THIS COMPOSITE DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect about this Composite Document or as to the action to be taken, you should consult a licensed securities dealer or registered institution in securities, a bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in TELEFIELD INTERNATIONAL (HOLDINGS) LIMITED , you should at once hand this Composite Document and the accompanying Form of Acceptance to the purchaser(s) or the transferee(s) or to the bank, licensed securities dealer or registered institution in securities, or other agent through whom the sale or transfer was effected for onward transmission to the purchaser(s) or the transferee(s). Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this Composite Document and the accompanying Form of Acceptance, make no representation as to their accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Composite Document and the accompanying Form of Acceptance.

This Composite Document should be read in conjunction with the accompanying Form of Acceptance, the contents of which form part of the terms and conditions of the Offer.

POWER PORT HOLDINGS LIMITED

(Incorporated in BVI with limited liability)

TELEFIELD INTERNATIONAL (HOLDINGS) LIMITED 中慧國際控股有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 1143)

COMPOSITE OFFER AND RESPONSE DOCUMENT RELATING TO MANDATORY UNCONDITIONAL CASH OFFER BY

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FOR AND ON BEHALF OF THE OFFEROR TO ACQUIRE ALL THE ISSUED SHARES (OTHER THAN THOSE ALREADY OWNED BY THE OFFEROR AND PARTIES ACTING IN CONCERT WITH IT) IN TELEFIELD INTERNATIONAL (HOLDINGS) LIMITED

Financial adviser to	Financial adviser to
POWER PORT HOLDINGS	TELEFIELD INTERNATIONAL
LIMITED	(HOLDINGS) LIMITED

Independent Financial Adviser to the Independent Board Committee of TELEFIELD INTERNATIONAL (HOLDINGS) LIMITED

Capitalised terms used on this cover page shall have the same meanings as those defined in this Composite Document.

A letter from Kingston Securities containing, among other things, principal terms of the Offer is set out on pages 9 to 17 of this Composite Document. A letter from the Board is set out on pages 18 to 24 of this Composite Document.

A letter from the Independent Board Committee to the Independent Shareholders containing its recommendation in respect of the Offer is set out on page 25 of this Composite Document.

A letter from Messis Capital containing its advice to the Independent Board Committee in respect of the Offer is set out on pages 26 to 45 of this Composite Document.

The procedures for acceptance and other related information in respect of the Offer are set out in the Appendix I to this Composite Document and the accompanying Form of Acceptance. Acceptance of the Offer should be received by the Registrar as soon as possible and in any event not later than Wednesday, 4 November 2015 (or such later time and/or date as the Offeror may determine and announce, with the consent of the Executive, in accordance with the Takeovers Code).

Any persons including, without limitation, custodians, nominees and trustees, who would, or otherwise intend to, forward this Composite Document and/or the accompanying Form of Acceptance to any jurisdiction outside of Hong Kong should read the section headed “Overseas Shareholders” in the “Letter from Kingston Securities” and Appendix I to this Composite Document before taking any action. It is the responsibility of Overseas Shareholders (if any) wishing to accept the Offer to satisfy themselves as to full observance of the laws and regulations of the relevant jurisdictions in connection with the acceptance of the Offer, including the obtaining of any governmental or other consent which may be required or the compliance with other necessary formalities and the payment of any transfer or other taxes due in connection with the acceptance of the Offer in respect of such jurisdictions. Overseas Shareholders (if any) are advised to seek professional advice on deciding whether to accept the Offer.

14 October 2015

EXPECTED TIMETABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM KINGSTON SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . .	25
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . .	26
APPENDIX I – FURTHER TERMS AND PROCEDURES FOR
ACCEPTANCE OF THE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
APPENDIX II – FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . .	II-1
APPENDIX III – GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
ACCOMPANYING DOCUMENT – FORM OF ACCEPTANCE

– i –

EXPECTED TIMETABLE

The timetable set out below is indicative and is subject to change. Any changes to the timetable will be jointly announced by the Offeror and the Company. All the time and date references contained in this Composite Document refer to Hong Kong time and dates.

2015

Despatch date of this Composite Document and

the Form of Acceptance and the commencement of

the Offer (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 14 October

Latest time and date for acceptance of the Offer (Note 2) . . . . . . . 4:00 p.m. on Wednesday, 4 November

Closing Date (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 4 November

Announcement of the results of the Offer

(or its extension of revision, if any), to be posted on

the website of the Stock Exchange (Note 2) . . . . . . no later than 7:00 p.m. on Wednesday, 4 November
Latest date of posting of remittances in respect of

valid acceptances received under the Offer (Notes 3 and 5) . . . . . . . .Friday, 13 November

Notes:

The Offer, which is unconditional, is made on the date of posting of this Composite Document, and is capable of acceptance on and from that date until the Closing Date.
The latest time and date for acceptance will be at 4:00 p.m. on 4 November 2015 unless the Offeror revises or extends the Offer in accordance with the Takeovers Code. The Offeror and the Company will jointly issue an announcement through the website of the Stock Exchange no later than 7:00 p.m. on 4 November 2015 stating whether the Offer has been extended, revised or has closed for acceptance. In the event that the Offeror decides to extend the Offer, at least 14 days’ notice by way of an announcement will be given before the Offer is closed to those Independent Shareholders who have not accepted the Offer.
Remittances in respect of the cash consideration (after deducting the seller’s ad valorem stamp duty) payable for the Shares tendered under the Offer will be despatched to the Independent Shareholders accepting the Offer by ordinary post at their own risk as soon as possible, but in any event within seven Business Days after the date of receipt by the Registrar of a duly completed acceptance in accordance with the Takeovers Code.
Acceptance of the Offer shall be irrevocable and not capable of being withdrawn, except as permitted under the Takeovers Code. Please refer to paragraph 4 headed “Right of withdrawal” in Appendix I to this Composite Document for further information on the circumstances where acceptances maybe withdrawn.
If there is a tropical cyclone warning signal number 8 or above, or a black rainstorm warning:
(a) in force in Hong Kong at any local time before 12:00 noon but no longer in force after 12:00 noon on the latest date for acceptance of the Offer, the latest time for acceptance of the Offer will remain at 4:00 p.m. on the same Business Day, and the latest date for posting of remittances for the amounts due under the Offer in respect of valid acceptances will remain unchanged; or
(b) in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. on the latest date for acceptance of the Offer, the latest time for acceptance of the Offer will be rescheduled to 4:00 p.m. on the following Business Day which does not have either of those warnings in force in Hong Kong, and the latest date for posting of remittances for the amounts due under the Offer in respect of valid acceptances will accordingly be rescheduled to the following Business Day.

– ii –

EXPECTED TIMETABLE

Save as mentioned above, if the latest time for acceptance of the Offer and the posting of remittances do not take effect on the date and time as stated above, the other dates mentioned above may be affected. The Offeror and the Company will notify the Shareholders by way of announcement(s) on any change to the expected timetable as soon as possible.

All references to date and time contained in this Composite Document and the Form of Acceptance refer to Hong Kong date and time.

– iii –

DEFINITIONS

In this Composite Document, unless the context otherwise requires, the following expressions have the following meanings:

“acting in concert”

has the meaning ascribed to it under the Takeovers Code

“Affonso”
Affonso Limited, a company incorporated in the BVI with limited liability and a non-wholly owned subsidiary of the Company
“Alagona”
Alagona Holdings Limited, a company incorporated in the BVI with limited liability and a wholly-owned subsidiary of the Company
“associate” has the meaning ascribed to it in the Takeovers Code
“Board” the board of Directors
“Business Day(s)”
a day on which the Stock Exchange is open for the transaction of business
“BVI”
the British Virgin Islands
“Calibre”
Calibre Holdings Limited, a company incorporated in the BVI with limited liability and a wholly-owned subsidiary of the Company
“Century Win”
“Circular”

Century Win Industrial Limited, interested in as to approximately 53.68% by Mr. Cheng and as to approximately 46.32% by Mrs. Cheng the circular of the Company dated 9 September 2015 in relation to, among other things, the Disposal, the Master Sale Agreement and the transactions contemplated thereunder

“Closing Date”

Wednesday, 4 November 2015, the closing date of the Offer, or if the Offer is extended, any subsequent closing date as may be determined and announced jointly by the Offeror and the Company, with consent of the Executive, in accordance with the Takeovers Code

“Company”

Telefield International (Holdings) Limited 中慧國際控股有限公司, a company incorporated under the laws of the Cayman Islands with limited liability (stock code: 1143)

– 1 –

DEFINITIONS

“Composite Document”

this composite offer and response document jointly issued by the Offeror and the Company to all Shareholders in connection with the Offer in accordance with the Takeovers Code containing, amongst other things, detailed terms of the Offer, and the letters of advice from the Independent Board Committee and the Independent Financial Adviser in respect of the Offer

“Corporate Reorganisation” the transfer of the entire issued share capital in each of Affonso, Alagona, Calibre, Macar and Phoenix Choice to Noble Treasure
“Corporate Reorganisation the completion of the Corporate Reorganisation Completion”
“Director(s)” the director(s) of the Company
“Disposal”
the disposal of the entire issued share capital of Noble Treasure (after the Corporate Reorganisation Completion) by the Company to Dragon Fortune
“Disposal Agreement” the conditional agreement dated 22 May 2015 entered into between the Company and Dragon Fortune in relation to the Disposal (as supplemented on 7 August 2015)
“Disposal Group”
Noble Treasure and its subsidiaries upon the Corporate Reorganisation Completion
“Dragon Fortune”
Dragon Fortune International Limited, an investment holding company incorporated in Hong Kong with limited liability and is interested in approximately 59.25% of the issued Shares, also being one of the Shares Vendors and the purchaser under the Disposal
“EMS”
electronic manufacturing services
“EMS Products”

wireless communication products, audio equipment products and other relevant electronic products and ancillary parts sold by the Remaining Group to the Disposal Group

– 2 –

DEFINITIONS

“Encumbrances” any pledge, charge, lien (otherwise than arising by statute or operation of law), option, other encumbrance, priority or security interest, deferred purchase, title retention, leasing, sale and purchase, sale-and-leaseback arrangement over or in any property, assets or rights of whatsoever nature or interest or any agreement for any of the same
“Executive” the Executive Director of the Corporate Finance Division of the SFC or any delegates of the Executive Director
“Form of Acceptance”
the form of acceptance and transfer of Shares in respect of the Offer accompanying this Composite Document
“Group”
the Company and its subsidiaries
“Hong Kong”
the Hong Kong Special Administrative Region of the PRC
“Independent Board Committee”
the independent committee of the Board, comprising all the independent non-executive Directors, namely AuYang Cheong Yan Peter, Kwan Pun Fong Vincent and Xue Quan, which has been established to advise the Independent Shareholders on the Offer
“Independent Financial Adviser” or “Messis Capital”
Messis Capital Limited, the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Offer
“Independent Shareholder(s)”
Shareholder(s) other than the Offeror and parties acting in concert with it
“Joint Announcement”
the announcement dated 11 August 2015 jointly issued by the Company and the Offeror in relation to, among other things, the Disposal, the Master Sale Agreement, the Share Sale Agreement and the Offer
“Kingston Corporate Finance”
Kingston Corporate Finance Limited, a corporation licensed to carry out businesses in Type 6 (advising on corporate finance) regulated activity under the SFO and the financial adviser to the Offeror in respect of the Offer

– 3 –

DEFINITIONS

“Kingston Securities”
Kingston Securities Limited, a corporation licensed to carry out business in Type 1 (dealing in securities) regulated activity under the SFO who shall make the Offer for and on behalf of the Offeror
“Last Trading Day”
21 May 2015, being the last trading day prior to the suspension of trading in the Shares on 22 May 2015 pending the publication of the Joint Announcement
“Latest Practicable Date”
12 October 2015, being the latest practicable date prior to the printing of this Composite Document for ascertaining certain information contained herein
“LIL” Landing International Limited, the controlling shareholder of Landing International Development Limited, whose shares are listed on the Main Board with stock code 582
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
“Loan Facility”
the standby facility of HK$830,000,000 granted by LIL to the Offeror pursuant to a loan facility agreement to finance the financial obligations of the Offeror under the Share Sale Agreement and the Offer
“Macar”
Macar Holdings Limited, a company incorporated in BVI with limited liability and a wholly-owned subsidiary of the Company
“Main Board”
Main Board of the Stock Exchange (excludes the option market) operated by the Stock Exchange which is independent from and operated in parallel with the Growth Enterprise Market of the Stock Exchange
“Master Sale Agreement”
the master electronics manufacturing services agreement dated 7 August 2015 between Noble Treasure and Telefield Holdings in relation to the provision of EMS Products by the Remaining Group to the Disposal Group (as supplemented on 7 September 2015)

– 4 –

DEFINITIONS

“Mr. Cheng”
“Mrs. Cheng”
“Noble Treasure”
“Offer”
“Offer Period”
“Offer Price”
“Offer Share(s)”
“Offeror”
“Optionholder”
Mr. Cheng Han Ngok Steve, an executive Director and chairman of the Company and ultimately interested in approximately 53.30% in each of Dragon Fortune and Telefield Charitable
Ms. Ma Mei Han, Elitte, wife of Mr. Cheng
Noble Treasure Holdings Limited (尚寶控股有限公司), a company incorporated in BVI and is directly holding the entire issued share capital of each of Affonso, Alagona, Calibre, Macar and Phoenix Choice
the mandatory unconditional cash offer made by Kingston Securities on behalf of the Offeror to acquire all the issued Shares (other than those already owned or agreed to be acquired by the Offeror and parties acting in concert with it) in accordance with the Takeovers Code
the period commencing from 27 April 2015, being the date of the commencement of the offer period pursuant to Rule 3.7 of the Takeovers Code and ending on the Closing Date or such other date or date to which the Offeror may decide to extend or revise the Offer in accordance with the Takeovers Code
the price at which the Offer will be made, being HK$2.031 per Offer Share
Share(s) not already owned or agreed to be acquired by the Offeror or parties acting in concert with it
Power Port Holdings Limited, a company incorporated in BVI with limited liability, which is wholly and beneficially owned by Mr. Yang Zhihui
the registered holder of the Share Options, Mr. Poon Ka Lee Barry, an executive Director

– 5 –

DEFINITIONS

“Optionholder Undertaking”
“Other Vendor Shareholders”
“Overseas Shareholder(s)”
“Phoenix Choice”
“PRC”
“Registrar”
“Relevant Period”
a written undertaking dated 22 May 2015 from the Optionholder to the Offeror and the Company that (a) at any time from the date of the Share Sale Agreement up to the Share Sale Completion, the Optionholder will not exercise any outstanding Share Options; (b) the Optionholder will not accept any general offer on the Share Options; and (c) if the Optionholder exercises any Share Options during the period between Share Sale Completion and the close of the Offer pursuant to the terms of the Takeovers Code, the Optionholder will ensure and procure that all the Shares to be issued to him pursuant thereto will be and will remain to be legally and beneficially owned by him from the date of exercise of the Share Options up to and including the close of the Offer pursuant to the terms of the Takeovers Code and the Optionholder will not accept any Offer
Lee Kai Bon, Ng Kim Yuen, Fok Pui Yin, Sum Kwok Fai, Wong Sik Hung, Chiu King Yim, Ko Mee Ling, Tam Kam Fong and Poon Ka Lee Barry
Shareholder(s) whose addresses, as shown on the register of members of the Company, are outside Hong Kong
Phoenix Choice Holdings Limited, a company incorporated in BVI with limited liability and a whollyowned subsidiary of the Company
the People’s Republic of China which, for the purpose of this Composite Document, shall exclude Hong Kong, Macau Special Administrative Region of the PRC and Taiwan
Tricor Investor Services Limited, the Hong Kong share registrar and transfer office of the Company, with its address at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong
the period commencing from 27 October 2014, being the date falling six months before the date of the commencement of the Offer Period and up to and including the Latest Practicable Date

– 6 –

DEFINITIONS

“Remaining Group”

being the Company and its subsidiaries upon Disposal Completion

“Sale Shares”
an aggregate of 274,588,000 Shares, representing approximately 66.69% of the entire issued share capital of the Company as at the date of the Share Sale Agreement, acquired by the Offeror from the Shares Vendors pursuant to the terms and conditions of the Share Sale Agreement
“SFC” the Securities and Futures Commission of Hong Kong
“SFO”
Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“Share(s)”
ordinary share(s) of HK$0.01 each in the issued share capital of the Company
“Share Options” the outstanding share options granted by the Company pursuant to the Share Option Scheme
“Share Option Scheme” the share option scheme of the Company adopted on 31 December 2010
“Share Sale”
the sale and purchase of the Sale Shares pursuant to the Share Sale Agreement
“Share Sale Agreement” the conditional agreement dated 22 May 2015 entered into between the Shares Vendors and the Offeror in relation to the Share Sale (as supplemented on 7 and 11 August 2015)
“Share Sale Completion” the completion of the Share Sale Agreement pursuant to the terms and conditions contained therein
“Shareholder(s)” holder(s) of the Shares
“Shares Vendors” Dragon Fortune and Telefield Charitable
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“Takeovers Code”
the Hong Kong Code on Takeovers and Mergers

– 7 –

DEFINITIONS

“Telefield Charitable”

“Telefield Holdings”
“Xinrong Fund”
“HK$”
“US$”

“%”

Telefield Charitable Fund Limited, a charitable organization incorporated in Hong Kong and is interested in approximately 7.44% of the issued Shares, also being one of the Shares Vendors

Telefield Holdings Limited, a company incorporated in BVI and a wholly owned subsidiary of the Company

Xinrong Fund Limited, a limited liability company incorporated in the Cayman Islands, which is a loan note subscriber of LIL and a third party independent of the Group and its connected persons

Hong Kong dollars, the lawful currency of Hong Kong

United States dollars, the lawful currency of the United States of America

per cent.

– 8 –

LETTER FROM KINGSTON SECURITIES

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Suite 2801, 28th Floor

One International Finance Centre 1 Harbour View Street, Central, Hong Kong

14 October 2015

To the Independent Shareholders

Dear Sir or Madam,

MANDATORY UNCONDITIONAL CASH OFFER BY KINGSTON SECURITIES LIMITED FOR AND ON BEHALF OF THE OFFEROR TO ACQUIRE ALL THE ISSUED SHARES (OTHER THAN THOSE ALREADY OWNED BY THE OFFEROR AND PARTIES ACTING IN CONCERT WITH IT) IN TELEFIELD INTERNATIONAL (HOLDINGS) LIMITED

INTRODUCTION

References are made to the Joint Announcement and the Circular. Immediately following the Share Sale Completion, the Offeror and persons acting in concert with it were interested in 274,588,000 Shares, representing approximately 66.69% of the entire issued share capital of the Company as at the Latest Practicable Date. Pursuant to Rule 26.1 of the Takeovers Code, the Offeror is required to make an unconditional mandatory cash offer for all the issued Shares other than those already owned or agreed to be acquired by the Offeror and parties acting in concert with it.

Kingston Securities has been appointed by the Offeror to make the Offer on its behalf. This letter, Appendix I to this Composite Document and the accompanying Form of Acceptance set out, among other things, the terms and other details of the Offer, information on the Offeror and the intention of the Offeror regarding the Remaining Group.

The Independent Shareholders are strongly advised to consider carefully the information contained in the “Letter from the Board”, the “Letter from the Independent Board Committee” and the “Letter from Independent Financial Adviser” as set out in this Composite Document.

– 9 –

LETTER FROM KINGSTON SECURITIES

THE OFFER

Principal terms of the Offer

We are making the Offer for and on behalf of the Offeror in compliance with the Takeovers Code on the following basis:

For each Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$2.031 in cash

The Offer is unconditional in all respects.

The Offer Price of HK$2.031 per Offer Share is the same as the purchase price for each Sale Share payable by the Offeror under the Share Sale Agreement.

Save for the outstanding Share Options, the Company has no outstanding securities, options, derivatives or warrants which are convertible or exchangeable into the Shares and has not entered into any agreement for the issue of such securities, options, derivatives or warrants of the Company with any parties.

Comparison of value

The Offer Price of HK$2.031 per Offer Share represents:

(i) a discount of approximately 35.93% to the closing price of HK$3.17 per Share as quoted on the Stock Exchange on the Last Trading Day;
(ii) a discount of approximately 32.57% to the average closing price of approximately HK$3.012 per Share, being the average of the closing prices of the Shares as quoted on the Stock Exchange for the 5 trading days up to and including the Last Trading Day;
(iii) a discount of approximately 31.41% to the average closing price of approximately HK$2.961 per Share, being the average of the closing prices of the Shares as quoted on the Stock Exchange for the 10 trading days up to and including the Last Trading Day;

– 10 –

LETTER FROM KINGSTON SECURITIES

(iv) a premium of approximately 0.05% over the closing price of HK$2.03 per Share as quoted on the Stock Exchange on the Latest Practicable Date;
(v) a discount of approximately 5.97% to the closing price of HK$2.16 per Share as quoted on the Stock Exchange on the last Business Day prior to the commencement of the Offer Period;
(vi) a premium of approximately 137.82% over the audited consolidated net assets of the Company of approximately HK$0.854 per Share as at 31 December 2014; and
(vii) a premium of approximately 166.19% over the unaudited consolidated net assets of the Company of approximately HK$0.763 per Share as at 30 June 2015.

Highest and lowest Share prices

During the Relevant Period, the lowest closing price of the Shares as quoted on the Stock Exchange was HK$0.61 per Share on 17 December 2014, 21 January 2015 and 22 January 2015 and the highest closing price of the Shares as quoted on the Stock Exchange was HK$3.21 per Share on 20 May 2015.

Total consideration of the Offer

As at the Latest Practicable Date, there were 411,714,000 Shares in issue. Assuming that there is no change in the issued share capital of the Company and none of the outstanding Share Options is exercised prior to the making of the Offer and on the basis of the Offer Price at HK$2.031 per Share, the entire issued share capital of the Company would be valued at HK$836,191,134.

Assuming that none of the 4,117,140 outstanding Share Options is exercised prior to the close of the Offer and there is no change in the issued share capital of the Company up to the close of the Offer, 137,126,000 Offer Shares, representing approximately 33.31% of the issued share capital of the Company, will be subject to the Offer which will be valued at HK$278,502,906.

Assuming all of the aforesaid outstanding Share Options are exercised by the Optionholder during the period as permitted under the Optionholder Undertaking prior to the close of the Offer, 4,117,140 Shares will be issued. Given that the Share Options held by the Optionholder represent all the outstanding Share Options and the Optionholder has undertaken that if he exercises any Share Options, he will not accept the Offer and he will remain to be the legal and beneficial owner of such Shares pursuant to the Optionholder Undertaking, no additional sum shall be payable by the Offeror under the Offer. Accordingly, the Offer will be valued at HK$278,502,906 in aggregate on a fully-diluted basis.

Financial resources available for the Offer

The maximum amount of cash payable by the Offeror in respect of the Offer is approximately HK$278,502,906. The Offeror intends to finance the cash consideration payable under the Offer with the Loan Facility granted by LIL to the Offeror. Kingston Corporate

– 11 –

LETTER FROM KINGSTON SECURITIES

Finance, the financial adviser to the Offeror, is satisfied that sufficient financial resources are available to the Offeror to satisfy the full acceptance of the Offer as set out in the section “Total consideration of the Offer” above.

Effects of accepting the Offer

By validly accepting the Offer, the accepting Shareholders will sell their tendered Shares to the Offeror free from all Encumbrances and together with all rights attached to them, including the rights to receive all dividends and distribution declared, made or paid on or after the date on which the Offer is made, being the date of posting of the Composite Document.

Acceptance of the Offer shall be irrevocable and shall not be capable of being withdrawn, subject to the Takeovers Code.

Hong Kong stamp duty

The seller’s Hong Kong ad valorem stamp duty arising in connection with acceptance of the Offer amounting to 0.1% of the amount payable in respect of the relevant acceptance or if higher, the market value of the Shares, will be deducted from the amount payable to Shareholders who accept the Offer. The Offeror will bear its own portion of buyer’s Hong Kong ad valorem stamp duty at the rate of 0.1% of the amount payable in respect of the relevant acceptances or if higher, the market value of the Shares, and will be responsible to account to the Stamp Office of Hong Kong for stamp duty payable for the sale and purchase of the Shares which are validly tendered for acceptance under the Offer.

Payment

Payment in cash in respect of acceptance of the Offer will be made as soon as possible but in any event within seven business days (as defined under the Takeovers Code) of the date on which the duly completed acceptance of the Offer and the relevant documents of title in respect of such acceptance are received by or for the Offeror.

Overseas Shareholders

As the Offer to persons not resident in Hong Kong may be affected by the laws of the relevant jurisdiction in which they are resident, the overseas Shareholders who are citizens or residents or nationals of a jurisdiction outside Hong Kong should satisfy themselves about and observe any applicable legal or regulatory requirements and where necessary seek legal advice. It is the responsibility of the overseas Shareholders who wish to accept the Offer to satisfy themselves as to the full observance of the laws of the relevant jurisdiction in connection therewith (including the obtaining of any governmental or other consent which may be required or the compliance with other necessary formalities and the payment of any transfer or other taxes due in respect of such jurisdiction for accepting the Offer).

Any acceptance by any Shareholder will be deemed to constitute a representation and warranty from such Shareholder to the Offeror that the local laws and requirements have been complied with. The Shareholders should consult their professional advisers if in doubt.

– 12 –

LETTER FROM KINGSTON SECURITIES

Taxation advice

Shareholders are recommended to consult their own professional advisers if they are in any doubt as to the taxation implications of accepting or rejecting the Offer. None of the Offeror, parties acting in concert with the Offeror, the Company, Kingston Securities, Kingston Corporate Finance, Veda Capital and Messis Capital and their respective ultimate beneficial owners, directors, officers, advisers, agents or associates or any other person involved in the Offer accepts responsibility for any taxation effects on, or liabilities of, any persons as a result of their acceptance or rejection of the Offer.

Dealing and interests in the Company’s securities

Save for the Sale Shares, save for the entering into of Share Sale Agreement, none of the Offeror, its ultimate beneficial owner, nor parties acting in concert with any of them has dealt in any Shares, options, derivatives, warrants or other securities convertible into Shares during the Relevant Period.

Acceptance and settlement

Your attention is drawn to the further details regarding the procedures for acceptance and settlement of the Offer as set out in Appendix I to this Composite Document and the accompanying Form of Acceptance.

Other arrangements

The Offeror confirms that as at the Latest Practicable Date:

(i) save for the Sale Shares, none of the Offeror, its ultimate beneficial owner or parties acting in concert with any of them owned or had control or direction over any voting rights or rights over the Shares or convertible securities, options, warrants or derivatives of the Company;
(ii) save for Optionholder Undertaking, none of the Offeror, its ultimate beneficial owner or parties acting in concert with any of them have received any irrevocable commitment to accept or not to accept the Offer;
(iii) pursuant to the Loan Facility, the Offeror has created a charge over the Sale Shares and the Offer Shares to be acquired by the Offeror from those Shareholders who accept the Offer in favour of Xinrong Fund, as a security for the Loan Facility. Under the abovementioned share charge, if there is any default under the Loan Facility, Xinrong Fund will be entitled to enforce the securities (including exercise of power of sale in respect of the Sale Shares and the Offer Shares) and all rights pertaining to such Shares will be transferred to Xinrong Fund. The loan is interest free and shall be repayable on demand after the close of Offer pursuant to the Loan Facility. The share charge shall be continuing securities and shall remain in full force and effect until discharge when the Offeror repays all the outstanding amount under the Loan Facility;

– 13 –

LETTER FROM KINGSTON SECURITIES

(iv) save for the Share Sale Agreement and the charge of the Sale Shares and the Offer Shares to be acquired by the Offeror through the Offer pursuant to the Loan Facility, there is no arrangement (whether by way of option, indemnity or otherwise) of the kind referred to in Note 8 to Rule 22 of the Takeovers Code in relation to the shares of the Offeror or the Shares and which might be material to the Offer;
(v) save for the Share Sale Agreement, there is no agreement or arrangement to which the Offeror, its ultimate beneficial owner or parties acting in concert with any of them is a party which relates to circumstances in which it may or may not invoke or seek to invoke a pre-condition or a condition to the Offer; and
(vi) none of the Offeror, its ultimate beneficial owner or parties acting in concert with any of them has entered into any arrangements or contracts in relation to the outstanding derivatives in respect of securities in the Company nor has borrowed or lent any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company.

The Independent Shareholders are encouraged to read this Composite Document carefully, including the advice of Messis Capital to the Independent Board Committee and the Independent Shareholders, and the recommendation from the Independent Board Committee to the Independent Shareholders in respect of the Offer, before deciding whether or not to accept the Offer.

INFORMATION OF THE OFFEROR

The Offeror is an investment holding company incorporated in the BVI with limited liability on 31 March 2015. The Offeror is wholly and ultimately owned by Mr. Yang Zhihui (“ Mr. Yang ”). Mr. Yang is currently the controlling shareholder (as defined under the Listing Rules), as well as the chairman and an executive director of Landing International Development Limited (the shares of which are listed on the Main Board, stock code: 582). He is also the founder and chairman of board of directors of Anhui Landing Holding Group Co., Ltd# (安徽藍鼎控股集團有限公司), which is principally engaged in real estate development business in the PRC. He had been a director of Hubei Landing Holding Co., Ltd. (shares of which are listed on Shenzhen Stock Exchange, stock code: 000971) from September 2013 to December 2014. Mr. Yang has over 11 years of experience in property development in the PRC.

OFFEROR’S INTENTION ON THE COMPANY

The Offeror intends to continue the principal business of the Group, which comprises of EMS business and distribution of communication products.

The Offeror will, following the completion of the Offer, conduct a detailed review of the business operations and financial position of the Remaining Group for the purpose of developing a sustainable business plan or strategy for the Remaining Group. In addition, in order to broaden its income source and to accelerate the Remaining Group’s growth and future

– 14 –

LETTER FROM KINGSTON SECURITIES

development, the Offeror will explore and consider any other investment and business opportunities that may arise in the market from time to time that it considers value-enhancing to Shareholders and/or otherwise in the best interests of the Group. If any possible investment materializes, the Company will make further announcement(s) as and when required under the Listing Rules. However, as of the Latest Practicable Date, no such investment or business opportunities have been identified nor has the Offeror entered into any agreement, arrangements, understandings, intention or negotiation in relation to the injection of any assets or business into the Remaining Group.

In order to strengthen the capital base of the Remaining Group so that it is in a better position to capture any investment and business opportunities that may arise, it is the Offeror’s intention to, as soon as practicable after the close of the Offer, procure the directors it nominates on the Board to consider raising fund from equity or equity-related securities. Further announcement(s) will be made by the Company once any of such fund raising proposals is put to the Board and approved. However, as of the Latest Practicable Date, no concrete fund raising plan has been identified nor has the Offeror entered into any agreement, arrangements, understandings or negotiation in relation to any fund raising exercise.

Save as required for the implementation of the Offeror’s intention regarding the Remaining Group as aforementioned, the Offeror has no intention to terminate any employment of the employees of the Remaining Group or to make significant changes to any employment of the Remaining Group (except for the proposed nomination of new directors to the Board as detailed in the section headed “Proposed change to the Board of the Company” below) or to dispose of or re-allocate or re-deploy the Remaining Group’s assets which are not in the ordinary and usual course of business of the Remaining Group. Notwithstanding the foregoing, the Offeror has not entered into any agreement, arrangements, understandings or negotiations in relation to the continued employment of the employees, disposal and/or re-deployment of the assets (including fixed assets) of the Remaining Group, or termination or scaling down of any Remaining Group’s business.

The Offeror has no intention to privatise the Group and intends to maintain the listing of the Shares on the Stock Exchange. The Offeror has undertaken to the Stock Exchange to take appropriate steps to ensure that not less than 25% of the entire issued share capital of the Company will continue to be held by the public at all times.

If, at the close of the Offer, less than the minimum prescribed percentage applicable to the Company, being 25% of the Shares, are held by the public, or if the Stock Exchange believes that:

a false market exists or may exist in the trading of Shares; or
there are insufficient Shares in public hands to maintain an orderly market,

the Stock Exchange will consider exercising its discretion to suspend dealings in the Shares.

– 15 –

LETTER FROM KINGSTON SECURITIES

PROPOSED CHANGES TO THE BOARD OF THE COMPANY

The Board comprises eight Directors, including five executive Directors and three independent non-executive Directors. Mr. Cheng, Mr. Poon Ka Lee, Barry, Mr. Ng Kim Yuen, Ms. Fok Pui Yin and Mr. Lee Kai Bon intend to resign as executive Directors and Mr. Au-Yang Cheong Yan, Peter, Mr. Kwan Pun Fong Vincent and Mr. Xue Quan intend to resign as independent non-executive Directors with effect from the earliest time permitted under the Takeovers Code (which is the first closing date of the Offer). Mr. Cheng, Mr. Ng Kim Yuen, Ms. Fok Pui Yin and Mr. Lee Kai Bon will remain as directors in subsidiaries of the Remaining Group. The Offeror intends to nominate new Director(s) for appointment to the Board after the close of the Offer. Details of the change of the Board composition and the biographies of the proposed new Director(s) will be further announced in compliance with the Takeovers Code and the Listing Rules.

DISCLOSURE IN DEALINGS

In accordance with Rule 3.8 of the Takeovers Code, the respective associates (as defined under the Takeovers Code and including a person who owns or controls 5% or more of any class of relevant securities) of the Company and the Offeror are hereby reminded to disclose their dealings in the securities of the Company pursuant to the Takeovers Code.

In accordance with Rule 3.8 of the Takeovers Code, the full text of Note 11 to Rule 22 of the Takeovers Code is reproduced below:

“Responsibilities of stockbrokers, banks and other intermediaries

Stockbrokers, banks and others who deal in relevant securities on behalf of clients have a general duty to ensure, so far as they are able, that those clients are aware of the disclosure obligations attaching to associates and other persons under Rule 22 of the Takeovers Code and that those clients are willing to comply with them. Principal traders and dealers who deal directly with investors should, in appropriate cases, likewise draw attention to the relevant rules of the Takeovers Code. However, this does not apply when the total value of dealings (excluding stamp duty and commission) in any relevant security undertaken for a client during any 7-day period is less than HK$1 million.

This dispensation does not alter the obligation of principals, associates and other persons themselves to initiate disclosure of their own dealings, whatever total value is involved.

Intermediaries are expected to co-operate with the Executive in its dealings enquiries. Therefore, those who deal in relevant securities should appreciate that stockbrokers and other intermediaries will supply the Executive with relevant information as to those dealings, including identities of clients, as part of that co-operation.”

– 16 –

LETTER FROM KINGSTON SECURITIES

INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

The Company has established the Independent Board Committee comprising all the independent non-executive Directors, namely Au-Yang Cheong Yan Peter, Kwan Pun Fong Vincent and Xue Quan, who have no direct or indirect interest in the Offer to advise the Independent Shareholders and to make recommendation as to whether the Offer is, or is not, fair and reasonable and as to its acceptance. Messis Capital has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders as to whether the terms of Offer are, or are not fair and reasonable and as to acceptance. The appointment of Messis Capital as the independent financial adviser has been approved by the Independent Board Committee.

COMPULSORY ACQUISITION

The Offeror does not intend to exercise any right which may be available to it to compulsorily acquire any outstanding Offer Shares not acquired under the Offer after the close of the Offer.

ADDITIONAL INFORMATION

Your attention is also drawn to the additional information regarding the Offer, set out in the appendices to this Composite Document and the accompanying Form of Acceptance, which form part of this Composite Document. In particular, your attention is draw to the “Letter from the Board”, the “Letter from the Independent Board Committee” and the letter of advice by Independent Financial Adviser to the Independent Board Committee as set out in the “Letter from Independent Financial Adviser” contained in this Composite Document.

Yours faithfully, For and on behalf of KINGSTON SECURITIES LIMITED Chu, Nicholas Yuk-yui Director

– 17 –

LETTER FROM THE BOARD

TELEFIELD INTERNATIONAL (HOLDINGS) LIMITED 中慧國際控股有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 1143)

Executive Directors: Mr. Cheng Han Ngok Steve Mr. Poon Ka Lee Barry Mr. Ng Kim Yuen Ms. Fok Pui Yin Mr. Lee Kai Bon

Registered office: Clifton House 75 Fort Street PO Box 1350 Grand Cayman KY1-1108 Cayman Islands

Independent non-executive Directors: Mr. Au-Yang Cheong Yan Peter Dr. Kwan Pun Fong Vincent Dr. Xue Quan

Head Office and Principal place of business in Hong Kong: Units 609-610 6/F, Bio-Informatics Centre No. 2 Science Park West Avenue Hong Kong Science Park Shatin, New Territories Hong Kong

14 October 2015

To the Independent Shareholders

Dear Sir or Madam,

MANDATORY UNCONDITIONAL CASH OFFER BY

==> picture [37 x 32] intentionally omitted <==

FOR AND ON BEHALF OF THE OFFEROR TO ACQUIRE ALL THE ISSUED SHARES (OTHER THAN THOSE ALREADY OWNED BY THE OFFEROR AND PARTIES ACTING IN CONCERT WITH IT) IN TELEFIELD INTERNATIONAL (HOLDINGS) LIMITED

INTRODUCTION

References are made to the Joint Announcement and the Circular.

The Company and the Offeror jointly announced on 11 August 2015, among other things, that on 22 May 2015, the Shares Vendors and the Offeror entered into the Share Sale Agreement (as supplemented on 7 and 11 August 2015), pursuant to which (i) the Offeror has

– 18 –

LETTER FROM THE BOARD

conditionally agreed to purchase the 274,588,000 Sale Shares, representing approximately 66.69% of the entire issued share capital of the Company as at the Latest Practicable Date; and (ii) Dragon Fortune has conditionally agreed to sell 243,942,000 Sale Shares and Telefield Charitable has conditionally agreed to sell 30,646,000 Sales Shares, representing approximately 59.25% and 7.44% respectively of the entire issued share capital of the Company as at the Latest Practicable Date. The Share Sale Completion is conditional upon, among other things, the Disposal Agreement having been duly executed and becoming unconditional in all respects (save for the condition that the Share Sale Completion having taken place).

The Share Sale Completion took place on 7 October 2015. Upon the Share Sale Completion, the Offeror and parties acting in concert with it are interested in 274,588,000 Shares, representing approximately 66.69% of the entire issued share capital of the Company as at the Latest Practicable Date. Pursuant to Rule 26.1 of the Takeovers Code, the Offeror is required to make an unconditional mandatory cash offer for all the issued Shares other than those already owned or agreed to be acquired by the Offeror and parties acting in concert with it. Kingston Securities, on behalf of the Offeror, is making the Offer.

Pursuant to the Share Sale Agreement, the Shares Vendors have procured the Optionholder to execute the Optionholder Undertaking on 22 May 2015. As the Share Options held by the Optionholder represent all the outstanding Share Options, the Offeror will not make any offer for the outstanding Share Options. Details of the Optionholder Undertaking are set out in the paragraph headed “Optionholder Undertaking” in the Letter from the Board below.

The purpose of this Composite Document is to provide you with, among other things, (i) information relating to the Offeror, the Offer and the Group; (ii) a letter of recommendation from the Independent Board Committee to the Independent Shareholders in relation to the Offer; and (iii) a letter of advice from Messis Capital to the Independent Board Committee in relation to the Offer and as to its acceptance.

THE MANDATORY UNCONDITIONAL CASH OFFER

The terms of the Offer summarised below are set out in details in the letter from Kingston Securities contained in this Composite Document and Appendix I to this Composite Document as well as the Form of Acceptance. You are recommended to refer to them for further details.

Principal terms of the Offer

Kingston Securities, on behalf of the Offeror, is making the Offer to acquire all the issued Shares other than those already owned by the Offeror and parties acting in concert with it in accordance with the Takeovers Code on the following basis:

For each Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .HK$2.031 in cash

– 19 –

LETTER FROM THE BOARD

The Offer Price of HK$2.031 per Offer Share is the same as the purchase price for each Sale Share payable by the Offeror under the Share Sale Agreement, which was negotiated and determined on arm’s length basis between the Shares Vendors and the Offeror with reference to the unaudited consolidated pro forma net assets value of the Group (after completion of the Corporate Reorganisation and the Disposal), and the fact that the Offeror can obtain a controlling interest in the Company. The Disposal would only result in a gain on disposal of immaterial amount and accordingly the net asset value of the Group would not have material change upon the Disposal. However, the net asset value of the Group would decrease by the amount of the professional fee of approximately HK$4 million in relation to the Disposal. Accordingly, the reassessed net asset value of the Remaining Group after taking into account such professional fee in relation to the Disposal would be approximately HK$356 million (or HK$0.865 per Share). The Offer Shares to be acquired under the Offer shall be free from all Encumbrances and together with all rights now or hereafter attaching to them, including all rights to any dividend or other distribution declared, made or paid on or after the date on which the Offer is made, being the date of this Composite Document.

The Offer will be unconditional in all respects and will not be conditional upon acceptances being received in respect of a minimum number of Shares or any other conditions.

Effects of accepting the Offer

By validly accepting the Offer, the Shareholders will sell their tendered Shares to the Offeror free from all Encumbrances and together with all rights now or hereafter attaching to them, including all rights to any dividend or other distribution declared, made or paid on or after the date on which the Offer is made, being the date of this Composite Document.

Optionholder Undertaking

Pursuant to the Share Sale Agreement, the Shares Vendors have procured the Optionholder to execute the Optionholder Undertaking on 22 May 2015 that (a) at any time from the date of the Share Sale Agreement up to the Share Sale Completion, the Optionholder will not exercise any outstanding Share Options; (b) the Optionholder will not accept any general offer on the Share Options; and (c) if the Optionholder exercises any Share Options during the period between Share Sale Completion and the close of the Offer pursuant to the terms of the Takeovers Code, the Optionholder will ensure and procure that all the Shares to be issued to him pursuant thereto will be and will remain to be legally and beneficially owned by him from the date of exercise of the Share Options up to and including the close of the Offer pursuant to the terms of the Takeovers Code and the Optionholder will not accept any Offer. All the outstanding Share Options are not transferable and not subject to any encumbrances. Upon close of the Offer, the Optionholder Undertaking will cease to be binding and as at the Latest Practicable Date, other than that, under no circumstances the Optionholder Undertaking will cease to be binding.

– 20 –

LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF THE COMPANY

Set out below is the shareholding structure of the Company (i) immediately prior to Share Sale Completion; and (ii) immediately following Share Sale Completion and as at the Latest Practicable Date.

The Offeror and parties acting in concert with it Dragon Fortune (Note 1) Telefield Charitable (Note 1) Mr. Lee Kai Bon (Notes 2 and 3) Mr. Ng Kim Yuen (Notes 2 and 3) Mr. Poon Ka Lee Barry (Notes 2 and 3) Ms. Fok Pui Yin (Notes 2 and 3) Mr. Sum Kwok Fai (Note 3) Mr. Wong Sik Hung (Note 3) Mr. Tam Kam Fong (Note 3) Mr. Chiu King Yim (Note 3) Ms. Ko Mee Ling (Note 3) Independent Shareholders Total	(i) Immediately prior to the Share Sale Completion Number of Shares Approximate % – – 243,942,000 59.25 30,646,000 7.44 2,634,000 0.64 2,640,000 0.64 540,000 0.13 1,950,000 0.47 1,950,000 0.47 1,590,000 0.39 1,230,000 0.30 1,050,000 0.26 930,000 0.23 122,612,000 29.78 411,714,000 100.00	(ii) Immediately following the Share Sale Completion and as at the Latest Practicable Date Number of Shares Approximate % 274,588,000 66.69 – – – – 2,114,000 0.51 2,640,000 0.64 540,000 0.13 1,950,000 0.47 1,950,000 0.47 1,590,000 0.39 1,230,000 0.30 1,050,000 0.26 930,000 0.23 123,132,000 29.91 411,714,000 100.00	(ii) Immediately following the Share Sale Completion and as at the Latest Practicable Date Number of Shares Approximate % 274,588,000 66.69 – – – – 2,114,000 0.51 2,640,000 0.64 540,000 0.13 1,950,000 0.47 1,950,000 0.47 1,590,000 0.39 1,230,000 0.30 1,050,000 0.26 930,000 0.23 123,132,000 29.91 411,714,000 100.00
			100.00

Notes:

Mr. Cheng holds approximately 53.68% interest in Century Win and Century Win respectively holds approximately 53.30% interest in each of Dragon Fortune and Telefield Charitable. Mrs. Cheng is interested in as to approximately 46.32% of Century Win. Therefore, Mr. Cheng is deemed or taken to be interested in all the Shares which are beneficially owned by each of Dragon Fortune and Telefield Charitable. The 46.7% interests in each of Dragon Fortune and Telefield Charitable are held by nine individuals as to approximately 8.64% by Lee Kai Bon, an executive Director, as to approximately 8.64% by Ng Kim Yuen, an executive Director, as to approximately 6.495% by Fok Pui Yin, an executive Director, as to approximately 6.495% by Sum Kwok Fai, as to approximately 5.19% by Wong Sik Hung, as to approximately 3.46% by Chiu King Yim, as to approximately 3.02% by Ko Mee Ling, as to approximately 3.02% by Tam Kam Fong and as to approximately 1.74% by Poon Ka Lee, Barry, an executive Director.
Mr. Lee Kai Bon, Mr. Ng Kim Yuen, Mr. Poon Ka Lee Barry and Ms. Fok Pui Yin are the executive Directors.
These nine individuals are referred as the Other Vendor Shareholders.
The above percentages are subject to rounding and may not add up to 100%.

– 21 –

LETTER FROM THE BOARD

INFORMATION ON THE GROUP

The Company is incorporated in the Cayman Islands as an exempted company with limited liability and was listed on the Stock Exchange. The principal activity of the Company is investment holding. Prior to the Disposal the Group was principally engaged into two business segments, the EMS and the distribution businesses. Among the distribution business segment, there are three main product lines including the communication products, multimedia products & computer accessories and gaming products and toys.

Upon the Disposal Completion, the Remaining Group is principally engaged in (i) distribution of business phone systems under the RCA brand; and (ii) EMS business originally engaged by the Group with manufacturing facilities located in Guangzhou upon Share Sale Completion. Major products manufactured under the EMS business of the Remaining Group are electronic consumer products including but not limited to residential and business phones, beauty consumer products, home appliances and appliance control products.

The following table is a summary of certain consolidated audited financial information of the Group for the two financial years ended 31 December 2014 and 31 December 2013, respectively.

	Year ended	Year ended
	31 December	31 December
	2014	2013
	HK$’000	HK$’000
Turnover	1,832,867	1,825,542
Gross profit	348,511	373,264
(Loss)/profit before taxation	(37,441)	37,554
(Loss)/profit for the year	(42,273)	31,414
	As at	As at
	31 December	31 December
	2014	2013
	HK$’000	HK$’000
Consolidated net asset value attributable to
owners of the Company	369,756	377,794

As disclosed in the interim report of the Company for the six months ended 30 June 2015, the unaudited consolidated net asset value attributable to owners of the Company was approximately HK$360,039,000 as at 30 June 2015.

– 22 –

LETTER FROM THE BOARD

INFORMATION ON THE OFFEROR AND ITS INTENTION REGARDING THE GROUP

Your attention is drawn to the Letter from Kingston Securities in this Composite Document for the information on the Offeror and its intention regarding the Group. In particular, as stated in the Letter from Kingston Securities, the Offeror has no intention to privatise the Group and intends to maintain the listing of the Shares on the Stock Exchange. The Offeror will undertake to the Stock Exchange to take appropriate steps to ensure that not less than 25% of the entire issued share capital of the Company will continue to be held by the public at all times.

In the event that after the completion of the Offer, the public float of the Company falls below 25%, the Offeror and the Company will undertake to the Stock Exchange that they will take appropriate steps to restore the minimum public float as required under the Listing Rules as soon as possible following the close of the Offer to ensure that sufficient public float exists for the Shares.

The Stock Exchange has stated that if, upon closing of the Offer, less than the minimum prescribed percentage applicable to the Company, being 25% of the Shares, are held by the public or if the Stock Exchange believes that (i) a false market exists or may exist in the trading of the Shares; or (ii) there are insufficient Shares in public hands to maintain an orderly market, it will consider exercising its discretion to suspend trading in the Shares until the prescribed level of public float is restored.

The Board is also aware of the Offeror’s intention in relation to the Group and its employees and the proposed change of Board composition, and is willing to render co-operation with the Offeror and would continue to act in the best interests of the Group and the Shareholders as a whole.

RECOMMENDATION

The Independent Board Committee comprising all three independent non-executive Directors, namely Mr. Au-Yang Cheong Yan Peter, Dr. Kwan Pun Fong Vincent and Dr. Xue Quan, has been formed to make a recommendation to the Independent Shareholders as to whether the Offer is, or is not, fair and reasonable and as to its acceptance and whether the Offer is in the interests of the Company and the Independent Shareholders.

Messis Capital has been appointed by the Board after approval by the Independent Board Committee as the Independent Financial Adviser to advise the Independent Board Committee as to whether the Offer is, or is not, fair and reasonable and as to its acceptance.

Your attention is drawn to the letter of recommendation from the Independent Board Committee set out on page 25 of this Composite Document and the letter of advice from Messis Capital set out on pages 26 to 45 of this Composite Document, which contains, among other things, its advice to the Independent Board Committee in relation to the Offer and the principal factors considered by it in arriving at its recommendation.

– 23 –

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

Your attention is drawn to the Letter from Kingston Securities set out in this Composite Document, Appendix I to this Composite Document and the accompanying Form of Acceptance which contain further details of the Offer and the procedures for acceptance of the Offer. Your attention is also drawn to the additional information set out in the appendices to this Composite Document.

Yours faithfully,

For and on behalf of the Board

TELEFIELD INTERNATIONAL (HOLDINGS) LIMITED Cheng Han Ngok Steve

Chairman

– 24 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

TELEFIELD INTERNATIONAL (HOLDINGS) LIMITED 中慧國際控股有限公司

(incorporated in the Cayman Islands with limited liability) (Stock Code: 1143)

14 October 2015

To the Independent Shareholders

Dear Sir or Madam,

MANDATORY UNCONDITIONAL CASH OFFER BY

==> picture [37 x 32] intentionally omitted <==

FOR AND ON BEHALF OF THE OFFEROR TO ACQUIRE ALL THE ISSUED SHARES (OTHER THAN THOSE ALREADY OWNED BY THE OFFEROR AND PARTIES ACTING IN CONCERT WITH IT) IN TELEFIELD INTERNATIONAL (HOLDINGS) LIMITED

We refer to the Composite Document dated 14 October 2015 jointly issued by the Company and the Offeror, of which this letter forms part. Terms defined in the Composite Document shall bear the same meanings when used herein unless the context requires otherwise.

We have been appointed to constitute the Independent Board Committee to consider the terms of the Offer and to advise you as to whether, in our opinion, the terms of the Offer are fair and reasonable so far as the Independent Shareholders are concerned and as to its acceptance. Messis Capital has been appointed as the Independent Financial Adviser to advise us in this respect. Details of its advice and the principal factors and reasons taken into consideration in arriving at its advice are set out in the letter from the Independent Financial Adviser set out on pages 26 to 45 of the Composite Document.

We also wish to draw your attention to the Letter from the Board, the Letter from Kingston Securities and the additional information set out in the appendices to the Composite Document.

Taking into account the terms of the Offer and the independent advice from Messis Capital, we consider that the terms of the Offer are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to accept the Offer. Independent Shareholders are recommended to read the full text of the letter from the Independent Financial Adviser set out in the Composite Document.

Yours faithfully, For and on behalf of

Independent Board Committee

Mr. Au-Yang Cheong Yan Peter Dr. Kwan Pun Fong Vincent Dr. Xue Quan Independent Independent Independent non-executive Director non-executive Director non-executive Director

– 25 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of the letter from the Independent Financial Adviser which sets out its advice to the Independent Board Committee for inclusion in this Composite Document.

==> picture [37 x 37] intentionally omitted <==

==> picture [200 x 35] intentionally omitted <==

14 October 2015

To: The Independent Board Committee of Telefield International (Holdings) Limited

Dear Sir/Madam,

MANDATORY UNCONDITIONAL CASH OFFER BY KINGSTON SECURITIES LIMITED ON BEHALF OF POWER PORT HOLDINGS LIMITED TO ACQUIRE ALL THE ISSUED SHARES IN TELEFIELD INTERNATIONAL (HOLDINGS) LIMITED (OTHER THAN THOSE ALREADY OWNED BY POWER PORT HOLDINGS LIMITED AND PARTIES ACTING IN CONCERT WITH IT)

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee in respect of the Offer, details of which are set out in this Composite Document dated 14 October 2015, of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as defined in the Composite Document unless the context otherwise requires.

On 22 May 2015, the Shares Vendors and the Offeror entered into the Share Sale Agreement (as supplemented on 7 and 11 August 2015), pursuant to which (i) the Offeror has conditionally agreed to purchase the 274,588,000 Sale Shares, representing approximately 66.69% of the entire issued share capital of the Company as at the Latest Practicable Date; and (ii) Dragon Fortune has conditionally agreed to sell 243,942,000 Sale Shares and Telefield Charitable has conditionally agreed to sell 30,646,000 Sales Shares for a total cash consideration of HK$557,688,228 (as to HK$495,446,202 to Dragon Fortune and as to HK$62,242,026 to Telefield Charitable), equivalent to HK$2.031 per Sale Share. Completion of the Share Sale Agreement took place on 7 October 2015. Pursuant to Rule 26.1 of Takeovers Code, the Offeror is required to make an unconditional mandatory cash offer to acquire all the issued Shares other than those already owned or agreed to be acquired by the Offeror and parties acting in concert with it.

– 26 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As at the Latest Practicable Date, the Company has 411,714,000 Shares in issue and outstanding Share Options entitling their holders to subscribe for up to an aggregate of 4,117,140 Shares at an exercise price of HK$0.65 per Share. All the Share Options are currently exercisable. If the Share Options are exercised in full during the period as permitted under the Optionholder Undertaking between Share Sale Completion and the close of the Offer, the Company will have to issue 4,117,140 Shares, representing approximately 0.99% of the enlarged issued share capital of the Company as at the Latest Practicable Date. Pursuant to the Share Sale Agreement, the Shares Vendors have procured the Optionholder to execute the Optionholder Undertaking on 22 May 2015 that (a) at any time from the date of the Share Sale Agreement up to the Share Sale Completion, the Optionholder will not exercise any outstanding Share Options; (b) the Optionholder will not accept any general offer on the Share Options; and (c) if the Optionholder exercises any Share Options during the period between Share Sale Completion and the close of the Offer pursuant to the terms of the Takeovers Code, the Optionholder will ensure and procure that all the Shares to be issued to him pursuant thereto will be and will remain to be legally and beneficially owned by him from the date of exercise of the Share Options up to and including the close of the Offer pursuant to the terms of the Takeovers Code and the Optionholder will not accept any Offer. All the outstanding Share Options are not transferable and not subject to any encumbrances.

THE INDEPENDENT BOARD COMMITTEE

The Independent Board Committee comprising all independent non-executive Directors, namely Au-Yang Cheong Yan Peter, Kwan Pun Fong Vincent and Xue Quan, has been established to advise the Independent Shareholders as to whether the terms of the Offer are fair and reasonable and as to the acceptance of the Offer.

We, Messis Capital Limited, have been appointed by the Company as the independent financial adviser to the Independent Board Committee in relation to the Offer. Our appointment has been approved by the Independent Board Committee. Our role as the independent financial adviser is to give our recommendation to the Independent Board Committee as to whether the terms of the Offer are fair and reasonable and as to the acceptance of the Offer.

BASIS OF OUR OPINION

In formulating our opinion, we have relied on the statements, information, opinions and representations contained in the Composite Document and the information and representations provided to us by the Directors and the management of the Company. We have assumed that all statements, information and representations provided by the Directors and the management of the Company, for which they are solely and wholly responsible, were true and accurate at the time when they were provided and continue to be so as at the Latest Practicable Date and

– 27 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the Shareholders will be notified of any material changes to such information and representations as soon as possible in accordance with Rule 9.1 of the Takeovers Code. We have also assumed that all statements of belief, opinion and expectation made by the Directors in the Composite Document were reasonably made after due enquiry and careful consideration. We have no reason to suspect that any material facts or information has been withheld or to doubt the truth, accuracy and completeness of the information and facts contained in the Composite Document, or the reasonableness of the opinions expressed by the Directors and the management of the Company. We believe that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, carried out any independent verification of the information provided by the Directors and the management of the Company, nor have we conducted an independent investigation into the business and affairs of the Group.

The sole director of the Offeror accepts full responsibility for the accuracy of the information contained in this Composite Document (other than the information relating to the Group, the Shares Vendors and parties acting in concert with any one of them), and confirms, having made all reasonable enquiries, that to the best of his knowledge, opinions expressed in this Composite Document (other than the opinion expressed by the Group, the Shares Vendors and parties acting in concert with any one of them) have been arrived at after due and careful consideration and there are no other facts not contained in this Composite Document, the omission of which would make any statement contained in this Composite Document misleading.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this Composite Document (other than information relating to the Offer and the Offeror, its associates and parties acting in concert with it) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this Composite Document (other than those expressed by the Offeror and parties acting in concert with it) have been arrived at after due and careful consideration and there are no other facts not contained in this Composite Document the omission of which would make any statement contained herein misleading.

We have not considered the tax and regulatory implications on the Independent Shareholders of acceptance or non-acceptance of the Offer since these depend on their individual circumstances. In particular, the Independent Shareholders who are resident overseas or subject to overseas taxes or Hong Kong taxation on securities dealings should consider their own tax positions, and if in any doubt, should consult their own professional adviser.

This letter is issued for the information of the Independent Board Committee and the Independent Shareholders solely in connection with their consideration of the Offer, and except for its inclusion in the Composite Document, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes, without our prior written consent.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and our recommendation, we have taken the following principal factors and reasons into consideration:

(A) Information of the Group before and after the Disposal

1. Information and historical financial performance of the Group before the Disposal

The Company was incorporated in the Cayman Islands with limited liability and its Shares are listed on the Main Board of the Stock Exchange. Before the Disposal, the Group had two main business segments, namely, (i) EMS; and (ii) the distribution business. Under the distribution business segment, there are three main product lines including (i) communications products; (ii) multimedia products and computer accessories; and (iii) gaming products and toys.

The table below sets out the consolidated key financial information of the Group before the Disposal for the two years ended 31 December 2014 and the six months ended 30 June 2014 and 30 June 2015 as extracted from the annual report of the Company for the year ended 31 December 2014 (the “ Annual Report ”) and the interim report of the Company for the six months ended 30 June 2015 (the “ Interim Report ”) respectively:

	For the	For the		For	the
	six months ended			year ended
	30 June			31 December
	2015		2014	2014	2013
	HK$’000		HK$’000	HK$’000	HK$’000
	(unaudited)	(unaudited)		(audited)	(audited)
Revenue	767,281		818,846	1,832,867	1,825,542
(Loss)/Profit before tax	(30,028)		(14,187)	(37,441)	37,554
(Loss)/Profit for the
year/period	(35,229)		(18,711)	(42,273)	31,414
(Loss)/Profit attributable to
owners of the Company	(4,789)		3,663	577	28,566
	As at 30 June			As at 31 December
	2015		2014	2014	2013
	(unaudited)	(unaudited)		(audited)	(audited)
Equity attributable to owners
of the Company	360,039		373,363	369,756	377,794

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

		For	the		For the
		six months ended			year ended
		30 June			31 December
		2015		2014	2014		2013
		HK$’000		HK$’000	HK$’000	HK$’000
		(unaudited)	(unaudited)		(audited)	(audited)
Segment revenue
– EMS	business	436,026		458,126	937,416	886,777
– Distribution business
(i)	Communication
	products	110,118		121,862	250,607	252,334
(ii)	Multimedia products
	and computer
	accessories	187,421		210,521	557,693	594,356
(iii)	Gaming products and
	toys	33,716		28,337	87,151		92,075
Segment profit/(loss)
– EMS	business	31,249		31,647	58,142		45,104
– Distribution business
(i)	Communication
	products	(10,844)		(4,369)	(9,478)		312
(ii)	Multimedia products
	and computer
	accessories	(37,611)		(25,187)	(66,865)		16,084
(iii)	Gaming products and
	toys	(13,356)		(11,491)	(18,785)	(10,152)

As set out in the table above, we note that the revenue of the Group before the Disposal increased slightly from approximately HK$1.826 billion for the year ended 31 December 2013 to approximately HK$1.833 billion for the year ended 31 December 2014 while the profit attributable to owners of the Company decreased significantly from approximately HK$28.6 million for the year ended 31 December 2013 to approximately HK$0.6 million for the year ended 31 December 2014. We note that the profit attributable to owners of the Company decreased significantly in 2014 compared to 2013, which was mainly due to the substantial loss recorded in the distribution business in 2014.

We also note that the revenue of the Group before the Disposal decreased from approximately HK$818.8 million for the six months ended 30 June 2014 to approximately HK$767.3 million for the six months ended 30 June 2015 and the Group before the Disposal turned from a profit attributable to owners of the Company of approximately HK$3.7 million for the six months ended 30 June 2014 to a loss attributable to owners of the Company of approximately HK$4.8 million for the six months ended 30 June 2015.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Set out below is a geographical breakdown of the Group’s revenue before the Disposal as extracted from the Annual Report:

Revenue – Germany – The PRC (including Hong Kong) – The United States of America (“USA”) – Switzerland – Italy – Poland – France – United Kingdom – Others (Note) Total	For the year ended 31 December 2014 2013 HK$’000 HK$’000 456,567 368,654 351,328 351,325 278,890 294,800 152,096 198,928 80,472 107,767 99,311 60,331 111,098 74,261 36,059 66,273 267,046 303,203 1,832,867 1,825,542	For the year ended 31 December 2014 2013 HK$’000 HK$’000 456,567 368,654 351,328 351,325 278,890 294,800 152,096 198,928 80,472 107,767 99,311 60,331 111,098 74,261 36,059 66,273 267,046 303,203 1,832,867 1,825,542
		1,825,542

Note: Others mainly include Brazil, Thailand, Sweden, Canada, South Africa, Portugal, Israel, India, Russia and Korea.

As set out in the table above, we note that the revenue of the Group was derived from many different countries around the world which mainly include Germany, the PRC, the USA, Switzerland and France.

2. Information of the Group after the Disposal

After the Disposal, the Group is principally engaged in (i) distribution of business phone systems under the RCA brand (under the category of communication products); and (ii) EMS business originally engaged by the Group. Major products manufactured under the EMS business of the Group are electronic consumer products including but not limited to residential and business phones, beauty consumer products, home appliances and appliance control products. According to the website of RCA, we note that the RCA brand is an American trademark brand administered by RCA Trademark Management. The RCA brand can be found on flat-panel televisions, home and business telephones, audio/video gear, accessories, small appliances, etc. The Group was authorised to distribute business phone systems under the RCA brand under a licensing agreement.

As disclosed in the Disposal Circular, the net proceeds from the Disposal are expected to be used as general working capital of the Group and for any other investment and business opportunities that may arise in the market from time to time that it considered value-enhancing to Shareholders and/or otherwise in the best interest of the Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As set out in the table shown in the sub-section “Information and historical financial performance of the Group before the Disposal” above, we note that the segment profit of the EMS business increased from approximately HK$45.1 million for the year ended 31 December 2013 to HK$58.1 million for the year ended 31 December 2014. We note from the Annual Report that the satisfactory performance of the EMS business towards the second half of 2014 was primarily due to the ongoing growth of this segment and healthy demand from the market. This performance was reinforced by the Group’s technical expertise and ability to meet increasingly stringent production requirements.

We also note that the segment revenue of the EMS business and distribution business of communication products decreased from approximately HK$458.1 million and approximately HK$121.9 million respectively for the six months ended 30 June 2014 to approximately HK$436.0 million and approximately HK$110.1 million for the six months ended 30 June 2015. We further note that the segment profit of the EMS business decreased from approximately HK$31.6 million for the six months ended 30 June 2014 to approximately HK$31.2 million for the six months ended 30 June 2015. Having discussed with the management of the Group, we understand that such decline in the performance of EMS business was mainly due to more cautious restocking practices initiated by the Group’s customers resulting from their view of a volatile and clouded global economy in the future. The decline in performance of EMS business was nonetheless moderated by the effective efforts of the management of the Group in adjusting the Group’s product portfolio, which in turn ensured that the communications and non-communications products offered to customers were in line with their unique needs.

In addition, the segment loss of distribution business of communication products deteriorated from approximately HK$4.4 million for the six months ended 30 June 2014 to approximately HK$10.8 million for the six months ended 30 June 2015. With regards to the decline in demand for communications products, it resulted from a change in the organisation structure of one of the Group’s customers following a merger exercise.

As advised by the management of the Group, we understand that notwithstanding the projected positive GDP growth in 2015 stated in the “IMF World Economic Outlook, July 2015”, the customers of the Group were of the view that the global economy in the future will remain volatile and clouded resulting in a decline in demand for the EMS business provided by the Group. The view of the Group’s customers on the global economy in the future will affect the demand for the products/services provided by the Group, resulting in the uncertainties of the future prospect of the Group’s business. Furthermore, as advised by the management of the Group, the rise in the performance of EMS business for the year ended 31 December 2014 as compared to the year ended 31 December 2013 was reinforced by the Group’s technical expertise and ability to meet increasingly stringent production requirements and the decline in performance of EMS business for the six months ended 30 June 2015 as compared to the six months ended 30 June 2014 was moderated by the management’s effective efforts in adjusting the Group’s product portfolio. We note that the performance of the business of the Group highly depends on the business strategy implemented by the management. Although the majority of the senior management of the Group will remain as directors in

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

subsidiaries of the Group, the Offeror intends to nominate new Director(s) for appointment to the Board after the close of the Offer. Given that the Board has the authority and power to appoint or remove directors of the subsidiaries of the Company and can influence the decision of the board of the Company’s subsidiaries, we are of the view that the proposed change to the Board composition of the Company will bring uncertainties to the future business strategy to be implemented by the board of the relevant subsidiaries of the Company in operating the Group’s EMS business.

Having discussed with the management, we understand that the revenue of the EMS business and the distribution of business phone systems of the Group after the Disposal was also mainly derived from Germany, the PRC, the USA, Switzerland and France. We have conducted research for the GDP growth of the global economy from the website of International Monetary Fund (“ IMF ”).

The IMF is an organization of 188 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. The IMF’s primary purpose is to ensure the stability of the international monetary system–the system of exchange rates and international payments that enables countries (and their citizens) to transact with each other. The IMF was created in 1945 and is governed by and accountable to the 188 countries that make up its near-global membership.

The table below sets out the gross domestic output (“ GDP ”) growth of countries (from which the revenue of the Group after the Disposal was mainly derived), as extracted from the “IMF World Economic Outlook, July 2015” issued by the IMF in July 2015, which contains, among other things, projections of the GDP growth rate for the entire year 2015:

GDP	2014	2015
		(Projections)
	Percentage change
Global	3.4	3.3
Advanced Economies	1.8	2.1
Euro Area (including Switzerland (Note))	0.8	1.5
USA	2.4	2.5
The PRC	7.4	6.8
Germany	1.6	1.6
France	0.2	1.2
Italy	-0.4	0.7
United Kingdom	2.9	2.4

Note: The GDP growth of Switzerland was not separately disclosed in the “IMF World Economic Outlook, July 2015”

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As set out in the table shown in the sub-section “Information and historical financial performance of the Group before the Disposal” above, we note that the segment revenue of the EMS business increased by 5.71% in 2014 compared to such segment revenue in 2013 and the growth of global GDP in 2014 was 3.4%. As set out in the table above, we note that the overall global GDP was projected to have a 3.3% growth rate in 2015, which is nearly the same as the global GDP growth rate in 2014, while the segment revenue of the EMS business for the six months ended 30 June 2015 decreased by 4.82% compared to such segment revenue for the six months ended 30 June 2014. As set out in the table of the geographical breakdown of the revenue shown in the sub-section “Information and historical financial performance of the Group before the Disposal” above, we note that Germany, the PRC, the USA, Switzerland and France are the top five countries from which the Group derived its revenue.We also note that, save for the PRC and United Kingdom, the GDP growth in 2015 in the key countries (from which the revenue of the Group after the Disposal was mainly derived) was higher than the GDP growth in 2014 and the GDP growth rate in 2015 in Germany, the PRC, the USA, France and Europe area (including Switzerland) was projected to be 1.6%, 6.8%, 2.5%, 1.2% and 1.5% respectively, which means that the global economy is projected to continue to grow and be in a better shape in 2015 than in 2014. Although the GDP growth rate of the PRC in 2015 is lower than that in 2014, the GDP of the PRC is still projected to record a 6.8% growth. Despite the positive GDP growth of the aforesaid countries (from which the revenue of the Group after the Disposal was mainly derived) and the positive projected GDP growth in the global economy in 2015, the financial performance of the Group after the Disposal (the EMS business and part of the distribution business of communication products) for the six months ended 30 June 2015 declined compared to the six months ended 30 June 2014. In view of the above, we consider that it casts doubt on the future prospect of the Group’s business and its ability to achieve growth under a generally positive economic environment.

Our view

Having considered that

(i) the financial performance of the Group after the Disposal (the EMS business and part of the distribution business of communication products) for the six months ended 30 June 2015 declined as compared to the six months ended 30 June 2014 notwithstanding the projected positive GDP growth in 2015 for those major countries from which the Group derives its revenue;
(ii) the decline in performance of EMS business for the six months ended 30 June 2015 was moderated because of the effective efforts of the management of the Group before the Disposal in adjusting the Group’s product portfolio. The satisfactory performance of the EMS business for the year ended 31 December 2014 was primarily due to the ongoing growth of this segment and healthy demand from the market and reinforced by the technical expertise and the ability (i.e. the ability to operate the EMS business through the management’s knowledge and experience in the EMS business) of the management of the Group before the Disposal to meet increasingly stringent production requirements. The performance of the business of

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the Group highly depends on the business strategy implemented by the management and the proposed change to the Board composition of the Company (which is further discussed below) will bring uncertainties to the future business strategies to be implemented by the management of the Group;

(iii) although the majority of the senior management of the Group will remain as directors in subsidiaries of the Group, the Offeror intends to nominate new Director(s) for appointment to the Board after the close of the Offer. Given that the Board has the authority and power to appoint or remove directors of the subsidiaries of the Company and can influence the decision of the board of the Company’s subsidiaries (such as when there are differences in opinions in various aspects in relation to the business of the Group, such as the mode of operation, the strategy of sales and marketing, the annual target of the financial performance, the category of target customers, the technique of the cost control, etc.), we are of the view that the proposed change to the Board composition of the Company will bring uncertainties to the business, operation, financial performance and position of the Group, as further discussed in the sub-section “Intention of the Offeror” below;
(iv) the ultimate beneficial owner of the Offeror does not have direct experience in EMS business and distribution of business phone systems, in which the Group is principally engaged after the Disposal, as further discussed in the sub-section “Information on the Offeror” below; and
(v) while the future performance of the Group will depend on, among other factors, the business plan and strategies to be proposed and implemented by the Offeror and the new Director(s) intended to be nominated by it to the Board, the identity, background and experience of such new Director(s) are not yet known and the Offeror has yet to formulate a substantial business plan for the Group as at the Latest Practicable Date pending a detailed review of the business operations and financial position of the Group to be conducted by the Offeror after the completion of the Offer, which is further discussed in the sub-section “Intention of the Offeror” below;

we are of the view that there are uncertainties regarding the future prospect of the Group.

(B) Principal terms of the Offer

1. The Offer

For each Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$2.031 in cash

The Offer Price of HK$2.031 per Offer Share is the same as the purchase price for each Sale Share payable by the Offeror under the Share Sale Agreement. As at the Latest Practicable Date, the Company has 411,714,000 Shares in issue.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Offer Price of HK$2.031 per Offer Share represents:

(i) a discount of approximately 35.93% to the closing price of HK$3.17 per Share as quoted on the Stock Exchange on the Last Trading Day;
(ii) a discount of approximately 32.57% to the average closing price of approximately HK$3.012 per Share, being the average of the closing prices of the Shares as quoted on the Stock Exchange for the 5 trading days up to and including the Last Trading Day;
(iii) a discount of approximately 31.41% to the average closing price of approximately HK$2.961 per Share, being the average of the closing prices of the Shares as quoted on the Stock Exchange for the 10 trading days up to and including the Last Trading Day;
(iv) a premium of approximately 0.05% over the closing price of HK$2.03 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and

Further terms and conditions of the Offer, including the procedures for acceptance, are set out in Appendix I of this Composite Document.

2. Historical Share price performance

Set out below is a chart showing the daily closing prices of the Shares as quoted on the Stock Exchange during the period from 22 May 2014, being the date which is 12 months prior to the Last Trading Date, up to and including the Latest Practicable Date (the “ Review Period ”):

==> picture [397 x 206] intentionally omitted <==

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

Comparsion of the Offer Price to Market Prices
3.5
Last Trading Day
3
2.5
2
HKD
MOU announcement
1.5
Closing Price
1 Offer Price
0.5 Joint Announcement
0
Date
5/22/20146/22/20147/22/20148/22/20149/22/201410/22/201411/22/201412/22/20141/22/20152/22/20153/22/20154/22/20155/22/20156/22/20157/22/20158/22/20159/22/2015
----- End of picture text -----

Source: The website of the Stock Exchange (www.hkex.com.hk)

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

During the Review Period, the closing price of the Shares ranged from the lowest closing price of HK$0.61 per Share to the highest closing price of HK$3.21 per Share, with a simple arithmetic average closing price of approximately HK$1.04 per Share. We note that out of 247 trading days from 22 May 2014 up to the Last Trading Date, there were only 18 trading days where the closing price of the Share was the same as or higher than the Offer Price of HK$2.031.

We note that before the announcement of the memorandum of understanding in relation to the possible transaction (“ MOU ”) released on 27 April 2015, the historical closing prices of the Shares were in general at below HK$1.0 per Share. We also note that the Share prices sharply increased from HK$0.73 on 13 April 2015 to HK$1.26 on 14 April 2015 and further increased to HK$2.16 on 23 April 2015, being the last trading day before the announcement of MOU. The Company announced that the Directors were not aware of any reason for the unusual prices and volume movement on 14 April 2015. We further note that during the period from 14 April 2015 to 23 April 2015, the Company did not issue any announcement except the release of the annual report on 23 April 2015. Therefore, the reason for the surge of the closing price of the Shares shortly before the the publication of the MOU announcement was unknown. We further note that the Share prices increased from HK$2.16 on 28 April 2015, being the first trading day after the release of the MOU announcement, to HK$3.17 on 21 May 2015, being the Last Trading Day. We have enquired with the management regarding the possible reasons for the increase in the Share price for the period from the publication of the MOU announcement and up to the Last Trading Day and were advised that at that time, they were not aware of any reason for such increase. In addition, no announcement in relation to any material change or improvement of the business operation of the Group was released in the aforesaid period. Therefore, we believe that the surge of the closing price of the Share after the publication of the MOU announcement was likely to be attributable to the market speculation on a possible takeover. After the publication of the Joint Announcement, the closing price of the Share decreased to HK$2.14 on 12 August 2015 and further decreased to HK$2.03 as at the Latest Practicable Date.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3. Liquidity of the Shares

The table below sets out the trading volume of the Shares during the Review Period:

					Percentage
					of average
					daily
					trading
				Percentage of	volume to
				average daily	the total
				trading	number of
	Total			volume to the	Shares
	monthly			total number	held by the
	trading	No. of	Average daily	of issued	Independent
	volume of	trading	trading volume of	Shares	Shareholders
Month	the Shares	days	the Shares	(Note 1)	(Note 2)
2014
May (from 22 May
to 31 May)	17,680,000	7	2,525,714	0.61%	2.06%
June	23,600,000	20	1,180,000	0.29%	0.96%
July	42,644,000	22	1,938,364	0.47%	1.58%
August	6,958,000	21	331,333	0.08%	0.27%
September	17,168,000	21	817,524	0.20%	0.67%
October	6,816,821	21	324,611	0.08%	0.26%
November	13,512,000	20	675,600	0.16%	0.55%
December	5,786,000	18	321,444	0.08%	0.26%
2015
January	5,040,000	20	252,000	0.06%	0.21%
February	4,510,000	16	281,875	0.07%	0.23%
March	11,982,000	20	599,100	0.15%	0.49%
April	185,248,700	17	10,896,982	2.65%	8.89%
May	47,276,700	14	3,376,907	0.82%	2.75%
June			Trading suspended
July			Trading suspended
August	44,416,821	14	3,172,630	0.77%	2.59%
September	6,202,150	20	310,108	0.08%	0.25%
October (up to the Latest
Practicable Date)	9,914,000	7	1,416,286	0.34%	1.16%

Source: The website of the Stock Exchange (www.hkex.com.hk)

Notes:

(1) Based on the 411,714,000 Shares in issue as at the Latest Practicable Date.

(2) Based on 122,612,000 Shares held by the Independent Shareholders as at the Latest Practicable Date.

As illustrated in the table above, the average daily trading volume of the Shares during the Review Period ranged from approximately 252,000 Shares to approximately 10,896,982 Shares, representing approximately 0.06% to approximately 2.65% of the total number of the Shares in issue as at the Latest Practicable Date, or approximately 0.21% to approximately 8.89% of the total number of Shares held by Independent Shareholders as at the Latest Practicable Date.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We note that the trading volume of the Shares in April 2015 increased significantly, resulting from the increase in trading volume in the period from 14 April 2015 to 23 April 2015, compared to other months during the Review Period. We note that the Company announced, on 14 April 2015, that the Directors were not aware of any reason for such unusual volume movement. Save for the aforesaid period, the historical trading volume of the Shares was relatively thin.

We also note that the daily trading volume of the Shares surged after the publication of the MOU announcement, i.e. period commencing from 28 April 2015 to the Latest Practicable Date. We believe that the significant increase in trading volume of the Shares during the aforesaid period was likely to be due to the market reaction to the possibility of the Offer. Although the trading volume of the Shares tended to be active during the Offer Period, the sustainability of the recent level of trading volume of the Shares after the Offer Period is uncertain.

Given the thin historical average daily trading volume of the Shares, it is uncertain that the overall liquidity of the Shares could be maintained and that there would be sufficient liquidity in the Shares for the Independent Shareholders to dispose of a significant number of Shares in the open market without exerting a downward pressure on the Share price. We, therefore, consider that the Share Offer provides the Independent Shareholders with an assured exit if they wish to realize their investments in the Shares.

4. Comparable companies analysis

In assessing the fairness and reasonableness of the Consideration, we note that the price-to-earnings ratio (“ PER ”) and the price-to-book ratio (“ PBR ”) approaches are commonly adopted valuation methods for the assessment of the value of a business.

As discussed earlier in the section headed “Information of the Group after the Disposal”, the Group is principally engaged in (i) distribution of business phone systems under the RCA brand; and (ii) EMS business originally engaged by the Group. Major products manufactured under the EMS business of the Group are electronic consumer products including but not limited to residential and business phones, beauty consumer products, home appliances and appliance control products. Accordingly we consider the segment results of the EMS business and part of the distribution business of communication products shown in the segment table in the section headed “Information of the Group before the Disposal” reflect the financial performance of the Group after the Disposal.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

According to the Annual Report, we note that the segment profit of the EMS business for the year ended 31 December 2014 was approximately HK$58.1 million. As advised by the management of the Group, the profit of EMS business was mainly derived from Telefield Limited, 廣州中慧電子有限公司 (transliterated as Guangzhou Telefield Limited) and 惠州中慧電子有限公司 (transliterated as Huizhou Telefield Limited), which are 100% held by the Company. We also note that the segment loss of the distribution business of communication products for the year ended 31 December 2014 was approximately HK$9.5 million. As advised by the management of the Group, the segment loss of approximately HK$6.1 million was attributable to the Group after the Disposal. Based on the above, we have calculated the implied PER of the Company based on the Offer Price and such segment profit (segment profit of EMS business and the segment loss of distribution business of communication products which was attributable to the Group after the Disposal). The PER implied by the Offer Price is approximately 16.07 times.

As stated in the Disposal Circular, the Disposal would only result in a gain on disposal of immaterial amount and accordingly the net asset value of the Group would not have material change upon the Disposal. However, the net asset value of the Group would decrease by the amount of the professional fee of approximately HK$4 million in relation to the Disposal. Accordingly, in calculating the implied PBR of the Company, we have deducted HK$4 million from the net asset value of the Group as at 30 June 2015. The reassessed net asset value of the Group after taking into account such professional fee in relation to the Disposal would be approximately HK$356 million (or HK$0.865 per Share) and the PBR implied by the Offer Price is approximately 2.35 times.

For comparison purpose, we have, on a best effort basis, conducted a search of comparable companies which meet the criteria of (i) being listed on the Hong Kong Stock Exchange; (ii) one of its business segment should be related to the manufacturing of electronic products; and (iii) the majority (at least 50%) of its revenue for its latest financial year was derived from such business segment; and (iv) have a market capitalisation ranging between HK$251.1 million and HK$1,321.6 million, which represents the range of the historical market capitalization of the Company during the Review Period, as at the Latest Practicable Date, which is considered to be comparable to the market capitalisation of the Remaining Group of approximately HK$836.2 million as implied by the Offer Price. Based on the abovementioned criteria, we have identified 10 comparable companies (the “ Comparables ”) by searching through published information on the Stock Exchange’s website. To the best of our knowledge, effort and endeavor and based on our search conducted according to the abovementioned criteria, we believe that the list of Comparables is an exhaustive list of those fair and representative comparable companies for comparison purpose.

We have computed the PER and the PBR for each of the Comparables based on (i) their respective market capitalization as at the Latest Practicable Date with reference to the closing price of their respective shares as quoted on the Stock Exchange on the Latest Practicable Date; and (ii) in relation to PER, the net profit attributable to the equity holders of the Comparables as set out in their respective latest audited annual reports released on or before Latest Practicable Date and, in relation to PBR, the equity attributable to the equity holders of the Comparables as set out in their respective latest annual reports/interim report released on or before Latest Practicable Date.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We set out our findings in the table below:

		Closing share
		price as at
		Latest
Stock		Practicable	Market
code	Company name	Day	capitalisation	PER	PBR
		HK$	HK$ (million)
40	Gold Peak Industries	0.97	761.2	14.77	0.54
	(Holdings) Limited
167	IDT International	0.325	845.0	N/A	2.06
	Limited			(Note)
320	Computime Group	1.18	984.0	12.90	0.87
	Limited
485	Shihua Development	0.098	286.2	N/A	3.49
	Company Limited			(Note)
601	Group Sense	0.325	467.1	N/A	2.16
	(International)			(Note)
	Limited
833	Alltronics Holdings	1.70	646.8	14.30	2.56
	Limited
912	Suga International	2.11	584.5	3.43	0.90
	Holdings Limited
927	Fujikon Industrial	1.00	420.2	33.34	0.56
	Holdings Limited
1249	Tonly Electronics	4.91	1,223.4	8.16	1.11
	Holdings Limited
			Average	14.48	1.58
			Maximum	33.34	3.49
			Minimum	3.43	0.54
	The Offer Price	2.031		16.07	2.35

Source: The website of the Stock Exchange (www.hkex.com.hk)

Note: These companies recorded net loss.

As illustrated in the analysis above, the PER of the Comparables range from a low of approximately 3.43 times to a high of approximately 33.34 times with the average being approximately 14.48 times. Accordingly, the implied PER of the Offer Price of approximately 16.07 times is (i) within the range of the Comparables’ PER; and (ii) larger than the average PER of the Comparables.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The PBR of the Comparables range from a low of approximately 0.54 times to a high of approximately 3.49 times with the average being approximately 1.58 times. Accordingly, the implied PBR of the Offer Price of approximately 2.35 times is (i) within the range of the Comparables’ PBR; and (ii) larger than the average PBR of the Comparables.

Our view

Having considered that:

(i) during the Review Period, the average closing price of the Shares was approximately HK$1.04 per Share, which was far below the Offer Price HK$2.031;
(ii) a premium of approximately 95.3% over the average closing price of approximately HK$1.04 per Share during the Review Period; and a premium of approximately 134.8% over the reassessed unaudited consolidated net asset value attributable to owners of the Group after the Disposal as at 30 June 2015;
(iii) the historical trading volume of the Shares was thin during the Review Period (in particular during the period prior to the publication of the MOU announcement) as discussed in “Liquidity of the Shares” above;
(iv) the PER and the PBR of the Company (based on the Offer Price) is above the average PER and PBR of the Comparables respectively,

we are of the view that the terms of the Offer are fair and reasonable so far as the Independent Shareholders are concerned.

(C) Information on the Offeror and the intention of the Offeror in relation to the Group

1. Information on the Offeror

As stated in the “Letter from Kingston Securities” contained in the Composite Document, the Offeror is an investment holding company incorporated in the BVI with limited liability on 31 March 2015. The Offeror is wholly and ultimately owned by Mr. Yang Zhihui (“ Mr. Yang ”). Mr. Yang is currently the controlling shareholder (as defined under the Listing Rules), as well as the chairman and an executive director of Landing International Development Limited (the shares of which are listed on the Main Board, stock code: 582). He is also the founder and chairman of board of directors of 安徽藍鼎控股集團有限公司 (transliterated as Anhui Landing Holding Group Co., Ltd), which is principally engaged in real estate development business in the PRC. Mr. Yang has over 11 years of experience in property development in the PRC.

2. Intention of the Offeror

As stated in the “Letter from Kingston Securities” contained in the Composite Document, the Offeror intends to continue the principal business of the Group, which, after the Disposal, comprises EMS business and distribution of business phone system.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Offeror will, following the completion of the Offer, conduct a detailed review of the business operations and financial position of the Group for the purpose of developing a sustainable business plan or strategy for the Group. In addition, in order to broaden its income source and to accelerate growth and future development of the Group, the Offeror will explore and consider any other investment and business opportunities that may arise in the market from time to time that it considers value-enhancing to Shareholders and/or otherwise in the best interests of the Group. As at the Latest Practicable Date, no such investment or business opportunities have been identified nor has the Offeror entered into any agreement, arrangements, understandings, intention or negotiation in relation to the injection of any assets or business into the Group.

The Offeror has no intention to terminate any employment of the employees of the Group or to make significant changes to any employment (except for the proposed nomination of new directors to the Board as detailed in the paragraph headed”Proposed change to the Board of the Company”in the “Letter from Kingston Securities”) or to dispose of or re-allocate the assets of the Group which are not in the ordinary and usual course of business of the Group. The Offeror has not entered into any agreement, arrangements, understandings or negotiations in relation to the continued employment of the employees, disposal and/or re-deployment of the assets (including fixed assets) of the Group, or termination or scaling down of any business of the Group.

The Offeror has no intention to privatise the Group and intends to maintain the listing of the Shares on the Stock Exchange. The Offeror will undertake to the Stock Exchange to take appropriate steps to ensure that not less than 25% of the entire issued share capital of the Company will continue to be held by the public at all times.

Having considered that

(i) the ultimate beneficial owner of the Offeror has abundant management experience in real estate development business in the PRC but does not have direct experience in EMS business and distribution of business phone systems, in which the Group is principally engaged after the Disposal; and
(ii) while the future performance of the Group will depend on, among other factors, the business plan and strategies to be proposed and implemented by the Offeror and the new Director(s) intended to be nominated by it to the Board, the identity, background and experience of such new Director(s) are not yet known and the Offeror has yet to formulate a substantial business plan for the Group as at the Latest Practicable Date pending a detailed review of the business operations and financial position of the Group to be conducted by the Offeror after the completion of the Offer,

we are of the view that there remains uncertainty on the future performance of the Group under the new controlling Shareholder (i.e. the Offeror).

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

RECOMMENDATION

Having considered that

(i) there are uncertainties regarding the future prospect of the Group as discussed in sections (A) and (C) above;
(ii) while the future performance of the Group will depend on, among other factors, the business plan and strategies to be proposed and implemented by the Offeror and the new Director(s) intended to be nominated by it to the Board, the identity, background and experience of such new Director(s) are not yet known and the Offeror has yet to formulate a substantial business plan for the Group as at the Latest Practicable Date pending a detailed review of the business operations and financial position of the Group to be conducted by the Offeror after the completion of the Offer;
(iii) the Offer Price of HK$2.031 per Share represents a premium of 95.3% over the average closing price during the Review Period and a premium of approximately 134.8% over the reassessed unaudited consolidated net asset value attributable to owners of the Group after the Disposal as at 30 June 2015;
(iv) the historical trading volume of the Shares was thin during the Review Period (in particular during the period prior to the publication of the MOU announcement) and the sustainability of the recent level of trading volume of the Shares after the Offer Period is uncertain; and
(v) the PER and the PBR of the Company (based on the Offer Price) is above the average PER and PBR of the Comparables respectively.

we are of the opinion that the terms of the Offer are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to accept the Offer. In view of the volatility of market conditions, those Independent Shareholders who intend to accept the Offer are reminded that they should closely monitor the market price and the liquidity of the Shares during the Offer Period and should consider selling their Shares in the open market, rather than accepting the Offer, if the net proceeds from the sale of such Shares in the open market would exceed the net proceeds receivable under the Offer.

In addition, the Independent Shareholders who wish to realize their investments in the Company in the open market should also consider and monitor the trading volume of the Shares during the Offer Period as, having taken into account the thin historical trading volume of the Shares on the Stock Exchange as discussed in the sub-section “Liquidity of Shares” of this letter, they may experience difficulty in disposing of their Shares in the open market without creating downward pressure on the price of the Shares.

– 44 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As each individual Independent Shareholder would have different investment objectives and/or circumstances, we would recommend the Independent Shareholders who may require advice in relation to any aspect of the Composite Document, or as to the action to be taken, to consult a licensed securities dealer, bank manager, solicitor, professional accountant, tax adviser or other professional adviser. Furthermore, they should carefully read the procedures for accepting the Offers as set out in the Composite Document, its appendices and the accompanying Forms of Acceptance.

Yours faithfully, For and on behalf of Messis Capital Limited

Kinson Li Thomas Lai Managing Director Chief Executive Officer

Note: Mr. Thomas Lai and Mr. Kinson Li are licensed persons registered with the SFC and responsible officers of Messis Capital Limited to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO and has over 19 and 17 years of experience, respectively, in the corporate finance industry.

– 45 –

FURTHER TERMS AND PROCEDURES FOR ACCEPTANCE OF THE OFFER

APPENDIX I

1. GENERAL PROCEDURES FOR ACCEPTANCE OF THE OFFER

To accept the Offer, you should complete and sign the accompanying Form of Acceptance in accordance with the instructions printed thereon, which instructions form part of the terms of the Offer.

(a) If the Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) in respect of your Share(s) is/are in your name, and you wish to accept the Offer, you must send the duly completed Form of Acceptance together with the relevant Share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof), by post or by hand, to the Registrar at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong in an envelope marked “Telefield International Offer” in any event not later than 4:00 p.m., on the Closing Date or such later time and/or date as the Offeror may determine and announce in accordance with the Takeovers Code.
(b) If the Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) in respect of your Shares is/are in the name of a nominee company or a name other than your own, and you wish to accept the Offer in respect of your Shares, you must either:
(i) lodge your Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) with the nominee company, or other nominee, with instructions authorising it to accept the Offer on your behalf and requesting it to deliver the duly completed Form of Acceptance together with the relevant Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) to the Registrar; or
(ii) arrange for the Shares to be registered in your name by the Company through the Registrar, and send the duly completed Form of Acceptance together with the relevant Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) to the Registrar; or
(iii) if your Shares have been lodged with your licensed securities dealer/registered institution in securities/custodian bank through CCASS, instruct your licensed securities dealer/registered institution in securities/custodian bank to authorize HKSCC Nominees Limited to accept the Offer on your behalf on or before the deadline set by HKSCC Nominees Limited (which is normally one Business Day before the latest date on which acceptances of the Offer must be received

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FURTHER TERMS AND PROCEDURES FOR ACCEPTANCE OF THE OFFER

APPENDIX I

by the Registrar). In order to meet the deadline set by HKSCC Nominees Limited, you should check with your licensed securities dealer/registered institution in securities/custodian bank for the timing on processing of your instruction, and submit your instruction to your licensed securities dealer/registered institution in securities/custodian bank as required by them; or

(iv) if your Shares have been lodged with your investor participant’s account maintained with CCASS, authorise your instruction via the CCASS Phone System or CCASS Internet System on or before the deadline set by HKSCC Nominees Limited (which is normally one Business Day before the latest date on which acceptances of the Offer must be received by the Registrar).
(c) If the Share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) in respect of your Shares is/are not readily available and/or is/are lost and you wish to accept the Offer in respect of your Shares, the Form of Acceptance should nevertheless be completed and delivered to the Registrar together with a letter stating that you have lost one or more of your Share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) or that it/they is/are not readily available. If you find such document(s) or if it/they become(s) available, the relevant Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) should be forwarded to the Registrar as soon as possible thereafter. If you have lost your Share certificate(s), you should also write to the Registrar for a letter of indemnity which, when completed in accordance with the instructions given, should be returned to the Registrar.
(d) If you have lodged transfer(s) of any of your Shares for registration in your name and have not yet received your Share certificate(s), and you wish to accept the Offer in respect of your Shares, you should nevertheless complete the Form of Acceptance and deliver it to the Registrar together with the transfer receipt(s) duly signed by yourself. Such action will be deemed to be an irrevocable authority to Kingston Securities and/or the Offeror or their respective agent(s) to collect from the Registrar on your behalf the relevant Share certificate(s) when issued and to deliver such certificate(s) to the Registrar and to authorise and instruct the Registrar to hold such share certificate(s), subject to the terms and conditions of the Offer, as if it was/they were delivered to the Registrar with the Form of Acceptance.

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FURTHER TERMS AND PROCEDURES FOR ACCEPTANCE OF THE OFFER

APPENDIX I

(e) Acceptance of the Offer will be treated as valid only if the completed Form of Acceptance in compliance with Note 1 to Rule 30.2 of the Takeovers Code is received by the Registrar no later than 4:00 p.m. on the Closing Date or such later time and/or date as the Offeror may determine and announce with the consent of the Executive in accordance with the Takeovers Code and the Registrar has recorded that the acceptance and the relevant documents as required under this paragraph have been so received, and is:
(i) accompanied by the relevant Share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) and, if the Share certificate(s) is/are not in your name, such other documents in order to establish your right to become the registered holder of the relevant Shares;
(ii) from a registered Shareholder or his/her/its personal representative (but only up to the amount of the registered holding and only to the extent that the acceptance relates to Shares which are not taken into account under another subparagraph of this paragraph; or

(iii) certified by the Registrar or the Stock Exchange.

(f) If the Form of Acceptance is executed by a person other than the registered Shareholder appropriate documentary evidence of authority to the satisfaction of the Registrar must be produced.
(g) In Hong Kong, seller’s ad valorem stamp duty arising in connection with acceptances of the Offer will be payable by relevant Independent Shareholders at a rate of 0.1% of (i) the market value of the Offer Shares; or (ii) the consideration payable by the Offeror in respect of the relevant acceptances of the Offer, whichever is higher, will be deducted from the cash amount payable by the Offeror to such Independent Shareholder on acceptance of the Offer (where the stamp duty calculated includes a fraction of HK$1, the stamp duty would be rounded-up to the nearest HK$1). The Offeror will arrange for payment of the seller’s ad valorem stamp duty on behalf of relevant Independent Shareholders accepting the Offer and will pay the buyer’s ad valorem stamp duty in connection with the acceptances of the Offer and the transfer of the Offer Shares in accordance with the Stamp Duty Ordinance (Chapter 117 of the Laws of Hong Kong).
(h) No acknowledgement of receipt of any Form of Acceptance, Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) will be given.

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FURTHER TERMS AND PROCEDURES FOR ACCEPTANCE OF THE OFFER

APPENDIX I

2. ACCEPTANCE PERIOD AND REVISIONS

(a) Unless the Offer has previously been revised or extended, with the consent of the Executive, in accordance with the Takeovers Code, the Form of Acceptance must be received by 4:00 p.m. on the Closing Date in accordance with the instructions printed on the relevant Form of Acceptance, and the Offer will be closed on the Closing Date.
(b) The Offeror and the Company will jointly issue an announcement through the website of the Stock Exchange no later than 7:00 p.m. on the Closing Date stating whether the Offer has been extended, revised or has closed for acceptance.
(c) In the event that the Offeror decides to extend the Offer, at least 14 days’ notice by way of announcement will be given, before the latest time and date for acceptance of the Offer, to those Independent Shareholders who have not accepted the Offer.
(d) If the Offeror revises the terms of the Offer, all Independent Shareholders, whether or not they have already accepted the Offer, will be entitled to the revised terms. The revised Offer must be kept open for at least 14 days following the date on which the revised offer document is posted.
(e) If the closing date of the Offer is extended, any reference in this Composite Document and in the Form of Acceptance to the closing date shall, except where the context otherwise requires, be deemed to refer to the closing date of the Offer so extended.

3. ANNOUNCEMENT

(a) By 6:00 p.m. on the Closing Date (or such later time and/or date as the Executive may in exceptional circumstances permit), the Offeror must inform the Executive and the Stock Exchange of its decision in relation to the revision, extension or expiry of the Offer. The Offeror must publish an announcement on the Stock Exchange’s website by 7:00 p.m. on the Closing Date stating whether the Offer has been extended, revised or has closed for acceptance.

Such announcement must state the following:

(i) the total number of Shares and rights over Shares for which acceptances of the Offer have been received;
(ii) the total number of Shares and rights over Shares held, controlled or directed by the Offeror or its concert parties before the Offer Period;
(iii) the total number of Shares and rights over Shares acquired or agreed to be acquired by the Offeror or its concert parties during the Offer Period;

– I-4 –

FURTHER TERMS AND PROCEDURES FOR ACCEPTANCE OF THE OFFER

APPENDIX I

(iv) details of any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company which the Offeror or any parties acting in concert with it has borrowed or lent, save for any borrowed securities which have been either on-lent or sold; and
(v) the percentages of the relevant classes of share capital of the Company and the percentages of voting rights of the Company represented by these numbers.
(b) In computing the total number of Shares represented by acceptances, only valid acceptances in complete and good order and in compliance with Note 1 to Rule 30.2 of the Takeovers Code, which have been received by the Registrar no later than 4:00 p.m. on the Closing Date, being the latest time and date for acceptance of the Offer, shall be included.

4. RIGHT OF WITHDRAWAL

(a) Acceptance of the Offer tendered by the Independent Shareholders shall be irrevocable and cannot be withdrawn, except in the circumstances set out in subparagraph (b) below.
(b) If the Offeror is unable to comply with the requirements set out in paragraph 3 of this Appendix headed “Announcement” above, the Executive may require pursuant to Rule 19.2 of the Takeovers Code that the Independent Shareholders who have tendered acceptance to the Offer be granted a right of withdrawal on terms that are acceptable to the Executive until the requirement of Rule 19 of the Takeovers Code can be met.

In such case, when the Independent Shareholders withdraw their acceptance(s), the Offeror shall, as soon as possible but in any event within 10 days thereof, return by ordinary post the Share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) lodged with the Form of Acceptance to the relevant Independent Shareholder(s).

5. SETTLEMENT OF THE OFFER

Provided that the accompanying Form of Acceptance, together with the Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) are valid, complete and in good order and have been received by the Registrar no later than 4:00 p.m. on the Closing Date or such later time and/or date as the Offeror may determine and announce in accordance with the Takeovers Code, a cheque for the amount due to each of the accepting Independent Shareholders in respect of the Shares tendered under the Offer (less seller’s ad valorem stamp duty payable by them, as the case maybe) will be despatched to the accepting Independent Shareholders by ordinary post at their own risk within 7 Business Days after the date of receipt of all relevant documents which render such acceptance complete and valid by the Registrar in compliance with Note 1 to Rule 30.2 of the Takeovers Code.

– I-5 –

FURTHER TERMS AND PROCEDURES FOR ACCEPTANCE OF THE OFFER

APPENDIX I

Settlement of the consideration to which any accepting Independent Shareholder is entitled under the Offer will be paid by the Offeror in full in accordance with the terms of the Offer (save with respect of the payment of seller’s ad valorem stamp duty) set out in this Composite Document (including this Appendix) and the accompanying Form of Acceptance, without regard to any lien, right of set-off, counterclaim or other analogous right to which the Offeror may otherwise be, or claim to be, entitled against such Independent Shareholder.

No fraction of a cent will be payable and the amount of consideration payable to an Independent Shareholder who accepts the Offer will be rounded up to the nearest cent.

6. OVERSEAS SHAREHOLDERS

The Offer is in respect of securities of a company incorporated in the Hong Kong and is subject to the procedural and disclosure requirements of Hong Kong which may be different from other jurisdictions. Any Overseas Shareholders who wish to participate in the Offer but with a registered address outside Hong Kong are subject to, and may be limited by, the laws and regulations of their respective jurisdictions in connection with their participation in the Offer. The Overseas Shareholders who are citizens, residents or nationals of a jurisdiction outside Hong Kong should observe relevant applicable legal or regulatory requirements and, where necessary, seek legal advice. It is the responsibility of the Overseas Shareholders who wish to accept the Offer to satisfy themselves as to the full observance of the laws and regulations of the relevant jurisdictions in connection with the acceptance of the Offer (including the obtaining of any governmental or other consent which may be required or the compliance with other necessary formalities and the payment of any transfer or other taxes due in respect of such jurisdictions).

7. TAX IMPLICATIONS

Independent Shareholders are recommended to consult their own professional advisers if they are in any doubt as to the taxation implications of their acceptance of the Offer. It is emphasised that none of the Offeror, the Company and their ultimate beneficial owners and parties acting in concert with any of them, Kingston Securities, Kingston Corporate Finance, Veda Capital, Messis Capital, the Registrar or any of their respective directors or any persons involved in the Offer accepts responsibility for any taxation effects on, or liabilities of, any person or persons as a result of their acceptance of the Offer.

8. GENERAL

(a) All communications, notices, Form of Acceptance, certificates, transfer receipts and other documents of title or of indemnity or of any other nature to be delivered by or sent to or from the Independent Shareholders will be delivered by or sent to or from them, or their designated agents, at their own risk, and none of the Offeror, the Company and their ultimate beneficial owners and parties acting in concert with any of them, Kingston Securities, Kingston Corporate Finance, Veda Capital Limited, Messis Capital, the Registrar or any of their respective directors or any persons involved in the Offer accepts any liability for any loss or any other liabilities whatsoever which may arise as a result.

– I-6 –

FURTHER TERMS AND PROCEDURES FOR ACCEPTANCE OF THE OFFER

APPENDIX I

(b) Acceptance of the Offer by any person or persons will be deemed to constitute a warranty by such person or persons to the Offeror that the Shares tendered under the Offer are sold by such person or persons free from all liens, charges, claims, equities, encumbrances, rights of preemption and any other third party rights of any nature and together with all rights attaching to them, including the rights to receive dividends if any, declared, made or paid by the Company on the posting of this Composite Document.
(c) Acceptance of the Offer by any nominee will be deemed to constitute a warranty by such nominee to the Offeror that the number of Shares in respect of which it is indicated in the Form of Acceptance is the aggregate number of Shares held by such nominee for such beneficial owners who accept the Offer.
(d) The provisions set out in the accompanying Form of Acceptance form part of the terms of the Offer.
(e) The accidental omission to despatch this Composite Document and/or the accompanying Form of Acceptance or either of them to any person to whom the Offer is made shall not invalidate the Offer in any way.
(f) The Offer and all acceptances will be governed by and construed in accordance with the laws of Hong Kong.
(g) Due execution of Form of Acceptance in compliance with Note 1 to Rule 30.2 of the Takeovers Code, will constitute an authority to the Offeror or its agents to complete and execute on behalf of the person accepting the Offer, and to do any other act that may be necessary or expedient for the purpose of vesting in the Offeror, or such other person as it may direct.
(h) The Offer is made in accordance with the Takeovers Code.
(i) In making their decision, Independent Shareholders must rely on their own examination of the Group and the terms of the Offer, including the merits and risks involved. The contents of this Composite Document, including any general advice or recommendation contained herein together with the Form of Acceptance, shall not be construed as any legal or business advice on the part of the Offeror, the Company, Kingston Securities, Messis Capital or their respective professional advisers. Independent Shareholders should consult their own professional advisers for professional advice.
(j) The English text of this Composite Document and of the accompanying Form of Acceptance shall prevail over the Chinese text.

– I-7 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

1. FINANCIAL SUMMARY

The following is a summary of the audited financial results of the Group for each of the three years ended 31 December 2012, 2013 and 2014 and the unaudited financial results of the group for the six months ended 30 June 2015 as extracted from respective annual reports of the Company and the interim report of the Company:

RESULTS Revenue Profit/(loss) before tax Income tax expense Profit/(loss) for the period Attributable to: Owners of the Company Non-controlling interests Earnings/(loss) per Share attributable to the Shareholders Basic (HK cents) Diluted (HK cents)	For the year ended 31 2014 2013 HK$’000 HK$’000 1,832,867 1,825,542 (37,441) 37,554 (4,832) (6,140) (42,273) 31,414 577 28,566 (42,850) 2,848 0.14 6.94 N/A N/A	December 2012 HK$’000 1,458,192 22,995 (3,507) 19,488 23,345 (3,857) 5.67 N/A	For the six months ended 30 June 2015 HK$’000 (unaudited) 767,281 (30,028) (5,201) (35,229) (4,789) (30,440) (1.16) N/A

There were no exceptional items because of size, nature of incidence in respect of the consolidated financial statements of the Company during each of the three years end 31 December 2012, 2013 and 2014 and the six months ended 30 June 2015.

The auditor of the Company, RSM Nelson Wheeler, issued unqualified opinion on the consolidated financial statements of the Company for the years ended 31 December 2012, 2013 and 2014.

– II-1 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

2. AUDITED FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 DECEMBER 2014

The following financial information is extracted from the annual report of the Company for the year ended 31 December 2014:

Consolidated Statement of Profit or Loss

For the year ended 31 December 2014

Note Revenue 7 Cost of goods sold Gross profit Other income 9 Selling and distribution expenses Administrative expenses Other operating expenses (Loss)/profit from operations Finance costs 10 Share of profit/(loss) of associates Share of loss of a joint venture (Loss)/profit before tax Income tax expense 11 (Loss)/profit for the year 12 Attributable to: Owners of the Company 15 Non-controlling interests Earnings per share 17 Basic (HK cents) Diluted (HK cents)	2014 HK$’000 1,832,867 (1,484,356) 348,511 65,890 (161,722) (189,141) (83,675) (20,137) (15,873) 2 (1,433) (37,441) (4,832) (42,273) 577 (42,850) (42,273) 0.14 N/A	2013 HK$’000 1,825,542 (1,452,278) 373,264 23,872 (125,547) (153,618) (66,988) 50,983 (13,300) (129) – 37,554 (6,140) 31,414 28,566 2,848 31,414 6.94 N/A

– II-2 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Consolidated Statement of Profit or Loss and other Comprehensive Income

For the year ended 31 December 2014

Note (Loss)/profit for the year Other comprehensive income, net of tax: Items that will not be reclassified to profit or loss: (Loss)/gain on property revaluation 18 Deferred tax changes from loss/gain on property revaluation 38 Items that may be reclassified to profit or loss: Exchange differences on translating foreign operations Other comprehensive income for the year, net of tax Total comprehensive income for the year Attributable to: Owners of the Company Non-controlling interests	2014 HK$’000 (42,273) (600) 99 (501) 1,481 980 (41,293) (600) (40,693) (41,293)	2013 HK$’000 31,414 1,000 (165) 835 3,941 4,776 36,190 33,422 2,768 36,190

– II-3 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Consolidated Statement of Financial Position

As at 31 December 2014

Note Non-current assets Fixed assets 18 Prepaid lease payments 19 Goodwill 20 Intangible assets 21 Investments in associates 23 Investment in a joint venture 24 Available-for-sale financial assets 25 Deferred tax assets 38 Current assets Inventories 26 Trade receivables 27 Prepayments, deposits and other receivables 28 Derivative financial assets 29 Amount due from a non-controlling shareholder of a subsidiary 30 Current tax assets Bank and cash balances 31 Current liabilities Trade payables 32 Accruals and other payables 33 Amounts due to non-controlling shareholders of subsidiaries 34 Bank borrowings 35 Financial liabilities at fair value through profit or loss 37 License fee payable 21(b) Derivative financial liabilities 29 Product warranty provisions 36 Current tax liabilities Net current assets Total assets less current liabilities Non-current liabilities Financial liabilities at fair value through profit or loss 37 License fee payable 21(b) Deferred tax liabilities 38 NET ASSETS Capital and reserves Share capital 39 Reserves 40 Equity attributable to owners of the Company Non-controlling interests TOTAL EQUITY	2014 HK$’000 105,050 7,001 3,471 43,132 2,403 134 – 12,221 173,412 290,143 315,648 116,236 4,824 1,257 4,822 185,752 918,682 280,502 266,247 1,798 117,075 3,428 9,963 82 21,885 5,222 706,202 212,480 385,892 646 16,474 17,225 34,345 351,547 4,117 365,639 369,756 (18,209) 351,547	2013 HK$’000 76,703 – 8,311 55,425 – – – 10,884
		151,323
		292,956 420,770 94,029 – 2,454 1,143 183,138
		994,490
		318,240 229,291 4,203 111,813 3,476 6,867 6,119 19,343 5,128
		704,480
		290,010
		441,333
		9,929 19,777 21,237
		50,943
		390,390

		4,117 373,677
		377,794 12,596
		390,390

– II-4 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Statement of Financial Position

As at 31 December 2014

Note Non-current assets Investments in subsidiaries 22 Current assets Amounts due from subsidiaries 22 Prepayments, deposits and other receivables 28 Bank and cash balances 31 Current tax assets Current liabilities Accruals and other payables 33 Amounts due to subsidiaries 22 Current tax liabilities Net current assets NET ASSETS Capital and reserves Share capital 39 Reserves 40(b) TOTAL EQUITY	2014 HK$’000 3,171 125,713 145 5,728 – 131,586 2,248 1,192 97 3,537 128,049 131,220 4,117 127,103 131,220	2013 HK$’000 3,171
		131,771 – 2,522 49
		134,342
		2,133 210 –
		2,343
		131,999
		135,170

		4,117 131,053
		135,170

– II-5 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

	Non-	controlling Total	interests equity			HK$’000 HK$’000	2,759 363,781		2,768 36,190				2,235 (5)	– –		1,066 1,066		3,768 3,768		– (8,234)		– (6,176)		– –	12,596 390,390
			Total			HK$’000	361,022		33,422				(2,240)	–		–		–		(8,234)		(6,176)		–	377,794
		Proposed	dividend			HK$’000	8,234		–				–	–		–		–		(8,234)		–		10,293	10,293
		Retained	profits			HK$’000	184,668		28,566				–	(255)		–		–		–		(6,176)		(10,293)	196,510
		Capital	reserve	(note 40	(c)(vii))	HK$’000	(6,789)		–				(2,240)	–		–		–		–		–		–	(9,029)
Foreign	currency Property	translation revaluation Contributed Statutory	reserve reserve surplus reserve	(note 40 (note 40 (note 40 (note 40	(c)(iii)) (c)(iv)) (c)(v)) (c)(vi))	HK$’000 HK$’000 HK$’000 HK$’000	16,179 16,231 18,298 1,405		4,021 835 – –				– – – –	– – – 255		– – – –		– – – –		– – – –		– – – –		– – – –	20,200 17,066 18,298 1,660
		Merger	reserve	(note 40	(c)(ii))	HK$’000	3,171		–				–	–		–		–		–		–		–	3,171
	Share	premium	account	(note 40	(c)(i))	HK$’000	115,508		–				–	–		–		–		–		–		–	115,508
		Share	capital		(note 39)	HK$’000	4,117		–				–	–		–		–		–		–		–	4,117
							At 1 January 2013	Total comprehensive income for	the year	Acquisition of shares in a	non-wholly owned subsidiary	from non-controlling	shareholders (note 41(j))	Transfers	Acquisition of subsidiaries	(note 41(c) and (d))	Contributions from non-controlling	shareholders	2012 final dividend paid	(note 16)	2013 interim dividend paid	(note 16)	2013 proposed final dividend	(note 16)	At 31 December 2013

– II-6 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

	Non-	controlling Total	interests equity			HK$’000 HK$’000	12,596 390,390		(40,693) (41,293)					(2,655) –		13,209 13,209			274 6,650		(940) (940)	– –		– (10,293)		– (6,176)		– –	(18,209) 351,547
			Total			HK$’000	377,794		(600)					2,655		–			6,376		–	–		(10,293)		(6,176)		–	369,756
		Proposed	dividend			HK$’000	10,293		–					–		–			–		–	–		(10,293)		–		6,176	6,176
		Retained	profits			HK$’000	196,510		577					–		–			–		–	(445)		–		(6,176)		(6,176)	184,290
		Capital	reserve	(note 40	(c)(vii))	HK$’000	(9,029)		–					2,655		–			6,376		–	–		–		–		–	2
Foreign	currency Property	translation revaluation Contributed Statutory	reserve reserve surplus reserve	(note 40 (note 40 (note 40 (note 40	(c)(iii)) (c)(iv)) (c)(v)) (c)(vi))	HK$’000 HK$’000 HK$’000 HK$’000	20,200 17,066 18,298 1,660		(676) (501) – –					– – – –		– – – –			– – – –		– – – –	– – – 445		– – – –		– – – –		– – – –	19,524 16,565 18,298 2,105
		Merger	reserve	(note 40	(c)(ii))	HK$’000	3,171		–					–		–			–		–	–		–		–		–	3,171
	Share	premium	account	(note 40	(c)(i))	HK$’000	115,508		–					–		–			–		–	–		–		–		–	115,508
		Share	capital		(note 39)	HK$’000	4,117		–					–		–			–		–	–		–		–		–	4,117
							At 1 January 2014	Total comprehensive income for	the year	Acquisition of shares in the	non-wholly owned subsidiaries	from non-controlling	shareholders	(note 41(e) and (f))	Acquisition of subsidiaries	(note 41(a) and (b))	Deemed disposal of partial	interests in subsidiaries	(note 41(g), (h), (i))	Dividend paid to non-controlling	shareholders by a subsidiary	Transfer	2013 final dividend paid	(note 16)	2014 interim dividend paid	(note 16)	2014 proposed final dividend	(note 16)	At 31 December 2014

– II-7 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Consolidated Statement of Cash Flows

For the year ended 31 December 2014

CASH FLOWS FROM OPERATING ACTIVITIES (Loss)/profit before tax Adjustments for: Allowance for receivables, net Allowance on inventories, net Amortisation of intangible assets Depreciation Share of (profit)/loss of an associate Share of loss of a joint venture (Gain)/loss on financial liabilities at fair value through profit or loss (Gain)/loss on derivative assets/liabilities Bad debt written off in other receivables Finance costs Impairment loss on goodwill Impairment loss on amount due from an associate Discount on acquisition Bank interest income (Gain)/loss on disposal of fixed assets Provision on product warranty Operating profit before working capital changes Payment of contingent considerations (note 37) Payment of license fee payables Decrease/(increase) in inventories Decrease/(increase) in trade receivables Increase in prepaid lease payments Increase in prepayments, deposits and other receivables Increase in amount due from associates Increase in amount due from a joint venture Decrease/(increase) in amount due from a non-controlling shareholder of subsidiary (Decrease)/increase in trade payables Increase in accruals and other payables (Decrease)/increase in amounts due to non-controlling shareholders of subsidiaries Decrease in product warranty provisions Cash generated from operations Income tax paid Finance costs paid Net cash generated from operating activities	2014 HK$’000 (37,441) 2,291 (10,180) 13,632 21,874 (2) 1,433 (6,036) (9,122) 22,212 15,873 4,840 6,048 (1,918) (1,061) (4) 14,370 36,809 (2,211) (5,377) 17,310 105,443 (7,001) (44,355) (5,571) (17) 1,197 (37,753) 31,934 (2,405) (9,967) 78,036 (14,778) (10,704) 52,554	2013 HK$’000 37,554 231 4,402 14,271 19,353 129 – 1,661 5,236 – 13,300 4,302 4,165 (915) (1,025) 3,901 12,104 118,669 (7,748) – (25,160) (220,240) – (41,627) – – (2,454) 189,329 34,422 3,357 (10,668) 37,880 (7,654) (9,020) 21,206

– II-8 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of subsidiaries (note 41(a), (b)) Acquisition of non-controlling interests Interest received Purchases of fixed assets Investments in associates Loan to an associate Investment in a joint venture Proceeds from disposal of fixed assets Net payments for settlement of derivative assets/liabilities Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Bank loans raised Repayment of bank loans Net import/export loans raised Contributions from non-controlling shareholders (note 41(h), (i)) Dividend paid to non-controlling shareholders Dividend paid to owners to the companies Net cash (used in)/generated from financing activities NET INCREASE IN CASH AND CASH EQUIVALENTS Effect of foreign exchange rate changes CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR CASH AND CASH EQUIVALENTS AT END OF YEAR ANALYSIS OF CASH AND CASH EQUIVALENTS Bank and cash balances (note 31)	2014 HK$’000 (11,510) (614) 1,061 (26,157) (49) (2,829) (1,550) – (1,739) (43,387) 80,655 (87,402) 12,009 6,650 (940) (16,469) (5,497) 3,670 (1,056) 183,138 185,752 185,752	2013 HK$’000 671 – 1,025 (14,266) (129) (4,165) – 227 (7,254) (23,891) 61,857 (45,960) 15,984 3,768 – (14,410) 21,239 18,554 2,776 161,808 183,138 183,138

– II-9 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2014

1. GENERAL INFORMATION

The Company was incorporated in the Cayman Islands under the Companies Law as an exempted company with limited liabilities on 18 May 2010. The address of its registered office is Clifton House, 75 Fort Street, PO Box 1350, Grand Cayman KY1-1108, Cayman Islands and principal place of business is Units 609-610, 6/F, Bio-Informatics Centre, No. 2 Science Park West Avenue, Hong Kong Science Park, Shatin, New Territories, Hong Kong. The Company’s shares are listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

The Company is an investment holding company. The principal activities of its subsidiaries are set out in note 22 to the consolidated financial statements.

In the opinion of the directors of the Company, Dragon Fortune International Limited (“Dragon Fortune”), a company incorporated in Hong Kong, is the ultimate parent and Mr. Cheng Han Ngok, Steve, is the ultimate controlling party of the Company.

2. ADOPTION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS AND REQUIREMENTS

In the current year, the Group has adopted all the new and revised Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) that are relevant to its operations and effective for its accounting year beginning on 1 January 2014. HKFRSs comprise Hong Kong Financial Reporting Standards (“HKFRS”); Hong Kong Accounting Standards (“HKAS”); and Interpretations.

(a) Application of new and revised HKFRSs

The following standards have been adopted by the Group for the first time for the financial year beginning 1 January 2014:

Amendment to HKAS 32, Offsetting financial assets and financial liabilities

This amendment clarifies that the right of set-off must not be contingent on a future event. It must also be legally enforceable for all counterparties in the normal course of business, as well as in the event of default, insolvency or bankruptcy. The amendment also considers settlement mechanisms. The amendment did not have a significant effect on the Group financial statements.

Amendment to HKAS 36, Recoverable amount disclosures for non-financial assets

The amendments reduce the circumstances in which the recoverable amount of assets or cash-generating units is required to be disclosed, clarify the disclosures required, and introduce an explicit requirement to disclose the discount rate used in determining impairment (or reversals) where recoverable amount based on fair value less costs of disposal is determined using a present value technique. The amendments do not have an impact on these consolidated financial statements as the recoverable amounts of assets or cash-generating units have been determined on the basis of their value in use.

HK(IFRIC) 21, Levies

The Interpretation provides guidance on when a liability to pay a levy imposed by a government should be recognised. The amendments do not have an impact on these consolidated financial statements as the Group is not currently subjected to significant levies.

Amendments to HKAS 39, Novation of derivatives and continuation of hedge accounting

The amendments to HKAS 39 provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria. The amendments do not have an impact on these financial statements as the Group has not novated any of its derivatives.

– II-10 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Amendments to HKFRS 2 (Annual Improvements to HKFRSs 2010-2012 Cycle)

This amendment clarifies the definitions of “vesting condition” and “market condition” and adds definitions for “performance condition” and “service condition”. The amendment is applicable prospectively to share-based payment transactions for which the grant date is on or after 1 July 2014 and had no effect on the Group’s consolidated financial statements.

Amendments to HKFRS 3 (Annual Improvements to HKFRSs 2010-2012 Cycle)

This amendment, applicable prospectively to business combinations for which the acquisition date is on or after 1 July 2014, requires any contingent consideration that is classified as an asset or a liability (i.e. non-equity) to be measured at fair value at each reporting date with changes in fair value recognised in profit or loss. It had no effect on the Group’s consolidated financial statements.

Amendments to HKFRS 13 (Annual Improvements to HKFRSs 2010-2012 Cycle)

This amendment to the standard’s basis for conclusions only clarifies that the ability to measure certain short-term receivables and payables on an undiscounted basis is retained.

(b) New and revised HKFRSs in issue but not yet effective

The Group has not early applied new and revised HKFRSs that have been issued but are not yet effective for the financial year beginning 1 January 2014. The directors anticipate that the new and revised HKFRSs will be adopted in the Group’s consolidated financial statements when they become effective. The Group is in the process of assessing, where applicable, the potential effect of all new and revised HKFRSs that will be effective in future periods but is not yet in a position to state whether these new and revised HKFRSs would have a material impact on its results of operations and financial position.

List of new and revised HKFRSs in issue but not yet effective:

HKFRS 9	Financial Instruments1
HKFRS 14	Regulatory Deferral Accounts2
HKFRS 15	Revenue from Contracts with Customers3
Amendments to HKAS 16 and HKAS 38	Clarification of Acceptable Methods of Depreciation and
	Amortisation5
Amendments to HKFRS 10 and	Sale or Contribution of Assets between an Investor and its
HKAS 28	Associate or Joint Venture5
Amendments to HKFRSs	Annual Improvements to HKFRSs 2010-2012 Cycle6
Amendments to HKFRSs	Annual Improvements to HKFRSs 2011-2013 Cycle4
Amendments to HKFRSs	Annual Improvements to HKFRSs 2012-2014 Cycle5

1 Effective for annual periods beginning on or after 1 January 2018, with earlier application permitted.
2 Effective for first annual HKFRS financial statements beginning on or after 1 January 2016, with earlier application permitted.
3 Effective for annual periods beginning on or after 1 January 2017, with earlier application permitted.
4 Effective for annual periods beginning on or after 1 July 2014, with earlier application permitted.
5 Effective for annual periods beginning on or after 1 January 2016, with earlier application permitted.
6 Effective for annual periods beginning on or after 1 July 2014, with limited exceptions. Earlier application is permitted.

– II-11 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

3. SIGNIFICANT ACCOUNTING POLICIES

These consolidated financial statements have been prepared in accordance with all applicable HKFRSs issued by the HKICPA and accounting principles generally accepted in Hong Kong. These consolidated financial statements also comply with the applicable disclosure requirements of the Hong Kong Companies Ordinance, which for this financial year and the comparative period continue to be those of the predecessor Hong Kong Companies Ordinance (Cap. 32), in accordance with transitional and saving arrangements for Part 9 of the new Hong Kong Companies Ordinance (Cap. 622), “Accounts and Audit”, which are set out in sections 76 to 87 of Schedule 11 to that Ordinance. These consolidated financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on the Stock Exchange.

These consolidated financial statements have been prepared under the historical cost convention, unless mentioned otherwise in the accounting policies below (e.g. land and buildings, derivative financial assets/liabilities, financial liabilities at fair value through profit or loss).

The preparation of financial statements in conformity with HKFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgements or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4.

The significant accounting policies applied in the preparation of these financial statements are set out below.

(a) Consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries made up to 31 December. Subsidiaries are entities over which the Group has control. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The Group has power over an entity when the Group has existing rights that give it the current ability to direct the relevant activities, i.e. activities that significantly affect the entity’s returns.

When assessing control, the Group considers its potential voting rights as well as potential voting rights held by other parties. A potential voting right is considered only if the holder has the practical ability to exercise that right.

Subsidiaries are consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date the control ceases.

The gain or loss on the disposal of a subsidiary that results in a loss of control represents the difference between (i) the fair value of the consideration of the sale plus the fair value of any investment retained in that subsidiary and (ii) the Company’s share of the net assets of that subsidiary plus any remaining goodwill and any related accumulated foreign currency translation reserve relating to that subsidiary.

Intragroup transactions, balances and unrealised profits are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Non-controlling interests represent the equity in subsidiaries not attributable, directly or indirectly, to the Company. Non-controlling interests are presented in the consolidated statement of financial position and consolidated statement of changes in equity within equity. Non-controlling interests are presented in the consolidated statement of profit or loss and consolidated statement of profit or loss and other comprehensive income as an allocation of profit or loss and total comprehensive income for the year between the non-controlling shareholders and owners of the Company.

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

– II-12 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions (i.e. transactions with owners in their capacity as owners). The carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the Company.

In the Company’s statement of financial position, the investments in subsidiaries are stated at cost less allowance for impairment losses. The results of subsidiaries are accounted for by the Company on the basis of dividends received and receivable.

(b) Business combination (other than under common control) and goodwill

The acquisition method is used to account for the acquisition of a subsidiary in a business combination. The consideration transferred in a business combination is measured at the acquisition-date fair value of the assets given, equity instruments issued, liabilities incurred and any contingent consideration. Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and the services are received. Identifiable assets and liabilities of the subsidiary in the acquisition are measured at their acquisition-date fair values.

The excess of the sum of the consideration transferred over the Company’s share of the net fair value of the subsidiary’s identifiable assets and liabilities is recorded as goodwill. Any excess of the Company’s share of the net fair value of the identifiable assets and liabilities over the sum of the consideration transferred is recognised in consolidated profit or loss as a gain on bargain purchase which is attributed to the Company.

In a business combination achieved in stages, the previously held equity interest in the subsidiary is remeasured at its acquisition-date fair value and the resulting gain or loss is recognised in consolidated profit or loss. The fair value is added to the sum of the consideration transferred in a business combination to calculate the goodwill.

The non-controlling interests in the subsidiary are initially measured either at fair value or at the non-controlling shareholders’ proportionate share of the net fair value of the subsidiary’s identifiable assets and liabilities at the acquisition date. The choice of measurement basis is made on a transaction-by-transaction basis.

After initial recognition, goodwill is measured at cost less accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units (“CGUs”) or groups of CGUs that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the Group at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level. Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of the CGU containing the goodwill is compared to its recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed.

(c) Associates

Associates are entities over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of an entity but is not control or joint control over those policies. The existence and effect of potential voting rights that are currently exercisable or convertible, including potential voting rights held by other entities, are considered when assessing whether the Group has significant influence. In assessing whether a potential voting right contributes to significant influence, the holder’s intention and financial ability to exercise or convert that right is not considered.

Investment in an associate is accounted for in the consolidated financial statements by the equity method and is initially recognised at cost. Identifiable assets and liabilities of the associate in an acquisition are measured at their fair values at the acquisition date. The excess of the cost of the investment over the Group’s share of the net fair value of the associate’s identifiable assets and liabilities is recorded as goodwill. The goodwill is included in the carrying amount of the investment and is tested for impairment together with the investment at the end of each reporting period when there is objective evidence that the investment is impaired. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition is recognised in consolidated profit or loss.

The Group’s share of an associate’s post-acquisition profits or losses is recognised in consolidated profit or loss, and its share of the post-acquisition movements in reserves is recognised in the consolidated reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured

– II-13 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. If the associate subsequently reports profits, the Group resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised.

The gain or loss on the disposal of an associate that results in a loss of significant influence represents the difference between (i) the fair value of the consideration of the sale plus the fair value of any investment retained in that associate and (ii) the Group’s entire carrying amount of that associate (including goodwill) and any related accumulated foreign currency translation reserve. If an investment in an associate becomes an investment in a joint venture, the Group continues to apply the equity method and does not remeasure the retained interest.

Unrealised profits on transactions between the Group and its associates are eliminated to the extent of the Group’s interests in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

(d) Joint arrangements

A joint arrangement is an arrangement of which two or more parties have joint control. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. Relevant activities are activities that significantly affect the returns of the arrangement. When assessing joint control, the Group considers its potential voting rights as well as potential voting rights held by other parties. A potential voting right is considered only if the holder has the practical ability to exercise that right.

A joint arrangement is either a joint operation or a joint venture. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

The Group has assessed the nature of its joint arrangements and determined them to be joint ventures.

Investment in a joint venture is accounted for in the consolidated financial statements by the equity method and is initially recognised at cost. Identifiable assets and liabilities of the joint venture in an acquisition are measured at their fair values at the acquisition date. The excess of the cost of the investment over the Group’s share of the net fair value of the joint venture’s identifiable assets and liabilities is recorded as goodwill. The goodwill is included in the carrying amount of the investment and is tested for impairment together with the investment at the end of each reporting period when there is objective evidence that the investment is impaired. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition is recognised in consolidated profit or loss.

The Group’s share of a joint venture’s post-acquisition profits or losses is recognised in consolidated profit or loss, and its share of the post-acquisition movements in reserves is recognised in the consolidated reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in a joint venture equals or exceeds its interest in the joint venture, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint venture. If the joint venture subsequently reports profits, the Group resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised.

The gain or loss on the disposal of a joint venture that results in a loss of joint control represents the difference between (i) the fair value of the consideration of the sale plus the fair value of any investment retained in that joint venture and (ii) the Group’s entire carrying amount of that joint venture (including goodwill) and any related accumulated foreign currency translation reserve. If an investment in a joint venture becomes an investment in an associate, the Group continues to apply the equity method and does not remeasure the retained interest.

Unrealised profits on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interests in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.

(e) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in Hong Kong dollars, which is the Company’s functional and presentation currency.

– II-14 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(ii) Transactions and balances in each entity’s financial statements

Transactions in foreign currencies are translated into the functional currency on initial recognition using the exchange rates prevailing on the transaction dates. Monetary assets and liabilities in foreign currencies are translated at the exchange rates at the end of each reporting period. Gains and losses resulting from this translation policy are recognised in profit or loss.

Non-monetary items that are measured at fair values in foreign currencies are translated using the exchange rates at the dates when the fair values are determined.

When a gain or loss on a non-monetary item is recognised in other comprehensive income, any exchange component of that gain or loss is recognised in other comprehensive income. When a gain or loss on a non-monetary item is recognised in profit or loss, any exchange component of that gain or loss is recognised in profit or loss.

(iii) Translation on consolidation

The results and financial position of all the Group entities that have a functional currency different from the Company’s presentation currency are translated into the Company’s presentation currency as follows:

Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;
Income and expenses are translated at average exchange rates for the period (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the exchange rates on the transaction dates); and
All resulting exchange differences are recognised in other comprehensive income and accumulated in the foreign currency translation reserve.

On consolidation, exchange differences arising from the translation of monetary items that form part of the net investment in foreign entities and of borrowings are recognised in other comprehensive income and accumulated in the foreign currency translation reserve. When a foreign operation is sold, such exchange differences are reclassified to consolidated profit or loss as part of the gain or loss on disposal.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

(f) Fixed assets

Land and buildings are initially recognised at cost. Freehold land is subsequently carried at the revalued amount less accumulated impairment losses. Leasehold land and buildings are subsequently carried at the revalued amounts less accumulated depreciation and accumulated impairment losses. Revaluation increases of land and building are recognised in profit or loss to the extent that the increases reverse revaluation decreases of the same asset previously recognised in profit or loss. All other revaluation increases are credited to such property revaluation reserve as other comprehensive income. Revaluation decreases that offset previous revaluation increases of the same asset remaining in the property revaluation reserve are charged against the property revaluation reserve as other comprehensive income. All other decreases are recognised in profit or loss. On the subsequent sale or retirement of a revalued land and buildings, the attributable revaluation increases remaining in the property revaluation reserve is transferred directly to retained profits.

All other fixed assets are stated in the consolidated statement of financial position at cost, less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are recognised in profit or loss during the period in which they are incurred.

– II-15 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Depreciation of fixed assets is calculated at rates sufficient to write off their cost less their residual values over the estimated useful lives on a straight-line basis. The principal annual depreciation rates are as follows:

Freehold land	Nil
Leasehold land and buildings	4%
Leasehold improvements	Over the lease term
	or 20% – 25%
Plant, machinery, moulds and tools	10% – 25%
Furniture and equipment	10% – 20%
Motor vehicles	18% – 331/3%

The residual values, useful lives and depreciation method are reviewed and adjusted, if appropriate, at the end of each reporting period.

The gain or loss on disposal of fixed assets is the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in profit or loss.

(g) Intangible assets

Trademarks are measured initially at fair value upon business combination and are assessed to have indefinite useful lives. No amortisation is charged to profit or loss. Useful lives are reviewed during each reporting period to determine whether events and circumstances continue to support an indefinite useful life assessment for the trademarks. If they do not, the change in the useful life assessment from indefinite to finite is accounted for as a change in an accounting estimate.

License rights, customer relationship, patents and technologies are measured initially at fair value upon business combination or acquisition date and amortised on straight-line basis over their estimated useful lives less impairment losses. Useful lives of license rights, customer relationship, patents and technologies are as follows:

License rights	Over the license period
Customer relationship	3 – 6 years
Patents	4 years
Technologies	3 years

The useful lives of customer relationship, patents and technologies were estimated by the Company’s management team upon business combination, based on their expected successful rate in retaining the acquirees’ customers, and the prevailing general practice in the industry in estimating the expected useful life of customer relationship acquired in business combination.

(h) Leases

(i) Operating leases

Leases that do not substantially transfer to the Group all the risks and rewards of ownership of assets are accounted for as operating leases. Lease payments (net of any incentives received from the lessor) are recognised as an expense on a straight-line basis over the lease term.

(ii) Finance leases

Leases that substantially transfer to the Group all the risks and rewards of ownership of assets are accounted for as finance leases. At the commencement of the lease term, a finance lease is capitalised at the lower of the fair value of the leased asset and the present value of the minimum lease payments, each determined at the inception of the lease.

The corresponding liability to the lessor is included in the statement of financial position as finance lease payable. Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The 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.

Assets under finance leases are depreciated the same as owned assets.

– II-16 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(i) Research and development expenditure

Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally generated intangible asset arising from the Group’s product development activity is recognised only if all of the following conditions are met:

An asset is created that can be identified (such as software and new processes);
It is probable that the asset created will generate future economic benefits; and
The development cost of the asset can be measured reliably.

Internally generated intangible assets are stated at cost less accumulated amortisation and impairment losses. Amortisation is calculated on a straight-line basis over their estimated useful lives. Where no internally generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred.

(j) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out basis. The cost of finished goods and work in progress comprises raw materials, direct labour and an appropriate proportion of all production overhead expenditure, and where appropriate, subcontracting charges. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

(k) Recognition and derecognition of financial instruments

Financial assets and financial liabilities are recognised in the statement of financial position when the Group becomes a party to the contractual provisions of the instruments.

Financial assets are derecognised when the contractual rights to receive cash flows from the assets expire; the Group transfers substantially all the risks and rewards of ownership of the assets; or the Group neither transfers nor retains substantially all the risks and rewards of ownership of the assets but has not retained control on the assets. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and the cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognised and the consideration paid is recognised in profit or loss.

(l) Investments

Investments are recognised and derecognised on a trade date basis where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, plus directly attributable transaction costs except in the case of financial assets at fair value through profit or loss.

Investments are classified as either financial assets at fair value through profit or loss or available-for-sale financial assets.

(i) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are either investments classified as held for trading or designated as at fair value through profit or loss upon initial recognition. These investments are subsequently measured at fair value. Gains or losses arising from changes in fair value of these investments are recognised in profit or loss.

– II-17 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(ii) Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are not classified as loans and other receivables, held-to-maturity investments or financial assets at fair value through profit or loss. Available-for-sale financial assets are subsequently measured at fair value. Gains or losses arising from changes in fair value of these investments are recognised in other comprehensive income, and accumulated in the investment revaluation reserve, until the investments are disposed of or there is objective evidence that the investments are impaired, at which time the cumulative gains or losses previously recognised in other comprehensive income are reclassified from equity to profit or loss. Interest calculated using the effective interest method and dividends on available-for-sale equity investments are recognised in profit or loss.

Instruments in equity institutions that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less impairment losses.

Impairment losses recognised in profit or loss for equity investments classified as available-for-sale financial assets are not subsequently reversed through profit or loss. Impairment losses recognised in profit or loss for debt instruments classified as available-for-sale financial assets are subsequently reversed and recognised in profit or loss if an increase in the fair value of the instruments can be objectively related to an event occurring after the recognition of the impairment loss.

(m) Trade and other receivables

Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less allowance for impairment. An allowance for impairment of trade and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the allowance is the difference between the receivables’ carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate computed at initial recognition. The amount of the allowance is recognised in profit or loss.

Impairment losses are reversed in subsequent periods and recognised in profit or loss when an increase in the receivables’ recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the receivables at the date the impairment is reversed shall not exceed what the amortised cost would have been had the impairment not been recognised.

(n) Cash and cash equivalents

For the purpose of the statement of cash flows, cash and cash equivalents represent cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term highly liquid investments which are readily convertible into known amounts of cash and subject to an insignificant risk of change in value. Bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management are also included as a component of cash and cash equivalents.

(o) Financial liabilities and equity instruments

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument under HKFRSs. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below.

(p) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

(q) Trade and other payables

Trade and other payables are stated initially at their fair value and subsequently measured at amortised cost using the effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost.

– II-18 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(r) Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held-for-trading and financial liabilities designated upon initial recognition at fair value through profit or loss. Financial liabilities are classified as held-for-trading if they are acquired for the purpose of selling in the near term. Gains or losses on liabilities held-for-trading and those designated at fair value through profit or loss are recognised in profit or loss.

(s) Derivative financial instruments

Derivatives are initially recognised and subsequently measured at fair value.

Changes in the fair value of derivatives that do not qualify for hedge accounting are recognised in profit or loss as they arise.

(t) Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

(u) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably.

Revenue from the sales of goods is recognised on the transfer of significant risks and rewards of ownership, which generally coincides with the time when the goods are delivered and the title has passed to the customers.

Management fee income is recognised when the service is rendered.

Interest income is recognised on a time-proportion basis using the effective interest method.

Dividend income is recognised when the shareholders’ rights to receive payment are established.

Rental income is recognised on a straight line basis over the lease term.

(v) Employee benefits

(i) Employee leave entitlements

Employee entitlements to annual leave and long service leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave and long service leave as a result of services rendered by employees up to the end of the reporting period.

Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.

(ii) Pension obligations

The Group contributes to defined contribution retirement schemes which are available to all employees. Contributions to the schemes by the Group and employees are calculated as a percentage of employees’ basic salaries. The retirement benefit scheme cost charged to profit or loss represents contributions payable by the Group to the funds.

(iii) Termination benefits

Termination benefits are recognised at the earlier of the dates when the Group can no longer withdraw the offer of those benefits and when the Group recognises restructuring costs and involves the payment of termination benefits.

– II-19 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(w) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

To the extent that funds are borrowed generally and used for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalisation is determined by applying a capitalisation rate to the expenditures on that asset. The capitalisation rate is the weighted average of the borrowing costs applicable to the borrowings of the Group that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset.

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

(x) Taxation

Income tax represents the sum of the current tax and deferred tax.

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

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences, unused tax losses or unused tax credits can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

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

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

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, based on tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax is recognised in profit or loss, except when it relates to items recognised in other comprehensive income or directly in equity, in which case the deferred tax is also recognised in other comprehensive income or directly in equity.

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

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

– II-20 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(y) Related parties

A related party is a person or entity that is related to the Group.

(A) A person or a close member of that person’s family is related to the Group if that person:
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Company or of a parent of the Company.
(B) An entity is related to the Group if any of the following conditions applies:
(i) The entity and the Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).
(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).
(iii) Both entities are joint ventures of the same third party.
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
(v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group.
(vi) The entity is controlled or jointly controlled by a person identified in (A).
(vii) A person identified in (A)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

(z) Impairment of assets

Goodwill and intangible assets that have an indefinite useful life or that are not yet available for use are reviewed for impairment annually and whenever events or changes in circumstances indicate the carrying amount may not be recoverable.

At the end of each reporting period, the Group reviews the carrying amounts of its assets – except derivative financial instruments, deferred tax assets, investments, inventories and receivables, of which the impairment policies are set out in note 3(s), 3(x), 3(l), 3(j) and 3(m) respectively, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of any impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Except for goodwill, where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

– II-21 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(aa) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Group has a present legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation.

When it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow is remote.

(ab) Events after the reporting period

Events after the reporting period that provide additional information about the Group’s position at the end of the reporting period or those that indicate the going concern assumption is not appropriate are adjusting events and are reflected in the financial statements. Events after the reporting period that are not adjusting events are disclosed in the notes to the financial statement when material.

4. CRITICAL JUDGEMENTS AND KEY ESTIMATES

Critical judgements in applying accounting policies

In the process of applying the accounting policies, the directors have made the following judgements that have the most significant effect on the amounts recognised in the financial statements.

(a) Split of land and building elements

The Group determines that the lease payments cannot be allocated reliably between the land and building elements. Accordingly the entire lease of land and buildings is classified as a finance lease and included under fixed assets.

(b) Legal titles of certain freehold land and buildings

As stated in note 18 to the consolidated financial statements, the titles of freehold land and buildings in India acquired during the year were not transferred to the Group as at 31 December 2014. Despite the fact that the Group has not obtained the relevant legal titles, the directors determined to recognise these freehold land and buildings as fixed assets on the grounds that they expect the transfer of legal titles in future should have no major difficulties and the Group is in substance controlling these freehold land and buildings.

(c) Consolidation of entity with less than 50% equity interest holding

Although the Group owns less than 50% of the equity interest in STI Technology Limited, it is treated as subsidiary because the Group is able to control the relevant activities of STI Technology Limited as a result of the majority voting right to direct its relevant activities.

(d) Joint control assessment

The Group holds 50% of the voting rights of its joint venture. The directors have determined that the Group has joint control over this joint venture as under the contractual agreements, it appears that unanimous consent is required from all parties to the agreements for all relevant activities.

(e) Joint arrangements of limited companies

The Group’s joint arrangements are structured as limited companies and provide the Group and the parties to the agreements with rights to the net assets of the limited companies under the arrangements. Therefore, the directors have determined that these entities are classified as joint ventures of the Group.

– II-22 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Key sources of estimation uncertainty

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

(a) Fair value of certain assets and liabilities involve valuation technique

The fair value of certain land and buildings, derivative financial instruments and financial liabilities at fair value through profit or loss as set out in note 18, note 29 and note 37 to the consolidated financial statements respectively also involve valuation techniques. When applying valuation techniques, various assumptions and generally accepted methodologies were used to derive the fair values. Any changes in these assumptions can significantly affect the estimate of the fair value of the underlying assets and liabilities.

(b) Fixed assets and depreciation

The Group determines the estimated useful lives, residual values and related depreciation charges for the Group’s fixed assets. This estimate is based on the historical experience of the actual useful lives and residual values of fixed assets of similar nature and functions. The Group will revise the depreciation charge where useful lives and residual values are different to those previously estimated, or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned.

The carrying amount of fixed assets as at 31 December 2014 was approximately HK$105,050,000 (2013: HK$76,703,000).

(c) Impairment of fixed assets

The Group assesses annually whether fixed assets have any indication of impairment in accordance with the accounting policy. The recoverable amounts of fixed assets have been determined based on value-in-use calculations. These calculations require the use of judgement and estimates. No impairment loss for fixed assets was made for the year ended 31 December 2014 (2013: nil).

(d) Intangible assets and amortisation

The Group determines the estimated useful lives and related amortisation for the Group’s intangible assets. The useful live of intangible assets are assessed to be either finite or indefinite, based on the expected usage and technical obsolescence from the changes in the market demands or services output from the assets. Intangible assets with finite useful lives are amortised over their expected useful economic lives and assessed for impairment whenever there is an indication that the intangible assets may be impaired. The amortisation period and the amortisation method for the intangible assets with a finite useful life are reviewed by the management at least at the end of each reporting period.

The carrying amount of intangible assets as at 31 December 2014 was approximately HK$43,132,000 (2013: HK$55,425,000).

(e) Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating unit to which goodwill has been allocated. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. The carrying amount of goodwill at the end of the reporting period was approximately HK$3,471,000 after an impairment loss of approximately HK$4,840,000 was recognised during 2014. Details of the impairment loss calculation are provided in note 20 to consolidated financial statements.

– II-23 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(f) Allowance for slow-moving inventories

Allowance for slow-moving inventories is made based on the ageing and estimated net realisable value of inventories. The assessment of the allowance amount involves judgement and estimates. Where the actual outcome in future is different from the original estimate, such difference will impact the carrying value of inventories and allowance charge/write-back in the period in which such estimate has been changed.

As at 31 December 2014, accumulated allowance for slow-moving inventories amounted to approximately HK$28,473,000 (2013: HK$38,653,000).

(g) Impairment of bad and doubtful debts

The Group makes impairment loss for bad and doubtful debts based on assessments of the recoverability of the trade and other receivables, including the current creditworthiness and/or the past collection history of each debtor. Impairment arises where events or changes in circumstances indicate that the balances may not be collectable. The identification of bad and doubtful debt requires the use of judgement and estimates. Where the actual result is different from the original estimate, such difference will impact on the carrying value of the trade and other receivables and doubtful debt expenses in the year in which such estimate has been changed.

As at 31 December 2014, accumulated allowance for trade receivables amounted to approximately HK$3,314,000 (2013: HK$1,023,000).

(h) Product warranty provisions

Product warranty provisions of the Group is recognised based on past experience of level of repairs and returns, discounted to their present value as appropriate. Movement of the product warranty provisions during the year is set out in note 36 to the consolidated financial statements.

The carrying amount of product warranty provisions as at 31 December 2014 was approximately HK$21,885,000 (2013: HK$19,343,000).

(i) Copyright fees provisions

One of the Group’s subsidiary in Germany are engaged in trading of computer accessories and tablet PCs, and copyright fees were unilaterally announced by a copyright collecting agency on some of the subsidiary’s products. The management is of the opinion that such amount of copyright fees are excessive hence only recognised certain percentage of the copyright fees as provision after consulting legal adviser.

The management expects it would take a long period of negotiation and/or legal proceedings between the copyright collecting agency and the computer industry to finalise the amount of copyright fees. The information usually required by HKAS 37 “Provisions, Contingent Liabilities and Contingent Assets” is not disclosed on the grounds that it can be expected to prejudice seriously the outcome of the negotiation and/or legal proceedings.

(j) Income taxes

The Group is subject to income taxes in several jurisdictions. Significant estimates are required in determining the provision for income taxes. There are many transactions and calculations for which without tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. During the year, approximately HK$4,832,000 (2013: HK$6,140,000) of income tax was charged to profit or loss based on the estimated (loss)/profit from continuing operations.

– II-24 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

5. FINANCIAL RISK MANAGEMENT

The Group’s activities expose it to a variety of financial risks: foreign currency risk, credit risk, liquidity risk and interest rate risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.

(a) Foreign currency risk

The Group has certain exposure to foreign currency risk as part of its business transactions, assets and liabilities are principally denominated in United States dollar, Euro, Renminbi and Hong Kong dollar.

The following tables detail the Group’s major exposure at the end of reporting period to foreign currency risk arising from recognised assets or liabilities denominated in respective foreign currencies. For presentation purposes, the amounts of the exposure are shown in Hong Kong dollar translated using the spot rates at the end of reporting period.

Denominated in United States dollar Trade receivables Deposits and other receivables Bank and cash balances Trade payables Accruals and other payables Bank borrowings Amounts due (to)/from group companies Total Denominated in Renminbi Trade receivables Deposits and other receivables Bank and cash balances Trade payables Accruals and other payables Amounts due to group companies Total Denominated in Euro Trade receivables Deposits and other receivables Bank and cash balances Trade payables Accruals and other payables Amounts due from group companies Total Denominated in Hong Kong dollar Deposits and other receivables Bank and cash balances Accruals and other payables Amounts due from group companies Total	2014 HK$’000 185,245 3,928 52,100 (46,860) (29,005) (27,316) (35,302) 102,790 71 1,650 58,756 (10,547) (8,992) (4,066) 36,872 2014 HK$’000 – 96 1,856 (788) – 57,422 58,586 – 3,992 (280) 36,777 40,489	2013 HK$’000 187,184 4,938 51,483 (58,723) (28,921) (23,091) 49,337 182,207 4,315 1,233 53,953 (9,684) (704) (20,266) 28,847 2013 HK$’000 – 48 8,788 (725) (179) 63,712 71,644 38 570 (284) 56,574 56,898

– II-25 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The following table indicates the instantaneous change in the Group’s (loss)/profit for the year and equity that would have been arisen if foreign exchange rates to which the Group has significant exposure at the end of reporting period had changed at those dates, assuming all other risk variables remained constant.

	2014		2013
	Increase/		Increase/
	(decrease)		(decrease)
Foreign currency/	in foreign		in foreign
functional currency	exchange rates	HK$’000	exchange rates	HK$’000
United States dollar/	1%	1,185	1%	1,957
Hong Kong dollar	(1)%	(1,185)	(1)%	(1,957)
Renminbi/	5%	(180)	5%	(727)
Hong Kong dollar	(5)%	180	(5)%	727
Euro/	10%	5,463	10%	6,538
Hong Kong dollar	(10)%	(5,463)	(10)%	(6,538)

During the years ended 31 December 2014 and 31 December 2013, the Group has used derivative financial instruments to mitigate its risks associated with foreign currency fluctuations. The use of financial derivatives has been closely monitored by directors of the Company. The Group would choose financial institutions with high credit rating as counter party when using derivative financial instruments. The Group currently does not have a foreign currency hedging policy in respect of other foreign currency transactions, assets and liabilities. The Group will monitor its foreign currency exposure closely and will consider hedging significant foreign currency exposure should the need arise.

(b) Credit risk

The carrying amount of the bank and cash balances, trade and other receivables derivate financial assets and amount due from a non-controlling shareholder of a subsidiary included in the statement of financial position represents the Group’s maximum exposure to credit risk in relation to the Group’s financial assets.

The Group has certain concentration of credit risk, as the Group’s largest three debtors account for 35% (2013: 34%) of trade receivables as at 31 December 2014.

It has policies in place to ensure that sales are made to customers with an appropriate credit history. Amount due from a non-controlling shareholder of a subsidiary is closely monitored by the directors.

The credit risk on bank and cash balances, derivative financial assets are limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

In order to minimise credit risk, the directors have delegated a team to be responsible for the determination of credit limits, credit approvals and other monitoring procedures. In addition, the directors review the recoverable amount of each individual trade debt regularly to ensure that adequate impairment losses are recognised for irrecoverable debts. In this regard, the directors consider that the Group’s credit risk is significantly reduced.

(c) Liquidity risk

The Group’s policy is to regularly monitor current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and longer term.

– II-26 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The maturity analysis based on contractual undiscounted cash flows of the Group’s financial liabilities is as follows:

	Less than	Between	Between
	1 year and	1 and	2 and	Over
	on demand	2 years	5 years	5 years	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
At 31 December 2014
Trade payables	280,502	–	–	–	280,502
Accruals and other payables	266,247	–	–	–	266,247
Amounts due to non-controlling
shareholders of subsidiaries	1,798	–	–	–	1,798
Bank borrowings	117,409	–	–	–	117,409
Financial liabilities at fair value
through profit or loss	3,428	646	–	–	4,074
Derivative financial liabilities	82	–	–	–	82
License fee payable	11,287	8,913	18,988	–	39,188
At 31 December 2013
Trade payables	318,240	–	–	–	318,240
Accruals and other payables	208,338	–	–	–	208,338
Amounts due to non-controlling
shareholders of subsidiaries	4,203	–	–	–	4,203
Bank borrowings	112,165	–	–	–	112,165
Financial liabilities at fair value
through profit or loss	3,549	8,428	2,023	–	14,000
Derivative financial liabilities	6,119	–	–	–	6,119
License fee payable	8,189	8,525	27,900	–	44,614

(d) Interest rate risk

The Group’s exposure to interest-rate risk arises from its bank deposits and bank borrowings. These deposits and borrowings bear interests at variable rates varied with the then prevailing market condition.

At 31 December 2014, it is estimated that a general increase/(decrease) of 100 basis points in interest rates, with all other variables held constant, would have increased/(decreased) the Group’s loss for the year and retained profits as follows:

	2014	2013
	HK$’000	HK$’000
Increase/(decrease) in interest rates
100 basis points	174	347
(100) basis points	(174)	(347)

The sensitivity analysis above indicates the impact on the Group’s loss for the year and equity that would have arisen assuming that there is an annualised impact on interest income and expense by a change in interest rates. The analysis has been performed on the same basis throughout the year.

– II-27 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(e) Categories of financial instruments at 31 December

Financial assets: Financial assets at fair value through profit or loss: Held for trading Loans and receivables (including cash and cash equivalents): Trade receivables Deposits and other receivables Amount due from an associate, net Amount due from a non-controlling shareholder of a subsidiary Bank and cash balances Financial liabilities: Financial liabilities at fair value through profit or loss: Designated as such upon initial recognition Held for trading Financial liabilities at amortised cost: Trade payables Accruals and other payables Amounts due to non-controlling shareholders of subsidiaries Bank borrowings License fee payable	2014 HK$’000	2013 HK$’000
	4,824 315,648 90,266 2,352 1,257 185,752	– 420,770 54,241 – 2,454 183,138
		660,603
	4,074 82 280,502 241,178 1,798 117,075 26,437	13,405 6,119 318,240 208,338 4,203 111,813 26,644
	671,146	688,762

(f) Fair values

The carrying amounts of the Group’s financial assets and financial liabilities as reflected in the consolidated statement of financial position approximate their respective fair values.

(g) Financial assets and financial liabilities subject to offsetting

The Group has legally enforceable right to set off certain other receivables and trade payables arising from the same suppliers and the Group intends to settle these balances on a net basis. The Group did not have similar offsetting as at 31 December 2013.

		Carrying amounts	Net amounts of
		of associated	financial assets/
		financial assets/	(liabilities)
	Gross amounts	(liabilities) set off	presented in the
	of recognised	in the consolidated	consolidated
	financial assets/	statement of	statement of
As at 31 December 2014	(liabilities)	financial position	financial position
	HK$’000	HK$’000	HK$’000
Other receivables	70,433	(32,091)	38,342
Trade payables	(312,593)	32,091	(280,502)

– II-28 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(h) Transfers of financial assets

The following were the Group’s financial assets as at 31 December 2014 and 2013 that were transferred to banks by discounting those receivables on a full recourse basis. As the Group has not transferred the significant risks and rewards relating to these receivables, it continues to recognise the full carrying amount of the receivables and has recognised the cash received on the transfer as bank loan (note 35). These financial assets are carried at amortised cost in the Group’s consolidated statement of financial position.

Carrying amount of transferred assets Carrying amount of associated liabilities Net position	2014 Trade receivables discounted to banks with full recourse HK$’000 2,515 (2,012) 503	2013 Trade receivables discounted to banks with full recourse HK$’000 1,043 (765)
		278

A subsidiary of the Group has transferred certain trade receivables to an oversea bank for financing. In the opinion of the directors, the subsidiary of the Group has transferred substantially all the risk and rewards relating to those factored trade receivables. Accordingly, the Group has derecognised the full carrying amounts of such factored trade receivables. As at 31 December 2014, the derecognised trade receivable under such factoring arrangement is approximately HK$106,981,000 (2013: HK$118,245,000), and an amount of approximately HK$47,139,000 (2013: HK$22,752,000), being the fund retained by the factoring bank (“Factoring retainer”) for any potential trading deductions by customers, will be received by the Group when the factored trade receivables are fully settled by respective customers. In addition, the Group also provide a corporate guarantee of approximately HK$18,863,000 (2013: HK$21,357,000) to indemnify the bank for any further trading deductions not covered by the fund retained. As at 31 December 2014, the maximum exposure to loss from the Group’s continuing involvement in respect at these factored trade receivables was of approximately HK$66,002,000 (2013: HK$44,109,000).

As at 31 December 2014 Type of continuing involvement Factoring retainer Corporate guarantee Total As at 31 December 2013 Type of continuing involvement Factoring retainer Corporate guarantee Total	Carrying amount of continuing involvement in the consolidated statement of financial position HK$’000 Other receivables 47,139 N/A 47,139 Carrying amount of continuing involvement in the consolidated statement of financial position HK$’000 Other receivables 22,752 N/A 22,752	Maximum exposure to loss HK$’000 – 47,139 18,863
		66,002

		Maximum exposure to loss HK$’000 – 22,752 21,357
		44,109

– II-29 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

6. FAIR VALUE MEASUREMENTS

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following disclosures of fair value measurements use a fair value hierarchy that categorises into three levels the inputs to valuation techniques used to measure fair value:

Level 1 inputs: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date.

Level 2 inputs: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 inputs: unobservable inputs for the asset or liability.

The Group’s policy is to recognise transfers into and transfers out of any of the three levels as of the date of the event or change in circumstances that caused the transfer.

(a) Disclosures of level in fair value hierarchy:

2014:

Recurring fair value measurements: Fixed assets Commercial units – Hong Kong (note 18) Freehold land and buildings – India (note 18) Financial assets Financial assets at fair value through profit or loss – Derivative financial assets – currency options (note 29) Financial liabilities Financial liabilities at fair value through profit or loss – Derivative financial liabilities – forward contracts (note 29) – Contingent/future considerations (note 37)	Fair value measurements using: Level 1 Level 2 Level 3 HK$’000 HK$’000 HK$’000 – 23,400 – – – 23,950 – 23,400 23,950 – 4,824 – – 28,224 23,950 – (82) – – – (4,074) – (82) (4,074)	Total HK$’000 23,400 23,950 47,350 4,824 52,174 (82) (4,074) (4,156)

– II-30 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

2013:

Recurring fair value measurements: Fixed assets Commercial units – Hong Kong (note 18) Financial liabilities Financial liabilities at fair value through profit or loss – Derivative financial liabilities – currency options (note 29) – Contingent/future considerations (note 37) Total	Fair value measurements using: Level 1 Level 2 Level 3 HK$’000 HK$’000 HK$’000 – 25,000 – – (6,119) – – – (13,405) – (6,119) (13,405)	Total HK$’000 25,000 (6,119) (13,405) (19,524)

(b) Reconciliation of assets/(liabilities) measured at fair value based on level 3:

Financial assets/(liabilities) at fair value through profit or loss RCA

At 1 January Total gains recognised in profit or loss (#) Purchase Settlements Exchange differences At 31 December (#) Include gains for financial liabilities held at end of reporting period	Freehold land and buildings – India HK$’000 – – 23,950 – – 23,950 –	business telephone system distribution business HK$’000 (2,211) – – 2,211 – – –	TrekStor multimedia product distribution business HK$’000 (5,228) 1,635 – – 470 (3,123) 1,635	Fargo communications product distribution business HK$’000 (5,966) 4,401 – 614 – (951) 4,401	2014 Total HK$’000 (13,405) 6,036 23,950 2,825 470 19,876 6,036

– II-31 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Financial liabilities at fair value through profit or loss RCA

At 1 January Total gains or (losses) recognised in profit or loss (#) Settlements Exchange differences At 31 December (#) Include gains or (losses) for financial liabilities held at end of reporting period	business telephone system distribution business HK$’000 (9,782) (177) 7,748 – (2,211) (177)	TrekStor multimedia product distribution business HK$’000 (2,704) (2,329) – (195) (5,228) (2,329)	Fargo communications product distribution business HK$’000 (6,811) 845 – – (5,966) 845	2013 Total HK$’000 (19,297) (1,661) 7,748 (195) (13,405) (1,661)

The total gains or losses recognised in profit or loss including those for liabilities held at end of reporting period are presented in other income and other operating expenses in the consolidated statement of profit or loss and other comprehensive income for the years ended 31 December 2014 and 2013 respectively.

(c) Disclosure of valuation process used by the Group and valuation techniques and inputs used in fair value measurements:

The Group’s financial controller is responsible for the fair value measurements of assets and liabilities required for financial reporting purposes, including level 3 fair value measurements. The financial controller reports directly to the Board of Directors for these fair value measurements. Discussions of valuation processes and results are held between the financial controller and the Board of Directors at least twice a year.

For level 2 and level 3 fair value measurements, the Group will normally engage external valuation experts with the recognised professional qualifications and recent experience to perform the valuations.

Level 2 fair value measurements

	Valuation			Fair	value
	technique	Inputs	2014		2013
			HK$’000	HK$’000	HK$’000	HK$’000
			Assets	Liabilities	Assets	Liabilities
Derivative financial	Binomial option	Average strike	4,824	–	–	(6,119)
assets/(liabilities) –	pricing model	exchange
currency options		rate
Derivative financial	Discounted	Forward	–	(82)	–	–
liabilities – forward	cash flows	exchange
contracts		rate
Commercial units	Direct	Price per	23,400	–	25,000	–
located in	comparison	square
Hong Kong	approach	meter

– II-32 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Level 3 fair value measurements

				Effect on
				fair value
	Valuation	Unobservable		for increase	Fair	value
	technique	inputs	Range	of inputs	2014	2013
					Assets/(liabilities)
					HK$’000	HK$’000
Contingent/future	Discounted	Discount rate	N/A (2013:	Decrease in	–	(2,211)
consideration:	cash flows		5.00%)	liability
– RCA business
telephone system
distribution
business
– TrekStor multimedia	Discounted	Discount rate	N/A (2013:	Decrease in	(3,123)	(5,228)
product distribution	cash flows		1.95%)	liability
business
– Fargo	Discounted	Discount rate	2.37%-3.47%	Decrease in	(951)	(5,966)
communications	cash flows		(2013:	liability
product distribution			1.47%-3.24%)
business
Freehold land and	Direct sales	Premium of	0%-10%	Increase in	23,950	–
buildings – India	comparison	size of		assets
	approach	land
		Discount on	0%-5%	Decrease in	–	–
		shape of		assets
		land
		(Discount)/	(15%)-20%	(Decrease)/	–	–
		premium		Increase in
		on location		assets
		of land
		Premium on	5%	Increase in	–	–
		land usage		assets
		Other	0%-5%	Decrease in	–	–
		discounts		assets

During the two years, there were no changes in valuation techniques used.

7. REVENUE

Sales of goods Net sales return arising from product warranty	2014 HK$’000 1,856,245 (23,378) 1,832,867	2013 HK$’000 1,843,970 (18,428) 1,825,542

– II-33 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

8. SEGMENT INFORMATION

The Group has four operating segments as follows:

EMS – Electronic manufacturing services Distribution Businesses: Communications Products – Marketing and distribution of communications products (“CP”) Multimedia Products and – Assembling and/or marketing and distribution of branded Computer Accessories multimedia products and computer accessories (“MPCA”) Gaming Products and Toys – Marketing and distribution of gaming and entertainment products (“GPT”)

Operating segments have been changed during the year to reflect the Group’s realignment of operations. Comparative figures have been restated to conform to current period’s presentation.

The Group’s reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies.

The accounting policies of the operating segments are the same as those described in note 3 to the consolidated financial statements. Segment profits or losses do not include share of profits/losses of associates and joint venture and impairment loss on amounts due from associates and joint venture. Segment assets do not include deferred tax assets. Segment liabilities do not include bank borrowings and deferred tax liabilities.

The Group accounts for intersegment sales and transfers as if the sales or transfers were to third parties, i.e. at current market prices.

(a) Information about reportable segment profit or loss, assets and liabilities:

		Distribution Businesses	Distribution Businesses	Distribution Businesses
	EMS	CP	MPCA	GPT	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Year ended 31 December 2014
Revenue from external customers	937,416	250,607	557,693	87,151	1,832,867
Intersegment revenue	140,102	762	31,357	819	173,040
Segment profit/(loss)	58,142	(9,478)	(66,865)	(18,785)	(36,986)
Interest revenue	1,047	2	3	9	1,061
Interest expense	2,286	5,416	8,171	–	15,873
Depreciation and amortisation	18,339	7,243	2,538	7,386	35,506
Staff costs	217,791	33,693	47,037	9,313	307,834
Other material items of income
and expenses:
Impairment of goodwill	–	–	–	4,840	4,840
Additions to segment non-current
assets	40,990	6,995	4,022	3,364	55,371
As at 31 December 2014
Segment assets	828,284	174,707	284,906	73,825	1,361,722
Segment liabilities	319,571	136,396	318,694	106,694	881,355
Investments in associates	–	2,403	–	–	2,403
Investment in a joint venture	134	–	–	–	134

– II-34 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

		Distribution Businesses	Distribution Businesses	Distribution Businesses
	EMS	CP	MPCA	GPT	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Year ended 31 December 2013
(restated)
Revenue from external customers	886,777	252,334	594,356	92,075	1,825,542
Intersegment revenue	205,631	260	88,833	–	294,724
Segment profit/(loss)	45,104	312	16,084	(10,152)	51,348
Interest revenue	998	2	3	22	1,025
Interest expense	1,882	4,439	6,979	–	13,300
Depreciation and amortisation	18,176	7,612	1,089	6,747	33,624
Staff costs	216,805	27,583	36,932	8,020	289,340
Other material items of income
and expenses:
Impairment of goodwill	–	–	–	4,302	4,302
Additions to segment non-current
assets	13,007	421	2,745	34	16,207
As at 31 December 2013
(restated)
Segment assets	793,699	167,913	393,786	114,661	1,470,059
Segment liabilities	328,746	132,134	358,901	128,222	948,003
Investment in an associate	–	–	–	–	–

(b) Reconciliations of segment revenue and profit or loss:

Revenue Total revenue of reportable segments Elimination of intersegment revenue Consolidated revenue Profit or loss Total (loss)/profit of reportable segments Intersegment elimination Unallocated amounts: Impairment loss on amount due from an associate Share of profit/(loss) of associates Share of loss of a joint venture Consolidated (loss)/profit before tax	2014 HK$’000 2,005,907 (173,040) 1,832,867 2014 HK$’000 (36,986) 2,750 (1,774) 2 (1,433) (37,441)	2013 HK$’000 (restated) 2,120,266 (294,724) 1,825,542 2013 HK$’000 (restated) 51,348 (9,500) (4,165) (129) – 37,554

– II-35 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(c) Reconciliations of segment assets and liabilities:

Assets Total assets of reportable segments Elimination of intersegment assets Elimination of unrealised profits Unallocated amounts: Deferred tax assets Consolidated total assets Liabilities Total liabilities of reportable segments Elimination of intersegment liabilities Unallocated amounts: Bank borrowings Deferred tax liabilities Consolidated total liabilities	2014 HK$’000 1,361,722 (275,108) (6,741) 12,221 1,092,094 2014 HK$’000 881,355 (275,108) 117,075 17,225 740,547	2013 HK$’000 (restated) 1,470,059 (325,630) (9,500) 10,884
		1,145,813

		2013 HK$’000 (restated) 948,003 (325,630) 111,813 21,237
		755,423

(d) Geographical information:

The Group’s revenue from external customers based on the location and information about its non-current assets by location of assets are detailed below:

Revenue Germany The People’s Republic of China (the “PRC”) (including Hong Kong) The United States of America (the “U.S.A.”) Switzerland Italy Poland France United Kingdom Others Consolidated total	2014 HK$’000 456,567 351,328 278,890 152,096 80,472 99,311 111,098 36,059 267,046 1,832,867	2013 HK$’000 368,654 351,325 294,800 198,928 107,767 60,331 74,261 66,273 303,203
		1,825,542

– II-36 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Non-current assets Germany The PRC (including Hong Kong) The U.S.A. Others Consolidated total	2014 HK$’000 18,640 108,915 28,144 5,492 161,191	2013 HK$’000 16,598 78,821 42,322 2,698
		140,439

(e) Revenue from major customers:

An analysis of revenue from major customers which account for 10 percent or more of the Group’s revenue is as follows:

	2014	2013
	HK$’000	HK$’000
EMS segment
Largest customer	200,409	208,592
Distribution Business – MPCA segment
Largest customer	259,901	258,961

9. OTHER INCOME

Bank interest income Compensation from suppliers Consultancy fee income Discount on acquisition (note 41(a)) Gain on derivative assets or liabilities Gain on financial liabilities at fair value through profit or loss (note 37) Insurance claim Promotion contribution from suppliers Rental income Reversal of allowance for trade receivables Reversal of commission payable Reversal of copyright fee provisions Reversal of license fees provisions Reversal of overly provided discount provisions Sales of scrap materials Sales of tooling to an associate Others	2014 HK$’000 1,061 3,968 762 1,918 9,122 6,036 1,649 15,868 318 – 444 1,281 5,953 5,841 4,458 4,274 2,937 65,890	2013 HK$’000 1,025 – 2,328 915 883 – 3 – – 2,612 – 5,019 – 3,742 1,175 – 6,170
		23,872

– II-37 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

10. FINANCE COSTS

Bank overdraft interest Bank loans interest Interest on import/export loans Interest on factoring loans Other interest expenses	2014 HK$’000 14 3,141 1,217 6,323 5,178 15,873	2013 HK$’000 11 1,523 740 6,752 4,274
		13,300

Interests on bank overdraft, bank loans, import/export loans and factoring loans are related to bank borrowings wholly repayable within five years.

11. INCOME TAX EXPENSE

Current tax – Hong Kong Profits Tax Provision for the year Under-provision in prior years Current tax – Overseas Provision for the year Under/(over)-provision in prior years Deferred tax (note 38)	2014 HK$’000 8,177 82 8,259 1,866 618 2,484 (5,911) 4,832	2013 HK$’000 8,014 39
		8,053

		3,502 (1,809)
		1,693

		(3,606)
		6,140

Hong Kong Profits Tax has been provided at a rate of 16.5% (2013: 16.5%) on the estimated assessable profit for the year ended 31 December 2014.

Tax charge on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries in which the Group operates, based on existing legislation, interpretation and practices in respect thereof.

– II-38 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The reconciliation between the income tax expense and the product of (loss)/profit before tax multiplied by the Hong Kong Profits Tax rate is as follows:

(Loss)/profit before tax Tax at the Hong Kong Profits Tax rate of 16.5% (2013: 16.5%) Tax effect of income that is not taxable Tax effect of expenses that are not deductible Tax effect of temporary differences not recognised Tax effect of tax concession Under/(over)-provision in prior years Tax effect of utilisation of tax losses not previously recognized Tax effect of tax losses not recognised Effect of different tax rates of subsidiaries Income tax expense	2014 HK$’000 (37,441) (6,178) (5,809) 11,919 (1,131) (5,656) 700 (202) 9,626 1,563 4,832	2013 HK$’000 37,554 6,196 (7,994) 13,381 (203) (4,473) (1,770) (370) 1,049 324 6,140

12. (LOSS)/PROFIT FOR THE YEAR

The Group’s (loss)/profit for the year is stated after charging/(crediting) the followings:

	2014	2013
	HK$’000	HK$’000
Amortisation of intangible assets (included in selling and
distribution expenses)	13,632	14,271
Auditor’s remuneration	3,263	3,198
Allowance for receivables, net (note 27)	2,291	231
Bad debt written off of other receivables	22,212	–
Cost of goods sold (Note (i)) Cost of inventories sold Allowance for inventories Reversal of allowance for inventories (Note (ii)) Depreciation Directors’ emoluments As directors For management Research and development expenditure (including in other operating expenses) (Note (iii)) Exchange loss, net (Gain)/loss on derivative assets or liabilities (Gain)/loss on financial liabilities at fair value through profit or loss Impairment loss on goodwill (included in other operating expenses) Impairment loss of amounts due from associates (included in other operating expenses) (Gain)/loss on disposals of fixed assets Operating lease charges Land and buildings Staff costs including directors’ emoluments	1,494,536 23,001 (33,181) 1,484,356 21,874 540 8,472 9,012 46,239 7,244 (9,122) (6,036) 4,840 6,048 (4) 21,364	1,447,876 31,558 (27,156) 1,452,278 19,353 540 9,850 10,390 44,392 2,762 6,119 1,661 4,302 4,165 3,901 20,735
Salaries, bonus and allowances	276,253	275,221
Retirement benefit scheme contributions	31,581	14,119
	307,834	289,340

– II-39 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Notes:

(i) During the year ended 31 December 2014, cost of goods sold includes of approximately HK$141,903,000 (2013: HK$146,737,000) relating to staff costs and depreciation, amounts of which are also included in the respective total amounts disclosed separately above for each of these types of expenses.
(ii) The Group makes allowance for inventories under respective aged criteria in different segments. The reversal of such allowance represents the amount of inventories subsequently used in production or sold.
(iii) During the year ended 31 December 2014, research and development expenditure includes approximately HK$39,828,000 (2013: HK$37,508,000) relating to staff costs, amounts of which are also included in the respective total amounts disclosed separately above for each of these types of expenses.

13. REMUNERATION OF DIRECTORS AND FIVE HIGHEST PAID INDIVIDUALS

(a) Directors’ remuneration

The emoluments of each director were as follows:

Name of director Year ended 31 December 2014 Executive directors Mr. Cheng Han Ngok, Steve (Chairman) Mr. Lee Kai Bon Mr. Ng Kim Yuen Mr. Poon Ka Lee, Barry Madam Fok Pui Yin Independent non-executive directors Mr. Au-yang Cheong Yan, Peter Mr. Kwan Pun Fong, Vincent Mr. Xue Quan Total Year ended 31 December 2013 Executive directors Mr. Cheng Han Ngok, Steve (Chairman) Mr. Lee Kai Bon Mr. Ng Kim Yuen Mr. Poon Ka Lee, Barry Madam Fok Pui Yin Independent non-executive directors Mr. Au-yang Cheong Yan, Peter Mr. Kwan Pun Fong, Vincent Mr. Xue Quan Total	Fees HK$’000 – – – – – – 180 180 180 540 – – – – – – 180 180 180 540	Salaries, allowances and benefits in kind HK$’000 3,026 1,308 1,482 1,174 1,167 8,157 – – – 8,157 2,960 1,275 1,448 1,137 1,134 7,954 – – – 7,954	Retirement benefit scheme contribution HK$’000 129 56 63 17 50 315 – – – 315 127 54 62 15 48 306 – – – 306	Discretionary bonus HK$’000 – – – – – – – – – – 520 245 270 285 270 1,590 – – – 1,590	Total HK$’000 3,155 1,364 1,545 1,191 1,217
					8,472 180 180 180
					9,012

					3,607 1,574 1,780 1,437 1,452
					9,850 180 180 180
					10,390

– II-40 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Neither the Chairman nor any of the directors waived any emoluments during the year (2013: nil).

(b) Five highest paid individuals’ remuneration

The five highest paid individuals in the Group during the year included 2 (2013: 2) directors whose emoluments are reflected in the analysis presented above. The emoluments of the remaining 3 (2013: 3) individuals are set out below:

Basic salaries and allowances Retirement benefit scheme contributions	2014 HK$’000 6,863 196 7,059	2013 HK$’000 7,133 190
		7,323

The emoluments fell within the following band:

HK$1,500,001 to HK$2,000,000 HK$2,000,001 to HK$2,500,000 HK$2,500,001 to HK$3,000,000 HK$3,000,001 to HK$3,500,000	2014 1 1 – 1 3	2013 1 1 – 1
		3

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

14. RETIREMENT BENEFIT SCHEMES

The Group operates a mandatory provident fund scheme (the “MPF Scheme”) under the Hong Kong Mandatory Provident Fund Schemes Ordinance for all qualifying employees in Hong Kong. The Group’s contributions to the MPF Scheme are calculated at 5% of the salaries and wages subject to a monthly maximum amount of contribution HK$1,500 (before 1 June 2014: HK$1,250) per employee and vest fully with employees when contributed into the MPF Scheme.

The employees of the Group’s subsidiaries established in the PRC are members of a central pension scheme operated by the local municipal government. These subsidiaries are required to contribute certain percentage of the employees’ basic salaries and wages to the central pension scheme to fund the retirement benefits. The local municipal government undertakes to assume the retirement benefits obligations of all existing and future retired employees of these subsidiaries. The only obligation of these subsidiaries with respect to the central pension scheme is to meet the required contributions under the scheme.

The subsidiaries of the Group incorporated in the U.S.A. and Germany make monthly contribution to the social security fund managed by respective relevant authorities, which undertake the retirement obligations of the Group’s employees in the U.S.A. and Germany. The Group has no obligation for payment of retirement benefits beyond the monthly contributions. The contributions payable are charged as an expense to the consolidated statement of profit or loss as and when incurred.

15. PROFIT FOR THE YEAR ATTRIBUTABLE TO OWNERS OF THE COMPANY

The profit for the year attributable to owners of the Company includes a profit of approximately HK$577,000 (2013: HK$17,836,000) which has been dealt with in the financial statements of the Company.

– II-41 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

16. DIVIDENDS

2013 Final of HK$0.025 (2012: HK$0.02) per ordinary share 2014 Interim of HK$0.015 (2013: HK$0.015) per ordinary share	2014 HK$’000 10,293 6,176 16,469	2013 HK$’000 8,234 6,176 14,410

Subsequent to the end of the reporting period, final dividend in respect of the year ended 31 December 2014 of HK$0.015 per shares has been proposed by the directors and is subject to approval by the shareholders at the forthcoming general meeting.

17. EARNINGS PER SHARE

Earnings Profit attributable to owners of the Company, used in the basic earnings per share calculation Number of shares Weighted average number of ordinary shares for the purpose of calculating basic earnings per share	2014 HK$’000 577 411,714,000	2013 HK$’000 28,566

		411,714,000

No diluted earnings per share are presented as the Company did not have any dilutive potential ordinary shares during the two years.

18. FIXED ASSETS

Group

				Plant,
				machinery,	Furniture
	Land and		Leasehold	moulds	and	Motor
	buildings		improvements	and tools	equipment	vehicles	Total
	HK$’000		HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Cost or valuation
At 1 January 2013		25,000	10,776	137,935	14,666	1,738	190,115
Additions		–	770	11,435	2,061	–	14,266
Acquisition of
subsidiaries
(note 41(c) and (d))		–	–	186	113	244	543
Gain on property
revaluation		1,000	–	–	–	–	1,000
Elimination of
accumulated
depreciation		(1,000)	–	–	–	–	(1,000)
Disposals		–	(4,967)	(28,254)	(1,670)	–	(34,891)
Exchange differences		–	233	1,922	249	14	2,418

– II-42 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

At 31 December 2013 and 1 January 2014 Additions Acquisition of subsidiaries (note 41(a) and (b)) Elimination of accumulated depreciation Loss on property revaluation Disposals Exchange differences At 31 December 2014 Accumulated depreciation At 1 January 2013 Charge for the year Elimination on revaluation Written back on disposals Exchange differences At 31 December 2013 and 1 January 2014 Charge for the year Elimination on revaluation Written back on disposals Exchange differences At 31 December 2014 Carrying amount At 31 December 2014 At 31 December 2013	Land and buildings HK$’000 25,000 – 24,314 (1,000) (600) – (364) 47,350 – 1,000 (1,000) – – – 1,000 (1,000) – – – 47,350 25,000	Leasehold improvements HK$’000 6,812 3,638 – – – (4) (7) 10,439 7,253 1,937 – (4,443) 161 4,908 1,398 – (4) (17) 6,285 4,154 1,904	Plant, machinery, moulds and tools HK$’000 123,224 13,879 1,373 – – (10) (555) 137,911 88,494 14,185 – (24,671) 1,423 79,431 15,439 – (2) (236) 94,632 43,279 43,793	Furniture and equipment HK$’000 15,419 8,102 – – – (495) (531) 22,495 9,284 2,107 – (1,649) 155 9,897 3,862 – (421) (270) 13,068 9,427 5,522	Motor vehicles HK$’000 1,996 538 – – – – (18) 2,516 1,368 124 – – 20 1,512 175 – – (11) 1,676 840 484	Total HK$’000 172,451 26,157 25,687 (1,000) (600) (509) (1,475) 220,711 106,399 19,353 (1,000) (30,763) 1,759 95,748 21,874 (1,000) (427) (534) 115,661 105,050 76,703

– II-43 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The analysis of the cost or valuation of the above assets is as follows:

At 31 December 2014 At cost At valuation At 31 December 2013 At cost At valuation	Land and buildings HK$’000 – 47,350 47,350 – 25,000 25,000	Leasehold improvements HK$’000 10,439 – 10,439 6,812 – 6,812	Plant, machinery, moulds and tools HK$’000 137,911 – 137,911 123,224 – 123,224	Furniture and equipment HK$’000 22,495 – 22,495 15,419 – 15,419	Motor vehicles HK$’000 2,516 – 2,516 1,996 – 1,996	Total HK$’000 173,361 47,350
						220,711

						147,451 25,000
						172,451

The carrying amount of the Group’s land and buildings would have been approximately HK$27,862,000 (2013: HK$3,882,000) had they been stated at cost less accumulated depreciation and impairment losses.

The Group’s land and buildings is analysed as follows:

In Hong Kong Medium term leases In India Freehold	2014 HK$’000 23,400 23,950 47,350	2013 HK$’000 25,000 –
		25,000

The Group’s land and buildings in Hong Kong were revalued at 31 December 2014 on the open market value basis by reference to market evidence of recent transactions for similar properties by Multiple Surveyors & Consultants Limited (2013: performed by Colliers International (HK) Ltd), an independent firm of professional surveyors.

The Group’s freehold land and buildings in India were revalued at 31 December 2014 on the open market value basis by reference to market evidence of recent transactions for similar properties by Colliers International (India) Property Services Pvt. Ltd., an independent firm of professional surveyors. The title deed and original sale deed are now in the stamp duty office’s custody for final stamp duty assessment. The Group would obtain full legal title after completing the stamp duty assessment and stamp duty payment process.

19. PREPAID LEASE PAYMENTS

The Group’s prepaid lease payments represent prepayments for using certain factory premises outside Hong Kong under medium term leases. At end of reporting period, the factory premises was still under construction. Therefore, no amortisation of prepaid lease payments was resulted for the year ended 31 December 2014.

– II-44 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

20. GOODWILL

Group

Cost At 1 January 2013 Arising on acquisition of a subsidiary (note 41(d)) At 31 December 2013, 1 January 2014 and 31 December 2014 Accumulated impairment losses Impairment losses recognised in the year ended 31 December 2013 and balance at 31 December 2013 and 1 January 2014 Impairment loss recognised in current year At 31 December 2014 Carrying amount At 31 December 2014 At 31 December 2013	GAEMS CGU within GPT segment HK$’000 12,157 – 12,157 4,302 4,840 9,142 3,015 7,855	Greenware CGU within CP segment HK$’000 – 456 456 – – – 456 456	Total HK$’000 12,157 456
			12,613
			4,302 4,840
			9,142
			3,471

			8,311

Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (“CGUs”) that are expected to benefit from that business combination. Before recognition of impairment losses, the carrying amount of goodwill had been allocated to the GAEMS CGU and Greenware CGU.

The recoverable amounts of the CGUs have been determined on the basis of their value in use using discounted cash flows method. The key assumptions for the discounted cash flow method are those regarding the discount rates, growth rates and budgeted gross margin and turnover during the period. The Group estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth rates are based on long-term average economic growth rate of the geographical area in which the businesses of the CGUs operate. Budgeted gross margin and turnover are based on past practices and expectations on market development.

The Group prepares cash flow forecasts derived from the most recent financial budgets approved by the directors for the next five years with the residual period using the growth rate of 3% (2013: 3%). This rate does not exceed the average long-term growth rate for the relevant markets.

The rates used to discount the forecast cash flows from the GAEMS CGU and the Greenware CGU are 14.8% (2013: 22.3%) and 24.0% (2013: 24.0%) respectively.

At 31 December 2014, before impairment testing, goodwill of HK$7,855,000 was allocated to GAEMS CGU within the GPT segment. Due to changes in market condition, the Group has revised its cash flow forecasts for this CGU. The directors have consequently determined to write off the goodwill allocated to GAEMS CGU amounting to HK$4,840,000 (2013: HK$4,302,000) during the year. No other write-down of the assets of GAEMS CGU is considered necessary.

– II-45 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

21. INTANGIBLE ASSETS

Group

Cost At 1 January 2013 Acquisition of a subsidiary (note 41(c)) Exchange differences At 31 December 2013 and 1 January 2014 Acquisition of subsidiaries (note 41(a)) Exchange differences At 31 December 2014 Accumulated amortisation and impairment losses At 1 January 2013 Amortisation for the year Exchange differences At 31 December 2013 and 1 January 2014 Amortisation for the year Exchange differences At 31 December 2014 Carrying amount At 31 December 2014 At 31 December 2013	Trademarks (note a) HK$’000 17,664 692 597 18,953 992 (1,858) 18,087 122 – 5 127 – (15) 112 17,975 18,826	License rights (note b) HK$’000 37,382 – – 37,382 – – 37,382 17,059 4,302 – 21,361 3,204 – 24,565 12,817 16,021	Customer relationship (note c) HK$’000 30,144 706 134 30,984 1,693 (573) 32,104 15,080 4,741 90 19,911 5,055 (318) 24,648 7,456 11,073	Patents (note d) HK$’000 17,152 – – 17,152 – – 17,152 5,003 4,288 – 9,291 4,288 – 13,579 3,573 7,861	Technologies (note e) HK$’000 2,819 – – 2,819 842 (90) 3,571 235 940 – 1,175 1,085 – 2,260 1,311 1,644	Total HK$’000 105,161 1,398 731 107,290 3,527 (2,521) 108,296 37,499 14,271 95 51,865 13,632 (333) 65,164 43,132 55,425

Notes:

(a) The Group’s trademarks registration protect the design and specification of the Group’s “TrekStor”, “Maestro”, “Rydeen” and “Falcom” trademarks, and were assessed to have indefinite useful lives.
(b) License rights represent the right to use the “RCA” trademark in trading of certain manufactured business phones in the United States and Canada. The remaining amortisation period of the license rights is 4 years (2013: 5 years).

– II-46 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Originally, the Group had the license rights for the period from 1 March 2009 to 31 December 2013. On 8 February 2011, Telefield NA Inc., a wholly-owned subsidiary of the Group, reached an agreement with the licensor to extend the license period for an additional terms of five years from 1 January 2014 up to and including 31 December 2018. The consideration for the additional license rights period is based on certain percentage of net sales of Telefield NA Inc. for the calendar year 2014 to 2018 with annual minimum guaranteed amounts increased progressively throughout the five calendar years.

At initial recognition in 2011, the cost of the license rights was based on the fair value of license fee payable of approximately HK$16,021,000. The discount rate used was 18.3%. The license fee payable is subsequently measured at amortised cost.

(c) Customer relationship represents the future economic benefit to the Group arising from regular contact between individual customer and the business entity before business combination. The amortising period of customer relationship is 3 – 6 years (2013: 3 – 6 years).
(d) Patents represent certain registered patents and patents under registration process in relation to design and utility of the portable gaming console. The amortisation period of patents is 4 years (2013: 4 years).
(e) Technologies represent GPS and modem technologies. The Group has offered several GPS and modem product for wireless tracking applications. The amortisation period of technologies is 3 years (2013: 3 years).

The Group carried out reviews of the recoverable amount of its intangible assets. The recoverable amounts of the relevant assets have been determined on the basis of the value in use of CGUs in which the relevant assets belong. The discount rates used in measuring value in use ranging from 15% to 31% (2013: 21% to 25%).

22. INVESTMENTS IN SUBSIDIARIES

Company

				2014	2013
				HK$’000	HK$’000
Unlisted	investment,	at	cost	3,171	3,171

The amounts due from/(to) subsidiaries are unsecured, interest-free and have no fixed terms of repayment.

Particulars of the subsidiaries as at 31 December 2014 are as follows:

			Percentage of	Percentage of
	Place of		ownership interest/
Name of	incorporation/	Issued and	voting power/		Principal
subsidiary	establishment	paid up capital	profit sharing		activities
			2014	2013
Telefield Holdings	British Virgin	410,000 ordinary	100%	100%	Investment holding
Limited	Islands	shares of US$1
	(“B.V.I.”)	each
Able Trend	Hong Kong	Ordinary shares of	85%	90%	Design of
Technology		HK$10,590			electronic
Limited		(2013:			components
		HK$10,000)
Affonso Limited	B.V.I.	1,000 ordinary	51%	100%	Investment holding
		shares of US$1
		each (2013: 510
		ordinary shares
		of US$1 each)

– II-47 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

			Percentage of	Percentage of
	Place of		ownership interest/
Name of	incorporation/	Issued and	voting power/		Principal
subsidiary	establishment	paid up capital	profit sharing		activities
			2014	2013
Aiko Products	Hong Kong	Ordinary shares of	100%	100%	Trading of
Limited		HK$10,000			electrical
					appliances,
					provision of
					consultancy and
					agency services
Allied Express	Hong Kong	Ordinary shares of	100%	–	Investment holding
(China) Limited		HK$1 (2013:
		Nil)
Alagona Holdings	B.V.I.	1 ordinary share of	100%	100%	Investment holding
Limited		US$1 each
B. Kettner	Hong Kong	Ordinary shares of	100%	–	Inactive
Products Hong		HK$1 (2013:
Kong Limited		Nil)
Bracciano Limited	B.V.I.	1 ordinary share of	100%	100%	Investment holding
		US$1 each
Brilliant Ace	Hong Kong	Ordinary shares of	51%	–	Investment holding
Limited		HK$1 (2013:
		HK$1)
Brilliant Ace	India	50,000 equity	51%	–	Property
Communications		share of Rs.10			investment
Private Limited		each
Calibre Holdings	B.V.I.	1 ordinary share of	100%	100%	Investment holding
Limited		US$1 each
Circuit	Hong Kong	Ordinary shares of	100%	100%	Property
Development		HK$10,000			investment
Limited
Ease Able Limited	Hong Kong	Ordinary share of	100%	100%	Investment holding
		HK$1
Ever Billion	Hong Kong	Ordinary share of	100%	–	Inactive
Industrial		HK$1 (2013:
Limited		Nil)
Falcom GmbH	Germany	100,000 ordinary	53%	–	Trading of
		shares of EUR1			modems and
		of each			related parts for
					communications
					products

– II-48 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

			Percentage of	Percentage of
	Place of		ownership interest/
Name of	incorporation/	Issued and	voting power/		Principal
subsidiary	establishment	paid up capital	profit sharing		activities
			2014	2013
Fargo Telecom	Hong Kong	Ordinary shares of	64%	53%	Investment holding
Asia Limited		HK$10,000			and trading of
					communications
					products
Fargo Telecom	B.V.I.	1,063,830 ordinary	64%	53%	Investment holding
Holdings		shares of US$1
Limited		each
Fargo Telecom	India	50,000 equity	64%	53%	Trading of
Technologies		shares of Rs.10			communications
Private Limited		each			products
G.A.E.M.S., Inc.	U.S.A.	13,265 shares at no	51%	51%	Design,
		par value			development,
					trading,
					distribution and
					sale of mobile
					electronic
					gaming and
					entertainment
					systems
Gabrio	B.V.I.	1 ordinary share of	100%	100%	Investment holding
International		US$1 each
Limited
GAEMS	Hong Kong	Ordinary shares of	51%	51%	Trading,
International		HK$1,000			distribution and
Limited					sales of mobile
					electronic
					gaming and
					entertainment
					systems
Greenware Limited	Hong Kong	Ordinary shares of	51%	42%	Environmental
		HK$169,583 and			monitoring
		preference			system
		shares of			integration
		HK$3,000			services
Keenpro	B.V.I.	1 ordinary share of	100%	100%	Investment holding
Investments		US$1
Limited
Lucky Century	B.V.I.	1,000 ordinary	51%	–	Investment holding
International		shares of US$1
Limited		each
Macar Holdings	B.V.I.	1 ordinary share of	100%	100%	Investment holding
Limited		US$1 each

– II-49 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

			Percentage of	Percentage of
	Place of		ownership interest/
Name of	incorporation/	Issued and	voting power/		Principal
subsidiary	establishment	paid up capital	profit sharing		activities
			2014	2013
Maestro Wireless	B.V.I.	100 ordinary	64%	53%	Inactive
Holdings		shares of US$1
Limited		each
Maestro Wireless	Hong Kong	Ordinary shares of	64%	53%	Trading of
Solutions		HK$100			modems and
Limited					related parts for
					communications
					products
Metro Creator	Hong Kong	Ordinary shares of	100%	100%	Investment holding
Limited		HK$10,000			and trading of
					multimedia
					products
Modern Channel	Hong Kong	Ordinary shares of	100%	100%	Development of
Limited		HK$10,000			electronic
					medical devices
Phoenix Choice	B.V.I.	1 ordinary share of	100%	–	Investment holding
Holdings		US$1 each
Limited		(2013: Nil)
Rydeen North	U.S.A.	1,000 shares at no	75%	75%	Design,
America Inc.		par value			development,
					trading,
					distribution of
					consumer
					electronics
Sino Achieve	Hong Kong	Ordinary shares of	100%	100%	Investment holding
Limited		HK$5,000,000			and trading
Smart Gears	Hong Kong	Ordinary shares of	64%	53%	Investment holding
Limited		HK$100			and trading of
					plastic parts for
					communications
					products,
					provision of
					software and
					hardware
					development
					services
Sota Acoustics	Hong Kong	Ordinary share of	100%	–	Inactive
Limited		HK$1 (2013:
		Nil)
Space Wisdom	B.V.I.	1 ordinary share of	100%	100%	Inactive
Limited		US$1 each

– II-50 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

			Percentage of	Percentage of
	Place of		ownership interest/
Name of	incorporation/	Issued and	voting power/		Principal
subsidiary	establishment	paid up capital	profit sharing		activities
			2014	2013
STI Technology	Hong Kong	Ordinary shares of	49%	49%	Trading of
Limited		HK$4,000,000			professional
					audio
					equipments
Telefield Asia	Hong Kong	Ordinary share of	100%	100%	Investment holding
Pacific Limited		HK$1
Telefield GAEMS	Hong Kong	Ordinary share of	100%	100%	Investment holding
Limited		HK$1
Telefield India	Hong Kong	Ordinary share of	51%	100%	Investment holding
Limited		HK$1
Telefield Industrial	Hong Kong	Ordinary shares of	51%	100%	Investment holding
(India) Limited		HK$15,000
Telefield Japan	Japan	Share capital of	100%	100%	EMS marketing
Inc.		JPY9,500,000			and agency
					services
Telefield Lifestyle	Hong Kong	Ordinary shares of	85%	75%	Trading and EMS
Limited		HK$700,000			agency services
Telefield Limited	Hong Kong	Ordinary shares of	100%	100%	Investment
		HK$20,000,000			holding,
		and non-voting			electronic
		deferred shares			manufacturing
		of			services for
		HK$5,000,000			telecommunications,
					security, car
					electronics,
					home
					appliances, other
					consumer and
					industrial
					electronic
					products
Telefield Medical	Hong Kong	Ordinary shares of	100%	100%	Trading and
Devices Limited		HK$1,000			development of
					electronic
					medical devices
Telefield Medical	Hong Kong	Ordinary share of	55%	100%	Development of
Imaging Limited		HK$1,000,000			electronic
					medical devices
Telefield NA Inc.	U.S.A.	Share capital of	100%	100%	Trading of
		US$2,000,000			business
					telephone system

– II-51 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

			Percentage of	Percentage of
	Place of		ownership interest/
Name of	incorporation/	Issued and	voting power/		Principal
subsidiary	establishment	paid up capital	profit sharing		activities
			2014	2013
Telefield TrekStor	Luxembourg	200 registered	51%	51%	Investment holding
S.a.r.l.		shares of			and sub-
		EUR125 each			licensing of
					trademark
Telefield Universal	Hong Kong	Ordinary shares of	100%	100%	Investment holding
Limited		HK$15,600,000			and trading
Telefield Vision	Hong Kong	Ordinary shares of	100%	100%	Investment holding
Limited		HK$10,000			and trading of
					computer
					accessories
Telefield Industries	India	1,000,000 equity	51%	100%	Electronic
(India) Private		shares of Rs.10			manufacturing
Limited		each			service for home
					appliances
Telefield Zen	India	1,000,000 equity	51%	100%	Trading of
Industries		shares of Rs.10			consumer
Private Limited		each			electronics
TK-Trade S.R.L.	Italy	Share capital of	51%	51%	Marketing and
		EUR15,000			agency services
TrekStor GmbH	Germany	Share capital of	51%	51%	Assembling,
		EUR25,000			marketing and
					distribution of
					“TrekStor”
					branded products
					such as portable
					storage devices
					and multimedia
					products
TrekStor Limited	Hong Kong	Ordinary shares of	51%	51%	Holding of
		HK$100			trademark and
					intellectual
					property,
					licensing of
					trademark
TS Technology	Hong Kong	Ordinary shares of	60%	60%	Investment holding
International		HK$20,000
Limited
Well Dragon	Hong Kong	Ordinary share of	100%	–	Inactive
Electronics		HK$1
Limited

– II-52 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

			Percentage of	Percentage of
	Place of		ownership interest/
Name of	incorporation/	Issued and	voting power/		Principal
subsidiary	establishment	paid up capital	profit sharing		activities
			2014	2013
Huizhou Telefield	PRC	Registered capital	100%	100%	Manufacture and
Limited (Note)		of			sale of
		HK$15,000,000			telecommunications
					and other
					products
Aiko Beauty	PRC	Registered capital	100%	100%	Trading of
(Shenzhen)		of			appliances
Limited (Note)		HK$1,000,000
Smart Gears	PRC	Registered capital	64%	53%	Trading of
(Shenzhen)		of			communications
Limited (Note)		RMB1,500,000			products and the
					provision of
					software and
					hardware
					development
					devices
Guangzhou	PRC	Registered capital	100%	100%	Manufacture of
Telefield		of US$7,060,000			telecommunications
Limited (Note)					and other
					products
Guangzhou	PRC	Registered capital	100%	100%	Manufacture and
Telefield		of US$200,000			sale of medical
Medical Devices					devices
Limited (Note)
Telefield Vision	PRC	Registered capital	100%	100%	Marketing and
(Shanghai)		of US$520,000			distribution of
Limited (Note)					computer
					accessories
Xin Qu Pin	PRC	Registered capital	100%	–	Inactive
(Shenzhen)		of HK$500,000
Limited		(2013: Nil)

Note: English names for identification purpose.

The Company held Telefield Holdings Limited directly and held other subsidiaries indirectly.

All subsidiaries established in the PRC are Wholly Foreign-Owned Enterprises.

Although the Group owns less than 50% of the equity interest in STI Technology Limited, STI Technology Limited is treated as subsidiary because the Group is able to control the relevant activities as a result of the majority voting right to direct relevant activities of STI Technology Limited.

– II-53 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The following table shows information of a subsidiary that have non-controlling interests (“NCI”) material to the Group. The summarised financial information represents amounts before inter-company eliminations.

Principal place of business/country of incorporation
% of ownership interests held by NCI
At 31 December:
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net liabilities
Accumulated NCI
Year ended 31 December:
Revenue
(Loss)/Profit
Total comprehensive income
(Loss)/Profit allocated to NCI
Net cash generated in operating activities
Net cash used in investing activities
Net cash (used in)/generated from financing activities
Net (decrease)/increase in cash and cash equivalents
23.
INVESTMENTS IN ASSOCIATES
Group
Unlisted investments:
Share of net assets
Amounts due from associates
Impairment loss
Exchange difference

TrekStor GmbH
2014
2013
Germany/Germany
49%
49%
HK$’000
HK$’000
2,816
1,885
254,375
321,537
(113)
(281)
(332,710)
(338,639)
(75,632)
(15,498)
(35,338)
(5,872)
517,733
540,464
(67,759)
8,213
(64,685)
7,877
(33,202)
3,700
15,282
4,928
(3,143)
(532)
(21,289)
3,898
(9,150)
8,294
2014
2013
HK$’000
HK$’000
51
–
12,396
4,313
(10,213)
(4,165)
169
(148)
2,403
–

As at 31 December 2014, the amounts due from associates included a loan to an associate granted during 2014 with principal amount of EUR300,000 which is unsecured, interest-bearing at the 4% per annum and repayable on 31 December 2021. The remaining balance of amounts due from associates is unsecured, interest free and has no specific repayment terms.

– II-54 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Details of the Group’s associates at 31 December 2014 and 2013 are as follows:

	Place of		Percentage of	Percentage of
	incorporation/	Issued and	ownership interest
Name	registration	paid up capital	2014	2013	Principal activities
KEYOS GmbH	Germany	Share capital of	30%	30%	Designing,
		EUR 41,667			developing and
					distributing smart
					key
King Choice	Hong Kong	10,000 ordinary	49%	N/A	Investment holding
Limited		shares of HK$1
		each

The following table shows, in aggregate, the carrying amounts of interests in associates and the Group’s share of the amounts of all individually immaterial associates that are accounted for using the equity method.

At 31 December: Carrying amounts of interests Year ended 31 December: Revenue Loss after tax Other comprehensive income Total comprehensive income 24. INVESTMENT IN A JOINT VENTURE Group Unlisted investment in Hong Kong: Share of net assets Amount due from a joint venture	2014 HK$’000 2,403 1,162 (2,525) – (2,525) 2014 HK$’000 117 17 134	2013 HK$’000 – 96 (2,314) – (2,314) 2013 HK$’000 N/A N/A N/A

– II-55 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Details of the Group’s joint venture at 31 December 2014 is as follows:

			Percentage of
	Place of	Issued and	ownership
Name	incorporation	paid up capital	interest	Principal activities
Groovio Company	Hong Kong	400,000 ordinary	50%	Trading of audio
Limited		share of US$1		based products
		each

The following table shows the Group’s share of the amount of Groovio Company Limited accounted for using the equity method.

At 31 December: Carrying amounts of interests Year ended 31 December: Revenue Loss after tax Other comprehensive income Total comprehensive income 25. AVAILABLE-FOR-SALE FINANCIAL ASSETS Group Unlisted equity securities, at cost Less: Impairment loss	2014 HK$’000 134 – (1,433) – (1,433) 2014 HK$’000 2,340 (2,340) –	2013 HK$’000 N/A

		N/A N/A

		N/A
		N/A

		2013 HK$’000 2,340 (2,340)
		–

At 31 December 2014, the Group has certain minority equity interest in Touch Media International Holdings, which is a private company incorporated in the Cayman Islands.

26. INVENTORIES

Group

Raw materials Work in progress Finished goods Goods in transit	2014 HK$’000 60,858 42,109 152,742 34,434 290,143	2013 HK$’000 61,538 39,771 157,364 34,283
		292,956

– II-56 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

27. TRADE RECEIVABLES

The Group’s trading terms with customers are mainly on credit. The credit terms generally range from 30 to 120 days. Each customer has a maximum credit limit. For new customers, payment in advance is normally required. The Group seeks to maintain strict control over its outstanding receivables. Overdue balances are reviewed regularly by the directors.

The aging analysis of trade receivables, based on invoice date, and net of allowance, is as follows:

Group

0 to 90 days 91 to 180 days 181 to 365 days Over 365 days	2014 HK$’000 302,141 7,835 589 5,083 315,648	2013 HK$’000 387,681 25,835 5,764 1,490
		420,770

Reconciliation of allowance for trade receivables:

At 1 January Allowance for the year Reversal for the year Bad debts written off At 31 December	2014 HK$’000 1,023 2,291 – – 3,314	2013 HK$’000 3,635 2,843 (2,612) (2,843)
		1,023

As of 31 December 2014, trade receivables of approximately HK$64,879,000 (2013: HK$96,366,000) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. An aging analysis of these trade receivables is as follows:

Up to 3 months Over 3 months	2014 HK$’000 56,298 8,581 64,879	2013 HK$’000 85,760 10,606
		96,366

The carrying amounts of the Group’s trade receivables are denominated in the following currencies:

United States dollar Hong Kong dollar Renminbi Euro Others Total	2014 HK$’000 230,494 1,318 6,539 75,435 1,862 315,648	2013 HK$’000 251,052 788 8,255 159,171 1,504
		420,770

– II-57 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

28. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

Prepayments Deposits Factoring deposits Purchase deposits Other receivables	Group 2014 2013 HK$’000 HK$’000 4,810 4,643 4,785 7,912 47,139 22,752 21,160 35,145 38,342 23,577 116,236 94,029	Company 2014 2013 HK$’000 HK$’000 145 – – – – – – – – – 145 –	Company 2014 2013 HK$’000 HK$’000 145 – – – – – – – – – 145 –
			–

29. DERIVATIVE FINANCIAL ASSETS/LIABILITIES

Group

At fair value Currency options – assets Currency options – liabilities Forward contracts – liabilities	2014 HK$’000 4,824 – (82) 4,742	2013 HK$’000 – (6,119) –
		(6,119)

The Group utilises currency options and forward contracts to mitigate foreign currency exposure of purchases denominated in foreign currencies.

The fair value of the Group’s currency options and forward contracts are based on the valuation performed by Grant Sherman Appraisal Limited, an independent firm of professional valuer. The key assumptions used are as follows:

Currency options (Short EUR, Long USD) Average strike exchange rate (EUR/USD) Time to expiration (year) Contract amounts Forward contracts (Long RMB, Short USD) Forward exchange rate (USD/RMB) Time to expiration (year) Contract amounts	2014 1.37 0.079 – 0.310 EUR4 million 2014 6.25 0.162 – 0.652 USD2 million	2013 1.32 0.063 – 0.134 EUR16 million

		2013 N/A N/A N/A

30. AMOUNT DUE FROM A NON-CONTROLLING SHAREHOLDER OF A SUBSIDIARY

The amount due from a non-controlling shareholder of a subsidiary is unsecured, interest-free and has no fixed terms of repayment.

– II-58 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

31. BANK AND CASH BALANCES

The cash and cash equivalents of the Group and Company are as follows:

Cash on hand Cash in transit Cash at bank Cash and cash equivalents in the consolidated statement of cash flows	Group 2014 2013 HK$’000 HK$’000 1,272 475 47 3,148 184,433 179,515 185,752 183,138	Company 2014 2013 HK$’000 HK$’000 – – – – 5,728 2,522 5,728 2,522	Company 2014 2013 HK$’000 HK$’000 – – – – 5,728 2,522 5,728 2,522
			2,522

The bank and cash balances of the Group and Company are denominated in the following currencies:

United States dollar Hong Kong dollar Renminbi Euro Others	Group 2014 2013 HK$’000 HK$’000 55,377 60,519 40,776 26,506 73,660 70,456 13,850 24,995 2,089 662 185,752 183,138	Company 2014 2013 HK$’000 HK$’000 – – 5,728 2,522 – – – – – – 5,728 2,522	Company 2014 2013 HK$’000 HK$’000 – – 5,728 2,522 – – – – – – 5,728 2,522
			2,522

As at 31 December 2014, the bank and cash balances of the Group denominated in Renminbi (“RMB”) amounted to approximately HK$14,883,000 (2013: HK$16,522,000). Conversion of RMB into foreign currencies is subject to the PRC’s Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations.

32. TRADE PAYABLES

The aging analysis of trade payables, based on invoice date, is as follows:

0 to 90 days 91 to 180 days 181 to 365 days Over 365 days	2014 HK$’000 251,580 583 26,317 2,022 280,502	2013 HK$’000 312,898 3,160 588 1,594
		318,240

– II-59 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The carrying amounts of the Group’s trade payables are denominated in the following currencies:

United States dollar Hong Kong dollar Renminbi Euro Others Total	2014 HK$’000 138,084 94,593 18,865 28,799 161 280,502	2013 HK$’000 194,734 61,385 16,818 44,503 800
		318,240

33. ACCRUALS AND OTHER PAYABLES

Accrued salaries Accrued expenses Customer deposits and receipts in advance Other payables	Group 2014 2013 HK$’000 HK$’000 110,187 104,507 122,533 89,625 25,069 20,953 8,458 14,206 266,247 229,291	Company 2014 2013 HK$’000 HK$’000 – – 2,248 2,133 – – – – 2,248 2,133	Company 2014 2013 HK$’000 HK$’000 – – 2,248 2,133 – – – – 2,248 2,133
			2,133

34. AMOUNTS DUE TO NON-CONTROLLING SHAREHOLDERS OF SUBSIDIARIES

The amounts due to non-controlling shareholders of subsidiaries are unsecured, interest-free and have no fixed terms of repayment.

35. BANK BORROWINGS

Group

Bank loans Import/export loans	2014 HK$’000 65,875 51,200 117,075	2013 HK$’000 72,622 39,191
		111,813

The carrying amounts of the Group’s borrowings are denominated in the following currencies:

At 31 December 2014 Bank loans Import/export loans	Hong Kong dollar HK$’000 45,000 25,896 70,896	United States dollar HK$’000 2,012 25,304 27,316	Euro HK$’000 18,863 – 18,863	Total HK$’000 65,875 51,200
				117,075

– II-60 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

At 31 December 2013 Bank loans Import/export loans	Hong Kong dollar HK$’000 35,000 32,365 67,365	United States dollar HK$’000 16,265 6,826 23,091	Euro HK$’000 21,357 – 21,357	Total HK$’000 72,622 39,191
				111,813

The average interest rates at 31 December were as follows:

	2014	2013
Bank loans	2.07%	2.63%
Import/export loans	2.97%	3.07%

Bank loans of approximately HK$20,875,000 (2013: HK$22,122,000) are arranged at fixed interest rates and expose the Group to fair value interest rate risk. Other borrowings are arranged at floating rates, thus exposing the Group to cash flow interest rate risk.

As at 31 December 2014 and 2013, the Group’s bank borrowings were secured by the Corporate guarantee of the Company, certain subsidiaries and certain non-controlling shareholders and personal guarantee by a director of a subsidiary.

36. PRODUCT WARRANTY PROVISIONS

The movement in the Group’s product warranty provisions are analysed as follows:

At 1 January Provision used Unused provision reversed Additional provision Exchange differences At 31 December	2014 HK$’000 19,343 (9,967) (398) 14,768 (1,861) 21,885	2013 HK$’000 17,463 (10,668) (3,841) 15,945 444
		19,343

The Group has committed to repurchase its products from or offer replacement of its products to certain distributors when these distributors receive returned goods from unsatisfied ultimate consumers. Such kind of provision for product warranties are recognised based on past experience of level of repairs and returns, discounted to their present value as appropriate.

37. FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

	RCA	TrekStor	Fargo
	(note a)	(note b)	(note c)	Total
	HK$’000	HK$’000	HK$’000	HK$’000
At 1 January 2013	9,782	2,704	6,811	19,297
Settlement during the year	(7,748)	–	–	(7,748)
Change of fair value during the year	177	2,329	(845)	1,661
Exchange differences	–	195	–	195

– II-61 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

At 31 December 2013 Settlement during the year Change of fair value during the year Exchange differences At 31 December 2014 At 31 December 2014 Current liabilities Non-current liabilities At 31 December 2013 Current liabilities Non-current liabilities	RCA (note a) HK$’000 2,211 (2,211) – – – – – – 2,211 – 2,211	TrekStor (note b) HK$’000 5,228 – (1,635) (470) 3,123 3,123 – 3,123 – 5,228 5,228	Fargo (note c) HK$’000 5,966 (614) (4,401) – 951 305 646 951 1,265 4,701 5,966	Total HK$’000 13,405 (2,825) (6,036) (470) 4,074 3,428 646 4,074 3,476 9,929 13,405

(a) The contingent consideration for acquisition of RCA business telephone system distribution business in 2009 is based on certain percentage of net sales of Telefield NA Inc. for the calendar year 2009 to 2013 with annual minimum guaranteed amounts increased progressively throughout the five calendar years.
(b) The contingent consideration for acquisition of TrekStor multimedia product distribution business in 2009 is based on 20% of accumulated consolidated taxable profit of TrekStor GmbH and TrekStor Limited for the five years after acquisition or 10% of yearly consolidated taxable profit of TrekStor GmbH and TrekStor Limited for the five years after acquisition, whichever is higher. The total contingent consideration is capped at EUR500,000.
(c) The Group acquired the Fargo communications product distribution business on 3 October 2012 by subscribing 53% of enlarged share capital of Fargo Telecom Group. As an integral part of the business combination, the Group agreed to purchase from the former controlling shareholder of Fargo Telecom Group up to 42.3% of the enlarged share capital in 4 equal lots before 30 April 2015 (“Subsequent Acquisition Arrangement”) with reference to the financial results of Fargo Telecom Group. Under such Subsequent Acquisition Arrangement, on 16 June 2014, the Group acquired 10.575% of enlarged share capital by paying HK$614,000. The second and third lots of shares totaling 21.15% of enlarged share capital would be acquired by the Group on 30 April 2015. On 1 May 2014, the Group agreed with the former controlling shareholder of Fargo Telecom Group to postpone the purchase date of the last lot of shares (i.e. 10.575% of enlarged share capital) under the Subsequent Acquisition Arrangement to 30 April 2017.
(d) The fair values of the above balances at the end of each reporting period are based on valuation results of Grant Sherman Appraisal Limited, an independent firm of professional valuer. The discount rates used in the valuations at end of reporting period are as follows:

			2014			2013
RCA			N/A			5.0%
TrekStor			N/A			1.95%
Fargo	2.37%	–	3.47%	1.47%	–	3.24%

– II-62 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

38. DEFERRED TAX

Group

At 1 January 2013 Credit/(charge) to profit or loss for the year (note 11) – origination and reversal of temporary differences Charge to equity for the year Acquisition of a subsidiary (note 41(c)) Exchange differences At 31 December 2013 and 1 January 2014 Credit/(charge) to profit or loss for the year (note 11) – origination and reversal of temporary differences Credit to equity for the year Acquisition of a subsidiary (note 41(a)) Exchange differences At 31 December 2014	Accelerated tax depreciation HK$’000 (2,018) 41 – – – (1,977) 46 – – – (1,931)	Valuation of intangible assets HK$’000 (20,157) 4,855 – (475) (110) (15,887) 4,528 – (982) 321 (12,020)	Valuation of contingent consideration HK$’000 10,680 (1,034) – – – 9,646 (148) – – – 9,498	Revaluation of land and buildings HK$’000 (3,208) – (165) – – (3,373) – 99 – – (3,274)	Others HK$’000 1,494 (256) – – – 1,238 1,485 – – – 2,723	Total HK$’000 (13,209) 3,606 (165) (475) (110) (10,353) 5,911 99 (982) 321 (5,004)

The following is the analysis of the deferred tax balances for consolidated statement of financial position purposes:

Deferred tax assets Deferred tax liabilities	2014 HK$’000 12,221 (17,225) (5,004)	2013 HK$’000 10,884 (21,237) (10,353)

At the end of the reporting period, the Group has unused tax losses of approximately HK$76.9 million (2013: HK$15.1 million) available for offset against future profits. No deferred tax asset in relation to unused tax losses has been recognised due to the unpredictability of future profit streams. Included in unrecognised tax losses are losses of approximately HK$1.1 million (2013: HK$2.9 million) that will expire before 2018. Other tax losses may be carried forward indefinitely.

Temporary differences arising in connection with interests in subsidiaries are insignificant.

– II-63 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

39. SHARE CAPITAL

Company

Authorised: Ordinary shares of HK$0.01 each At 1 January and at 31 December Issued and fully paid: Ordinary shares of HK$0.01 each At 1 January and at 31 December	2014 Number of shares Amount HK$’000 10,000,000,000 100,000 411,714,000 4,117	2013 Number of shares Amount HK$’000 10,000,000,000 100,000 411,714,000 4,117	2013 Number of shares Amount HK$’000 10,000,000,000 100,000 411,714,000 4,117

			4,117

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and to maximise the return to the shareholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from prior year.

The Group sets the amount of capital in proportion to risk. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the payment of dividends, issue new shares, buy-back shares, raise new debts, redeem existing debts or sell assets to reduce debts.

The externally imposed capital requirements for the Group is to have a public float of at least 25% of the Company’s shares in order to maintain its listing on the Stock Exchange.

40. RESERVES

(a) Group

The amounts of the Group’s reserves and the movements therein are presented in the consolidated statement of profit or loss and other comprehensive income and consolidated statement of changes in equity.

(b) Company

At 1 January 2013 Profit for the year 2013 interim dividend and 2012 final dividend paid At 31 December 2013 At 1 January 2014 Profit for the year 2014 interim dividend and 2013 final dividend paid At 31 December 2014	Share premium account HK$’000 115,508 – – 115,508 115,508 – – 115,508	Merger reserve HK$’000 3,171 – – 3,171 3,171 – – 3,171	Retained profits HK$’000 8,948 17,836 (14,410) 12,374 12,374 12,519 (16,469) 8,424	Total HK$’000 127,627 17,836 (14,410)
				131,053

				131,053 12,519 (16,469)
				127,103

– II-64 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(c) Nature and purpose of reserves

(i) Share premium account

Share premium represents the amount of the excess of issue price of the Company’s shares over its par value.

(ii) Merger reserve

The merger reserve represents the difference between the nominal value of the shares issued by the Company in exchange for the nominal value of the share capital of its subsidiaries arising from the Group Reorganisation.

(iii) Foreign currency translation reserve

The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations. The reserve is dealt with in accordance with the accounting policies set out in note 3(e)(iii) to the consolidated financial statements.

(iv) Property revaluation reserve

The property revaluation reserve has been set up and is dealt with in accordance with the accounting policies adopted for land and buildings in note 3(f) to the consolidated financial statements.

(v) Contributed surplus

The contributed surplus of the Group represents the difference between the nominal value of shares of the subsidiaries acquired pursuant to a group reorganisation in 1997, over the nominal value of shares of Telefield Holdings Limited issued in exchange therefor.

(vi) Statutory reserve

The statutory reserve, which is non-distributable, is appropriated from the profit after taxation of the Group’s PRC subsidiaries under the applicable laws and regulations in the PRC.

(vii) Capital reserve

The capital reserve represents (i) the present value of future consideration of Subsequent Acquisition Arrangement of Fargo Telecom Group (note 37(c)) at inception and (ii) gains/losses directly reflect in equity resulted from change of equity interests in subsidiaries without change of control.

– II-65 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

41. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS

(a) On 4 June 2014, the Group acquired 83% equity interest of Falcom GmbH (“Falcom”) by subscribing newly allotted ordinary shares of Falcom for cash consideration of approximately HK$4,318,000 and payment of another approximately HK$84,000 to existing shareholders. Falcom is engaged in design, development and production of automatic vehicle location tracking systems and asset tracking products during the period. The amount of acquisition-related costs was approximately HK$562,000.

The fair value of the identifiable assets and liabilities of Falcom acquired as at its date of acquisition, is as follows:

Net assets acquired:
Fixed assets (note 18)
Trademark (note 21)
Technologies (note 21)
Customer relationship (note 21)
Inventories
Other receivables
Bank and cash balances
Trade and other payables
Deferred tax liabilities (note 38)
Non-controlling interest
Discount on acquisition (note 9)
Satisfied by:
Cash
Net cash inflow arising on acquisition:
Cash consideration paid
Cash and cash equivalents acquired

HK$’000
1,373
992
842
1,693
3,384
58
5,292
(5,037)
(982)
(1,295)
6,320
(1,918)
4,402
HK$’000
4,402
(4,402)
5,292
890

The Group recognised discount on acquisition of approximately HK$1.9 million as other income. The directors of the Group are of the opinion that the discount on acquisition of Falcom was resulted from a liquidation sales of a well-established company in Germany.

Falcom contributed approximately HK$20,319,000 and HK$1,971,000 to the Group’s revenue and loss for the year respectively for the period between the date of acquisition and the end of the reporting period.

If the acquisition had been completed on 1 January 2014, the Group’s total revenue for the year would have been HK$1,832,867,000, and loss for the year would have been approximately HK$42,929,000. The proforma information is for illustrative purposes only and is not necessarily an indication of the revenue and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 January 2014, nor is intended to be a projection of future results.

– II-66 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

(b) On 12 May 2014, the Group obtained control of Lucky Century International Limited (“Lucky Century”), a company incorporated in the British Virgin Islands and its subsidiaries (collectively referred to as “Lucky Century Group”) by paying cash consideration of approximately HK$12,400,000 to Ace Choice Global Limited (the “Vendor”) for 51% of the issued share capital of Lucky Century. Lucky Century Group holds certain land and buildings in India.

Net assets acquired: Fixed assets – land and buildings (note 18) Non-controlling interest Satisfied by: Cash Net cash outflow arising on acquisition: Cash consideration paid	HK$’000 24,314 (11,914) 12,400 HK$’000 12,400 (12,400)

(c) Acquisition of a subsidiary – Rydeen North America Inc (“Rydeen”)

On 16 August 2013, the Group obtained control of Rydeen North America Inc. (“Rydeen”) by subscribing newly allotted ordinary shares of Rydeen for cash consideration of HK$2,325,000. The newly allotted ordinary shares represented 75% of the enlarged share capital of Rydeen. Rydeen was engaged in design, development, trading, distribution of consumer electronics. The amount of acquisition – related costs was approximately HK$125,000.

The fair value of the identifiable assets and liabilities of Rydeen acquired as at its date of acquisition is as follows:

Net assets acquired: Fixed assets (note 18) Trademark (note 21) Customer relationship (note 21) Inventories Trade receivables Prepayments and deposits Bank and cash balances Trade payables Accrued and other payables Deferred tax liabilities (note 38) Non-controlling interests Discount on acquisition (note 9)	HK$’000 530 692 706 1,246 1,021 776 3,381 (608) (2,949) (475) (1,080) 3,240 (915) 2,325

– II-67 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Satisfied by: Cash Net cash inflow arising on acquisition: Cash consideration paid Cash and cash equivalents acquired	HK$’000 2,325 (2,325) 3,381 1,056

The fair value of trade receivables at the date of acquisition amount to HK$1,021,000. The gross contractual amount of those trade receivables acquired amount to HK$1,021,000 at the date of acquisition. The best estimate at acquisition date of the contractual cash flows not expected to be collected amount to HK$Nil.

The Group recognised discount on acquisition of approximately HK$915,000 in other income (note 9) in relation to the acquisition of Rydeen. The directors of the Group are of the opinion that the discount on acquisition of Rydeen mainly arising from good business relationship between the Group and the former controlling shareholder of Rydeen. The recognition of quantified intangible assets including trademark and customer relationship, which are valuable to the Company than the price paid.

Rydeen contributed approximately HK$6,001,000 and HK$447,000 to the Group’s revenue and profit for the year respectively for the period between the date of acquisition and the end of the reporting period.

If the acquisition had been completed on 1 January 2013, total Group revenue for the year ended 31 December 2013 would have been HK$1,832,083,000 and profit for the year would have been HK$32,152,000. The proforma information is for illustrative purposes only and is not necessarily an indication of the revenue and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 January 2013, nor is intended to be a projection of future results.

(d) Acquisition of a subsidiary – Greenware Limited (“Greenware”)

On 1 July 2013, the Group obtained control of Greenware Limited (“Greenware”) by injecting cash of HK$400,000 into Greenware in return for 80% of its issued share capital. Greenware was engaged in environmental monitoring system integration services.

The fair value of the identifiable assets and liabilities of Greenware acquired as at its date of acquisition is as follows:

Net assets acquired: Fixed assets (note 18) Trade receivables Deposit paid Bank balances Trade payable Accrued and other payables Non-controlling interests Goodwill (note 20)	HK$’000 13 88 16 20 (6) (201) 14 (56) 456 400

– II-68 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Satisfied by: Cash Net cash outflow arising on acquisition: Cash consideration paid Cash and cash equivalents acquired	HK$’000 400

	(400) 20
	(380)

The fair value of trade receivables at the date of acquisition amount to HK$88,000. The gross contractual amount of those trade receivables acquired amount to HK$88,000 at the date of acquisition. The best estimate at acquisition date of the contractual cash flows not expected to be collected amount to HK$Nil.

The goodwill arising on the acquisition of Greenware is attributable to the anticipated profitability of the distribution of the Group’s products in the new markets and the anticipated future operating synergies from the combination.

Greenware contributed approximately HK$Nil and HK$525,000 to the Group’s revenue and loss for the year respectively for the period between the date of acquisition and the end of the reporting period.

If the acquisition had been completed on 1 January 2013, total Group revenue for the year ended 31 December 2013 would have been HK$1,825,674,000 and profit for the year would have been HK$31,265,000. The proforma information is for illustrative purposes only and is not necessarily an indication of the revenue and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 January 2013, nor is intended to be a projection of future results.

(e) Purchase of non-controlling interests of Fargo Telecom Group

On 16 June 2014, the Group acquired 10.575% of Fargo Telecom Group’s equity interest under the Subsequent Acquisition Arrangement (note 37(c)). The effect of the acquisition on the equity attributable to the owners of the Company is as follows:

Share of net assets acquired Consideration paid in accordance with Subsequent Acquisition Arrangement Settlement of financial liabilities at fair value through profit or loss (note 37(c)) Gain recognised directly in equity	HK$’000 3,094 (614) 614
	3,094

(f) Purchase of non-controlling interests in Telefield Lifestyle Limited

The Group acquired additional 5% of equity interests of Telefield Lifestyle Limited each on 29 October 2014 and 31 December 2014 (i.e. 10%). The effect of the acquisition on the equity attributable to the owners of the Company is as follows:

Share of net liabilities Consideration paid Loss on acquisition recognised directly in equity	HK$’000 439 –
	439

– II-69 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(g) Deemed disposal of partial interest in Able Trend Technology Limited

On 29 January 2014, Able Trend Technology Limited (“Able Trend”) allotted shares to its non-controlling shareholders with a consideration of HK$590, such that the Group’s equity interest in Able Trend decreased by 5%. The effect of the acquisition on the equity attributable to the owners of the Company is as follows:

Carrying net liabilities of non-controlling interests disposed Consideration Gain on disposal recognised directly in equity	HK$’000 134 –
	134

(h) Deemed disposal of partial interest in Affonso Group

On 31 December 2014, Affonso Limited allotted shares to a non-controlling shareholder with a consideration of HK$6,200,000, such that the Group’s equity interest in Affonso Limited and its subsidiaries decreased by 49%. The effect of the acquisition on the equity attributable to the owners of the Company is as follows:

Carrying net asset of non-controlling interests disposed Consideration Gain on disposal recognised directly in equity	HK$’000 (3,240) 6,200
	2,960

(i) Deemed disposal of partial interest in Telefield Medical Imaging Limited

On 31 December 2014, Telefield Medical Imaging Limited allotted shares to a non-controlling shareholder with a consideration of HK$450,000, such that the Group’s equity interest in Telefield Medical Imaging Limited decreased by 45%. The effect of the acquisition on the equity attributable to the owners of the Company is as follows:

Carrying net liabilities of non-controlling interests disposed Consideration Gain on disposal recognised directly in equity	HK$’000 2,832 450
	3,282

(j) Purchase of non-controlling interests

During the year ended 31 December 2013, the Group acquired 33.3% interests in a 66.7% subsidiary from the non-controlling shareholders at a cash consideration of HK$5,000. The effect of the acquisition on the equity attributable to the owners of the Company is as follows:

Share of net liabilities in the subsidiary acquired Consideration Loss on acquisition recognised directly in equity	HK$’000 2,235 5
	2,240

– II-70 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

42. CONTINGENT LIABILITIES

As at 31 December 2014, the Group has three (2013: three) patent infringement claims lodged by E-Ink Corp. against one of its subsidiaries, seeking for an injunction against the sale of ebook reader and for a compensation of approximately HK$9.4 million (2013: HK$10.7 million). The management considers E-Ink Corp.’s allegations are without merits and thus no provision for loss had been provided. Subsequent to the reporting period, two out of the three patent infringement claims were suspended by Mannheim Court resulting from the favorable judgement to the Group in parallel nullity action counter claim lodged by the Group with the Federal Patent Court in Germany, whilst the third patent claim was currently subject to the review of expert appointed by Court in regard to its validity.

A copyright collecting agency has unilaterally announced copyright fees for certain storage products and multimedia products of the Group sold in Germany. Management estimated that the alleged claims from the copyright collecting agency at the end of the reporting period are approximately HK$44.6 million (2013: HK$53.9 million) and HK$95.7 million (2013: HK$57.7 million) respectively. The directors consider that the unilaterally announced copyright rates are either non applicable or excessive for these products and respective provision, if required, has been duly made by the Group to cover the expected maximum liabilities pursuant to the best knowledge of the directors.

43. CAPITAL COMMITMENTS

The Group’s capital commitments at the end of the reporting period are as follows:

Plant and machinery Contracted but not provided for Approved but not contracted for	2014 HK$’000 – 15,260 15,260	2013 HK$’000 1,332 14,960
		16,292

44. LEASE COMMITMENTS

The total future minimum lease payments under non-cancellable operating leases are payable as follows:

Within one year In the second to fifth years inclusive After five years	2014 HK$’000 16,796 29,675 – 46,471	2013 HK$’000 15,327 28,232 2,307
		45,866

Operating lease payments represent rentals payable by the Group for certain of its staff quarters, factories and offices. Leases are negotiated for a range from one to ten years and rentals are fixed over the lease terms and do not include contingent rentals.

– II-71 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

45. RELATED PARTY TRANSACTIONS

In addition to those related party transactions and balances disclosed elsewhere in the consolidated financial statements, the Group had the following transactions with its related parties during the year:

	Name of directors having
	beneficial interest	2014	2013
		HK$’000	HK$’000
Rent paid to related companies
– Perpetual Rich Limited	Mr. Cheng Han Ngok Steve	780	780
– Swintown Investment Limited	Mr. Ng Kim Yuen	312	264
– Grand Access Limited	Mr. Lee Kai Bon	288	288
		1,380	1,332
Sales to a related company
– Farindo Trade Services Limited	N/A	3,700	953
Interest income from an associate
– KEYOS GmbH	N/A	146	175
Sales to a joint venture
– Groovio Company Limited	N/A	1,007	–
Sales to an associate
– KEYOS GmbH	N/A	4,143	–
Impairment loss of amounts due from a
associates
– KEYOS GmbH	N/A	6,048	–
Management fee received from a
joint venture
– Groovio Company Limited	N/A	60	–

The details of remuneration of key management personnel, represents the emoluments of directors of the Company paid during the year and set out in note 13(a).

46. EVENTS AFTER THE REPORTING PERIOD

On 22 January 2015, the Company granted a total of 4,117,140 share options to an Executive Director to subscribe for up to 4,117,140 ordinary shares of HK$0.01 each in the share capital of the Company at an exercise price of HK$0.65 per share. The estimated fair value of the share options granted on grant date is approximately HK$934,000.

47. COMPARATIVE FIGURES

Certain comparative figures of reportable segments (note 8) have been restated to conform to the current period’s presentation. The change in reportable segment reflects the Group’s realignment of operations and comparative figures are retrospectively restated.

48. APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the Board of Directors on 27 March 2015.

– II-72 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

3. UNAUDITED FINANCIAL INFORMATION OF THE GROUP FOR THE SIX MONTHS ENDED 30 JUNE 2015

The following financial information is extracted from the interim report of the Company for the six months ended 30 June 2015 (the “ 2015 Interim Report ”):

Condensed Consolidated Statement of Profit or Loss

For the six months ended 30 June 2015

Note
Revenue
4
Cost of goods sold
Gross profit
Other income
5
Selling and distribution expenses
Administrative expenses
Other operating expenses
Loss from operations
Finance costs
6
Share of profit of an associate
Share of loss of a joint venture
Loss before tax
Income tax expense
7
Loss for the period
8
Attributable to:
Owners of the Company
Non-controlling interests
(Loss)/earnings per share
10
Basic (HK cents per share)
Diluted (HK cents per share)

Six months ended 30 June
2015
2014
HK$’000
HK$’000
(unaudited)
(unaudited)
767,281
818,846
(621,042)
(658,435)
146,239
160,411
11,566
20,464
(58,237)
(77,993)
(90,250)
(83,724)
(33,052)
(24,742)
(23,734)
(5,584)
(6,207)
(7,916)
29
–
(116)
(687)
(30,028)
(14,187)
(5,201)
(4,524)
(35,229)
(18,711)
(4,789)
3,663
(30,440)
(22,374)
(35,229)
(18,711)
(1.16)
0.89
N/A
N/A

– II-73 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the six months ended 30 June 2015

Loss for the period Other comprehensive income for the period, net of tax Item that will be reclassified to profit or loss: – Exchange differences on translating foreign operations Total comprehensive income for the period Attributable to: Owners of the Company Non-controlling interests	Six months ended 30 June 2015 2014 HK$’000 HK$’000 (unaudited) (unaudited) (35,229) (18,711) 3,092 (990) (32,137) (19,701) (4,475) 2,768 (27,662) (22,469) (32,137) (19,701)

– II-74 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Condensed Consolidated Statement of Financial Position

At 30 June 2015 Note ASSETS Non-current assets Property, plant and equipment 11 Prepaid lease payments Goodwill Intangible assets Investments in associates Investment in a joint venture Deferred tax assets Total non-current assets Current assets Inventories Trade receivables 12 Prepayments, deposits and other receivables Derivative financial assets 13 Amount due from a non-controlling shareholder of a subsidiary Current tax assets Bank and cash balances Total current assets TOTAL ASSETS EQUITY AND LIABILITIES Equity attributable to owners of the Company Share capital 16 Other reserves Non-controlling interests Total equity	30 June 2015 HK$’000 (unaudited) 104,744 7,054 3,471 35,232 2,432 – 12,578 165,511 232,458 253,906 86,077 323 358 5,698 157,999 736,819 902,330 4,117 355,922 360,039 (45,871) 314,168	31 December 2014 HK$’000 (audited) 105,050 7,001 3,471 43,132 2,403 134 12,221 173,412 290,143 315,648 116,236 4,824 1,257 4,822 185,752 918,682 1,092,094 4,117 365,639 369,756 (18,209) 351,547

– II-75 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Note LIABILITIES Non-current liabilities Financial liabilities at fair value through profit or loss License fee payable Deferred tax liabilities Total non-current liabilities Current liabilities Trade payables 14 Accruals and other payables Amounts due to non-controlling shareholders of subsidiaries Amount due to an associate Other loans 15 Bank borrowings Financial liabilities at fair value through profit or loss License fee payable Derivative financial liabilities 13 Product warranty provisions Current tax liabilities Total current liabilities TOTAL EQUITY AND LIABILITIES	30 June 2015 HK$’000 (unaudited) 1,353 17,988 14,871 34,212 153,515 243,382 609 1,661 8,635 100,320 – 9,545 669 22,240 13,374 553,950 902,330	31 December 2014 HK$’000 (audited) 646 16,474 17,225
		34,345

		280,502 266,247 1,798 – – 117,075 3,428 9,963 82 21,885 5,222
		706,202
		1,092,094

– II-76 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

					Total	equity	HK$’000	390,390		(19,701)			–	13,209		(940)	(10,293)	(17,725)	372,665
				Non-	controlling	interests	HK$’000	12,596		(22,469)			(3,094)	13,209		(940)	–	(13,294)	(698)
						Total	HK$’000	377,794		2,768			3,094	–		–	(10,293)	(4,431)	373,363
					Proposed	dividend	HK$’000	10,293		–			–	–		–	(10,293)	(10,293)	–
					Retained	profits	HK$’000	196,510		3,663			–	–		–	–	3,663	200,173
			Share-	based	payments	reserve	HK$’000	–		–			–	–		–	–	–	–
	(Unaudited)	Attributable to owners of the Company		Property	revaluation Contributed Statutory Capital	reserve surplus reserve reserve	HK$’000 HK$’000 HK$’000 HK$’000	17,066 18,298 1,660 (9,029)		– – – –			– – – 3,094	– – – –		– – – –	– – – –	– – – 3,094	17,066 18,298 1,660 (5,935)
			Foreign	currency	translation	reserve	HK$’000	20,200		(895)			–	–		–	–	(895)	19,305
					Merger	reserve	HK$’000	3,171		–			–	–		–	–	–	3,171
For the six months ended 30 June 2015				Share	Share premium	capital account	HK$’000 HK$’000	At 1 January 2014 4,117 115,508	Total comprehensive income for	the period – –	Acquisition of shares in a non-	wholly owned subsidiary from	non-controlling shareholders – –	Acquisition of subsidiaries – –	Dividend paid to non-controlling	shareholders by a subsidiary – –	2013 final dividend paid – –	Changes in equity for the period – –	At 30 June 2014 4,117 115,508

– II-77 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

		Total	equity	HK$’000	351,547		(32,137)	934	(6,176)	(37,379)	314,168
	Non-	controlling	interests	HK$’000	(18,209)		(27,662)	–	–	(27,662)	(45,871)
			Total	HK$’000	369,756		(4,475)	934	(6,176)	(9,717)	360,039
		Proposed	dividend	HK$’000	6,176		–	–	(6,176)	(6,176)	–
		Retained	profits	HK$’000	184,290		(4,789)	–	–	(4,789)	179,501
Share-	based	payments	reserve	HK$’000	–		–	934	–	934	934
	Property	revaluation Contributed Statutory Capital	reserve surplus reserve reserve	HK$’000 HK$’000 HK$’000 HK$’000	16,565 18,298 2,105 2		– – – –	– – – –	– – – –	– – – –	16,565 18,298 2,105 2
Foreign	currency	translation	reserve	HK$’000	19,524		314	–	–	314	19,838
		Merger	reserve	HK$’000	3,171		–	–	–	–	3,171
	Share	premium	account	HK$’000	115,508		–	–	–	–	115,508
		Share	capital	HK$’000	4,117		–	–	–	–	4,117
					At 1 January 2015	Total comprehensive income for	the period	Share based payments (note 17)	2014 final dividend paid	Changes in equity for the period	At 30 June 2015

– II-78 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Condensed Consolidated Statement of Cash Flows

For the six months ended 30 June 2015

NET CASH (USED IN)/GENERATED FROM
OPERATING ACTIVITIES
Interest received
Proceeds from disposal of property, plant and
equipment
Acquisition of subsidiaries
Acquisition of non-controlling interests
Purchases of property, plant and equipment
Investment in a joint venture
Net receipt/(payment) on exercising derivative
instruments
NET CASH USED IN INVESTING ACTIVITIES
Bank loans raised
Repayment of bank loans
Net repayment of trust receipt loans
Other loans raised
Dividends paid to the owners of the Company
Dividends paid to non-controlling shareholders
NET CASH USED IN FINANCING ACTIVITIES
NET DECREASE IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD
EFFECT OF FOREIGN EXCHANGE RATE
CHANGES
CASH AND CASH EQUIVALENTS AT END OF
PERIOD, REPRESENTED BY
ANALYSIS OF CASH AND CASH EQUIVALENTS
Bank and cash balances

Six months ended 30 June
2015
2014
HK$’000
HK$’000
(unaudited)
(unaudited)
(13,813)
3,656
1,402
460
268
–
–
(11,510)
–
(614)
(11,773)
(10,785)
–
(775)
7,409
(1,850)
(2,694)
(25,074)
45,715
46,193
(48,327)
(56,857)
(14,143)
(1,660)
8,603
–
(6,176)
(10,293)
–
(940)
(14,328)
(23,557)
(30,835)
(44,975)
185,752
183,138
3,082
(681)
157,999
137,482
157,999
137,482

– II-79 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the six months ended 30 June 2015

1. BASIS OF PREPARATION

These condensed financial statements have been prepared in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) and the applicable disclosures required by the Rules Governing the Listing of Securities (“Listing Rules”) on The Stock Exchange of Hong Kong Limited.

These condensed financial statements should be read in conjunction with the 2014 annual financial statements. The accounting policies and methods of computation used in the preparation of these condensed financial statements are consistent with those used in the annual financial statements for the year ended 31 December 2014 except for the addition of accounting policies of the share-based payments set out below.

Share-based payments

The Group issues equity-settled share-based payments to eligible persons. Equity-settled share-based payments to a director is measured at the fair value (excluding the effect of non-market based vesting conditions) of the equity instruments at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.

2. ADOPTION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS AND REQUIREMENTS

In the current period, the Group has adopted all the new and revised Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the HKICPA that are relevant to its operations and effective for its accounting year beginning on 1 January 2015. HKFRSs comprise Hong Kong Financial Reporting Standards (“HKFRS”); Hong Kong Accounting Standards (“HKAS”); and Interpretations. The adoption of these new and revised HKFRSs did not result in significant changes to the Group’s accounting policies, presentation of the Group’s financial statements and amounts reported for the current period and prior years.

The Group has not applied the new HKFRSs that have been issued but are not yet effective for the financial year beginning on 1 January 2015. The directors anticipate that the new and revised HKFRSs will be adopted by the Group when they become effective. The Group is in the process of assessing, where applicable, the potential effect of all new and revised HKFRSs that will be effective in future periods but is not yet in a position to state whether these new HKFRSs would have a material impact on its results of operations and financial position.

3. FAIR VALUE MEASUREMENTS

The carrying amounts of the Group’s financial assets and financial liabilities as reflected in the condensed consolidated statement of financial position approximate their respective fair values.

Level 1 inputs: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date.

Level 2 inputs: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 inputs: unobservable inputs for the asset or liability.

– II-80 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The Group’s policy is to recognise transfers into and transfers out of any of the three levels as of the date of the event or change in circumstances that caused the transfer.

(a) Disclosures of level in fair value hierarchy:

30 June 2015:

Recurring fair value measurements: Property, plant and equipment Commercial units – Hong Kong Freehold land and buildings – India Financial assets Financial assets at fair value through profit or loss – Derivative financial assets – currency options (note 13) – Derivative financial assets – forward contracts (note 13) Total Recurring fair value measurements: Financial liabilities Financial liabilities at fair value through profit or loss – Derivative financial liabilities – currency options (note 13) – Contingent/future considerations Total	Fair value measurements Level 1 Level 2 HK$’000 HK$’000 – 23,400 – – – 23,400 – 255 – 68 – 323 – 23,723 – (669) – – – (669)	using: Level 3 HK$’000 – 23,940 23,940 – – – 23,940 – (1,353) (1,353)	30 June 2015 Total HK$’000 (unaudited) 23,400 23,940 47,340 255 68 323 47,663 (669) (1,353) (2,022)

– II-81 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

31 December 2014:

Recurring fair value measurements: Property, plant and equipment Commercial units – Hong Kong Freehold land and buildings – India Financial assets Financial assets at fair value through profit or loss – Derivative financial assets – currency options (note 13) Total Recurring fair value measurements: Financial liabilities Financial liabilities at fair value through profit or loss – Derivative financial liabilities – forward contracts (note 13) – Contingent/future considerations Total	Fair value measurements Level 1 Level 2 HK$’000 HK$’000 – 23,400 – – – 23,400 – 4,824 – 28,224 – (82) – – – (82)	using: Level 3 HK$’000 – 23,950 23,950 – 23,950 – (4,074) (4,074)	31 December 2014 Total HK$’000 (audited) 23,400 23,950 47,350 4,824 52,174 (82) (4,074) (4,156)

(b) Reconciliation of assets/(liabilities) measured at fair value based on level 3:

At 1 January 2015 Total losses recognised in profit or loss (#) Transferred to other payables Exchange differences At 30 June 2015 (#) Include losses for financial liabilities held at end of reporting period	Freehold land and buildings – India HK$’000 23,950 – – (10) 23,940 –	Financial liabilities at fair value through profit or loss TrekStor multimedia product distribution business Fargo communication product business HK$’000 HK$’000 (3,123) (951) – (709) 2,849 307 274 – – (1,353) – (709)	Total HK$’000 (unaudited) 19,876 (709) 3,156 264 22,587 (709)

– II-82 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

At 1 January 2014 Total gains recognised in profit or loss (#) Purchase Settlements Exchange differences At 31 December 2014 (#) Include gains for financial liabilities held at end of reporting period	Freehold land and buildings – India HK$’000 – – 23,950 – – 23,950 –	Financial liabilities at fair value through profit or loss RCA business telephone system distribution business TrekStor multimedia product distribution business Fargo communication product business HK$’000 HK$’000 HK$’000 (2,211) (5,228) (5,966) – 1,635 4,401 – – – 2,211 – 614 – 470 – – (3,123) (951) – 1,635 4,401	Total HK$’000 (audited) (13,405) 6,036 23,950 2,825 470 19,876 6,036

The total gains or losses recognised in profit or loss including those for liabilities held at end of reporting period are presented in other operating expenses and other income in the consolidated statement of profit or loss and other comprehensive income for the period ended 30 June 2015 and the year ended 31 December 2014 respectively.

(c) Disclosure of valuation process used by the Group and valuation techniques and inputs used in fair value measurements:

Level 2 fair value measurements

	Valuation			Fair value	Fair value
	technique	Inputs	30 June	2015	31 December 2014
			HK$’000	HK$’000	HK$’000	HK$’000
			(unaudited)	(unaudited)	(audited)	(audited)
			Assets	Liabilities	Assets	Liabilities
Derivative financial	Binomial	Average	255	(669)	4,824	–
assets/ (liabilities) –	option	strike
currency options	pricing	exchange
	model	rate
Derivative financial	Discounted	Forward	68	–	–	(82)
assets/ (liabilities) –	cash flows	exchange
forward contracts		rate
Commercial units	Direct	Price per	23,400	–	23,400	–
located in Hong Kong	comparison	square
	approach	meter

– II-83 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Level 3 fair value measurements

				Effect on fair
				value for	Fair	value
	Valuation	Unobservable		increase of	30 June	31 December
	technique	inputs	Range	inputs	2015	2014
					HK$’000	HK$’000
					(unaudited)	(audited)
					Assets/(Liabilities)
Contingent/future
consideration:
– TrekStor multimedia	Discounted	Discount rate	N/A	Decrease in	N/A	(3,123)
product distribution	cash flows		(2014: ditto)	liability
business
– Fargo communications	Discounted	Discount rates	3.24%	Decrease in	(1,353)	(951)
product distribution	cash flows		(2014:	liability
business			2.37%-3.47%)
Freehold land and buildings	Direct sales	Premium of	0%-10%	Increase in	23,940	23,950
– India	comparison	size of land	(2014: ditto)	assets
	approach
		Discount on	0%-5%	Decrease in
		shape of land	(2014: ditto)	assets
		(Discount)/	(15%)-20%	(Decrease)/Increase
		premium on	(2014: ditto)	in assets
		location of land
		Premium on	5%	Increase in
		land usage	(2014: ditto)	assets
		Other discounts	0%-5%	Decrease in
			(2014: ditto)	assets

During the two periods, there were no changes in valuation techniques used. For commercial units located in Hong Kong and freehold land and buildings – India, no revaluation is required for the six months ended 30 June 2015, as in the opinion of the management, the fair value of the land did not differ materially from its carrying amount.

4. REVENUE AND SEGMENT INFORMATION

The Group has four reportable segments as follows:

EMS	–	Electronic manufacturing services
Distribution Businesses:
Communications Products (“CP”)	–	Marketing and distribution of communications
		products
Multimedia Products and Computer Accessories	–	Assembling and/or marketing and distribution of
(“MPCA”)		branded multimedia products and computer
		accessories
Gaming Products and Toys (“GPT”)	–	Marketing and distribution of gaming and
		entertainment products

– II-84 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

		Distribution Businesses	Distribution Businesses
			Multimedia
			Products
	Electronic		and	Gaming
Manufacturing		Communications	Computer	Products
	Services	Products	Accessories	and Toys
	(“EMS”)	(“CP”)	(“MPCA”)	(“GPT”)		Total
	HK$’000	HK$’000	HK$’000	HK$’000		HK$’000
	(unaudited)	(unaudited)	(unaudited)	(unaudited)	(unaudited)
6 months ended
30 June 2015:
Revenue from external
customers	436,026	110,118	187,421	33,716		767,281
Intersegment revenue	68,724	565	363	265		69,917
Segment profit/(loss)	31,249	(10,844)	(37,611)	(13,356)		(30,562)
As at 30 June 2015:
Segment assets	809,531	161,288	155,592	65,868		1,192,279
Segment liabilities	293,659	138,708	224,731	112,358		769,456
Investment in associates	–	2,432	–	–		2,432
Investment in a joint
venture	–	–	–	–		–

6 months ended
30 June 2014:
Revenue from external
customers	458,126	121,862	210,521	28,337		818,846
Intersegment revenue	79,485	817	30,655	–		110,957
Segment profit/(loss)	31,647	(4,369)	(25,187)	(11,491)		(9,400)
	(audited)	(audited)	(audited)	(audited)		(audited)
As at 31 December 2014:
Segment assets	828,284	174,707	284,906	73,825		1,361,722
Segment liabilities	319,571	136,396	318,694	106,694		881,355
Investments in associates	–	2,403	–	–		2,403
Investment in a joint
venture	134	–	–	–		134

			Six months	ended 30 June
			2015			2014
			HK$’000			HK$’000
			(unaudited)		(unaudited)
Reconciliations of segment profit	or loss:
Total loss of reportable segments			(30,562)			(9,400)
Elimination of intersegment profits			1,118			174
Unallocated amounts:
Impairment loss on amount due	from an associate		(449)			(4,274)
Impairment loss on amount due	from a joint	venture	(48)			–
Share of profit of an associate			29			–
Share of loss of a joint venture			(116)			(687)
Consolidated loss before tax for the period			(30,028)			(14,187)

– II-85 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

5. OTHER INCOME

Bank interest income Compensation from suppliers Consultancy fee income Discount on acquisition Gain on derivative instruments Gain on financial liabilities at fair value through profit or loss Government subsidy Promotion contribution from suppliers Reversal of commission payables Reversal of copyright fee provision Reversal of license fee provisions Sales of scrap materials Others	Six months ended 30 June 2015 2014 HK$’000 HK$’000 (unaudited) (unaudited) 1,402 460 – 3,864 133 36 – 1,918 2,321 4,409 – 3,516 562 – 3,590 – – 444 – 1,281 994 – 200 1,636 2,364 2,900 11,566 20,464	Six months ended 30 June 2015 2014 HK$’000 HK$’000 (unaudited) (unaudited) 1,402 460 – 3,864 133 36 – 1,918 2,321 4,409 – 3,516 562 – 3,590 – – 444 – 1,281 994 – 200 1,636 2,364 2,900 11,566 20,464
		20,464

6. FINANCE COSTS

Bank overdraft interest Bank loans interest Interest on import/export loans Interest on factoring loans Other loans interest Other interest expense	Six months ended 30 June 2015 2014 HK$’000 HK$’000 (unaudited) (unaudited) 27 5 1,058 1,777 637 492 2,276 3,193 32 – 2,177 2,449 6,207 7,916	Six months ended 30 June 2015 2014 HK$’000 HK$’000 (unaudited) (unaudited) 27 5 1,058 1,777 637 492 2,276 3,193 32 – 2,177 2,449 6,207 7,916
		7,916

7. INCOME TAX EXPENSE

Current tax – Hong Kong Profits Tax – Overseas Deferred tax	Six months ended 30 June 2015 2014 HK$’000 HK$’000 (unaudited) (unaudited) 6,257 4,030 1,456 3,334 7,713 7,364 (2,512) (2,840) 5,201 4,524	Six months ended 30 June 2015 2014 HK$’000 HK$’000 (unaudited) (unaudited) 6,257 4,030 1,456 3,334 7,713 7,364 (2,512) (2,840) 5,201 4,524
		7,364 (2,840)
		4,524

– II-86 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Hong Kong Profits Tax has been provided at a rate of 16.5% (2014: 16.5%) based on the estimated assessable profit for the period.

8. LOSS FOR THE PERIOD

The Group’s loss for the period is arrived at after charging/(crediting):

	Six months ended 30 June	Six months ended 30 June
	2015	2014
	HK$’000	HK$’000
	(unaudited)	(unaudited)
Amortisation of intangible assets (included in selling and
distribution expenses)	6,465	6,721
Allowance for trade receivables, net	909	–
Bad debt written off of trade receivables	242	–
Bad debt written off of other receivables	8,195	–
Cost of goods sold
Cost of inventories sold Allowance for inventories Reversal of allowance for inventories*	616,601 14,303 (9,862)	649,738 35,215 (26,518)
Depreciation Directors’ emoluments	621,042 11,587	658,435 9,803
As directors For management	270 5,228	270 3,460
Exchange losses, net Impairment loss on amount due from an associate (included in other operating expenses) Impairment loss on amount due from a joint venture (included in other operating expenses) Loss/(gain) on financial liabilities at fair value through profit or loss Loss on disposal of property, plant and equipment Operating lease charges Land and buildings Research and development expenditures Staff costs including directors’ emoluments	5,498 1,354 449 48 709 116 11,528 22,330	3,730 48 4,274 – (3,516) – 11,008 20,323
Salaries, bonus and allowances Retirement benefit scheme contributions	143,580 4,431	140,968 3,706
	148,011	144,674

The Group makes allowance for inventories under respective aging criteria in different operating segments. The reversal of allowance represents the amount of inventories subsequently used in production or sold.

– II-87 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

9. DIVIDENDS

	Six months ended 30 June	Six months ended 30 June
	2015	2014
	HK$’000	HK$’000
	(unaudited)	(unaudited)
Final dividend of HK$0.015 for the year ended
31 December 2014 (31 December 2013:
HK0.025) per ordinary share paid	6,176	10,293

10. (LOSS)/EARNINGS PER SHARE

The calculation of basic (loss)/earnings per share is based on the following:

Earnings (Loss)/profit attributable to owners of the Company, used in the basic earnings per share calculation Number of shares Weighted average number of ordinary shares used in basic earnings per share calculation	Six months ended 30 June 2015 2014 HK$’000 HK$’000 (unaudited) (unaudited) (4,789) 3,663 411,714,000 411,714,000	Six months ended 30 June 2015 2014 HK$’000 HK$’000 (unaudited) (unaudited) (4,789) 3,663 411,714,000 411,714,000

		411,714,000

The effect of all potential ordinary shares are anti-dilutive for the six months ended 30 June 2015. No diluted earnings per share are presented as the Company did not have any dilutive potential ordinary shares for the six months ended 30 June 2014.

11. PROPERTY, PLANT AND EQUIPMENT

During the six months ended 30 June 2015, the Group has acquired property, plant and equipment of approximately HK$11,773,000 (Six months ended 30 June 2014: HK$36,472,000) of which HK$Nil (Six months ended 30 June 2014: HK$25,687,000) was through the acquisition of subsidiaries.

At 30 June 2015, the Group has freehold land and building in India amounted to HK$23,940,000 (At 31 December 2014: HK$23,950,000). The title deed and original sale deed are now in the stamp duty office’s custody for final stamp duty assessment. The Group would obtain full legal title after completing the stamp duty assessment and stamp duty payment process.

12. TRADE RECEIVABLES

The Group’s trading terms with customers are mainly on credit. During the period, the credit term generally ranges from 30 to 120 days. Each customer has a maximum credit limit. For new customers, payment in advance is normally required. The Group seeks to maintain strict control over its outstanding receivables. Overdue balances are reviewed regularly by the directors.

– II-88 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The aging analysis of trade receivables as at the end of the reporting period, based on invoice date, and net of allowance, is as follows:

0 – 90 days 91 – 180 days 181 – 365 days Over 365 days DERIVATIVE INSTRUMENTS At fair value Currency options – assets Currency options – liabilities Forward contracts – assets Forward contracts – liabilities	30 June 2015 HK$’000 (unaudited) 224,126 20,425 4,973 4,382 253,906 30 June 2015 HK$’000 (unaudited) 255 (669) 68 – (346)	31 December 2014 HK$’000 (audited) 302,141 7,835 589 5,083
		315,648

		31 December 2014 HK$’000 (audited) 4,824 – – (82)
		4,742

13. DERIVATIVE INSTRUMENTS

The Group utilises currency options and forward contracts to mitigate foreign currency exposure of purchases denominated in foreign currencies.

14. TRADE PAYABLES

The aging analysis of trade payables as at the end of the reporting period, based on invoice date, is as follows:

0 – 90 days 91 – 180 days 181 – 365 days Over 365 days	30 June 2015 HK$’000 (unaudited) 141,840 7,760 1,567 2,348 153,515	31 December 2014 HK$’000 (audited) 251,580 583 26,317 2,022
		280,502

15. OTHER LOANS

Loans from a third party amounted to EUR1,000,000 are interest bearing at 8% per annum, unsecured and repayable within twelve months.

– II-89 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

16. SHARE CAPITAL

Authorised: Ordinary shares of HK$0.01 each At 1 January and 30 June/31 December Issued and fully paid: Ordinary shares of HK$0.01 each At 1 January and 30 June/31 December	30 June 2015 (unaudited) Number of shares Amount HK$’000 10,000,000,000 100,000 411,714,000 4,117	31 December 2014 (audited) Number of shares Amount HK$’000 10,000,000,000 100,000 411,714,000 4,117	31 December 2014 (audited) Number of shares Amount HK$’000 10,000,000,000 100,000 411,714,000 4,117

			4,117

17. SHARE-BASED PAYMENTS

Equity-settled share option scheme

The Company operates a share option scheme (the “Scheme”) for the purpose of providing incentives to those who make contributes to the Group. Eligible participants include the full-time or part-time employee of any member of the Group; consultant or advisor of any member of the Group; director (including executive, non-executive or independent non-executive directors) of any member of the Group; any substantial shareholder of any member of the Group and distributor, contractor, supplier, agent, customer, business partner or service provider of any member of the Group. The Scheme became effective on 31 December 2010 and, unless otherwise cancelled or amended, will remain in force for 10 years from that date.

The Company shall be entitled to issue options, provided that the total number of shares which may be issued upon exercise of all options to be granted under the Scheme does not exceed 10% of the shares in issue from the Listing Date. The Company may at any time refresh such limit, subject to the shareholders’ approval and issue of a circular in compliance with the Listing Rules, provided that the total number of shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under all the share option schemes of the Company does not exceed 30% of the shares in issue at the time. The maximum number of shares issuable under share options to each eligible participant in the Scheme within any 12-month period is limited to 1% of the shares of the Company in issue at any time. Any further grant of shares options in excess of this limit is subject to shareholders’ approval in a general meeting.

Share options granted to a director, chief executive or substantial shareholder of the Company, or to any of their respective associates, are subject to approval in advance by the independent non-executive directors. In addition, any share options granted to a substantial shareholder or an independent non-executive director of the Company, or to any of their respective associates, in excess of 0.1% of the shares of the Company in issue at any time or with an aggregate value (based on the price of the Company’s shares at the date of the grant) in excess of HK$5 million, within any 12-month period up, are subject to shareholders’ approval in advance in a general meeting.

The offer of a grant of share options may be accepted within 7 days from the date of the offer, upon payment of a nominal consideration of HK$1 in total by the grantee.

The exercise price of the share options is determinable solely by the board of directors (“the Board”) or a duly authorised committee therefore, but may not be less than the highest of (i) the Stock Exchange closing price of the Company’s shares on the date of the offer of the share options; (ii) the average Stock Exchange closing price of the Company’s shares for the five business days immediately preceding the date of the offer; and (iii) the nominal value of the Company’s shares on the date of the offer, when applicable.

Share options do not confer rights on the holder to dividends or to vote at shareholders’ meetings.

– II-90 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Details of the outstanding options granted to a director under the Scheme as at the end of reporting periods are as follows:

Date of grant Vesting period Exercisable period Exercise price HK$ 22 January 2015 Nil 22 January 2015 – 21 January 2025 0.65	Number of shares issuable under options granted 30 June 2015 31 December 2014 (unaudited) (audited) 4,117,140 – 4,117,140 –	Number of shares issuable under options granted 30 June 2015 31 December 2014 (unaudited) (audited) 4,117,140 – 4,117,140 –
		–

Details of the share options outstanding during the period/year are as follows:

Outstanding at the beginning of the period/year Granted during the period/ year Lapsed during the period/year Outstanding at the end of the period/year Exercisable at the end of the period/year	30 June 2015 (unaudited) Number of share options Weighted average exercise price HK$ – – 4,117,140 0.65 – – 4,117,140 – 4,117,140* 0.65	31 December 2014 (audited) Number of share options Weighted average exercise price HK$ – – – – – – – – – –	31 December 2014 (audited) Number of share options Weighted average exercise price HK$ – – – – – – – – – –
			–

			–

On 21 May 2015, the optionholder undertook that he will not exercise any outstanding share options until the completion of the Disposal Agreement and Share Sale Agreement as set out in note 21 to the condensed financial statements.

At 30 June 2015, the share options outstanding have a remaining contractual life of 9.5 years.

The fair value of share options granted was determined using the Binomial option pricing model with assumptions set out as follows:

Grant date	22 January 2015
Share price on grant date	HK$0.61
Exercise price	HK$0.65
Expected volatility	55.559%
Expected life	10 years
Risk-free rate	1.496%
Fair value of share options granted	HK$934,000

Expected volatility was determined by using historical volatility of the Company’s share price over a historic period equal to respective expected life. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

– II-91 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

18. RELATED PARTY TRANSACTIONS

In addition to those related party transactions and balances disclosed elsewhere in the condensed financial statements, the Group had the following material transactions with its related parties during the period:

	Directors having	Six months ended 30 June	Six months ended 30 June
	beneficial interest	2015	2014
		HK$’000	HK$’000
		(unaudited)	(unaudited)
Share-based payments	Mr. Poon Ka Lee Barry	934	–
Rent paid to related companies
– Perpetual Rich Limited	Mr. Cheng Han Ngok Steve	–	390
– Big Dragon International
Investment Limited	Mr. Cheng Han Ngok Steve	660	–
– Swintown Investment
Limited	Mr. Ng Kim Yuen	162	156
– Grand Access Limited	Mr. Lee Kai Bon	168	144
		990	690
Impairment loss on amount due
from an associate
– KEYOS GmbH	N/A	449	4,274
Impairment loss on amount due
from a joint venture
– Groovio Company Limited	N/A	48	–
Management fee received from a
joint venture
– Groovio Company Limited	N/A	30	30

19. CONTINGENT LIABILITIES

As at 30 June 2015, the Group has the following material contingent liabilities:

(a) the Group has two (At 31 December 2014: three) patent infringement claims lodged by E-Ink Corp. against one of its subsidiaries, seeking for an injunction against the sale of ebook reader and for a compensation of approximately HK$8.6 million (At 31 December 2014: HK$9.4 million). One of the two patent infringement claims was suspended by the Mannheim Court pending the outcome of the appeal by E-Ink Corp. in the Federal Patent court of Germany, whilst the second patent claim was currently subject to the review of an expert appointed by the Mannheim Court in regard to its validity;
(b) a copyright collecting agency has unilaterally announced copyright fees for certain storage products and multimedia products of the Group sold in Germany. The Directors estimated that the alleged claims from the copyright collecting agency were approximately HK$39.8 million (At 31 December 2014: HK$44.6 million) and HK$98.7 million (At 31 December 2014: HK$95.7 million) respectively;
(c) an insolvency administrator of one of the Group’s customers has claimed against the Group for an amount of approximately HK$3.5 million which the Group considered had already settled by netting off the said balance with trade receivables from the same customer; and
(d) a supplier of a subsidiary of the Company has alleged that the Company should be liable to a sum of HK$20.3 million pursuant to a corporate guarantee given by the Company to the said supplier for the said subsidiary, in consequence of the alleged breach of contract on the part of the said subsidiary. The management considers this allegation is without merits.

– II-92 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

20. CAPITAL COMMITMENTS

	30 June	31 December
	2015	2014
	HK$’000	HK$’000
	(unaudited)	(audited)
Plant and machinery:
Contracted but not provided for	3,443	–

21. EVENTS AFTER THE REPORTING PERIOD

References are made to the announcements of the Company dated 9 June 2015, 27 July 2015 and 11 August 2015 respectively and unless otherwise stated, capitalised terms used in this note shall have the same meanings as those defined in the abovementioned announcements.

(i) The Disposal Agreement

On 22 May 2015, the Company entered into the Disposal Agreement (as supplemented on 7 August 2015), pursuant to which the Company has conditionally agreed to sell the equity interests of a group of subsidiaries (the “Disposal”) to Dragon Fortune International Limited (“Dragon Fortune”), a controlling shareholding of the Company, at a consideration of HK$169,800,000. Completion of the Disposal is subject to a number of conditions. As at the date of approval of these interim financial statements, the Disposal has not yet been completed.

(ii) The Share Sale Agreement

On 22 May 2015, Dragon Fortune and Telefield Charitable Fund Limited (collectively, “Shares Vendors”) entered into the Share Sale Agreement with Power Port Holdings Limited (as supplemented on 7 and 11 August 2015), pursuant to which Power Port Holdings Limited conditionally agreed to purchase approximately 66.69% of the entire issued share capital of the Company from the Shares Vendors at an aggregate consideration of HK$557,688,228 (the “Share Sale”). Completion of the Disposal is subject to a number of conditions. As at the date of approval of these interim financial statements, the Share Sale has not yet been completed.

22. APPROVAL OF INTERIM FINANCIAL STATEMENTS

The interim financial statements were approved and authorised for issue by the Board of Directors on 24 August 2015.

4. STATEMENT OF INDEBTEDNESS

(a) Borrowings

As of the close of business on 31 July 2015 being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this Composite Document, the Group had total borrowings comprising (i) bank borrowings of HK$101.0 million, (ii) bank overdrafts of HK$2.6 million and (iii) other loans from an independent third party of HK$8.5 million.

The above bank borrowings and bank overdrafts of the Group are guaranteed by (i) corporate guarantees totalling HK$103.6 million issued by the Company, certain subsidiary and certain non-controlling shareholders; and (ii) a personal guarantee by a director of a subsidiary.

The other loans are unsecured and unguaranteed.

– II-93 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(b) Financial liabilities at fair value through profit or loss

As at 31 July 2015, the Group has financial liabilities at fair value through profit or loss amounted to HK$1.4 million.

(c) License fee payable

As at 31 July 2015, the Group has license fee payable at nominal value of HK$38.2 million.

(d) Contingent liabilities

As at 31 July 2015, the Group has the following material contingent liabilities:

(i) the Group has two patent infringement claims lodged by E-Ink Corp. against one of its subsidiaries, seeking for an injunction against the sale of ebook reader and for a compensation of approximately HK$8.5 million. One of the two patent infringement claims was suspended by the Mannheim Court pending the outcome of the appeal by E-Ink Corp. in the Federal Patent court of Germany, whilst the second patent claim was currently subject to the review of an expert appointed by the Mannheim Court in regard to its validity;
(ii) a copyright collecting agency has unilaterally announced copyright fees for certain storage products and multimedia products of the Group sold in Germany. The Directors estimated that the alleged claims from the copyright collecting agency as at 31 July 2015 were approximately HK$39.3 million and HK$98.9 million respectively;
(iii) an insolvency administrator of one of the Group’s customers has claimed against the Group for an amount of approximately HK$3.5 million which the Group considered had already settled by netting off the said balance with trade receivables from the same customer; and
(iv) a supplier of a subsidiary of the Company has alleged that the Company should be liable to a sum of HK$20.3 million pursuant to a corporate guarantee provided by the Company to the said supplier for the said subsidiary, in consequence of the alleged breach of contract on the part of the said subsidiary. The management considers this allegation is without merits.

Save as disclosed above and apart from intra-group liabilities and normal trade payables, the Group did not have, as at the close of business on 31 July 2015, any material loan capital, issued and outstanding or agreed to be issued, borrowings, bank overdrafts, charges, debentures or other similar indebtedness, liabilities under acceptances (other than normal trade bills), acceptance credits, mortgages, hire purchase or finance lease commitments, guarantees or other material contingent liabilities.

– II-94 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

5. MATERIAL CHANGE

Saved for the completion of the Disposal and the turn into a loss attributable to owners of the Company for the six months period ended 30 June 2015, the Directors have confirmed that they were not aware of any material change in the financial or trading position or outlook of the Group since 31 December 2014, being the date to which the latest published audited accounts of the Company were made, up to and including the Latest Practicable Date. The turn into a loss attributable to owners of the Company for the six months period ended 30 June 2015 which was mainly attributable to the drop in other income of the Company for the six months period ended 30 June 2015 of approximately HK$11.6 million (2014: HK$20.5 million) and the one-off legal and professional fees of approximately HK$4 million for the intended transactions as indicated in the holding announcements of the Company dated 9 June 2015, 27 July 2015 and 11 August 2015. The decrease in other income of the Company for the six months period ended 30 June 2015 is derived mainly from the (a) drop in gain on derivative instruments; (b) drop in gain on financial liabilities at fair value through profit or loss; and (c) the financial impact of the non-recurring income such as (i) discount on acquisition and (ii) compensation from suppliers which were only recorded for the six months ended 30 June 2014.

– II-95 –

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

The sole director of the Offeror accepts full responsibility for the accuracy of the information contained in this Composite Document (other than the information relating to the Group, the Shares Vendors and parties acting in concert with any one of them), and confirms, having made all reasonable enquires, that to the best of his knowledge, opinions expressed in this Composite Document (other than the opinion expressed by the Group, the Shares Vendors and parties acting in concert with any one of them) have been arrived at after due and careful consideration and there are no other facts not contained in this Composite Document, the omission of which would make any statement contained in this Composite Document misleading.

2. SHARE CAPITAL

As at the Latest Practicable Date, the authorised and issued share capital of the Company were as follows:

Authorised Shares: 10,000,000,000 Shares Issued Shares: 411,714,000 Shares	HK$ 100,000,000.00

	HK$ 4,117,140.00

All existing issued Shares rank equally in all respects, including in particular as to dividend, voting rights and capital.

The Company had not issued any Shares since 31 December 2014 (being the date to which the latest published audited financial statements of the Group were made up) and up to and including the Latest Practicable Date.

Save for the outstanding Share Options entitling the holder thereof to subscribe for 4,117,140 Shares, the Company has no outstanding securities, options, derivatives, warrants and other convertible securities or rights affecting the Shares as at the Latest Practicable Date.

– III-1 –

GENERAL INFORMATION

APPENDIX III

3. DISCLOSURE OF INTEREST

(i) Interests of the Directors or chief executive of the Company

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executives of the Company in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) (a) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which the Directors or the chief executives were taken or deemed to have under such provisions of SFO); or (b) which were required, pursuant to section 352 of SFO, to be entered in the register referred to therein; or (c) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in the Listing Rules were as follows:

Long Positions in the Shares

(i) Ordinary Shares

			Approximate
			percentage of
		Number of	issued share
	Capacity/Nature	issued ordinary	capital of the
Name of Directors	of interests	Shares held	Company
Mr. Lee Kai Bon	Beneficial owner	2,114,000	0.51%
Mr. Ng Kim Yuen	Beneficial owner	2,640,000	0.64%
Ms. Fok Pui Yin	Beneficial owner	1,950,000	0.47%
Mr. Poon Ka Lee Barry	Beneficial owner	540,000	0.13%

(ii) Share Options

				Approximate
				percentage of
		Number of	Number of	issued share
	Capacity/Nature	Share Options	underlying	capital of the
Name of Directors	of interests	held	Shares	Company
Mr. Poon Ka Lee Barry	Beneficial owner	4,117,140	4,117,140	1.00%

– III-2 –

APPENDIX III

GENERAL INFORMATION

Save as disclosed above, as at the Latest Practicable Date, none of the Directors, chief executives and their associates had or were deemed to have any interests or short positions in any shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), (a) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which the Directors or the chief executives were taken or deemed to have under such provisions of SFO); or (b) which were required, pursuant to section 352 of SFO, to be entered in the register referred to therein; or (c) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in the Listing Rules.

(ii) Substantial Shareholder’s interests and short positions in the Shares

As at the Latest Practicable Date, so far as was known to the Directors and the chief executives of the Company, the interests and short positions of the persons (other than the Directors and the chief executive of the Company) or corporations in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which had been disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO and as recorded in the register required to be kept by the Company under Section 336 of the SFO were as follows:

			Approximate
			percentage of
		Number of	issued share
	Capacity/	issued ordinary	capital of the
Name of Directors	Nature of interests	Shares held	Company
Power Port Holdings	Beneficial owner	274,588,000	66.69%
Limited
Mr. Yang Zhihui	Interest in controlled	274,588,000	66.69%
	Corporation
	(Note 2)
Ms. Xu Ning	Interest of spouse	274,588,000	66.69%
	(Note 3)

Notes:

On 22 May 2015, Dragon Fortune and Telefield Charitable have charged all their rights, title and interest in all those shares beneficially owned by them in favour of Power Port Holdings Limited.
Mr. Yang Zhihui wholly owns Power Port Holdings Limited. Therefore, Mr. Yang Zhihui is deemed or taken to be interested in all the Shares which are beneficially owned by Power Port Holdings Limited.
Ms. Xu Ning is the spouse of Mr. Yang Zhihui. Under the SFO, Ms. Xu Ning is deemed or taken to be interested in the same number of Shares in which Mr. Yang Zhihui is interested.

– III-3 –

APPENDIX III

GENERAL INFORMATION

Save as disclosed above, as at the Latest Practicable Date, so far as was known to the Directors and the chief executives of the Company, no other person (other than the Directors and the chief executive of the Company) had interests or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who were, directly or indirectly, beneficially interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group or in any options in respect of such capital.

4. ADDITIONAL DISCLOSURE OF INTERESTS AND DEALINGS

(a) none of the Company and the Directors owned or controlled or was interested in any relevant securities (as defined under Note 4 to Rule 22 of the Takeovers Code (“ Relevant Securities ”) of the Offeror as at the Latest Practicable Date, nor had dealt in any Relevant Securities of the Offeror during the Relevant Period;
(b) as at the Latest Practicable Date, save for the 2,114,000 Shares held by Mr. Lee Kai Bon (an executive Director), the 2,640,000 Shares held by Mr. Ng Kim Yuen (an executive Director), the 1,950,000 Shares held by Ms. Fok Pui Yin (an executive Director), and the 540,000 Shares and Share Options held by Mr. Poon Ka Lee Barry (an executive Director), none of the Directors owned or controlled or was interested in any Relevant Securities of the Company. Save for the Share Options held by Mr. Poon Ka Lee Barry (which subject to Optionholder Undertaking), the Directors who hold Shares as at the Latest Practicable Date will intend (i) not to accept the Offer if the market price of the Shares continues to be above the Offer Price and will consider selling some or all of their respective Shares in the market or (ii) to accept the Offer in respect of some or all of their respective Shares if the market price of the Shares falls below the Offer Price.
(c) save for (i) the disposal of 243,942,000 Sale Shares by Dragon Fortune and 30,646,000 Sale Shares by Telefield Charitable pursuant to the Share Sale Agreement; and (ii) the disposal of an aggregate of 520,000 Shares by Mr. Lee Kai Bon during the period between 8 October 2015 and 9 October 2015 (out of which (a) 278,000 Shares were sold at HK$2.04 and 42,000 Shares were sold at HK$2.07 on 8 October 2015; and (b) 162,000 Shares were sold at HK$2.04 and 38,000 Shares were sold at HK$2.03 on 9 October 2015), none of the Directors had dealt for value in any Relevant Securities of the Company during the Relevant Period;
(d) none of the subsidiaries of the Company, pension fund of the Company or of any subsidiaries of the Company and any adviser to the Company as specified in class (2) of the definition of “associate” under the Takeovers Code owned or controlled any Relevant Securities of the Company as at the Latest Practicable Date and none of them had dealt in any Relevant Securities of the Company since the commencement of the Offer Period and up to and including the Latest Practicable Date;

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GENERAL INFORMATION

APPENDIX III

(e) as at the Latest Practicable Date, no person had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Company or any person who is an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of associate under the Takeovers Code;
(f) there were no Relevant Securities of the Company which were managed on a discretionary basis by fund managers connected with the Company as at the Latest Practicable Date and there were no fund managers connected with the Company had dealt in any Relevant Securities of the Company since the commencement of the Offer Period and up to and including the Latest Practicable Date;
(g) as at the Latest Practicable Date, neither the Company nor any of the Directors had borrowed or lent any Shares, convertible securities, warrants, options or derivatives of the Company;
(h) save for the Sale Shares, none of the Offeror, its ultimate beneficial owner or parties acting in concert with any of them had dealt in the Shares, outstanding options, derivatives, warrants or other securities convertible into Shares during the Relevant Period;
(i) save for the Share Sale Agreement, as at the Latest Practicable Date, there was no arrangement of the kind referred to in the third paragraph of Note 8 to Rule 22 of the Takeovers Code between the Offeror, any person acting in concert with it or the Offeror’s associate, and any other person;
(j) as at the Latest Practicable Date, no person owning or controlling any shareholding in the Company with whom the Offeror or any person acting in concert with the Offeror had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code, and no such person had dealt in any Shares, convertible securities, warrants, options or derivatives of the Company during the Relevant Period;
(k) as at the Latest Practicable Date, none of the Offeror, its ultimate beneficial owner or parties acting in concert with any of them has borrowed or lent any Relevant Securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company;
(l) save for the Optionholder Undertaking, none of the Offeror, its ultimate beneficial owner or parties acting in concert with any of them have received any irrevocable commitment to accept or not to accept the Offer;
(m) pursuant to the Loan Facility, the Offeror has created a charge over the Sale Shares and the Offer Shares to be acquired by the Offeror from those Shareholders who accept the Offer in favour of Xinrong Fund, as a security for the Loan Facility. Under the abovementioned share charge, if there is any default under the Loan Facility, Xinrong Fund will be entitled to enforce the securities (including exercise of power of sale in respect of the Sale Shares and the Offer Shares) and all rights pertaining to such Shares will be transferred to Xinrong Fund. The share charge shall be continuing securities and shall remain in full force and effect until discharge when the Offeror repays all the outstanding amount under the Loan Facility;

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GENERAL INFORMATION

APPENDIX III

(n) save for the Share Sale Agreement and the charge of the Sale Shares and the Offer Shares to be acquired by the Offeror through the Offer pursuant to the Loan Facility, there is no arrangement (whether by way of option, indemnity or otherwise) of the kind referred to in Note 8 to Rule 22 of the Takeovers Code in relation to the shares of the Offeror or the Shares and which might be material to the Offer;
(o) save for the Share Sale Agreement, there is no agreement or arrangement to which the Offeror, its ultimate beneficial owner or parties acting in concert with any of them is a party which relates to circumstances in which it may or may not invoke or seek to invoke a pre-condition or a condition to the Offer; and
(p) none of the Offeror, its ultimate beneficial owner or parties acting in concert with any of them has entered into any arrangements or contracts in relation to the outstanding derivatives in respect of securities in the Company nor has borrowed or lent any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company.

5. ARRANGEMENT AFFECTING DIRECTORS

As at the Latest Practicable Date,

(i) none of the Directors had been given any benefit as compensation for loss of office or otherwise in connection with the Offer;
(ii) save for the Optionholder Undertaking, there was no agreement or arrangement between any Directors and any other persons which is conditional on or dependent upon the outcome of the Offer or otherwise connected with the Offer;
(iii) save for the Share Sale Agreement, there was no material contract entered into by the Offeror in which any Director had a material personal interest; and
(iv) there was no agreement, arrangement or understanding (including any compensation arrangement) existing between the Offeror or any person acting in concert with it and any Director, recent Directors, Shareholders or recent Shareholders having any connection with or dependence upon the Offer.

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GENERAL INFORMATION

APPENDIX III

6. MARKET PRICES

The table below sets out the closing prices of the Shares on the Stock Exchange on (i) the last Business Day of each of the calendar months during the Relevant Period; (ii) the last Business Day immediately preceding the commencement of the Offer Period; (iii) the Last Trading Day; and (iv) the Latest Practicable Date:

	Closing price
Date	per Share
	(HK$)
31 October 2014	0.71
28 November 2014	0.73
31 December 2014	0.62
30 January 2015	0.62
27 February 2015	0.69
31 March 2015	0.70
24 April 2015 (last Business Day immediately precedent the
commencement of the Offer Period)	N/ANote
30 April 2015	2.65
21 May 2015 (Last Trading Day)	3.17
29 May 2015	N/ANote
30 June 2015	N/ANote
31 July 2015	N/ANote
31 August 2015	1.87
30 September 2015	1.99
12 October 2015 (Latest Practicable Date)	2.03

Note : Not applicable as trading of the Shares were suspended on that day.

During the Relevant Period, the highest closing price of the Shares as quoted on the Stock Exchange was HK$3.21 per Share on 20 May 2015 and the lowest closing price of the Shares as quoted on the Stock Exchange was HK$0.61 per Share on 17 December 2014, 21 January 2015 and 22 January 2015 respectively.

7. LITIGATIONS

As at the Latest Practicable Date, save as disclosed below, no member of the Group was engaged in any litigation or claims of material importance and no litigation or claims of material importance was known to the Directors to be pending or threatened by or against any member of the Group:

(a) there are two patent infringement claims lodged by E-Ink Corp. against one of the Company’s subsidiaries, seeking for an injunction against the sale of ebook reader and for a compensation of approximately HK$8.5 million. One of the two patent infringement claims was suspended by the Mannheim Court pending the outcome of

– III-7 –

GENERAL INFORMATION

APPENDIX III

the appeal by E-Ink Corp. in the Federal Patent court of Germany, whilst the second patent claim was currently subject to the review of an expert appointed by the Mannheim Court in regard to its validity;

(b) a copyright collecting agency has unilaterally announced copyright fees for certain storage products and multimedia products of the Group sold in Germany. The Directors estimated that the alleged claims from the copyright collecting agency as at 31 July 2015 were approximately HK$39.3 million and HK$98.9 million respectively;
(c) an insolvency administrator of one of the Group’s customers has claimed against the Group for an amount of approximately HK$3.5 million which the Group considered had already settled by netting off the said balance with trade receivables from the same customer; and
(d) a supplier of a subsidiary of the Company has alleged that the Company should be liable to a sum of HK$20.3 million pursuant to a corporate guarantee provided by the Company to the said supplier for the said subsidiary, in consequence of the alleged breach of contract on the part of the said subsidiary. The management considers this allegation is without merits.

8. MATERIAL CONTRACTS

The following contracts (not being a contract entered into in the ordinary course of business carried on or intended to be carried on by the Group) have been entered into by the Group after the date falling two years prior to 27 April 2015, being the date of commencement of the Offer Period up to and including the Latest Practicable Date:

(i) the Disposal Agreement;
(ii) the supplemental agreement dated 7 August 2015 in relation to the Disposal Agreement;
(iii) the Master Sale Agreement;
(iv) the supplemental agreement dated 7 September 2015 in relation to the Master Sale Agreement;
(v) the acquisition agreement dated 14 January 2014 entered into among Phoenix Choice (an indirect wholly owned subsidiary of the Company, being the purchaser), Ace Choice Global Limited (a company wholly and beneficially owned by Mr. Raman Jay, a director of certain subsidiaries of the Group, being the vendor) and Lucky Century International Limited (a company wholly owned by Mr. Raman Jay, being the target company) in relation to the acquisition of 51% of the issued share capital of Lucky Century International Limited by Phoenix Choice at the consideration of US$1,600,000 (equivalent to approximately HK$12,400,000); and

– III-8 –

GENERAL INFORMATION

APPENDIX III

(vi) the subscription and shareholders’ agreement dated 14 January 2014 entered into between Affonso, Telefield (BVI), a wholly-owned subsidiary of the Company and Radell Holdings Limited (being the subscriber), pursuant to which Radell Holdings Limited agreed to subscribe for the 49% of the issued shares of Affonso, at the subscription price of US$800,000 (equivalent to approximately HK$6,200,000).

9. EXPERTS AND CONSENTS

The following are the qualifications of the experts contained in this Composite Document:

Name

Qualification

Kingston Securities

a licensed corporation permitted to carry out type 1 (dealing in securities) regulated activity under the SFO

Kingston Corporate Finance a corporation licensed to carry out businesses in type 6 (advising on corporate finance) regulated activity under the SFO Veda Capital Limited (“ Veda ”) A licensed corporation for Type 6 (advising on corporate finance) regulated activity under the SFO Messis Capital A licensed corporation under the SFO to engage in Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities RSM Nelson Wheeler (“ RSM ”) Certified Public Accountants

Each of Kingston Securities, Kingston Corporate Finance, Veda, Messis Capital and RSM has given and has not withdrawn its written consent to the issue of this Composite Document with the inclusion herein of its advice or report, as the case may be, and reference to its name in the form and context in which they are respectively included.

As at the Latest Practicable Date, none of Kingston Securities, Kingston Corporate Finance, Veda, Messis Capital and RSM had any shareholding in any member of the Group and did not have any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

– III-9 –

GENERAL INFORMATION

APPENDIX III

10. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered into any service contracts with the Company or any of its subsidiaries or associated companies which (i) (including both continuous and fixed-term contracts) have been entered into or amended within 6 months preceding the commencement of the Offer Period; (ii) are continuous contracts with a notice period of 12 months or more; or (iii) are fixed term contracts with more than 12 months to run irrespective of the notice period.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection (i) on the website of the Company (www.telefieldgroup.com.hk); (ii) on the website of the SFC (www.sfc.hk) and; (iii) at the principal place of business of the Company in Hong Kong at Units 609-610 6/F, Bio-Informatics Centre No. 2 Science Park West Avenue Hong Kong Science Park Shatin, New Territories, Hong Kong from Wednesday, 14 October 2015, being the date of this Composite Document up to and including the Closing Date or the date on which the Offer is extended or revised (whichever is earlier):

(i) the memorandum of association and the articles of association of the Company;
(ii) the memorandum and articles of association of the Offeror;
(iii) the annual reports of the Company for each of the three financial years ended 31 December 2012, 2013 and 2014;
(iv) the interim report of the Company for six months period ended 30 June 2015;
(v) the letter from Kingston Securities, the text of which is set out on pages 9 to 17 of this Composite Document;
(vi) the letter from the Board, the text of which is set out on pages 18 to 24 of this Composite Document;
(vii) the letter from the Independent Board Committee to the Independent Shareholders, the text of which is set out on page 25 of this Composite Document;
(viii) the letter of advice from Messis Capital to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 26 to 45 of this Composite Document;
(ix) the written consents referred to in the paragraph headed “Experts and consents” of this appendix;

– III-10 –

GENERAL INFORMATION

APPENDIX III

(x) the material contracts referred to in the paragraph headed “Material contracts” in this appendix;
(xi) the Optionholder Undertaking; and
(xii) this Composite Document.

12. MISCELLANEOUS

As at the Latest Practicable Date:

(i) The registered office of the Company is situated at Clifton House, 75 Fort Street, PO Box 1350, Grand Cayman KY1-1108, Cayman Islands and its head office and principal place of business in Hong Kong is at Units 609-610 6/F, Bio-Informatics Centre, No. 2 Science Park West Avenue, Hong Kong Science Park, Shatin, New Territories, Hong Kong.
(ii) The Offeror is a company incorporated in BVI with limited liability, which is wholly and beneficially owned by Mr. Yang Zhihui.
(iii) The sole director of the Offeror is Mr. Yang Zhihui, the correspondence address is situated at Flat A, 38/F., Block 1 Larvotto, 8 Ap Lei Chau Praya Road, Ap Lei Chau, Hong Kong.
(iv) The registered address of the Offeror is situated at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.
(v) the registered office and correspondence address of Kingston Securities and Kingston Corporate Finance is situated at Suite 2801, 28th Floor One International Finance Centre, 1 Harbour View Street, Central Hong Kong.
(vi) the registered office and correspondence address of Veda is situated at Suite 3711, 37/F., Tower 2, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong;
(vii) the registered office and correspondence address of Messis Capital is situated at Room 1606, 16/F, Tower 2, Admiralty Centre, 18 Harcourt Road, Hong Kong; and
(viii) in the event of inconsistency, the English texts of this Composite Offer Document and the Form of Acceptance shall prevail over their respective Chinese texts.

– III-11 –

AI assistant

China Energy Storage Technology Development Limited — M&A Activity 2015

49722_rns_2015-10-14_ff476cd4-732f-464c-ade1-58eefa16e93f.pdf

THIS COMPOSITE DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

POWER PORT HOLDINGS LIMITED

TELEFIELD INTERNATIONAL (HOLDINGS) LIMITED 中慧國際控股有限公司

COMPOSITE OFFER AND RESPONSE DOCUMENT RELATING TO MANDATORY UNCONDITIONAL CASH OFFER BY

TABLE OF CONTENTS

EXPECTED TIMETABLE

Despatch date of this Composite Document and

Announcement of the results of the Offer

Notes:

EXPECTED TIMETABLE

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

INTRODUCTION

THE OFFER

Principal terms of the Offer

Comparison of value

Highest and lowest Share prices

Total consideration of the Offer

Financial resources available for the Offer

Effects of accepting the Offer

Hong Kong stamp duty

Payment

Overseas Shareholders

Taxation advice

Dealing and interests in the Company’s securities

Acceptance and settlement

Other arrangements

LETTER FROM KINGSTON SECURITIES

INFORMATION OF THE OFFEROR

OFFEROR’S INTENTION ON THE COMPANY

LETTER FROM KINGSTON SECURITIES

PROPOSED CHANGES TO THE BOARD OF THE COMPANY

DISCLOSURE IN DEALINGS

INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

COMPULSORY ACQUISITION

ADDITIONAL INFORMATION

Yours faithfully, For and on behalf of KINGSTON SECURITIES LIMITED Chu, Nicholas Yuk-yui Director

TELEFIELD INTERNATIONAL (HOLDINGS) LIMITED 中慧國際控股有限公司

MANDATORY UNCONDITIONAL CASH OFFER BY

FOR AND ON BEHALF OF THE OFFEROR TO ACQUIRE ALL THE ISSUED SHARES (OTHER THAN THOSE ALREADY OWNED BY THE OFFEROR AND PARTIES ACTING IN CONCERT WITH IT) IN TELEFIELD INTERNATIONAL (HOLDINGS) LIMITED

INTRODUCTION

LETTER FROM THE BOARD

THE MANDATORY UNCONDITIONAL CASH OFFER

Principal terms of the Offer

LETTER FROM THE BOARD

Effects of accepting the Offer

Optionholder Undertaking

SHAREHOLDING STRUCTURE OF THE COMPANY

INFORMATION ON THE GROUP

INFORMATION ON THE OFFEROR AND ITS INTENTION REGARDING THE GROUP

RECOMMENDATION

ADDITIONAL INFORMATION

TELEFIELD INTERNATIONAL (HOLDINGS) LIMITED 中慧國際控股有限公司

MANDATORY UNCONDITIONAL CASH OFFER BY

FOR AND ON BEHALF OF THE OFFEROR TO ACQUIRE ALL THE ISSUED SHARES (OTHER THAN THOSE ALREADY OWNED BY THE OFFEROR AND PARTIES ACTING IN CONCERT WITH IT) IN TELEFIELD INTERNATIONAL (HOLDINGS) LIMITED

Yours faithfully, For and on behalf of

Independent Board Committee

INTRODUCTION

THE INDEPENDENT BOARD COMMITTEE

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

(A) Information of the Group before and after the Disposal

1. Information and historical financial performance of the Group before the Disposal

2. Information of the Group after the Disposal

Our view

(B) Principal terms of the Offer

1. The Offer

For each Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$2.031 in cash

2. Historical Share price performance

3. Liquidity of the Shares

4. Comparable companies analysis

China Energy Storage Technology Development Limited M&A Activity 2015