The net proceeds from the Second Placing has been used as to (i) approximately HK$21,700,000 has been utilized for settling part of the consideration for the acquisition of 28% of issued share capital of All Treasure International Limited; (ii) approximately HK$5,000,000 has been used for money lending business; and (iii) the remaining balance of approximately HK$11,000,000 has not yet been utilized and remains in the bank for general working capital of the Group.

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Significant Investments

The Group has not made any significant investment for the six months ended 30 June 2016 (six months ended 30 June 2015: Nil).

Material Acquisition and Disposal of Subsidiaries or Associated Companies

On 9 May 2016, Fine Time Global Limited (the “Purchaser”), a direct wholly-owned subsidiary of the Company and Wisdom Master Investments Limited (the “Vendor”) entered into the acquisition agreement, pursuant to which the Purchaser has agreed to acquire and the Vendor has agreed to sell 28% of issued share capital of All Treasure International Limited (the “Target Company”) at the consideration of HK$71,706,600, which has been satisfied as to (i) HK$21,706,600 in cash; and (ii) HK$50,000,000 by the issue of the promissory notes to the Vendor. Completion of the acquisition has taken place simultaneously upon signing of the acquisition agreement. Upon completion, the Target Company has become an associated company of the Company. The Target Company and its subsidiaries are principally engaged in (i) making and editing song library into karaoke music and managing and licensing copyrights thereof in the PRC; and (ii) provision of information system service and karaoke content management service, in respect of karaoke music products in the PRC, to karaoke venues in the PRC.

Save as disclosed above, the Group has not made any material acquisition or disposal of subsidiaries or associated companies for the six months ended 30 June 2016.

Subsequent Event

On 12 August 2016, the Company proposed to raise approximately HK$206,900,000 (before expenses) by way of a rights issue of 1,253,774,946 rights shares at a subscription price of HK$0.165 per rights share on the basis of three (3) rights shares for every one (1) share held on the record date. The rights issue is subject to the approval of the independent shareholders at an extraordinary general meeting to be convened and held for approving the same. For details, please refer to the Company’s announcement dated 12 August 2016.

Employees and Remuneration Policies

As at 30 June 2016, the Group employed 184 (30 June 2015: 172) full time employees. The remuneration package of employees is determined by reference to their performance, experience, 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 for all qualifying employees in Hong Kong.

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Contingent Liabilities

As at 30 June 2016, there was no significant contingent liability (30 June 2015: Nil).

BUSINESS REVIEW

The Group recorded a turnover of approximately RMB224,661,000 for the six months ended 30 June 2016 (six months ended 30 June 2015: RMB338,692,000), representing a decrease of approximately 34%. The decrease is mainly due to the decrease in the realized and unrealized gain on investments in listed financial assets at fair value through profit and loss by approximately 98%.

The turnover of the software business amounted to approximately RMB215,824,000 for the period, representing an increase of approximately 52%. The increase is due to the continuing growing business in the provision of upgrade and maintenance services for Oracle’s database products distributed in the PRC. The Group also provides customised development of applications as a value-added service to customers, and sells self-developed firewall and other software products in the PRC.

The mobile marketing business has contributed approximately RMB4,780,000 for the current period (six months ended 30 June 2015: RMB3,005,000).

OUTLOOK

We have a large client base in the PRC who use Oracle’s databases and an experienced technical team which can provide prompt and effective services and develop services.

Apart from our existing software business and mobile marketing business, the Group acquired All Treasure International Limited (the “Target Company”) on 9 May 2016. The Target Company and its subsidiaries are principally engaged in (i) making and editing song library into karaoke music and managing and licensing copyrights thereof in the PRC; and (ii) provision of information system service and karaoke content management service, in respect of karaoke music products in the PRC, to karaoke venues in the PRC. The Directors consider the acquisition is in line with the Group’s business diversification strategy and represents an attractive investment opportunity for the Group to further expand and diversify its business portfolio and tap into the entertainment industry with growth potential.

In order to maintain the Group’s sustainability and preservation of value over the longer term, the Group will continue to look for suitable business opportunities so as to diversify the Group’s business into a new line of business with growth potential and to broaden its source of income that can bring return to the shareholders of the Company.

INTERIM DIVIDEND

The Directors resolved not to declare any interim dividend for the six months ended 30 June 2016 (six months ended 30 June 2015: Nil).

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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 2016.

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted the Model Code 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 standard set out in the Model Code during the six months ended 30 June 2016.

CORPORATE GOVERNANCE PRACTICES

The Company has all along committed to fulfilling its responsibilities to its shareholders by ensuring that the proper processes for supervision and management of the Group’s business are duly operated and reviewed and that good corporate governance practices and procedures are established throughout the six months ended 30 June 2016.

The Company has adopted the code provisions set out in the Corporate Governance Code and Corporate Governance Report (“CG Code”) as set out in Appendix 14 to the Listing Rules as its own code of corporate governance. During the six months ended 30 June 2016, the Company was in compliance with all the relevant code provisions set out in the CG Code except for the deviations from code provisions A.4.1 and D.1.4, which are explained below.

Code provision A.4.1 of the CG Code requires that non-executive directors should be appointed for a specific term and subject to re-election. The term of appointment of Ms. Hu Gin Ing, an independent non-executive Director, expired in year 2013 and thereafter she is not appointed for a specific term, but she is subject to retirement by rotation at least once in every three years in accordance with the articles of association of the Company (the “Articles”).

Code provision C.2.5 requires that the Company should have an internal audit function. During the six months ended 30 June 2016, as it takes time to obtain quotation from service providers on internal audit functions, the Company had only been preparing for but yet to complete the establishment of comprehensive internal audit functions. The Company will actively keep up with relevant matters and expects to complete the establishment of internal audit functions in 2016 by engaging external service provider to assist the Company, in order to ensure the effective compliance with the risk management and internal control requirements under the CG Code.

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Code provision D.1.4 of the CG Code requires that, 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 Mr. Lam Kai Tai, Mr. Wong Ho Sing and Mr. Kwok Ho On Anthony, executive Directors of the Company, and Ms. Hu Gin Ing, an independent non-executive Director. However, they are subject to retirement by rotation at least once in 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 Non-Executive 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.

Code provision E.1.2 of the CG Code requires that the chairman of the board should attend the annual general meeting. He should also invite the chairmen of the audit, remuneration, nomination committee and any other committees (as appropriate) to attend. Mr. Lam Kai Tai, Chairman, did not attend the 2016 AGM due to his other business engagement.

Save as those mentioned above and in the opinion of the Directors, the Company has met all the relevant code provisions set out in the CG Code throughout the six months ended 30 June 2016.

AUDIT COMMITTEE

The Audit Committee comprises three independent non-executive Directors, namely Mr. Yau Yan Ming Raymond (as chairman), Ms. Hu Gin Ing and Mr. Liu Kam Lung. The primary duties of the Audit Committee are to review and supervise the financial reporting process, to review the risk management and internal control systems of the Group. The unaudited interim results of the Group for the six months ended 30 June 2016 have been reviewed by the Audit Committee.

By Order of the Board Enterprise Development Holdings Limited Mr. Lam Kai Tai Chairman

Hong Kong, 31 August 2016

As at the date of this announcement, the Board comprises four executive Directors, namely Mr. Lam Kai Tai (Chairman), Mr. Kwok Ho On Anthony, Mr. Wang Jun and Mr. Wong Ho Sing, and three independent non-executive Directors, namely Mr. Yau Yan Ming Raymond, Ms. Hu Gin Ing and Mr. Liu Kam Lung.

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