Upon completion of the subscription by TCL Industries Holdings (HK) Limited ("TCL") in October 2010, Termbray Petro-king Oilfield Services (BVI) Limited ("Termbray Petro- king") is owned as to 45.9%, 44.1% and 10.0% by Termbray Natural Resources Limited, a wholly owned subsidiary of the Group, King Shine Group Limited and TCL respectively. Termbray Petro-king has ceased to be subsidiary of the Company and has become an associate of the Company. The assets and liabilities of Termbray Petro-king is no longer consolidated to the consolidated financial statements of the Group.

The last financial year end date for Termbray Petro-king Group is 31st December, 2010. For the purpose of applying the equity method of accounting, the audited consolidated financial statements of Termbray Petro-king Group for the year ended 31st December, 2010 have been used for the last audited financial statement of the Group, as the Group considers that it is impracticable for Termbray Petro-king Group to issue a separate set of audited consolidated financial statements as of 31st March, 2011.

During the current period under review, the Group has applied the equity method of accounting for the unaudited results of Termbray Petro-king Group as an associate for the six months period from 1st January, 2011 to 30th June, 2011. Any significant transaction for the period from 1st July, 2011 to 30th September, 2011 has been adjusted. For the comparative reporting period, the Group has accounted for the unaudited result of Termbray Petro-king Group from 1st April, 2010 to 30th September, 2010 as subsidiaries under discontinued operations.

For the period from 1st January, 2011 to 30th June, 2011, Termbray Petro-king Group achieved a turnover of HK$191 million. During the period under review, Termbray Petro- king Group gained substantial recognition on its capability of provision of high end oilfield technical solutions in Mainland China and the overseas, especially the Middle East. Leveraging on its highly dedicated professional engineering team with extensive overseas experience, Termbray Petro-king Group has started to explore market opportunities of those non-chinese oilfield operators in the Middle East in order to further expand its overseas customer base. To further enhance its competency in oilfield technology, Termbray Petro-king Group entered into research and development and manufacture of oilfield equipments through acquisitions in the first half of 2011. The directors considered that the overall performance of Termbray Petro-king Group for the period under review is satisfactory.

Included in the net fair value of the Group's share of Termbray Petro-king Group's identifiable assets and liabilities is intangible assets in relation to incomplete contracts of HK$66,338,000, determined based on the income-based method. Such intangible assets are amortised according to the management expectation of realization of profits of the incomplete contracts over their estimated useful lives of one to two years. The Group's share of result of an associate for the current financial period ended 30th September, 2011 has accounted for an amortization of the intangible assets in relation to incomplete contracts of HK$31.9 million. The balance of the intangible assets is expected to be amortised in the financial year ending 31st March, 2012.

Most of the contracts completed by Termbray Petro-king Group during the current financial period are incomplete contracts as of October 2010. Thus, most of the Group's share of operating result of Termbray Petro-king Group for the current financial period have been offset by the amortisation of the intangible assets in relation to incomplete contracts.

The major customers of Termbray Petro-king Group acquired several massive overseas oil reserves which created substantial demand for experienced oilfield engineering and consultancy services. Termbray Petro-king Group has the technical know how to provide comprehensive oilfield development design and consultancy services and is well recognised in the sector as one of the best oilfield service company from China. During the period, Termbray Petro-king Group has gained substantial progress in developing new customers in the Middle East, and is now working hard on them and this will secure business growth of Termbray Petro-king Group in future

Termbray Petro-king Group has strengthened its technical communication with its domestic customers and introduced advanced technology from abroad to them. The management expected that this would help Termbray Petro-king Group enhances its marketing and sales efforts and domestic sales in near future.