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FOREWORD Since 2007, AXP has issued several sets of Model Financial Statements for Malaysia and Singapore markets that conform to local reporting standards and received encouraging responses from customers and other Audit Practitioners. As part of our mission to assist Audit Practitioners to resolve contemporary issues, we have prepared the Illustrative Financial Statements for Small and Medium-sized Entity Financial Reporting Standard (“IFS for SME-FRS 2011”) [in both English and Chinese versions] and the related Disclosure and Presentation Checklist aiming to assist our existing clients and other audit practitioners to audit, and companies to prepare, 2011 financial statements that are in compliance with the prevailing financial reporting and disclosure requirements of the Companies Ordinance (“CO”), and Small and Medium-sized Entity Financial Reporting Framework (SME-FRF) and Financial Reporting Standard (SME-FRS). In addition to this IFS for SME-FRS 2011, AXP has also prepared the Illustrative Financial Statements for: 1. Hong Kong Financial Reporting Standard for Private Entities (HKFRS for Private Entities) [English and Chinese

versions] 2. International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) 3. Singapore Financial Reporting Standard for Small Entities (SFRS for Small Entities) 4. Malaysia Financial Reporting Standard for Small and Medium-sized Entities (based on ED 72 FRS for SMEs) 5. Malaysia Financial Reporting Standards 2010 (FRS 2010) 6. Malaysia Private Entity Reporting Standards 2009 (PERS 2009) [English and Malay versions]

ABOUT OUR IFS FOR SME-FRS 2011 Our IFS for SME-FRS 2011 provides various alternative presentation and disclosure requirements for the SME-FRS Sections indicated in the scope below, including the local statutory requirements on the financial statements, while the Disclosure and Presentation Checklist provides readily available checkboxes for users. Our IFS for SME-FRS 2011 is based on the financial statements of a hypothetic Company, called Illustrative SME-FRS Limited, for the financial year ending 31 December 2011. We trust that you will find our IFS for SME-FRS 2011 a useful reference point when you are auditing or preparing 2011 financial statements. While every effort has been made to ensure that our IFS for SME-FRS 2011 demonstrates all the possible disclosure and presentation requirements of the SME-FRS, it should not be used as a substitute for the laws, regulations and existing body of SME. However, should you have any questions on the application of any of the statutory and financial reporting requirements not presented in our IFS for SME-FRS 2011, you are welcomed to contact our Technical Support Unit for assistance.

REFERENCES IN OUR IFS FOR SME-FRS 2011 To the left of each disclosure and presentation item, references are made to “CO” or “SME-FRS”. Requirements under the Companies Ordinance are shown with “CO”, and requirements under the SME-FRS are shown with “SME-FRS”. If the disclosures and presentations are required under both CO and SME-FRS, references are only made to SME-FRS. Where there are alternative applications allowed under the SME-FRS, we have also presented the alternative disclosures throughout our IFS for SME-FRS 2011 for your reference.

SCOPE OF OUR IFS FOR SME-FRS 2011 Our IFS for SME-FRS 2011 covers the following sections in the SME-FRS applicable to all accounting periods commencing on or after 1 January 2005: Section

Descriptions

1 Presentation of Financial Statements

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Section

Descriptions

2 Accounting Policies, Changes in Accounting Estimates and Errors 3 Property, Plant and Equipment 4 Intangible Assets 5 Leases 6 Investments 7 Inventories 8 Construction Contracts 9 Impairment of Assets 10 Provisions, Contingent Liabilities and Contingent Assets 11 Revenue 13 Government Grants and Other Government Assistance 14 Borrowing Costs 15 Income Taxes 16 The Effects of Changes in Foreign Exchange Rates 17 Related Party Disclosures 18 Events After the Balance Sheet Date AXP has exercised professional due care and diligence in the preparation of our IFS for SME-FRS 2011. However, the information contained herein is intended to be a general guide. While every effort has been made to ensure accuracy, no liability is accepted by AXP or any member of AXP on any grounds whatsoever to any party in respect of any errors or omissions, or any action or omission to act a result of the information contained in our IFS for SME-FRS 2011.

ABOUT AXP AXP was formed in 2005 by a team of qualified accountants with years of extensive experience in both the public practice and commercial sector. Through extensive research and development since 2001 under both its predecessor and AXP, we have successfully developed in-house a wide range of IT tools and solutions for Audit Practitioners. Besides being able to optimise the business value of IT in the audit practice, our products also possess enhanced features and updates that are in full compliance with the requirements of the prevailing IFRS and Hong Kong FRS. For more information on AXP, please visit us at www.myAXP.com or contact us at [email protected].

ABOUT THE EDITORIAL TEAM The editorial team consists of both AXP’s Technical Adviser and Business Partners, who jointly possess a wealth of experience in financial reporting and wide exposure to the accounting industry in general. The profile of each team member is as follows: Keith Farmer, FCA, B.A., Technical Adviser of AXP, holds an honours degree in Economics and became a Fellow of the Institute Chartered of Accountants in England and Wales (“ICAEW”) in January 1983. He taught in London at the London School of Accountancy and Emile Woolf College and at the University of Essex until he came to Asia in early 1994. He has been based in Asia ever since.

His specialist subject is Financial Accounting. He has conducted courses for both students and practitioners in many parts of the world, including the UK, Malaysia, Singapore, Hong Kong, Kenya, and Mauritius for both private colleges and the Association of Chartered Certified Accountants (“ACCA”). His students have consistently won numerous prizes in the ACCA examinations.

Whilst Keith is justifiably proud of individual student performance, his key aim is to convey a fundamental understanding of the basic principles and concepts which underlie financial accounting and a detailed knowledge and application of the requirements of accounting standards. This is based on the three core principles of education: instruction, demonstration and experience. Understanding is important, in fact it is a prerequisite to developing the level of knowledge required to sit examinations with confidence and inspires individuals to achieve far more than they ever expected in far less time than they ever anticipated.

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In furtherance of achieving his aim, Keith has recently embarked upon a three point strategy. Firstly, he is writing a series of books, primarily aimed at students, covering consolidation and accounting standards which contain numerous progressive worked examples. Secondly, he is currently engaged in developing a series of DVD's which, together with the books, will form an integral part of a new co-ordinated learning package. Finally, in the near future, this learning package will be extended to a structured continuing professional development programme. Ivan Er Soon Lock, C.A.(M), FCCA, B.Com(NZ), is a fellow member of ACCA and a member of the Malaysian Institute of Accountants (“MIA”). Ivan first joined Deloitte in 1997 as an Audit Assistant, and subsequently became an Audit Manager. He left Deloitte in 2003 to join Horwath, another international public practice. At Horwath, he was soon promoted to become an Audit Principal. In 2005, he left Horwath to join AXP.

His experience includes managing the audit and the corporate finance functions and the setting up of the business improvement division of the practice, assisting companies listing on the stock exchange by providing consultancy services on listing exercise and financial management, advising on good accounting and internal control systems to a wide range of companies, provision of technical training on financial reporting standards and conducting due-diligence review on companies in Malaysia and China. Currently, he is involved in conducting financial reporting courses for internal and external parties. Eric Chia Kok Haur, C.A.(M), C.A.(NZ), B.Com(Hons), is a member of New Zealand Institute of Chartered Accountants (“NZICA”) and the MIA. Eric started his career as an Audit Assistant with Deloitte in 1997. He was an Assistant Audit Manager when he left the firm to join KPMG Singapore in 2000. He was also an Assistant Audit Manager at KPMG, where he served until 2003. From KPMG, he moved on to H W Kuah & Co., another public practice in Singapore, as the Audit Manager. In 2005, he left H W Kuah & Co. to join AXP.

Eric is well-versed with the financial reporting environment of both Malaysia and Singapore. In addition, as he has spearheaded major audit assignments in China, he is also familiar with China financial reporting requirements. His experience includes managing audit and due diligence assignments, monitoring the budgetary function of the practice, provision of advisory services for corporate exercises and corporate governance matters, preparation and review of published financial statements, including those of significantly large groups of companies, and conducting training on technical subjects. Kua Le Ting, C.A.(M), FCCA, is a fellow member of ACCA and a member of the MIA. Ms. Kua joined Deloitte in 1995 as an audit assistant and was soon promoted to become an audit senior. She was in-charge of the managing and supervising of audit engagements ranging from small to big multinational companies. To further enhance her experience, she then joined the tax department of Deloitte, where she was involved in tax planning and consultancy services, in addition to preparing tax returns for both corporate and individual clients. She left the public practice in 1999 to set up her own consultancy business, LT Kua Consultation Services, specialising in personal financial planning and risk management planning. In addition, Ms. Kua is also involved in the preparation of various study materials for professional courses used in institutions of higher learning. Vicky Chuar Xin Peng, B.Com.(Hons), graduated in May 2007 and soon started her career in CPA Group as an Audit Assistant. Then she moved on to join BDO Binder while pursuing her study for the ACCA qualification, professional level. She was a Senior Associate when she left BDO Binder to join AXP in 2010 as Consultant (Customer support and technical research).

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CONTACT US AXP Technical Support Unit Hong Kong Suites 1201-4, 12/F, Tower 2, The Gateway, 25-27 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong. 香港九龍尖沙咀廣東道 25-27號港威大廈 2座 12樓 1201-4室 Tel: 852.2133.9127 Fax: 800.905.397 Singapore Blk 5000, Ang Mo Kio Ave 5, #03-09, TechPlace II, Singapore 569870. Tel: 65.6876.7297 Fax: 65.6853.1965 Southern Malaysia 83A, Jalan Emas Satu, Taman Sri Skudai, 81300 Johor Bahru, Johor, Malaysia. Tel: 1300.882.297 or 607.557.5722 Fax: 607.557.7697 Central Malaysia A-3-03 & A-3-05, SME Technopreneur Centre 2 Cyberjaya, 2260, Jalan Usahawan 1, 63000 Cyberjaya, Selangor, Malaysia. Tel: 1300.882.297 or 603.8318.8297 Fax: 603.8318.9297

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Copyright © 2007 - 2011. All rights reserved. AXP Solutions Group. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise without the prior written permission of AXP. However, written permission need not be obtained from AXP if it is used internally within the Firm.

SME-FRS Ref. 1.12(a)

ILLUSTRATIVE SME-FRS LIMITED (Incorporated in Hong Kong with limited liability)

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TABLE OF CONTENTS

Page No.

Report of the Directors 1 - 2

Independent Auditors’ Report 3 - 4

Financial Statements Balance Sheet 5 - 6 Income Statement – Expenses Classified by Function 7

Alternative presentation formats for Income Statement Income Statement – Expenses Classified by Nature 8

Statement of Changes in Equity1 9

Notes to the Financial Statements 1 General Information 10 2 Significant Accounting Policies 10 - 15 3 Property, Plant and Equipment 16 4 Intangible Assets 17 5 Investment in an Associate 18 6 Other Investments 18 7 Inventories 19 8 Amount Due from Directors 19 9 Gross Amount Due from Customers for Contract Work 19 10 Share Capital 20 11 Share Premium 20 12 Retained Earnings 21 13 Provisions 21 14 Finance Lease Payables 21 15 Bank Overdrafts and Other Borrowings 22 16 Gross Amount Due to Customers for Contract Work 22 17 Government Grant 23 18 Revenue 23 19 Profit Before Tax 23 - 24 20 Tax Expense 24 – 25 21 Prior Year Error Adjustment 25 22 Dividends 25 – 26 23 Related Party Transactions 26 24 Commitments 26 25 Contingent Liabilities 26 26 Reclassifications of Comparative Figures 27 27 Events After the Balance Sheet Date 27 28 Authorisation for Issue of the Financial Statements 27

Additional Notes: Change of the Balance Sheet Date 27 Presentation of First Set of Financial Statements 27

1 * Notes on the presentation of financial statements:

In accordance with Section 1.29, changes in equity should be presented either in the notes to the financial statements or as a separate component of the financial statements.



1.12(b)

REPORT OF THE DIRECTORS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011

1

CO Ref. 129D(1) The directors present their annual report and the audited financial statements for the financial year ended

31 December 2011.

PRINCIPAL ACTIVITIES

129D(3) (a)

The Company is a private limited company domiciled and incorporated in Hong Kong. The registered office and principal place of business is located at Suites 1201-4, 12/F, Tower 2, The Gateway, 25-27 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong. The principal activities of the Company are that of construction contract activity, development and marketing of computer software and sales of computer hardware. There have been no significant changes in the nature of the activities during the financial year.

RESULTS AND APPROPRIATIONS 129D(3) (b)

129D(3) (c)

The profit of the Company for the financial year ended 31 December 2011 and the state of the Company's affairs as at that date are set out in the Company's financial statements on pages 5 to 27. On 1 April 2011, the Company paid a 10% final dividend, total dividend of HK$1,105,020 (2010: HK$1,104,520), in respect of the previous financial year. The net dividend per share was 10 cent. On 31 August 2011, the directors declared a 10% interim dividend, total dividend of HK$1,132,020 (2010: HK$1,105,020), in respect of the current financial year. The dividend was paid to the shareholders on 31 October 2011. The net dividend per share was 10 cent. After the financial year, the directors have proposed a 10% final dividend in respect of the current financial year. The dividend is subject to approval by the shareholders at the forthcoming Annual General Meeting and has not been included as a liability in the financial statements. Total dividend payable is HK$1,132,020, and the net dividend per share is 10 cent. There were no movements in reserves except for changes to retained earnings which arose from profit or loss and payment of dividends.

FIXED ASSETS 129D(3) (f)

Details of the movements during the financial year in the property, plant and equipment of the Company are set out in Note 3 to the financial statements.

SHARE CAPITAL AND DEBENTURES 129D(3) (g)

Details of the movements during the financial year in the share capital of the Company are set out in Note 10 to the Company’s financial statements.

During the financial year, the Company has issued the following ordinary shares:

Date of Issue No. of Shares Issued Issue Price Purposes

1 June 2011 270,000 HK$3.90 Increase the working capital

129D(3) (h)

The new ordinary shares issued rank pari passu in respect of the distribution of dividends and repayment of capital with the existing ordinary shares.

The Company did not issue debentures during the financial year.



1.12(b)

REPORT OF THE DIRECTORS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011

2

CO Ref. DIRECTORS 129D(3) (i)

The directors of the Company during the financial year were: Ser L. T. Lian K. K. Gi J. Q. The L. P. (Appointed on 1 July 2011)

162A(1) (a), 129D(3) (ia)

There being no provision in the Company's Articles of Association in connection with the retirement of directors by rotation, all existing directors continue in office for the following financial year. The Company did not enter into any contract, other than the contracts of service with the directors or any person engaged in the full-time employment of the Company, whereby any individual, firm or body corporate undertakes the management and administration of the whole, or any substantial part of any business of the Company.

ARRANGEMENTS TO PURCHASE SHARES OR DEBENTURES 129D(3) (k)

At no time during the financial year was the Company, was a party to any arrangements to enable the directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

DIRECTORS' INTERESTS IN CONTRACTS OF SIGNIFICANCE 129D(3) (j)

No contract of significance to which the Company, was a party and in which a director of the Company had a material interest, whether directly or indirectly, subsisted at the end of the financial year or at any time during the financial year.

DONATIONS 129D(3) (d),(e)

During the financial year, the Company made donations for charitable purpose amounting to HK$12,000 (2010: HK$12,000).

EVENTS AFTER THE BALANCE SHEET DATE 129D(3) (1)

Details of significant events occurring after the balance sheet date are set out in Note 27 to the financial statements.

AUDITORS A resolution will be submitted to the annual general meeting to re-appoint Messrs. Auditors & Co. as

auditor of the Company.

129D(2) Signed on behalf of the Board of Directors in accordance with a resolution of the directors,

Ser L T

Ser L. T. Chairman Hong Kong 31 January 2012

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Auditors & Co.

HKSA 770 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF


Report on the Financial Statements

We have audited the financial statements of Illustrative SME-FRS Limited (“the Company”) set out on pages 5 to 27, which comprise the balance sheet as at 31 December 2011, and the income statement and statement of changes in equity for the financial year then ended, and a summary of significant accounting policies and other explanatory information.

Directors’ Responsibility for the Financial Statements The directors are responsible for the preparation of financial statements in accordance with the Small and Medium-sized Entity Financial Reporting Standard (SME-FRS) issued by the Hong Kong Institute of Certified Public Accountants, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In addition, section 141D of the Companies Ordinance requires that the balance sheet together with the notes thereon should be prepared in accordance with the requirements of the Eleventh Schedule to that Ordinance.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Hong Kong Standards on Auditing and with reference to PN900 (Clarified) “Audit of Financial Statements Prepared in Accordance with the Small and Medium-sized Entity Financial Reporting Standard” issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation of financial statements 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 Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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Auditors & Co.

HKSA 770

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ILLUSTRATIVE SME-FRS LIMITED – Cont’d (Incorporated in Hong Kong with limited liability)

CO Ref.

141(3)

Opinion

In our opinion, the financial statements of the Company for the year ended 31 December 2011 are prepared, in all material respects, in accordance with the SME-FRS. In addition, in our opinion, the balance sheet together with the notes thereon is properly drawn up so as to exhibit a true and correct view of the state of the Company’s affairs as at 31 December 2011 according to the best of our information and explanations given to us, and as shown by the books of the Company. Report on Other Matters under Section 141D of the Hong Kong Companies Ordinance We report that we have obtained all the information and explanations which we have required.

Auditors & Co.

Auditors & Co.

Certified Public Accountants

Hong Kong

31 January 2012

The accompanying notes form an integral part of the financial statements.

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SME-FRS Ref.

1.12(a) ILLUSTRATIVE SME-FRS LIMITED (Incorporated in Hong Kong with limited liability)

1.1(a) BALANCE SHEET 1.12(b) AT 31 DECEMBER 2011

2011 2010

1.12(c) Note HK$ HK$ SCH11(4)(1), 1.20 NON-CURRENT ASSETS 1.19(a) Property, plant and equipment 3 9,363,354 9,445,154 1.19(b) Intangible assets 4 2,741,704 1,704,990 1.19(c) Investment in an associate 5 23,093 23,093 1.19(c) Other investments 6 340,000 400,000

1.20 Total Non-current Assets 12,468,151 11,573,237 SCH11(4)(1), 1.20 CURRENT ASSETS 1.19(d) Inventories 7 393,798 770,136 1.19(e) Trade and other receivables 3,732,444 3,005,534 1.19(e) Amount due from directors 8 15,500 17,500 1.19(c) Other investments 6 248,045 230,984 8.15(a) Gross amount due from customers for contract work 9 101,398 108,183 1.19(g) Cash and cash equivalents 1,200,128 1,500,214

1.20 Total Current Assets 5,691,313 5,632,551

1.20 TOTAL ASSETS 18,159,464 17,205,788

1.20 CAPITAL AND RESERVES 1.19(l) Share capital 10 11,320,200 11,050,200 1.19(m) Share premium 11 1,242,500 459,500 1.19(m) Exchange difference on translating a foreign branch 12,346 10,568 1.19(m) Retained earnings 12 2,342,715 3,771,869

1.20 TOTAL EQUITY 14,917,761 15,292,137

1.19(k) NON-CURRENT LIABILITIES 1.19(j) Provisions 13 30,449 44,888 1.19(k) Finance lease payables 14 91,622 105,812 1.20 Other borrowings 15 1,294,998 41,534

1.20 Total Non-current Liabilities 1,417,069 192,234


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SME-FRS Ref.

1.12(a) ILLUSTRATIVE SME-FRS LIMITED (Incorporated in Hong Kong with limited liability)

1.1(a) BALANCE SHEET 1.12(b) AT 31 DECEMBER 2011

2011 2010

1.12(c) Note HK$ HK$

1.20 CURRENT LIABILITIES 1.19(h) Trade and other payables 1,207,227 1,218,545 8.15(b) Gross amount due to customers for contract work 16 3,211 1,453 1.19(j) Provisions 13 163,358 165,268 1.20 Finance lease payables 14 56,966 53,476 1.19(g) Bank overdrafts 15 36,068 44,396 1.20 Other borrowings 15 169,935 138,279 1.20 Government grant 17 100,000 100,000 1.19(i) Current tax liabilities 87,869 -

1.20 Total Current Liabilities 1,824,634 1,721,417

1.20 TOTAL LIABILITIES 3,241,703 1,913,651

1.20 TOTAL EQUITY AND LIABILITIES 18,159,464 17,205,788

CO129B(1)

The financial statements on pages 5 to 27 were approved and authorised for issue by the Board of Directors on 31 January 2012 and are signed on its behalf by:

Ser L T

Lian K KLian K KLian K KLian K K

Ser L. T. Lian K. K.

Director Director


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SME-FRS Ref.

1.12(a) ILLUSTRATIVE SME-FRS LIMITED

(Incorporated in Hong Kong with limited liability)

1.1(b),1.26 INCOME STATEMENT - Expenses classified by Function 1.12(b) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011

2011 2010


1.22(a) Revenue 18 9,438,209 9,393,050

1.22 Cost of sales (8,005,788) (8,108,766)

1.22 Gross profit 1,432,421 1,284,284

1.22 Other income 107,585 117,882 1.22 Distribution costs (2,300) (1,200) 1.22 Administrative expenses (262,106) (251,628) 1.22 Other expenses (340,373) (393,587)

1.22(b) Finance costs (39,472) (24,262)

1.22 Profit before tax 19 895,755 731,489

1.22(c) Tax expense 20 (87,869) (83,948)

1.22(d) Profit For The Financial Year 807,886 647,541


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SME-FRS Ref.



1.1(b),1.26 INCOME STATEMENT - Expenses classified by Nature 1.12(b) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011

2011 2010


1.22(a) Revenue 18 9,438,209 9,393,050

1.22 Other income 106,387 117,882 1.22 Changes in inventories of finished goods and work in progress (191,418) (115,907) 1.22 Raw materials and consumable used (46,289) (68,739) 1.22 Contract costs recognised (7,988,414) (8,092,562) 1.22 Employees benefit expenses (58,975) (38,305) 1.22 Depreciation of property, plant and equipment (16,246) (15,346) 1.22 Amortisation of intangible assets (104,096) (116,830) 1.22 Impairment losses recognised (2,046) (1,026) 1.22 Impairment losses reversed 1,198 - 1.22 Other expenses (203,083) (306,466) 1.22(b) Finance costs (39,472) (24,262)

1.22 Profit before tax 19 895,755 731,489

1.22(c) Tax expense 20 (87,869) (83,948)

1.22(d) Profit For The Financial Year 807,886 647,541


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SME-FRS Ref.



1.29

1.12(b)

Share

Capital

Share

Premium

Translation

Reserves

Retained

Earnings

Total

Equity

1.12(c) Note HK$ HK$ HK$ HK$ HK$

1.29(f) Previously stated at 1 January 2010 11,050,200 459,500 10,568 3,872,127 15,392,395

1.29(c) Prior year error adjustment 21 - - - (100,258) (100,258)

1.29(f) As restated at 1 January 2010 11,050,200 459,500 10,568 3,771,869 15,292,137

1.29(a) Profit for the financial year - - - 807,886 807,886

1.29(e) Exchange difference on translating a foreign branch - - 1,778 - 1,778

1.29(d) Dividends 22 - - - (2,237,040) (2,237,040)

1.29(d) Issue of ordinary shares 270,000 783,000 - - 1,053,000

1.29(f) Balance at 31 December 2011 11,320,200 1,242,500 12,346 2,342,715 14,917,761

1.29(f) Note: Comparative information is not required.

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011

STATEMENT OF CHANGES IN EQUITY



1.1(c), 1.30 1.12(b)

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011

10

1. GENERAL INFORMATION 1.33(a) 1.33(b)

16.3

The Company is a private limited company domiciled and incorporated in Hong Kong. The registered office and principal place of business is located at Suites 1201-4, 12/F, Tower 2, The Gateway, 25-27 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong. The principal activities of the Company are that of construction contract activity, development and marketing of computer software and sales of computer hardware. There have been no significant changes in the nature of the activities during the financial year. The Company is a subsidiary of Be Competent Pte. Ltd., a company incorporated in Singapore, which is also regarded by the directors as the ultimate holding company.

If the immediate holding company is different from ultimate holding company:

The Company is a subsidiary of Be Competent Pte. Ltd., a company incorporated in Singapore. The ultimate holding company is Be Creative Pte. Ltd., a company incorporated in Singapore.

2. SIGNIFICANT ACCOUNTING POLICIES 1.32(a) The Company qualifies under the Companies Ordinance to prepare and present its financial statements in

accordance with section 141D of that Ordinance. The Company’s shareholders have unanimously agreed in writing to apply section 141D with respect to the Company’s financial statements for the financial year ended 31 December 2011.

1.30(a) 1.32(b)

1.32(b)

1.32(c)

Basis of Preparation These financial statements comply with the Small and Medium-sized Entity Financial Reporting Standard issued by the Hong Kong Institute of Certified Public Accountants and have been prepared under the accrual basis of accounting and on the basis that the Company is going concern. The measurement base adopted is the historical cost convention. The principal accounting policies adopted are set out below.

11SCH(4)(2)

3.20(a) 3.1(a), (b) 3.10

3.13, 3.20(b)

3.20(c)

3.15

Property, Plant and Equipment The cost of an item of property, plant and equipment (including investment property held for rental) is recognised as an asset when it is probable that future economic benefits associated with the asset will flow to the Company and the cost of the asset can be measured reliably. After initial recognition as an asset, all items of property, plant and equipment are carried at cost less any accumulated depreciation and any accumulated impairment losses. Except for freehold land which are not depreciated, depreciation is provided on a straight-line method so as to write off the depreciable amount of the following assets over their estimated useful lives, as follows: Buildings 50 years Motor vehicles 5 years Equipment, furniture and fittings 3 ~ 5 years The useful life of an item of property, plant and equipment are reviewed annually and, if expectations are significantly different from previous estimates, the depreciation charge for the current and future periods are adjusted.



1.1(c), 1.30 1.12(b)


11

3.16

3.18

3.19

The depreciation method applied to property, plant and equipment are reviewed annually and, if there has been a significant change in the expected pattern of economic benefits from those assets, the method is changed to reflect the changed pattern. When such a change in depreciation method is necessary, the change is accounted for as a change in accounting estimate and the depreciation charge for the current and future periods are adjusted. Property, plant and equipment are eliminated from the balance sheet on disposal or when the asset is permanently withdrawn from use and no future economic benefits are expected from its disposal. Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are determined as the difference between the estimated net disposal proceeds and the carrying amount of the asset and are recognised as income or expense in the income statement.

Intangible Assets 4.2(a), (b) 4.8

Intangible assets are recognised when it is probable that the future economic benefits that are attributable to the assets will flow to the Company, the cost of the assets can be measured reliably and the assets do not result from expenditure incurred internally on an intangible item.

4.4 4.13 4.22(a), (b) 4.16 4.18

i) Intangible Assets Acquired Separately Intangible assets acquired separately are measured at cost initially. Subsequently, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Patents and trademarks are amortised on a straight-line method over the estimated useful lives of 8 years. The amortisation period and method are reviewed if there is an indication of a significant change in factors affecting the residual value, useful life or asset consumption pattern of an asset.

4.6 4.7 4.22(a), (b)

ii) Internally Generated Intangible Assets Costs associated with internally generated intangible assets arising from research activities are recognised as an expense when it is incurred. Costs associated with internally generated intangible assets arising from development activities are recognised when, and only when it meets the recognition criteria. After initial recognition as intangible assets, these development costs are carried at cost less any accumulated amortisation and any accumulated impairment losses. Software development costs are amortised on a straight-line basis over their estimated useful lives of 10 years. The amortisation period and method are reviewed if there is an indication of a significant change in factors affecting the residual value, useful life or asset consumption pattern of an asset.

6.11(a) Investments 6.2(a), (b)

6.3

6.7 6.8

Investments are recognised when it is probable that future economic benefits associated with the assets will flow to the Company, and the cost of the assets can be measured reliably. Investments that qualify for recognition as assets are initially measured at cost. Except for held-to-maturity securities, subsequent to initial recognition as assets, the investments are carried at the lower of cost and net realisable value for current investments and at cost less any accumulated impairment losses for long-term investments. The difference between the acquisition cost and redemption value of an investment in held-to-maturity debt securities (the discount or premium on acquisition) are amortised on a systematic basis over the period from acquisition to maturity by way of straight-line method. The amortised discount or premium is credited or charged to income as though it were interest and added to or subtracted from the carrying amount of the securities. The resulting carrying amount is then regarded as cost.



1.1(c), 1.30 1.12(b)


12

6.9 Gains or losses arising from the disposal of an investment are determined as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised as income or expense in the income statement.

Impairment of Assets, Other Than Inventories, Construction Contracts and Current Investments 9.1

9.1 9.5

9.6

At each balance sheet date, the Company considers whether there exists any indications that an asset may be impaired. If any such indication exists, the recoverable amount of the asset is estimated. In the event that an asset’s carrying amount exceeds its recoverable amount, the carrying amount is restated to recoverable amount and an impairment loss is recognised in the profit or loss for the period. At each balance sheet date, the Company assesses whether there is any indication that an impairment loss recognised in prior periods for an asset may no longer exist or may have decreased and, if so, the recoverable amount of the asset is estimated. In case of a reversal of impairment loss, the increased carrying amount of an asset does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years.

15.9(a) 15.1

15.2(a), (b) 15.3

Foreign Currencies ~ Foreign Currency Transactions Transactions in foreign currencies are initially recognised in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transactions. At each balance sheet date, foreign currency monetary items are reported using the closing rate. Non-monetary items denominated in a foreign currency are reported using the exchange rate at the date of the transactions or events. Exchange differences arising on the settlement of monetary items or on reporting the Company’s monetary items at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, are recognised as income or expenses in the period in which they arise.

15.4 15.4(a) 15.4(b)

15.4(c)

15.5

Foreign Currencies ~ Translation of a Foreign Branch Assets and liabilities for each balance sheet, including comparatives, are translated at the closing rate at the date of that balance sheet. Income and expenses for each income statement, including comparatives, are translated at average rate for the period. All resulting exchange differences are recognised as a separate component of equity. On the disposal of a foreign branch, the cumulative amount of the exchange differences deferred in the separate component of equity relating to the foreign branch are recognised in profit or loss when the gain or loss on disposal is recognised.

15.6

15.7

Foreign Currencies ~ Forward contracts Where a non-speculative forward contract is used as a hedge of a net monetary asset or liability, the gain or loss on the contract and the discount or premium is taken to the income statement. Where a non-speculative forward contract is used as a hedge of a firm commitment, no gain or loss is recognised during the commitment period. At the end of that period, any gain or loss is added to, or deducted from, the amount of the relevant transaction. The discount or premium is deferred with the gain or loss.



1.1(c), 1.30 1.12(b)


13

15.8 Where a forward contract is speculative, the gain or loss is credited or charged to the income statement.

7.6(a) Inventories 7.1, 7.2

7.4

7.5

Inventories are measured at the lower of cost and net realisable value. Cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Cost of inventories is assigned by using the first-in, first-out method. When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period in which the write-down or loss occurs. The amount of any reversal of any write-down of inventories arising from an increase in net realisable value are recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

Provisions 10.1(a),(b), (c)

10.9 10.11

A provision is recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the amount required to settle the present obligation at the balance sheet date. The risks and uncertainties are taken into account in reaching the best estimate of a provision.

Leases 5.2 5.4 5.5 5.6 5.7

i) Finance Leases Leases of property, plant and equipment are classified as finance lease where substantially all the risks and benefits incidental to the ownership of the assets, but not the legal ownership, are transferred to the Company. The Company initially recognises finance leases as assets and liabilities in the balance sheet at amounts equal at the inception of the lease to the lower of fair value of the leased assets and the present value of the minimum lease payments. Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. A finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The depreciation policy for depreciable leased assets is consistent with that for depreciable assets that are owned. If there is no reasonable certainty that the Company will obtain ownership by the end of the lease terms, the leased assets are fully depreciated over the shorter of the lease terms and their useful life.

5.1 5.9

ii) Operating Leases A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership. Lease payments under operating leases are recognised as expense in the income statement on a straight-line basis over the lease terms.

12.13(a) Government Grants 12.1

12.2 12.6

Government grants are recognised when there is reasonable assurance that the Company will comply with the conditions attaching to them and the grants will be received. Government grants are recognised as income on a systematic basis over the periods in which the Company recognises as expense the related costs for which the grants are intended to compensate. Government grants related to income are presented as a credit in income statement separately.



1.1(c), 1.30 1.12(b)


14

12.5 12.6

Government grants related to assets are deducted in arriving at the carrying amount of the assets. The grants are recognised as income over the useful lives of the depreciable assets as a reduced depreciation expense.

11.11(a) Revenue 11.1 11.2 11.3 11.9(a)

11.9(b)

11.9(c)

Revenue is measured at the fair value of the consideration received or receivable. Revenue is recognised in the income statement based on the following: i) Sales of Goods Revenue from sales of goods is recognised when all the following conditions are satisfied: - the Company has transferred to the buyer the significant risks and rewards of ownership of the goods; - the Company retains neither continuing managerial involvement to the degree usually associated with

ownership nor effective control over the goods sold; - the amount of revenue can be measured reliably; - it is probable that the economic benefits associated with the transaction will flow to the Company; and - the costs incurred or to be incurred in respect of the transaction can be measured reliably. ii) Rendering of Services Revenue from rendering of services is recognised by reference to the stage of completion of the transaction at the balance sheet date when it is probable that the economic benefits associated with the transactions will flow to the Company and the amount of the revenue can be measured reliably. iv) Interest Revenue Interest revenue is recognised on a time proportion basis when it is probable that the economic benefits associated with the transactions will flow to the Company and the amount of the revenue can be measured reliably. v) Royalty Revenue Royalty revenue are recognised on an accrual basis in accordance with the substance of the agreements when it is probable that the economic benefits associated with the transactions will flow to the Company and the amount of the revenue can be measured reliably. vi) Dividend Revenue Dividend revenue is recognised when the shareholder’s rights to receive payment is established and when it is probable that the economic benefits associated with the transactions will flow to the Company and the amount of the revenue can be measured reliably.

Construction Contracts 8.4, 8.7, 8.12(b) 8.12(c)

8.8(a),(b)

8.10

When the outcome of a construction contract activity can be estimated reliably, contract revenue and contract costs associated with the construction contract are recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at the balance sheet date. Stage of completion is determined based on the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs. When the outcome of a construction contract cannot be estimated reliably, contract revenue are recognised only to the extent of contract costs incurred that it is probable that the contract revenue will be recoverable and contract costs are recognised as expense in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately irrespectively of whether contract work has commenced or the stage of completion of contract activity.



1.1(c), 1.30 1.12(b)


15

13.12(a) Borrowing Costs 13.4 13.8

13.9 13.10 13.2

Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are capitalised as part of the cost of the assets when the Company incurs the expenditure for the assets, incurs the borrowing costs and undertakes activities that are necessary to prepare the assets for the intended use or sale are in progress. Capitalisation of borrowing costs is suspended during extended periods in which active development is interrupted and ceased when substantially all the activities necessary to prepare the qualifying assets for the intended use or sale are complete. All other borrowing costs are recognised as an expense in the period in which they are incurred.

14.9 Income Tax 14.6

14.1 14.3

14.8(a),(b)

Tax expense is the aggregate amount included in the determination of profit or loss for the period in respect of current tax. Current tax is charged or credited directly to equity if the tax relates to items that are credited or charged directly to equity. Current tax for current and prior periods is recognised as a liability to the extent unpaid. If the amount already paid in respect of the current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset. Current tax assets and liabilities for the current and prior periods are measured at the amounts expected to be recovered or paid, using the tax rates that have been enacted or substantially enacted by the balance sheet date. Current tax assets and liabilities are offset only if the Company has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Deferred tax is not provided.



1.1(c), 1.30 1.12(b)


16

3. PROPERTY, PLANT AND EQUIPMENT

Freehold

Land Buildings

Motor

Vehicles

Equipment,

Furniture and

Fittings Total

HK$ HK$ HK$ HK$ HK$

Cost

3.20(d) At 1 January 2011 6,150,000 2,245,000 538,154 532,698 9,465,852

3.20(e)(i) Additions - - 6,508 10,285 16,793

3.20(e)(ii) Disposals - (68,600) (7,300) (12,523) (88,423)

3.20(d) At 31 December 2011 6,150,000 2,176,400 537,362 530,460 9,394,222

Accumulated Depreciation and Impairment Losses

3.20(d) At 1 January 2011 - 6,755 12,827 1,116 20,698

3.20(e)(ii) Disposals - (328) (6,501) (990) (7,819)

3.20(e)(iii) Impairment losses recognised (Note 19a) - 2,046 - - 2,046

3.20(e)(iv) Impairment losses reversed (Note 19b) - (303) - - (303)

3.20(e)(v) Depreciation (Note 19a) - 3,593 9,390 3,263 16,246

3.20(d) At 31 December 2011 - 11,763 15,716 3,389 30,868

Carrying Amounts

At 31 December 2010 6,150,000 2,238,245 525,327 531,582 9,445,154

At 31 December 2011 6,150,000 2,164,637 521,646 527,071 9,363,354

3.20(e) Note: Comparative information is not required

3.21 The carrying amounts of the property, plant and equipment under finance lease of the Company are as follows:

2011 2010 HK$ HK$ Motor vehicles 15,320 18,210 3.21 The carrying amounts of the property, plant and equipment pledged to secure banking facilities of the

Company are as follows: 2011 2010 HK$ HK$ Freehold land 6,150,000 6,150,000 Buildings 1,081,395 1,088,837

7,231,395

7,238,837



1.1(c), 1.30 1.12(b)


17

4. INTANGIBLE ASSETS Software

Development Costs

Patents and Trademarks

Total HK$ HK$ HK$ Cost 4.22(c) At 1 January 2011 1,483,605 463,752 1,947,357 4.22(e)(i) Additions 1,063,015 76,900 1,139,915 4.22(e)(ii) Disposals - - - 4.22(c) At 31 December 2011 2,546,620 540,652 3,087,272 Accumulated Amortisation and Impairment Losses 4.22(c) At 1 January 2011 104,672 137,695 242,367 4.22(e)(ii) Disposals - - - 4.22(e)(iv) Impairment losses reversed (Note 19b) - (895) (895) 4.22(e)(v) Amortisation (Note 19a) 50,006 54,090 104,096 4.22(c) At 31 December 2011 154,678 190,890 345,568 Carrying Amounts

At 31 December 2010

1,378,933

326,057

1,704,990

At 31 December 2011

2,391,942

349,762

2,741,704

4.22(e) Note: Comparative information is not required.

4.23(b) The carrying amounts of the Company’s patents and trademarks to protect the computer software developed by the Company in Hong Kong, Malaysia, Singapore, United States, United Kingdom and Japan are HK$349,762 (2010: HK$326,057) at the balance sheet date. The average remaining amortisation period of these patents and trademarks is 8 years.

4.23(b) The carrying amounts of the Company’s software development costs is HK$2,391,942 (2010: HK$1,378,933) at the balance sheet date. The average remaining amortisation period of the software development costs is 8 years.

4.23(c) The carrying amounts of intangible assets whose titles are restricted are HK$290,000 (2010: HK$310,000).

4.23(c) The carrying amounts of intangible assets pledged as securities for liabilities of the Company are HK$50,000 (2010: HK$50,000).



1.1(c), 1.30 1.12(b)


18

5. INVESTMENT IN AN ASSOCIATE

6.11(e) Details of the Company’s associate as at 31 December 2011 are as follows:

Name of Associate

Place of Operation and Incorporation

Nature of Business

Proportion of Ownership Interest

% AE (HK) Limited Hong Kong SAR Investment holding and software

consultancy services 25

6. OTHER INVESTMENTS 2011 2010 HK$ HK$ 6.12 Non-current: Listed investments at cost: Debt securities 190,000 220,000 Equity securities 90,000 120,000 Unlisted investments at cost: Equity securities 60,000 60,000

340,000

400,000 6.12 Current: Listed investments at cost: Debt securities 123,647 128,036 Equity securities 124,398 102,948

248,045

230,984 6.11(c) Market value of listed investments Debt securities 330,409 354,900 Equity securities 244,900 230,800 6.11(d) The investment in equity securities amounting to HK$50,000 (2010: HK$50,000) represents an investment in

equity linked note with a term of six months and its return is dependent on the performance of a single security.

6.13 The carrying amounts of investments whose titles are restricted are HK$90,000 (2010: HK$90,000).

6.13 The carrying amounts of investments pledged as securities for liabilities of the Company are HK$60,000 (2010: HK$60,000).



1.1(c), 1.30 1.12(b)


19

7.16(b) 7. INVENTORIES 2011 2010 HK$ HK$ At cost: Raw materials 120,758 108,682 Work-in-progress 32,976 36,772 Finished goods 169,397 502,009 323,131 647,463 At net realisable value: Finished goods 70,667 122,673

Carrying amounts

393,798

770,136 7.6(c) Inventories with carrying amounts of HK$82,288 (2010: HK$69,108) have been pledged to licensed banks for

bank facilities granted to the Company.

CO161B(1) 8. AMOUNT DUE FROM DIRECTORS

Directors

Terms

Balance at end of year

Balance at

beginning of year

Maximum amount

outstanding during the year

HK$ HK$ HK$ Lian K. K. Unsecured, repayable within one year,

interest-free

10,000

8,000

10,000 Gi J. Q. Unsecured, repayable within one year,

interest-free

5,500

9,500

9,500

15,500

17,500

19,500

8.16 9. GROSS AMOUNT DUE FROM CUSTOMERS FOR CONTRACT WORK 2011 2010 HK$ HK$ 8.16(a) Aggregate contract costs incurred to date 2,393,904 1,650,960 8.16(a) Add: Attributable profits recognised 693,586 453,986 8.16(b) Less: Expected losses recognised (395) (267) 3,087,095 2,104,679 8.16(b) Less: Progress billings (2,985,697) (1,996,496) 8.13(a)

101,398

108,183

8.13(b) Advances received from customers included in other payables 47,932 32,908 8.13(c) Retentions included in trade receivables 69,294 80,933



1.1(c), 1.30 1.12(b)


20

11SCH(2) 10. SHARE CAPITAL Number of Shares Amounts 1.21(a)(i) Authorised Share Capital 2011 2010 2011 2010 Units Units HK$ HK$ 1.21(a)(iii) Ordinary Shares of HK$1.00 each: 1.21(a)(iv) At beginning of the financial year 40,000,000 40,000,000 40,000,000 40,000,000 Increased 10,000,000 - 10,000,000 -

At end of the financial year

50,000,000

40,000,000

50,000,000

40,000,000 1.21(a)(ii) Issued and Fully Paid Share Capital 1.21(a)(iii) Ordinary Shares of HK$1.00 each: 1.21(a)(iv) At beginning of the financial year 11,050,200 11,045,200 11,050,200 11,045,200 Issued and fully paid 270,000 5,000 270,000 5,000

At end of the financial year

11,320,200

11,050,200

11,320,200

11,050,200

During the financial year, the authorised ordinary share capital of the Company has been increased by 10,000,000 ordinary shares to 50,000,000 ordinary shares of HK$1.00 each.

During the financial year, the Company has issued the following ordinary shares:

Date of Issue No. of Shares Issued Issue Price Purposes 1 June 2011 270,000 HK$3.90 Increase the working capital 1.21(a)(v) The new ordinary shares issued rank pari passu in respect of the distribution of dividends and repayment of

capital with the existing ordinary shares.

1.21(b) 11. SHARE PREMIUM 2011 2010 HK$ HK$ 11SCH(2)(c) At end of the financial year 1,242,500 459,500

Share premium arose from the issues of ordinary shares in excess of the par value, as follows:

HK$ 1 January 2002 Issue of 300,000 ordinary shares at an issue price of HK$2.50 for working capital

purpose

450,000 1 October 2009 Issue of 5,000 ordinary shares at an issue price of HK$2.90 for working capital

purpose

9,500 1 June 2011 Issue of 270,000 ordinary shares at an issue price of HK$3.90 for working capital

purpose

783,000

1,242,500



1.1(c), 1.30 1.12(b)


21

1.21(b) 12. RETAINED EARNINGS Retained earnings are distributable as dividends to the shareholders of the Company. 13. PROVISIONS 2011 2010 HK$ HK$ Classified as: - Non-current liability 30,449 44,888 - Current liability 163,358 165,268

193,807

210,156

Warranties Legal Costs

Total

HK$ HK$ HK$ 10.18(a) At 1 January 2011 210,156 - 210,156 Additions (Note 19a) 63,718 50,347 114,065 Amounts charged against the provision (57,503) - (57,503) Reversals of unused provisions (Note 19b) (72,911) - (72,911)

10.18(a)

At 31 December 2011

143,460

50,347

193,807

10.18(b) Warranties Provision for warranties is made based on the management’s best estimate of the expenditure required, based on past experience of similar products and services, to be incurred during the warranty periods.

10.18(b) Legal Costs During the financial year, a supplier took legal action against the Company seeking damages, including interest costs and legal costs incurred and to be incurred, from the Company for the delay in making payments, but the Company disputes liability since the quality of the products supplied by the supplier did not meet the original specification. However, based on the evidence available, the Company’s lawyer advises that it is probable that the Company will be found liable. A provision has been set up to recognise further costs associate with settling the supplier.

14. FINANCE LEASE PAYABLES 2011 2010 HK$ HK$ Present value of finance lease payables is analysed as follows: 5.8(a) - not later than one year 56,966 53,476 5.8(b) - later than one year 91,622 105,812

148,588

159,288



1.1(c), 1.30 1.12(b)


22

15. BANK OVERDRAFTS AND OTHER BORROWINGS 2011 2010 HK$ HK$ BANK OVERDRAFTS 11SCH(6) - secured 36,068 44,396 - unsecured - -

Total bank overdrafts

36,068

44,396

2011 2010 HK$ HK$ OTHER BORROWINGS Non-current Liabilities Term loans (i) 11SCH(6) - secured 294,998 41,534 - unsecured - - Interest free government loan (ii) 1,000,000 - 1,294,998 41,534 Current Liabilities 11SCH(6) Secured: - term loans (i) 40,751 70,122 - revolving credits (i) 129,184 68,157 169,935 138,279

1,464,933

179,813

i) Bank Overdrafts, Term Loans and Revolving Credits The secured bank borrowings of the Company are secured by a legal charge over the Company’s landed properties, fixed and floating charges over assets of the Company.

12.13(b) ii) Interest Free Government Loan On 1 January 2011, the Company obtained an interest free loan of HK$1,000,000 from the government, which is repayable in full on 31 December 2013, to finance promotional expenses in overseas over a three-years’ period.

8.17 16. GROSS AMOUNT DUE TO CUSTOMERS FOR CONTRACT WORK 2011 2010 HK$ HK$ 8.17(a) Aggregate contract costs incurred to date 76,960 33,911 8.17(a) Add: Attributable profits recognised 5,056 5,966 8.17(b) Less: Expected losses recognised (95) - 81,921 39,877 8.17(b) Less: Progress billings (78,710) (38,424) 8.13(a)

3,211

1,453

8.13(c) Retentions included in trade receivables 772 679



1.1(c), 1.30 1.12(b)


23

12.13(b) 17. GOVERNMENT GRANT 12.13(c) In February 2010, the Company obtained a government grant under the Research & Development Grant

Scheme up to a maximum of HK$100,000 on the approved software development costs incurred. The government grant granted is subject to the fulfilment of the condition that the percentage of the knowledge workers should attain 20% of the total employees of the Company by 30 June 2012. The Company has achieved this condition on 20 January 2012.

18. REVENUE 2011 2010 HK$ HK$ 11.11(b)(i) Sales of goods 329,384 315,890 11.11(b)(ii) Rendering of services 235,502 299,439 11.11(b)(iii) Interest revenue 8,839 3,804 11.11(b)(vi) Royalty revenue 300,406 222,905 11.11(b)(v) Dividend revenue 15,768 16,914 8.12(a) Contract revenue 8,548,310 8,534,098

9,438,209

9,393,050 19. PROFIT BEFORE TAX a) Other losses and expenses 2011 2010 HK$ HK$

15.9(b) Exchange loss - 90 Provision for legal costs (Note 13) 50,347 - Provision for warranties (Note 13) 63,718 91,634

1.27 If the entity chooses to present the expenses by their functions, the following items are required to be

disclosed:

4.22(d) Amortisation of other intangible assets (Note 4) included in: - cost of sales 40,070 26,900 - other expenses 64,026 89,930 1.27 Depreciation of property, plant and equipment (Note 3) 16,246 14,032

1.25(a) 1.25(b)

Impairment losses recognised, included in other expenses, for: - property, plant and equipment (Note 3) - intangible assets

2,046

-

- -

1.25(a) Write-down of inventories 13,498 8,340 1.27 Staff costs 58,975 38,305

2011 2010 HK$ HK$ b) Other gains and income 1.25(d) Gain on disposal of property, plant and equipment (760) (1,088) 1.25(h) Reversal of provision for warranties (Note 13) (72,911) (31,695)



1.1(c), 1.30 1.12(b)


24

1.27 If the entity chooses to present the expenses by their functions, the following items are required to be disclosed:

2011 2010 HK$ HK$

1.25(a) 1.25(b)

Reversal of impairment losses, included in other income, for: - property, plant and equipment (Note 3) - intangible assets (Note 4)

(303) (895)

- -

1.25(a) Reversal of write-down of inventories (10,558) -

c) Directors’ remuneration

CO161 16.4

Directors’ remuneration (who are also the key management personnel of the Company) disclosed pursuant to Section 161 of the Companies Ordinance is as follows:

2011 2010 HK$ HK$ Fees 96,000 96,000 Other emoluments and benefits 150,000 150,000

13.12(b) e) Finance costs 2011 2010 HK$ HK$ - bank overdrafts 9,964 5,432 - finance lease 8,808 6,351 - other short-term bank borrowings 11,578 6,114 - term loans 10,172 6,365 40,522 24,262 13.12(c) Less: Finance costs capitalised under property, plant and equipment (1,050) -

Finance costs charged to income statement

39,472

24,262

13.12(d) The finance costs capitalised are determined by applying a capitalisation rate of 7% (2010: 7.5%) to the cost of

that asset. 14.9(b) 20. TAX EXPENSE

2011 2010 HK$ HK$ 14.10(a) Current tax expense 87,869 85,088 14.10(b) Adjustments for current tax of prior periods - (1,140)

Total tax expense

87,869

83,948



1.1(c), 1.30 1.12(b)


25

14.10(c) The benefit arising from previously unrecognised tax losses or tax credits of a prior period that is used to reduce current tax expense amounts to HK$20,000 (2010: Nil).

21. PRIOR YEAR ERROR ADJUSTMENT 2.14 In year 2011, the Company identified that finished goods amounted to HK$120,000 that had been sold in 2010

were in error included in inventory at 31 December 2010. The financial statements of 2010 have been restated to correct this error. The effect of the restatement is a HK$120,000 decrease in ending balance of inventories and HK$100,258 decrease in profit for the financial year ended 31 December 2010 after decreasing tax expense by HK$19,742. This resulted in a HK$100,258 (decrease) restatement of retained earnings at 31 December 2010. The impact of the prior year error adjustment is summarised as follows:

As Previously Reported

As Restated 2010 2010 HK$ HK$ Balance Sheet Inventories 890,136 770,136 Current tax liabilities (19,742) - Retained earnings 3,872,127 3,771,869

Income Statement Cost of sales 7,988,766 8,108,766 Tax expense 103,690 83,948 Profit for the financial year 747,799 647,541 If the entity chooses to present the expenses by their nature, the income statement presentation would be as

follows: As

Previously Reported

As Restated 2010 2010 HK$ HK$ Income Statement Changes in inventories of finished goods and work in progress (235,907) (115,907) Tax expense 103,690 83,948 Profit for the financial year 747,799 647,541

22. DIVIDENDS 1.28 1.28

On 1 April 2011, the Company paid a 10% final dividend, total dividend of HK$1,105,020 (2010: HK$1,104,520), in respect of the previous financial year. The net dividend per share was 10 cents. On 31 August 2011, the directors declared a 10% interim dividend, total dividend of HK$1,132,020 (2010: HK$1,105,020), in respect of the current financial year. The dividend was paid to the shareholders on 31 October 2011. The net dividend per share was 10 cents.



1.1(c), 1.30 1.12(b)


26

1.21(c) After the balance sheet date, the directors have proposed a 10% final dividend in respect of the current financial year. The dividend is subject to approval by the shareholders at the forthcoming Annual General Meeting and has not been included as a liability in the financial statements. Total dividend payable is HK$1,132,020, and the net dividend per share is 10 cents.

23. RELATED PARTY TRANSACTIONS

Dividend paid

Sales of goods Amounts due from related parties

2011 2010 2011 2010 2011 2010 HK$ HK$ HK$ HK$ HK$ HK$ 16.5(a) Holding company 1,450,000 1,400,000 - - - - 16.5(a) Associate - - 3,489 5,083 - - 16.5(a) Companies in which directors of the

Company have interests

-

-

78,693

33,943

54,900

89,485 16.5(b)(i)

16.5(c)

16.5(d)

The amounts due from related parties are unsecured, interest-free and have no fixed terms of repayment. No provisions for uncollectible receivables are required for the amount of outstanding balances due from related companies. No expense has been recognised during the period for bad or doubtful debts in respect of the amounts due from related parties.

24. COMMITMENTS Operating lease commitments 5.11 The future minimum lease payments under non-cancellable operating leases of the Company for the leasing

of certain office premises, is as follows:

2011 2010 HK$ HK$ Not later than one year 10,543 10,439 Later than one year 74,689 74,862

85,232

85,301

25. CONTINGENT LIABILITIES 10.19 During the financial year, a customer took legal action against the Company for default in payment of the

warranty claims to the said customer amounting to HK$40,000. However, based on the legal opinion and the terms of the warranty agreement entered into with the customer, the Company has a merit to win the legal suit. Thus, additional provision has not been made in the financial statements of the Company. However, the associated legal costs have been accrued in the balance sheet.



1.1(c), 1.30 1.12(b)


27

3.12 26. RECLASSIFICATIONS OF COMPARATIVE FIGURES During the financial year, the Company has reclassified the following comparative figures to conform with

the current financial year’s presentation:

As Previously Reported

As Restated 2010 2010 HK$ HK$ Balance Sheet Current assets Trade and other receivables 3,023,034 3,005,534 Amount due from directors - 17,500

27. EVENTS AFTER THE BALANCE SHEET DATE 17.7

17.8

After the balance sheet date, a) the Company has obtained court approval to appeal against a legal suit won by a creditor at the balance

sheet date. Total amount claimed by the creditor is HK$1 million. No provision has been made in the financial statements as the advocator of the Company estimates that the Company has a good chance of winning the litigation.

b) one of the Company’s debtors has gone into liquidation. The total outstanding amount due from this debtor is HK$200,000. Of the total outstanding amount, the Company expects to recover approximately HK$50,000. An impairment loss has been recognised for the estimated unrecoverable amount.

c) on 18 January 2012, the Company announced the closure of its Product A operations. During the financial

year ended 31 December 2011, Product A accounted for operating profits of HK$50,000. At 31 December 2011, the carrying amount of the net assets related to Product A operations was HK$600,000.

28. AUTHORISATION FOR ISSUE OF THE FINANCIAL STATEMENTS 17.10 The financial statements of the Company were authorised for issue by the Board of Directors on 31 January

2012.

The following additional notes are prepared for reference:

1.13 CHANGE OF THE BALANCE SHEET DATE During the financial period, the Company changed the balance sheet date from 30 June to 31 December.

Thus, the amounts presented in the income statement and the related notes for the current financial period are for a period of six months, and they are not entirely comparable with the comparative figures.

1.13 PRESENTATION OF FIRST SET OF FINANCIAL STATEMENTS This is the first set of financial statements prepared by the Company since its date of incorporation on

________________, thus, comparative figures are not presented.

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