Microware Group Limited — Annual Report 2021

Jul 22, 2021

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Microware Group Limited 美高域集團有限公司 (incorporated in the Cayman Islands with limited liability) Stock Code: 1985

Contents

Corporate Information	2
Highlights of the Year	3
Chairman’s Statement	6
Management Discussion and Analysis	8
Profle of Directors and Senior Management	12
Corporate Governance Report	15
Directors’ Report	26
Environmental, Social and Governance Report	40
Independent Auditor’s Report	66
Consolidated Statement of Proft or Loss and Other Comprehensive Income	71
Consolidated Statement of Financial Position	72
Consolidated Statement of Changes in Equity	73
Consolidated Statement of Cash Flows	74
Notes to the Consolidated Financial Statements	76
Financial Summary	132
	Annual Report 2021	01

Corporate Information

BOARD OF DIRECTORS

Executive Directors

CHU Ming Ho (Chairman and Chief Executive Officer of the Group) YANG Peter Shun Tsing CHENG Wing Fai (appointed on 1 March 2021)

Non-Executive Director

REGISTERED OFFICE

Conyers Trust Company (Cayman) Limited Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

WAN Yiu Hon

Independent Non-Executive Directors

LI Wai Man CHENG Tak Chung LI Richard King Hang

AUDIT COMMITTEE

LI Wai Man (Chairlady) CHENG Tak Chung LI Richard King Hang

REMUNERATION COMMITTEE

LI Richard King Hang (Chairman) CHU Ming Ho CHENG Tak Chung

NOMINATION COMMITTEE

CHU Ming Ho (Chairman) CHENG Tak Chung LI Richard King Hang

COMPANY SECRETARY

CHAN Wai Hing Gloria (HKICPA)

AUTHORISED REPRESENTATIVES

CHU Ming Ho (Chairman and Chief Executive Officer of the Group) CHAN Wai Hing Gloria

AUDITOR

Deloitte Touche Tohmatsu Registered Public Interest Entity Auditors

LEGAL ADVISERS

As to Hong Kong Law

Sidley Austin Solicitors, Hong Kong

HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS IN HONG KONG

1/F, Century Centre 44-46 Hung To Road Kwun Tong Kowloon Hong Kong

PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE IN CAYMAN ISLANDS

Conyers Trust Company (Cayman) Limited Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

BRANCH SHARE REGISTRAR AND TRANSFER OFFICE IN HONG KONG

Tricor Investor Services Ltd. Level 54, Hopewell Centre 183 Queen’s Road East, Hong Kong

PRINCIPAL BANKS

Industrial and Commercial Bank of China (Asia) Limited Dah Sing Bank Limited Hang Seng Bank Limited DBS Bank (Hong Kong) Limited

COMPANY’S WEBSITE

www.microware1985.com

STOCK CODE

1985

Highlights of the Year

Business Activities

1

In the past year, Microware has organised end-users webinars with different partners to promote our value-added services and create business opportunities.

Highlights of the Year

It is Microware’s honor to receive the continuous support from different business partners and we are looking forward to reaching another milestone together in the coming years.

2

Highlights of the Year

3

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Annual General Meeting 2020
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Caring For The Community

Rice Dumpling Voluntary Service 2020

Chairman’s Statement

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On behalf of the board (the “ Board ”) of directors (the “ Directors ”) of Microware Group Limited (the “ Company ”, together with its subsidiaries, the “ Group ”), I am pleased to present to the shareholders of the Company (the “ Shareholders ”) the annual report of the Group for the year ended 31 March 2021 (the “ Year ”).

For the Year, the Group reported total revenue of approximately HK$1,114.3 million, representing a decrease of approximately 18.4% compared to the year ended 31 March 2020 (the “ Previous Year ”). Gross profit for the Year was approximately HK$142.0 million, representing a year-on-year decrease of approximately 5.5%. An analysis of the financial results of the Group for the Year is included in the Management Discussion and Analysis section of this report.

Gross profit was higher than expected, which offset the slowing of revenue, thanks to an improved profit margin from our expanded service portfolio, augmented by our enriched skillset and service capacity in delivering higher value-added solutions that addressed the needs of a bigger potential market. We also benefited from our diverse spectrum of customers from segments with increased IT support needs, compensated for a slowdown in other segments.

While the onset of the Covid-19 pandemic took a severe toll on the global economy, demand for IT services increased as companies adopted new business models to cope with the new environment. Many organizations began to undertake digital transformation programs, or to accelerate those already underway, to minimise business disconnection and increase operational efficiencies. This typically involved the adoption of technology to address the need for more remote working, virtual collaboration and cloud-based services.

Although the economic slowdown prompted some of our customers to take a more cautious approach in rolling out less timesensitive IT projects, we observed greater urgency in the business community to upgrade IT infrastructure and network security to support the digital transformation process.

Chairman’s Statement

To ensure that the Group was able to respond to the changing market needs and seize the new business opportunities, we focused our core business solutions in the areas of Hybrid IT infrastructure, Smart Workplace, Security and Managed Services, and continued to evolve our offerings and services to help our customers on their digital transformation journeys. At the same time, we sharpened our business strategies by boosting resources in expanding technical resources pool, forming business partnership with new potential vendors and keeping widening our service portfolio in order to capture a bigger share of the security and managed services markets.

In response to the pandemic, the Group fine-tuned its business operation model to ensure the health and well-being of its staff while doing everything possible to maintain business as usual, minimise any negative impacts and provide continuity of support for our customers. Despite the public health and operational challenges, we stayed committed to being a responsible company and continued to observe our social responsibility diligently, including supporting charities and abiding by the tenets of a Caring Company. Given our long-term commitment to social responsibility, we were very pleased to be named a Caring Company for the 14th consecutive year.

Hong Kong has emerged stronger after 18 months of disruption, initially posed by the social unrest and then compounded by the pandemic. In the year to come, however, our Group expects the global economic and business environment to remain challenging. We will continue to take a prudent approach and adapt our business strategies to address market changes. In addition, we will keep investing in acquiring different skillsets and expand our capabilities at a measured pace to excel in service delivery. We will enrich those solutions and services that we believe to have the potential to meet viable market demand and deliver healthy returns to the shareholders.

With the expertise built over nearly 36 years in the IT industry, Microware will not only keep delivering the best quality of the service to our customers, we will strive for excellence in everything we do.

On behalf of the Board, I would like to take this opportunity to thank our shareholders, business partners and customers for their trust and support throughout this challenging time in Hong Kong. I would also like to express my sincere appreciation to the management team and the entire staff for their unwavering commitment and contribution to the growth and prosperity of the Group, and especially for those staff who performed services and logistics duties in person throughout the pandemic. We will continue to capitalize on market opportunities and stay committed to delivering strong results for our stakeholders in the year to come.

Chu Ming Ho

Chairman of the Board, executive Director and Chief Executive Officer

Hong Kong 25, June 2021

Management Discussion and Analysis

BUSINESS REVIEW

The Group is principally engaged in the provision of IT infrastructure solution services and IT managed services business in Hong Kong. The Group strives to provide one-stop IT experience which begins with (i) consultation and advice; (ii) hardware and/or software procurement; (iii) implementation; (iv) management and maintenance of the IT infrastructure solutions; to (v) provision of cyber securities training programmes.

The Group is a well-established IT infrastructure solutions provider based in Hong Kong. As at 31 March 2021, the Group has maintained the number of both technical and sales staff who have passed the qualification test to ensure that the Group keeps abreast of the advanced technology development with its vendors. In addition, the Group has received numerous of remarkable awards of top performance and enterprise solutions from the vendors as set out below:

Presented by	Awards
Hewlett Packard Enterprise	Top Partner — Aruba Central Award FY20
Cisco	Partner Awards FY20 — Spotlight Award — Cloud Frontier
City University of Hong Kong	Certifcate for Scholarship and Bursary Support
Hewlett Packard Enterprise	Outstanding Business Partner Solution Architect FY20
Hewlett Packard Enterprise	Top Performing Partner on PointNext Services FY20
International Business Machines Corporation	Top Contribution Award — Reseller Gold Award 2020
Kaspersky	Outstanding Partner 2020
McAfee	Best Performer in FY20
NetApp	Best Business Growth FY21
RedHat	Top Performance Partner FY20
Sangfor	Best Gold Partner 2020

The IT infrastructure solution industry in Hong Kong is highly competitive and fragmented. In particular, the Board believes that the business environment of Hong Kong is challenging. The Group’s management team will continue to take proactive actions with an aim to improve the Group’s operations and results.

Management Discussion and Analysis

FINANCIAL REVIEW

Revenue

The total revenue of the Group amounted to approximately HK$1,114.3 million for the Year, representing a decrease of approximately HK$251.1 million or 18.4% as compared to approximately HK$1,365.3 million for the Previous Year. The decrease in total revenue was mainly due to the decrease in revenue of the business segment of IT infrastructure solution services which was approximately HK$995.8 million for the Year, representing a decrease of approximately HK$245.8 million or 19.8% as compared to approximately HK$1,241.7 million for the Previous Year. The revenue of the business segment of IT managed services was approximately HK$118.4 million, representing a decrease of approximately HK$5.2 million or 4.2% as compared to approximately HK$123.7 million for the Previous Year. For the Year, the business segments of IT infrastructure solution services and IT managed services contributed approximately 89.4% and 10.6% to the total revenue of the Group, respectively.

Cost of sales

The cost of sales of the Group for the Year was approximately HK$972.2 million, representing a decrease of approximately HK$242.8 million or 20% from approximately HK$1,215.1 million for the Previous Year. Such decrease was mainly attributable to the business segment of IT infrastructure solution services and the receipt of government subsidies from the Employment Support Scheme implemented by the Hong Kong Government of approximately HK$7.2 million.

Gross profit and gross profit margin

The gross profit of the Group for the Year was approximately HK$142.0 million, representing a decrease of approximately HK$8.2 million or 5.5% from approximately HK$150.2 million for the Previous Year. Such decrease was mainly due to the decrease in gross profit generated from the IT infrastructure solution services of the Group, which was partly offset by the recognition of the government subsidiaries from the Employment Support Scheme implemented by the Hong Kong Government of approximately HK$7.2 million.

Operating expenses

The total operating expenses of the Group for the Year was approximately HK$87.3 million, representing a decrease of approximately HK$12.7 million or 12.7% as compared to approximately HK$100.1 million for the Previous Year. Such decrease was due to the decrease in selling and distribution expenses of approximately HK$8.8 million or 12.8%, the decrease in administrative expenses of approximately HK$3.9 million or 12.5%, and the receipt of government subsidies from the Employment Support Scheme implemented by the Hong Kong Government of approximately HK$6.2 million as a result of the outbreak of the coronavirus disease (“COVID-19”).

Profit for the Year

The profit and total comprehensive income of the Group for the Year was approximately HK$46.9 million, representing an increase of approximately HK$6.6 million or 16.4% as compared to approximately HK$40.3 million for the Previous Year. Such increase was due to the receipt of government subsidies from the Employment Support Scheme implemented by the Hong Kong Government of approximately HK$13.4 million.

Liquidity and financial resources

Capital Structure

The Group did not have any borrowings as at 31 March 2021 (31 March 2020: Nil). The details of the share capital of the Company during the Year and the Previous Year are set out in note 21 to the consolidated statements of the Group for the Year included in this report (the “ Financial Statements ”).

Management Discussion and Analysis

Cash position

The Group recorded net current assets of approximately HK$209.7 million as at 31 March 2021, while the net current assets of the Group as at 31 March 2020 was approximately HK$224.2 million. As at 31 March 2021, the Group had cash and cash equivalents of approximately HK$234.8 million (31 March 2020: HK$225.6 million). Most of the cash and cash equivalents of the group were denominated in HKD and USD.

Capital expenditure

During the Year, the Group’s total capital expenditure amounted to approximately HK$2.7 million (the Previous Year: HK$3.1 million), which was mainly incurred for acquisition of office equipment.

Gearing ratio

The net gearing ratio was not applicable to the Group since it did not have any interest-bearing liabilities as at 31 March 2021 and 31 March 2020.

Performance guarantees

The Group’s performance guarantees as at 31 March 2021 are set out in note 27 to the Financial Statements.

Contingent liabilities

The Group had no contingent liabilities as at 31 March 2021.

Pledge of assets

As at 31 March 2021, certain of the Group’s bank deposits totaling HK$27.6 million (31 March 2020: HK$11.3 million) were pledged as securities for securing banking facilities granted to the Group.

Foreign exchange risk

The Group’s transactions are mainly denominated and settled in Hong Kong Dollars (“ HK$ ”) and the United States Dollars (“ US$ ”). Foreign exchange exposure of the Group to US$ will continue to be minimal as long as the policy of the Government of the Hong Kong Special Administrative Region to link HK$ to US$ remains in effect. During the Year, the Group has entered into the HK$/US$ net-settled structured foreign currency forward contracts with banks in Hong Kong in order to mitigate foreign exchange exposure as a result of purchases made from certain suppliers in its regular course of business. The fair value changes of the derivative financial instruments comprised realised gain (loss) and unrealised fair value gain (loss) on the HK$/US$ netsettled structured foreign currency forward contracts entered into by the Group.

HUMAN RESOURCES

As at 31 March 2021, the Group had a total of 263 employees (31 March 2020: 288 employees). For the Year, the total staff costs including Directors’ emoluments was approximately HK$103.4 million (Previous Year: HK$122.8 million). The Group offers a competitive remuneration package to its employees, including mandatory provident funds in accordance with the Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong) and medical insurance coverage to employees who are retained after the probation period. The Group will review the performance of its employees and make reference to such performance reviews in its salary and/or promotional review in order to attract and retain talented employees.

Management Discussion and Analysis

In order to promote overall efficiency, employee loyalty and retention, employees of the Group are required to attend orientation sessions when they first join the Group and may attend other training courses held onsite or externally. The Group has also implemented (i) an educational subsidy programme to its employees to allow them to enrol courses relating to IT services from external organisations; (ii) an university education subsidy programme for the children of its employees; and (iii) a medical check programme for its employees.

The Company adopted a share option scheme (the “ Share Option Scheme ”) on 15 February 2017 (the “ Adoption Date ”). As such, share options may be granted to eligible employees of the Group pursuant to the Share Option Scheme. During the period from the Adoption Date to the date of this report, no share options have been granted under the Share Option Scheme.

DIVIDEND

The Board declared a special dividend of HK$0.05 per Share for the Year (the “ 2021 Special Dividend ”) to the Shareholders (Previous Year: HK$0.07 per Share). The 2021 Special Dividend will be paid on or about Friday, 30 July 2021 to Shareholders whose names appear on the register of members of the Company on Monday, 19 July 2021.

The Board recommends the payment of a final dividend of HK$0.05 per share of the Company (the “ Shares ”) for the Year (the “ 2021 Final Dividend ”) to the Shareholders (Previous Year: HK$0.08 per Share). Subject to the approval by the Shareholders at the forthcoming annual general meeting of the Company (the “ AGM ”) to be held on Tuesday, 24 August 2021, the 2021 Final Dividend will be paid on or about Friday, 10 September 2021 to Shareholders whose names appear on the register of members of the Company on Monday, 30 August 2021.

SIGNIFICANT INVESTMENTS HELD

The Group did not hold any significant investments during the Year.

MATERIAL ACQUISITIONS OR DISPOSALS OF SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES, AND PLANS FOR MATERIAL INVESTMENTS OR CAPITAL ASSETS

The Group had no material acquisitions or disposals of subsidiaries, associates or joint ventures during the Year and no future plans for material investments or capital assets as at 31 March 2021.

FUTURE OUTLOOK

Covid-19 has caused a decline in the Group’s business due to the shutdown of international borders and trades. The Group will keep close attention on the impacts of pandemic and the ongoing tensions between the US and China. Despite the current uncertain economic environment in Hong Kong, the Group is optimistic about future business opportunities. The Group had a good capital structure and a prudent financial policy to minimize the financial risk.

The Group will proactively seek and widen the business opportunities, and will continue to focus on core businesses and partnerships with key vendors. Other than looking for new market offerings and demand, the Group will optimize operational efficiencies and leverage its industry leadership to achieve long-term sustainable growth.

EVENTS AFTER THE REPORTING PERIOD

There was no significant event affecting the Group that had occurred since the end of the Year up to the date of this report.

Profile of Directors and Senior Management

BOARD OF DIRECTORS

EXECUTIVE DIRECTORS

Chu Ming Ho (Chairman and Chief Executive Officer)

Mr. Chu, aged 51, was appointed as a Director on 20 January 2016 and was re-designated as an executive Director on 25 May 2016. He has been the chairman and chief executive officer of the Group since 25 May 2016 and a director of all of the subsidiaries of the Company. From January 2006 to the present, Mr. Chu has been the managing director of Microware Limited (“ Microware Ltd. ”), an indirect wholly-owned subsidiary of the Company, and he has been primarily responsible for the overall management, strategic planning and leading the management team. Mr. Chu received a bachelor’s degree in business (economics and finance) from Royal Melbourne Institute of Technology University in Australia in September 2004.

Mr. Chu is a director of Microware International Holdings Limited (“ Microware International ”), a company beneficially and wholly owned by Mr. Yang Peter Shun Tsing and having an interest in the Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the “ SFO ”). For details, please refer to the paragraphs under the section headed “Substantial Shareholders’ Interest and Short Positions in Shares” on page 32 of this report.

Yang Peter Shun Tsing

Mr. Yang, aged 70, was appointed as a Director on 20 January 2016 and was re-designated as an executive Director on 25 May 2016. He has over 30 years of experience in the IT industry. From 1 March 1989 to the present, Mr. Yang has been the president of Microware Ltd. and has been primarily responsible for the overall management and strategic planning of the businesses of the Group. He is a director of all subsidiaries of the Company. From March 1989 to February 2008 and from February 2008 to July 2012, he was the president and chairman of Microware Ltd., respectively, where he was responsible for the overall management and strategic planning of its businesses. Mr. Yang received a degree of Bachelor of Science with a specialisation in physics from the University of Alberta in Canada in May 1971. From 1974 to 1984, Mr. Yang was a chartered accountant of The Institute of Chartered Accountants and Canadian Institute of Chartered Accountants.

Mr. Yang is a director of Microware International, a company beneficially and wholly owned by him and having an interest in the 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. For details, please refer to the paragraphs under the section headed “Substantial Shareholders’ Interest and Short Positions in Shares” on page 31 of this report.

Cheng Wing Fai Ray

Mr. Cheng, aged 51, was appointed as an executive Director on 1 March 2021. From April 2018 to present, Mr Cheng has been the director of the system integration group of Microware Ltd. He is primarily responsible for sales management of the Group. He has over 20 years of sales experience. From July 2002 to March 2018, he was the senior sales manager of the Group and was responsible for a sales team for projects of the Government of Hong Kong.

Mr. Cheng received a Bachelor of Engineering degree from the City Polytechnic of Hong Kong (now known as City University of Hong Kong) in November 1993 and a master’s degree in quantitative analysis for business from the City University of Hong Kong in November 1998.

Profile of Directors and Senior Management

NON-EXECUTIVE DIRECTOR

Wan Yiu Hon

Mr. Wan, aged 64, was appointed as a non-executive Director on 25 May 2016 and is primarily responsible for supervising the business of the Group. Mr. Wan has been a director of Microware Ltd. since 1 August 2007 and is responsible for supervising the business of Microware Ltd.. Mr. Wan graduated from St. Louis School in Hong Kong in 1975. He has over 26 years of sales and sales management experience in the IT industry. From June 2003 to September 2004, Mr. Wan was the director of the systems integration group of Microware Ltd., where he was responsible for supervising the sales team.

INDEPENDENT NON-EXECUTIVE DIRECTORS

Cheng Tak Chung

Mr. Cheng, aged 64, was appointed as an independent non-executive Director on 14 February 2017. During the period between April 1983 and September 2008, Mr. Cheng served various roles in IBM China/Hong Kong Limited, a multinational technology and consulting corporation, and he held the position of GCG channel director in general management office before he left such company. From September 2008 to September 2011, Mr. Cheng worked as the vice president and general manager of Avnet Partner Solutions, greater China region, a distributor of IT services. Mr. Cheng received a bachelor’s degree in science from the University of Wisconsin-Stevens Point in the United States in August 1980 and a master’s degree in business administration from Northern Michigan University in the United States in August 1982.

Li Wai Man

Ms. Li, aged 54, was appointed as an independent non-executive Director on 14 February 2017. From 7 May 2001 to January 2007, Ms. Li served as the accounts and operation manager of Microware Ltd., where she was responsible for company secretarial services, financial management and office administration of the Group. She has over 20 years of accounting experience. Ms. Li received a master’s degree in business administration and a master’s degree in corporate governance from The Open University of Hong Kong through distance learning in June 2005 and June 2011, respectively. Ms. Li was admitted as a certified public accountant in June 1996. She has been a fellow of the Association of Chartered Certified Accountants since September 2001 and a fellow of the Hong Kong Institute of Certified Public Accountants since October 2013.

Li Richard King Hang

Mr. Li, aged 77, was appointed as an independent non-executive Director on 14 February 2017. He served as the director of IT services in the Hong Kong Polytechnic University for 10 years and retired from the IT services office of the university in October 2005. Mr. Li obtained a Bachelor of Science degree in physics and a Master of Science degree from Indiana University in the United States in June 1966 and February 1968, respectively.

Profile of Directors and Senior Management

SENIOR MANAGEMENT

Au Man Wah Randy

Mr. Au, aged 57, is the director of technical services and outsourcing of Microware Ltd. since 1 June 2011 and is primarily responsible for maintenance and service sales of the Group. He has over 21 years of sales and marketing experience. Mr. Au received a bachelor’s degree in business administration from Fu Jen Catholic University in Taiwan in June 1988. He has also received a master’s degree in information systems from the Hong Kong Polytechnic University in November 2010 through distance learning.

Chan Wai Hing Gloria

Ms. Chan, aged 52, is the chief financial officer, authorised representative and a company secretary of the Group since 22 January 2007 and is primarily responsible for the management of financial, accounting and company secretarial matters of the Group. She has over 20 years of accounting experience. Ms. Chan received a master’s degree in professional accounting from The Hong Kong Polytechnic University in November 2003. Ms. Chan was admitted as a certified public accountant in July 1999. She has been an associate of the Hong Kong Society of Accountants since July 1999 and a fellow of the Hong Kong Institute of Certified Public Accountants since May 2007.

Lau Yuen Ling Crystal

Ms. Lau, aged 50, is the director of product and marketing of Microware Ltd. since June 2018 and is primarily responsible for the management of vendors relationship, product and solutions, go-to-market strategy, marketing and inventory control of the Group. Ms. Lau has over 20 years of experience in product marketing. She joined the Group in 27 March 2000 as product marketing officer and was responsible for vendor relationship and product. She was promoted to business manager in October 2013 and served as the senior manager of product and marketing from June 2017 to May 2018. Ms. Lau received a master’s degree in business administration from University of Leicester through distance learning in July 2004.

Corporate Governance Report

CORPORATE GOVERNANCE PRACTICES

The Company is committed to achieving good corporate governance practices by emphasising its accountability, transparency, independence, responsibility and fairness. The Company’s corporate governance practices are based on the principles (the “ Principles ”) and code provisions (the “ Code Provisions ”) in the Corporate Governance Code (the “ CG Code ”) 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 (the “ Stock Exchange ”).

Save for Code Provision A.2.1 of the CG Code as disclosed below, the Company has applied the Principles and complied with all applicable Code Provisions for the Year.

DIRECTORS’ SECURITIES TRANSACTIONS

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules (the “ Model Code ”) as the securities dealing code for its Directors.

Specific enquiry had been made to all Directors and all the Directors have confirmed that they have fully complied with the required standards and provisions as set out in the Model Code during the Year.

THE BOARD

Board Composition

The Board, which currently comprises seven Directors, is responsible for governing the Company. The Board is responsible for performing the corporate governance functions of the Company in accordance with the CG Code, including determining the Company’s corporate governance policies, and reviewing and monitoring the corporate governance practices of the Company. The Board is responsible for determining the overall corporate strategies and development of the Company to meet its business objectives. All substantial business decisions, as the Board considers appropriate, have to be escalated to the Board level with written resolutions. The Board should make decisions objectively in the best interests of the Company. The Board currently comprises three executive Directors, one non-executive Director and three independent non-executive Directors:

Executive Directors

Mr. Chu Ming Ho (Chairman and Chief Executive Officer of the Group) Mr. Yang Peter Shun Tsing Mr. Cheng Wing Fai (appointed on 1 March 2021)

Non-Executive Director

Mr. Wan Yiu Hon

Independent Non-Executive Directors

Mr. Cheng Tak Chung Ms. Li Wai Man Mr. Li Richard King Hang

All the Directors have given sufficient time and attention to the affairs of the Company. Each Director has sufficient experience to hold the position so as to carry out his duties effectively and efficiently. Details of the backgrounds and qualifications of the chairman of the Board and the other Directors are set out in the section headed “Profile of Directors and Senior Management” in this report.

Corporate Governance Report

Responsibilities of the Board and the management

The principal responsibility of the Board is to provide entrepreneurial leadership of the Company within a framework of prudent and effective controls which enables risks to be assessed and managed. The Board is collectively responsible for the long-term success of the Company and delivery of sustainable value to the Shareholders. It sets strategies for the Company and approves capital and operating plans presented by management for the achievement of strategic objectives it has set. Implementation of the strategies set by the Board is delegated to the management which is led by the chief executive officer of the Group (the “ Chief Executive Officer ”). The management is responsible for the day-to-day management and operation of the Group and to provide the Board with updates in a timely manner, giving an assessment of the Company’s performance and position to enable the Board to discharge its duties.

Regarding the Company’s corporate governance, the Board as a whole is responsible for performing the following corporate governance duties including:

• i. to review and monitor the Company’s policies and practices in compliance with legal and regulatory requirements;

• ii. to develop and review the Company’s policies and practices on corporate governance;

• iii. to review and monitor the training and continuous professional development of Directors and management;

• iv. to review the Company’s compliance with the CG Code and disclosure in its corporate governance report; and

• v. to develop, review and monitor the code of conduct and compliance manual (if any) applicable to employees and Directors.

The Board has delegated such duties to the audit committee established by the Board (the “ Audit Committee ”).

All Directors have full and timely access to all the information of the Company and may, upon request, seek independent professional advice in appropriate circumstances at the Company’s expenses for discharging their duties to the Company.

The Directors acknowledge their responsibility for preparing the Financial Statements.

Directors’ and Officers’ Insurance

The Company has arranged for appropriate insurance coverage in respect of legal actions against the Directors.

Board meetings and Board practices

The Board is scheduled to meet at least four times a year to determine overall strategic direction and objectives and approve interim and annual results and other significant matters. Apart from regular board meetings, the Board will meet on other occasions when a board level decision on a particular matter is required. Each of the members of the Board has full access to relevant information at the meetings.

Corporate Governance Report

Four Board meetings and one general meeting were held during the Year. Details of the attendance of the Board meetings and the general meeting are as follows:

	Attendance/Number of	Attendance/Number of
	meetings during the Year
		The 2020
		Annual General
	Board Meeting	Meeting
Mr. Chu Ming Ho	4/4	1/1
Mr. Yang Peter Shun Tsing	4/4	1/1
Mr. Cheng Wing Fai_(appointed on 1 March 2021)_	1/1	N/A
Mr. Wan Yiu Hon	4/4	1/1
Mr. Cheng Tak Chung	4/4	1/1
Ms. Li Wai Man	4/4	1/1
Mr. Li Richard King Hang	4/4	1/1

Appointment and re-election of directors

Under Code Provision A.4.1 of the CG Code, the non-executive Directors should be appointed for a specific term and subject to re-election. All Directors appointed to fill a casual vacancy should be subject to election by Shareholders at the first general meeting after appointment. Every Director, including those appointed for a specific term, should be subject to retirement by rotation at least once every three years.

All the Directors are subject to retirement by rotation and re-election at the annual general meeting in accordance with the Company’s articles of association (the “ Articles ”).

Continuing professional development

According to Code Provision A.6.5 of the CG Code, all Directors should participate in continuous professional development to develop and refresh their knowledge and skills. The Directors acknowledge the need to continue to develop and refresh their knowledge and skills for making contributions to the Company. As part of continuous professional development of the Directors, the Company provides in-house training and engages professional firms to provide training to Directors to develop and refresh their knowledge and skills and continuously update Directors on the latest developments regarding the Group’s business, the Listing Rules and other applicable legal and regulatory requirements to ensure compliance and enhance their awareness of good corporate governance practices. Every newly appointed Director has received comprehensive induction on the first occasion of his/her appointment to ensure appropriate understanding of the business and operations of the Company and full awareness of Director’s responsibilities and obligations under the Listing Rules and relevant statutory requirements.

The participation by individual Directors in the continuous professional development programme with appropriate emphasis on the roles, functions and duties of a director of a listed company by way of attending training sessions organised by professional firms and reading relevant materials during the Year is recorded in the table below:

	Training on corporate governance,
	regulatory development
Name of Directors	and other relevant topics
Mr. Chu Ming Ho	3
Mr. Yang Peter Shun Tsing	3
Mr. Cheng Wing Fai_(appointed on 1 March 2021)_	3
Mr. Wan Yiu Hon	3
Mr. Cheng Tak Chung	3
Ms. Li Wai Man	3
Mr. Li Richard King Hang	3

Corporate Governance Report

Independent non-executive Directors and Non-executive Director

The Company appointed three independent non-executive Directors and one non-executive Director who have appropriate and sufficient experience and qualification to carry out their duties so as to protect the interests of the Shareholders.

The Company has received from each of the independent non-executive Directors an annual confirmation of independence pursuant to Rule 3.13 of the Listing Rules and considers all the independent non-executive Directors to be independent.

Each of the non-executive Directors (including the independent non-executive Directors) has been appointed for a term of three years commencing from 8 March 2020 and are subject to retirement by rotation in accordance with the Articles.

Chairman and Chief Executive Officer

The chairman of the Board is responsible for overseeing the strategic planning and leadership of the Group and ensuring that the entire Board members are properly briefed on issues at the Board meetings and receive adequate and reliable information on a timely basis. The Chief Executive Officer is responsible for the strategic development and maintaining the Company’s relationship with companies outside of the Group. Senior management is responsible for effective implementation of the Board’s decisions and the day-to-day operations of the Group.

Code Provision A.2.1 of the CG Code provides that the roles of the chairman and chief executive officer should be separate and should not be performed by the same individual. The Company does not at present separate roles of the chairman and chief executive officer. Mr. Chu Ming Ho is the chairman of the Board and the Chief Executive Officer. In view of the fact that Mr. Chu Ming Ho has been assuming day-to-day responsibilities in operating and managing the Company since April 2000, the Board believes that it is in the best interest of the Company to have Mr. Chu taking up both roles for effective management and business development. Therefore, the Directors consider that the deviation from Code Provision A.2.1 of the CG Code is appropriate in such circumstance. Notwithstanding the above, the Board is of the view that this management structure is effective for the Group’s operations and sufficient checks and balances are in place.

BOARD COMMITTEES

The Board is responsible for the leadership and control of the Company and overseeing the Group’s businesses, strategic decisions and promoting the success of the Company. The Board is delegated with the authority and responsibility for the management of the Group. In addition, the Board has also established various Board committees, including the remuneration committee (the “ Remuneration Committee ”), the nomination committee (the “ Nomination Committee ”) and the Audit Committee, and has delegated various responsibilities to them. The executive Directors and senior management of the Company, as delegated by the Board, are responsible for implementing the determined strategies and policies and the day-to-day management of the Group’s business.

Remuneration Committee

The Remuneration Committee was established on 15 February 2017. The chairman of the committee is Mr. Li Richard King Hang, an independent non-executive Director, and other members include Mr. Chu Ming Ho, the chairman of the Board, executive Director and Chief Executive Officer, and Mr. Cheng Tak Chung, an independent non-executive Director.

The primary objectives and duties of the Remuneration Committee were set out in its terms of reference adopted in compliance with the requirements under the CG Code, which include making recommendations to the Board on the remuneration policy and structure and remuneration packages and employee benefits arrangements of the Directors and the senior management.

Corporate Governance Report

During the Year, one Remuneration Committee meeting was held to review and make recommendation to the Board on the remuneration policy and the remuneration packages of executive Directors and senior management for 2020 as well as other related matters. Details of the attendance of the Remuneration Committee meeting are as follows:

	Attendance of the
Name of Directors	Remuneration Committee meeting
Mr. Li Richard King Hang_(Chairman)_	1/1
Mr. Cheng Tak Chung	1/1
Mr. Chu Ming Ho	1/1

During the Year, the Remuneration Committee has considered and reviewed the terms of employment contracts of the executive Directors and appointment letters of the non-executive Director and the independent non-executive Directors and has assessed the performance of the Directors. The Remuneration Committee considers that the terms of service agreements of the executive Directors, the appointment letters of the non-executive Director and the independent non-executive Directors are fair and reasonable.

Details of the directors’ remuneration and five highest paid individuals for the Year to be disclosed pursuant to the CG Code are provided in note 9 to the Financial Statements.

During the Year, the remuneration of the senior management is listed below by band:

		Number of individuals
HK$1,000,001	to HK$1,500,000	3

Nomination Committee

The Nomination Committee was established on 15 February 2017. The chairman of the committee is Mr. Chu Ming Ho, the chairman of the Board, executive Director and the Chief Executive Officer and other members include Mr. Cheng Tak Chung and Mr. Li Richard King Hang, both being independent non-executive Directors.

The roles and functions of the Nomination Committee include making recommendations to the Board on any proposed changes to the Board to complement the Company’s corporate strategy. The Nomination Committee identifies individuals suitably qualified to become Board members and select or make recommendations to the Board on the selection of individuals nominated for directorships. The Nomination Committee also reviews the structure, size and composition of the Board and assesses the independence of the independent non-executive Directors.

The Company has adopted a nomination policy (the “ Nomination Policy ”) which sets out the nomination procedures and criteria for the Nomination Committee to select and recommend candidates to the Board for consideration of appointment as Directors or for recommendations to Shareholders for election as Directors at general meetings.

Pursuant to the Nomination Policy, prior to a meeting of the Nomination Committee called for considering candidates for directorship, the Nomination Committee will invite nominations of candidates from the Board members or put forward candidates. The Nomination Committee will consider the nominated candidates at such committee meeting according to the following criteria: reputation for integrity; accomplishment and experience; compliance with legal and regulatory requirements; commitment in respect of available time and relevant interest; and board diversity. A selected candidate will then be recommended by the Nomination Committee to the Board for consideration and approval.

Corporate Governance Report

A Shareholder may propose a person for election as a Director in a general meeting pursuant to procedures set out in the Articles.

In addition, the Board has adopted a board diversity policy. The Company seeks to achieve board diversity through the consideration of a number of factors in the Board members’ selection process, including but not limited to gender, age, cultural and educational background, race, professional experience and industry experience. These factors will be considered in determining the optimum composition of the Board and all Board appointments will be based on meritocracy, having due regard to the Group’s business needs from time to time.

As at 31 March 2021, Board diversification in terms of gender and age group is set out below:

Gender

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Female Male
14% 86%
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Age Group
50-60 61-70 71-80
60%
30%
10%
----- End of picture text -----

The Board considers that the current Board composition has provided the Company with a good balance and diversity of skills and experience appropriate to the requirements of its business. The Board will continue to review its composition from time to time taking into consideration specific needs for the Group’s business.

During the Year, one Nomination Committee meeting was held. Details of the attendance of the Nomination Committee meeting are as follows:

	Attendance of the
Name of Directors	Nomination Committee meeting
Mr. Chu Ming Ho_(Chairman)_	1/1
Mr. Cheng Tak Chung	1/1
Mr. Li Richard King Hang	1/1

During the Year, the Nomination Committee reviewed the structure, size and diversity of the Board and assessed the independence of the independent non-executive Directors.

Corporate Governance Report

Audit Committee

The Audit Committee was established on 15 February 2017. The chairlady of the committee is Ms. Li Wai Man, an independent non-executive Director with the appropriate professional qualifications and other members include Mr. Cheng Tak Chung and Mr. Li Richard King Hang, both being independent non-executive Directors.

The main responsibilities of the Audit Committee are to review the Group’s financial information and the auditors’ reports and monitor the integrity of the financial statements of the Group as well as overseeing the financial reporting process, risk management and internal control system of the Group and assisting the Board to fulfil its responsibility over the audit. Other responsibilities include making recommendations to the Board on the appointment, reappointment and removal of external auditor, approval of the remuneration and terms of the engagement of the external auditor, and any other matters arising from the above. The Audit Committee is also responsible for performing the Company’s corporate governance functions and serves as a channel of communication between the Board and the external auditor.

During the Year, three Audit Committee meetings were held. Details of the attendance of the Audit Committee meetings are as follows:

	Attendance of the
Name of Directors	Audit Committee meeting
Ms. Li Wai Man_(Chairlady)_	3/3
Mr. Cheng Tak Chung	3/3
Mr. Li Richard King Hang	3/3

During the Year, the Audit Committee has reviewed the audit plan and approach of the external auditor, monitored the progress and results of the audit regularly and performed the Company’s corporate governance functions as delegated by the Board. The Group’s unaudited interim results for the period ended 30 September 2020 and the audited annual results for the Year have been reviewed by the Audit Committee, which was of the opinion that the preparation of such results complied with the applicable accounting standards and requirements and that adequate disclosure has been duly made.

RISK MANAGEMENT AND INTERNAL CONTROLS

The outbreak of coronavirus, disease may impede the operations of the Company, especially the frontline sales. It may also lead to the postponement of the IT solution projects resulting in customers’ late payment. The Board has reviewed the risk and has adopted certain policies to reduce such risk and impact to the Group, such as, implementing flexible working arrangements for employees to work from home while maintaining the operations. The Company has also designated a team to monitor the payment schedule of customers and its cash flow.

The Board acknowledges its responsibility for the management of the Company and is collectively responsible for ensuring sound and effective risk management and internal control systems and reviewing their effectiveness on an ongoing basis. Such risk management and internal control systems are designed for managing risk rather than eliminating the risk of failure to achieve business objective, and can only provide reasonable and not absolute assurance against material misstatement or loss.

The Board, having reviewed the effectiveness of the risk management and internal control systems of the Company through the Audit Committee, considers that the Company’s risk management and internal control systems are adequate and effective and no significant control failings or weaknesses were identified for the Year. The level of resources, staff qualifications and experience, training programmes and budget of the Company’s internal audit and accounting and financial reporting functions were also assessed and considered adequate for the Year. The Company will continue to improve its system of internal control. The Board shall conduct such review through the Audit Committee at least once annually.

Corporate Governance Report

Risk Management and Internal Control Systems

The Company’s risk management and internal control systems are designed to manage and mitigate risks, rather than eliminating risks, and can only provide reasonable but not absolute assurance against material misstatement or loss. The Company employed a top-down and bottom-up approach for identification, assessment and mitigation of risk at all business unit levels and across functional areas. Through the Audit Committee, the Board conducts annual review of the effectiveness of the Company’s risk management and internal control systems, covering the material controls, including financial, operational and compliance controls. The Chief Executive Officer and chief financial officer of the Group (the “ Chief Financial Officer ”) are primarily responsible for applying, supporting the risk management and internal control processes. The operating units and support functions are facilitated and coordinated by the Chief Executive Officer and the Chief Financial Officer, and ensure that risk management processes and mitigation plans follow good practices and guidelines established by the Company in their day-today operations. Risk events and incidents are reported by the operating units and support functions to the management in a timely manner.

Internal Audit

The Group has an internal audit function. The primary role of the internal audit function is to help the Board and the senior management of the Group to protect the assets, reputation and sustainability of the Group. The internal audit function provides independent and objective assurance as to whether the design and operational effectiveness of the Group’s framework of risk management, control and governance process, as designed and represented by the Company’s management, is adequate. The internal audit function of the Group is independent of the risk management and internal control systems of the Group.

Results of audit work together with an assessment of the overall risk management and control framework of relating to inventory management, fixed assets management, insurance management and tax management are reported to the Audit Committee as appropriate. In every year, the Group reports the implementation status of the mitigation controls to the Audit Committee to ensure proper monitoring. The internal audit function also reviews the Company’s management’s action plans in relation to audit findings and verifies the adequacy and effectiveness of the mitigating controls before formally closing the issue.

Main Features of Risk Management and Internal Control Systems

The key elements of the Company’s risk management and internal control systems include the establishment of strategic risk register to monitor, evaluate and assess the identified risks. The Company updates the risk responses for each key risk identified to ensure the effectiveness of the mitigation procedures on an ongoing basis. A risk matrix approach is adopted to determine the significance of the risk after evaluation of the risk according to the impact, frequency and probability of the risk event identified. The significance of the risks reflects the level of management’s attention and risk responses.

Risk management process is integrated with the internal control system, so that the Company’s ability to handle risks that hinder the achievement of financial, operational and compliance goals is strengthened and the allocation of resources on control measures against specific or high risks areas is more adequate.

Corporate Governance Report

Process used to identify, evaluate and manage significant risks

The Company develops a preliminary inventory of events that could influence the achievement of the Company’s business objectives. The Company identifies outside and inside events by reviewing its external and internal environment and stakeholders, which have an influence or potential influence on the Company’s ability to achieve its strategies and business objectives. The risk identification process takes place at least once a year. Furthermore, any risk events and incidents identified by the operating units and support functions will be reported to the management in a timely manner.

The risks identified are evaluated with a risk matrix which prioritises risks according to the frequency and probability of their occurrence and the significance of their impact on the achievement of the Company’s business objectives. Following the review of the risk matrix, the Company selects and deploys the corresponding risk responses and investigates the mitigation procedures to be executed to ensure the identified significant risks were managed to an acceptable level.

Process used to review the effectiveness of the Risk Management and Internal Control Systems

During the Year, the Group has performed a review on the risk management and internal control systems and prepared a report to enable the Board and management to evaluate and provide reasonable assurance on the effectiveness and efficiency of operations, providing reliable financial reporting, complying with applicable laws and regulations and, where appropriate, carry out the recommended procedures (if any). The Audit Committee has reviewed the report and the review covered all material controls, including operational, financial and compliance control, and risk management functions. The scope and the quality of ongoing monitoring of risks and internal control systems have been assessed. The Board considered that during the Year, the risk management and internal control systems of the Group were effective, and no significant deficiency was identified during the course of review.

Inside Information Policy

The Company has established a disclosure policy for the handling and dissemination of inside information. Such policy is set out inside the staff manual and all staff is required to comply with such policy. Employees of the Company must be made aware of the disclosure policy and the importance of bringing any potential inside information promptly to the attention of their immediate supervisors. They are also prohibited from disclosing any confidential information to anyone outside the Company without having obtained the necessary approval. In addition, each level of personnel of the Group is granted a specific level of access to price sensitive and inside information. Control procedures have been implemented to ensure that unauthorised access and use of inside information are strictly prohibited. The Directors, senior management and employees are kept up-to-date on the latest regulatory updates.

Corporate Governance Report

AUDITOR’S REMUNERATION

The statement of the Company’s auditors about their reporting responsibilities for the Financial Statements is set out in the “Independent Auditor’s Report” on pages 66 to 70 of this report.

For the Year, the remuneration payable or paid to the Company’s auditors, Deloitte Touche Tohmatsu, is as follows:

	Year ended 31 March 2021
	(HK$’000)
Statutory audit services	1,600
ORSO audit and Review document	25
	1,625

COMPANY SECRETARY

Ms. Chan Wai Hing Gloria, the company secretary of the Company (the “ Company Secretary ”), has complied with the relevant professional training requirement under Rule 3.29 of the Listing Rules during the Year.

SHAREHOLDERS’ RIGHTS

Procedures for Shareholders to convene an extraordinary general meeting

• Pursuant to the memorandum and articles of association of the Company (the “ Memorandum and Articles ”), any one or more Shareholders holding, at the date of deposit of the requisition, not less than one-tenth of the paid up capital of the Company carrying the right of voting at general meetings of the Company (the “ Eligible Shareholder(s) ”) shall at all times have the right, by written requisition to the Board or the Company Secretary, to require an extraordinary general meeting (“ EGM ”) to be called by the Board for the transaction of any business specified in such requisition.

• Eligible Shareholder(s) who wish to convene an EGM must deposit a written requisition (the “ Requisition ”) signed by the Eligible Shareholder(s) concerned to the principal place of business of the Company in Hong Kong, at 1/F, Century Centre, 44-46 Hung To Road, Kwun Tong, Kowloon, Hong Kong, for the attention of the Company Secretary.

• The Requisition must state clearly the name of the Eligible Shareholder(s) concerned, his/her/their shareholding in the Company, the reason(s) to convene an EGM, the agenda proposed to be included and the details of the business(es) proposed to be transacted at the EGM. The Requisition must be signed by the Eligible Shareholder(s) concerned.

• The Company will check the Requisition and the identity and the shareholding of the Eligible Shareholder(s) will be verified with the Company’s branch share registrar. If the Requisition is found to be proper and in order, the Company Secretary will ask the Board to convene an EGM within two months and/or include the proposal or the resolution proposed by the Eligible Shareholder(s) at the EGM after the deposit of the Requisition.

• If within 21 days of the deposit of the Requisition the Board has not advised the Eligible Shareholders of any outcome to the contrary and fails to proceed to convene such EGM, the Eligible Shareholder(s) himself/herself/themselves may do so in accordance with the Memorandum and Articles, and all reasonable expenses incurred by the Eligible Shareholder(s) concerned as a result of the failure of the Board shall be reimbursed to the Eligible Shareholder(s) concerned by the Company.

Corporate Governance Report

Putting enquiries by Shareholders to the Board

Shareholders may send their enquiries and concerns to the Board by addressing them to the principal place of business of the Company in Hong Kong at 1/F, Century Centre, 44-46 Hung To Road, Kwun Tong, Kowloon, Hong Kong by post or email to Ms. Chan Wai Hing Gloria at gloriachan@microware.com.hk, for the attention of the Company Secretary.

Procedures for Shareholders to put forward proposals at Shareholders’ meeting

There is no provision allowing Shareholders to propose resolutions at the general meetings of the Company under the Memorandum and Articles. Shareholders who wish to propose resolutions may, however, convene an EGM to do so by following the procedures as set out in the section headed “Procedures for Shareholders to convene an extraordinary general meeting” in this report.

INVESTOR RELATIONS

The Company is committed to a policy of open and regular communication and reasonable disclosure of information to its Shareholders. Information of the Company is disseminated to the Shareholders in the following manner:

• Delivery of annual and interim results and reports to all Shareholders;

• Publication of announcements regarding the annual and interim results on the Stock Exchange’s website, and issue of other announcements and Shareholders’ circulars in accordance with the continuing disclosure obligations under the Listing Rules; and

• The general meeting of the Company is also an effective communication channel between the Board and Shareholders.

CONSTITUTIONAL DOCUMENTS OF THE COMPANY

There were no changes in the constitutional documents of the Company during the Year.

A copy of the latest version of the Memorandum and Articles are available on the websites of the Company and the Stock Exchange.

Directors’ Report

DIRECTORS’ REPORT

The Board is pleased to present to the Shareholders their report for the Year and the Financial Statements.

PRINCIPAL ACTIVITIES

The principal activity of the Company is investment holding. The principal activities of its major subsidiaries are set out in note 29 to the Financial Statements.

BUSINESS REVIEW

Discussion and analysis on the business of the Group for the Year are set out in the section headed “Management Discussion and Analysis” on pages 8 to 11 of this report.

RESULTS AND DIVIDENDS

The results of the Group for the Year and the Group’s financial position as at 31 March 2021 are set out in the Financial Statements on pages 71 to 72 of this report.

Under the dividend policy adopted by the Company, dividends may be recommended, declared and paid to the Shareholders from time to time. In summary, the declaration of dividend is subject to the discretion of the Board, taking into consideration of, among others, the following factors: financial results, Shareholders’ interests, general business conditions and strategies, capital requirements, taxation considerations, contractual, statutory and regulatory restrictions (if any) and any other factors that the Board may deem relevant.

The Board declared the payment of a 2021 Special Dividend of HK$0.05 per Share to the Shareholders. The 2021 Special Dividend will be paid on or about Friday, 30 July 2021 to Shareholders whose names appear on the register of members of the Company on Monday, 19 July 2021.

The Board recommends the payment of a 2021 Final Dividend of HK$0.05 per Share to the Shareholders. Subject to the approval by the Shareholders at the AGM to be held on Tuesday, 24 August 2021, the 2021 Final Dividend will be paid on or about Friday, 10 September 2021 to Shareholders whose names appear on the register of members of the Company on Monday, 30 August 2021.

There is no arrangement that a Shareholder has waived or agreed to waive any dividend.

CLOSURE OF REGISTER OF MEMBERS

For the purpose of determining the Shareholders’ rights to attend and vote at the AGM, the register of members of the Company will be closed from Thursday, 19 August 2021 to Tuesday, 24 August 2021, both days inclusive, during which period no transfer of Shares will be registered. In order to be eligible to attend and vote at the AGM, all transfer documents accompanied by the relevant share certificates must be lodged with the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration no later than 4:30 p.m. on Wednesday, 18 August 2021.

For the purposes of determining the Shareholders’ entitlement to the 2021 Final Dividend, if approved by the Shareholders at the AGM, the register of members of the Company will be closed on Monday, 30 August 2021, on which day no transfer of Shares will be registered. In order to be eligible for the proposed the 2021 Final Dividend, all transfer documents accompanied by the relevant share certificates must be lodged with Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration no later than 4:30 p.m. on Friday, 27 August 2021.

Directors’ Report

For the purpose of determining the Shareholders entitlement to the 2021 Special Dividend, the register of members of the Company will be closed on Monday, 19 July 2021, on which day no transfer of shares will be registered. In order to be eligible for the 2021 Special Dividend, all share transfer documents accompanied by the relevant share certificates must be lodged with the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration no later than 4:30 p.m. on Friday, 16 July 2021.

FINANCIAL SUMMARY

A summary of the published results and of the assets, equity and liabilities of the Group for the last five financial years is set out on page 132 of this report.

ENVIRONMENTAL POLICIES

The Directors believe that the IT infrastructure solutions industry in which the Group operates its business is not a major source of environmental pollution and the impact of its operations on the environment is minimal. The Group has taken measures to facilitate the environmental-friendliness of its workplace by encouraging, among other things, a recycle culture within the Group.

The Group has also dedicated its effort to review and monitor the Group’s environmental, social and governance (“ ESG ”) policies and practices to ensure compliance with the relevant legal and regulatory requirements as described in Appendix 27 to the Listing Rules. The Group is committed to engaging its key stakeholders and operating its business in a fair, responsible and transparent manner. Details of the Group’s ESG performance for the Year can be found in “Environmental, Social and Governance Report” as set out on pages 40 to 65 of this report.

COMPLIANCE WITH LAWS AND REGULATIONS

During the Year, the Group complied in material respects with the relevant laws and regulations that have a significant impact on the business and operation of the Group, including those in respect of its provision of IT infrastructure solutions services and IT managed services in Hong Kong, employment and labour practices and environmental protection. The Company also complied with the requirements under the Listing Rules, the SFO and the laws of the Cayman Islands during the Year. The Group conducts on-going review of the newly enacted laws and regulations affecting the operations of the Group, if any, and provides relevant trainings and guidance to the staff. During the Year, there was no material breach of or non-compliance with the applicable laws and regulations by the Group.

Directors’ Report

PRINCIPAL RISKS AND UNCERTAINTIES

Pandemic Risk

During the Year, the business operations of the Group were affected to some extent due to the Pandemic, such as, the projects were delayed by customers due to the uncertainties of Pandemic and has brought additional uncertainties to the Group’s operations. On the other hand, the shortage of materials of hardware caused the delay the delivery schedule and other uncertainties impact.

After several measures were implemented by the Hong Kong government to bring COVID-19 under control in the 1st half year of 2021, the projects of the Group may steady resume. However, it remains uncertain that the COVID-19 will be completely brought under control in both Hong Kong and the world. The Group will keep close monitoring the pandemic status and further assess the financial impact which in line with the prudence financial policy.

The Directors are aware that the Group’s financial condition, results of operations, businesses and prospects may be affected by a number of risks and uncertainties. The key risks and uncertainties identified by the Group are set out as follows:

• the Group is dependent upon recruiting and retaining eligible employees. Any shortfall in its workforce or increase in direct staff costs may materially impede its business operations and adversely affect its financial results;

• the Group may encounter cost overruns or delays in its IT infrastructure solutions service contracts, which may materially and adversely affect its business, financial position and results of operation; and

• the preferences of the Group’s clients are highly subjective in nature and can substantially deviate from one another, and consequently failure to accommodate the client’s individual preferences may result in client dissatisfaction, thereby potentially damaging the Group’s business reputation and hindering its opportunity to secure future contracts or orders.

For other risks and uncertainties faced by the Group, please refer to the section headed “Risks Factors” in the prospectus of the Company dated 24 February 2017 (the “ Prospectus ”).

Directors’ Report

USE OF PROCEEDS

The net proceeds (the “ Net Proceeds ”) from the initial public offering of the Company in March 2017 amounted to approximately HK$56.0 million (after deducting underwriting commissions and related expenses).

The proposed allocation of the Net Proceeds as set out in the Company’s announcement of 19 December 2019 and the actual usage of the Net Proceeds up to 31 March 2021 are set out below:

	Approximate				Actual and
	planned	Approximate amount of		Approximate	expected timeline
	use of Net	Net proceeds utilised		Unutilised of Net	for utilising
	Proceeds — after	Utilised during	Total	Proceeds as at	the remaining
	Reallocation	the year	utilised	31 March 2021	Net Proceeds
	(HK$’million)	(HK$’million)	(HK$’million)	(HK$’million)
Upgrading of the IT management	12.6	4.5	11.7	0.9	Expected to be
systems of the Group					fully utilized
					on or before
					31 March 2022
Enhancing of the Group’s capability to	21.0	2.3	14.5	6.5	Expected to be
undertake large-scale contracts					fully utilized
					on or before
					31 December 2022
					(Note 1)
Recruitment and training of employees	13.2	—	13.2	—	—
Strengthening the marketing efforts	3.6	0.5	1.9	1.7	Expected to be
of the Group					fully utilized
					on or before
					31 March 2023
					(Note 1)
Additional working capital and	5.6	0.1	5.6	—
other general corporate purposes
	56.0	7.4	46.9	9.1

Note 1. As a result of the impact of COVID-19 pandemic, there had been a decrease in marketing activities such as industry exhibitions and forums and delay in undertaking large-scale contracts during the Year, the original plan for utilizing the Net Proceeds in these areas had further been delayed as disclosed above.

Directors’ Report

SHARE CAPITAL

Movements in the share capital of the Company during the Year are set out in note 28 to the Financial Statements.

DISTRIBUTABLE RESERVES

The Company’s reserves available for distributions to Shareholders as at 31 March 2021 comprised the share premium plus accumulated loss with an aggregate amount of approximately HK$74,701,000 (2020: HK$76,624,000).

RESERVES

Movements in the reserves of the Group during the Year are set out in the consolidated statement of changes in equity on page 73 of this report and the details of reserves attributable to equity shareholders of the Company are set out in note 28 to the Financial Statements.

MAJOR SUPPLIERS AND CUSTOMERS

The Group’s five largest customers accounted for approximately 17% of the total revenue of the Group for the Year, while the largest customer accounted for approximately 7% of the total revenue of the Group for the Year.

The Group’s five largest suppliers accounted for approximately 69% of the Group’s total purchases during the Year, while the largest supplier accounted for approximately 18% of the total purchases of the Group for the Year.

At all time during the Year, none of the Directors or any of their close associates or any Shareholders who, to the best knowledge of the Directors, own more than 5% of the number of issued Shares had an interest in any of the five largest suppliers or five largest customers of the Group.

DIRECTORS

The Directors as at the date of this report were:

Executive Directors

Mr. Chu Ming Ho (Chairman and Chief Executive Officer) Mr. Yang Peter Shun Tsing Mr. Cheng Wing Fai (appointed on 1 March 2021)

Non-executive Director

Mr. Wan Yiu Hon

Independent non-executive Directors

Mr. Cheng Tak Chung Ms. Li Wai Man Mr. Li Richard King Hang

In accordance with article 84 of the Articles, Mr. Wan Yiu Hon and Mr. Li Richard King Hang will retire by rotation and, being eligible, offer themselves for re-election as non-executive Director and independent non-executive Director, respectively, at the AGM.

Directors’ Report

BIOGRAPHICAL DETAILS OF THE DIRECTORS AND SENIOR MANAGEMENT

Biographical details of the Directors and the senior management of the Group are set out on pages 12 to 14 of this report.

DIRECTORS’ SERVICE CONTRACTS

Each of the executive Directors has entered into a service agreement with the Company for a term of three years commencing from 8 March 2020, which may be terminated by not less than three months’ notice in writing served by either party on the other.

Each of the non-executive Director and independent non-executive Directors has entered into a letter of appointment with the Company for a term of three years commencing from 8 March 2020, which may be terminated by not less than three months’ notice in writing served by either party on the other.

All Directors are subject to retirement by rotation and re-election in accordance with the Articles.

None of the Directors has a service contract with the Company which is not determinable by the Company within one year without payment of compensation, other than statutory compensation.

DIRECTORS’ MATERIAL INTERESTS IN CONTRACTS

Details of the connected transactions, and related party transactions of the Group during the Year are respectively set out on pages 35 to 36 and of this report.

Save as disclosed above, no other transactions, arrangements and contracts of significance in relation to the Group’s business to which the Company or any of its subsidiaries was a party and in which a Director or an entity connected with Director had a material interest, whether directly or indirectly, subsisted at any time during the Year or as at the end of the Year.

CONTROLLING SHAREHOLDERS’ INTEREST

Save as disclosed in this report, no contracts of significance between the Company or any of its subsidiaries and a controlling Shareholder or any of its subsidiaries or any contracts of any significance for the provision of services to the Company or any of its subsidiaries by a controlling Shareholder or any of its subsidiaries subsisted at any time during the Year or as at the end of the Year.

DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES

As at 31 March 2021, the interests or short positions in the shares, underlying shares and debentures of the Company and any of its associated corporations (within the meaning of Part XV of the SFO) held by the Directors and chief executive of the Company 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 were taken or deemed to have under such provisions of the SFO) or have been recorded in the register maintained by the Company pursuant to Section 352 of the SFO, or as otherwise have been notified to the Company and the Stock Exchange pursuant to the Model Code were as follows:

Directors’ Report

(i) Interest in the Company

			Approximate
			percentage of
Name of Director	Nature of Interest	Number of Shares(1)	shareholding
Mr. Yang Peter Shun Tsing	Interest of a controlled	164,804,000 (L)	54.9%
	corporation(2)
	Benefcial owner	40,076,000 (L)	13.4%
Mr. Chu Ming Ho	Benefcial owner	11,500,000 (L)	3.8%

Notes:

(1) The letter “L” denotes the person’s long position in the Shares.

(2) These 164,804,000 Shares are held by Microware International, which is beneficially and wholly owned by Mr. Yang Peter Shun Tsing. By virtue of the SFO, Mr. Yang is deemed to be interested in the Shares held by Microware International.

(ii) Interest in associated corporations of the Company

	Name of associated		Interest in	Percentage
Name of Director	corporation	Nature of interest	shares	holding
Mr. Yang Peter Shun Tsing	Microware International	Benefcial owner	50,000	100%

Save as disclosed above, none of the Directors or chief executive of the Company had registered any interests or short positions in any shares, underlying shares and debentures of the Company or any associated corporations as at 31 March 2021, as recorded in the register required to be kept by the Company pursuant to section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.

SUBSTANTIAL SHAREHOLDERS’ INTEREST AND SHORT POSITIONS IN SHARES

As at 31 March 2021, the interests or short positions in the Shares or underlying Shares held by the persons (not being a Director or chief executive of the Company) which fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO as recorded in the register required to be kept by the Company pursuant to section 336 of the SFO:

			Approximate
			percentage of
Name of Director	Nature of Interest	Number of Shares(1)	shareholding
Microware International	Benefcial owner	164,804,000 (L)	54.9%
Note:

(1) The letter “L” denotes the person’s long position in the Shares.

Directors’ Report

Save as disclosed above, as at 31 March 2021, no person, other than the Directors and chief executive of the Company, whose interests are set out in the section “Directors’ and Chief Executive’s Interests and Short Positions in Shares, Underlying Shares and Debentures” above, had registered an interest or short position in the Shares or underlying Shares that was required to be recorded pursuant to Section 336 of the SFO or which would fall to be disclosed to the Company and Stock Exchange pursuant to Divisions 2 and 3 of Part XV of the SFO.

SHARE OPTION SCHEME

The Company has adopted the Share Option Scheme, a summary of the principal terms of which is set out as follows:

1. Purpose of the Share Option Scheme

The Share Option Scheme is a share incentive scheme prepared in accordance with Chapter 17 of the Listing Rules and is established to recognise and acknowledge the contributions that the Eligible Participants (as defined below) had or may have made to the Group. The Share Option Scheme will provide the Eligible Participants (as defined below) an opportunity to have a personal stake in the Company with the view to achieving the following objectives:

• (i) motivate the Eligible Participants (as defined below) to optimise their performance efficiency for the benefit of the Group; and

• (ii) attract and retain or otherwise maintain an on-going business relationship with the Eligible Participants (as defined below) whose contributions are or will be beneficial to the long-term growth of the Group.

2. Participants of the Share Option Scheme

The Board may, at its discretion, offer to grant an option to the following persons (collectively the “ Eligible Participants ”) to subscribe for such number of new Shares as the Board may determine:

• (i) any full-time or part-time employees, executives or officers of the Company or any of its subsidiaries;

• (ii) any directors (including non-executive directors and independent non-executive directors) of the Company or any of its subsidiaries; and

• (iii) any advisers, consultants, suppliers, customers, distributors and such other persons who, in the sole opinion of the Board, will contribute or have contributed to the Company and/or any of its subsidiaries.

3. Total number of Shares available for issue under the Share Option Scheme and percentage of issued Shares

As at the date of this report, no share option has been granted under the Share Option Scheme.

The maximum number of Shares in respect of which options may be granted under the Share Option Scheme and under any other share option schemes of the Company must not in aggregate exceed 30,000,000 Shares, representing 10% of the total number of Shares in issue as at the date of this report.

Directors’ Report

4. Maximum entitlement of each participant under the Share Option Scheme

The total number of Shares issued, and which may fall to be issued upon exercise of the options granted under the Share Option Scheme and any other share option schemes of the Company (including both exercised and outstanding options) to each Eligible Participant in any 12-month period up to the date of grant shall not exceed 1% of the Shares in issue as at the date of grant. Any further grant of options in excess of this 1% limit shall be subject to:

• (i) the issue of a circular by the Company containing the identity of the Eligible Participant, the numbers of and terms of the options to be granted (and options previously granted to such participant), the information as required under Rules 17.02(2)(d) and the disclaimer required under 17.02(4) of the Listing Rules; and

• (ii) the approval of the Shareholders in general meeting and/or other requirements prescribed under the Listing Rules from time to time with such Eligible Participant and his close associates (as defined in the Listing Rules) (or his/her associates if the Eligible Participant is a connected person) abstaining from voting.

5. The period within which the options must be exercised under the Share Option Scheme

An option may be exercised at any time during a period to be determined and notified by the Directors to each grantee, but shall not be more than 10 years from the date upon which the option is deemed to be granted and accepted.

6. The minimum period for which an option must be held before it can be exercised

There is no minimum period for which an option granted must be held before it can be exercised except otherwise imposed by the Directors.

7. The basis of determining the exercise price

The exercise price of a Share in respect of any particular option granted under the Share Option Scheme shall be such price as the Board in its absolute discretion shall determine, save that such price must be at least the higher of:

• (i) the official closing price of the Shares as stated in the Stock Exchange’s daily quotation sheets on the date of grant, which must be a day on which the Stock Exchange is open for the business of dealing in securities;

• (ii) the average of the official closing prices of the Shares as stated in the Stock Exchange’s daily quotation sheets for the five business days immediately preceding the date of grant; and

• (iii) the nominal value of a Share.

8. The amount payable on application or acceptance of the option and the period within which payments or calls must or may be made or loans for such purposes must be repaid

The grantee shall pay HK$1.00 to the Company by way of consideration for the grant on or before the relevant acceptance date of the option.

Directors’ Report

9. The remaining life of the Share Option Scheme

The Share Option Scheme, unless otherwise terminated or amended, will remain in force for a period of 10 years from the Adoption Date, i.e. 15 February 2017. As at the date of this report, the remaining life of the Share Option Scheme is approximately 5 years and 8 months.

Since the adoption of the Share Option Scheme, no share options were granted, exercised or cancelled by the Company under the Share Option Scheme. There were no outstanding share options under the Share Option Scheme as at the date of this report.

DIRECTORS’ RIGHTS TO ACQUIRE SHARES OR DEBENTURES

Other than as disclosed in the sections headed “Directors’ and Chief Executive’s Interests and Short Positions in Shares, Underlying Shares and Debentures” on pages 31 to 33 of this report and “Share Option Scheme” on pages 33 to 35 of this report, at no time during the Year were rights to acquire benefits by means of the acquisition of Shares in or debentures of the Company granted to any Director or their respective associates nor was the Company and any of its subsidiaries a party to any arrangement to enable the Directors, or their respective associates to acquire such rights in any other body corporate.

CONNECTED TRANSACTIONS

During the Year, the Group had entered into the following connected transactions:

• (1) On 25 March 2020, Microware Ltd., an indirect wholly-owned subsidiary of the Company, as tenant, entered into the residential tenancy agreement (the “ Residential Tenancy Agreement ”) with Mr. Yang Peter Shun Tsing (“ Mr. Yang ”) and Mrs. Yang Wong Rebecca Mi Kam (“ Mrs. Yang ”) as landlord, pursuant to which Mr. Yang and Mrs. Yang agreed to lease to Microware Ltd. a property situated at Flat B, 8/F, Tower 3, One Mayfair, 1 Broadcast Drive, Kowloon Tong, Kowloon, Hong Kong (the “ Residential Premises ”), with a total gross floor area of approximately 2,177 square feet (“ sq. ft. ”) and a car parking space at the same building (the “ Car Parking Space ”) for a term commenced from 1 April 2020 and ended on 31 March 2021 at a monthly rental (exclusive of utilities, telephone charges and other similar charges) of HK$106,000. The Residential Premises are used as residence for, and the Car Parking Space is used by, Mr. Chu Ming Ho, an executive Director, chairman and chief executive officer of the Group, provided by the Group as part of his director’s emoluments. The value of right-of-use assets recognised under the Residential Tenancy Agreement for the year ended 31 March 2021 was HK$1,272,000.

On 29 March 2021, Microware Ltd. renewed the Residential Tenancy Agreement (the “ Renewed Residential Tenancy Agreement ”) with Mr. Yang and Mrs. Yang for a term of one year commencing on 1 April 2021 and expiring on 31 March 2022 at a monthly rental (exclusive of utilities, telephone charges and other similar charges) of HK$80,000. The value of right-of-use assets recognised under the Renewed Residential Tenancy Agreement for the financial year ending 31 March 2022 is HK$960,000; and

Directors’ Report

• (2) On 25 March 2020, Microware Ltd. as tenant entered into the office tenancy agreement (the “ Office Tenancy Agreement ”) with Microware Properties Limited (“ Microware Properties ”), a wholly-owned subsidiary of Microware International which is in turn wholly owned by Mr. Yang, as landlord, on 15 February 2017, pursuant to which Microware Properties agreed to lease to Microware Ltd. a property situated at 1st Floor, Century Centre, 44 and 46 Hung To Road, Kwun Tong, Kowloon, Hong Kong (the “ Office Premises ”) with a total gross floor area of approximately 48,960 sq.ft. for a term of three years commenced from 1 April 2020 and ended on 31 March 2021 at a monthly rental of HK$535,590 (exclusive of management fees, rates and government rent). The Office Premises are used as the Group’s head office. The annual value of right-of-use assets recognised under the Office Tenancy Agreement for the year ended 31 March 2021 was HK$6,427,080.

On 29 March 2021, Microware Ltd. renewed the Office Tenancy Agreement (the “ Renewed Office Tenancy Agreement ”) with Microware Properties for a term of one year commencing on 1 April 2021 and expiring on 31 March 2022 at a monthly rental (exclusive of management fees, rates and government rent) of HK$535,590. The value of rightof-use assets recognised under the Renewed Office Tenancy Agreement for the financial year ending 31 March 2022 is HK$6,427,080.

During the Year, the aggregate rent paid by Microware Ltd. to Mr. Yang pursuant to the Residential Tenancy Agreement amounted to HK$1,272,000 and the aggregate rent paid by Microware Ltd. to Microware Properties pursuant to the Office Tenancy Agreement amounted to HK$6,427,080.

Mr. Yang is an executive Director and a substantial shareholder of the Company. Mrs. Yang is the spouse of Mr. Yang and thus an associate of Mr. Yang. Microware Properties is a wholly-owned subsidiary of Microware International, which is in turn wholly owned by Mr. Yang. Accordingly, each of Mr. Yang, Mrs. Yang and Microware Properties is a connected person of the Company for the purpose of the Listing Rules. As such, the entering into of the aforementioned agreements and the transactions conducted thereunder are connected transactions of the Group under the Listing Rules.

All related party transactions for the year ended 31 March 2021 set out in note 25 to the Financial Statements constitute connected transactions of the Company and the Company has complied with the disclosure requirements in Chapter 14A of the Listing Rules in respect of these transactions.

EMOLUMENT POLICY AND DIRECTORS’ REMUNERATION

The emoluments of the Directors are reviewed and approved by the Remuneration Committee, having regard to factors including salaries paid by comparable companies, time commitment, job duties and responsibilities in respect of the relevant positions. The Company has adopted the Share Option Scheme, details of which are set out in the paragraphs under the section headed “Share Option Scheme” in this report.

PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES OF THE COMPANY

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

CHARITABLE DONATIONS

During the Year, the Group made charitable donations amounting to HK$2.9 million.

Directors’ Report

PRE-EMPTIVE RIGHTS

There are no provisions for pre-emptive rights under the Articles or the laws of the Cayman Islands, which would oblige the Company to offer new Shares on a pro-rata basis to existing Shareholders.

CORPORATE GOVERNANCE AND MODEL CODE

The Company has complied with the code provisions of the CG Code as set out in Appendix 14 to the Listing Rules throughout the Year, except for Code Provision A.2.1 of the CG Code. For details, please refer to the Corporate Governance Report of the Company which is set out on pages 15 to 25 of this report.

The Company has adopted the Model Code as the securities dealing code for its Directors. Having made specific enquiry to all Directors, all Directors confirmed that they have fully complied with the required standards and provisions as set out in the Model Code during the Year.

INDEPENDENCE OF INDEPENDENT NON-EXECUTIVE DIRECTORS

The Company has received from each of its independent non-executive Directors a confirmation of independence, and the Company considers that each of them is independent and has met the guidelines set out in Rule 3.13 of the Listing Rules.

INTEREST OF DIRECTORS AND CONTROLLING SHAREHOLDERS IN A COMPETING BUSINESS

As at 31 March 2021, the Directors were not aware of any business in which the Directors or the controlling Shareholders are interested that had competed or might compete with the business of the Group.

DEED OF NON-COMPETITION

Each of Microware International and Mr. Yang (the “ Covenantors ”), being the controlling Shareholders, has undertaken to the Company in the deed of non-competition (the “ Deed of Non-competition ”) entered into by them in favour of the Company on 15 February 2017 that he/it will not, and will procure his/its close associates (as defined in the Listing Rules and other than members of the Group) not to directly or indirectly participate, acquire or hold any right or interest in or otherwise be involved in or undertake any business that directly or indirectly competes, or may compete, with the existing business activity or any business activities that the Group may undertake in the future, or hold shares or interest in any companies or business that compete directly or indirectly with the business engaged by the Group from time to time except where the Covenantors hold less than 5% of the total issued share capital of any company (whose shares are listed on the Stock Exchange or any other stock exchange) which is engaged in any business that is or may be in competition with any business engaged by any member of the Group and they do not control 10% or more of the board of directors of such company. Details of the Deed of Non-competition have been disclosed in the Prospectus under the section headed “Relationship with Our Controlling Shareholders”.

The Company has received an annual written confirmation from the Covenantors in respect of their compliance with the Deed of Non-competition. The independent non-executive Directors have reviewed and were satisfied that each of the Covenantors has complied with the Deed of Non-competition during the Year.

Directors’ Report

SUFFICIENCY OF PUBLIC FLOAT

As at the date of this report, based on the information publicly available to the Company and within the knowledge of the Directors, the Directors confirmed that the Company maintained the prescribed public float under the Listing Rules.

RELATIONSHIP WITH EMPLOYEES, CUSTOMERS AND SUPPLIERS

The Group believes that its employees are valuable assets for the Group’s continuous development. Thus, it offers competitive salary package to its employees including mandatory provident funds in accordance with the Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong) and medical insurance coverage to employees who are retained after the probation period. In order to promote overall efficiency, employee loyalty and retention, employees of the Group are required to attend orientation sessions when they first join the Group and may attend other training courses held onsite or externally.

The Company has also adopted the Share Option Scheme to recognise and motivate contributions of its employees. Further details regarding the Share Option Scheme are set out in the paragraphs headed “Share Option Scheme” on pages 33 to 35 of this report.

The Group provides high quality IT infrastructure solutions to its customers from both private sector and public sector to fulfil their immediate and long-term needs. The Group also communicates with its customers regularly to maintain close relationship with them.

The Group strives to maintain fair and cooperative relationships with its suppliers.

PERMITTED INDEMNITY PROVISIONS

Pursuant to the Articles, every Director, auditor, secretary or other officers of the Company shall be entitled to be indemnified by the Company out of the assets and profits of the Company from and against all actions, costs, charges, losses, damages and expenses which they or any of them may sustain or incur by or by reason of any act done, concurred in or omitted in or about the execution of their duty, or supposed duty, in their respective offices or trusts.

The Company has taken appropriate insurance coverage in respect of Directors’ and officers’ liability throughout the Year.

RELIEF OF TAXATION

The Company is not aware of any relief from taxation available to the Shareholders by reason of their holding of the Shares.

MANAGEMENT CONTRACT

No contract concerning the management or administration of the whole or any substantial part of the business of the Company was entered into or existed during the Year.

IMPORTANT EVENT AFTER THE END OF THE YEAR

There is no important event affecting the Group which has occurred since the end of the Year up to the date of this report.

Directors’ Report

REVIEW OF THE ANNUAL RESULTS

The Audit Committee has reviewed the Financial Statements, the annual results announcement and this annual report of the Company for the Year and had submitted the same to the Board for approval. Members of the Audit Committee were of the opinion that the preparation of such Financial Statements, results announcement and annual report has complied with the applicable accounting standards, the Listing Rules and that adequate disclosure had been made.

AUDITORS

A resolution will be proposed at the AGM to re-appoint Deloitte Touche Tohmatsu as the external auditors of the Company until the conclusion of the next annual general meeting of the Company and to authorise the Board to fix their remuneration.

On behalf of the Board

Chu Ming Ho Chairman

Environmental, Social and Governance Report

SCOPE AND REPORTING PERIOD

Microware Group Limited (hereinafter referred as the “ Company ”, and together with its subsidiaries referred as the “ Group ”) is pleased to publish the Environmental, Social, and Governance (the “ ESG ”) report, highlighting its ESG performance, with disclosure reference made to the ESG Reporting Guide as described in Appendix 27 to the Rules Governing the Listing of Securities on the Listing Rules Guidance set out by Stock Exchange. The disclosure in this report complies with the disclosure requirements of the “comply or explain” as set out in the ESG Reporting Guide.

The principal activity of the Group is the provision of IT infrastructure solution services and IT managed services in Hong Kong. It advises clients on their IT systems, delivers, and/or installs and implements IT infrastructure solutions with the hardware and software purchased from a number of manufacturers or authorised distributors for its clients. This ESG report covers the Group’s overall environmental and social performances of the business operations in the two offices of the Group in Kwun Tong and Wan Chai, Hong Kong, from 1 April 2020 to 31 March 2021 (“ Reporting Period ”), unless otherwise stated. The total floor area of the abovementioned two offices is 4,632.87 m[2] . Other operations that had no significant environmental and social impacts contributed were excluded from the reporting scope.

STAKEHOLDER ENGAGEMENT AND MATERIALITY

It is believed that every corporation shall take into consideration of its people, the environment and the community in its business operation to achieve sustainable development and return. The Group upholds high ethical standards and is committed to engaging its stakeholders and operating its business in a fair, responsible, and transparent manner.

The Group manages stakeholders’ satisfaction by holding regular meetings with its stakeholders. The Group maintains a list of stakeholders (e.g. customers, suppliers, regulatory bodies, etc.) and reviews it on a half-yearly basis. Interim service meetings with stakeholders are organised on a quarterly basis to discuss service performance and achievement, business environment in which the services operate, requirements for new or changed services and other service-related issues. Service review meetings are organised on an annual basis to discuss any changes to the service scope and stakeholders’ business needs.

During the Reporting Period, the Group had specifically circulated a survey amongst stakeholders such as, directors, senior management, frontline employees, shareholders, suppliers, and customers to understand their concerns on the Group’s operations. The topics of concern and their respective level of materiality is shown on the matrix as follows.

Environmental, Social and Governance Report

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Materialilty of Different Topics from Stakeholder Engagement
15
16
9
10 14
13
12 18
11
17
8
6
1
5
2 3
4
LOWER HIGHER
HIGHER
External Interests
LOWER
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Internal Assessment on Importance to Business

Environmental

• 1 Energy

• 2 Water

• 3 Air Emission

• 4 Waste and Effluent

• 5 Other Raw Materials Consumption 6 Environmental Protection Measures

Social

• 7 Employment

• 8 Occupational Health and Safety

• 9 Development and Training

• 10 Labour Standards

• 11 Supply Chain Management

• 12 Intellectual Property Rights

• 13 Data Protection

• 14 Customer Service 15 Product/Service Quality 16 Advertising and Claims 17 Anti-corruption

• 18 Community Investment

Environmental, Social and Governance Report

As indicated by the materiality assessment, topics on the social aspects are viewed as of higher importance in stakeholders’ perspectives. The top 5 material topics are,

1. Product/Service Quality

2. Advertising and Claims

3. Development and Training

4. Data Protection

5. Customer Service

The Group has policies addressing the above issues and will be discussed in this report. The Group will continue to engage its stakeholders and review its polices such that all potential challenges to the Group’s sustained development can be reduced.

REPORT AVAILABILITY AND STAKEHOLDERS’ FEEDBACK

The report can be accessed and downloaded from the company’s website at https://www.microware1985.com/ or on the website of the Stock Exchange at www.hkexnews.hk. The Group welcomes stakeholders’ feedback on its environmental, social and governance approach and performance. Please give your suggestions or share your views with the Group via email at ir@microware1985.com or by phone (852)2565 3088.

THE GROUP’S ESG COMMITMENT

It is a fundamental aim of the Group to accomplish the green vision and raise employee’s environmental awareness for carbon reduction. The Group integrates environmental management into business processes and continually improves environmental performance in line with local regulations and industry specific guidelines.

Environmental-specific Strategies

The Group is committed to achieving the following environmental objectives:

1. Strictly comply with all applicable environmental legislation, standards and regulations;

2. Ensure that resources are not wasted and that where practicable, materials and goods are re-used and recycled;

3. Reduce the generation of waste as far as it is reasonably practicable and dispose of waste in an environmentally responsible manner;

4. Reduce energy consumption and improve energy efficiency through appropriate environmental management;

5. Avoid, reduce, or control environmental pollution arising from its business and engaged suppliers and contractors to adopt and implement similar environmental measures;

6. Communicate best practices relating to environmental issues; and

7. Encourage employees to take part in appropriate environmental initiatives.

Environmental, Social and Governance Report

Social-specific Strategies

1. Organise end-user seminars of different scales to share and promote industrial expertise and cutting-edge solutions while boosting sales;

2. Sponsor and participate in large-scale exhibitions organised by IT leaders to demonstrate leadership in the industry to showcase corporate responsibility; and

3. Attend overseas trainings and roundtable summits to enhance engagement, thus relationships, with vendors.

Recognitions, Accreditations and Certifications

As a result of the Group’s continuous effort in community work and performing social responsibility, it has been honoured to receive the title of Caring Company for the fourteenth consecutive year.

Running a business that focuses on delivering IT infrastructure solutions services, the Group is determined in providing services that meet international standards as their corporate responsibility. The Group has therefore earned certifications as follows as evidence of their accountability.

• ISO/IEC 20000-1:2018 The IT Service Management System that supports the provision of hardware maintenance services to its external customers by Microware Limited. — Part 1: Service management system requirements

• ISO/IEC 27001:2013 Provision of hardware maintenance services, assessed in accordance with Statement of Applicability v2.2 — Information security management systems

The Group holds corporate memberships of the Hong Kong Computer Society and the Federation of Hong Kong Industries. The Group is also a highly trusted partner for various multinational corporations, such as, Adobe Systems, DellEMC, HP Inc, Lenovo, Microsoft, Nutanix, VMWare etc., having qualified for a range of professional specialism. They include, network security, wireless LAN, storage solutions, cloud solutions, data analytics, management operations, sales, and post-sales services, etc.

Environmental, Social and Governance Report

A. ENVIRONMENTAL

The Group has implemented environmental protection policies which raise employee’s awareness on carbon reduction and waste reduction. There was no other major non-compliance relating to air and greenhouse gas (“ GHG ”) emissions, discharges into water and land, and generation of hazardous and non-hazardous waste.

A1. Emissions

A1.1 Air Emissions

The Group had not involved in the consumption of fuel that contributes to a significant emission of nonGHG air emissions.

A1.2 Greenhouse Gas Emissions

During the Reporting Period, a total of 413.07 tonnes of carbon dioxide equivalent (tCO2e) GHG, mainly carbon dioxide, methane, and nitrous oxide, were emitted due to the Group’s operation (2019/20: 459.55 tCO2e; 2018/19: 452.51 tCO2e). The annual emission intensity was 0.09 tCO2e/m[2] (2019/20: 0.10 tCO2e/ m[2] ; 2018/19: 0.10 tCO2e/m[2] ) and 1.61 tCO2e/employee (2019/20: 1.60 tCO2e/employee; 2018/19:1.62 tCO2e/employee). See Table 2 for the breakdown of GHG emissions during the Reporting Period and Figure 1 for a five-year comparison of the emissions.

Table 1 Greenhouse Gas Emissions during the Reporting Period

Scope of		Emission	Total Emission
GHG Emissions	Emission Sources	(tCO2e)	Percentage
Scope 1 Direct Emission	N/A	N/A	N/A
Scope 2 Energy Indirect	Purchased electricity	409.79	99%
Emission
Scope 3 Other Indirect	Wastepaper disposal at landflls	0.78	1%
Emission	Electricity used for freshwater processing	1.89
	Electricity used for sewage processing	0.62
	Business air travel	N/A
TOTAL		413.08	100%

Note 1: Emission factors were made by reference to Appendix 27 to the Listing Rules and their referred documentation as set out by the Stock Exchange, unless stated otherwise.

Environmental, Social and Governance Report

Figure 1 Yearly Comparison of Greenhouse Gas Emissions

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600 3.00
518.69
500 456.21 452.51 459.55 2.50
1.85 413.08
400 1.65 1.62 1.60 1.61 2.00
300 1.50
200 1.00
100 0.50
0.11 0.10 0.10 0.10 0.09
0 0.00
2016/17 2017/18 2018/19 2019/20 2020/21
Reporting Period
Total Amount tonne CO2e/m2 tonne CO2e/employee
tonne CO2e
Intensity (tonne CO2e /unit)
----- End of picture text -----

With the implementation of the Environmental Protection Policy, the Group had been able to achieve a generally reducing trend in the total amount of GHG emissions as well as maintaining the emission intensity per square metre and per employee.

A1.3. Hazardous Waste

During the Reporting Period, a total of 0.80 tonnes of hazardous electronic wastes were generated by the Group, which included 0.098 tonnes of batteries and computer hardware such as computers and 0.70 tonnes of printing cartridges. The intensity of hazardous waste generated was 0.17 kg/m[2] , or 2.96 kg/ employee.

A1.4. Non-hazardous Waste

During the Reporting Period, paper was the Group’s major source of non-hazardous wastes. A total of 162 kg of wastepaper, with an intensity of 0.035 kg/m[2] , or 0.60 kg/employee, was generated during the Reporting Period. Other non-hazardous wastes in small amount were not recorded, which included nonhazardous computer components, food scraps, packaging boxes, worn-out uniform, and towels, etc.

A1.5. Measures to Mitigate Emissions

To reduce carbon emission induced by the Group’s operations, the Group has the following measures and initiatives:

• Employee utilising video conference calls, and online meetings and training sessions to avoid air travel needs;

• Working with suppliers who have implemented environmental policies such that its emissions induced indirectly can be controlled;

Environmental, Social and Governance Report

• Reducing waste generation for the reduction of emission incurred from waste treatment; and

• Carrying out multiple energy saving practices as described in Section A2.3.

A1.6. Waste Handling and Reduction Initiatives

Waste Handling

The Group handles both its hazardous and non-hazardous waste in a careful manner to minimise risks imposed on the environment as a result of its operations.

The Group acts for proper recycling of regulated electrical equipment and electronic equipment from its customers, turning waste into resources. The steps for recycling of electrical and electronic equipment are shown below:

• Notify customers in writing of the arrangement of the statutory removal services and the relevant terms of services;

• Upon the consumer’s request, arrange for free statutory removal services to remove old equipment;

• Provide an appropriate recycling label to the consumer;

• Provide a receipt with the prescribed wording to inform consumers about the recycling levy payable by registered supplier; and

• Keep a record of the request for statutory removal services for the ease of future review.

For IT equipment collected from its customers, they are grouped as usable or unusable items after recording, and degaussing and erasing relevant data. Usable components are sent to workshop for repair while unusable ones are sent to sub-contractors for dismantling. If the dismantled parts of such components are found to be able to function, they will be integrated into computer equipment for reuse. As for those that are un-reusable, they will be collected by licensed collectors which are qualified with ISO 14001 to ensure that they are handled properly. For toner cartridges, they are also sent to specialists for further recycling when feasible.

For non-hazardous wastes that are generated from office operations, they are regularly collected by the property managing companies of the respective office buildings. Regarding to documents and paper works that involve a large amount of confidential information, a licensed recycler is engaged to collect such paper for careful treatment.

Reduction Initiatives

To reduce generation of non-hazardous wastes, the Group raises its employees’ awareness of adopting waste reduction practices by reducing, reusing, and recycling. Specific measures taken include:

• Disposing of office furniture and other materials only when they are no longer usable;

• Gathering used and shared stationaries such as binders, punchers, and file folders at an internal reuse area employee for employees’ usage;

Environmental, Social and Governance Report

• Deploying e-administration such as e-fax and e-forms for leave application, stationary application, submission of benefit and expenses claims, appraisal, payroll slip, medical insurance claims, etc. to reduce paper usage;

• Making the default printing mode as double-sided printing, and use encourage employees to reuse single-sided paper for drafting purposes;

• Using e-cards for festival greetings; and

• Encouraging on-site engineers to reuse or recycle packaging materials for parts delivery after maintenance.

A2. Use of Resources

A2.1. Energy Consumption

The only source of energy for the Group was electricity during the Reporting Period. Consumption of energy was 806.24 kWh, with an energy intensity of 174.03 kWh/m[2] or 2,997.19 kWh/employee (2019/20: 185.93 kWh/m[2] or 2,991.01 kWh/employee; 2018/19: 183.94 kWh/m[2] or 3089.89 kWh/ employee). See Figure 2 for a five-year comparison in electricity consumption.

Figure 2 Yearly Comparison of Electricity Consumption

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1,000 4,000
900.27
862.08 861.41
900 832.92
806.24
800
3,215.25 3,000
700 3,006.94 3,089.89 2,991.01 2,997.19
600
500 2,000
400
300
1,000
200
100 191.88 177.53 183.94 185.93 174.03
0 0
2016/17 2017/18 2018/19 2019/20 2020/21
Reporting Period
Total Consumption kWh/m [2] kWh/employee
kWh (thousands)
Intensity (kWh/unity)
----- End of picture text -----

Environmental, Social and Governance Report

A2.2. Water Consumption

Water consumption of the Group during the Reporting Period was 4,451 m[3] with water intensity of 0.96 m[3] /m[2] or 16.55 m[3] /employee (2019/20: 0.64 m[3] /m[2] or 10.33 m[3] /employee; 2018/19: 0.84 m[3] /m[2] or 13 m[3] /employee). Only water consumption of the Group’s Kwun Tong office has been included as water consumption of the Group’s Wan Chai office is managed by the office’s building management office and the toilet is in the public area, and therefore water usage data is not available. It is noteworthy that its water consumption is insignificant.

Figure 3 Yearly Comparison of Water Consumption

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----- Start of picture text -----

6,531.00 25
6,000 23.33
20
5,000
4,451.00
3,960.00
4,000 15
3,342.00
16.55
2,974.00
3,000
12.06 13.00 10
2,000 10.33
5
1,000
1.39 0.71 0.84 0.64 0.96
0
0
2016/17 2017/18 2018/19 2019/20 2020/21
Reporting Period
Total Consumption m [3] /m [2] m [3] /employee
/unit)3
3m
Intensity (m
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A2.3. Energy Use Efficiency Initiatives

The Group encourages employee to reduce electricity consumption and has implemented the following initiatives:

• Using energy-efficient lightings (e.g. LED tubes, T5 fluorescent tubes and parabolic reflectors);

• Using electronic appliances with Grade 1 energy labels;

• Using all-in-one multi-functional devices that minimise power consumption and carbon footprint;

• Setting computer monitors to enter sleeping mode when idled over 5 minutes;

• Reminding employee to turn off unnecessary lightings, electronic appliances, and devices via sending messages before holidays and posting prompts next to light switches; and

• Turning off lights, air-conditioner, and other electronic equipment during non-office hours.

Environmental, Social and Governance Report

A2.4. Water Use Efficiency Initiatives

The Group has adopted automatic urinal sensors and installed faucet water savers with Grade 1 water efficiency labels to reduce water wastage.

A2.5. Packaging Materials

Due to the business nature of the Group as a service provider, it does not require any packaging materials for its products. While its services may often involve computer parts and items that are wrapped in protective materials, its engineers are reminded to reuse these materials for delivery or recycling.

A3. The Environment and Natural Resources

A3.1. Significant Impacts of Activities on the Environment

The Group’s business operations were office-based, in which significant emissions were mainly related to electricity consumption. Other emission sources included freshwater processing, sewage treatment, paper disposed at landfill and business air travel. Hazardous wastes generated from its offices were mainly computer hardware and batteries while non-hazardous wastes generated were mainly paper.

The Group believes that the IT infrastructure solutions industry in which it operates in is not a major source of environmental pollution and the impact of its operation on the environment is minimal. Even so, the Group formulated its own environmental protection policy and stresses on the principle of “Reduce, Reuse and Recycle” to promote better utilisation of environmental resources. The Group is committed to promoting an environmental-friendly ambience among its employees and raising employee’s awareness on carbon reduction and waste reduction.

During the Reporting Period, to the best of the Group’s knowledge, the Group did not have any noncompliance issues in relation to environmental laws and regulations in Hong Kong.

Environmental, Social and Governance Report

B. SOCIAL

1. Employment and Labour Practices

B1. Employment

B1.1 Employee Figures

The Group had a total number of 263 employees as of 31 March 2021 (2019/20: 288 employees; 2018/19: 277 employees; 2017/18: 277 employees), all of which were from Hong Kong. In general, the make-up of the Group’s workforce has remained similar throughout the years. See Figures 4-7 for the compositions of employees by categories.

Figure 4 Yearly Comparison of Workforce by Employee Type

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----- Start of picture text -----

300 2.8%
1.4% 0.4% 1.8%
0.7%
200
98.6% 99.6% 98.2% 97.2% 99.3%
100
0
2016/17 2017/18 2018/19 2019/20 2020/21
Full Time Part Time
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Environmental, Social and Governance Report

Figure 5 Yearly Comparison of Workforce by Job Grade

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----- Start of picture text -----

300
200
89.6% 89.5% 90.0% 88.5% 90.0%
100
6.1% 6.5% 6.5% 6.9% 5.6%
4.3% 4.0% 3.6% 4.5% 4.5%
0
2016/17 2017/18 2018/19 2019/20 2020/21
Frontline & Other Staff Middle Management Senior Management
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Figure 6 Yearly Comparison of Workforce by Age

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----- Start of picture text -----

300
6.9%
4.3% 4.3% 4.3%
7.4%
15.0%
18.1% 20.1% 21.9%
22.7%
200
32.9%
35.0% 30.8%
34.7%
35.7%
100
38.6% 34.1%
34.7%
28.1%
26.0%
9.3% 7.9% 10.8% 8.3% 8.2%
0
2016/17 2017/18 2018/19 2019/20 2020/21
18-25 26-35 36-45 46-55 56 or above
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Environmental, Social and Governance Report

Figure 7 Yearly Comparison of Workforce by Gender

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----- Start of picture text -----

300
25.4% 27.1% 28.0% 27.8%
29.4%
200
100 74.6% 72.9% 72.0% 72.2% 70.6%
0
2016/17 2017/18 2018/19 2019/20 2020/21
Male Female
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B1.2 Turnover

During the Reporting Period, a total of 68 employees left the Group, contributing to a turnover rate of 25.3%. In general, the proportion of employees who left the Group during the Reporting Period was significantly lower than that of the previous Reporting Period. Figures 8-11 illustrate the turnover rate by categories with yearly comparison.

Figure 8 Yearly Comparison of Turnover Rate by Employee Type[1]

==> picture [355 x 209] intentionally omitted <==

----- Start of picture text -----

200%
150%
100%
50%
0%
2016/17 2017/18 2018/19 2019/20 2020/21
Average Turnover Full Time Part Time
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1 No data on turnover rate according to employee type is available for the Reporting Period of 2016/17.

Environmental, Social and Governance Report

Figure 9 Yearly Comparison of Turnover Rate by Job Grade[2]

==> picture [355 x 198] intentionally omitted <==

----- Start of picture text -----

60%
50%
40%
30%
20%
10%
0%
2016/17 2017/18 2018/19 2019/20 2019/21
Average Turnover Senior Management
Middle Management Frontline & Other Staff
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Figure 10 Yearly Comparison of Turnover Rate by Employee Age

==> picture [355 x 245] intentionally omitted <==

----- Start of picture text -----

120%
100%
80%
60%
40%
20%
0%
2016/17 2017/18 2018/19 2019/20 2020/21
Average Turnover 18-25
26-35 36-45
46-55 56 or above
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2 No data on turnover rate according to job grade is available for the Reporting Period of 2016/17.

Environmental, Social and Governance Report

Figure 11 Yearly Comparison of Turnover Rate by Gender

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----- Start of picture text -----

70%
60%
50%
40%
30%
20%
10%
0%
2016/17 2017/18 2018/19 2019/20 2020/21
Average Turnover Male Female
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B1.3 Employment Policies

Employee Benefits and Welfare

The Group generally recruits employees from the open market. Fair terms regarding standard working hours, termination of employment and dismissal had been laid down in the employment contracts. Competitive remuneration is offered to its employees with medical insurance, travel insurance and employees’ compensation insurance provided. Housing allowances are approved on a case-by-case basis by the Chief Executive Officer. The salary range for each employee grade is determined and approved by the Directors based on principles of fairness, ability, competitiveness, and timeliness. Overall employee salary is reviewed annually based on the result of performance evaluation approved by departmental directors and the Chief Executive Officer. The Group provides a defined contribution to the Mandatory Provident Fund (“ MPF ”) as required under the Mandatory Provident Fund Schemes Ordinance Cap.485 for its eligible employees. Employees are entitled to various types of leave including annual, sick, maternity, and paternity leave under the Employment Ordinance Cap.57 and other laws and regulations. In addition, the Group also provides compassionate leave and two days of marriage leave. Education subsidy programme, children education allowance and medical check programme are provided. They can also purchase the Group’s products at special prices upon approval from the relevant department head or senior management. The Group did not note any material non-compliance with laws and regulations regarding compensation and dismissal, recruitment and promotion, working hours, rest periods and other benefits and welfare during the Reporting Period.

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Equal Opportunity and Fair Treatment

As an equal opportunity employer, the Group emphasises a fair, open, objective, and nondiscriminatory selection process in its recruitment, promotion, transferral processes and other business operation activities. Assessment of eligibility is based on attributes relevant to the job requirement like qualifications, knowledge, work experience, skills, and competency. No candidate is screened and discriminated against based on their race, gender, religion, age, disability, nationality, family status, etc.

The Group is committed to creating a safe work environment which is free from discrimination and sexual harassment and where members of employee are treated with dignity, courtesy, and respect. The policy of anti-discrimination has been developed which applies to all employee, their work-related interactions, and functions. Any acts in relation to discrimination and sexual harassment are strongly prohibited and condemned against and the terms are clearly written on the Group’s employees’ handbook. The Hong Kong Bill of Rights Ordinance Cap.383, the Sex Discrimination Ordinance Cap.480, Disability Discrimination Ordinance Cap.487, Family Status Discrimination Ordinance Cap.527 and Race Discrimination Ordinance Cap.602 are complied with. It is unlawful under the said ordinances to discriminate against or harass a person directly or indirectly.

Any employee who believes he or she has been subjected to, or has witnessed, actions that constitute a violation of this Anti-discrimination policy must promptly report the matter to management. Management will investigate any report of an alleged violation of this Antidiscrimination policy and, where appropriate, take appropriate corrective action.

Any employee who feels sexually harassed are encouraged to report to his or her supervisor and the Head of Personnel. The Company will evaluate the relevant facts and circumstances and give appropriate advice if necessary. Sexual harassment is a civil offence under Sex Discrimination Ordinance and is strictly prohibited by law. Any harassment complaints will be handled seriously and reported to the Equal Opportunities Commission immediately.

Employee Relations

Appraisals are conducted annually to evaluate employee performance and strengthen mutual understanding between appraisees and the Group. They also provide a basis of reference for making related personnel decisions including confirmation of employment, salary increment, bonus allocation, promotion, transferal, jobs rotation and arrangement of trainings, etc. Employee performance is appraised through self-assessment and assessment by immediate supervisors as well as interactive communication between employee and his/her immediate supervisor.

Dismissal procedure is established to ensure fair treatment for all employee who may become liable for disciplinary action. Except in cases of dismissal without notice for serious misconduct, employee will receive formal oral warning and three formal written warnings before formal dismissal.

During the Reporting Period, to the best of the Group’s knowledge, the Group did not have any non-compliance issues in relation to labour laws and regulations.

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To build workplace camaraderie, the Group celebrates with its employee during festivals such as Winter Solstice, Lunar New Year, Mid-Autumn festival and Christmas. Apart from statutory holidays, early leave from work is sometimes allowed during festive celebrations or special occasions. There are also quarterly morale activities that employees are invited to join to strengthen their sense of belonging. Some of the activities include, cooking class, VR war game, barbeque, hobby workshop, etc. In addition, the Group also celebrates employees’ life events through:

• Sending greeting cards with red packets to employees who are parents,

• Giving red packets to newly married employees, and

• Giving red packets to employees’ newborn babies.

COVID-19 Adaptations

In consideration of the Coronavirus Disease 2019 (COVID-19), the Group has made several adjustments to company policy and practices, one of which is the “Employee Support Scheme.” The scheme ensures that normal wages continue to be paid to employees and are not reduced. In addition, some staff have contracted the virus and had to be quarantined. The Group arranged for these employees to either be temporarily released from their work or be on paid sick leave allowance. The Group has made adaptations, such as a group medical scheme and COVID-19 testing claim reimbursements. The Group also paid termination compensation, which includes wages, severance payments, and severance payment to redundant employees.

B2. Employee Health and Safety

The Group provides a healthy and safe working environment for its employees and sub-contractors and takes adequate steps to prevent accidents and injuries arising in the course of work. It also exercises duty of care to its customers and general public in its business activities.

The health and safety policy of the Group states that one of the prime responsibilities of the management at all levels is to ensure all reasonably practicable actions are taken to comply with the Occupational Safety and Health Ordinance Cap.509 and the policy itself. The policy ensures that:

• Risks of all types of work activities are identified and minimised,

• Accidents are prevented and investigated if occurred, and

• Contractors and business partners selected shall conform to the Group’s health and safety requirements.

The health and safety performances are periodically monitored and reviewed by the Company’s Office Administration Department. The Group provides proper lighting and adequate ventilation at office and promotes employee awareness on health and safety through posted information at conspicuous locations. Furniture and fixtures are also checked and inspected regularly to ensure that they are well maintained and replaced if necessary, to avoid physical injuries.

Environmental, Social and Governance Report

The Group did not note any material non-compliance with laws and regulations in relation to providing a safe working environment and protecting employees from occupational hazards during the Reporting Period.

Occupational Health and Safety Data

Year	2020	2019	2018
Work related fatality	0	0	0
Work injury cases >3 days	0	0	1
Work injury cases ≤3 days	0	0	0
Lost days due to work injury	0 days	0 days	28 days

COVID-19 Adaptations

In efforts to prevent the transmission of the COVID-19 pandemic, employees were required to check their body temperatures regularly. All staff that showed signs of fever and respiratory symptoms were instructed to stay home and seek medical advice immediately. In addition, similar policies were enforced upon visitors and clients. Their temperatures were checked prior entering the office, and those who had fever or signs of symptoms had their visits cancelled. All employees and external personnel had to always wear surgical masks in the office area, and surgical masks and alcohol hand sanitizers were provided in the office. The Group maintained hygiene in the environment through regular cleaning and disinfection of frequently touched surfaces, such as furniture, phones, computers, etc. Finally, in the case where employees developed symptoms of the virus, they were required to notify the supervisor or department head immediately, refrain from work, and stay at home until they acquire a negative test result for the COVID-19 test.

B3. Development and Training

The Group provides internal trainings and encourages participation in external trainings through provision of the education subsidy programme. It believes that all-round trainings can increase productivity, build confidence in its workforce, and create a better working environment.

Internal trainings such as employee orientations cover various topics including company policy, antidiscrimination, anti-corruption, intellectual property, and data security. External trainings are organised by professional institutions, hardware, software, or supplier companies, which mainly involve trainings of new product knowledge, sales skills, technical IT skills and solutions. Training is arranged by the Human Resources Department according to employees’ needs.

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Training and Development Data

Year	2020/21	2019/20	2018/19
Total number of employees	263	288	277
Total training hours	342	1,356	642
Percentage of employees trained by gender (%)
Male	11%	79%	72%
Female	8%	40%	87%
Percentage of employees trained by
employment category (%)
Senior management	N/A	23%	100%
Middle management	7%	90%	100%
Frontline and other employees	10%	69%	72.1%
Average training hours completed per
employee by gender (hours)
Male	1.3	5.3	2.2
Female	1.3	3.2	2.6
Average training hours completed per
employee by job grade (hours)
Senior management	0	1.9	3.6
Middle management	0.27	7.2	3.3
Frontline and other employees	1.4	4.7	2.2

B4. Labour Standards

In compliance with the Employment Ordinance Cap.57, there was no child nor forced labour in the Group’s operation during the Reporting Period. The human resources department of the Group checks job candidates’ identity cards, working visas, relevant certificates and references to ensure compliance with all the applicable laws regarding employment and labour standard. The Group also ensures a fair recruitment process and working environment without any coercive acts. There was no non-compliance in relation to preventing child and forced labour that have a significant impact on the Group during the Reporting Period.

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2. Operating Practices

B5. Supply Chain Management

Suppliers the Group engaged were principally hardware and software manufacturers, authorised distributors and other IT service providers which mainly act as its subcontractors. Hardware and software were mainly purchased from the manufacturers directly or through their authorised distributors.

Since providing a healthy and safe working environment for employees and sub-contractors is a top concern of the Group, it requires its business partners and suppliers to fulfill and perform health standards that the Group sets. This makes sure anyone who is working directly or indirectly for the Group is protected from any workplace hazards, and any injury arising from such work can be prevented.

When selecting and evaluating a supplier, the Group also considers three other major criteria namely price, quality of work, and performance capability. It executes a contract with the chosen supplier either in the form of a purchase order or a contract which covers statement of work, schedule, service term, pricing and payment, acceptance of products, warranty, and termination. The supplier is assessed and filed to the supplier master file before being employed. Suppliers in the master file are evaluated periodically with frequency depending on the nature of products or services they provide. Purchase orders are approved by the procurement manager. All personnel involved in the selection and evaluation processes should declare any conflict of interest before the selection and evaluation process is performed. These measures are taken such that the Group can ensure the quality of its products delivered remains top tier.

B6. Product Responsibility

Product responsibility is one of the Group’s priorities. There was no non-compliance in relation to health and safety, advertising, labelling and privacy matters of products and services provided and methods of redress that have a significant impact on the Group during the Reporting Period.

B6.1 Advertising and Labelling

The Group mainly distributes promotional materials via sending electronic direct mails (eDM) to its target database. When the marketing department sends out promotional messages, the Group’s name and contact information is made clearly visible to receivers such that to notify them the sender of the e-mail. The Group also clearly states the terms and conditions of the promotional offers in case of any ambiguity. Such terms and conditions include valid dates and exceptions of the offer. It is also stated that the Group reserves the final rights if there are any disputes. If receivers no longer wish to be contacted by the Group for such promotional matters, there is also an unsubscribe button on every eDM that receivers are free to click on to opt-out from the mailing list.

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B6.2 Product Recalls

While the Group’s products are rarely subjected to safety and health issues, it has certain recall procedures if the products are defected. A recall may be taken place if a complaint is filed by a customer stating that the distributed product does not meet the user’s expectation, or if a manufacturer of the distributed product informs the Group of its potential violation against local legislation. Under both of the circumstances, the Group will follow the following procedures as remedial follow up.

1. File an incidence report;

2. Evaluate the problem to determine any associated risks, and inform the product market department regarding the affected product and problem;

3. Determine the scope and degree of products affected, and find out their batches, serial numbers, list of affected customers, then inform relevant sales teams and individual salesmen;

4. Define actions to be taken with a timeframe, and assign responsibilities to relevant team members;

5. The product recall activities may, when necessary, include:

6. a. replacing the distributed products

7. b. taking corrective actions to repair affected apparatuses and materials, or replace spare parts

8. c. notifying affected customers/users of recalls with instructions on ceasing the use and return method of the product

9. d. advising customer on any other problem or aspect of the product;

10. File a final report that analyses the causes of the recall and any relevant conclusions; and

11. Take necessary corrective measures to avoid another incidence.

B6.3 Intellectual Property (“IP”) Rights

The Group registered several trademarks in Hong Kong and branded its business using the brand name “Microware”. It is prohibited for staffs or external parties to make use of the brand name or logo showing in any messages or promotion materials without the Group’s approval. Legal action will be taken for any unauthorized use of our logo or trademark.

It manages security of its assets such as financial information, IP, or employee details entrusted to the Group by third parties in compliance with the ISO/IEC 27001:2013 information security management system. For any infringement of its IP, the Group will urge infringers to cease such infringement. The human resources department of the Group will take further action if infringement continues.

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To protect third party IP rights and comply with relevant licensing terms when software is used, employees are prohibited from duplicating, installing or using software in violation of its copyright or license terms, as stated on the Group’s information security policy and employee handbook. Use of free software products is stringently controlled, making copies of copyright works (e.g. books, periodicals, computer software, etc.) is strictly prohibited, permission shall be sought before bringing in personal computers or software to the office. Employees in violation of the policy will be subject to disciplinary action, civil or criminal sanctions. If any illegal or unauthorised use of their hardware and/or software is noticed, the Group will notify the manufacturers. No material non-compliance with the following laws and regulations regarding IP rights was noted during the Reporting Period:

• Trade Marks Ordinance Cap.599;

• Patents Ordinance Cap.514; and

• Copyright Ordinance Cap.528

B6.4 Information Security

Information has varying degrees of sensitivity and criticality. The Group classifies information into three categories according to its asset management policy, namely public, internal use and confidential. Information is labelled and handled according to their sensitivity to ensure sufficient level of protection. Access to confidential information is restricted, in which they are either password-protected, encrypted, or can only be accessed upon authorisation of the management.

Complying with the Personal Data (Privacy) Ordinance Cap.486, the Group collects and uses data from job applicants, employees, and customer in a lawful and fair manner. Employees of the Group are required to sign employment contracts with contractual obligations which include code of conduct and confidentiality clauses that prohibit employees from disclosing trade secrets, confidential information, and customers’ information without permission. Apart from the information security policy, the Group has also established procedures on management of cryptographic keys, which maintains confidentiality, integrity, authenticity, and non-repudiation of the Group’s sensitive data.

The Group has also implemented measures to enhance security of its IT system. It applies Dedicated Internet Access (DIA) internet line to provide a stable internet access, and installs firewall on server and devices to monitor and control incoming and outgoing network traffic. Moreover, the Group has added SSL certificate (https://) in its website for data protection to ensure information security when customer fill in information/data in the online enquiry form.

The Group did not note any cases of material non-compliance regarding data protection and privacy as required by related laws and regulations during the Reporting Period. No material noncompliance with laws and regulations that have a significant impact on the Group in relation to customer data protection and privacy was recorded during the Reporting Period.

Environmental, Social and Governance Report

B6.5 Data Protection and Privacy Policies

The Group is committed to ensuring a high level of data protection to its existing and potential clients. Therefore, employees and subcontractors are subject to duty of confidentiality to the Group and the Group’s clients pursuant to their employment agreements and subcontracting agreements. By the employees’ handbook, confidential information includes all tangible or intangible ideas, information, and materials generally not known to the public in relation to the business or its customers.

Employees and subcontractors are forbidden to disclose any confidential information obtained during or after the course of services regarding to the Group’s clients to any third party and shall not use such confidential information for their own benefit. All telemarketing promotion needs to operate within the Group’s office and data is not allowed to copy out of the working site. Upon termination of employment with Microware, employees are also not to use and retain any confidential information. A privacy policy page was also added to the Group’s revamped website for its stakeholders’ reference. Some of the guideline’s suggestions are as follows:

“Dos”

“Don’ts”

• Make sure all information is removed from the workplace at the end of the day and stored in a locked area • Confidential sensitive or classified information, when printed, should be cleared from printers immediately • Keep your drawers locked when you are not on your seat. • Ensure doors of entrance / exits are closed • Shred your confidential and internal use document when it is not required at all time. • Beware of social engineering methods • Report to MIS Manager immediately If you see anyone unknown in offce premises • Share the folders/files only to intended users & for specified time. Provide specific Read, Modify, Full Control etc. on requirement basis only • Remove all unauthorised software • Lock your computers when away from the seat (Press Win key + L)

• DO NOT display confidential and internal use documents on the board at your workstation • DO NOT cluttering the work area with Post-It or other handwritten, notes displaying sensitive information such as user ID’s, passwords, personal information of teams including contact details, conference details etc. • DO NOT leave confidential and internal use document in your rubbish bin • DO NOT leave your notepads unattended or being used as a mouse pad • DO NOT leave your RSA token unattended • DO NOT plug USB Drive / Device on your laptop / desktop • DO NOT tailgating and piggy backing • DO NOT store any songs and videos on the desktop/laptop • DO NOT save passwords in text file on your desktop • DO NOT let auditors touch/take/have access to your personal information/ data/objects

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In case of information leakage, the Group will take the following steps:

• Meet related department heads to review the cases;

• Evaluate the impact about the data leakage;

• Inform any internal or related parties about the data leakage issue;

• Take immediate actions to prevent further data leakage, e.g., scan the virus, install the security patch, block the internet access in firewall, etc; and

• Review the progress with committee members.

B6.6 Customer Communication

The Group is committed to providing quality service to its customers. It complies with the ISO/IEC 20000-1:2011 service management system and established a business relationship management procedure to ensure maintenance of good relationship with customers through understanding customers and their business needs, regular review of service level achievements and timely resolution of customers’ complaints.

To manage customer satisfaction, the Group maintains a list of customers and reviews it on a half-yearly basis. Interim meetings and annual meetings are organised on a quarterly and yearly basis to discuss service performance and achievement of the Group. The Group analyses customer surveys and establishes service improvement plans after meetings to follow up with the customers. When customers call or email the Group for product enquiry, service call, or maintenance, the marketing department will pass the respective contacting information and product request to the sales team for follow up.

Upon receipt of product or service-related enquiries or complaints, customers’ information will be recorded, and cases will be transferred to relevant departments for further handling. Initial assessment will be conducted to determine complaints in terms of severity, safety implication, complexity, impact and the need or possibility of immediate action. Respective departments will take reasonable efforts to investigate all relevant circumstances and information surrounding the complaint, followed by communicating with the complainant regarding the decision and action to be taken. If the complaint cannot be resolved immediately, the case will be escalated to the higher management. Action plans to address the complaints and customers’ satisfaction will be evaluated after the complaints are settled. There was no complaint regarding to the Group’s products and services, nor product sold or shipped subject to recalls for safety and health reasons during the Reporting Period.

Environmental, Social and Governance Report

B7. Anti-corruption

The Group believes that honesty, integrity, and fair play are essential values in its business. It has established the anti-corruption policy to ensure that the Group’s reputation is not tarnished by dishonesty, disloyalty, or corruption. The policy stipulates standards of behaviour and explains proper procedures and response to different situations in business dealings.

B7.1 Conflict of Interest

Conflict of interest arises when the personal interests of employee compete or conflict with the interests of the Group. Employee should avoid such situations, actual or potential, which may compromise his/her integrity and put the Group’s interests and reputation at stake. Employee must declare to the Group any financial interest, direct or indirect, which he/she or members of his/her immediate family may have, in any business or other organisation which competes with the Group or with which the Group has business dealings.

B7.2 Anti-Corruption

Any employee soliciting or accepting an advantage in connection with his/her work without the permission of the employer commits an offence under the Prevention of Bribery Ordinance Cap.201. The offeror will also commit an offence. The term “advantage” is defined in the said ordinance and includes gift, loan, fee, reward, office employment, contract, service and favour. The acceptance of an advantage that could affect an employee’s objectivity or induce an employee to act against the Company’s interests, or lead to questions or complaints of bias or impropriety, shall be declined. In cases of an advantage given voluntarily, the employee may accept it if it will not influence his/her performance, and knowing that there is no obligation to return anything for the offer. The value of the advantage accepted shall not exceed HK$500.

The Group followed the said ordinance during the Reporting Period. There was no concluded legal case regarding corrupt practices brought against the Group or its employees during the Reporting Period.

Environmental, Social and Governance Report

B7.3 Whistle-blowing Policy

The Group is committed to the highest possible standards of openness, probity, and accountability. In line with the standards it upholds, the Group expects and encourages its employees, customers, suppliers and other stakeholders who have concerns about any suspected misconduct or malpractice within the Group to voice those concerns to the human resources and administrative manager in full details with supporting evidence. Upon receipt of complaints and potential breaches, the Group will endeavour to respond fairly and properly.

Persons making appropriate complaints under the policy are assured of protection against unfair dismissal, victimisation, or unwarranted disciplinary action, even if the concerns turn out to be unsubstantiated. Employees who victimise or retaliate against those who have raised concerns under the policy will be subject to disciplinary actions.

The Group was in compliance with all applicable laws on prohibiting bribery, extortion, fraud and money laundering of Hong Kong and the PRC. There was no concluded legal case regarding corrupt practices brought against the Group or its employees during the Reporting Period.

B8. Community Investment

Apart from caring for its employees, the Group cares for its community and discharges its corporate social responsibilities by actively participating in voluntary services. With its care for people and the environment, the Group has long been recognised by the Hong Kong Council of Social Service with the “Caring Company Award” for more than ten consecutive years.

B8.1 Voluntary Services

During the Reporting Period, the Group collaborated with the Methodist Social Services and the Community Chest of Hong Kong and the Friends of Earth (HK) to carry out several social services. These voluntary programmes included the Rice Dumpling Delivery Voluntary Services, the Mooncake Delivery Voluntary Services, and the Trees Planting Challenge. An accumulated total of 22 employees participated as volunteers in these programmes. The Group also donated a total of HK$72,000 in support of these events.

Independent Auditor’s Report

TO THE SHAREHOLDERS OF MICROWARE GROUP LIMITED ( 美高域集團有限公司 )

(Incorporated in the Cayman Islands with limited liability)

OPINION

We have audited the consolidated financial statements of Microware Group Limited (the “Company”) and its subsidiaries (collectively referred to as “the Group”) set out on pages 71 to 131, which comprise the consolidated statement of financial position as at 31 March 2021, and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 March 2021, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

BASIS FOR OPINION

We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the HKICPA’s Code of Ethics for Professional Accountants (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

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Microware Group Limited

Independent Auditor’s Report

KEY AUDIT MATTERS (continued)

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Key audit matter How our audit addressed the key audit matter
Valuation of Inventories
We identified valuation of inventories as a key audit matter Our procedures in relation to the valuation of inventories
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Key audit matter	How our audit addressed the key audit matter
Valuation of Inventories
We identifed valuation of inventories as a key audit matter	Our procedures in relation to the valuation of inventories
due to the use of judgment and estimates by management in identifying obsolete and slow-moving inventories and estimating the allowance for inventories. Obsolete and slow-moving inventories were identified by management based on ageing analysis and conditions and marketability of inventories. Allowance was applied to inventories based on assessment of net realisable value by management by considering the latest selling prices and current market conditions. As set out in note 15 to the consolidated financial statements, the Group had inventories of HK$53,807,000 (net of allowance of inventories of HK$20,000) as at 31 March 2021.	included: • Obtaining an understanding of how allowance for inventories is estimated by the management; • Obtaining an understanding of the key controls of the Group in relation to identifcation of slow-moving and obsolete inventories and preparation of ageing analysis of inventories; • Testing the ageing analysis of the inventories, on a sample basis, to the source documents (goods receipts notes); • Assessing the reasonableness of the net realisable value of inventories estimated by the management for those slow-moving and obsolete inventories with reference to the recent selling prices, movements, physical conditions, ageing analysis and subsequent sales of inventories; and • Testing the subsequent sales, on a sample basis, to source documents (sales invoices and sales orders).

67

Annual Report 2021

Independent Auditor’s Report

OTHER INFORMATION

The directors of the Company are responsible for the other information. The other information comprises the information included in the annual report, but does not include the consolidated financial statements and our auditor’s report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

RESPONSIBILITIES OF DIRECTORS AND THOSE CHARGED WITH GOVERNANCE FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with HKFRSs and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

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Microware Group Limited

Independent Auditor’s Report

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL

STATEMENTS (continued)

As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Annual Report 2021 69

Independent Auditor’s Report

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in the independent auditor’s report is Hung Suk Fan.

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong 25 June 2021

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Microware Group Limited

Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the Year ended 31 March 2021

NOTES	2021 HK$’000	2020 HK$’000
Revenue 5 Cost of sales	1,114,277 (972,248)	1,365,341 (1,215,094)
Gross proft Other income 6 Other gains and losses, net 6 Other expenses Distribution and selling expenses Administrative expenses Finance cost — interest on lease liabilities	142,029 2,234 645 (2,864) (59,857) (27,483) (236)	150,247 1,346 533 (2,763) (68,669) (31,395) (41)
Proft before taxation Taxation 7	54,468 (7,546)	49,258 (8,944)
Proft and total comprehensive income for the year 8	46,922	40,314
Proft (loss) and total comprehensive income (expense) for the year attributable to — owners of the Company — non-controlling interest	47,332 (410)	40,619 (305)
	46,922	40,314
Earnings per share 11 Basic (HK$)	0.16	0.14

Annual Report 2021 71

Consolidated Statement of Financial Position

As at 31 March 2021

NOTES	2021 HK$’000	2020 HK$’000
NON-CURRENT ASSETS Property, plant and equipment 12 Deferred tax asset 13 Deposit paid for acquisition of property, plant and equipment Prepayments and deposits 16	11,141 — 1,612 1,991	11,459 4 803 1,109
	14,744	13,375
CURRENT ASSETS Inventories 15 Trade and other receivables, prepayments and deposits 16 Pledged bank deposits 17 Bank balances and cash 17	53,807 153,351 27,639 239,933	39,101 247,160 11,277 241,025
	474,730	538,563
CURRENT LIABILITIES Trade and other payables and accruals 18 Amount due to a non-controlling interest of a subsidiary 22 Contract liabilities 19 Tax liabilities Lease liabilities 20 Derivative fnancial instruments 14	193,204 1,099 62,131 1,138 7,269 186	228,863 699 72,995 3,787 8,013 —
	265,027	314,357
NET CURRENT ASSETS	209,703	224,206
TOTAL ASSETS LESS CURRENT LIABILITIES	224,447	237,581
NON-CURRENT LIABILITIES Derivative fnancial instruments 14 Contract liabilities 19 Lease liabilities 20 Deferred tax liabilities 13	— 3,598 — 29	106 3,494 83 —
	3,627	3,683
NET ASSETS	220,820	233,898
CAPITAL AND RESERVES Share capital 21 Reserves	3,000 218,788	3,000 231,456
Equity attributable to owners of the Company Non-controlling interest	221,788 (968)	234,456 (558)
	220,820	233,898

The consolidated financial statements on pages 71 to 131 were approved and authorised for issue by the Board of Directors on 25 June 2021 and are signed on its behalf by:

Yang Peter Shun Tsing DIRECTOR

Chu Ming Ho DIRECTOR

72

Microware Group Limited

Consolidated Statement of Changes in Equity For the Year ended 31 March 2021

Non- Share Share Other Retained controlling Total capital premium reserve profts Subtotal interest equity HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (note) At 1 April 2019 3,000 75,297 70,832 61,208 210,337 (253) 210,084 Proft (loss) and total comprehensive income (expense) for the year — — — 40,619 40,619 (305) 40,314 Dividends paid (note 10) — — — (16,500) (16,500) — (16,500)	Non- Share Share Other Retained controlling Total capital premium reserve profts Subtotal interest equity HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (note) At 1 April 2019 3,000 75,297 70,832 61,208 210,337 (253) 210,084 Proft (loss) and total comprehensive income (expense) for the year — — — 40,619 40,619 (305) 40,314 Dividends paid (note 10) — — — (16,500) (16,500) — (16,500)
At 31 March 2020 Proft (loss) and total comprehensive income (expense) for the year Dividends paid (note 10)	3,000 75,297 70,832 85,327 234,456 (558) 233,898 — — — 47,332 47,332 (410) 46,922 — — — (60,000) (60,000) — (60,000) 3,000 75,297 70,832 72,659 221,788 (968) 220,820
At 31 March 2021

Note: Other reserve represents the balance in relation to the shareholder’s contribution arising from share-based payment arrangements attributable to owners of the Company.

73

Annual Report 2021

Consolidated Statement of Cash Flows

For the Year ended 31 March 2021

	2021 HK$’000	2020 HK$’000
OPERATING ACTIVITIES Proft before taxation Adjustments for: Interest income Reversal of allowance for inventories Fair value changes of derivative fnancial instruments Depreciation Impairment loss, net of reversal on — property, plant and equipment — trade receivables under ECL model Written-off of property, plant and equipment Finance cost — interest on lease liabilities	54,468 (575) (201) (1,071) 10,281 — — 6 236	49,258 (1,105) (3,605) (543) 2,303 151 16 — 41
Operating cash fows before movements in working capital (Increase) decrease in inventories Decrease (increase) in trade and other receivables, prepayments and deposits (Decrease) increase in trade and other payables and accruals Decrease in contract liabilities Net change in derivative fnancial instruments	63,144 (14,505) 92,927 (35,659) (10,760) 1,151	46,516 3,547 (39,160) 14,545 (10,536) 401
Cash generated from operations Income tax paid	96,298 (10,162)	15,313 (6,652)
NET CASH FROM OPERATING ACTIVITIES	86,136	8,661
INVESTING ACTIVITIES Bank interest received Purchase of property, plant and equipment Deposit paid for acquisition of property, plant and equipment Placement of time deposits Withdrawal of time deposits Placement of pledged bank deposits Withdrawal of pledged bank deposits	575 (2,408) (1,078) (20,343) 30,665 (63,843) 47,481	1,105 (1,902) (803) (5,035) 11,656 (1,368) —
NET CASH (USED IN) FROM INVESTING ACTIVITIES	(8,951)	3,653
FINANCING ACTIVITIES Advance from a non-controlling interest of a subsidiary Repayment of lease liabilities Dividends paid Interest paid	400 (8,119) (60,000) (236)	100 (612) (16,500) (41)
NET CASH USED IN FINANCING ACTIVITIES	(67,955)	(17,053)

74

Microware Group Limited

Consolidated Statement of Cash Flows For the Year ended 31 March 2021

	2021 HK$’000	2020 HK$’000
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR	9,230 225,603	(4,739) 230,342
CASH AND CASH EQUIVALENTS AT END OF THE YEAR, represented by bank balances and cash 17	234,833	225,603

Annual Report 2021 75

Notes to the Consolidated Financial Statements For the Year ended 31 March 2021

1. GENERAL INFORMATION

Microware Group Limited (“the Company ”) was incorporated as an exempted company with limited liability in the Cayman Islands under the Companies Law, Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands on 20 January 2016. The addresses of the Company’s registered office and the principal place of business are at Conyers Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands and 1/F, Century Centre, 44-46 Hung To Road, Kwun Tong, Kowloon, Hong Kong, respectively.

The Company’s immediate and ultimate holding company is Microware International Holdings Limited (“ Microware International ”). Microware International is a limited liability company incorporated in the British Virgin Islands (the “ BVI ”) and wholly owned by Mr. Yang Peter Shun Tsing (“ Mr. Yang ”), who is an executive director of the Company.

The Company is an investment holding company. The principal activities of its subsidiaries are set out in note 29. The Company and its subsidiaries (“the “ Group ”) is principally engaged in the provision of information technology (“ IT ”) infrastructure solution services and IT managed services in Hong Kong.

The consolidated financial statements are presented in Hong Kong dollar (“ HK$ ”) which is also the functional currency of the Company.

2. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”)

Amendments to HKFRSs that are mandatorily effective for the current year

In the current year, the Group has applied the Amendments to References to the Conceptual Framework in HKFRS Standards and the following amendments to HKFRSs issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) for the first time, which are mandatorily effective for the Group’s annual periods beginning on or after 1 April 2020 for the preparation of the consolidated financial statements:

Amendments to HKAS 1 and HKAS 8 Definition of Material Amendments to HKFRS 3 Definition of Business Amendments to HKFRS 9, Interest Rate Benchmark Reform HKAS 39 and HKFRS 7

Except as described below, the application of the “ Amendments to References to the Conceptual Framework in HKFRS Standards ” and the amendments to HKFRSs in the current year had no material impact on the Group’s financial positions and performance for the current and prior years and/or on the disclosures set out in these consolidated financial statements.

Impacts on application of Amendments to HKAS 1 and HKAS 8 “Definition of Material”

The Group has applied the Amendments to HKAS 1 and HKAS 8 for the first time in the current year. The amendments provide a new definition of material that states “information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.” The amendments also clarify that materiality depends on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements taken as a whole.

The application of the amendments in the current year had no impact on the consolidated financial statements.

76 Microware Group Limited

Notes to the Consolidated Financial Statements

For the Year ended 31 March 2021

2. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”) (continued)

New and amendments to HKFRSs in issue but not yet effective

The Group has not early applied the following new and amendments to HKFRSs that have been issued but are not yet effective:

HKFRS 17	Insurance Contracts and the related Amendments5
Amendments to HKFRS 3	Reference to the Conceptual Framework4
Amendments to HKFRS 9,	Interest Rate Benchmark Reform — Phase 22
HKAS 39, HKFRS 7,
HKFRS 4 and HKFRS 16
Amendments to HKFRS 10	Sale or Contribution of Assets between an Investor
and HKAS 28	and its Associate or Joint Venture6
Amendment to HKFRS 16	Covid-19-Related Rent Concessions1
Amendment to HKFRS 16	Covid-19-Related Rent Concessions beyond 30 June 20213
Amendments to HKAS 1	Classifcation of Liabilities as Current or Non-current
	and related amendments to Hong Kong Interpretation 5 (2020)5
Amendments to HKAS 1 and	Disclosure of Accounting Policies5
HKFRS Practice Statement 2
Amendments to HKAS 8	Defnition of Accounting Estimates5
Amendments to HKAS 16	Property, Plant and Equipment — Proceeds before Intended Use4
Amendments to HKAS 37	Onerous Contracts — Cost of Fulflling a Contract4
Amendments to HKFRSs	Annual Improvements to HKFRSs 2018-20204

• 1 Effective for annual periods beginning on or after 1 June 2020 2 Effective for annual periods beginning on or after 1 January 2021 3 Effective for annual periods beginning on or after 1 April 2021

• 4 Effective for annual periods beginning on or after 1 January 2022

• 5 Effective for annual periods beginning on or after 1 January 2023 6 Effective for annual periods beginning on or after a date to be determined

Except the amendments to HKFRSs mentioned below, the directors of the Company anticipate that the application of all other new and amendments to HKFRSs will have no material impact on the consolidated financial statements in the foreseeable future.

Amendments to HKFRS 9, HKAS 39, HKFRS 7, HKFRS 4 and HKFRS 16 “Interest Rate Benchmark Reform — Phase 2”

Amendments to HKFRS 9, HKAS 39, HKFRS 7, HKFRS 4 and HKFRS 16 Interest Rate Benchmark Reform — Phase 2 relate to the modification of financial assets, financial liabilities and lease liabilities, specific hedge accounting requirements and disclosure requirements applying HKFRS 7 “Financial Instruments: Disclosures” to accompany the amendments regarding modifications and hedge accounting.

• Modification of financial assets, financial liabilities and lease liabilities. A practical expedient is introduced for modifications required by the reform (modifications required as a direct consequence of the interest rate benchmark reform and made on an economically equivalent basis). These modifications are accounted for by updating the effective interest rate. All other modifications are accounted for using the current HKFRSs requirements. A similar practical expedient is proposed for lessee accounting applying HKFRS 16;

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Annual Report 2021

Notes to the Consolidated Financial Statements

For the Year ended 31 March 2021

2. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”) (continued)

New and amendments to HKFRSs in issue but not yet effective (continued)

Amendments to HKFRS 9, HKAS 39, HKFRS 7, HKFRS 4 and HKFRS 16 “Interest Rate Benchmark Reform — Phase 2” (continued)

• Hedge accounting requirements. Under the amendments, hedge accounting is not discontinued solely because of the interest rate benchmark reform. Hedging relationships (and related documentation) are required to be amended to reflect modifications to the hedged item, hedging instrument and hedged risk. Amended hedging relationships should meet all qualifying criteria to apply hedge accounting, including effectiveness requirements; and

• Disclosures. The amendments require disclosures in order to allow users to understand the nature and extent of risks arising from the interest rate benchmark reform to which the Group is exposed to and how the entity manages those risks as well as the entity’s progress in transitioning from interbank offered rates to alternative benchmark rates, and how the entity is managing this transition.

As at 31 March 2021, the Group has several Hong Kong Interbank Offered Rate (“HIBOR”) bank loans which may be subject to interest rate benchmark reform. The Group expects no significant gains or losses should the interest rate benchmark for these loans change resulting from the reform on application of the amendments.

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES

3.1 Basis of preparation of consolidated financial statements

The consolidated financial statements have been prepared in accordance with HKFRSs issued by the HKICPA and included applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and the Hong Kong Companies Ordinance.

The consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair value at the end of the reporting period, as explained in the accounting policies set out below.

Historical cost is generally based on fair value of the consideration given in exchange for goods or services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for leasing transactions that are accounted for in accordance with HKFRS 16, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in HKAS 2 “Inventories” or value in use in HKAS 36 “Impairment of Assets”.

78 Microware Group Limited

Notes to the Consolidated Financial Statements

For the Year ended 31 March 2021

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

3.1 Basis of preparation of consolidated financial statements (continued)

For financial instruments which are transacted at fair value and a valuation technique that unobservable inputs is to be used to measure fair value in subsequent periods, the valuation technique is calibrated so that the results of the valuation technique equals the transaction price.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

3.2 Significant accounting policies

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company and its subsidiaries. Control is achieved when the Company:

• has power over the investee;

• is exposed, or has rights, to variable returns from its involvement with the investee; and

• has the ability to use its power to affect its returns.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statements of profit or loss and other comprehensive income from the date the Group gains control until the date when the Group ceases to control the subsidiary.

Profit or loss and each item of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Annual Report 2021 79

Notes to the Consolidated Financial Statements

For the Year ended 31 March 2021

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

• 3.2 Significant accounting policies (continued)

Basis of consolidation (continued)

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

Non-controlling interests in subsidiaries are presented separately from the Group’s equity therein, which represent present ownership interests entitling their holders to a proportionate share of net assets of the relevant subsidiaries upon liquidation.

Revenue from contracts with customers

The Group recognises revenue when (or as) a performance obligation is satisfied, i.e. when “control” of the goods or services underlying the particular performance obligation is transferred to the customer.

A performance obligation represents a good or service (or a bundle of goods or services) that is distinct or a series of distinct goods or services that are substantially the same.

Control is transferred over time and revenue is recognised over time by reference to the progress towards complete satisfaction of the relevant performance obligation if one of the following criteria is met:

• the customer simultaneously receives and consumes the benefits provided by the Group’s performance as the Group performs;

• the Group’s performance creates or enhances an asset that the customer controls as the Group performs; or

• the Group’s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.

Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct good or service.

A contract asset represents the Group’s right to consideration in exchange for goods or services that the Group has transferred to a customer that is not yet unconditional. It is assessed for impairment in accordance with HKFRS 9 “Financial instrument” (“HKFRS 9”). In contrast, a receivable represents the Group’s unconditional right to consideration, i.e. only the passage of time is required before payment of that consideration is due.

80

Microware Group Limited

For the Year ended 31 March 2021

Notes to the Consolidated Financial Statements

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

3.2 Significant accounting policies (continued)

Revenue from contracts with customers (continued)

A contract liability represents the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer.

A contract asset and a contract liability relating to the same contract are accounted for and presented on a net basis.

Over time revenue recognition: measurement of progress towards complete satisfaction of a performance obligation

Input method

The progress towards complete satisfaction of a performance obligation is measured based on input method, which is to recognise revenue on the basis of the Group’s efforts or inputs to the satisfaction of a performance obligation relative to the total expected inputs to the satisfaction of that performance obligation, that best depict the Group’s performance in transferring control of goods or services.

Warranties

If a customer has the option to purchase a warranty separately, the Group accounts for the warranty as a separate performance obligation.

If a customer does not have the option to purchase a warranty separately, the Group accounts for the warranty in accordance with HKAS 37 “Provisions, Contingent Liabilities and Contingent Assets” unless the warranty provides the customer with a service in addition to the assurance that the product complies with agreed-upon specifications (i.e. service-type warranties).

Property, plant and equipment

Property, plant and equipment held for administrative purposes are stated in the consolidated statement of financial position at cost less subsequent accumulated depreciation and accumulated impairment losses, if any.

Depreciation is recognised so as to write off the cost of items of property, plant and equipment over their estimated useful lives, using the straight-line method. The estimated useful lives and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Annual Report 2021 81

Notes to the Consolidated Financial Statements

For the Year ended 31 March 2021

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

3.2 Significant accounting policies (continued)

Property, plant and equipment (continued)

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

Leases

Definition of a lease

A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

For contracts entered into or modified on or after the date of initial application, the Group assesses whether a contract is or contains a lease based on the definition under HKFRS 16 at inception or modification date. Such contract will not be reassessed unless the terms and conditions of the contract are subsequently changed.

The Group as a lessee

Short-term leases

The Group applies the short-term lease recognition exemption to leases of premises that have a lease term of 12 months or less from the commencement date and do not contain a purchase option. Lease payments on shortterm leases are recognised as expense on a straight-line basis over the lease term.

Right-of-use assets

The cost of right-of-use assets includes:

• the amount of the initial measurement of the lease liability; and

• any lease payments made at or before the commencement date, less any lease incentives received.

Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities.

Right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term.

The Group presents right-of-use assets in “property, plant and equipment”, the same line item as that within which the corresponding underlying assets would be presented if they were owned.

82

Microware Group Limited

Notes to the Consolidated Financial Statements For the Year ended 31 March 2021

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

3.2 Significant accounting policies (continued)

Leases (continued)

The Group as a lessee (continued)

Refundable rental deposits

Refundable rental deposits paid are accounted under HKFRS 9 and initially measured at fair value. Adjustments to fair value at initial recognition are considered as additional lease payments and included in the cost of right-ofuse assets.

Lease liabilities

At the commencement date of a lease, the Group recognises and measures the lease liability at the present value of lease payments that are unpaid at that date. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determine.

The lease payments include fixed payments less any lease incentives receivable.

After the commencement date, lease liabilities are adjusted by interest accretion and lease payments.

The Group remeasures lease liabilities (and makes a corresponding adjustment to the related right-of-use assets) whenever the lease term has changed, in which case the related lease liability is remeasured by discounting the revised lease payments using a revised discount rate at the date of reassessment.

The Group presents lease liabilities as a separate line item on the consolidated statement of financial position.

Lease modifications

For a lease modification that is not accounted for as a separate lease, the Group remeasures the lease liability based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification.

Short-term and other long-term employee benefits

Short-term employee benefits are recognised at the undiscounted amount of the benefits expected to be paid as and when employees rendered the services. All short-term employee benefits are recognised as an expense.

83

Annual Report 2021

Notes to the Consolidated Financial Statements

For the Year ended 31 March 2021

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

3.2 Significant accounting policies (continued)

Short-term and other long-term employee benefits (continued)

A liability is recognised for benefits accruing to employees (such as wages and salaries and annual leave) after deducting any amount already paid.

Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Group in respect of services provided by employees up to the reporting date. Any changes in the liabilities’ carrying amounts resulting from service cost, interest and remeasurements are recognised in profit or loss.

Retirement benefits costs

Payments to the Mandatory Provident Fund Scheme (“MPF Scheme”) are recognised as an expense when employees have rendered service entitling them to the contributions.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recognised at the rates of exchanges prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in term of historical cost in a foreign currency are not re-translated.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are recognised in profit or loss in the period in which they arise.

Borrowing costs

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Government grants

Government grants are not recognised until there is reasonable assurance that the Institution will comply with the conditions attaching to them and that the grants will be received.

Government grants are recognised in profit or loss on a systematic basis over the periods in which the Institution recognises as expenses the related costs for which the grants are intended to compensate.

84

Microware Group Limited

For the Year ended 31 March 2021

Notes to the Consolidated Financial Statements

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

3.2 Significant accounting policies (continued)

Government grants (continued)

Government grants related to income that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Institution with no future related costs are recognised in profit or loss in the period in which they become receivable. Government grants relating to compensation of expenses are deducted from the related expenses.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before taxation because of income or expense that are taxable or deductible in other years, and items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which those deductible temporary differences can be utilised.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

85

Annual Report 2021

Notes to the Consolidated Financial Statements For the Year ended 31 March 2021

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

3.2 Significant accounting policies (continued)

Taxation (continued)

For the purposes of measuring deferred tax for leasing transactions in which the Group recognises the right-ofuse assets and the related lease liabilities, the Group first determines whether the tax deductions are attributable to the right-of-use assets or the lease liabilities.

For leasing transactions in which the tax deductions are attributable to the lease liabilities, the Group applies HKAS 12 Income Taxes requirements to the leasing transaction as a whole. Temporary differences relating to right-of-use assets and lease liabilities are assessed on a net basis. Excess of depreciation on right-of-use assets over the lease payments for the principal portion of lease liabilities resulting in net deductible temporary differences.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied to the same taxable entity by the same taxation authority.

Current and deferred tax is recognised in profit or loss.

Inventories

Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a firstin, first-out method. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

Impairment on property, plant and equipment

At the end of the reporting period, the Group reviews the carrying amounts of its property, plant and equipment with finite useful lives to determine whether there is any indication that these assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the relevant asset is estimated in order to determine the extent of the impairment loss (if any).

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

86

Microware Group Limited

Notes to the Consolidated Financial Statements For the Year ended 31 March 2021

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

3.2 Significant accounting policies (continued)

Impairment on property, plant and equipment (continued)

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

Financial instruments

Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value except for trade receivables arising from contracts with customers which are initially measured in accordance with HKFRS 15 “Revenue from Contracts with Customers” (“HKFRS 15”). Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating interest income and interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts and payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset or financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Financial assets

Classification and subsequent measurement of financial assets

Financial assets that meet the following conditions are subsequently measured at amortised cost:

• the financial asset is held within a business model whose objective is to collect contractual cash flows; and

• the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Annual Report 2021 87

Notes to the Consolidated Financial Statements For the Year ended 31 March 2021

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

• 3.2 Significant accounting policies (continued)

Financial instruments (continued)

Financial assets (continued)

Classification and subsequent measurement of financial assets (continued)

All other financial assets are subsequently measured at FVTPL, except that at initial recognition of a financial asset the Group may irrevocably elect to present subsequent changes in fair value of an equity investment in other comprehensive income (“OCI”) if that equity investment is neither held for trading nor contingent consideration recognised by an acquirer in a business combination to which HKFRS 3 “Business Combinations” applies.

A financial asset is held for trading if:

• it has been acquired principally for the purpose of selling in the near term; or

• on initial recognition it is a part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or

• it is a derivative that is not designated and effective as a hedging instrument.

In addition, the Group may irrevocably designate a financial asset that are required to be measured at the amortised cost or FVTOCI as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch.

• (i) Amortised cost and interest income

Interest income is recognised using the effective interest method for financial assets measured subsequently at amortised cost. Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset, except for financial assets that have subsequently become credit-impaired (see below). For financial assets that have subsequently become credit-impaired, interest income is recognised by applying the effective interest rate to the amortised cost of the financial asset from the next reporting period. If the credit risk on the credit-impaired financial instrument improves so that the financial asset is no longer credit-impaired, interest income is recognised by applying the effective interest rate to the gross carrying amount of the financial asset from the beginning of the reporting period following the determination that the asset is no longer credit-impaired.

88 Microware Group Limited

Notes to the Consolidated Financial Statements For the Year ended 31 March 2021

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

3.2 Significant accounting policies (continued)

Financial instruments (continued)

Financial assets (continued)

Classification and subsequent measurement of financial assets (continued)

(ii) Financial assets at FVTPL

Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI or designated as FVTOCI are measured at FVTPL.

Financial assets at FVTPL are measured at fair value at the end of the reporting period, with any fair value gains or losses recognised in profit or loss. The net gain or loss recognised in profit or loss excludes any dividend or interest earned on the financial asset and is included in the “other gains and losses, net” line item.

Impairment of financial assets

The Group performs impairment assessment under ECL model on financial assets (including trade and other receivables and deposits, pledged bank deposits and bank balance) which are subject to impairment under HKFRS 9. The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition.

Lifetime ECL represents the ECL that will result from all possible default events over the expected life of the relevant instrument. In contrast, 12-month ECL (“12m ECL”) represents the portion of lifetime ECL that is expected to result from default events that are possible within 12 months after the reporting date. Assessment are done based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current conditions at the reporting date as well as the forecast of future conditions.

The Group always recognises lifetime ECL for trade receivables without significant financing component.

Trade receivables with significant balances and credit-impaired are assessed for ECL individually.

For all other instruments, the Group measures the loss allowance equal to 12m ECL, unless when there has been a significant increase in credit risk since initial recognition, the Group recognises lifetime ECL. The assessment of whether lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default occurring since initial recognition.

Annual Report 2021 89

For the Year ended 31 March 2021

Notes to the Consolidated Financial Statements

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

• 3.2 Significant accounting policies (continued)

Financial instruments (continued)

Financial assets (continued)

Impairment of financial assets (continued)

• (i) Significant increase in credit risk

In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort.

In particular, the following information is taken into account when assessing whether credit risk has increased significantly:

• an actual or expected significant deterioration in the financial instrument’s external (if available) or internal credit rating;

• significant deterioration in external market indicators of credit risk, e.g. a significant increase in the credit spread, the credit default swap prices for the debtor;

• existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a significant decrease in the debtor’s ability to meet its debt obligations;

• an actual or expected significant deterioration in the operating results of the debtor;

• an actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor that results in a significant decrease in the debtor’s ability to meet its debt obligations.

Irrespective of the outcome of the above assessment, the Group presumes that the credit risk has increased significantly since initial recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and supportable information that demonstrates otherwise.

The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit risk before the amount becomes past due.

90

Microware Group Limited

Notes to the Consolidated Financial Statements For the Year ended 31 March 2021

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

• 3.2 Significant accounting policies (continued)

Financial instruments (continued)

Financial assets (continued)

Impairment of financial assets (continued)

(ii) Definition of default

For internal credit risk management, the Group considers an event of default occurs when information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Group, in full (without taking into account any collaterals held by the Group).

Irrespective of the above, the Group considers that default has occurred when a financial asset is more than 90 days past due unless the Group has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate.

(iii) Credit-impaired financial assets

A financial asset is credit-impaired when one or more events of default that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired includes observable data about the following events:

• (a) significant financial difficulty of the issuer or the borrower;

• (b) a breach of contract, such as a default or past due event;

• (c) the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider;

• (d) it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or

• (e) the disappearance of an active market for that financial asset because of financial difficulties.

• (iv) Write-off policy

The Group writes off a financial asset when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery, for example, when the counterparty has been placed under liquidation or has entered into bankruptcy proceedings, or in the case of trade receivables, when the amounts are over two years past due, whichever occurs sooner. Financial assets written off may still be subject to enforcement activities under the Group’s recovery procedures, taking into account legal advice where appropriate. A write-off constitutes a derecognition event. Any subsequent recoveries are recognised in profit or loss.

Annual Report 2021 91

Notes to the Consolidated Financial Statements For the Year ended 31 March 2021

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

• 3.2 Significant accounting policies (continued)

Financial instruments (continued)

Financial assets (continued)

Impairment of financial assets (continued)

• (v) Measurement and recognition of ECL

The measurement of ECL is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical data and forward-looking information. Estimation of ECL reflects an unbiased and probability-weighted amount that is determined with the respective risks of default occurring as the weights.

Generally, the ECL is the difference between all contractual cash flows that are due to the Group in accordance with the contract and the cash flows that the Group expects to receive, discounted at the effective interest rate determined at initial recognition.

Lifetime ECL for trade receivables are considered on a collective basis taking into consideration past due information and relevant credit information such as forward looking macroeconomic information.

For collective assessment, the Group takes into consideration the following characteristics when formulating the grouping:

• Past-due status;

• Nature, size and industry of debtors; and

• External credit ratings where available.

The grouping is regularly reviewed by management to ensure the constituents of each group continue to share similar credit risk characteristics.

Interest income is calculated based on the gross carrying amount of the financial asset unless the financial asset is credit-impaired, in which case interest income is calculated based on amortised cost of the financial asset.

The Group recognises an impairment gain or loss in profit or loss for all financial instruments by adjusting their carrying amount, with the exception of trade receivables where the corresponding adjustment is recognised through a loss allowance account.

92

Microware Group Limited

Notes to the Consolidated Financial Statements For the Year ended 31 March 2021

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

3.2 Significant accounting policies (continued)

Financial instruments (continued)

Financial liabilities and equity

Debt and equity instruments are classified in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.

Financial liabilities at amortised cost

Financial liabilities (including trade and other payables and accruals and amount due to a non-controlling interest of a subsidiary) are subsequently measured at amortised cost, using the effective interest method.

Derivative financial instruments

Derivatives are initially recognised at fair value at the date when derivative contracts are entered into and are subsequently remeasured to their fair value at the end of the reporting period. The resulting gain or loss is recognised in profit or loss immediately.

Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

4. KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are described in note 3, the directors of the Company are required to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

Annual Report 2021 93

Notes to the Consolidated Financial Statements

For the Year ended 31 March 2021

4. KEY SOURCES OF ESTIMATION UNCERTAINTY (continued)

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets within the next financial year.

Allowance for inventories

Obsolete and slow-moving inventories were identified by management based on ageing analysis and conditions and marketability of inventories. Allowance was applied to inventories based on assessment of net realisable value by management by considering the latest selling prices and current market conditions. Allowance will be provided if the net realisable value is estimated to be below the cost.

Reversal of allowance for inventories of HK$201,000 (2020: HK$3,605,000) is charged for the year ended 31 March 2021. The carrying amount of inventories is HK$53,807,000 (2020: HK$39,101,000) as at 31 March 2021. The carrying amount of allowance of inventories is HK$20,000 (2020: HK$221,000) as at 31 March 2021.

Estimated impairment of trade receivables

The management of the Group estimates the amount of lifetime ECL of trade receivables based on the grouping of various debtors that have similar loss patterns, after considering internal credit ratings of trade debtors, ageing, repayment history and/or past due status of respective trade receivables. Estimated loss rates are based on historical observed default rates over the expected life of the debtors and adjusted for forward-looking information. At every reporting date, the historical observed default rates are reassessed and changes in the forward-looking information are considered. In addition, trade receivables with significant balances and credit-impaired are assessed for ECL individually.

As at 31 March 2021, the carrying amount of trade receivables is HK$132,964,000 (2020: HK$228,700,000). No impairment loss (2020: HK$16,000) was recognised during the year ended 31 March 2021 as the management of the Group considers the ECL of trade receivables is insignificant as at 31 March 2021.

The provision of ECL is sensitive to changes in estimates. The information about the ECL and the Group’s trade receivables are disclosed in notes 31 and 16 respectively.

94

Microware Group Limited

Notes to the Consolidated Financial Statements For the Year ended 31 March 2021

5. REVENUE AND SEGMENT INFORMATION

Revenue

(i) Disaggregation of revenue and reconciliation to segment revenue

For the year ended 31 March 2021

	Segment of Segment of IT infrastructure IT managed solution services services business Total HK$’000 HK$’000 HK$’000 955,381 — 955,381 40,087 11,241 51,328 374 107,194 107,568 995,842 118,435 1,114,277 955,381 — 955,381 40,461 118,435 158,896 995,842 118,435 1,114,277
Procurement of hardware and software Provision of design of solutions Provision of maintenance and/or support services to IT systems of the customers
Total
A point in time Over time
Total

95

Annual Report 2021

Notes to the Consolidated Financial Statements

For the Year ended 31 March 2021

5. REVENUE AND SEGMENT INFORMATION (continued)

Revenue (continued)

• (i) Disaggregation of revenue and reconciliation to segment revenue (continued)

Revenue from major customer types

The following is an analysis of the Group’s revenue from its major customer types:

	Segment of Segment of IT infrastructure IT managed solution services services business Total HK$’000 HK$’000 HK$’000 263,842 32,016 295,858 92,217 3,707 95,924 144,012 10,986 154,998 500,071 46,709 546,780 163,363 36,133 199,496 16,454 4,139 20,593 97,012 3,658 100,670 58,385 5,326 63,711 160,558 22,469 183,027 495,772 71,725 567,497 995,843 118,434 1,114,277
Public sector Hong Kong Government Public bodies Educational institutions, and non-profts organisations
Sub-total
Private sector Banking and fnance IT Telecommunications and media Transportation Others
Sub-total

96

Microware Group Limited

Notes to the Consolidated Financial Statements For the Year ended 31 March 2021

5. REVENUE AND SEGMENT INFORMATION (continued)

Revenue (continued)

(i) Disaggregation of revenue and reconciliation to segment revenue (continued)

For the year ended 31 March 2020

	Segment of	Segment of
	IT infrastructure	IT managed
	solution	services
	services	business	Total
	HK$’000	HK$’000	HK$’000
Procurement of hardware and software	1,179,766	—	1,179,766
Provision of design of solutions	61,910	16,207	78,117
Provision of maintenance and/or
support services to IT systems of
the customers	—	107,275	107,275
Provision of training programs
relating to cyber security	—	183	183
Total	1,241,676	123,665	1,365,341
A point in time	1,179,766	—	1,179,766
Over time	61,910	123,665	185,575
Total	1,241,676	123,665	1,365,341

Annual Report 2021 97

Notes to the Consolidated Financial Statements For the Year ended 31 March 2021

5. REVENUE AND SEGMENT INFORMATION (continued)

Revenue (continued)

• (i) Disaggregation of revenue and reconciliation to segment revenue (continued)

Revenue from major customer types

The following is an analysis of the Group’s revenue from its major customer types:

	Segment of	Segment of
	IT infrastructure	IT managed
	solution	services
	services	business	Total
	HK$’000	HK$’000	HK$’000
Public sector
Hong Kong Government	326,858	29,974	356,832
Public bodies	132,040	1,967	134,007
Educational institutions, and non-profts organisations	168,322	12,384	180,706
Sub-total	627,220	44,325	671,545
Private sector
Banking and fnance	184,425	36,629	221,054
IT	17,939	5,007	22,946
Telecommunications and media	71,432	4,972	76,404
Transportation	114,766	5,944	120,710
Others	225,894	26,788	252,682
Sub-total	614,456	79,340	693,796
	1,241,676	123,665	1,365,341

98

Microware Group Limited

Notes to the Consolidated Financial Statements For the Year ended 31 March 2021

5. REVENUE AND SEGMENT INFORMATION (continued)

Revenue (continued)

(ii) Performance obligations for contracts with customers

The Group recognises revenue under HKFRS 15 mainly from the (i) provision of design of solutions; (ii) procurement of hardware and software; (iii) provision of maintenance and/or support services to IT systems of the customers; and (iv) provision of training programmes relating to cyber security.

For revenue from procurement of hardware and software, revenue is recognised when the customer obtains the control of the related products, being when the products are handed over to the customers and the titles of products are passed to the customers.

For stand-alone procurement of hardware and software, control transfers at the point in time when the customer takes undisputed delivery of the goods.

When the hardware and software are sold together with design of solutions, the Group determines the prices for each of the procurement of hardware and software and design of solutions on a stand-alone selling price basis at contract inception. It represents the price at which the Group would sell a promised good or service separately to a customer.

For revenue from provision of design of solutions, revenue is recognised over time using the input method when the assets of the customers are enhanced, being the time when the Group carries out implementation work of the solutions provided.

For revenue from provision of maintenance and/or support services to IT systems of the customers, revenue is recognised over time using the input method when the customers simultaneously receives and consumes the benefits provided by the Group’s performance, being the time when the Group carries out the maintenance and support services.

For revenue from provision of training programmes relating to cyber security, revenue is recognised over time using the input method when the customers simultaneously receives and consumes the benefits provided by the Group’s performance, being the time when the Group carries out the training programmes.

Details of contract liabilities are set out in the note 19.

Annual Report 2021 99

Notes to the Consolidated Financial Statements

For the Year ended 31 March 2021

5. REVENUE AND SEGMENT INFORMATION (continued)

Revenue (continued)

• (iii) Transaction price allocated to the remaining performance obligation for contracts with customers

The transaction price allocated to the remaining performance obligations (unsatisfied or partially unsatisfied) as at 31 March 2021 and the expected timing of recognising revenue are as follows:

	Provision of maintenance and/or support services to IT Procurement systems of of hardware the customers and software HK$’000 HK$’000 64,830 177,173 7,139 2,872 2,184 1,449 19 — 74,172 181,494
Within one year More than one year but not more than two years More than two years but not more than fve years More than fve years

The transaction price allocated to the remaining performance obligations (unsatisfied or partially unsatisfied) as at 31 March 2020 and the expected timing of recognising revenue are as follows:

	Provision of
	maintenance
	and/or support
	services to IT	Procurement
	systems of	of hardware
	the customers	and software
	HK$’000	HK$’000
Within one year	52,766	237,199
More than one year but not more than two years	3,476	7,030
More than two years but not more than fve years	921	1,558
More than fve years	32	—
	57,195	245,787

100 Microware Group Limited

Notes to the Consolidated Financial Statements

For the Year ended 31 March 2021

5. REVENUE AND SEGMENT INFORMATION (continued)

Revenue (continued)

• (iii) Transaction price allocated to the remaining performance obligation for contracts with customers (continued)

All provision of design of solutions services and training programmes relating to cyber security are for periods of one year or less. As permitted under HKFRS 15, the transaction price allocated to these unsatisfied contracts is not disclosed.

Segment information

The Group determines its operating segments based on the reports reviewed by the executive directors of the Company who are also the chief operating decision makers (the “CODM”) that are used to make strategic decisions. Information reported to the CODM is based on the business lines operating by the Group. No operating segments have been aggregated to form the following reportable segments.

Details of the Group’s operating and reportable segments are as follows:

• (1) IT infrastructure solution services business refers to the procurement of hardware and software by the Group and such procurement together with provision of design of solutions; and

• (2) IT managed services provision of design of solutions business refers to the provision of design of solutions, provision of maintenance and/or support services to IT systems of the customers and provision of training programmes relating to cyber security by the Group.

An analysis of the Group’s operating and reportable segment revenue and segment results is set out as below:

	Segment of Segment of IT infrastructure IT managed solution services services business business HK$’000 HK$’000	Total HK$’000 1,114,277 83,099 2,234 645 (2,864) (927) (27,483) (236) 54,468
For the year ended 31 March 2021 Segment revenue	995,842 118,435
Segment results Other income Other gains and losses, net Other expenses Certain distribution and selling expenses Administrative expenses Finance cost — interest on lease liabilities Proft before taxation	63,914 19,185

Annual Report 2021 101

Notes to the Consolidated Financial Statements

For the Year ended 31 March 2021

5. REVENUE AND SEGMENT INFORMATION (continued)

Segment information (continued)

Segment of Segment of IT infrastructure IT managed solution services services business business HK$’000 HK$’000	Total HK$’000
For the year ended 31 March 2020 Segment revenue 1,241,676 123,665	1,365,341
Segment results 70,264 12,262 Other income Other gains and losses, net Other expenses Certain distribution and selling expenses Administrative expenses Finance cost — interest on lease liabilities Proft before taxation	82,526 1,346 533 (2,763) (948) (31,395) (41)
	49,258

The accounting policies of the operating and reportable segments are the same as the Group’s accounting policies described in note 3. Segment result represents the profit earned by each segment without allocation of other income, other gains and losses, other expenses, certain distribution and selling expenses, administrative expenses, finance cost and taxation.

No analysis of the Group’s assets and liabilities by reportable segments is disclosed as it is not regularly provided to the executive directors of the Company for review.

102 Microware Group Limited

Notes to the Consolidated Financial Statements For the Year ended 31 March 2021

5. REVENUE AND SEGMENT INFORMATION (continued)

Other segment information

Segment of Segment of IT infrastructure IT managed solution services services business business Unallocated Total HK$’000 HK$’000 HK$’000 HK$’000 Amounts included in the measure of segment results: For the year ended 31 March 2021	Segment of Segment of IT infrastructure IT managed solution services services business business Unallocated Total HK$’000 HK$’000 HK$’000 HK$’000 Amounts included in the measure of segment results: For the year ended 31 March 2021
Depreciation Allowance for inventories	4,731 2,313 3,237 10,281 201 — — 201
For the year ended 31 March 2020 Depreciation 471 974 858 2,303 Reversal of allowance for inventories (3,605) — — (3,605) Impairment loss of trade receivables 16 — — 16

Geographical information

As all the Group’s revenue is derived from its operation in Hong Kong and all its non-current assets (excluding financial assets and deferred tax asset) are located in Hong Kong, no geographical information is presented.

Information about major customers

No individual customer was accounted for over 10% of the Group’s total revenue during both years.

Annual Report 2021 103

Notes to the Consolidated Financial Statements

For the Year ended 31 March 2021

6. OTHER INCOME AND OTHER GAINS AND LOSSES, NET

OTHER INCOME AND OTHER GAINS AND LOSSES, NET
	2021 HK$’000	2020 HK$’000
Other income Interest income Others	575 1,659	1,105 241
	2,234	1,346
Other gains and losses, net Impairment loss, net of reversal on trade receivables under ECL model (note 16) Fair value changes of derivative fnancial instruments Net foreign exchange (loss) gain Written-off of property, plant and equipment Impairment loss on property, plant and equipment	— 1,071 (420) (6) —	(16 543 157 — (151
	645	533

7. TAXATION

	2021 HK$’000	2020 HK$’000
Hong Kong Profts Tax: Current tax Deferred tax (note 13)	7,513 33	8,560 384
	7,546	8,944

Under the two-tiered profits tax rates regime, the first HK$2 million of profits of qualifying corporations will be taxed at 8.25%, and profits above HK$2 million will be taxed at 16.5%. The profits of corporations not qualifying for the twotiered profits tax rates regime (i.e. other subsidiaries of the Group) will continue to be taxed at a flat rate of 16.5%.

104 Microware Group Limited

Notes to the Consolidated Financial Statements For the Year ended 31 March 2021

7. TAXATION (continued)

Hong Kong Profits Tax is calculated in accordance with the two-tiered profits tax rates regime for the year ended 31 March 2021 and 2020.

The taxation for the year can be reconciled to the profit before taxation per the consolidated statement of profit or loss and other comprehensive income as follows:

	2021 HK$’000	2020 HK$’000
Proft before taxation	54,468	49,258
Taxation at Hong Kong Profts Tax rate of 16.5% Tax effect of income not taxable for tax purposes Tax effect of expenses not deductible for tax purposes Tax effect of tax losses not recognised Tax effect of two-tiered tax rates Others	8,987 (2,306) 356 682 (165) (8)	8,128 (264) 569 566 (165) 110
Taxation for the year	7,546	8,944

8. PROFIT FOR THE YEAR

	2021 HK$’000	2020 HK$’000
Proft for the year has been arrived at after charging: Staff costs: Directors’ remuneration (note 9) Other staff costs Retirement benefts scheme contributions (excluding directors)	8,185 91,565 3,620	6,110 113,063 3,610
	103,370	122,783
Auditor’s remuneration Cost of inventories recognised as an expense Depreciation of property, plant and equipment Reversal of allowance for inventories (included in cost of sales)	1,600 882,540 10,281 (201)	2,000 1,113,553 2,303 (3,605)

For the year ended 31 March 2021, government grants from the Employment Support Scheme amounted to HK$13,401,000 have been offset against staff costs.

Annual Report 2021 105

Notes to the Consolidated Financial Statements For the Year ended 31 March 2021

9. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

Directors’ and chief executive’s emoluments

The emoluments paid or payable to the directors and chief executive of Company by the Group during the year were as follows:

	Salaries, Retirement allowance benefts Directors’ and other scheme fee benefts Bonus contribution Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (note i) — 600 — — 600 8 1,522 815 23 2,368 — 3,203 1,417 69 4,689 132 — — — 132 132 — — — 132 132 — — — 132 132 — — — 132 536 5,325 2,232 92 8,185
For the year ended 31 March 2021 Executive directors Mr. Yang Mr. Cheng Wing Fai Mr. Chu Ming Ho (“Mr. Chu”) (note ii) Non-executive director Mr. Wan Yiu Hon Independent non-executive directors Mr. Cheng Tak Chung Ms. Li Wai Man Mr. Li Richard King Hung
Salaries, Retirement allowance benefts Directors’ and other scheme fee benefts Bonus contribution Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (note i) For the year ended 31 March 2020 Executive directors Mr. Yang — 600 — — 600 Mr. Chu Ming Ho (“Mr. Chu”) (note ii) 88 2,998 1,881 59 5,026 Non-executive director Mr. Wan Yiu Hon 121 — — — 121 Independent non-executive directors Mr. Cheng Tak Chung 121 — — — 121 Ms. Li Wai Man 121 — — — 121 Mr. Li Richard King Hung 121 — — — 121 572 3,598 1,881 59 6,110

Notes:

(i) Bonus was determined by reference to their duties and responsibilities of the relevant individual within the Group and the Group’s performance.

(ii) Mr. Chu acts as the chairman and chief executive officer of the Group. Included in salaries, allowance and other benefits was rental expense of director’s quarter occupied by Mr. Chu paid by the Group to the landlord, Mr. Yang, of HK$1,272,000 for the year ended 31 March 2021, which recognised lease liabilities of HK$1,244,000 as at 31 March 2020 and interest expenses recognised of HK$28,000 during the year ended March 2021, in relation to the renewal leases on 25 March 2020 (2020: HK$1,140,000) as set out in note 25.

106

Microware Group Limited

Notes to the Consolidated Financial Statements For the Year ended 31 March 2021

9. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS (continued)

Directors’ and chief executive’s emoluments (continued)

The executive directors’ emoluments stated above were for their services in connection with the management of the affairs of the Company and subsidiaries undertaking. The non-executive director’s emoluments shown above were for his services as the director of the Company and its subsidiaries. The independent non-executive directors’ emoluments shown above were for their services as directors of the Company.

During both years, no remuneration was paid by the Company to the directors as an inducement to join or upon joining the Group or as compensation for loss of office. The directors of the Company have not waived any remuneration during the year.

Employees’ emoluments

The five highest paid individuals of the Group include two (2020: one) directors of the Company for the year ended 31 March 2021, whose emoluments are included in the disclosures above. The emoluments of the remaining three (2020: four) individuals for the year ended 31 March 2021, are as follows:

	2021 HK$’000	2020 HK$’000
Salaries and other benefts Bonuses Retirement benefts scheme contributions	2,440 1,258 91	3,189 984 106
	3,789	4,279

The number of highest paid employees who are not the directors of the Company whose remuneration fell within the following bands is as follows:

	2021 No. of employees	2020 No. of employees
Nil to HK$1,000,000 HK$1,000,001 to HK$1,500,000	— 3	1 3

During both years, no emoluments were paid by the Group to the five highest paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office.

Annual Report 2021 107

Notes to the Consolidated Financial Statements

For the Year ended 31 March 2021

10. DIVIDENDS

DIVIDENDS
	2021 HK$’000	2020 HK$’000
Dividends for ordinary shareholders of the Company recognised as distribution during the year: Interim dividend — HK$0.05 (2020: HK$nil) per share Final dividend — HK$0.08 (2020: HK$0.055) per share Special dividend — HK$0.07 (2020: HK$nil) per share	15,000 24,000 21,000	— 16,500 —
	60,000	16,500

Subsequent to the end of the reporting period, a special dividend in respect of the year ended 31 March 2021 of HK$0.05 (2020: HK$0.07) per share in an aggregate amount of HK$15,000,000 (2020: HK$21,000,000), has been declared by the directors of the Company. A final dividend in respect of the year ended 31 March 2021 of HK$0.05 (2020: HK$0.08) per share, in an aggregate amount of HK$15,000,000 (2020: HK$24,000,000), has been proposed by the directors of the Company and is subject to approval by the shareholders in the forthcoming general meeting.

11. EARNINGS PER SHARE

The calculation of the basic earnings per share is based on the following data:

	2021 HK$’000	2020 HK$’000
Earnings: Proft for the year for the purpose of basic earnings per share	47,332	40,619
	2021 ’000	2020 ’000
Number of shares: Number of ordinary shares for the purpose of basic earnings per share	300,000	300,000

No diluted earnings per share for both years was presented as there were no potential ordinary shares in issue during both years.

108

Microware Group Limited

Notes to the Consolidated Financial Statements For the Year ended 31 March 2021

12. PROPERTY, PLANT AND EQUIPMENT

Furniture, fxtures and Leased Leasehold offce Motor properties improvements equipment vehicles Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 COST At 1 April 2019 1,052 5,045 11,506 296 17,899 Additions — 199 2,887 — 3,086 Written-off — — (229) — (229) Modifcation of lease term 7,656 — — — 7,656	Furniture, fxtures and Leased Leasehold offce Motor properties improvements equipment vehicles Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 COST At 1 April 2019 1,052 5,045 11,506 296 17,899 Additions — 199 2,887 — 3,086 Written-off — — (229) — (229) Modifcation of lease term 7,656 — — — 7,656
At 31 March 2020 Additions Written-off Modifcation of lease term Eliminated upon leases expired	8,708 5,244 14,164 296 28,412 — 729 1,948 — 2,677 — (182) (1,911) — (2,093) 7,292 — — — 7,292 (7,656) — — — (7,656) 8,344 5,791 14,201 296 28,632
At 31 March 2021
ACCUMULATED DEPRECIATION AND IMPAIRMENT At 1 April 2019 — 4,761 9,671 296 14,728 Provided for the year 629 92 1,582 — 2,303 Eliminated on written-off — — (229) — (229) Impairment loss in proft or loss — — 151 — 151
At 31 March 2020 Provided for the year Eliminated on written-off Eliminated upon lease expired	629 4,853 11,175 296 16,953 8,122 199 1,960 — 10,281 — (182) (1,905) — (2,087) (7,656) — — — (7,656) 1,095 4,870 11,230 296 17,491 7,249 921 2,971 — 11,141
At 31 March 2021
CARRYING VALUE At 31 March 2021
At 31 March 2020 8,079 391 2,989 — 11,459

Depreciation is charged so as to write off the cost over their estimated useful lives, using the straight-line method, at the following rates per annum:

Leased properties Leasehold improvements Furniture, fixtures and office equipment Motor vehicles

Over the shorter of its estimated useful life and the lease term Over the shorter of lease term or 20% 20%-33[1] /3% 33[1] /3%

Annual Report 2021 109

Notes to the Consolidated Financial Statements

For the Year ended 31 March 2021

12. PROPERTY, PLANT AND EQUIPMENT (continued)

Right-of-use assets (included in the leased properties)

	Leased
	properties
	HK$’000
As at 31 March 2020
Carrying amount	8,079
As at 31 March 2021
Carrying amount	7,249
For the year ended 31 March 2021
Deprecation charge	8,122
Expense relating to short-term leases	210
Total cash outfow for leases	8,565
Additions of right-of-use assets	7,292
For the year ended 31 March 2020
Deprecation charge	629
Expense relating to short-term leases	8,406
Total cash outfow for leases	9,059
Additions of right-of-use assets	7,656

For both years, the Group leases office premises, a warehouse from a related company for its operations and a director’s quarter from Mr. Yang as disclosed in note 25. Lease contracts are entered into for fixed term of one to two years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. In determining the lease term and assessing the length of the non-cancellable period, the Group applies the definition of a contract and determines the period for which the contract is enforceable.

The Group regularly entered into short-term leases for a warehouse as at 31 March 2021 (31 March 2020: an office, a warehouse and a director’s quarter). As at 31 March 2021, the portfolio of short-term leases is similar to the portfolio of short-term leases to which the short term lease expense for year ended 31 March 2021 disclosed above.

Restrictions or covenants on leases

In addition, lease liabilities of HK$7,269,000 are recognised with related right-of-use assets of HK$7,249,000 as at 31 March 2021 (2020: lease liabilities of HK$8,096,000 and related right-of-use assets of HK$8,079,000). The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.

110 Microware Group Limited

Notes to the Consolidated Financial Statements For the Year ended 31 March 2021

13. DEFERRED TAXATION

The following are the major deferred tax (liabilities) asset arising from accelerated accounting depreciation recognised by the Group and movement thereon during the year.

HK$’000 As at 1 April 2019 388 Charge to proft or loss (384) At 31 March 2020 4 Charge to proft or loss (33)	HK$’000 As at 1 April 2019 388 Charge to proft or loss (384) At 31 March 2020 4 Charge to proft or loss (33)
At 31 March 2021	(29)

As at 31 March 2021, the Group had estimated unused tax losses of HK$11,551,000 (2020: HK$7,418,000) to offset against future profits. No deferred tax asset has been recognised due to the unpredictability of future profit streams. All losses may be carried forward indefinitely.

14. DERIVATIVE FINANCIAL INSTRUMENTS

The Group entered into HK$ to United States dollars (“US$”) net-settled structured foreign currency forward contracts with banks in Hong Kong in order to manage the Group’s currency risk.

The Group is required to transact with the bank monthly during contract period for designated notional amount under the respective contract. If the spot rate for conversion of US$ for HK$ as prevailing in the international foreign exchange market on fixing date is higher than the upper strike price, the Group will pay the bank for an amount equivalent to notional amount 1 multiplied by (1) the difference between upper strike price and lower strike price, or (2) the difference between spot rate and bonus points ranging from 0.00 to 0.05, depending on respective contract terms. If the spot rate on fixing date is lower than the upper strike price but higher than lower strike price, the Group will buy amount 1 from the banks at lower strike price. If the spot rate on fixing date is lower than lower strike price, the Group will buy notional amount 2 at lower strike price from the banks.

				Lower	Upper
	Notional	Notional		strike	strike	Beginning	Ending
	amount 1	amount 2	Contract date	price	price	fxing date	fxing date
							(note)
As at 31 March 2020:
Contract A	US$600,000	US$1,200,000	11 April 2019	7.749	7.749	8 August 2019	8 July 2021
As at 31 March 2021:
Contract A	US$600,000	US$1,200,000	11 April 2019	7.749	7.749	8 August 2019	8 July 2021
Contract B	US$600,000	US$1,200,000	17 April 2020	7.746	7.746	25 May 2020	28 March 2022

Note: The contract maturity date approximates to the ending fixing date.

The above contracts are measured at fair value at the end of the reporting period.

Annual Report 2021 111

Notes to the Consolidated Financial Statements

For the Year ended 31 March 2021

15. INVENTORIES

INVENTORIES
	2021 HK$’000	2020 HK$’000
Finished goods	53,807	39,101

16. TRADE AND OTHER RECEIVABLES, PREPAYMENTS AND DEPOSITS

TRADE AND OTHER RECEIVABLES, PREPAYMENTS AND	DEPOSITS
	2021 HK$’000	2020 HK$’000
Trade receivables from contracts with customers Less: Allowance for credit losses	132,964 —	228,700 —
Rental and utilities deposits Prepayments for costs of maintenance services Others	132,964 318 17,534 4,526	228,700 312 15,759 3,498
Total trade and other receivables, deposits and prepayments	155,342	248,269
Analysed as: Current Non-current (including prepayments for costs of maintenance services, rental and utilities deposits)	153,351 1,991	247,160 1,109
	155,342	248,269

As at 1 April 2019, trade receivables from contracts with customers amounted to HK$174,858,000.

Before accepting any new customer, the Group performs a credit review to assess the potential customer’s credit quality and defines credit limits by customer. Limits and credit rating to customers are reviewed on a regular basis. The Group allows credit period of 7 to 90 days to its customers.

112 Microware Group Limited

Notes to the Consolidated Financial Statements

For the Year ended 31 March 2021

16. TRADE AND OTHER RECEIVABLES, PREPAYMENTS AND DEPOSITS (continued)

The following is an ageing analysis of trade receivables from third parties net of allowance for impairment losses presented based on the invoice date at the end of the reporting period:

	2021 HK$’000	2020 HK$’000
0 to 30 days 31 to 60 days 61 to 90 days 91 to 120 days 121 to 180 days Over 180 days	75,476 18,369 11,597 12,856 4,138 10,528	102,630 43,440 29,294 22,948 18,558 11,830
	132,964	228,700

As at 31 March 2021, included in the Group’s trade receivables balance are debtors with aggregate carrying amount of HK$68,084,000 (2020: HK$139,254,000) which are past due as at the reporting date. Out of the past due balances, HK$16,880,000 (2020: HK$31,811,000) has been past due 90 days or more and is not considered as in default as these debtors have a good business relationship with the Group and recurring overdue records of these debtors with satisfactory settlement history.

Detail of impairment assessment of trade and other receivables and deposits are set out in note 31.

17. PLEDGED BANK DEPOSITS/BANK BALANCES AND CASH

	2021 HK$’000	2020 HK$’000
Cash on hand Bank balances/deposits with original maturity within three months or less	25 234,808	23 225,580
Cash and cash equivalents Bank deposits with original maturity over three months but less than one year	234,833 5,100	225,603 15,422
Bank balances and cash	239,933	241,025
Pledged bank deposits	27,639	11,277

Bank balances and cash comprise cash and short-term bank deposits held by the Group and carry interest at market rates ranging from 0.01% to 2.15% (31 March 2020: 0.01% to 2.15%) per annum. Pledged bank deposit carries fixed interest rate at 0.10% to 1.80% (31 March 2020: 0.60%) per annum for securing banking facilities granted to the Group.

Detail of impairment assessment of pledge bank deposits and bank balances are set out in note 31.

Annual Report 2021 113

Notes to the Consolidated Financial Statements

For the Year ended 31 March 2021

18. TRADE AND OTHER PAYABLES AND ACCRUALS

The following is an analysis of trade and other payables and accruals:

	2021 HK$’000	2020 HK$’000
Trade payables Accrued staff costs Others	153,509 18,892 20,803	176,812 22,340 29,711
	193,204	228,863

The following is an ageing analysis of trade payables presented based on the invoice date:

	2021 HK$’000	2020 HK$’000
0 to 30 days 31 to 60 days 61 to 90 days Over 90 days	87,352 31,879 27,715 6,563	101,457 48,681 25,189 1,485
	153,509	176,812

19. CONTRACT LIABILITIES

	2021 HK$’000	2020 HK$’000
Current Non-current	62,131 3,598	72,995 3,494
	65,729	76,489

As at 1 April 2019, contract liabilities amounted to HK$87,025,000.

Contract liabilities, that are not expected to be settled within the Group’s normal operating cycle, are classified as current and non-current based on the Group’s earliest obligation to transfer goods or services to the customers.

For the contract liabilities as at 31 March 2020 and 31 March 2019 of HK$72,995,000 and HK$81,959,000 respectively, the entire balances are recognised as revenue during the years ended 31 March 2021 and 2020.

Typical payment terms which impact on the amount of contract liabilities recognised are as follows:

114 Microware Group Limited

For the Year ended 31 March 2021

Notes to the Consolidated Financial Statements

19. CONTRACT LIABILITIES (continued)

(a) Procurement of hardware and software, design of solution/maintenance and/ or support services

The Group typically receives 20% — 30% of the contract value as deposits and advance payments for the procurement of hardware and software, design of solution/maintenance and/or support services when the purchase order is entered into, while the amount of deposits may be varied depending on the business relationship with the customers. The deposits and advance payments result in contract liabilities being recognised until the customer obtains control of hardware and software or until revenue recognised on the relevant contract exceeds the amounts of deposit and advance payments.

(b) Provision of training programs

The Group typically receives full amount of contract value for provision of training programs. This will give rise to contract liabilities at the start of a contract, until revenue recognised on the relevant contract equals the amounts of deposit and advance payments.

20. LEASE LIABILITIES

	2021 HK$’000	2020 HK$’000
Lease liabilities payable: Within one year Within a period of more than one year but not more than two years	7,269 —	8,013 83
	7,269	8,096
Less: Amount due for settlement within 12 months shown under current liabilities	(7,269)	(8,013)
Amount due for settlement after 12 months shown under non-current liabilities	—	83

Annual Report 2021 115

Notes to the Consolidated Financial Statements

For the Year ended 31 March 2021

21. SHARE CAPITAL

The share capital as at 31 March 2020 and 2021 represented the share capital of the Company with the details as follows:

	Number of shares Amount HK$’000 5,000,000,000 50,000 300,000,000 3,000
Ordinary shares of HK$0.01 each Authorised: At 1 April 2019, 31 March 2020 and 2021
Issued and fully paid: At 1 April 2019, 31 March 2020 and 2021

There was no movement in the Company’s share capital for both years.

22. AMOUNT DUE TO A NON-CONTROLLING INTEREST OF A SUBSIDIARY

Amount due to a non-controlling interest of a subsidiary is interest-free, unsecured and repayable on demand.

23. RETIREMENT BENEFITS SCHEME

The MPF Scheme is registered with the Mandatory Provident Fund Schemes Authority under the Mandatory Provident Fund Schemes Ordinance. The assets of the MPF Scheme are held separately from those of the Group in funds under the control of an independent trustee. Under the MPF Scheme, the employer and its employees are each required to make contributions to the MPF Scheme at rates specified in the rules. The only obligation of the Group with respect to the MPF Scheme is to make the required contributions. Except for voluntary contribution, no forfeited contribution under the MPF Scheme is available to reduce the contribution payable in future years.

The retirement benefits scheme contributions arising from the MPF Scheme of HK$3,712,000 (2020: HK$3,669,000) charged to the consolidated statement of profit or loss and other comprehensive income represent contributions paid or payable to the MPF Scheme by the Group. No forfeited contribution under the defined contribution retirement benefit plans is available to reduce the contribution payable in future years.

24. CAPITAL COMMITMENT

At 31 March 2021, the Group has capital commitment of HK$2,036,000 (2020: HK$2,107,000) in respect of the acquisition of property, plant and equipment contracted but not provided for.

116 Microware Group Limited

For the Year ended 31 March 2021

Notes to the Consolidated Financial Statements

25. RELATED PARTY TRANSACTIONS

The Group had entered into the following related party transactions:

Name of related party Nature of transactions	2021 HK$’000	2020 HK$’000
Microware Properties limited Interest expenses on lease liabilities (“Microware Properties”) Expenses relating to short-term leases Lease liabilities Mr. Yang Interest expenses on lease liabilities Expenses relating to short-term leases Lease liabilities	170 — 6,252 32 — 934	22 7,056 6,284 4 1,140 1,244

During both years, the Group, as the tenant, and Mr. Yang, as the landlord, entered into a tenancy agreement in respect of a residential property which is provided to Mr. Chu as the director’s quarter.

Mr. Yang is the controlling shareholder of Microware Properties.

On 25 March 2021, the Group has renewed tenancy agreements with Microware Properties and Mr. Yang for the use of office premises and a director’s quarter respectively both of which the relevant lease terms have been extended to 31 March 2022. These constituted lease modifications and the Group has recognised an addition of right-of-use assets and lease liabilities at the same amount of HK$7,292,000 during the year ended 31 March 2021.

On 25 March 2020, the Group has renewed tenancy agreements with Microware Properties and Mr. Yang for the use of office premises and a director’s quarter respectively both of which the relevant lease terms have been extended to 31 March 2021. These constituted lease modifications and the Group has recognised an addition of right-of-use assets and lease liabilities at the same amount of HK$7,656,000 during the year ended 31 March 2020.

Compensation of key management personnel

The remuneration of the executive directors and other members of key management during the year were as follows:

	2021 HK$’000	2020 HK$’000
Short-term benefts Post-employment benefts	13,720 219	11,131 184
	13,939	11,315

Annual Report 2021 117

Notes to the Consolidated Financial Statements

For the Year ended 31 March 2021

26. FINANCIAL ASSETS AND FINANCIAL LIABILITIES SUBJECT TO ENFORCEABLE MASTER NETTING ARRANGEMENTS

The Group has entered into the International Swaps and Derivatives Association Master Netting Agreements (“ISDA Agreements”) with certain banks. The following recognised financial assets and financial liabilities are not offset in the consolidated statement of financial position as the ISDA Agreements are in place with a right of set off only in the event of default, insolvency or bankruptcy so that the Group currently has no legally enforceable right to set off the recognised amounts:

At 31 March 2021

	Gross/net amounts presented on consolidated statement of fnancial position HK$’000	Related amount not set off in consolidated statement of fnancialposition Cash collateral Financial received/ Net instrument pledged amount HK$’000 HK$’000 HK$’000 (186) — 13,738 — 186 —
Recognised fnancial assets: — Bank balances	13,924
Recognised fnancial liabilities: — Derivative fnancial instruments	(186)

At 31 March 2020

Gross/net amounts presented on consolidated statement of fnancial position HK$’000	Related amount not set off in consolidated statement of fnancialposition
	Cash collateral Financial received/ Net instrument pledged amount HK$’000 HK$’000 HK$’000
Recognised fnancial assets: — Bank balances 11,177	(106) — 11,071
Recognised fnancial liabilities: — Derivative fnancial instruments (106)	— 106 —

118

Microware Group Limited

For the Year ended 31 March 2021

Notes to the Consolidated Financial Statements

27. PERFORMANCE GUARANTEES

As at 31 March 2021, the performance guarantees of the Group of HK$21,943,000 (2020: HK$24,724,000) were given by a bank in favour of the Group’s customers as security for the due performance and observance of the Group’s obligations under the contracts entered into between the Group and their customers. If the Group fails to provide satisfactory performance to their customers to whom performance guarantees have been given, such customers may demand the bank to pay them the sum or sum stipulated in such demand. The Group will become liable to compensate the bank accordingly. The performance guarantee will be released upon completion of the contract works.

As at 31 March 2021 and 2020, the directors of the Company did not consider that it is probable that a claim will be made against the Group.

28. STATEMENT OF FINANCIAL POSITION AND RESERVES OF THE COMPANY

	2021 HK$’000	2020 HK$’000
Non-current asset Investment in a subsidiary Amount due from subsidiaries	46,056 —	— * 46,056
Current assets Other receivables, prepayment and deposits Bank balances and cash	46,056 208 31,935	46,056 183 33,901
	32,143	34,084
Current liabilities Other payables and accruals Amount due to a subsidiary	491 7	516 —
	498	516
Net current assets	31,645	33,568
Net assets	77,701	79,624
Capital and reserves Share capital (note 21) Reserves (note i)	3,000 74,701	3,000 76,624
	77,701	79,624

• Less than HK$1,000

Annual Report 2021 119

Notes to the Consolidated Financial Statements

For the Year ended 31 March 2021

28. STATEMENT OF FINANCIAL POSITION AND RESERVES OF THE COMPANY

(continued)

Note i:

Reserves of the Company

	Share Retained premium profts Total HK$’000 HK$’000 HK$’000 75,297 135 75,432 — 17,692 17,692 — (16,500) (16,500) 75,297 1,327 76,624 — 58,077 58,077 — (60,000) (60,000) 75,297 (596) 74,701
At 1 April 2019 Proft and total comprehensive income for the year Dividends paid (note 10)
At 31 March 2020 Proft and total comprehensive income for the year Dividends paid (note 10)
At 31 March 2021

29. PARTICULARS OF SUBSIDIARIES OF THE COMPANY

Particulars of the Company’s subsidiaries at the end of each reporting period are as follows:

				Proportion of	Proportion of
				ownership interest
		Place of incorporation/	Particulars of issued and paid	attributable to the Company
Name of subsidiary		operation	up capital	2021	2020	Principal activities
Microware Hong Kong		BVI	HK$1	100%	100%	Investment holding
Limited^
Microware Limited		Hong Kong	US$6,000,000	100%	100%	Provision of IT
						infrastructure solutions
						services and provision
						of IT managed services
Cumulus Managed		Hong Kong	HK$1	100%	100%	Provision of IT
Services Limited						infrastructure solutions
						services
Microware Computer		Hong Kong	HK$10,000	100%	100%	Inactive
Systems Limited
ProAct IT Services		Hong Kong	HK$100,000	100%	100%	Provision of IT managed
Limited						services
Cyber Range Training		Hong Kong	HK$10,000	90%	90%	Provision of IT managed
Centre Limited						services
^	Directly held by	the Company.

None of the subsidiaries had issued any debt securities at the end of the year.

120 Microware Group Limited

Notes to the Consolidated Financial Statements

For the Year ended 31 March 2021

29. PARTICULARS OF SUBSIDIARIES OF THE COMPANY (continued)

The table below shows details of non-wholly-owned subsidiary of the Group that has material non-controlling interests:

Place of incorporation Proportion of and principal ownership interests Loss place of and voting rights held by allocated to non- Accumulated non- Name of subsidiary business non-controlling interest controlling interest controlling interest	Place of incorporation Proportion of and principal ownership interests Loss place of and voting rights held by allocated to non- Accumulated non- Name of subsidiary business non-controlling interest controlling interest controlling interest	Place of incorporation Proportion of and principal ownership interests Loss place of and voting rights held by allocated to non- Accumulated non- Name of subsidiary business non-controlling interest controlling interest controlling interest	Place of incorporation Proportion of and principal ownership interests Loss place of and voting rights held by allocated to non- Accumulated non- Name of subsidiary business non-controlling interest controlling interest controlling interest	Place of incorporation Proportion of and principal ownership interests Loss place of and voting rights held by allocated to non- Accumulated non- Name of subsidiary business non-controlling interest controlling interest controlling interest	Place of incorporation Proportion of and principal ownership interests Loss place of and voting rights held by allocated to non- Accumulated non- Name of subsidiary business non-controlling interest controlling interest controlling interest	Place of incorporation Proportion of and principal ownership interests Loss place of and voting rights held by allocated to non- Accumulated non- Name of subsidiary business non-controlling interest controlling interest controlling interest
	2021	2020	2021 HK$’000	2020 HK$’000	2021 HK$’000	2020 HK$’000
Cyber Range Training Centre Limited Hong Kong	10%	10%	(410)	(305)	(968)	(558)

Summarised financial information for the year ended 31 March 2021 in respect of the Group’s subsidiary that has material non-controlling interest is set out below.

Cyber Range Training Centre Limited

	2021 HK$’000	2020 HK$’000
Current assets Current liabilities	1,417 (11,115)	1,460 (7,051)
Net liabilities	(9,698)	(5,591)
Total equity	(9,698)	(5,591)
Revenue Other income Expenses	9 11 (4,127)	292 40 (3,383)
Loss and total comprehensive expense for the year	(4,107)	(3,051)
Net cash outfow in operating activities Net cash infow from investing activities Net cash infow from fnancing activities	(2,759) — 4,000	(3,052) 900 100
Net cash infow (outfow)	1,241	(2,052)

Annual Report 2021 121

For the Year ended 31 March 2021

Notes to the Consolidated Financial Statements

30. CAPITAL RISK MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to owners of the Company through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from the prior years.

The capital structure of the Group represents equity attributable to owners of the Company, comprising issued share capital and reserves.

The directors of the Company review the capital structure on a regular basis. As part of this review, the directors consider the cost of capital and the risks associated with each class of capital. Based on recommendations of the directors, the Group will balance its overall capital structure through new share issues and raise of new borrowings.

31. FINANCIAL INSTRUMENTS

Categories of financial instruments

	2021 HK$’000	2020 HK$’000
Financial assets Financial assets at amortised cost	401,545	481,555
Financial liabilities Amortised cost	194,303	229,562
Derivative fnancial instruments	186	106

Financial risk management objectives and policies

The Group’s major financial instruments include trade and other receivables, deposits, trade and other payables and accruals, amount due to a non-controlling interest of a subsidiary, derivative financial instruments, pledged bank deposits as well as bank balances and cash. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented in a timely and effective manner.

122 Microware Group Limited

Notes to the Consolidated Financial Statements For the Year ended 31 March 2021

31. FINANCIAL INSTRUMENTS (continued)

Financial risk management objectives and policies (continued)

Market risks

Interest rate risk

The Group’s fair value interest rate risk relates primarily to pledged bank deposits (note 17) and lease liabilities (note 20). The Group’s cash flow interest rate risk relates primarily to variable-rate bank balances (note 17).

The Group has not used any interest rate hedging policy to mitigate its exposure associated with interest rate risk. However, the management monitors interest rate exposure and will consider hedging significant interest rate exposure should the need arise.

The directors of the Company consider the Group’s exposure to future cash flow interest rate risk is minimal taking into account the minimal fluctuation on market interest rate and carrying amounts as at 31 March 2021 and 2020. Accordingly, no sensitivity analysis on interest rate risk is presented.

Currency risk

The Group has foreign currency purchases, which exposes the Group to foreign currency risk. Certain bank balances and cash and trade payables of the Group are denominated in foreign currencies. The carrying amounts of the Group’s bank balances and cash and trade payables denominated in foreign currencies at the end of each reporting period are as follows:

Bank balances and cash Trade payables	Bank balances and cash Trade payables	Bank balances and cash Trade payables	Bank balances and cash Trade payables	Bank balances and cash Trade payables
	2021 HK$’000	2020 HK$’000	2021 HK$’000	2020 HK$’000
US$ Renminbi (“RMB”)	3,812 —	38,825 5,035	78,859 —	69,798 —

The Group has entered into certain foreign exchange forward contract as set out in note 14 to mitigate foreign exchange exposure arising on the purchase to external parties. The Group currently does not have a foreign currency hedging policy. However, the directors of the Company monitor foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arises.

No sensitivity analysis is provided on derivative financial instruments as the management of the Company considers that the effect of the foreign exchange rate fluctuations on the fair value of derivative financial instruments are considered as insignificant.

Annual Report 2021 123

Notes to the Consolidated Financial Statements

For the Year ended 31 March 2021

31. FINANCIAL INSTRUMENTS (continued)

Financial risk management objectives and policies (continued)

Market risks (continued)

Currency risk (continued)

Sensitivity analysis

The change in exchange rate of HK$ against US$ has not been considered in the sensitivity analysis as HK$ is pegged to US$. In the opinion of the directors of the Company, the Group does not expect any significant movements between the exchange rate of US$ against HK$. Hence, only sensitivity of the change in foreign exchange rate of HK$ against RMB is considered. The following table details the Group’s sensitivity to a 5% increase and decrease in RMB against HK$. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding RMB denominated monetary items and adjusts their translation at the year end for a 5% change in foreign currency rates. A positive number below indicates an increase in profit for the year where RMB strengthen 5% against HK$. For a 5% weakening of RMB against HK$, there would be an equal and opposite impact on the profit, and the balances below would be negative.

	2021 HK$’000	2020 HK$’000
Increase in post-tax proft for the year RMB	—	210

Credit risk and impairment assessment

Credit risk refers to the risk that the Group’s counterparties default on their contractual obligations resulting in financial losses to the Group. As at 31 March 2021, other than those financial assets whose carrying amounts best represent the maximum exposure to credit risk, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group arising from the amount of performance guarantees provided by the Group is disclosed in note 27. The Group does not hold any collateral or other credit enhancements to cover its credit risks associated with its financial assets.

Trade receivables

Management has a credit policy in place and the exposures to these credit risks are monitored on an ongoing basis. The Group assess the potential customer’s credit quality customer at new customer acceptance. Other monitoring procedures are in place to ensure that follow-up action is taken to recover overdue debts. In addition, the Group performs impairment assessment under ECL model on trade receivables based on the grouping of various debtors that have similar loss patterns, after considering internal credit ratings of trade debtors, ageing, repayment history and/or past due status of respective trade receivables. Trade receivables with significant balances and credit-impaired are assessed for ECL individually. In this regard, the directors of the Group consider that the Group’s credit risk is significantly reduced.

124 Microware Group Limited

For the Year ended 31 March 2021

Notes to the Consolidated Financial Statements

31. FINANCIAL INSTRUMENTS (continued)

Financial risk management objectives and policies (continued)

Credit risk and impairment assessment (continued)

Trade receivables (continued)

The Group’s concentration of credit risk by sectors is mainly in Bank and finance, Hong Kong Government, Others and Educational institution and, non-profits organisations which accounted for 25%, 22%, 19% and 17%, respectively of the total trade receivables as at 31 March 2021 and is mainly in Hong Kong Government, Others, Telecommunications and media and Public bodies which accounted for 29%, 20%, 13% and 12% of the total trade receivables as at 31 March 2020. The Group has concentration of credit risk as 11% (2020: 23%) of the total trade receivables was due from the Group’s five largest customers respectively. In order to minimise the credit risk, the management of the Group has delegated a team responsible for determination of credit limits and credit approvals.

For trade receivables of HK$132,964,000 (2020: HK$228,700,000) (note 16), the Group has applied the simplified approach in HKFRS 9 to measure the loss allowance at lifetime ECL. The Group assessed the ECL on trade receivables using the grouping with reference to past default experience for recurring customers and current past due exposure for new customers.

The estimated loss rates on trade receivables are estimated based on historical observed default rates over the expected life of the debtors and study of other corporates’ default and recovery data from international credit-rating agencies including Moody’s, and are adjusted for forward-looking information (for example, the current and forecasted economic growth rates which reflect the general economic conditions of the industry in which the debtors operate) that is available without undue cost or effort. The grouping is regularly reviewed by management to ensure relevant information about specific debtors is updated.

Based on the assessment of the management, the ECL on trade receivables is insignificant.

Other receivables and deposits

For other receivables and deposits, the directors of the Company make periodic individual assessment on the recoverability based on historical settlement records, past experience, and also quantitative and qualitative information that is reasonable and supportive forward-looking information. The directors of the Company believe that there is no material credit risk inherent in the Group’s outstanding balance of other receivables and deposits. The Group performs impairment assessment under 12m ECL model.

Annual Report 2021 125

For the Year ended 31 March 2021

Notes to the Consolidated Financial Statements

31. FINANCIAL INSTRUMENTS (continued)

Financial risk management objectives and policies (continued)

Credit risk and impairment assessment (continued)

Other receivables and deposits (continued)

For the purpose of internal credit risk management, the Group uses past due information to assess whether credit risk has increased significantly since initial recognition.

	Not past due/ no fxed Past due repayment terms Total HK$’000 HK$’000 HK$’000 — 1,009 1,009 — 553 553
Financial assets at amortised cost Other receivables and deposits (note 16) As at 31 March 2021 As at 31 March 2020

Based on the assessment of the management, the ECL on other receivables and deposits is insignificant.

Pledged bank deposits and bank balances

The Group only transacts with reputable banks with high credit ratings assigned by international credit-rating agencies and therefore the directors of the Company consider the risk of default is low. The Group uses 12m ECL to perform the assessment under ECL on balances individually based on the average loss rate by reference to credit ratings assigned by international credit-rating agencies including Moody’s, ranging from Aa3 to A3. As at 31 March 2021, the directors of the Company consider the credit risk is limited and thus the ECL on pledged bank deposits and bank balances of HK$27,639,000 (2020: HK$11,277,000) and HK$239,908,000 (2020: HK$241,002,000) respectively (note 17) is insignificant.

Other than concentration of credit risk on liquid funds which are deposited with several banks with high credit ratings, the Group does not have any other significant concentration of credit risk.

126

Microware Group Limited

Notes to the Consolidated Financial Statements For the Year ended 31 March 2021

31. FINANCIAL INSTRUMENTS (continued)

Financial risk management objectives and policies (continued)

Credit risk and impairment assessment (continued)

The following table shows the movement in lifetime ECL that has been recognised for trade receivables under the simplified approach.

	Lifetime	Lifetime
	ECL	ECL
	(not credit-	(credit-
	impaired)	impaired)	Total
	HK$’000	HK$’000	HK$’000
As at 1 April 2019	—	—	—
Changes due to fnancial instruments recognised as at 1 April 2019:
— Transfer to credit-impaired	(16)	16	—
— Impairment losses recognised	16	—	16
— Write-offs	—	(16)	(16)
As at 31 March 2020 and 2021	—	—	—

Changes in the loss allowance for trade receivables are mainly due to:

		2021		2020
	Increase/(decrease)			Increase
	in	lifetime ECL	in lifetime ECL
	Not credit-	Credit-	Not credit-	Credit-
	impaired	impaired	impaired	impaired
	HK$’000	HK$’000	HK$’000	HK$’000
One trade debtor with a gross
carrying amount of HK$nil
(2020: HK$16,000) defaulted and
transferred to credit-impaired	—	—	—	16

The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, e.g. when the debtor has been placed under liquidation or has entered into bankruptcy proceedings, or when the trade receivables are over two years past due, whichever occurs earlier.

Liquidity risk

In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Group’s operations and mitigate the effects of fluctuations in cash flows.

Annual Report 2021 127

Notes to the Consolidated Financial Statements

For the Year ended 31 March 2021

31. FINANCIAL INSTRUMENTS (continued)

Financial risk management objectives and policies (continued)

Liquidity risk (continued)

The contractual maturity of the Group for its non-derivative financial liabilities with undiscounted cash flow of HK$194,303,000 (2020: HK$229,562,000), based on the earliest date on which the Group can be required to pay, are repayable on demand or within 3 months.

The following table details the Group’s remaining contractual maturity for lease liabilities. The table has been drawn up based on the undiscounted cash flows of lease liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate at the end of the reporting period.

Liquidity tables

Weighted Total average un- effective Less 3 months discounted Total interest rate On than to 1-2 2-5 Over cash carrying per annum demand 3 months 1 year years years 5 years fows amounts % HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	Weighted Total average un- effective Less 3 months discounted Total interest rate On than to 1-2 2-5 Over cash carrying per annum demand 3 months 1 year years years 5 years fows amounts % HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
As at 31 March 2021 Lease liabilities	5.25% — 1,930 5,540 — — — 7,470 7,269
As at 31 March 2020 Lease liabilities 4.25% — 2,050 6,149 83 — — 8,282 8,096

128

Microware Group Limited

Notes to the Consolidated Financial Statements For the Year ended 31 March 2021

31. FINANCIAL INSTRUMENTS (continued)

Financial risk management objectives and policies (continued)

Liquidity risk (continued)

Liquidity tables (continued)

In addition, the following table details the Group’s liquidity analysis for its derivative financial instruments. The table has been drawn up based on the undiscounted contractual cash inflows and outflows on derivative instruments by using the forward rate published by independent researchers as at 31 March 2021 and 2020. The liquidity analysis for the Group’s derivative financial instruments is prepared based on the contractual maturities as the management of the Company considers that the contractual maturities are essential for an understanding of the timing of the cash flows of derivatives.

Total carrying amount of derivative On demand Total forward or less than 3 months undiscounted contract 3 months to 1 year 1-5 years cash fows liabilities HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 As at 31 March 2021 Diti ttlt	Total carrying amount of derivative On demand Total forward or less than 3 months undiscounted contract 3 months to 1 year 1-5 years cash fows liabilities HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 As at 31 March 2021 Diti ttlt
ervave — gross seemen — Infow — Outfow	27,990 46,650 — 74,640 — (27,891) (46,478) — (74,369) — 99 172 — 271 (186)
As at 31 March 2020 Derivative — gross settlement — Infow 13,959 41,877 18,612 74,448 — — Outfow (13,948) (41,845) (18,598) (74,391) — 11 32 14 57 (106)

Annual Report 2021 129

For the Year ended 31 March 2021

Notes to the Consolidated Financial Statements

31. FINANCIAL INSTRUMENTS (continued)

Fair value measurements of financial instruments

Fair value of the Group’s financial liabilities that are measured at fair value on a recurring basis

Some of the Group’s financial liabilities are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial liabilities are determined (in particular, the valuation technique(s) and inputs used).

	Fair value as at 31 March	Fair value as at 31 March	Fair value	Valuation
Financial liabilities	2021	2020	hierarchy	technique	Key input
Derivative fnancial	Liabilities:	Liabilities:	Level 2	Discounted cash	Forward exchange
instruments	HK$186,000	HK$106,000		fow	rate and contracted
					exchange rate

There were no transfers between Level 1 and 2 during the year.

Fair value of the Group’s financial assets and financial liabilities that are not measured at fair value on a recurring basis

The management of the Group estimates the fair value of its financial assets and financial liabilities measured at amortised cost using the discounted cash flows analysis. The management of the Group considers that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the consolidated statement of financial position approximate their fair values.

130

Microware Group Limited

For the Year ended 31 March 2021

Notes to the Consolidated Financial Statements

32. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES

The table below details changes in the Group’s liabilities arising from financing activities, including both cash and noncash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s consolidated statement of cash flows as cash flows from financing activities.

Amount due to a Lease Dividends non-controlling liabilities payable interest Total HK$’000 HK$’000 HK$’000 HK$’000 (note 20) As at 1 April 2019 1,052 — 599 1,651 Financing cash fow (653) (16,500) 100 (17,053) Finance cost 41 — — 41 Other non-cash changes: Dividends declared (note 10) — 16,500 — 16,500 New leases entered leases modifed (note 12) 7,656 — — 7,656	Amount due to a Lease Dividends non-controlling liabilities payable interest Total HK$’000 HK$’000 HK$’000 HK$’000 (note 20) As at 1 April 2019 1,052 — 599 1,651 Financing cash fow (653) (16,500) 100 (17,053) Finance cost 41 — — 41 Other non-cash changes: Dividends declared (note 10) — 16,500 — 16,500 New leases entered leases modifed (note 12) 7,656 — — 7,656
As at 31 March 2020 Financing cash fow Finance cost Other non-cash changes: Dividends declared (note 10) New leases entered leases modifed (note 12)	8,096 — 699 8,795 (8,355) (60,000) 400 (67,955) 236 — — 236 — 60,000 — 60,000 7,292 — — 7,292 7,269 — 1,099 8,368
As at 31 March 2021

Annual Report 2021 131

Financial Summary

RESULTS

For the year ended 31 March	For the year ended 31 March
2017 2018 2019 2020 HK$’000 HK$’000 HK$’000 HK$’000	2021 HK$’000 1,114,277 54,468 (7,546) 46,922 47,332 (410) 46,922 0.16
Revenue 1,124,374 1,096,205 1,255,078 1,365,341
Proft before taxation 28,088 35,888 34,888 49,258 Taxation (8,128) (5,806) (6,259) (8,944)
Proft for the year 19,960 30,082 28,629 40,314
Attributable to: Owners of the Company 19,960 30,082 28,883 40,619 Non-controlling interests — — (254) (305)
19,960 30,082 28,629 40,314
Earnings per share Basic (HK$) 0.08 0.10 0.10 0.14

ASSETS AND LIABILITIES

At 31 March	At 31 March
2017 2018 2019 2020 HK$’000 HK$’000 HK$’000 HK$’000	2021 HK$’000 489,474 (268,654) 220,820 221,788 (968) 220,820
Total assets 424,188 445,385 514,153 551,938 Total liabilities (221,816) (230,931) (304,069) (318,040)
202,372 214,454 210,084 233,898
Equity attributable to owners of the Company 202,372 214,454 210,337 234,456 Non-controlling interests — — (253) (558)
202,372 214,454 210,084 233,898

132

Microware Group Limited