(Stock Code : 00085) Interim Report 2012

Transcription

1 (Stock Code : 00085) Interim Report 2012

2 CONTENTS Pages Corporate Information 2 Condensed Consolidated Interim Income Statement Condensed Consolidated Interim Statement of Comprehensive Income Condensed Consolidated Interim Balance Sheet Condensed Consolidated Interim Statement of Changes in Equity Condensed Consolidated Interim Cash Flow Statement Notes to the Condensed Consolidated Interim Financial Information Report on Review of Interim Financial Information Management Discussion and Analysis 23 Other Information 28 Interim Report

3 CORPORATE INFORMATION Board of Directors Non-executive Directors Rui Xiaowu (Chairman) Zhao Guiwu (Vice Chairman) Executive Directors Fan Qingwu (Managing Director) Liu Jinping Independent Non-executive Directors Chan Kay Cheung Wong Po Yan Yin Yongli Audit Committee Chan Kay Cheung (Chairman) Wong Po Yan Yin Yongli Remuneration and Nomination Committee Wong Po Yan (Chairman) Chan Kay Cheung Yin Yongli Fan Qingwu Company Secretary Ng Kui Kwan Registered Office Clarendon House 2 Church Street Hamilton HM 11 Bermuda Principal Office in Hong Kong Room 3403, 34th Floor China Resources Building 26 Harbour Road Wanchai Hong Kong Clarendon House 2 Church Street Hamilton HM 11 Bermuda Interim Report 2012

4 CORPORATE INFORMATION Investor Relations Telephone: (852) Facsimile: (852) Website: Stock Code Principal Bankers Bank of China (Hong Kong) Limited The Hongkong and Shanghai Banking Corporation Limited Bank of Beijing Co., Ltd Principal Share Registrar Butterfield Fulcrum Group (Bermuda) Limited Rosebank Centre 11 Bermudiana Road Pembroke HM 08 Bermuda Hong Kong Branch Share Registrar and Transfer Office Tricor Abacus Limited 26th Floor, Tesbury Centre 28 Queen s Road East Wanchai Hong Kong Independent Auditor PricewaterhouseCoopers Legal Advisors As to Hong Kong Law Jun He Law Offices As to Bermuda Law Conyers Dill & Pearman (852) (852) investor@cecholdings.com.hk Butterfield Fulcrum Group (Bermuda) Limited Rosebank Centre 11 Bermudiana Road Pembroke HM 08 Bermuda Conyers Dill & Pearman Interim Report

5 The board of directors (the Board ) of China Electronics Corporation Holdings Company Limited (the Company ) hereby presents the unaudited condensed consolidated interim results of the Company and its subsidiaries (the Group ) for the six months ended 30 June 2012 together with the comparative figures as follows: CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE Unaudited Six months ended 30 June Note HK$ 000 HK$ 000 Revenue 3 611, ,563 Cost of sales (378,643) (455,838) Gross profit 232, ,725 Other gains net 4 21,981 14,819 Selling and marketing costs (25,422) (27,283) Administrative expenses 6 (94,492) (81,928) Operating profit 134, ,333 Finance income net Profit before taxation 6 135, ,515 Taxation 7 (21,691) (18,287) Profit for the period 113,863 93,228 Attributable to owners of the Company 113,863 93,228 Dividends 8 HK cents HK cents Earnings per share 9 Basic Diluted Interim Report 2012

6 CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30 JUNE Unaudited Six months ended 30 June HK$ 000 HK$ 000 Profit for the period 113,863 93,228 Other comprehensive income for the period: Exchange differences on translation of financial statements of foreign operations (3,229) 8,604 Total comprehensive income for the period Attributable to owners of the Company 110, , , ,832 Interim Report

7 CONDENSED CONSOLIDATED INTERIM BALANCE SHEET AT 30 JUNE June 31 December (Unaudited) (Audited) Note HK$ 000 HK$ 000 ASSETS Non-current assets Property, plant and equipment 10 22,415 16,988 Intangible assets 10 8,288 4,281 Deferred tax assets 36,513 28,560 Available-for-sale financial assets 2,453 2,467 69,669 52,296 Current assets Inventories 261, ,457 Trade and other receivables , ,672 Cash and cash equivalents 387, ,453 1,253,340 1,002,582 Total assets 1,323,009 1,054,878 EQUITY Equity attributable to owners of the Company Issued equity , ,171 Other reserves (324,467) (321,238) Retained earnings 153,509 39,646 Total equity 718, ,579 LIABILITIES Current liabilities Trade and other payables , ,629 Short term bank loans 1,227 24,670 Total liabilities 604, ,299 Total equity and liabilities 1,323,009 1,054,878 Net current assets 648, ,283 Total assets less current liabilities 718, ,579 6 Interim Report 2012

8 CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 JUNE Issued equity Unaudited Attributable to owners of the Company Other reserves Retained earnings/ (accumulated losses) Total equity HK$ 000 HK$ 000 HK$ 000 HK$ 000 At 1 January ,171 (341,371) (75,013) 472,787 Total comprehensive income for the period 8,604 93, ,832 At 30 June ,171 (332,767) 18, ,619 At 1 January ,171 (321,238) 39, ,579 Total comprehensive income for the period (3,229) 113, ,634 At 30 June ,171 (324,467) 153, ,213 Interim Report

9 CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE Net cash generated from operating activities Net cash used in investing activities Net cash used in financing activities Unaudited Six months ended 30 June HK$ 000 HK$ ,331 42,090 (16,469) (4,300) (23,430) Effect of foreign exchange rate changes Net increase in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 30 June 209 (979) 57,641 36, , , , ,096 Analysis of balances of cash and cash equivalents: Cash and bank balances 387, ,096 8 Interim Report 2012

10 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 30 JUNE Basis of preparation The condensed consolidated interim financial information have been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and with Hong Kong Accounting Standard ( HKAS ) 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements of the Group for the year ended 31 December 2011, which have been prepared in accordance with Hong Kong Financial Reporting Standards ( HKFRS ). 2 Principal accounting policies Except as described below, the accounting policies used in the preparation of the condensed consolidated interim financial information are consistent with those used in the annual financial statements of the Group for the year ended 31 December In 2012, the Group has adopted the following amendments to existing HKAS and HKFRS that are relevant to its operations and effective for the accounting period beginning on 1 January 2012: HKAS 12 (amendment) Income Taxes 12 HKFRS 7 (amendment) Disclosure Transfer of Financial Assets 7 Interim Report

11 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 30 JUNE Principal accounting policies (Continued) Adoption of such amendments to existing standards did not have any significant effect on results or financial position of the Group for the current period. The Group did not early adopt any of the new or revised HKAS and HKFRS, amendments and interpretation to existing HKAS and HKFRS that have been issued by the Hong Kong Institute of Certified Public Accountants but are not yet effective. Management is currently assessing the financial impact of these revisions to the Group s financial position and performance. 3 Revenue and segment information (a) Revenue (a) Integrated circuits products Unaudited Six months ended 30 June HK$ 000 HK$ , , Interim Report 2012

12 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 30 JUNE Revenue and segment information (Continued) (b) Operating segments Management has determined the operating segments based on the reports reviewed by the directors (the chief operating decision maker) that are used to assess performance and allocate resources. The directors consider that the Group s operations are operated and managed as a single segment, accordingly no operating segment information is presented. In terms of geographical location, nearly 100% of the Group s revenue is attributable to the market in the People s Republic of China (the PRC ) and over 90% of the Group s non-current assets are located in the PRC. 4 Other gains net (b) 100% 90% 4 Unaudited Six months ended 30 June HK$ 000 HK$ 000 Government grants 24,229 12,088 Share of loss of an associate (253) Gain on disposal of an associate 1,053 Exchange (losses)/gains (319) 1,124 Others (1,929) ,981 14,819 During the six months ended 30 June 2011, the Group disposed of its entire interest in an associate to an independent third party at a consideration of RMB1,100,000 (equivalent to approximately HK$1,323,000) and recognised gain on disposal of HK$1,053, ,100,000 1,323,000 1,053,000 Interim Report

13 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 30 JUNE Finance income net Unaudited Six months ended 30 June HK$ 000 HK$ 000 Interest income on short term deposits 1, Interest on bank loans (510) (749) Profit before taxation The Group s profit before taxation has been arrived at after charging/(crediting) the following: 6 Unaudited Six months ended 30 June HK$ 000 HK$ 000 Depreciation of property, plant and equipment 3,376 2,775 Amortisation of intangible assets 4,862 3,628 Research and development * costs* 86,166 48,736 Written down of inventories to net realisable value 15,235 17,067 (Reversal of )/Impairment provision for trade receivables (9,423) 6,587 Auditor s remuneration Operating lease expenses on property and equipment 5,244 3,838 * Research and development costs for the six months ended 30 June 2011 had been reclassified to administrative expenses to be consistent with current period s presentation. * Interim Report 2012

14 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 30 JUNE Taxation Unaudited Six months ended 30 June HK$ 000 HK$ 000 Current taxation PRC enterprise income tax 29,827 25,114 Deferred taxation (8,136) (6,827) 21,691 18,287 (a) No provision for Hong Kong profits tax had been made as the Group did not generate any assessable profit in Hong Kong for the six months ended 30 June 2012 (2011: nil). (b) In accordance with the enterprise income tax laws in the PRC, CEC Huada Electronic Design Co., Ltd ( Huada Electronics ) s applicable statutory tax rate is 25% from 1 January However, Huada Electronics qualified as a High/New Technology Enterprise and thus was granted a 15% preferential tax rate from 1 January 2008 to 31 December (a) (b) % % Interim Report

15 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 30 JUNE Dividends The Board does not recommend the payment of interim dividend for the six months ended 30 June 2012 (2011: nil). 9 Earnings per share The calculation of the basic and diluted earnings per share is based on the following data: Profit for the period attributable to owners of the Company (HK$ 000) Weighted average number of ordinary shares for the purposes of basic and diluted earnings per share Earnings per share (HK cents) Unaudited Six months ended 30 June ,863 93,228 1,691,560,000 1,691,560,000 Basic Diluted (Note (a)) (a) (a) The Company did not have any potential ordinary share outstanding for the six months ended 30 June 2012 (2011: nil). Diluted earnings per share is therefore equal to basic earnings per share. (a) Interim Report 2012

16 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 30 JUNE Property, plant and equipment and intangible assets During the six months ended 30 June 2012, the Group had additions to property, plant and equipment of HK$8,886,000 (2011: HK$4,213,000). During the six months ended 30 June 2012, the Group had additions to intangible assets of HK$8,906,000 (2011: HK$8,144,000). 11 Trade and other receivables The majority of the Group s sales are with credit terms of 30 days to 135 days. The remaining amounts are due immediately after the delivery of goods. Included in trade and other receivables are trade receivables (net of provision for impairment) of HK$595,579,000 (31 December 2011: HK$398,475,000) and their ageing analysis is as follows: ,886, ,213, ,906, ,144, ,579, ,475, June 31 December (Unaudited) (Audited) HK$ 000 HK$ 000 Current to 30 days , , days ,408 24,256 Over 60 days and within 1 year , ,117 Over 1 year 1 4,247 1, , ,475 Interim Report

17 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 30 JUNE Issued equity June 31 December (Unaudited) (Audited) HK$ 000 HK$ 000 1,691,560,000 ordinary shares of HK$0.01 each 13 Trade and other payables 1,691,560, , , Included in trade and other payables are trade payables of HK$339,223,000 (31 December 2011: HK$218,966,000) and their ageing analysis is as follows: 339,223, ,966, June 31 December (Unaudited) (Audited) HK$ 000 HK$ 000 Current to 30 days , , days ,337 25,739 Over 60 days ,316 59, , , Interim Report 2012

18 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 30 JUNE Operating lease commitments The Group s future aggregate minimum lease payments under non-cancellable operating leases for factories and office premises are as follows: Group 30 June 31 December (Unaudited) (Audited) HK$ 000 HK$ 000 Not later than one year 1 5,011 5,874 In the second to fifth year ,380 5,888 7, Contingent liabilities The Group did not have any material contingent liability at 30 June 2012 (31 December 2011: nil) Interim Report

19 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 30 JUNE Related party transactions and balances The Group entered into the following material transactions in the ordinary course of business with related parties during the period: (a) Significant transactions with companies under common control of China Electronics Corporation Limited ( CEC ) (a) Unaudited Six months ended 30 June HK$ 000 HK$ 000 Sales of products 35,957 40,513 Purchases of goods and services 270, ,323 Interest received Rental paid Interim Report 2012

20 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 30 JUNE Related party transactions and balances (Continued) (b) Significant balances with companies under common control of CEC (b) 30 June 31 December (Unaudited) (Audited) HK$ 000 HK$ 000 Trade receivables 16,239 Advance from customers 11,853 Deposits 98,133 98,680 Trade payables 287, ,452 Other payables 3,680 3,701 Except for deposits, the above balances with related parties were unsecured, interest-free and settled according to the contract terms. The weighted-average interest rate of the deposits were 1.81% (2011: 1.33%). 1.81% % Interim Report

21 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 30 JUNE Related party transactions and balances (Continued) (c) Transactions with an associate (c) Unaudited Six months ended 30 June HK$ 000 HK$ 000 Sales of products 29,904 (d) Key management compensation (d) Salaries, allowances and benefits in kind Contributions to retirement schemes Unaudited Six months ended 30 June HK$ 000 HK$ 000 1,879 1, ,967 1, Interim Report 2012

22 REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION TO THE BOARD OF DIRECTORS OF CHINA ELECTRONICS CORPORATION HOLDINGS COMPANY LIMITED (incorporated in the Cayman Islands and continued in Bermuda with limited liability) Introduction We have reviewed the interim financial information set out on pages 4 to 20, which comprises the condensed consolidated interim balance sheet of China Electronics Corporation Holdings Company Limited (the Company ) and its subsidiaries (together, the Group ) as at 30 June 2012 and the related condensed consolidated interim statements of income, comprehensive income, changes in equity and cash flows for the six-month period then ended, and a summary of significant accounting policies and other explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants. The directors of the Company are responsible for the preparation and presentation of this interim financial information in accordance with Hong Kong Accounting Standard 34 Interim Financial Reporting. Our responsibility is to express a conclusion on this interim financial information based on our review and to report our conclusion 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 Interim Report

23 Scope of Review We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Hong Kong Institute of Certified Public Accountants. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the interim financial information is not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34 Interim Financial Reporting PricewaterhouseCoopers Certified Public Accountants Hong Kong, 23 August Interim Report 2012

24 MANAGEMENT DISCUSSION AND ANALYSIS Business Review The Group s integrated circuits design business comprises the design of integrated circuits chips and the development of application system. Currently, our products are mainly used in smart cards such as identity cards, social security cards, telecommunications cards and electric cards. Our products are also applied in wireless local area networks. For the six months ended 30 June 2012, the Group has obtained 14 new patents. Due to the further intensification of market price competition in 2012, the average selling prices of integrated circuits chip products were generally lower when comparing with those of the The Group on one hand adjusted its product mix in its telecommunications card chips business and concentrated on products which have a lower selling price per unit but better gross profit margin, also stepped up its effort in cost control and expanded the market share of its products. Through successfully boosting the sales of a number of our main products, the overall sales volume recorded a moderate increase during the six months ended 30 June 2012 and partially compensated the impact of the decrease in the average selling prices of integrated circuits chip products on the revenue for the period. Revenue for the six months ended 30 June 2012 amounted to HK$611.3 million, representing a moderate decrease of 7.6% when comparing with the corresponding period of last year and when comparing with the decrease in the average selling prices of integrated circuits chip products in As the combined effects of the improvement on the product mix of the Group, increase in sales volume and effective cost control had out-weighed the impact of the decrease in the average selling prices of integrated circuits chip products on the gross profit, the gross profit increased by 13.1% to HK$232.7 million for the six months ended 30 June During the period, the overall gross profit margin, which was still maintained at industry level, increased 7% to 38.1% % % %38.1% Interim Report

25 MANAGEMENT DISCUSSION AND ANALYSIS Business Review (Continued) Selling and marketing costs for the six months ended 30 June 2012 amounted to HK$25.4 million, representing a decrease of 6.8% when comparing with the corresponding period of last year. Selling and marketing costs decreased as a result of lower revenue. Administrative expenses increased by 15.3% to HK$94.5 million for the six months ended 30 June This was mainly attributable to the increase in research and development costs, the reversal of provision for trade receivables and the decrease in other administrative expenses resulting from streamlining its administrative team. Research and development costs were HK$86.2 million in 2012 (2011: HK$48.7 million), which represented 14.1% of the revenue for the six months ended 30 June 2012 (2011: 7.4%). Research and development during the period primarily focused on the EMV card, mobile payment card and RFID ( radio frequency identification ) chip products. Government grants received increased by 100% to HK$24.2 million for the six months ended 30 June 2012 resulted from more government subsidies for research and development costs incurred in the period. For the six months ended 30 June 2012, the profit attributable to owners of the Company was HK$113.9 million (2011: HK$93.2 million), and the basic earnings per share was HK6.73 cents (2011: HK5.51 cents). The Board does not recommend the payment of interim dividend for the six months ended 30 June 2012 (2011: nil) % % % % IC RFID % Interim Report 2012

26 MANAGEMENT DISCUSSION AND ANALYSIS Outlook At present, the application of smart cards in the PRC has penetrated into various trades and industries in the national economy. According to the statistics, smart cards applied in sectors such as telecommunications, social security, information security, urban construction, public health and financial services accounted for about 80% of the domestic smart card market, and this is the main driving force to promote the development of the domestic smart card market. With the continuing increase in investment in the areas of social security, public health and financial services domestically, the overall market size of the smart card industry in the PRC is expected to grow continuously in this year. In particular, the demand for smart cards such as telecommunications cards, social security cards, petrol payment cards and electric cards will achieve steady growth. At the same time, amid a slowing down in the pace of economic growth in the PRC caused by the faltering of the US and European economies, and coupled with the rising in the labour and material costs, the pace of growth in the smart card market may slow down and product price competition may further intensify. Looking forward, the Group will continue to increase investment in technology, persist in independent technology innovation and accumulation, improve its product mix, strengthen its operation management and cost control, consolidate its market leadership in sectors of social security cards, telecommunications cards, identity cards, petrol payment cards, etc.; and actively explore market application opportunities in the sectors of EMV cards and transportation cards. At the same time, the Group will also actively explore and develop new business areas and industry coverage, strive to capture the development opportunities in the smart card market and other related sectors in the PRC, so as to bring better returns to our shareholders. 80% IC Interim Report

27 MANAGEMENT DISCUSSION AND ANALYSIS Financial Review The Group finances its operations primarily by internal resources and short term bank loans. At 30 June 2012, the Group had cash and cash equivalents amounted to HK$387.1 million, 72% of which was denominated in Renminbi, 27.8% in United States dollars and 0.2% in Hong Kong dollars (31 December 2011: HK$329.5 million, 68% of which was denominated in Renminbi, 31.8% in United States dollars and 0.2% in Hong Kong dollars). At 30 June 2012, the Group had unsecured short term bank loans of HK$1.2 million, which were denominated in Renminbi (31 December 2011: HK$24.7 million, which were denominated in Renminbi). The bank loans were borrowed at contracted fixed interest rate. At 30 June 2012, committed borrowing facilities available to the Group but not drawn amounted to HK$170.6 million. At 30 June 2012, the Group did not have any pledged asset or guarantee (31 December 2011: nil). The Group s revenue are mainly denominated in Renminbi and payments are denominated in Renminbi and Hong Kong dollars. The Group will make use of hedging contracts, when appropriate, to hedge the risk of foreign exchange fluctuation arising from its operations % 27.8%0.2% % 31.8% 0.2% Interim Report 2012

28 MANAGEMENT DISCUSSION AND ANALYSIS Financial Review (Continued) At 30 June 2012, the Group had net current assets of HK$648.5 million (31 December 2011: HK$555.3 million). The overall gearing ratio, which is calculated as the total liabilities over total assets of the Group, was 45.7% (31 December 2011: 42.4%). At 30 June 2012, the Group did not have any material capital commitment (31 December 2011: nil) for the acquisition of fixed assets and intangible assets. The Group did not have any material contingent liability at 30 June 2012 (31 December 2011: nil). Employee and Remuneration Policies At 30 June 2012, the Group had approximately 310 employees, the majority of whom were based in the PRC. Employee benefit expenses for the period were HK$57.3 million. The Group recognises the importance of high calibre and competent staff and has a strict recruitment policy and performance appraisal scheme. Remuneration policies are largely in line with industry practices, and are formulated on the basis of performance and experience and will be reviewed regularly. Bonus and other merit payments are linked with the performance of the Group and of the individuals as incentive to optimise performance % % Interim Report

29 OTHER INFORMATION Directors and Chief Executive s Interests and Short Positions in Shares, Underlying Shares and Debentures At 30 June 2012, none of the directors nor the chief executive of the Company and their respective associates had any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the SFO )), which were recorded in the register maintained by the Company pursuant to Section 352 of the SFO or as otherwise notified to the Company and The Stock Exchange of Hong Kong Limited pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the Model Code ) as set out in Appendix 10 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the Listing Rules ). Share Option Scheme The share option scheme adopted by the Company pursuant to an ordinary resolution passed on 20 June 2002 expired on 19 June During the period from 1 January 2012 to 19 June 2012, no share option was granted under such share option scheme. During the six months ended 30 June 2012, no share option was exercised, cancelled or lapsed. The Company had no outstanding share option at 1 January 2012 and 30 June XV Interim Report 2012

30 OTHER INFORMATION Directors Rights to Acquire Shares or Debentures At no time during the six months ended 30 June 2012 was the Company, its holding company or any of its subsidiaries or fellow subsidiaries a party to any arrangements to enable the directors of the Company or their respective associates (as defined under the Listing Rules) to acquire benefits by means of acquisition of shares in, or debentures of, the Company or any other body corporate. Shareholders with Notifiable Interests At 30 June 2012, the register maintained by the Company pursuant to Section 336 of the SFO showed that the following persons (other than the director or chief executive of the Company) had notified the Company that they had an interest of 5% or more in the issued share capital of the Company: % Name of interested party Number or attributable number of shares interested Percentage of shareholding China Electronics Corporation (BVI) Holdings Company Limited ( CEC (BVI) ) China Integrated Circuit Design Corp., Ltd ( China Huada ) China Electronics Corporation Limited ( CEC ) (Notes (1) and (2)) SDIC High-Tech Investment Co., Ltd (Note (1)) The State Development and Investment Corporation (Note (1)) China Electronics Corporation (BVI) Holdings Company LimitedCEC (BVI) 812,500, % 393,680, % 1,206,180, % (1) (2) 393,680, % (1) (1) 393,680, % Interim Report

31 OTHER INFORMATION Shareholders with Notifiable Interests (Continued) Notes: (1) The equity interest of China Huada is contributed as to 50% by CEC and as to 50% by SDIC High-Tech Investment Co., Ltd. SDIC High-Tech Investment Co., Ltd is a wholly-owned subsidiary of The State Development and Investment Corporation, which is a state-owned investment holding company established under the laws of the PRC. By virtue of the SFO, CEC, SDIC High-Tech Investment Co., Ltd and The State Development and Investment Corporation are deemed to be interested in the 393,680,000 shares of the Company held by China Huada. (2) CEC holds 100% interest in CEC (BVI) and is deemed to be interested in the shares of the Company held by CEC (BVI). All the interests disclosed above represent long position in the shares of the Company. Save as disclosed above, at 30 June 2012, the Company had not been notified of any other interest or short position in the shares or underlying shares of the Company which were required to be recorded in the register required to be kept under Section 336 of the SFO. (1) 50% 393,680,000 (2) CEC (BVI) 100% CEC (BVI) Interim Report 2012

32 OTHER INFORMATION Purchase, Sale or Redemption of Securities Neither the Company nor any of its subsidiaries had purchased or sold any of the Company s shares and the Company had not redeemed any of its shares during the six months ended 30 June Corporate Governance Code The Company has complied with all the applicable code provisions in the Code on Corporate Governance Practices (effective up to 31 March 2012) and the Corporate Governance Code (effective from 1 April 2012) as set out in Appendix 14 of the Listing Rules throughout the six months ended 30 June 2012, except for the deviation from the code provision A.6.7 of the Corporate Governance Code as summarised below: Mr. Wong Po Yan, an independent non-executive director, was unable to attend the annual general meeting of the Company held in April 2012 (the AGM ) due to other crucial business commitment. However, Mr. Wong subsequently requested the company secretary of the Company to report to him on the views of the shareholders of the Company in the AGM. As such the Board considers that the development of a balanced understanding of the views of shareholders among the independent non-executive directors and other non-executive directors was ensured. The Model Code for Securities Transactions by Directors The Company has adopted the Model Code to regulate the directors securities transactions. All directors have confirmed, following specific enquiry by the Company, that they have fully complied with the Model Code throughout the six months ended 30 June A ( ) Interim Report

33 OTHER INFORMATION Audit Committee The audit committee has reviewed the unaudited condensed consolidated interim financial information of the Group for the six months ended 30 June By Order of the Board Rui Xiaowu Chairman Hong Kong, 23 August Interim Report 2012

34 Room 3403, 34th Floor, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong