SuperRobotics Limited — Interim / Quarterly Report 2011

May 9, 2011

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China AU Group Holdings Limited 中國金豐集團控股有限公司[*]

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 8176)

THIRD QUARTERLY RESULTS ANNOUNCEMENT FOR THE NINE MONTHS ENDED 31 MARCH 2011

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

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

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

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

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

• For identification purpose only

• 1 -

SUMMARY

• The Group’s turnover for the nine months ended 31 March 2011 was approximately HK$45,498,000, representing a decrease of approximately 17.3% over the corresponding period of 2010.

• Loss for the nine months ended 31 March 2011 was approximately HK$6,696,000 (2010: profit of approximately HK$17,889,000). Excluding the imputed interest on the convertible bonds, loss before finance costs for the period under review was approximately HK$549,000.

• Basic and diluted loss per share for the nine months ended 31 March 2011 were HK0.89 cents (2010: basic earnings per share of HK3.62 cents) and HK0.70 cents (2010: N/A) respectively.

• The board did not recommend the payment of an interim dividend for the nine months ended 31 March 2011.

UNAUDITED QUARTERLY RESULTS

The board of directors (the “Board”) of China AU Group Holdings Limited (the “Company”) is pleased to announce the unaudited condensed consolidated quarterly results of the Company and its subsidiaries (the “Group”) for the three months and nine months ended 31 March 2011 together with the comparative figures for the corresponding periods in 2010. The condensed consolidated quarterly results have not been audited, but have been reviewed by the Company’s audit committee.

• 2 -

CONDENSED CONSOLIDATED INCOME STATEMENT

Notes Turnover 3 Cost of sales Gross profit Other revenue Selling and distribution costs Administrative expenses (Loss)/Profit before finance costs Finance costs – Imputed interest on convertible bonds 4 (Loss)/Profit before taxation Taxation 5 (Loss)/Profit for the period 6 (Loss)/Earnings per share 8 Basic Diluted	(Unaudited) For the nine months ended 31 March 2011 2010 HK$’000 HK$’000 45,498 55,029 (29,916 ) (16,441 ) 15,582 38,588 3 – (5,121 ) (8,741 ) (11,013 ) (8,458 ) (549 ) 21,389 (5,745 ) – (6,294 ) 21,389 (402 ) (3,500 ) (6,696 ) 17,889 HK cents HK cents (0.89 ) 3.62 (0.70 ) N/A	(Unaudited) For the three months ended 31 March 2011 2010 HK$’000 HK$’000 5,268 12,862 (4,378 ) (3,130 ) 890 9,732 3 (21 ) (1,780 ) (1,453 ) (4,122 ) (3,093 ) (5,009 ) 5,165 (497 ) – (5,506 ) 5,165 691 (500 ) (4,815 ) 4,665 HK cents HK cents (0.49 ) 0.89 (0.41 ) N/A

• 3 -

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Loss)/Profit for the period Other comprehensive expense Exchange differences arising from translation of foreign operations Other comprehensive expense for the period (net of tax) Total comprehensive (expense)/income for the period	(Unaudited) For the nine months ended 31 March 2011 2010 HK$’000 HK$’000 (6,696 ) 17,889 3 (4 ) 3 (4 ) (6,693 ) 17,885	(Unaudited) For the three months ended 31 March 2011 2010 HK$’000 HK$’000 (4,815 ) 4,665 5 27 5 27 (4,810 ) 4,692	(Unaudited) For the three months ended 31 March 2011 2010 HK$’000 HK$’000 (4,815 ) 4,665 5 27 5 27 (4,810 ) 4,692
			27
			4,692

• 4 -

NOTES

1. GENERAL

The Company was incorporated in the Cayman Islands on 30 August 2001 as an exempted company with limited liability under the Companies Law Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands.

The consolidated results are presented in Hong Kong dollars, which is same as the functional currency of the Company.

The Company is an investment holding company. The Group is principally engaged in the development, distribution and marketing of personal care treatment products and services.

2. PRINCIPAL ACCOUNTING POLICIES

The unaudited condensed consolidated results for the nine months ended 31 March 2011 have been prepared under the historical cost convention, as modified for the revaluation of investment properties, available-for-sale investments and financial assets at fair value through profit or loss, which are measured at fair values.

The unaudited condensed consolidated results for the nine months ended 31 March 2011 have been prepared in accordance with Hong Kong Financial Reporting Standards (the “HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) and in compliance with the applicable disclosure requirements set out in Chapter 18 of the GEM Listing Rules. The accounting policies used in the unaudited consolidated results for the nine months ended 31 March 2011 are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 30 June 2010, except for the following accounting policies newly adopted in the current review period.

In the current review period, the Group has applied for the first time the following new or revised standards, amendments and interpretations issued by the HKICPA, which are effective for the Group’s financial year beginning on 1 July 2010:

HKFRSs (Amendments)	Improvements to HKFRSs issued in 20104
HKFRS 1 (Amendments)	Additional Exemptions for First-time Adopters1
HKFRS 1 (Amendments)	Limited Exemptions from Comparative HKFRS 7
	Disclosures for First-time Adopters3
HKFRS 2 (Amendment)	Group Cash-settled Share-based Payment Transactions1
HKAS 32 (Amendments)	Classification of Rights Issues2
HK(IFRIC) – Int 19	Extinguishing Financial Liabilities with Equity Instruments3

• 1 Effective for annual periods beginning on or after 1 January 2010 2 Effective for annual periods beginning on or after 1 February 2010

• 3 Effective for annual periods beginning on or after 1 July 2010

• 4 Effective for annual periods beginning on or after 1 July 2010 and 1 January 2011, as appropriate

The adoption of these new or revised standards, amendments and interpretations had no material effect on how the results of the Group for the current or prior accounting periods have been prepared. Accordingly, no prior period adjustment has been required.

• 5 -

3. BUSINESS AND GEOGRAPHICAL SEGMENTS

Turnover represents the net amounts received and receivable for goods sold, therapy services and training course services provided, less returns and allowances, by the Group to outside customers. Turnover also includes royalty fee income charged to the distributors for use of the Group’s trademarks/tradenames.

Segment revenue and results

An analysis of the Group’s turnover and contribution to operating results by reportable segments are as follows:

For the nine months ended 31 March 2011 (Unaudited) Turnover External sales – Sales of beauty equipments – Sales of beauty products – Royalty fee income – Therapy services – Provision of training courses Total revenue Result Segment result Unallocated corporate incomes Unallocated corporate expenses Interest income Finance costs Taxation Loss for the period	PRC HK$’000 35,320 3,046 3,836 – 500 42,702 15,716	Hong Kong HK$’000 – 782 – 1,728 286 2,796 (134 )	Consolidated HK$’000 35,320 3,828 3,836 1,728 786 45,498 15,582 – (16,134 ) 3 (5,745 ) (402 ) (6,696 )

• 6 -

For the nine months ended 31 March 2010 (Unaudited) Turnover External sales – Sales of beauty equipments – Sales of beauty products – Royalty fee income – Therapy services – Provision of training courses Total revenue Result Segment result Unallocated corporate incomes Unallocated corporate expenses Interest income Finance costs Taxation Profit for the period	PRC HK$’000 42,000 5,990 4,799 – 1,500 54,289 44,086	Hong Kong HK$’000 – 346 – 394 – 740 (5,498 )	Consolidated HK$’000 42,000 6,336 4,799 394 1,500 55,029 38,588 – (17,199 ) – – (3,500 ) 17,889

The geographical segments were analysed in accordance with the ultimate destination where the products are sold or services are provided based on knowledge of the Directors.

Revenue reported above represents revenues generated from external customers. There were no intersegment sales during the period under review (2010: Nil).

Segment profit/(loss) represents profit earned or loss incurred by each segment without allocation of corporate administration costs including Directors’ salaries, investment income, other income, finance costs and income tax expense. This is the measure reported to the chief operation decision maker for the purposes of resource allocation and assessment of segment performance.

• 7 -

4. FINANCE COSTS

Imputed interest on convertible bonds TAXATION Profits tax – Hong Kong – current period – PRC – current period Deferred tax – current period	(Unaudited) Nine months ended 31 March 2011 2010 HK$’000 HK$’000 5,745 – 5,745 – (Unaudited) Nine months ended 31 March 2011 2010 HK$’000 HK$’000 402 3,500 – – 402 3,500 – – 402 3,500	(Unaudited) Three months ended 31 March 2011 2010 HK$’000 HK$’000 497 – 497 – (Unaudited) Three months ended 31 March 2011 2010 HK$’000 HK$’000 (691 ) 500 – – (691 ) 500 – – (691 ) 500	(Unaudited) Three months ended 31 March 2011 2010 HK$’000 HK$’000 497 – 497 – (Unaudited) Three months ended 31 March 2011 2010 HK$’000 HK$’000 (691 ) 500 – – (691 ) 500 – – (691 ) 500
			500 –
			500

5. TAXATION

Hong Kong profits tax is calculated at 16.5% of the estimated assessable profits arising in Hong Kong for the nine months ended 31 March 2011 and 2010.

Taxation arising in other regions in the PRC is calculated in accordance with the relevant laws of the PRC.

• 8 -

6. (LOSS)/PROFIT FOR THE PERIOD

(Loss)/Profit for the period has been arrived at after charging: Directors’ remuneration Other staff costs Retirement benefit scheme contributions Total staff costs Amortisation of intangible assets Depreciation Written off of fixed assets	(Unaudited) Nine months ended 31 March 2011 2010 HK$’000 HK$’000 1,710 1,710 8,323 5,385 284 185 10,317 7,280 702 702 534 307 – 161	(Unaudited) Three months ended 31 March 2011 2010 HK$’000 HK$’000 570 570 3,316 1,874 97 52 3,983 2,496 234 234 178 89 – –	(Unaudited) Three months ended 31 March 2011 2010 HK$’000 HK$’000 570 570 3,316 1,874 97 52 3,983 2,496 234 234 178 89 – –
			2,496
			234 89 –

7. DIVIDENDS

The Board did not recommend the payment of an interim dividend for the nine months ended 31 March 2011 (2010: Nil).

8. (LOSS)/EARNINGS PER SHARE

The calculation of the basic loss per share for the three months and nine months ended 31 March 2011 is based on the loss for the period of approximately HK$4,815,000 and HK$6,696,000, and on the weighted average number of 983,533,334 ordinary shares and 751,506,569 ordinary shares in issue respectively during the periods.

The calculation of the diluted loss per share for the three months and nine months ended 31 March 2011 is based on the loss for the period of approximately HK$4,815,000 and HK$6,696,000, and on the weighted average number of 1,183,533,334 ordinary shares and 951,506,569 ordinary shares in issue respectively during the periods.

Diluted earnings per share for the nine months ended 31 March 2011 assumed the conversion of all outstanding convertible bonds of the Company, amounted to a maximum of 200,000,000 shares.

The calculation of the basic earnings per share for the three months and nine months ended 31 March 2010 is based on the profit for the period of approximately HK$4,665,000 and HK$17,889,000, and on the weighted average number of 522,200,000 ordinary shares and 494,210,219 ordinary shares in issue respectively during the periods.

No diluted earnings per share for the three months and nine months ended 31 March 2010 was presented as there was no potential dilutive ordinary share in issue.

• 9 -

9. RESERVES

The movements in the reserve of the Group are as follows:

At 1 July 2010 Loss for the period Other comprehensive expense for the period: Exchange differences arising from translation of operations outside Hong Kong Total comprehensive (expense)/ income for the period Issue of new shares pursuant to subscription agreements dated 29 November 2010 Transaction costs attributable to issue of new shares Convertible bonds exercised At 31 March 2011 At 1 July 2009 Profit for the period Other comprehensive expense for the period: Exchange differences arising from translation of operations outside Hong Kong Total comprehensive (expense)/ income for the period Issue of new shares pursuant to a placing agreement dated 19 August 2009 Transaction costs attributable to issue of new shares At 31 March 2010	Share premium HK$’000 90,134 – – – 22,000 (1,163 ) 39,007 149,978 57,060 – – – 34,860 (1,786 ) 90,134	Merger difference HK$’000 22,735 – – – – – – 22,735 22,735 – – – – – 22,735	(Unaudited) Convertible bonds equity reserve HK$’000 40,566 – – – – – (27,996 ) 12,570 – – – – – – –	Translation Accumulated reserve losses HK$’000 HK$’000 (21 ) (17,769 ) – (6,696 ) 3 – 3 (6,696 ) – – – – – – (18 ) (24,465 ) (26 ) (44,882 ) – 17,889 (4 ) – (4 ) 17,889 – – – – (30 ) (26,993 )	Total HK$’000 135,645 (6,696 ) 3 (6,693) 22,000 (1,163 ) 11,011 160,800 34,887 17,889 (4) 17,885 34,860 (1,786) 85,846

• 10 -

10. RELATED PARTY DISCLOSURES

a. Related party transactions

		(Unaudited)	(Unaudited)
		Nine months ended
		31 March
Name of party	Nature of transactions	2011	2010
		HK$’000	HK$’000
Garrick International	Purchase of products	40	3,998
Limited_(Note)_
	Deposit paid for purchase
	of inventories	–	3,000

Note: Ms. Keung Wai Fun (“Ms. Samantha Keung”), chief executive officer of the Company, and Mr. Cheung Tsun Hin, Samson, non-executive Director of the Company, are shareholders and directors of Garrick International Limited. Garrick International Limited is owned as to 90% by Ms. Samantha Keung and as to 10% by Mr. Cheung Tsun Hin, Samson. Mr. Cheung Tsun Hin, Samson is son of Ms. Samantha Keung.

b. Compensation for key management personnel

The remuneration of Directors and other members of key management personnel during the period was as follows:

	(Unaudited)	(Unaudited)
	Nine months ended
	31 March
	2011	2010
	HK$’000	HK$’000
Short-term employee benefits	2,637	2,610

The remuneration of Directors and key management personnel is determined or proposed by the remuneration committee having regard to the performance of individuals and market trends.

• 11 -

MANAGEMENT DISCUSSION AND ANALYSIS

Results of operation

For the nine months ended 31 March 2011, the Group recorded a turnover of approximately HK$45,498,000 (2010: approximately HK$55,029,000) which represented a decrease of approximately 17.3% over the corresponding period last year. The gross profit for the nine months ended 31 March 2011 amounted to approximately HK$15,582,000 (2010: approximately HK$38,588,000), representing a decrease of 59.6% over the corresponding period last year. The decrease in turnover and gross profit were mainly due to the Group revamping its distribution and marketing strategies.

Selling and distribution costs for the nine months ended 31 March 2011 amounted to approximately HK$5,121,000 (2010: HK$8,741,000), representing a decrease of 41.4% over the corresponding period last year. The decrease in selling and distribution costs was mainly due to less marketing and promotional expenditure for the development of the distributorship business in the PRC.

Administrative expenses for the nine months ended 31 March 2011 amounted to approximately HK$11,013,000 (2010: approximately HK$8,458,000), representing an increase of approximately 30.2% over the corresponding period last year. It was mainly due to the increase in legal and professional expenses incurred for the Group’s possible acquisitions and increase in rentals for the Company’s new office.

Finance costs for the nine months ended 31 March 2011 amounted to approximately HK$5,745,000 (2010: Nil). The finance costs relates to the imputed interest on the convertible bonds issued in April 2010.

The Group’s loss for the nine months ended 31 March 2011 was approximately HK$6,696,000 (2010: profit of approximately HK$17,889,000). Excluding the imputed interest on the convertible bonds, loss before finance costs for the period under review was approximately HK$549,000.

• 12 -

Business Review

During the period under review, the turnover of the Group amounted to approximately HK$45,498,000 representing a decrease of approximately 17.3% from HK$55,029,000 the turnover during the same period last year. In addition, the Group resulted in loss for the nine months ended 31 March 2011 due to imputed interest attributed to the convertible bonds issued by the Company in late April 2010 and due to the Group revamping its distribution and marketing strategies.

In order to redefine its distribution network geographically, during the period under review, the Group appointed a new distributor responsible for the Northern region in PRC. The Group believes that the grant of such new distributorship will strengthen its distribution network and sales in Northern Region of PRC and gain market recognition of its products and services.

Prospect

Given the growing demand for high quality and effective beauty products and services in China, the Group will continue to direct its focus on continuing expansion of its distribution network and growth of its new franchising business. As regards the hair care franchising business, the Group will continue to seek and recruit young entrepreneurs who are especially interested in investing in and developing hair care franchise. The Group believes that the franchising business of hair care is in the position to contribute to the expansion of the Group’s market share in Hong Kong and in PRC.

Given the successful opening and operation of Blu Spa cosmetic sales and spa service counters at leading lifestyle department stores and shopping centres, the Group will continue to identify and secure suitable locations to open Blu Spa cosmetic sales and spa service counters. At the same time, the Group is actively seeking further spa facility management opportunity in high-end residential estates and hotels in Hong Kong and the PRC.

POSSIBLE MATERIAL ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES AND JOINT VENTURES

Possible major transaction and advance to entity

Reference is made to the Company announcements published on 16 December 2009, 24 February 2010, 30 March 2010, 30 April 2010, 20 May 2010, 25 August 2010, 29 October 2010, 1 February 2011, 14 February 2011 and 28 February 2011. Unless otherwise stated, capitalized terms used in this announcement shall have the same meanings as defined in the above announcements.

Pursuant to the Company’s announcement of 1 February 2011, BSHK and the Vendor entered into a supplemental agreement to the S&P Agreement, pursuant to which BSHK and the Vendor agreed to, among others, extend the long stop date of the S&P Agreement to 30 June 2011 (or such later date as BSHK and the Vendor may agree).

• 13 -

Given the Deposit of HK$45,000,000 represents approximately 14.6% of the total asset value of the Group as at 31 March 2011 under the assets ratio (as defined under Rule 19.07(1) of the GEM Listing Rules), it constitutes an advance to entity under Rule 17.15 of the GEM Listing Rules.

Possible Acquisition of indirect interest in the Joint Venture Company and advance to entity

Reference is made to the Company announcements published on 9 December 2009, 28 January 2010, 25 February 2010, 3 May 2010, 27 August 2010 and 31 December 2010. Unless otherwise stated, capitalized terms used in this announcement shall have the same meanings as defined in the above announcements.

Pursuant to the Company’s announcement of 31 December 2010, the Purchaser, the Vendor and the Guarantor have mutually agreed that the exclusivity clause of the HOA for entering into the S&P Agreement will not be further extended and it has expired on 31 December 2010. However, the negotiations of the Possible Acquisition remain underway amongst the Purchaser, the Vendor and the Guarantor with a view to enter into the S&P Agreement.

Given the refundable earnest money of HK$25,000,000 represents approximately 8.1% of the total asset value of the Group as at 31 March 2011 under the assets ratio (as defined under Rule 19.07(1) of the GEM Listing Rules), it constitutes an advance to entity under Rule 17.15 of the GEM Listing Rules.

INTERIM DIVIDEND

The Board did not recommend the payment of an interim dividend for the nine months ended 31 March 2011 (2010: Nil).

DISCLOSURE OF THE INTERESTS AND SHORT POSITIONS OF DIRECTORS AND CHIEF EXECUTIVES IN THE SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY AND ITS ASSOCIATED CORPORATIONS

As at 31 March 2011, the interests or short positions of the Directors and chief executives of the Company in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the “SFO”)), which were required (i) to be notified to the Company and the Exchange pursuant to Divisions 7 and 8 of Part XV of SFO (including interests or short positions which they have taken or deemed to have taken under such provisions of SFO); or (ii) to be entered in the register referred to therein pursuant to Section 352 of SFO; or (iii) to be notified to the Company and the Exchange pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules, were as follows:

• 14 -

Long position in shares

			Approximate
			percentage of
Name	Nature of interests	Number of shares	shareholding
Executive Director
Mr. Ji He Qun	Beneficial owner	264,355,000	26.38%
	Interest of spouse	6,760,000	0.67%
Ms. Chan Choi Har	Beneficial owner	2,000,000	0.20%
(“Ms. Ivy Chan”)	Corporate interest	11,065,787	1.10%
		(Note 1)
Mr. Gu Da Xin	Beneficial owner	27,400,000	2.73%
Chief executive officer
Ms. Samantha Keung	Corporate interest	682,200	0.07%
		(Note 2)

Notes:

1. These shares are held by XO-Holdings Limited. The issued share capital of XO-Holdings Limited is beneficially owned as to 65% by Ms. Ivy Chan.

2. These shares are held by Queensbury Global Limited. Queensbury Global Limited is owned as to 88.38% by Million Fortune Group Limited. Million Fortune Group Limited is owned as to 87% by Ms. Samantha Keung.

Save as disclosed above, as at 31 March 2011, none of the Directors or chief executives of the Company had any interest or short position in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have taken under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO to be entered in the register referred to therein or which were required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules, to be notified to the Company and the Exchange.

• 15 -

SHARE OPTION SCHEMES

On 30 January 2002, the Company adopted a share option scheme (the “Share Option Scheme”) for the primary purpose of providing incentives or rewards to the directors and employees of the Group and to recognise the contribution of such eligible persons to the growth of the Group. The Share Option Scheme will expire on 29 January 2012.

Under the Share Option Scheme, the Board may grant options to directors and employees of the Company or any subsidiaries, to subscribe for shares in the Company within ten years from the adoption date of the Share Option Scheme. Any grant of options to a connected person or any of its associates must be approved by all the independent non-executive Directors of the Company (the “INEDs”).

The total number of shares in respect of which options may be granted under the Share Option Scheme and any other scheme is not permitted to exceed 30% of the issued share capital of the Company from time to time. The total number of shares which may be allotted and issued upon full exercise of all options to be granted under the Share Option Scheme is an amount equivalent to 10% of the shares of the Company in issue as at the date of the annual general meeting held on 28 December 2009.

The number of shares issued and issuable in respect of which options may be granted under the Share Option Scheme and any other scheme to any individual within 12-month period immediately preceding the date of such new grant is not permitted to exceed 1% of the issued share capital of the Company at the date of such new grant, without prior approval from the Company’s shareholders. Options granted to substantial shareholders or INEDs, when aggregated with the options granted under the Share Option Scheme and any other scheme in the past 12 months, in excess of 0.1% of the Company’s share capital and with a value in excess of HK$5 million must be approved in advance by the Company’s shareholders.

Options granted must be taken up within 28 days of the date of grant, upon payment of HK$1 per grant. Options may be exercised at any time from the date of grant to the 10th anniversary of the date of grant. The exercise price is determined by the Board, and will not be less than the higher of the closing price of the Company’s shares on the date of grant, and the average closing price of the Company’s shares for the five business days immediately preceding the date of grant.

As at 31 March 2011, no options had been granted under the Share Option Scheme.

DIRECTORS’ RIGHTS TO ACQUIRE SHARES OR DEBENTURES

At no time during the period was the Company, or any of its subsidiaries, a party to any arrangements to enable the Directors to acquire benefit by means of acquisition of shares in, or debt securities, including debentures, of the Company or any other body corporate, and none of the Directors or their spouses or children under the age 18 had any right to subscribe for the securities of the Company, or had exercised any such right.

• 16 -

SUBSTANTIAL SHAREHOLDERS

As at 31 March 2011, so far as is known to the Directors and chief executives of the Company, the following persons (other than the Directors and chief executives of the Company as disclosed above) had an interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under provisions of Divisions 2 and 3 of Part XV of the SFO:

Long position in shares

			Approximate
	Nature of		percentage of
Shareholder	interests	Number of shares	shareholding
Mr. Ji He Qun	Beneficial owner	264,355,000	26.38%
(Executive Director)	Interest of spouse	6,760,000	0.67%

Save as disclosed above, the Directors and chief executives of the Company are not aware of any person (other than the Directors and chief executives of the Company as disclosed above) who, as at 31 March 2011, had any interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

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

Neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities for the nine months ended 31 March 2011.

COMPETING INTERESTS

During the period under review, none of the Directors or the management shareholders (as defined in the GEM Listing Rules) of the Company had any interest in business that competes or might compete with the business of the Group.

CORPORATE GOVERNANCE

For the nine months ended 31 March 2011, the Group had been in compliance with most of the provisions of the Code on Corporate Governance Practices as set out in Appendix 15 to the GEM Listing Rules, save as the deviations discussed below. The Company adopted the code provisions set out in the Code on Corporate Governance Practices as its own code of corporate governance practices.

• 17 -

According to Code Provision A.4.1, non-executive directors must be appointed for a specific term and subject to re-election. The existing non-executive Directors do not have specific terms of appointment. However, pursuant to the Bye-laws of the Company, all Directors (including executive and non-executive Directors) (except the Chairman of the Company) shall be subject to retirement by rotation in annual general meetings of the Company.

According to Code Provision A.4.2, every director is subject to retirement by rotation at least once every three years. Pursuant to the Bye-laws of the Company, at each annual general meeting, one-third of the directors must retire. Notwithstanding any requirements of that provision, the Chairman of the Company is not subject to retirement by rotation or taken into account in determining the number of Directors to retire. Mr. Ji He Qun is currently the Chairman and executive Director of the Company. The Board believes that continuity is the key to implementing the long-term business plans successfully, and that with the Chairman continuing in office, it can provide the Group with consistent leadership, thus long-term business strategies can be planned and implemented more effectively. The Board is of the view that the Chairman of the Company should not be subject to retirement by rotation.

SECURITIES TRANSACTIONS BY DIRECTORS

During the period under review, the Company has adopted a code of conduct regarding directors’ securities transactions on terms no less exacting than the required standard of dealings as set out in Rules 5.48 to 5.67 of the GEM Listing Rules. After making specific enquiries to all Directors, the Company was not aware of any Directors who were in breach of the required standard of dealings and the Company’s code of conduct on securities transactions by Directors for the period under review.

BOARD OF DIRECTORS

The Board comprises eight Directors, of which three are executive Directors, namely Mr. Ji He Qun, Ms. Ivy Chan and Mr. Gu Da Xin, two are non-executive Directors, namely Mr. Cheung Tsun Hin, Samson and Mr. Chan Shun Kuen, Eric and three are INEDs, namely Mr. Chan Sze Hon, Mr. Lam Wai Pong and Ms. Liu Jiang. The Directors are collectively responsible for the development of the Group’s strategies and policies. The executive Directors are responsible for the daily operation of the Group while the non-executive Directors provide their professional advices to the Group. The non-executive Directors have professional experiences in legal, finance and accounting and engineering respectively.

With the exception of the Chairman of the Company not subject to retirement by rotation or taken into account in determining the number of Directors to retire, one-third of the Directors shall retire by rotation from office each year in accordance with the Company’s Bye-laws. The term of office of the Directors is the period up to their retirement by rotation. Those Directors at any time appointed by the Board shall hold office only until the next following annual general meeting of the Company and shall be eligible for re-election but shall not be taken into account in determining the Directors who are to retire by rotation at such meeting.

• 18 -

AUDIT COMMITTEE

As required by Rules 5.28 to 5.33 of the GEM Listing Rules, the Company established an audit committee on 10 December 2001 with written terms of reference which precisely specifies its powers and duties. The primary duties of the audit committee are to review and supervise the financial reporting process and internal control system of the Group.

The audit committee currently comprises three INEDs, namely, Mr. Chan Sze Hon, Mr. Lam Wai Pong and Ms. Liu Jiang. Mr. Chan Sze Hon is the Chairman of the Audit Committee.

The Group’s unaudited quarterly results for the nine months ended 31 March 2011 have been reviewed by the audit committee.

REMUNERATION COMMITTEE

The Company established a remuneration committee on 30 March 2005 with written terms of reference. The remuneration committee currently comprises three INEDs, namely, Mr. Chan Sze Hon, Mr. Lam Wai Pong and Ms. Liu Jiang. Mr. Chan Sze Hon is the Chairman of the remuneration committee.

PUBLIC FLOAT

Based on the information that is publicly available to the Company and within the knowledge of its Directors, as at the date of this announcement, there is sufficient public float, as not less than 25% of the Company’s issued shares are held by the public.

BOARD PRACTICES AND PROCEDURES

During the period under review, the Company has been in compliance with the requirements for the Board Practices and Procedures as set out in Rule 5.34 of the GEM Listing Rules.

By order of the Board China AU Group Holdings Limited Ji He Qun Chairman

Hong Kong, 9 May 2011

As at the date of this announcement, the Board comprises three executive Directors, namely Mr. Ji He Qun, Ms. Chan Choi Har, Ivy and Mr. Gu Da Xin; two non-executive Directors, namely Mr. Cheung Tsun Hin, Samson and Mr. Chan Shun Kuen, Eric; and three INEDs, namely Mr. Chan Sze Hon, Mr. Lam Wai Pong and Ms. Liu Jiang.

This announcement will appear and remain on the GEM website at www.hkgem.com on the “Latest Company Announcements” page for at least 7 days from the date of its posting and the website of the Company at www.bluspa.com.

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