hmvod Limited - Interim / Quarterly Report 2007

Tai Shing International (Holdings) Limited 泰盛國際（控股）有限公司 *

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 8103)

INTERIM REPORT 2007

* For identification purpose only

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

GEM has been established as a market designed to accommodate companies to which a high investment risk may be attached. In particular, companies may list on GEM with neither a track record of profitability nor any obligation to forecast future profitability. Furthermore, there may be risks arising out of the emerging nature of companies listed on GEM and the business sectors or countries in which the companies operate. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

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

The principal means of information dissemination on GEM is publication on the Internet website operated by the Stock Exchange. Listed companies are not generally required to issue paid announcements in gazetted newspapers. Accordingly, prospective investors should note that they need to have access to the GEM website in order to obtain up-to-date information on GEM-listed issuers.

The Stock Exchange takes no responsibility for the contents of this report, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this report.

This report, for which the directors of Tai Shing International (Holdings) Limited collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on the GEM of the Stock Exchange for the purpose of given information with regard to Tai Shing International (Holdings) Limited. The directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief:– (1) the information contained in this report is accurate and complete in all material respects and not misleading; (2) there are no other matters the omission of which would make any statement in this report misleading; and (3) all opinions expressed in this report have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.

HIGHLIGHTS

Turnover for the six months period ended 30 September 2007 amounted to approximately HK$19 million representing a decrease of approximately 46% over the corresponding period in 2006.
• Loss attributable to the shareholders for the six months ended 30 September 2007 amounted to approximately HK$3.9 million. Profit attributable to the shareholders for the six months ended 30 September 2006 amounted to approximately HK$5.6 million.
• Losses per share for the six months ended 30 September 2007 was approximately 4.3 HK cents. Earnings per share for the six months ended 30 September 2006 was approximately 6.2 HK cents.
• The Board does not recommend the payment of any dividend for the six months ended 30 September 2007.

The board of directors (the “Board”) of Tai Shing International (Holdings) Limited (the “Company”) is pleased to present the unaudited condensed consolidated results of the Company and its subsidiaries (collectively the “Group”) for the three months and six months ended 30 September 2007, together with the unaudited comparative figures for the corresponding periods in 2006, are as follows:–

CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)

for the three months and six months ended 30 September 2007

Notes Turnover 2 Cost of services and merchandise sold Gross profit/(loss) Other revenue Selling expenses General and administrative expenses Profit/(Loss) before tax 4 Income Tax 5 Profit/(Loss) for the period Attributable to: Equity holder to the Company Earnings/(Loss) per share - basic (HK cents) 6	Three months ended 30 September 2007 2006 *HK$’000* HK$’000 12,090 22,282 (13,494) (17,206) (1,404) 5,076 1,681 1,707 (782) (719) (2,601) (2,365) (3,106) 3,699 (367) (74) (3,473) 3,625 (3,473) 3,625 (3.8) 4.0	Six months ended 30 September 2007 2006 *HK$’000* HK$’000 19,583 36,554 (18,175) (27,771) 1,408 8,783 2,055 2,704 (1,686) (1,372) (5,272) (4,292) (3,495) 5,823 (391) (203) (3,886) 5,620 (3,886) 5,620 (4.3) 6.2

CONDENSED CONSOLIDATED BALANCE SHEET

as at 30 September 2007

30 Notes Non-current assets Fixed assets Intangible asset Current assets Inventories Financial assets at fair value through profit or loss 7 Gross amount due from customers for contract work Trade and other receivables 8 Tax recoverable Pledged bank deposits bank and cash balances Current liabilities Gross amount due to customers for contract work Trade and other payables 9 Receipts in advance Warranty provision Amount due to a substantial shareholder Net current assets Net Assets Capital and Reserves Share capital 10 Reserves 11	Unaudited September 2007 *HK$’000* 6,463 2,872 9,335 10,238 500 14,422 41,267 233 4,031 6,177 76,868 8,372 39,239 8,358 879 8,365 65,213 11,655 20,990 4,550 16,440 20,990	Audited 31 March 2007 HK$’000 6,894 2,804
		9,698
		181 328 14,076 35,916 228 926 10,146
		61,801
		8,171 31,957 2,149 858 4,028
		47,163
		14,638
		24,336
		4,550 19,786
		24,336

CONDENSED CONSOLIDATED STATEMENT IN CHANGES IN EQUITY (UNAUDITED)

for the six months ended 30 September 2007

			Attributable to	equity holders of the company	equity holders of the company
					Foreign
					currency	Accumulated
	Share	Share	General	Capital	translation	Profits/
	Capital	Premium	Reserve	Reserve	Reserve	(Losses)	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
At 1 April 2007	4,550	14,049	1,224	1,200	1,932	1,381	24,336
Exchange
differences on
translation of
foreign
operations and
net income
recognised
directly
in equity	—	—	—	—	540	—	540
Loss for the period	—	—	—	—	—	(3,886)	(3,886)
At 30 September 2007	4,550	14,049	1,224	1,200	2,472	(2,505)	20,990
At 1 April 2006	4,550	14,049	466	1,200	235	4,603	25,103
Exchange
differences on
translation of
foreign
operations and
net income
recognised
directly in
equity	—	—	—	—	684	—	684
Profit for the period	—	—	—	—	—	5,620	5,620
At 30 September 2006	4,550	14,049	466	1,200	919	10,223	31,407

CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

for the six months ended 30 September 2007

Net cash outflow from operating activities Net cash inflow/(outflow) from investing activities Net decrease in cash and cash equivalents Effects of foreign exchange rate Cash and cash equivalents at 1 April Cash and cash equivalents at 30 September Analysis of the balances of cash and cash equivalents Cash at bank and in hand	Six months ended 30 September 2007 2006 *HK$’000* HK$’000 (3,854) (2,775) (302) 1,453 (4,156) (1,322) 187 552 10,146 4,796 6,177 4,026 6,177 4,026 6,177 4,026

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED RESULTS

1. Basis of presentation

The unaudited condensed consolidated financial results of the Group (the “financial results”) have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards(“HKFRSs”), accounting principles generally accepted in Hong Kong and the disclosure requirements of Hong Kong Companies Ordinance and the GEM Listing Rules of the Hong Kong Stock Exchange.

The accounting policies and methods of computation used in the preparation of the financial results are consistent with those used in the audited annual accounts for the year ended 31 March 2007. These financial statements have been prepared under the historical cost convention,except that financial assets at fair value through profit or loss are carried at their fair values.

2. Turnover

The principal activities of the Group are the provision of systems development, sales of software and hardware products and provision of professional services. Turnover represents income arising from the provision of systems development and consultancy services, provision of IT engineering and technical support services and the sales of software and hardware products.

An analysis of the turnover by principal activities of the operations of the Group during the reporting periods is as follows:

		UNAUDITED	UNAUDITED
	Three months	ended	Six months		ended
	30 September			30 September
	2007	2006		2007	2006
	*HK$’000*	HK$’000	*HK$’000*		HK$’000
Systems development	11,049	21,192		18,542	35,464
Professional
services fees	1,041	1,090		1,041	1,090
	12,090	22,282		19,583	36,554

3. Segment reporting

(a) Business segments

Segment information is presented in respect of the Group’s business and geographical segments. Business segment information is chosen as the primary reporting format because this is more relevant to the Group’s internal financial reporting.

An analysis of the Group’s turnover and results for the six months period by business segment is as follows:

	System	System		Professional	Professional
	development			services		Consolidated
	2007		2006	2007	2006	2007	2006
	*$’000*	$’000		*$’000*	$’000	*$’000*	$’000
Revenue from
external customers	18,542	35,464		1,041	1,090	19,583	36,554
Segment results	1,110		8,026	298	757	1,408	8,783
Interest income						38	60
Unallocated operating
income and expenses						(4,941)	(3,020)
Profit/(Loss) before tax						(3,495)	5,823
Income tax						(391)	(203)
Profit/(Loss) for the period						(3,886)	5,620
Assets
Segment assets	82,098	82,264		3,666	2,188	85,764	84,452
Unallocated assets						439	2,164
Total assets						86,203	86,616
Liabilities
Segment liabilities	60,340	50,444		3,049	554	63,389	50,998
Unallocated liabilities						1,824	4,211
Total liabilities						65,213	55,209
Other information
Depreciation &
Amortisation for
the period	975		923	—	—	975	923

(b) Geographical segments

For the period ended 30 September 2007 and 2006, over 90% of the Group’s revenue and assets are derived from customers and operations based in the PRC and accordingly, no further analysis of the Group’s geographical segments is disclosed.

4. Profit/(Loss) before tax

Profit/(Loss) before tax is stated after charging/(crediting):

		UNAUDITED	UNAUDITED
Three months		ended	Six months		ended
	30 September			30 September
	2007	2006		2007	2006
	*HK$’000*	HK$’000	*HK$’000*		HK$’000
Auditors’ remuneration	200	170		400	340
Depreciation	486	632		975	923
Operating leases	541	1,054		1,100	1,163
Staff costs	7,560	3,251		11,210	6,843
Net exchange loss	9	—		9	—

5. Income tax

No Hong Kong profits tax has been provided in the financial statements as the group has no assessable profits arising in Hong Kong during the three months and six months ended 30 September 2007 and 2006.

Pursuant to the relevant laws and regulations in the PRC, Beijing Tongfang Electronic Science & Technology Co.,Ltd (“Beijing Tongfang”) is subject to PRC Enterprise Income Tax at a rate of 15% on its taxable income and is granted a 50% relief, which is effective from 1 January 2004 to 31 December 2006 (“Tax holidays”). After the Tax Holidays, Beijing Tongfang is subject to a preferential Enterprise Income Tax rate of 10% which is effective from 1 January 2007 to 31 December 2009, as it is qualified as an advanced technology enterprise.

6. Earnings/(Loss) per share

The calculation of basic earnings/(loss) per share for the three months and six months ended 30 September 2007 were based on the loss attributable to the shareholders of approximately of HK$3,473,000 and HK$3,886,000 (2006: earnings of HK$3,625,000 and HK$5,620,000) divided by the weighted average number of 90,995,000 shares for the three months and six months ended (2006: 90,995,000 shares) in issue during the period.

There were no potential dilutive ordinary shares in issue during the three months and six months ended 30 September 2007 and 2006.

7. Financial assets at fair value through profit or loss

	Unaudited	Audited
	At 30 September	At 31 March
	2007	2007
	*HK$’000*	HK$’000
At fair value:
Equity securities listed in the PRC	500	328

The above financial assets are classified as held for trading. The fair values of these financial assets are based on quoted market price.

8. Trade and other receivables

Unaudited At 30 September 2007 *HK$’000* Trade receivables 24,176 Retention receivables 4,430 Prepayments, deposits and other receivables 12,661 41,267 An aged analysis of trade receivables is as follows:	Audited At 31 March 2007 HK$’000 20,718 4,905 10,293
	35,916

Unaudited At 30 September 2007 *HK$’000* Within 1 month 3,238 More than 1 month but within 3 months 4,213 More than 3 months 16,725 24,176	Audited At 31 March 2007 HK$’000 2,585 1,310 16,823
	20,718

9. Trade and other payables

Unaudited At 30 September 2007 *HK$’000* Bills payable 729 Trade payable 13,148 Other payable and accruals 25,362 39,239 An aged analysis of trade payable is as follows: Unaudited At 30 September 2007 *HK$’000* Within 1 month 1,766 More than 1 month but within 3 months 1,084 More than 3 months 10,298 13,148	Audited At 31 March 2007 HK$’000 — 12,730 19,227
	31,957
	Audited At 31 March 2007 HK$’000 829 189 11,712
	12,730

All bills payable are due within one months.

10. Share capital

	Unaudited		Audited
	AS at 30 September	2007	AS at 31 March	2007
	No. of shares	Amount	No. of shares	Amount
	’000	HK$’000	’000	HK$’000
Authorised:
Ordinary shares of
HK$0.05 each	4,000,000	200,000	4,000,000	200,000
Issued and fully paid:
At beginning and
at end of the period
ordinary shares of
HK$0.05 each	90,995	4,550	90,995	4,550

11. Reserves

Movements in reserves for the Group during the period are set out in the unaudited condensed consolidated statement of changes in equity of the financial statement.

12. Commitments under operating leases

At 30 September 2007 the total future minimum lease payments under noncancellable operating leases payable are as follows:

Unaudited At 30 September 2007 *HK$’000* Within 1 year 1,848 After 1 year but within 5 years — 1,848	Audited At 31 March 2007 HK$’000 179 108
	287

13. Dividend

The Board does not recommend the payment of any dividend for the six months ended 30 September 2007 (2006: Nil).

14. Litigation

On 19 April 2006, a High Court Action No.858 of 2006 was commenced by Chan Kar Kui, Wong Calvin Ting Chi, Chan Wai Phan, Chan Man Wan and Kwok King Chuen (the “Plaintiffs”) against the Company for specific performance of the agreement entered between the Plaintiffs and the Company’s former director, To Cho Kei, on behalf of the Company, in around May/June 2000 to purchase from the Plaintiffs all their shareholdings in Epplication.Net Limited (“Epplication.Net”) at a consideration of HK$6,800,000 being twice of the actual amount that the Plaintiffs expended on Epplication.Net by way of transfer or allotment of the shares of the Company of the equivalent value, or alternatively, damages with interests and costs. The Company has filed a defence denying the allegation as the Company has no record of any agreement for the purchase of the Plaintiffs’ shareholdings in Epplication.Net and the Plaintiffs have not produced any documentary evidence to support their claim. The directors believe that the Company has strong defence in this action and therefore, no provision for liabilities was made.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Business Review

Turnover for the six months ended 30 September 2007 amounted to approximately HK$19 million representing a decrease of approximately 46% over the corresponding period in 2006.

Beijing Tongfang Electronic Science and Technology Company Limited (“Beijing Tongfang”), the main operating unit of the Group, continue to experience strong demand for its power plant operations and management software. In the six months ended 30 September 2007, the group was awarded a number of major projects include the provision of power plant simulation software to Guangdong Electricty Development Co., Ltd Shajiao A Power Plant, and the provision of management software for Panzhihua Panmei Coal Gangue Power Generation Co., Ltd and Shanghai Waigaoqiao The Third Electricty Generation Co., Ltd.

Financial Performance

During the six months ended 30 September 2007, the Group recorded a turnover of HK$19 million (2006: HK$36 million) representing a decrease of approximately 46% as compared to that of the corresponding period in 2006.

Revenue for the three months ended 30 September 2007 of approximately HK$12 million is about 46% lower than that for the three months ended 30 June 2007. Loss attributable to the shareholders was approximately HK$3.9 million (2006: profit HK$5.6million).

Liquidity and Financial Resources

As at 30 September 2007, shareholders’ funds of the Group amounted to approximately HK$20 million (2006: $31 million). Current assets amounted to approximately HK$77 million (2006: $79 million), of which approximately HK$6 million (2006: $4 million) were cash and cash equivalents. Current liabilities of HK$65 million (2006: $55 million) were mainly other payables and accruals.

Gearing Ratio

The gearing ratio calculated on the basis of total liabilities over the total shareholders’ fund as at 30 September 2007 was 311% (2006: 176%).

Foreign Currency Exposure

During the six months ended 30 September 2007, the Group experienced only immaterial exchange rate fluctuations as the functional currencies of the Group’s operations were mainly Hong Kong dollars and Renminbi. As the risk on exchange rate difference was considered to be minimal, the Group did not employ any financial instruments for hedging purposes.

Capital Structure

There has been no change in the capital structure of the company since 1 April 2007.

New Products and Services

The Group did not launch any new products or services during the period under review.

Material Acquisitions and significant Investments

There has no material acquisitions and significant investment during the period under review.

Employees and Remuneration Policies

As at 30 September 2007, the Group had hired 4 and 208 employees in Hong Kong and PRC respectively (2006: a total of 221) including the executive directors of the Company. Total staff costs including directors’ remuneration for the six months period under review amounting to approximately HK$11.2 million(2006: 6.8 million). The Group’s remuneration policies are in line with the prevailing market practices and are determined on the basis of performance and experience of individual employees. The Group provides mandatory provident fund scheme for the employees employed under the jurisdiction of the Hong Kong Employment Ordinance.

The Company has conditionally adopted a share option scheme pursuant to which the executive directors of the Company and full-time employees of the Group may be granted options to subscribe for the shares of the Company. During the six months ended 30 September 2007, no option was granted under the share option scheme.

Charges on Group Assets and Contingent Liabilities

As at 30 September 2007, the Group did not have any material charge on assets or any contingent liabilities.

Future Plans to Material Investments or Capital Assets

As at 30 September 2007, the Group had no plans for material investments or capital assets.

Future Prospects

The main operation of the Group, supplying management information system to power plant and power grid in China, is expected to benefit from the building of power plants in the PRC and the improvement of management information system for existing power plants. In addition to expanding into nuclear power station, the Group is actively looking for new growth areas through merger and acquisition.

DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS IN SECURITIES

As at 30 September 2007, the relevant 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 of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571, the Laws of Hong Kong) (“SFO”)) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they have taken or deemed to have under such provisions of the SFO), or which are required, pursuant to Section 352 of the SFO, to be entered in the register maintained by the Company referred to therein, or which are required, pursuant to Rule 5.46 of the GEM Listing Rules relating to securities transactions by the directors, to be notified to the Company and the Stock Exchange, were as follows:

Long positions in the shares of the Company

			Approximate
	Nature of	Number of	Percentage
	Shares	Shares	of issued share
Nane of Director	interested	interested	captical
Mr. Luk Yat Hung_(Note)_	Corporate	21,542,476	23.67%
Mr. Ho Cho Hang	Personal	1,100,000	1.21%

Note: Mr. Luk Yat Hung will be taken to be interested in 21,542,476 shares in the Company as a result of him being beneficially interested in 100% of the issued share capital of Wide Source Group Ltd. which in turn holds 21,542,476 shares in the Company.

Long positions in underlying shares of equity derivatives and debentures of the Company

As at 30 September 2007, no long positions of directors and chief executive in the underlying shares of equity derivatives and debentures of the Company and its associated corporations were recorded in the register or as otherwise notified to the Company and the Stock Exchange pursuant to Rule 5.46 of the GEM Listing Rules.

Short positions in shares, underlying shares of equity derivatives and debentures of the Company

During the period under review, no short positions of the directors and chief executive in the shares, underlying shares of equity derivatives and debentures of the Company and its associated corporations were recorded in the register or as otherwise notified to the Company and the Stock Exchange pursuant to Rule 5.46 of the GEM Listing Rules.

Save as disclosed above, as at 30 September 2007, none of the directors or chief executive of the Company or their respective associates had any interests or short positions in the shares, underlying shares of equity derivative and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which would have to be notified to the Company and 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 to be kept under Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the minimum standards of dealing by the directors of listed issuers as referred to in Rule 5.46 of the GEM Listing Rules.

SUBSTANTIAL SHAREHOLDERS

So far as is known to the directors of the Company, as at 30 September 2007, the following persons who had an interest or short positions in the shares of the Company as recorded in the register required to be kept under Section 336 of the SFO:–

Long positions in shares of the Company

			Approximate
		Number of	Percentage of
Name of Shareholders	Note	shares held	shareholding
Wise Sourse Group Ltd.	1	21,542,476	23.67%
Mr. Luk Yat Hung	2	21,542,476	23.67%
Resuccess Investments Ltd.	3	15,890,000	17.46%
Tongfang Co.Ltd	4	15,890,000	17.46%
Tsinghua Holdings Co.Ltd	5	15,890,000	17.46%
Best Jade Ltd.	6	7,190,000	7.90%
Ms.Li Luyuan	7	7,190,000	7.90%

Notes:

Wide Source Group Ltd. (“Wide Source”) is a company incorporated in the British Virgin Islands with limited liability and is ultimately and beneficially owned as to 100% by Mr. Luk Yat Hung.
Mr. Luk Yat Hung will be taken to be interested in 21,542,476 shares in the Company as a result of him being beneficially interested in 100% of the issued share capital of Wide Source which in turn holds 21,542,476 shares in the Company.
Resuccess Investments Ltd. is a company incorporated in the British Virgin Islands with limited liability and isowened by Tongfang Co.Ltd.
Tongfang Co.Ltd will be taken to be interest in 15,890,000 shares in the Company as a result of it being benefically interested in 100% of the issued share capital of Resuccess Investments Ltd.

Tsinghua Holdings Co.Ltd will be taken to be interested in 15,890,000 shares in the Company as a result of it being benefically interested in 33.06% of the issued share capital of Tongfang Co.Ltd.
Best Jade Ltd. (“Best Jade”) is a company incorporated in the British Virgin Islands with limited liability and is 100% ultimately and beneficially owned by Ms. Li Luyuan.
Ms. Li Luyuan will be taken to be interested in 7,190,000 shares in the Company as a result of her being beneficially interested in the entire issued share capital of Best Jade which in turn holds 7,190,000 shares in the Company.

Long positions in underlying shares of the Company

As at 30 September 2007, no long positions of other persons or substantial shareholders in the underlying shares of equity derivatives of the Company and its associated corporations were recorded in the register.

Short positions in shares of the Company

As at 30 September 2007, no short positions of other persons or substantial shareholders in the shares of the Company and its associated corporations were recorded in the register.

Short positions in underlying shares of the Company

As at 30 September 2007, no short positions of other persons or substantial shareholders in the underlying shares of equity derivatives of the Company and its associated corporations were recorded in the register.

Save as disclosed above, as at 30 September 2007, the directors were not aware of any other person who had an interest or short position in the shares or underlying shares (including interests in options, if any) of the Company as recorded in the register required to be kept under Section 336 of the SFO.

DIRECTORS’ INTERESTS IN CONTRACTS

No contracts of significance in relation to the Group’s business to which the Group was a party and in which a director of the Group had a material interest, whether directly or indirectly, subsisted at the six months ended 30 September 2007 or at any time during such period.

DIRECTORS’ COMPETING INTERESTS

As of 30 September 2007, none of the directors, substantial shareholders or management shareholders of the Company or their respective associates (as defined under the GEM Listing Rules) had any business or interest in a business which competes or may compete with the business of the Group.

SHARE OPTION SCHEME

Pursuant to the written resolutions of the shareholders, the Company has conditionally adopted and approved a share option scheme on 22 October 2003 (“New Share Option Scheme”) to replace the share option scheme adopted on 26 August 2000 (“Old Share Option Scheme”). The principal terms of the New Share Option Scheme were set out in the Appendix I to the circular of the Company dated 30 September 2003. No option has been granted by the Company under both the Old Share Option Scheme and New Share Option Scheme during the period under review or outstanding as at 30 September 2007.

The purpose of the New Share Option Scheme is to enable the Company to grant share options to selected participants as incentives or rewards for their contribution and prospective contribution to and stronger business relationship between the selected participants and the Group.

Save as disclosed above, as at 30 September 2007, none of the directors, chief executive or management shareholders or their respective associates (as defined under the GEM Listing Rules) had any interests or rights to subscribe for any shares of the Company or any of its associated corporations as defined in the SDI Ordinance.

AUDIT COMMITTEE

The Company has established an audit committee on 18 May 2000 with written terms of reference in compliance with the requirements as set out in Rules 5.28 to 5.30 of the GEM Listing Rules. The primary duties of audit committee are to review and supervise the financial reporting process and internal control system of the Group and to provide advice and comments to the Board.

The audit committee comprises four independent non-executive directors, namely, Mr. Chung Shui Ming Timpson, Professor Ip Ho Shing Horace and Mr. Yan Yonghong, and Mr. Chung Shui Ming Timpson is the chairman of the audit committee. Mr. Yan Yonghong and Mr. Peng lijun,and Mr. Chung Shui Ming Timpson is the chairman of the audit committee.

The audit committee has reviewed this interim results and has provided advice and comments thereon.

BOARD PRACTICES AND PROCEDURES

Up to the six months period ended 30 September 2007, the Company has complied with the board practices and procedures as set out in Rules 5.34 to 5.45 of the GEM Listing Rules.

COMPLIANCE WITH CODE ON CORPORATE GOVERNANCE PRACTICES

The company has complied with the code provisions as set out in the Code on Corporate Governance Practices contained in Appendix 15 of the GEM Listing Rules throughout the period under review.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

During the six months period under review, neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company’s listed securities.

On behalf of the Board. Li Wenli Chairman

Hong Kong, 9 November 2007

for identification purpose only

As at the date hereof, the Board comprises the following directors:

Executive directors:

Mr. Ho Cho Hang Ms. Li Wenli

Non-executive director:

Mr. Luk Yat Hung (Chairman)

Independent non-executive directors:

Mr. Chung Shui Ming, Timpson Professor Ip Ho Shing, Horace Mr. Yan Yonghong Mr. Peng Lijun