China High Precision Automation Group Limited — Proxy Solicitation & Information Statement 2016

Feb 22, 2016

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Alco Holdings Limited , you should at once hand this circular to the purchaser or to the transferee or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser or transferee.

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

(Incorporated in Bermuda with limited liability) Website: http://www.alco.com.hk (Stock Code: 328)

MAJOR TRANSACTION

DISPOSAL OF PROPERTY

A letter from the Board is set out on pages 3 to 9 of this circular.

22nd February 2016

CONTENTS

			Page
Definitions. . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			3
Appendix I	–	Financial Information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Appendix II	–	Property Valuation Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Appendix III	–	General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25

– i –

DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions shall have the following meanings:

“Board”

the board of Directors

“Building”

Zung Fu Industrial Building, 1067 King’s Road, Quarry Bay, Hong Kong

“Company”

Alco Holdings Limited, a company incorporated in Bermuda and the Shares of which are listed on the main board of the Stock Exchange

“Completion”

completion of the Disposal

“Consideration”

HK$537,000,000

“Director(s)”

the director(s) of the Company

“Disposal”

disposal of the Property by the Vendor pursuant to the terms of the Provisional SP Agreement

“Expert”

LCH (Asia-Pacific) Surveyors Limited, an independent property valuer

“Formal SP Agreement”

the formal sale and purchase agreement entered into between Vendor and Purchaser on 13th January 2016 for the Disposal, the major terms therein are in line with and have no material difference from the terms in the Provisional SP Agreement

“Group”

the Company and its subsidiaries

“HK$”

Hong Kong dollars, the lawful currency of Hong Kong

“Hong Kong”

the Hong Kong Special Administrative Region of the People’s Republic of China

“Independent Third Party(ies)”

party(ies) who are third parties independent of the Company and connected persons (as defined in the Listing Rules) of the Company

– 1 –

DEFINITIONS

“Latest Practicable Date” 18th February 2016, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange “Property” 5th Floor, 9th Floor and 11th Floor of the Building “Provisional SP Agreement” the provisional sale and purchase agreement entered into between Vendor and Purchaser on 29th December 2015 for the Disposal “Purchaser” Lead Harvest Group Limited. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, the Purchaser is an Independent Third Party “SFO” Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “Share(s)” share(s) of par value of HK$0.10 each in the capital of the Company “Shareholder(s)” holder(s) of the Shares “Stock Exchange” The Stock Exchange of Hong Kong Limited “Vendor” Alco Electronics Limited, a wholly-owned subsidiary of the Company “%” per cent

– 2 –

LETTER FROM THE BOARD

(Incorporated in Bermuda with limited liability) Website: http://www.alco.com.hk

(Stock Code: 328)

Executive Directors: Registered Office: Mr. LEUNG Kai Ching, Kimen Clarendon House Mr. LEUNG Wai Sing, Wilson 2 Church Street Mr. KUOK Kun Man, Andrew Hamilton HM11 Mr. LEUNG, Jimmy Bermuda Mr. LIU Lup Man Principal place of business Independent Non-executive Directors: and head office: Mr. LI Wah Ming, Fred 11th Floor Mr. LAU Wang Yip, Derrick Zung Fu Industrial Building Mr. LEE Tak Chi 1067 King’s Road Quarry Bay Hong Kong 22nd February 2016

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION

DISPOSAL OF PROPERTY

INTRODUCTION

On 29th December 2015, the Board announced that on the even date (after trading hours), the Vendor, a wholly-owned subsidiary of the Company, entered into the Provisional SP Agreement with the Purchaser for the disposal of the Property at a consideration of HK$537,000,000.

– 3 –

LETTER FROM THE BOARD

On 31st December 2015, the Board announced that the written approval pursuant to rule 14.44 of the Listing Rules for the Disposal was obtained from Shundean Investments Limited, Mr. LEUNG Kai Ching, Kimen and Mr. LEUNG Wai Sing, Wilson, who are a closely allied group of Shareholders holding an aggregate of approximately 50.47% of the issued share capital of the Company. The Disposal is taken to have been duly approved on 31st December 2015 pursuant to rule 14.44 of the Listing Rules and the condition precedent for the Completion of the Disposal was fulfilled.

The purpose of this circular is to provide you with the information relating to, among other things, further details of the Disposal together with other information as required under the Listing Rules.

THE DISPOSAL

SUMMARY OF TERMS OF THE PROVISIONAL SP AGREEMENT

Date: 29th December 2015 Vendor: Alco Electronics Limited, a wholly-owned subsidiary of the Company. Purchaser: Lead Harvest Group Limited. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the Purchaser and its ultimate beneficial owner are Independent Third Parties. Property: 5th Floor, 9th Floor and 11th Floor of the Building.

Consideration and payment: Pursuant to the terms of the Provisional SP Agreement, the Vendor will sell the Property to the Purchaser at a consideration of HK$537,000,000. An initial deposit of HK$16,110,000 in cash was received by the Vendor upon signing of the Provisional SP Agreement and a further deposit of HK$37,590,000 in cash was received by the Vendor upon signing of the Formal SP Agreement on 13th January 2016. The balance of the Consideration, being HK$483,300,000, will be received by Vendor in cash upon Completion, which is scheduled to take place on or before 29th February 2016.

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LETTER FROM THE BOARD

The Consideration was arrived at after arm’s length negotiation between the Vendor and the Purchaser on normal commercial terms after considering the property market conditions in Hong Kong at the time of entering into the Provisional SP Agreement.

Tenancies of the Property:

5th Floor and 9th Floor of the Building shall be sold to the Purchaser subject to the existing tenancy. While upon Completion, the Vendor and the Purchaser shall enter into a tenancy agreement, whereby the Vendor will lease back 11th Floor of the Building for its own use for a term of 3 years commencing on the actual date of the Completion. The major terms of the tenancy agreement to be entered into are set out as follows:–

Rents

1st and 2nd years: HK$1 per annum (exclusive of rates, Government rent and management fees).

3rd year: at market rent subject to a maximum of HK$250,000 per month (exclusive of rates, Government rent and management fees). The market rent to be agreed by both parties but if no agreement is reached by the end of the 22nd month of the tenancy term the same shall be determined by an independent surveyor to be nominated by the parties or the Hong Kong Institute of Surveyors in case no agreement is reached between the parties about the nomination of surveyor.

Term

Three years commencing on the actual date of Completion.

– 5 –

LETTER FROM THE BOARD

Rental deposit

• 1st and 2nd years: nil.

3rd year: H K $ 5 0 0 , 0 0 0 p a y a b l e a t t h e commencement of the 3rd year of the lease.

Early termination by tenant

The Vendor, as tenant, shall be entitled to give a notice of not less than 6 months to the Purchaser, as landlord, to terminate the tenancy at any time during the term of the tenancy, without payment of compensation to the landlord.

Specific performance:

Nothing in the Provisional SP Agreement shall be so construed as to prevent either the Vendor or the Purchaser from bringing an action and obtaining a decree for specific performance of the contract and/or for other remedies.

Orders and building works:

The Purchaser agreed and acknowledged that the sale and purchase of the Property shall be subject to the existing building order on 5th Floor of the Building and the building works on the Property.

INFORMATION ON THE PROPERTY

The Property comprises 5th Floor, 9th Floor and 11th Floor of Zung Fu Industrial Building, 1067 King’s Road, Quarry Bay, Hong Kong. 5th Floor and 9th Floor of the Building were acquired by the Vendor in 1994 and 1997 respectively initially for the Group’s own use. The Group had leased 11th Floor of the Building from Euroform Enterprise Limited to use as office prior to the acquisition of this company. As a result of the acquisition of Euroform Enterprise Limited in 1995, 11th Floor of the Building was subsequently transferred to the Vendor in 1997. The Property is solely and beneficially owned by the Vendor. The total saleable area of the Property is approximately 45,633 square feet. Zung Fu Industrial Building is a 15-storey industrial building completed in about 1971 and situated in the industrial area of Quarry Bay.

– 6 –

LETTER FROM THE BOARD

The Property is currently not subject to any mortgage or charge. 5th Floor and 9th Floor of the Building of a saleable area of approximately 30,422 square feet has been owned by the Group for investment purpose and leased out for rental incomes prior to the Disposal. Rental incomes attributable to these two floors for the two financial years ended 31st March 2014 and 31st March 2015 were HK$4,839,000 and HK$5,086,000 respectively. After accounting for the related management fee and government rates paid by the Vendor, net profit before and after taxation for 5th Floor and 9th Floor of the Building for the two financial years ended 31st March 2014 and 31st March 2015 are as follows:

	For the year ended	31st March
	2015	2014
	HK$	HK$
Net profit before taxation	4,300,087	4,102,529
Net profit after taxation	3,590,573	3,425,612

11th Floor of the Building of a saleable area of approximately 15,211 square feet has since its acquisition by the Group in 1995 been used by the Company as its head office and principal place of business.

INFORMATION ON THE VENDOR AND THE COMPANY

The Vendor is a company incorporated in Hong Kong and is a wholly-owned subsidiary of the Company. The Vendor is principally engaged in designing, manufacturing and selling of consumer electronics products.

The Company is a company incorporated in Bermuda with limited liability whose shares are listed on the Stock Exchange. The principal business of the Group involves designing, manufacturing and selling of consumer electronic products.

INFORMATION ON THE PURCHASER

The Purchaser is a company incorporated in the British Virgin Islands. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, the Purchaser and its ultimate beneficial owner are Independent Third Parties and the Purchaser is an investment company.

– 7 –

LETTER FROM THE BOARD

FINANCIAL EFFECTS OF THE DISPOSAL

The Property is not under any mortgage/charge. The net book value of the Property as at the date of the latest audited financial statement, i.e. 31st March 2015, amounted to HK$260,282,000. After completion of the Disposal, non-current assets of the Group will be reduced by HK$260,282,000 and current assets of the Group will be increased by HK$534,215,000, but there will be no effect on current and non-current liabilities. Based on the Consideration of HK$537,000,000, the total gain expected to accrue to the Group from the Disposal is approximately HK$274 million, with a gain of approximately HK$55 million deferred and amortised throughout the lease term under the leaseback arrangement. The estimated gain represents the difference between the Consideration and Group’s carrying value of the Property as at 31st March 2015 and the relevant fees expected to be payable by the Group. The consolidated net asset value of the Group is also expected to increase accordingly. During the financial year ending 31st March 2016, a gain of approximately HK$219 million is expected to be recognized for the Disposal and leaseback arrangement.

PROPOSED USE OF PROCEEDS

Based on the Consideration of HK$537,000,000 and the associated estimated direct cost of the Disposal of HK$2,785,000, the Company is expected to receive a net proceeds of HK$534,215,000 from the Disposal.

The Company intends to use the net proceeds as general working capital of the Group.

REASONS FOR AND BENEFITS OF THE DISPOSAL

Having taken into account the current property market conditions, the Directors consider that the Disposal gives a good opportunity for the Company to realize its investment with considerable gain. After the Disposal, the Group will have additional working capital for future expansion.

The Board is of the view that the terms in the Provisional SP Agreement including the Consideration are in normal commercial terms, which are fair and reasonable and in the interests of the Shareholders and the Company as a whole.

IMPLICATIONS UNDER THE LISTING RULES

As the applicable percentage ratio under the Listing Rules in respect of the Disposal is more than 25% but less than 75%, the Disposal constitutes a major transaction for the Company and is subject to reporting, announcement and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

– 8 –

LETTER FROM THE BOARD

To the best of the Directors’ knowledge, information and belief, as no Shareholder has a material interest in the Disposal, no Shareholder is required to abstain from voting if the Company were to convene a general meeting for the approval of the Disposal.

On 31st December 2015, the written approvals for the Disposal were obtained from Shundean Investments Limited, Mr. LEUNG Kai Ching, Kimen and Mr. LEUNG Wai Sing, Wilson, who are holding 225,911,400 Shares, 20,152,000 Shares and 46,320,000 Shares respectively and who are a closely allied group of Shareholders holding an aggregate of approximately 50.47% of the issued share capital of the Company as at the date of the above written approval, in lieu of holding a general meeting to approve the Disposal pursuant to rule 14.44 of the Listing Rules.

Mr. LEUNG Kai Ching, Kimen and Mr. LEUNG Wai Sing, Wilson are the chairman and the chief executive officer of the Company, respectively, and both are executive Directors of the Company. Shundean Investments Limited is a company beneficially wholly owned by Mr. LEUNG Kai Ching, Kimen, while Mr. LEUNG Wai Sing, Wilson is the son of Mr. LEUNG Kai Ching, Kimen.

FURTHER INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular.

Yours faithfully, On behalf of the Board Alco Holdings Limited LEUNG Kai Ching, Kimen Chairman

– 9 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION

The unaudited consolidated financial statement of the Group for the six months ended 30th September 2015 is disclosed in the 2015 interim report of the Company dated 25th November 2015 from pages 1 to 14; the audited consolidated financial statements of the Group (i) for the year ended 31st March 2015 is disclosed in the 2015 annual report of the Company dated 25th June 2015, from pages 26 to 94; (ii) for the year ended 31st March 2014 is disclosed in the 2014 annual report of the Company dated 26th June 2014, from pages 26 to 98; and (iii) for the year ended 31st March 2013 is disclosed in the 2013 annual report of the Company dated 26th June 2013 from pages 24 to 90, all of which have been published on the website of Hong Kong Exchanges and Clearing Limited (www.hkexnews.hk) and the website at www.irasia.com/listco/hk/alco/index.htm.

2. STATEMENT OF INDEBTEDNESS

As at the close of business on 31st December 2015, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, the Group had outstanding unsecured interest bearing bank borrowings of approximately HK$398 million and trust receipt loan of approximately HK$545 million.

Save as aforesaid and apart from intra-group liabilities, as at the close of business on 31st December 2015, the Group did not have any debt securities, issued or outstanding, or authorized or otherwise created but unissued, any term loans, any other borrowings or indebtedness in the nature of borrowing of the Group including bank overdrafts, liabilities under acceptances (other than normal trade bills), acceptance credits or hire purchase commitments, any mortgages, charges, contingent liabilities or guarantees.

3. WORKING CAPITAL

The Directors are of the opinion that, after taking into account the internal resources, the existing available facilities and the proceeds from the Disposal, the Group will have sufficient working capital for its present requirements for at least the next twelve months from the date of this circular.

4. MATERIAL ADVERSE CHANGE

Up to and including the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31st March 2015, being the date to which the latest published audited accounts of the Company were made up.

5. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

The Group is principally engaged in designing, manufacturing and selling consumer electronic products business.

– 10 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

As disclosed in the interim report of the Group for the six months ended 30th September 2015, the Group reported turnover of HK$1.4 billion (2014: HK$1.1 billion), with profit attributable to shareholders amounting to HK$71 million. Gross margin increased to 11.6% compared with 5.9% for the corresponding period last year. The rise in turnover was mainly due to the encouraging performance of the Group’s tablet products and stable sales generated by its existing product portfolio, all of which have capitalised on a rise in consumption in key markets. As the US economy makes incremental steps forward, the management will place even greater attention to opportunities and trends that will emerge in the future. Having achieved a strong track record of effectively identifying consumer trends and leveraging in-house R&D capabilities to introduce exciting new products to market, the management will continue to use such strengths as it pursues sustainable and healthy growth.

While always looking out for new opportunities and new product developments, the management will at the same time seek to build on the progress achieved by the Group’s existing product lines. Of the highest priority is to further strengthen, and therefore capitalise on the success so far achieved by the Group’s tablet series. In addition to sizes ranging from 7-inch to 11-inch presently available, larger size models are now in the pipe-line and will gradually enter production in 2016. Also in the new year, in addition to wireless keyboards, other productivity accessories will be considered for inclusion with the Group’s tablets, such as wireless mouse, active stylus and the like.

Even though the Group’s sound bars and other AV products will not need to be renewed and revamped as drastically or as frequently as tablets, they are still being examined and reengineered constantly to make sure that they can be produced more efficiently and have features and refinements which are in step with consumer trends.

The need for constant development will also extend to production. Although the Houjie Town facility is state-of-the-art, the management will continue to dedicate efforts towards raising efficiency, and thereby minimise the Group’s exposure to high labour costs. And apart from investing in automation for continuous productivity improvements, the Group has also added, and will continue to add, high-precision equipment for further enhancing product quality, reliability and durability.

Even though the Group has made clear progress during the latest financial period, it is well aware of the need to sustain growth over the long term. Through the determination of an experienced management team; the nurturing of ties with long-standing and trusted business partners; the bolstering of product lines and ongoing push to enter new markets, the Group will have the means and methods for achieving this overriding goal.

– 11 –

PROPERTY VALUATION REPORT

APPENDIX II

The following is the text of a letter, a summary of values and the valuation certificate prepared for the purpose of incorporation in this circular received from LCH (Asia-Pacific) Surveyors Limited, an independent professional surveyor, in connection with its valuation as at 30th November 2015 of the property interests held by the Company.

PROFESSIONAL SURVEYOR PLANT AND MACHINERY VALUER BUSINESS & FINANCIAL ASSETS VALUER

The readers are reminded that the report which follows has been prepared in accordance with the reporting guidelines set by the HKIS Valuation Standards 2012 Edition (the “HKIS Standards”) published by the Hong Kong Institute of Surveyors (the “HKIS”). The standards entitles the valuer to make assumptions which may on further investigation, for instance by the readers’ legal representative, prove to be inaccurate. Any exception is clearly stated below. Headings are inserted for convenient reference only and have no effect in limiting or extending the language of the paragraphs to which they refer. Translations of terms in English or in Chinese are for reader’s identification purpose only and have no legal status or implication in this report. This report was prepared and signed off in English format, translation of this report in language other than English shall only be used as a reference and should not be regarded as a substitution for this report. Piecemeal reference to this report is considered to be inappropriate and no responsibility is assumed from our part for such piecemeal reference. It is emphasised that the findings and conclusion presented below are based on the documents and facts known to the valuer at the Latest Practicable Date of this circular. If additional documents and facts are made available, the valuer reserves the right to amend this report and its conclusion.

17th Floor Champion Building Nos. 287-291 Des Voeux Road Central Hong Kong

22nd February 2016

The Board of Directors Alco Holdings Limited 11th Floor Zung Fu Industrial Building No. 1067 King’s Road Quarry Bay Hong Kong

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APPENDIX II

PROPERTY VALUATION REPORT

Dear Sirs,

In accordance with the instructions given by the present management of Alco Electronics Limited (hereinafter referred to as the “Instructing Party”) to us to conduct an agreed-upon procedures valuations of certain designated real properties (same as the word “properties” in this report) in which Alco Holdings Limited (hereinafter referred to as the “Company”) and its subsidiaries (collectively, hereinafter together with the Company referred to as the “Group”) have interests in Hong Kong, we confirm that we have conducted inspection, made relevant enquiries and obtained such further information as we consider necessary to support our findings and our conclusion of values of the subject properties as at 30th November 2015 (hereinafter referred to as the “Valuation Date”) for the Instructing Party’s internal management reference purpose.

We understand that the use of our work product (regardless of form of presentation) will form part of the Instructing Party’s due diligence but we have not been engaged to make specific sale or purchase recommendations, or give opinion for financing arrangement. We further understand that the use of our work product will not supplant other due diligence which the Instructing Party should conduct in reaching its business decision regarding the properties valued. Our work is designed solely to provide information that will give the Instructing Party a reference in its due diligence process, and our work should not be the only factor to be referenced by the Instructing Party. Our findings and conclusion of values of the subject properties are documented in a valuation report and submitted to the Instructing Party at today’s date (hereinafter referred to as the “Report Date”).

At the request of the Instructing Party, we prepared this summary report (including this letter, the summary of values and the valuation certificate) to the Company to summarise our findings and conclusion of values as documented in the valuation report for the purpose of inclusion in this circular at the Report Date for the Company’s shareholders’ reference. Terms herein used without definition shall have the same meanings as in the valuation report, and the assumptions and caveats adopted in the valuation report also apply to this summary report.

BASIS OF VALUATION AND ASSUMPTIONS

According to the HKIS Standards, there are two valuation bases, namely market value basis and valuation bases other than market value. In this engagement, we have provided our conclusion of values of the properties on the market value basis.

– 13 –

APPENDIX II

PROPERTY VALUATION REPORT

The term “Market Value” is defined by the HKIS Standards as “the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion”.

Our valuations of the real properties have been made on the assumptions that, as at the Valuation Date,

1. the legally interested party in each of the properties has free and uninterrupted rights to assign its relevant property interest for the whole of the unexpired terms as granted, and any premium payable have already been fully paid; and

2. the legally interested party in each of the properties sells its relevant property interest in the market in its existing state without the benefit of a deferred terms contract, leaseback, joint venture, management agreement or any other similar arrangement which could serve to increase the value of the property interest.

Should any of the above not be the case, it will have adverse impact to the values as reported.

APPROACH TO VALUE

There are three generally accepted approaches in arriving at the market value of a property on an absolute title basis, namely the Sales Comparison Approach (or known as the Market Approach), the Cost Approach and the Income Approach.

In valuing the property in Group I, we have adopted the Sales Comparison Approach with the benefit of vacant possession as at the Valuation Date. The Sales Comparison Approach considers the sales, listing or offerings of similar or substitute properties and related market data establishes a value estimate by processes involving comparison. The underlying assumption of this approach is that an investor will pay no more for a property than he or she would have to pay for a similar property of comparable utility.

In valuing the property in Group II which is subject to existing tenancies, we have adopted the Investment Method. Investment Method considers capitalising the rental receivable from the existing tenancies plus the reversionary value of the property. The underlying assumption of this method is that an investor will pay no more for the property than he or she would have to be paid for another property with an income stream of comparable amount, duration, and certainty. In assessing the reversionary value of the property, we have also adopted the Sales Comparison Approach.

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PROPERTY VALUATION REPORT

APPENDIX II

Unless otherwise stated, we have not carried out a valuation on a redevelopment basis and the study of possible alternative development options and the related economics do not come within the scope of our work.

MATTERS THAT MIGHT AFFECT THE VALUES REPORTED

For the sake of valuation, we have adopted the areas as appeared in the copies of the documents as provided and no further verification work has been conducted. Should it be established subsequently that the adopted areas were not the latest approved, we reserve the right to revise our report and the valuations accordingly.

No allowance has been made in our valuations for any charges, mortgages, outstanding premium or amounts owing on the properties valued nor any expenses or taxation which may be incurred in affecting sales for properties. Unless otherwise stated, it is assumed that the properties are free from all encumbrances, restrictions, and outgoings of an onerous nature which could affect their values.

In our valuations, we have assumed that the properties are able to be sold and purchased in the market without any legal impediment (especially from the regulators). Should this not be the case, it will affect the reported values significantly. The readers are reminded to have their own legal due diligence work on such issue. No responsibility or liability from our part is assumed.

As at the Latest Practicable Date of this circular, we were unable to identify any adverse news against the properties which may affect the reported values in our work product. Thus, we are not in the position to report and comment on its impact (if any) to the properties. However, should it be established subsequently that such news did exist at the Valuation Date, we reserve the right to adjust the values reported herein.

ESTABLISHMENT OF TITLES

We have been provided with copy of tenancy agreements but have not been provided with copy of the title documents relating to the properties. We have caused searches to be made at the Land Registry of Hong Kong regarding the properties. However, we have not searched the original documents to verify ownership or to verify any amendments on the tenancy agreements which may not appear on the copy handed to us.

– 15 –

APPENDIX II

PROPERTY VALUATION REPORT

We need to state that we are not legal professionals and are not qualified to ascertain the titles and to report any encumbrances that may be registered against the properties. However, we have complied with the requirements as stated in Chapter 5 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and relied solely on the copies of documents in our valuations. All documents and leases have been used as reference only. No responsibility or liability from our part is assumed.

In our report, we have assumed that the Group has obtained all the approval and/or endorsement from the relevant authorities to own the properties, and that there would be no legal impediment (especially from the regulators) for the Group to continue the legal titles to the properties. Should this not be the case, it will affect our findings or conclusion of values in this report significantly. The readers are reminded to have their own legal due diligence work on such issues. No responsibility or liability from our part is assumed.

INSPECTIONS AND INVESTIGATIONS OF THE PROPERTIES

We have conducted inspections to the exterior, and where possible, the interior of the properties in respect of which we have been provided with such information as we have requested for the purpose of engagement. The properties were inspected by our graduate surveyor Mr. Rex Chan in January 2016. We have not inspected those parts of the properties which were covered, unexposed or inaccessible and such parts have been assumed to be in a reasonable condition. We cannot express an opinion about or advice upon the condition of the properties and our work product should not be taken as making any implied representation or statement about the condition of the properties. No structural survey, investigation or examination has been made, but in the course of our inspections, we did not note any serious defects in the properties inspected. We are not, however, able to report that the properties are free from rot, infestation or any other structural defects. No tests were carried out to the utilities (if any) and we are unable to identify those utilities covered, unexposed or inaccessible.

We have not carried out on-site measurements to verify the correctness of the areas of the properties, but have assumed that the areas shown on the documents and official layout plans handed to us are correct. All dimensions, measurements and areas are approximations.

Our engagement and the agreed procedures to value the properties did not include an independent land survey to verify the legal boundaries of the properties. We need to state that we are not in the land survey profession, therefore, we are not in the position to verify or ascertain the correctness of the legal boundaries of such properties that appeared on the documents handed to us. No responsibility from our part is assumed. The management of the Company or interested party in the properties should conduct their own legal boundaries due diligence work.

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APPENDIX II

PROPERTY VALUATION REPORT

We have not arranged for any investigation to be carried out to determine whether or not any deleterious or hazardous material has been used in the construction or formation of the properties, or has since been incorporated, and we are therefore unable to report that the properties are free from risk in this respect, and therefore we have not considered such factors in our valuations.

We are not aware of the content of any environmental audit or other environmental investigation or soil survey which may have been carried out on the properties and which may draw attention to any contamination or the possibility of any such contamination. In undertaking our work, we have been instructed to assume that no contaminative or potentially contaminative uses have ever been carried out in the properties. We have not carried out any investigation into past or present uses, either of the properties or of any neighbouring land, to establish whether there is any contamination or potential for contamination to the properties from these uses or sites, and have therefore assumed that none exists. However, should it be established subsequently that contamination, seepage or pollution exists at the properties or on any neighbouring land, or that the premises have been or are being put to a contaminative use, this might reduce the values now reported or affect our findings.

SOURCES OF INFORMATION AND ITS VERIFICATION

In the course of our work, we have been provided with copies of the documents regarding the properties, and these copies have been referenced without further verifying with the relevant bodies and/or authorities. Our procedures did not require us to conduct any searches or to inspect the original documents to verify ownership or to verify any amendment which may not appear on the copies handed to us. We need to state that we are not legal professionals, therefore, we are not in the position to advise and comment on the legality and effectiveness of the documents provided by the Instructing Party or the appointed personnel of the Company.

We have relied solely on the information provided by the Instructing Party or the appointed personnel of the Company without further verification and have fully accepted advice given to us on such matters as planning approvals or statutory notices, locations, titles, easements, tenure, occupation, rentals, floor areas and all other relevant matters.

Our valuations have been made only based on the advice and information made available to us. While a limited scope of general inquiries had been made to the real property market practitioners, we are not in a position to verify and ascertain the correctness of the advice given by the relevant personnel. No responsibility or liability from our part is assumed.

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APPENDIX II

PROPERTY VALUATION REPORT

Information furnished by others, upon which all or portions of our report are based, is believed to be reliable but has not been verified in all cases. Our procedures to work do not constitute an audit, review, or compilation of the information provided. Thus, no warranty is made nor liability assumed for the accuracy of any data, advice, opinions, or estimates identified as being furnished by others which have been used in formulating our work product.

When we adopted the work products from other professions, external data providers and the Instructing Party or its appointed personnel of the Company in our works, the assumptions and caveats that adopted by them in arriving at their figures also applied to this report. The procedures we have taken do not provide all the evidence that would be required in an audit and, as we have not performed an audit, accordingly, we do not express an audit opinion.

We are unable to accept any responsibility for the information that has not been supplied to us by the Instructing Party or the appointed personnel of the Company. Also, we have sought and received confirmation from the Instructing Party or the appointed personnel of the Company that no material factors have been omitted from the information supplied. Our analysis and valuations are based upon full disclosure between us and the Instructing Party of material and latent facts that may affect the works.

We have had no reason to doubt the truth and accuracy of the information provided to us by the Instructing Party or the appointed personnel of the Company. We consider that we have been provided with sufficient information to reach an informed view, and have had no reasons to suspect that any material information has been withheld.

Unless otherwise stated, all monetary amounts are in Hong Kong dollars (“HK$”).

LIMITING CONDITIONS IN THIS SUMMARY REPORT

Our findings or conclusion of values of the properties in this summary report are valid only for the stated purpose and only for the Valuation Date, and for the sole use of the Instructing Party. We or our personnel shall not be required to give testimony or attendance in court or to any government agency by reason of this summary report, and the valuer accepts no responsibility whatsoever to any other person.

Our valuations have been made on the assumption that no unauthorized alteration, extension or addition has been made in the properties, and that the inspection and the use of this report do not purport to be a building survey of the properties. We have assumed that the properties are free of rot and inherent danger or unsuitable materials and techniques.

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APPENDIX II

PROPERTY VALUATION REPORT

No responsibility is taken for changes in market conditions and local government policy, and no obligation is assumed to revise this summary report to reflect events or conditions which occur or make known to us subsequent to the date hereof.

Neither the whole nor any part of this summary report or any reference made hereto may be included in any published documents, prospectus or statement, or published in any way, without our written approval of the form and context in which it may appear. Nonetheless, we consent to the publication of this summary report in this circular to the Company’s shareholders’ reference.

Our maximum liability relating to services rendered under this engagement (regardless of form of action, whether in contract, negligence or otherwise) shall be limited to the charges paid to us for the portion of its services or work products giving rise to liability. In no event shall we be liable for consequential, special, incidental or punitive loss, damage or expense (including without limitation, lost profits, opportunity costs, etc.), even if it has been advised of their possible existence.

The Company and the Instructing Party are required to indemnify and hold us and our personnel harmless from any claims, liabilities, costs and expenses (including, without limitation, attorney’s fees and the time of our personnel involved) brought against, paid or incurred by us at a time and in any way based on the information made available in connection with our work product except to the extent that any such loses, expenses, damages or liabilities are ultimately determined to be the result of gross negligence of our engagement team in conducting its work. This provision shall survive even after the termination of this engagement for any reason.

STATEMENTS

The attached valuation certificate is prepared in line with the requirements contained in Chapter 5 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited as well as the guidelines contained in the HKIS Standards. The valuations have been undertaken by valuer, acting as external valuer, qualified for the purpose of this valuation.

We retain a copy of this summary report and the detailed valuation report together with the data from which it was prepared, and these data and documents will, according to the Laws of Hong Kong, be kept for a period of 6 years from the date of this report and to be destroyed thereafter. We considered these records confidential, and we do not permit access to them by anyone, with the exception for law enforcement authorities or court order, without the Instructing Party’s authorisation and prior arrangement made with us. Moreover, we will add the Company’s information into our client list for our future reference.

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PROPERTY VALUATION REPORT

APPENDIX II

The analysis or valuations of the properties depends solely on the assumptions made in this report and not all of which can be easily quantified or ascertained exactly. Should some or all of the assumptions prove to be inaccurate at a later date, it will affect the reported findings or conclusion of values significantly.

We hereby certify that the fee for this service is not contingent upon our conclusion and we have no significant interest in the properties, the Group, or the values reported.

The summary of values and the valuation certificate are attached.

Yours faithfully,

For and on behalf of

LCH (Asia-Pacific) Surveyors Limited

Elsa Ng Hung Mui B.Sc. M.Sc. RPS (GP)

Executive Director

Contributing valuers:

Ivan Mak Kin Hong B.Sc Rex Chan King Man B.Sc

Sr Elsa Ng Hung Mui has been conducting valuation of real properties in Hong Kong, Macau and mainland China since 1994. She is a Fellow of The HKIS and a valuer on the List of Property Valuers for Undertaking Valuation for Incorporation or Reference in Listing Particulars and Circulars and Valuation in Connection with Takeovers and Mergers published by The HKIS.

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PROPERTY VALUATION REPORT

APPENDIX II

SUMMARY OF VALUES

Group I – Property owned and occupied by the Group in Hong Kong and valued on the Market Value basis

Property 1. The whole of 11th Floor Zung Fu Industrial Building No.1067 King’s Road Quarry Bay Hong Kong

Amount of Amount of valuations in valuations in existing state existing attributable to state as at Interest the Group as at 30th November attributable 30th November 2015 to the Group 2015 HK$ HK$ 123,100,000 100 per cent. 123,100,000

Sub-total HK$123,100,000

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PROPERTY VALUATION REPORT

APPENDIX II

Group II – Property owned by the Group for investment in Hong Kong and valued on the Market Value basis

Amount of Amount of valuations in valuations in existing state existing attributable to state as at Interest the Group as at 30th November attributable 30th November Property 2015 to the Group 2015 HK$ HK$ 2. The whole of 5th Floor 251,400,000 100 per cent. 251,400,000 and 9th Floor Zung Fu Industrial Building No.1067 King’s Road Quarry Bay Hong Kong Sub-total HK$251,400,000 Grand Total * HK$374,500,000

• HONG KONG DOLLARS THREE HUNDRED SEVENTY FOUR MILLION AND FIVE HUNDRED THOUSAND ONLY

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PROPERTY VALUATION REPORT

APPENDIX II

VALUATION CERTIFICATE

Group I – Property owned and occupied by the Group in Hong Kong and valued on the Market Value basis

Property

Description and tenure

Amount of valuation in existing state attributable to the Particulars of Company as at occupancy 30th November 2015

1. The whole of The property comprises the whole 11th Floor of the 11th Floor of a 15-storey Zung Fu Industrial industrial building which was Building completed in about 1971. No. 1067 King’s Road The property has a total saleable floor Quarry Bay area of approximately 15,211 sq. ft. Hong Kong (1,413.14 sq.m.)

As inspected and HK$123,100,000 confirmed by the (100 per cent.) Instructing Party or the appointed personnel of the Company, the property was owneroccupied as at the Valuation Date.

Sub-section 2 of The Lot is held under a government Section E of lease for a term of 999 years Quarry Bay Marine commencing from 18th April 1900 Lot No. 2 and with a government rent HK$174 per the Extension annum. Thereto (the “Lot”).

(6/92nd shares of and in the Lot)

Notes:

1. The registered owner is Alco Electronics Limited.

2. Pursuant to a provisional sale and purchase agreement dated 29th December 2015 and made between Alco Electronics Limited and Lead Harvest Group Limited, the whole of the 5th Floor, 9th Floor and 11th Floor of Zung Fu Industrial Building were sold at a consideration of HK$537,000,000.

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PROPERTY VALUATION REPORT

APPENDIX II

Group II – Property owned by the Group for investment in Hong Kong and valued on the Market Value basis

Amount of valuation in existing state attributable to the Particulars of Company as at Property Description and tenure occupancy 30th November 2015 2. The whole of The property comprises the whole of As inspected and HK$251,400,000 5th Floor and the 5th and 9th Floors of a 15-storey confirmed by the (100 per cent.) 9th Floor industrial building which was Instructing Party or the Zung Fu Industrial completed in about 1971. appointed personnel Building of the Company, the No.1067 King’s The property has a total saleable floor property was subject to Road area of approximately 30,422 sq. ft. two various tenancies as Quarry Bay (2,826.27 sq.m.) at the Valuation Date. Hong Kong The Lot is held under a government The total monthly Sub-section 2 of lease for a term of 999 years rental receivable as at Section E of Quarry commencing from 18th April 1900 the Valuation Date was Bay Marine Lot No. with a government rent HK$174 per HK$525,000. (See Notes 2 and the Extension annum. 2 and 3 below) Thereto (the “Lot”).

(12/92nd shares of and in the Lot)

Notes:

1. The registered owner is Alco Electronics Limited.

2. According to the information provided by the Instructing Party, as at the Valuation Date, the whole of the 5th Floor was subject to a tenancy for a term of 3 years commencing from 1st February 2013 to 31st January 2016 at a monthly rental of HK$230,000 exclusive of management fee and rates, with an option to renew for a further term of 2 years at market rent. We are advised that the term has been renewed for a term of 2 years commencing from 1st February 2016 to 31st January 2018 at a monthly rental of HK$300,000 exclusive of management fee and rates.

3. According to the information provided by the Instructing Party, as at the Valuation Date, the whole of the 9th Floor was subject to a tenancy for a term of 2 years and 8 months commencing from 27th November 2015 to 26th July 2018 at a monthly rental of HK$295,000 exclusive of management fee and rates, with an option to renew for a further term of 2 years at market rent.

4. Order No. C/TB/001216/15/HK under Section 24(1) of the Building Ordinance with plan dated 17th June 2015 and registered in the Land Registry by Memorial No. 15070201620060 on 2nd July 2015.

5. Pursuant to a provisional sale and purchase agreement dated 29th December 2015 made between Alco Electronics Limited and Lead Harvest Group Limited, the whole of the 5th Floor, 9th Floor and 11th Floor of Zung Fu Industrial Building were sold at a consideration of HK$537,000,000.

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GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

Interests of Directors

As at the Latest Practicable Date, the interests and short positions of the Directors or chief executive of the Company in the shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO), which were required (i) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which any such Director or chief executive was taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (“Model code”), to be notified to the Company and the Stock Exchange, were as follows:

Long position in Shares

				Percentage of
				the issued share
	Personal	Corporate		capital of
Name of Directors	interests	interests	Total interests	the Company
Mr. LEUNG Kai Ching,	20,152,000	225,911,400	246,063,400	42.47%
Kimen		(note)
Mr. LEUNG Wai Sing,	46,320,000	–	46,320,000	7.99%
Wilson
Mr. LEUNG, Jimmy	1,144,000	–	1,144,000	0.20%
Mr. KUOK Kun Man,	752,000	–	752,000	0.13%
Andrew
Mr. LI Wah Ming, Fred	260,000	–	260,000	0.04%

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GENERAL INFORMATION

APPENDIX III

Notes:

These shares were owned by Shundean Investments Limited, a company incorporated in the British Virgin Islands with limited liability, of which Mr. LEUNG Kai Ching, Kimen was the sole shareholder.

Save as disclosed above, none of the Directors or chief executive of the Company had, as at the Latest Practicable Date, any interests or short positions in the Shares, underlying Shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which would have 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 any such Director or chief executive was taken or deemed to have under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO, to be entered in the register maintained by the Company referred to therein, or which were required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange.

Interests of substantial Shareholders

As at the Latest Practicable Date, so far as was known to the Directors or the chief executive of the Company, persons other than a Director or chief executive of the Company who had interests or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company under provisions of Divisions 2 and 3 of Part XV of the SFO, or were directly or indirectly 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 member of the Group, or held any option in respect of such capital were as follows:

		Long position in Shares
			Percentage of
			the issued
	Number of		share capital
Name of substantial Shareholders	Shares held	Capacity	of the Company
Shundean Investments Limited	225,911,400	Beneficial owner	38.99%
	(note i)
Webb David Michael	52,367,400	Beneficial owner and	9.04%
	(note ii)	interest in a controlled
		corporation
Preferable Situation Assets Limited	35,749,000	Beneficial owner	6.17%
	(note ii)
LEUNG Wai Lap, David	34,828,190	Beneficial owner	6.01%

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GENERAL INFORMATION

APPENDIX III

Notes:

• (i) These shares were owned by Shundean Investments Limited, a company incorporated in the British Virgin Islands with limited liability, of which Mr. LEUNG Kai Ching, Kimen was the sole shareholder.

• (ii) 16,618,400 of which was owned by Mr. Webb David Michael personally, and 35,749,000 was owned by Preferable Situation Assets Limited, which is a corporation 100% owned by Mr. Webb David Michael.

Save as disclosed above, so far as was known to the Directors or the chief executive of the Company, as at the Latest Practicable Date, no persons other than a Director or chief executive of the Company had any interests or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or were directly or indirectly 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 member of the Group, or held any option in respect of such capital.

Save as disclosed above, none of the Directors was a director or any employee of a company which has an interest or shore position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

3. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with any member of the Group which will not expire or may not be terminated by the Company within one year without payment of compensation (other than statutory compensation).

4. INTERESTS IN CONTRACT OR ARRANGEMENT

None of the Directors was materially interested, directly or indirectly, in any contract or arrangement entered into by any member of the Group which was subsisting as at the Latest Practicable Date and which was significant in relation to the business of the Group.

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GENERAL INFORMATION

APPENDIX III

5. INTERESTS IN ASSETS

As at the Latest Practicable Date, none of the Directors or the Expert had any direct or indirect interest in any assets which have been, since 31st March 2015, the date to which the latest published audited financial statements of the Group were made up, acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

6. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors or the controlling Shareholders or their respective associates had any interests in businesses which competes or may compete with the business of the Group or had any other conflict of interests which any such person has or may have with the Group.

7. LITIGATION

So far as the Directors are aware, as at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration of material importance and there was no litigation or claim of material importance known to the Directors to be pending or threatened by or against any member of the Group.

8. QUALIFICATION AND CONSENT OF EXPERT

The following are the qualifications of the Expert whose advice or opinion is contained in this circular:

Name

Qualification

LCH (Asia-Pacific) Surveyors Limited professional surveyor

As at the Latest Practicable Date, the Expert:

• (a) did not have any direct or indirect shareholding in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for shares in any member of the Group; and

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GENERAL INFORMATION

APPENDIX III

• (b) did not have any direct or indirect interests in any assets which since 31st March 2015 (being the date to which the latest published audited consolidated financial statements of the Group were made up), had been acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

The Expert has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter or report and references to its name in the form and context in which it appears.

9. MATERIAL CONTRACTS

As at the Latest Practicable Date, save for the Provisional SP Agreement and the Formal SP Agreement entered into between the Vendor and the Purchaser in relation to the Disposal, there was no contract (not being contracts entered into in the ordinary course of business), entered into by the members of the Group within the two years immediately preceding the issue of this circular and which is material.

10. MISCELLANEOUS

• (a) The registered address of the Company is Clarendon House, 2 Church Street, Hamilton HM11, Bermuda and the head office and principal place of business in Hong Kong is 11th Floor, Zung Fu Industrial Building, 1067 King’s Road, Quarry Bay, Hong Kong.

• (b) The share registrar and transfer office of the Company in Hong Kong is Tricor Abacus Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

• (c) The company secretary of the Company is Mr. KUOK Kun Man, Andrew, who holds a master degree in business administration and has more than 38 years of experience in finance and accounting with multinational organisations.

• (d) The English text of this circular shall prevail over the Chinese text in the case of any inconsistency.

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GENERAL INFORMATION

APPENDIX III

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of the Company at 11th Floor, Zung Fu Industrial Building, 1067 King’s Road, Quarry Bay, Hong Kong during normal business hours on any weekday (Saturdays, Sundays, and public holidays excepted) during the period of 14 days from the date of this circular:

• (a) the Memorandum and Articles of Association of the Company;

• (b) the material contracts referred to in the paragraph headed “Material Contracts” in this Appendix;

• (c) the property valuation report issued by LCH (Asia-Pacific) Surveyors Limited in relation to the valuation of the Property as at 30th November 2015, as set out in Appendix II to this circular;

• (d) the annual reports of the Company for the three years ended 31st March 2013, 2014 and 2015;

• (e) the interim report of the Company for the six months ended 30th September 2015; and

• (f) this circular.

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