hmvod Limited — Interim / Quarterly Report 2011

Nov 14, 2011

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 2011

• For identification purpose only

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

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

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

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

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

HIGHLIGHTS

• Revenue for the six months ended 30th September 2011 amounted to approximately HK$41 million representing an increase of approximately 132% over the corresponding period in 2010.

• Loss attributable to the shareholders for the six months ended 30th September 2011 amounted to approximately HK$10.9 million representing a decrease of approximately 57% over the corresponding period in 2010 (2010: loss of HK$25.5 million).

• Loss per share for the six months ended 30th September 2011 was approximately 0.5 HK cent (2010: loss per share 1.8 HK cents)

• The Board does not recommend the payment of any dividend for the six months ended 30th September 2011.

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The board of Directors (“Board”) of 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 30th September 2011, together with the unaudited comparative figures for the corresponding periods in 2010, as follows:—

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Notes Revenue 2 Cost of services Gross profit Other income 4 Selling and distribution expenses Administrative expenses Other expenses 5 Finance costs 6 Loss before taxation Income tax expenses 7 Loss for the period 8 Other comprehensive income/(expense) for the period Exchange difference arising on translation Total comprehensive expenses for the period Loss per share — basic (HK cents) 9	Three months ended 30th September 2011 2010 HK$’000 HK$’000 15,294 11,858 (12,559) (9,607) 2,735 2,251 649 2,884 (1,232) (1,589) (11,435) (8,966) (67) (8,640) (285) (278) (9,635) (14,338) — (1) (9,635) (14,339) 135 1,091 (9,500) (13,248) (0.4) (1.0)	Six months ended 30th September 2011 2010 HK$’000 HK$’000 41,466 17,897 (34,012) (14,585) 7,454 3,312 1,795 4,445 (1,744) (2,841) (17,725) (21,114) (67) (8,784) (553) (492) (10,840) (25,474) (95) (58) (10,935) (25,532) 257 (175) (10,678) (25,707) (0.5) (1.8)

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CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Unaudited 30th September 2011 Notes HK$’000 Non-current assets Plant and equipment 5,071 Intangible assets 136,054 Goodwill 63,741 Interests in associates 45,989 Available-for-sale investments 27,317 Deposit paid for acquisition of plant and equipment 18,500 296,672 Current assets Trade and other receivables and prepayments 10 97,940 Deposit for acquisition of subsidiaries 11 41,000 Amounts due from customers for contract work 21,030 Financial assets at fair value through profit or loss 12 536 Pledged bank deposits 1,770 Bank balances and cash 7,557 169,833 Current liabilities Amounts due to customers for contract work 10,575 Trade and other payables 13 79,984 Receipts in advance 6,916 Warranty provision 25 Amount due to a substantial shareholder 17,047 Amount due to director 156 Income tax payable 3,711 Bank borrowings 12,258 Obligations under finance leases 996 131,668 Net current assets/(liabilities) 38,165 Total assets less current liabilities 334,837

Audited 31st March 2011 HK$’000 6,106 143,543 — 45,989 27,317 18,500 241,455 73,897 — 16,332 570 2,724 17,490 111,013 12,095 67,114 5,724 53 10,930 — 3,711 11,954 961 112,542 (1,529) 239,926

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CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

30th Notes Capital and reserves Share capital 14 Reserves 15 Non-controlling interest Total equity Non-current liabilities Obligations under finance leases	Unaudited September 2011 HK$’000 15,206 314,044 2,704 331,954 2,883 334,837	Audited 31st March 2011 HK$’000 10,993 225,536 —
		236,529 3,397
		239,926

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UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

					Attributable to equity holders of the	Attributable to equity holders of the	Attributable to equity holders of the	company
							Foreign
						Share	**Currency **	Accumulated		Non-
	Share		Share	General	Capital	Option	Translation	Profits/		Controlling
	Capital		Premium	Reserve	Reserve	Reserve	Reserve	(Losses)		Interest		Total
	HK$’000		HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000		HK$’000		HK$’000
At 1st April 2010	6,529		45,970	2,439	1,200	—	4,131	(4,594)		—		55,675
Total comprehensive expenses
for the period, net of tax	—		—	—	—	—	(175) (25,532)			—		(25,707)
Issue of shares upon
— placement of shares	1,330		68,160	—	—	—	—	—		—		69,490
— transaction cost attributable
to placement of shares	—		(469)	—	—	—	—	—		—		(469)
At 30th September 2010	7,859		113,661	2,439	1,200	—	3,956	(30,126)		—		98,989
At 1st April 2011	10,993		256,251	3,066	1,200	13,515	4,275	(52,771)		—		236,529
Total comprehensive income
for the period, net of tax	—		—	—	—	—	257	(10,935)		—		(10,678)
Issue of shares upon
— placement of shares	1,967		61,386	—	—	—	—	—		—		63,353
— acquisition of subsidiaries	2,246		39,714	—	—	—	—	—		—		41,960
— transaction cost attributable
to placement of shares	—		(1,914)	—	—	—	—	—		—		(1,914)
Transfer from general reserve	—		—	(10)	—	—	—	10		—		—
Acquisition of non-controlling
interests in subsidiary	—		—	—	—	—	—	—		2,704		2,704
At 30th September 2011	15,206		355,437	3,056	1,200	13,515	4,532	(63,696)		2,704		331,954

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UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASHFLOWS

Net cash outflow from operating activities Net cash outflow from investing activities Net cash inflow from financing activities Net decrease in cash and cash equivalents Effects of foreign exchange rate Cash and cash equivalents at 1st April Cash and cash equivalents at 30th September Analysis of the balances of cash and cash equivalents Cash at bank and in hand	Six months ended 30th September 2011 2010 HK$’000 HK$’000 (12,187) (35,087) (60,104) (45,482) 61,847 68,528 (10,444) (12,041) 511 (175) 17,490 25,857 7,557 13,641 7,557 13,641

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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.

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 31st March 2011. 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. Revenue

Revenue represents income arising from the provision of systems development and provision of professional services.

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

Systems development Professional services fees	UNAUDITED Three months ended Six months ended 30th September 30th September 2011 2010 2011 2010 HK$’000 HK$’000 HK$’000 HK$’000 12,007 11,504 38,122 17,488 3,287 354 3,344 409 15,294 11,858 41,466 17,897	UNAUDITED Three months ended Six months ended 30th September 30th September 2011 2010 2011 2010 HK$’000 HK$’000 HK$’000 HK$’000 12,007 11,504 38,122 17,488 3,287 354 3,344 409 15,294 11,858 41,466 17,897
		17,897

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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 revenue and results for the six months period by business segment is as follows:

Systems development 2011 2010 $’000 $’000 Revenue from external customers 38,122 17,488 Segment results (1,884) 3,143 Interest income Unallocated operating income Unallocated operating expenses Finance costs Income tax expenses Loss for the period Assets Segment assets 295,585 59,466 Unallocated assets Total assets Liabilities Segment liabilities 53,528 51,647 Unallocated liabilities Total liabilities Other information Depreciation & Amortisation for the period — Segment 165 291 — Unallocated	Professional services 2011 2010 $’000 $’000 3,344 409 851 169 1,297 105 2,126 3,089 27 —	Consolidated 2011 2010 $’000 $’000 41,466 17,897 (1,033) 3,312 33 9 19 4,436 (9,306) (32,739) (553) (492) (95) (58) (10,935) (25,532) 296,882 59,571 169,623 125,964 466,505 185,535 55,654 54,736 78,897 31,810 134,551 86,546 192 291 914 706 1,106 997

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(b) Geographical segments

For the period ended 30th September 2011 and 2010, over 90% of the Group’s revenue and assets were derived from customers and operations based in the People’s Republic of China (“PRC”) and accordingly, no further analysis of the Group’s geographical segments is disclosed.

4. Other income

Reversal of impairment loss in respect of trade receivables Reversal of impairment loss in respect of other receivables Gain/(loss) on disposal of financial assets at fair value through profit or loss Interest income Sundry income	UNAUDITED Three months ended Six months ended 30th September 30th September 2011 2010 2011 2010 HK$’000 HK$’000 HK$’000 HK$’000 619 1,243 1,485 2,034 78 231 258 342 (61) 5 19 5 13 1 33 9 — 1,404 — 2,055 649 2,884 1,795 4,445	UNAUDITED Three months ended Six months ended 30th September 30th September 2011 2010 2011 2010 HK$’000 HK$’000 HK$’000 HK$’000 619 1,243 1,485 2,034 78 231 258 342 (61) 5 19 5 13 1 33 9 — 1,404 — 2,055 649 2,884 1,795 4,445
		4,445

5. Other expenses

		UNAUDITED	UNAUDITED
	Three months ended		Six months ended
	30th September		30th September
	2011	2010	2011	2010
	HK$’000	HK$’000	HK$’000	HK$’000
Fair value loss on
financial assets
at fair value through
profit or loss	67	8,640	67	8,784

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6. Finance costs

UNAUDITED

Interest on bank borrowing due within one year Finance lease	Three months ended 30th September 2011 2010 HK$’000 HK$’000 222 199 63 79 285 278	Six months ended 30th September 2011 2010 HK$’000 HK$’000 433 371 120 121 553 492	Six months ended 30th September 2011 2010 HK$’000 HK$’000 433 371 120 121 553 492
			492

7. Income tax expenses

• (a) Hong Kong profit tax has not been provided for in the consolidated financial statements as there was no estimated assessable profit derived from Hong Kong during the six months ended 30th September 2011 and 2010.

• (b) Under the Law of the PRC on Enterprise Income Tax (the “EIT Law”) and Implementation Regulation of the EIT Law, the standard tax rate is 25%.

In accordance with the relevant regulations, approvals from relevant local tax bureaus and Foreign Enterprise Income Tax Law in the PRC, one subsidiary qualified as an advanced technology enterprise and was subject to a preferential Enterprise Income Tax rate of 15% (2010: 15%) which was effective from 1st January 2008 to 31st December 2010. The PRC subsidiaries are subject to PRC Enterprise Income Tax at 25% starting from 1st January 2011.

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8. Loss for the period

Loss for the period has been arrived at after charging:

Staff Costs Salaries and other benefits Retirement benefits scheme contributions Auditors’ remuneration Amortisation of intangible assets Depreciation of plant and equipment Operating leases rentals in respect of land and buildings Net exchange loss	UNAUDITED Three months ended Six months ended 30th September 30th September 2011 2010 2011 2010 HK$’000 HK$’000 HK$’000 HK$’000 3,129 4,015 5,479 6,903 682 854 1,222 1,590 3,811 4,869 6,701 8,493 113 160 225 320 7,092 — 7,489 — 541 560 1,106 997 689 670 1,158 1,232 1 — 1 1.921	UNAUDITED Three months ended Six months ended 30th September 30th September 2011 2010 2011 2010 HK$’000 HK$’000 HK$’000 HK$’000 3,129 4,015 5,479 6,903 682 854 1,222 1,590 3,811 4,869 6,701 8,493 113 160 225 320 7,092 — 7,489 — 541 560 1,106 997 689 670 1,158 1,232 1 — 1 1.921
		8,493
		320 — 997 1,232 1.921

9. Loss per share

The calculation of basic loss per share for the three months and six months ended 30th September 2011 were based on the loss attributable to the shareholders of approximately of HK$9,635,000 and HK$10,935,000 (2010: losses of HK$14,339,000 and HK$25,532,000) divided by the weighted average number of 2,376,439,000 shares for the three months and six months ended (2010: 1,395,749,000 shares) in issue during the period.

As the Group sustained a loss for the period, diluted loss per share is not presented as the potential shares arising from the exercise of the Company’s share options would decrease the loss for the six months ended 30th September 2011 and 2010 which is regarded as anti-dilutive.

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10. Trade and other receivables and prepayments

	Unaudited	Audited
At 30th September		At 31st March
	2011	2011
	HK$’000	HK$’000
Trade and bills receivables	60,857	44,709
Less: Impairment loss recognised
in respect of trade receivables	(17,144)	(17,897)
	43,713	26,812
Retention receivables	3,633	7,167
Less: Impairment loss recognised
in respect of retention receivables	(1,193)	(1,450)
	2,440	5,717
Prepayments, deposits and
other receivables	70,425	59,761
Less: Impairment loss recognised
in respect of other receivables	(18,638)	(18,393)
	51,787	41,368
	97,940	73,897

(a) Trade receivables are due for settlement in accordance with the terms of the underlying agreements with the customers. Trade receivables with balances that are more than 9 months overdue are requested to settle all outstanding balances before any further credit is granted.

Impairment loss is recognized again trade receivables more than one year based on estimated irrecoverable amounts determined by reference to past default experience of the counterparty.

• (b) An aged analysis of trade and bills receivables based on the date of invoice, net of impairment loss recognised is as follows:

	Unaudited	Audited
	At 30th September	At 31st March
	2011	2011
	HK$’000	HK$’000
0-30 days	18,830	7,712
31-90 days	9,414	—
Over 90 days	15,469	19,100
	43,713	26,812

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11. Deposit for acquisition of subsidiaries

Balance at 30th September 2011 represents a refundable deposit of HK$20,000,000 paid to prospective seller for the possible acquisition of the entire issued share of capital of Fame Thrive Limited, details of the possible acquisition are disclosed in the announcement of the Company dated 30th December 2010, 6th May 2011 and 30th June 2011, and a refundable deposit of HK$21,000,000 paid to Gold Tycoon Limited for the possible acquisition of not less than 50% of the entire issued share capital of Gold Depot Investments Limited, details of the possible acquisition are disclosed in the announcement of the Company dated 20th April 2011, 17th May 2011 and 17th October 2011.

12. Financial assets at fair value through profit or loss

	Unaudited	Audited
	At 30th September	At 31st March
	2011	2011
	HK$’000	HK$’000
Equity securities listed in the PRC,
at fair value	536	570

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

13. Trade and other payables

		Unaudited		Audited
	At	30th September	At	31st March
		2011		2011
		HK$’000		HK$’000
Trade payable		31,633		15,890
Other payable and accruals		48,351		51,224
		79,984		67,114

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

	Unaudited	Audited
	At 30th September	At 31st March
	2011	2011
	HK$’000	HK$’000
0-30 days	8,901	11
31-90 days	6,840	654
Over 90 days	15,892	15,225
	31,633	15,890

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14. Share capital

Authorised: Ordinary shares of HK$ 0.005 each at 31st March 2011 and 30th September 2011 Issued and fully paid: Ordinary shares of HK$0.005 each at 31st March 2011 Issue of shares of HK$0.005 each upon share placements_(Note a) Issue of shares of HK$0.005 each upon acquisition of subsidiaries (Note b)_	Number of shares 40,000,000,000 2,198,484,547 393,500,000 449,196,909 3,041,181,456	Amount HK$’000 200,000
		10,993 1,967 2,246
		15,206

Notes:

• (a) On 18th May 2011, the Company allotted and issued a total of 393,500,000 shares of HK$0.005 each to certain independent parties at the price of HK$0.161 per share for a cash consideration of HK$63.35 million (before expenses).

• (b) On 15th July 2011, the Company allotted and issued, credited as fully paid, a total of 49,196,909 shares of HK$0.005 each in relation to the acquisition of 51% of the registered capital of 青島博達保險經紀有限公 司 (unofficial English translation being Qingdao Boda Insurance Brokerage Company Limited) at the price of HK$0.1618 per share as consideration shares.

On 12th September 2011, the Company allotted and issued, credited as fully paid, a total of 400,000,000 shares of HK$0.005 each in relation to the acquisition of the entire issued share capital of Joint Bridge Investments Limited at the price of HK$0.10 per share as consideration shares.

15. 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.

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16. Commitments

• (a) Capital commitments for the acquisition of intangibles assets, plant and equipment

and equipment
		Unaudited		Audited
	At	30th September	At	31st March
		2011		2011
		HK$’000		HK$’000
Contracted but not provided for		25,500		25,500

(b) Commitment under operating lease

The Group leases certain of its office premises under operating lease. Leases for properties are negotiated for a term ranging from one to two years and rentals are fixed, with an option to renew the lease. At 30th September 2011 the total future minimum lease payments under noncancellable operating leases payable are as follows:

	Unaudited		Audited
	At 30th September	At 31st March
	2011		2011
	HK$’000		HK$’000
Within 1 year	1,669		2,535
After 1 year but within 5 years	—		—
	1,669		2,535

17. Dividend

The Board does not recommend the payment of any dividend for the six months ended 30th September 2011 (2010: Nil).

18. Litigation

On 19th 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 into 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 action has been dormant since end of 2008. The Directors believe that the Company has a strong defence in this action and therefore, no provision for liabilities was made.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

Business Review

Benefited from the revenue contribution from Fullmark Management Limited and the improved operation of the Group’s research, development and provision of integrated management information system division, the Group’s revenue for the six months ended 30th September 2011 amounted to approximately HK$41 million representing an increase of approximately 132% over the corresponding period in 2010.

Financial Performance

Revenue for the three months ended 30th September 2011 of approximately HK$15 million is about 43% lower than that for the three months ended 30th June 2011 which is HK$26.2 million. Such decrease was mainly due to the fact that no major contract in relation to systems development was awarded to the Group in the period under review. Amortisation of intangible assets of approximately HK$7.5 million for InsureLink System of Fullmark Management Limited had been incurred during the period under review. Such amortisation has resulted in a loss to the segment results of systems development.

Even so, with the better results for the first three months ended 30th June 2011, the Group still recorded a revenue of HK$41 million (2010: HK$18 million) during the six months ended 30th September 2011 representing an increase of approximately 132% as compared to that of the corresponding period in 2010.

On the other hand, fair value on loss on financial assets at fair value through profit or loss (which was included in the other expenses) decreased to approximately HK$0.1 million as compared to HK$8.8 million of the previous corresponding period, representing a decrease of approximately 99.2%.

As a result of the increase in revenue and decrease in other expenses for the six months ended 30th September 2011 as mentioned above, loss attributable to the shareholders was reduced to approximately HK$10.9 million (2010: loss of HK$25.5 million).

Liquidity and Financial Resources

As at 30th September 2011, shareholders’ funds of the Group amounted to approximately HK$332 million (2010: HK$99 million). Current assets amounted to approximately HK$170 million (2010: HK$152 million), of which approximately HK$8 million (2010: HK$14 million) were cash and cash equivalents. Current liabilities of HK$132 million (2010: HK$87 million) were mainly trade and other payables.

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Gearing Ratio

The gearing ratio calculated on the basis of total liabilities over the total shareholders’ fund as at 30th September 2011 was 40.5 % (2010: 87%).

Foreign Currency Exposure

During the six months ended 30th September 2011, 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

Save as disclosed in Note 14 of the unaudited condensed financial statements above, there has been no change in the capital structure of the Company from 1st April 2011 up to 30th September 2011.

On 11th November 2011, a share consolidation became effective by which every ten shares of HK$0.005 each (before such share consolidation) in the issued and unissued share capital of the Company was consolidated into one share of HK$0.05 (after such share consolidation) in the issued and unissued share capital of the Company.

Details of the above share consolidation are disclosed in the circular of the Company dated 25th October 2011.

New Products and Services

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

Material Acquisitions and Significant Investments

During the period under review, the Company has been involved in the following material acquisitions:

• (i) On 20th April 2011, the Company and Gold Tycoon Limited, a company incorporated in the British Virgin Islands with limited liability, entered into the memorandum of broad terms in relation to the proposed acquisition of not less than 50% of the entire issued share capital of the Gold Depot Investments Limited, a company incorporated in the British Virgin Islands with limited liability. The Company understood that Gold Depot Investments Limited directly or indirectly owns an exploration right and a mining right of a gold mine located in Guizhou, the People’s Republic of China.

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Details of the above possible acquisition are disclosed in the announcement of the Company dated 20th April 2011, 17th May 2011 and 17th October 2011.

• (ii) On 24th June 2011, Fei Luxi (費露熙) and 鑫約福（上海）貿易有限公司 (unofficial English translation being Fullmark (Shanghai) Trading Company Limited), a wholly-owned subsidiary of the Company, entered into a conditional share transfer agreement whereby Fei Luxi (費露熙) agreed to sell, and 鑫約福（上海）貿易有限公司 (unofficial English translation being Fullmark (Shanghai) Trading Company Limited) agreed to purchase, 51% of the registered capital of 青島博達保險經紀有限公 司 (unofficial English translation being Qingdao Boda Insurance Brokerage Company Limited), at the consideration of HK$33,000,000. The principal business of 青島博達保險經紀有限公司 is, among others, the provision of insurance brokerage service in Qingdao and its surrounding area.

Having obtained a legal opinion from its legal advisers as to the PRC law confirming that all necessary documents in relation to the acquisition had been submitted to the relevant authorities for approval, the Company has issued, credited as fully paid, an aggregate of 49,196,909 shares to the vendor to satisfy part of the consideration.

Details of the above transaction are disclosed in the announcements of the Company dated 23rd May 2011, 24th June 2011 and 15th July 2011.

• (iii) On 2nd September 2011, the Company and Liang Zhuo Hui and Chen Nan (collectively, the “Vendors”) entered into sale and purchase agreement, pursuant to which the Company conditionally agreed to purchase, and the Vendors conditionally agreed to sell, the issued share capital of Joint Bridge Investments Limited, for a consideration of HK$40,000,000. A wholly-owned subsidiary of Joint Bridge Investments Limited is principally engaged in the development and application of computer software and system integration and computer technology consultancy services. The completion of this acquisition took place on 12th September 2011 and the consideration for the acquisition was satisfied by the Company alloting and issuing, credited as fully paid, 400,000,000 shares of the Company to the Vendors.

Details of the above acquisition are disclosed in the announcements of the Company dated 2nd September 2011, 5th September 2011 and 12th September 2011.

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Employees and Remuneration Policies

As at 30th September 2011, the Group hired 21 and 104 employees in Hong Kong and PRC respectively (2010: a total of 181 including the executive Directors. Total staff costs including Directors’ remuneration for the six months period under review amounting to approximately HK$5.2 million (2010: HK$8.5 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 and full-time employees of the Group may be granted options to subscribe for the shares of the Company. During the six months ended 30th September 2011, no options had been granted under such share option scheme.

Charges on Group Assets and Contingent Liabilities

As at 30th September 2011, the Group did not have any material charge on assets or any contingent liabilities (2010: Nil).

Future Plans to Material Investments or Capital Assets

As at 30th September 2011, the Group had no plans for material investments or capital assets save as disclosed in the subsection headed “Material Acquisitions and Significant Investments” above and Note 11 of the unaudited condensed financial statements above.

Future Prospects

It has been the Company’s long term goal to maximize shareholders’ value. In view of the intense market competition for the Group’s existing business particularly for the security and surveillance division, the Company has been exploring business opportunities to expand the Groups’ operations and enhance its earnings.

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DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS IN SECURITIES

As at 30th September 2011, save as mentioned below, none of the Directors and chief executive has any interest or short position in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (“SFO”) which are required to be (i) notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he is taken or deemed to have taken under such provisions of the SFO); or (ii) entered in the register kept by the Company pursuant to section 352 of the SFO; or (iii) notified to the Company and the Stock Exchange pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules:

Long positions in the shares of the Company

			Approximate
	Nature of	Number of	percentage of
	shares	shares	issued share
Name of director	interested	interested	Capital
			(note 3)
Mr. Wong Chung Wai,	Beneficial owner	10,000,000	0.33%
Eric_(note 1)_
Mr. Chan Yun Sang	Beneficial owner	10,000,000	0.33%
(note 2)
Note:

1. Mr. Wong Chung Wai, Eric is an executive Director. As at 30th September 2011, Mr. Wong Chung Wai, Eric was interested in 2,000,000 issued shares of the Company and an option to subscribe up to 8,000,000 shares of the Company.

2. Mr. Chan Yun Sang is an executive Director. As at 30th September 2011, Mr. Chan Yun Sang was interested in 2,000,000 issued shares of the Company and an option to subscribe up to 8,000,000 shares of the Company.

3. As at 30th September 2011, the issued share capital of the Company is 3,041,181,456 shares.

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SUBSTANTIAL SHAREHOLDERS

So far as is known to the Directors or chief executive of the Company, as at the 30th September 2011, the person other than a director or chief executive of the Company who has an interest or short position in the shares and 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 10% 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, were as follows:

			Approximate
		Number of	percentage of
Name of shareholders	Capacity	shares held	shareholding
Chiu Wai Shing	Beneficial owner	217,340,000	7.14%
Resuccess Investments	Beneficial owner	158,900,000	5.22%
Limited_(note 1)_
Tsinghua Tongfang Co.	Interest in controlled	158,900,000	5.22%
Limited_(note 1)_	corporation

Notes:

1. Resuccess Investments Ltd. is a company incorporated in the British Virgin Islands with limited liability and is owned by Tsinghua Tongfang Co. Ltd. Tsinghua Tongfang Co. Ltd. will be taken to be interested in 158,900,000 issued shares in the Company as a result of it being beneficially interested in 100% of the issued share capital of Resuccess Investments Limited.

2. As at 30th September 2011, the issued share capital of the Company is 3,041,181,456 shares.

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 had a material interest, whether directly or indirectly, subsisted at the six months ended 30th September 2011 or at any time during such period.

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DIRECTORS’ COMPETING INTERESTS

As of 30th September 2011, none of the Directors, 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

During the six months ended 30th September 2011, the movement or the options granted under the share option scheme adopted by the Company on 22nd October 2003 are as follows:

						Closing
						price of the				Closing
						securities				price
						immediately				immediately
						**before the **	**Number of **	Number of	Exercise	before the
	**Number of **	Number of			Number of	date on	options	options	price of	date on
	options	options			options	which the	cancelled	**outstanding **	the option	which the
	outstanding	granted			exercised	options	or lapsed	as at 30th	and	options
	as at 1st	during	Date of	Vesting	during	were	**during **	September	exercise	were
	March 2011	the year	grant	period	**the year **	exercised	the year	2011	period	granted
Directors
Mr. Wong	8,000,000	Nil	N/A	N/A	Nil	N/A	Nil	8,000,000	N/A	N/A
Chung Wai, Eric
Mr. Chan Yun Sang	8,000,000	Nil	N/A	N/A	Nil	N/A	Nil	8,000,000	N/A	N/A
Others
Employee	8,000,000	Nil	N/A	N/A	Nil	N/A	8,000,000	Nil	N/A	N/A
Employee	11,450,000	Nil	N/A	N/A	Nil	N/A	Nil	11,450,000	N/A	N/A

Save as disclosed herein, as at 30th September 2011, none of the Directors, chief executive, substantial shareholders of the Company or their respective associates (as defined under the GEM Listing Rules) had any right to subscribe for the shares of the Company

AUDIT COMMITTEE

The Company has established an audit committee on 18th 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.

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As at the date of this report, the audit committee comprises three independent non-executive directors, namely, Mr. Tang Sze Lok, Mr. Chan Wai Kwong, Peter and Mr. Xu Jingbin, where Mr. Tang Sze Lok is the chairman of the audit committee.

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

SECURITIES TRANSACTIONS BY DIRECTORS

The Company adopted the required standard of dealings as set out in Rules 5.48 to 5.67 of the GEM Listing Rules as the code of conduct regarding securities transactions in securities of the Company by the Directors.

Having made specified enquiry with the Directors, all the Directors confirmed that they had complied with the required standard of dealings for the year ended 30th September 2011.

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 to 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 Wong Chung Wai, Eric Chairman and Executive Director

Hong Kong, 14th November 2011

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

Executive Directors:

Mr. Wong Chung Wai, Eric (Chairman) Mr. Chan Yun Sang Mr. Choi King Lit Mr. Han Fangfa Ms. Ju Lijun Mr. Liu Bo

Non-executive Director:

Dr. Pan Jin

Independent non-executive Directors:

Mr. Tang Sze Lok Mr. Chan Wai Kwong, Peter Mr. Xu Jingbin

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