Launch Tech Company Limited — Interim / Quarterly Report 2014

Sep 28, 2014

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2014

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中期報告

Interim Report

深圳市元征科技股份有限公司 LAUNCH TECH COMPANY LIMITED *

(a joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 2488)

2014 INTERIM REPORT

I. FINANCIAL INFORMATION

(All amounts in RMB’000 unless otherwise stated)

CONSOLIDATED BALANCE SHEET

		30 June	31 December
	Notes	2014	2013
			(Audited)
Current assets:
Cash		321,525	315,245
Bills receivables		27,416	20,765
Trade receivables	5	250,105	249,351
Prepayments		62,296	83,505
Other receivables		74,221	28,249
Inventories	6	156,267	110,538
Other current assets		5,803	3,955
Total current assets		869,633	811,608
Non-current assets:
Fixed assets		320,495	342,590
Construction in progress		99,262	88,067
Intangible assets		108,682	110,239
Development expenditure		19,510	16,340
Goodwill		1,139	1,139
Deferred income tax assets		4	4
Total non-current assets		549,092	558,380
Total assets		1,418,725	1,369,989

* For identification purpose only

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		30 June	31 December
	Notes	2014	2013
			(Audited)
Current liabilities:
Short-term borrowings		505,122	528,442
Bill payables		131,429	–
Trade payables	7	28,125	137,203
Receipts in advance		87,658	56,958
Wage payables		3,677	2,968
Tax payables		2,930	-8,013
Other payables		9,046	8,764
Non-current liabilities due within one year		630	631
Total current liabilities		768,617	726,953
Non-current liabilities:
Long-term borrowings		2,458	158
Other non-current liabilities		20,000	20,000
Total non-current liabilities		22,458	20,158
Total liabilities		791,075	747,111
Shareholders’ equity:
Share capital		60,360	60,360
Capital reserve		283,189	283,189
Surplus reserve		18,099	18,099
Undistributed profit	8	266,059	261,412
Exchange difference arising on translation
of foreign currency statements		-260	-323
Total owners’ equity attributable to
parent company		627,447	622,737
Minority shareholders’ equity		203	140
Total shareholders’ equity		627,650	622,877
Total liabilities and shareholders’ equity		1,418,725	1,369,988

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CONSOLIDATED INCOME STATEMENT

		For the six months	ended
		30 June
	Notes	2014	2013
Operating income		359,647	321,663
Less: Operating costs		217,027	213,802
Business tax and surcharge		1,225	2,532
Selling expenses		44,212	39,305
Administrative expenses		78,502	53,685
Finance costs		21,948	19,639
Impairment loss on assets		-295	1,415
Add: Gain on investments		–	5,600
Operating profit (loss expressed with “–”)		-2,972	-3,115
Add: Non-operating income		7,625	7,150
Less: Non-operating expenses		617	128
Total profit		4,036	3,907
Less: Income tax expenses	9	-674	1,643
Net profit		4,710	2,264
Net profit attributable to owners of
parent company		4,647	2,264
Profit or loss attributable to minority
shareholders		63	–
Earnings per share:
Basic earnings per share	10	0.08	0.04

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Net cash flow generated from operating activities Net cash flow from investing activities Net cash flow from financing activities Net flow in cash and cash equivalents Cash and cash equivalents at 1 January Effect of foreign exchange rate changes, on cash held Cash and cash equivalents at 30 June, comprising cash at banks and in hand	Six months ended 30 June 2014 2013 89,880 79,775 -42,578 -23,562 -41,022 31,072 6,280 87,285 315,245 301,157 – -74 321,525 388,368	Six months ended 30 June 2014 2013 89,880 79,775 -42,578 -23,562 -41,022 31,072 6,280 87,285 315,245 301,157 – -74 321,525 388,368
		87,285 301,157 -74
		388,368

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT

1. Basis of Preparation of Financial Statement

Financial information in this announcement was extracted from the audited financial statements (the “Financial Statements”) published in the 2013 Annual Report.

The Company carried out recognition and measurement on a going concern and actual transaction and event basis in accordance with the Basic Standard and 38 specific standards of the Accounting Standards for Business Enterprises issued by the Ministry of Finance on 15 February 2006, and the Application Guidance for Accounting Standard for Business Enterprises, Interpretations of Accounting Standards for Business Enterprises and other relevant regulations issued thereafter (hereafter referred to as “the Accounting Standards for Business Enterprises”) and the Preparation Convention of Information Disclosure by Companies Offering Securities to the Public No.15 – General Provisions on Financial Reporting (amended in 2010) issued by the China Securities Regulatory Commission (CSRC) and prepared the Financial Statements on such basis. The accounting policies are consistent with those adopted in the preparation of the Group’s 2013 annual results.

In addition, the Financial Statements have also complied with the disclosure requirements of the Hong Kong Companies Ordinance and the applicable disclosure provisions of the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited.

2. Significant Accounting Policies, Accounting Estimates and Compilation Method of Consolidated Financial Statements

(1) Accounting period

The Reporting Period is from 1 January 2014 to the six months ended 30 June 2014.

(2) Reporting currency

Renminbi was adopted as the reporting currency. The Company’s foreign subsidiaries choose their reporting currencies on the basis of the primary economic environment in which they operate and converted into RMB when preparing financial statements.

(3) Method of preparing consolidated financial statements

All subsidiaries were included in the consolidated financial statements

The subsidiaries that are within the scope of the consolidation shall have the same accounting policies and the accounting periods with those of the Company. In preparing the consolidated financial statements, where the accounting policies and the accounting periods are inconsistent between the Company and subsidiaries, the financial statements of subsidiaries are adjusted in accordance with the accounting policies and accounting periods of the Company. Based on the financial statements of the Company and its subsidiaries, the consolidated financial statements are prepared by the Company according to other relevant information and after the long-term equity investments in the subsidiaries are adjusted in accordance with the equity method. When consolidating the financial statements, the effects of intra-transactions between the Company and its subsidiaries, and among subsidiaries on the consolidated balance sheet, the consolidated income statement, the consolidated cash flow statement and the consolidated statement of changes in equity shall be offset.

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3. Revenue

Revenue from main operations includes the net value of the received and receivable for the sales of different types of vehicle maintenance equipment, and provision of internet upgrade service as follows:

	For the six	months ended
	30	June
	Current year	Previous year
Product sales	383,090	309,689
Income of software upgrade fees	8,540	8,188
Revenue from main operations	391,630	317,877
Revenue from other operations: rent	4,017	3,786
	395,647	321,663

4. Trade Receivables

Trade receivables Less: provision of bad debts Net amount Within 1 year Over 1 year	At the period end 286,745 36,640 250,105 At the period end 144,895 105,210 250,105	At the beginning of the year 286,126 36,775
		249,351
		At the beginning of the year 136,256 113,095
		249,351

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5. Inventories

At the period end Raw materials 34,093 Work in progress 35,113 Finished goods 87,061 156,267 6. Trade Payables At the period end Within 1 year 24,804 Over 1 year 3,321 28,125 7. Undistributed profits Current year As at the beginning of the period Add: net profit attributable to parent company in the current period As at the end of the period	At the beginning of the year 26,515 13,893 70,130
	110,538
	At the beginning of the year 130,636 6,567
	137,203
	Amount 261,412 4,647
	266,059

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Previous year

As at the beginning of the period Add: net profit attributable to parent company in the current period As at the end of the period	Amount 254,378 2,264
	256,642

8. Income tax expense

		Applicable tax rate
	The Company	15%
	Launch Software	15%
	Shanghai Launch	25%
	Launch Europe Gmbh	32%
	Xi’an Launch	25%
	Peng Ao Da	15%
9.	Earnings per share

(1) Basic earnings per share

Basic earnings per share is calculated by dividing the consolidated net profit for holders of ordinary share of the parent company by average weighted number of outstanding ordinary shares of the parent company.

Items	Current year	Previous year
Consolidated net profit for holder of
ordinary shares of the parent company	4,647	2,264
Average weighted number of outstanding
ordinary shares of the parent	60,360,000	60,360,000
Basic earnings per share (RMB/share)	0.08	0.04

• (2) Diluted earnings per share

As there was no ordinary share with dilutive potential for the year 2014 and 2013, thus no diluted earnings per share is presented.

10. Dividend

From the end of the Reporting Period, no dividend has been recommended by the board. (2013: nil).

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11. Subsidiaries

Name of the corporation	Shareholding	Business nature	Registered capital
上海元征機械設備有限責任公司	Wholly-owned	Manufacturing of equipment
(“Shanghai Launch”)		and machines for maintenance	USD18,000,000
深圳市元征軟件開發有限公司(“Launch Software”)	Wholly-owned	Software development	RMB40,000,000
Launch Europe GmbH	Wholly-owned	Sales of LAUNCH products	RMB671,875
西安元征軟件科技有限公司(“Xi’an Launch”)	Wholly-owned	Software development	RMB100,000,000
深圳市鵬奧達科技有限公司(“Peng Ao Da”)	Controlling subsidiary
	(88% shareholding)	Software development	RMB1,000,000

12. Contingent Liability

At the end of the Reporting Period, the Company did not have any significant contingent liability.

13. Pledge of assets

As at 30 June 2014, the Company pledged properties and buildings with original value approximately amounted to 251,000,000 for certain bank borrowings.

14. Capital commitment

As at 30 June 2014, the Company did not have any significant capital commitment.

15. Post-Balance Sheet Event

There is no material post-balance sheet event which is required to be disclosed but has not been disclosed.

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II. MANAGEMENT DISCUSSION AND ANALYSIS

The Group’s principal developments in the first half of the year under review are set as follows:

OPERATING RESULTS

In the first half of 2014, macroeconomic downward pressure still exists; however, capital and labor costs showed growth trend. Amid the slow economic recovery of the developed countries, the overall weak demand at home and abroad, the underdeveloped new needs of the market, the operating pressure is comparatively heavy as a whole. In this regard, the Group timely adjusted the business strategy, on the one hand, to accelerate the development of car networking business and on the other hand, to maintain the leading position of the traditional diagnostic equipment in the industry.

In the first half of 2014, the Group completed the development of parts of the car networking products and the platform construction. In order to better develop the car networking market, the Group provided the market with an experience edition of the car networking product. During several experience months, according to the feedbacks from tens of thousands of users, the Group not only improved the functional planning and contents of services, but also was more confident on the development of the car networking business.

In the first half of 2014, since the car networking products have not yet put into mass production and marketing, the operating income from the car networking business has not yet made a significant contribution to the Group’s revenue; in addition, to successfully develop the car networking market, the Group not only invested more in the R&D of the car networking application platform, but also strengthened the efforts to publicize the car networking products; therefore, the car networking business wrote off a portion of the profits from traditional diagnostic products. The operating result of the first half basically met our expectation laid down in the beginning of the year.

BUSINESS REVIEW

Market

The Group initiated the restructuring and development of the car networking business in 2014. In the first half of 2014, the Group focused on the building of the marketing team as well as the warm-up publicity of the car networking market to well prepare for the full implementation of the O2O market strategy. In traditional business, the Group focused on the development of high margin automotive diagnostic devices and the control over low-margin business; therefore, operating income in the first half maintained steady growth. The sales volume of high value-added automotive diagnostic devices soared as compared to the last year and the low value-added business obviously decreased. The operating results basically hit the desired objectives.

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In the first half of 2014, the Group invited overseas and domestic distributors for the nineteenth Launch annual conference in Shenzhen, China, at which, the attending global distributors and main partners spoke highly of the products under the car networking products launched by the Company, fully affirmed the Company’s technological achievements and were deeply interested in new product reserved. Users in the industry strongly preferred thereto. The sales generating from the annual conference basically achieved the desired objectives. The attending distributors that conference expressed full confidence on the Group’s future development plans. According to the distributors attending the annual conference, the Group’s performance in the second half is expected to significantly increase. In addition to the annual conference once a year, the Group mainly organized and participated 57 marketing campaigns, and 27 exhibitions, both local and overseas:

1. held golo launch event in Shenzhen, Beijing, Shanghai, Xi’an, Wuhan and Guangzhou

2. held 50 product trainings in major cities in China

3. held, together with China Unicom, a Car Parade titled “War, Auto and Life. golo”

4. participated 2014 AMR International Auto Maintenance Fair

5. participated in the 2014 Beijing International Auto Show

6. participated in activities of Dongguan Auto Show, Shenzhen Auto Club, Dongguan Drift Racing, Chongqing Auto Show and other marketing activities

7. partipated in exhibition shows in 19 oversea countries

Financial

In the first half of 2014, the Group’s revenue and profit grew significantly, especially the diagnostic product, the sales of which showed substantial growth, generating increasing market share. As the Group, in order to accelerate the development of car networking business, has invested more in the R&D of the car cloud platform and the car networking product; in addition, to successfully develop the car networking market, the Group has also invested a lot of advertising expenses in terms of the construction of the marketing team and warm-up publicity of the car networking market; in terms of the financial expenses, although the amount of bank loans remained flat basically, the finance costs also increased to some extent due to the growth of interest rates on bank loans. The increases in the aforementioned cost resulted in obvious increase of the Group’s operating costs as compared to last year; therefore, the net profit was not so much, but it improved significantly. In addition, the Group’s capital structure is reasonable within high quality of assets.

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Technology & Products

In the first half of 2014, the successfully developed and developing technologies and products by the Group’s IPD R&D system included:

• 1) DBSCar.com product line: golo2 Project, golo3 Project, golo4 Project, golo Technician Project, RCU-P Module, RCU-H Module;

• 2) diagnostic equipment product line: X-431 PADII Project, Maximus 2.0, MaxGo, CUBE, CRP229 Project;

• 3) Tire and maintenance product line: X-712S 4-wheel alignment development Project;

• 4) Technological development project: RCU-U, Encryption system based on hardware, golo2s, golo3s

Patents & Honors

In the first half of 2014, the Group obtained 4 new patents and 8 software copyrights; 54 patents and 9 software copyrights were undergoing the approval process. In addition, the Group was awarded 10 honors, including:

• 1) China Connected Car Business Development Award 2014;

• 2) Famous Trademark of Guangdong Province;

• 3) Equipment Management Outstanding Unit for Communication and Transportation Enterprises 2013;

• 4) Enterprise of Continuous Innovation;

• 5) Shenzhen Top Brand Authorization Certificate

Production

With the full implementation of enhanced production and effective control in product specifications and yield, the Group achieved significant results in areas such as manufacturing technology, manufacturing procedures, quality management and inventory management, which allowed it to have better cost control, ensured product quality and significantly enhanced production efficiency. Furthermore, the R&D system of the Shanghai plant has been optimized and improved. The mode of enhanced production contributed significantly to the growth of the Group’s product sales.

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Management

In the first half of 2014, the Group invited a large number of internet technology and automotive diagnostic technology talents to optimize human resource allocation and our R&D management team structure. Furthermore, the Group continued to adopt various strict performance appraisal and incentive measures to motivate and inspire the staff, particularly for its R&D and marketing personnels, who were full of confidence in the Group’s development planning and incentive policy with high morale.

In the first half of 2014, the Group continued to carry out enhanced production and fully implemented 6S management and procedure management. Also, the Group implemented refined management in human resources management, systematical procedure management, marketing management, general budget management, cost control and management, quality management, efficiency management, R&D management and corporate culture establishment.

In the first half of 2014, the Group established an information system security management team to optimize the Group’s ERP, CRM, IO and OA systems and significantly enhanced the procedural efficiency. Moreover, the IPD R&D system of the Group has been improving and stabilizing, and the internal communication system was streamlined.

Prospect

For the second half of 2014, the Group will continue to strengthen and perfect internal management, implement various incentive systems, and strictly apply the internal appraisal and reward and punishment system. It will also deepen its corporate culture establishment in respect of “innovation, quality, efficiency, professionalism and competitiveness”. The Group will strive to raise the staff’s passion for work and inspire their potential and morale, which will in turn enhance the overall competitive advantage of the Group.

In development plan, Connected Car business will be the Group’s direction of development with Connected Car users as the core. It will focus on the development of the Connected Car application technologies and services, strive to build the vehicle cloud platform as the centre and construct the business chain of car owners, technicians, repair enterprise and third-party service. It strives to rapidly become core enterprise of the Connected Car based on automotive diagnostic technology. As for its traditional business, the Group will maintain its leading position in the automotive diagnostic equipment industry, controlling business with low additional value.

As for marketing, the Group will absorb talents with experience in online marketing and continue to implement refined management. With online marketing being the focus, the business development model will be optimized and organically linked up with the traditional business model. Relevant marketing policies will be formulated according to the characteristics of different regional markets to suit the Group’s overall development and strategic planning. It will also conduct various marketing activities to promote awareness towards the differential advantages of the Group’s products and enhance the popularity and brand appeal of “LAUNCH”. Furthermore, the Group will keep improving its after sale technical service network and provide satisfactory technology and services to the market.

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For R&D, the Group will continue to use the IPD R&D system, recruit experienced R&D and internet technology talents, optimize the structure of the R&D team and stabilize the team, and strictly apply internal appraisal and incentive system and encourage innovation. With diagnostic technology as the core technology, the Group will give full play to its technological advantage drawing on its 20 years of experience in the area to expedite the R&D of new products. The Group will leverage on its differential advantages in technology and products to increase the dependence of distributors on it and to win the confidence of end users.

While developing new products and technology, the Group will maintain strict control on R&D, manufacturing and sale costs, and adopt enhanced production and flexible market management and human resources policy to facilitate the Group’s healthy and sustainable growth and provide even better return for shareholders and investors.

As for production, the Group will continue to implement enhanced production and optimize manufacturing procedures to enhance the production management of high value-added and high-tech products and gradually outsource production processes of products of low-value, in order to enhance production efficiency, ensure product quality, reduce production cost and control inventory effectively to cope with the requirement of a rapidly growing market and achieve higher profit margin for the benefit of shareholders and investors.

FINANCIAL ANALYSIS

Analysis of Financial Status and Business Performance During the Reporting Period

Operating results

In first six months of 2014, total profit of the Company increased by 2,000,000 as compared with the same period last year.

• (1) Operation revenues, operation costs and gross profits margin were 12%, 1% and 4% higher than the same period of last year respectively. Gross profit margin increased to 40%.

Analysis of assets, liabilities and equity interests

Total assets value amounted to 1,419,000,000 during the Reporting Period, increased by 4% as compared with the beginning of the year, of which inventory increased. Total liabilities amounted to 791,000,000, increased by 6% as compared with the beginning of the year, mainly due to increase in short term loans. Total equity interest attributable to shareholders amounted to 628,000,000, increased by 1% as compared with the beginning of the year.

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Principal Sources of Fund and Its Use

Cash flows from operating activities

The Company’s cash inflows during the Reporting Period were mainly derived from revenue of goods selling. Cash outflow was mainly related to production and operating activities. The Company’s net cash inflow from operating activities for the reporting period amounted to 90,000,000.

Cash flows from investment activities

Cash inflow from investment activities during the Reporting Period was nil. Cash outflow to investment activities amounted to 42,000,000, which was mainly used for capital expense on purchase of plant facilities and research. The above expenditures were mainly financed by the Company’s internal resources.

Cash flows from fund-raising activities

Cash inflow from fund-raising activities during the Reporting Period amounted to 509,000,000, which was mainly derived from bank loans. Cash outflow from fund-raising activities during the Reporting Period amounted to 550,000,000 was mainly for repayment of bank loans and interest. Net cash outflow from fund-raising activities for the Reporting Period amounted to 41,000,000.

Capital Structure

The Company’s capital structure consists of interests and liabilities attributable to shareholders during the Reporting Period. Interests attributable to shareholders amounted to 627,000,000; and total liabilities amounted to 791,000,000. Total assets amounted to 1,419,000,000. As at the end of the period, the Company’s gearing ratio was 179% (At the beginning of the period: 183%).

Capital structure by liquidity

Total current liabilities 769,000,000 Accounting for 54% (At the beginning of the period: (At the beginning of the period: 53%) of 727,000,000) the capital Total equity interest 628,000,000 Accounting for 43% (At the beginning of the period: (At the beginning of the period: 45%) of 623,000,000) the capital

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III. NOTES TO OTHER MATERIAL EVENTS

1. Receipt of government subsidies

The Company had received return of value-added tax amounting to approximately 2,000,000 from the government. Other government subsidies concerning the development of science and technology was approximately RMB4,000,000.

2. Scope of consolidation

During the Reporting Period, there was no change in respect of the consolidation.

3. Review of financial statements for the Reporting Period by the audit committee

The 2014 interim financial statements has been reviewed and confirmed by the audit committee of the Board of the Company.

4. Code on Corporate Governance Practices

During the Reporting Period, the Company was in compliance with the code provisions set out in the Code on Corporate Governance Practices as set out in Appendix 14 to the Rules Governing the Listing of Securities (the “Listing Rules”) on the Stock Exchange of Hong Kong Limited.

5. Model Code for securities transactions by directors and supervisors

During the Reporting Period, the Company has adopted a set of code of practice regarding securities transactions by directors and supervisors on terms no less exacting than the standards set out in the Model Code in Appendix 10 to the Listing Rules. Having made specific enquiry to all directors and supervisors of the Company, the Company confirmed that, each of the Directors and supervisors has complied with the required standards regarding securities transactions by directors set out in the Model Code within the 6 months ended 30 June 2014.

6. Share capital

• (1) During the Reporting Period, there was no change in the total number of shares and the structure of share capital of the Company.

• (2) During the Reporting Period, neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company’s shares.

• (3) During the Reporting Period, the Company had no share options granted under the share option scheme.

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7. Directors’, supervisors’ and chief executives’ interests in securities

• (a) Interests and short positions of Directors, chief executives and supervisors of the Company in the share capital of the Company and its associated corporations

As at 30 June 2014, the Directors, chief executives and supervisors of the Company have the following interests and short positions in the shares, debentures or underlying shares of the Company or its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (“SFO”)) which have been 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 under such provisions of the SFO) or which have been required, pursuant to section 352 of the SFO, to be entered in the register referred to therein or which have been required, pursuant to the Model Code For Securities Transactions by Directors of Listed Issuers (the “Model Code”) of the 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 shares

Domestic shares

			Approximate	Approximate
			percentage of	percentage of
	Capacity in	Number of	the Company’s	the Company’s
	which shares	domestic	issued domestic	total issued
Name of Director	were held	shares	shares	shares
Mr. Liu Xin	Beneficiary	13,200,000	40.00%	21.87%
	owner
	Interest in	13,886,400	42.08%	23.01%
	a controlled		(Note 1)
	company
	Interest in	1,026,100	3.11%	1.70%
	a controlled		(Note 2)
	company
Mr. Liu Jun	Interest in	13,886,400	42.08%	23.01%
	a controlled		(Note 3)
	company
Ms. Liu Yong	Interest in	1,026,100	3.11%	1.70%
	a controlled		(Note 4)
	company

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Notes:

• (1) Mr. Liu Xin holds 60.00% interest in 深圳市浪曲科技開發有限公司 (“Shenzhen Langqu”) which holds approximately 42.08% interest in the issued domestic shares of the Company. The corporate interest of Mr. Liu Xin in the Company duplicates with that held by Mr. Liu Jun in the Company. By virtue of Mr. Liu Xin’s holding more than one-third interest in Shenzhen Langqu, Mr. Liu Xin is deemed, under Part XV of the SFO, to be interested in approximately 42.08% interest in the issued domestic shares of the Company apart from his personal interest of 42.01% interest in the issued domestic shares of the Company.

• (2) Mr. Liu Xin holds 40.00% interest in 深圳市得時域投資有限公司 (“Shenzhen De Shi Yu”) which holds approximately 3.11% interest in the issued domestic shares of the Company. By virtue of Mr. Liu Xin’s holding more than one-third interest in Shenzhen De Shi Yu, Mr. Liu Xin is deemed, under the Part XV of the SFO, to be interested in 3.11% interest in the issued domestic shares of the Company apart from his personal interest of 40.00% interest in the issued domestic shares of the Company.

• (3) Mr. Liu Jun holds 40.00% interest in Shenzhen Langqu which holds approximately 42.08% interest in the issued domestic shares of the Company. The corporate interest of Mr. Liu Jun in the Company duplicates with that held by Mr. Liu Xin in the Company. By virtue of Mr. Liu Jun’s holding more than one-third interest in Shenzhen Langqu which holds approximately 42.08% interest in the issued domestic shares of the Company, Mr. Liu Jun is deemed, under Part XV of the SFO, to be interested in approximately 42.08% interest in the issued domestic shares of the Company.

• (4) Mr. Liu Yong holds 60.00% interest in Shenzhen De Shi Yu which holds approximately 3.11% interest in the issued domestic shares of the Company. The corporate interest of Ms. Liu Yong in the Company duplicates with that held by Mr. Liu Xin in the Company. By virtue of Mr. Liu Yong’s holding more than one-third interest in Shenzhen De Shi Yu, Ms. Liu Yong is deemed, under Part XV of the SFO, to be interested in 3.11% interest in the issued domestic shares of the Company.

Save as disclosed above, as at the 30 June 2014, none of the Directors, chief executives or supervisors of the Company has any personal, family, corporate or other interests or short positions in any shares, debentures or underlying shares of the Company or any of its associated corporations as defined in the SFO.

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(b) Persons who have an interest or short position which is discloseable under Divisions 2 and 3 of Part XV of the SFO and substantial shareholders

So far as known to the Directors, as at 30 June 2014, the following (not being a Director or supervisor of the Company) have an interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions of 2 and 3 of Part XV of the SFO or be directly or indirectly 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:

Long positions in shares and underlying shares in the Company

(i) Domestic shares

			Approximate	Approximate
			percentage of	percentage of
	Capacity in		the Company’s	the Company’s
	which shares	Number of	issued domestic	total issued
Name	were held	domestic shares	shares	shares
Shenzhen Langqu	Interest of	13,886,400	42.08%	23.01%
	corporation		(Note)
	controlled by
	substantial
	shareholder

Note:

The legal and beneficial interests in the shares of Shenzhen Langqu are owned by Mr. Liu Xin as to 60% and by Mr. Liu Jun as to 40% respectively. Mr. Liu Xin and Mr. Liu Jun are therefore deemed to be interested in all domestic shares registered in the name of Shenzhen Langqu under Part XV of the SFO.

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8. Purchase, sale or redemption of the company’s listed securities

Neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities during the period.

9. Securities transactions by directors

The Company has adopted a code of conduct regarding securities transactions by directors on terms no less exacting than the required standard of dealings set out in Appendix 10 of the Listing Rules. The Company has also made specific enquiry of all directors and the Company are not aware of any non-compliance with the required standard of dealings and the code of conduct regarding securities transactions by directors adopted by the Company throughout the period.

10. Competing interests

None of the Directors or the management shareholders of the Company or their respective associates (as defined in the Listing Rules) had an interest in a business which causes or may cause significant competition with the business of the Group.

IV. INTERIM REPORT AND OTHER INFORMATION

This announcement will set out on the websites of the Company (www.cnlaunch.com) and the Stock Exchange (www.hkexnews.hk). Interim report will be despatched to shareholders and will be published on the aforesaid websites in due course.

By Order of the Board Launch Tech Company Limited Liu Xin Chairman

Shenzhen, the PRC 29 August 2014

As at the date of this report, the board of directors of the Company comprises Mr. Liu Xin (Chairman), Mr. Liu Jun, Ms. Huang Zhao Huan and Mr. Jiang Shiwen as executive Directors, Ms. Liu Yong as nonexecutive Director, and Ms. Zhang Yan, Mr. Liu Yuan and Dr. Zou Shulin as independent non-executive Directors.

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