China Silver Technology Holdings Limited - Proxy Solicitation & Information Statement 2010

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 a licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in TC Interconnect Holdings Limited (the “ Company ”), you should at once hand this circular, together with the enclosed proxy form, to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

Hong Kong Exchanges and Clearing Limited and the Stock Exchange 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.

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TC INTERCONNECT HOLDINGS LIMITED

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 515)

Website: www.tatchun.com

MAJOR AND CONNECTED TRANSACTIONS FORMATION OF JV COMPANY, THE PURCHASE OF ASSETS BY THE JV COMPANY FROM ITS EQUITY HOLDER AND THE ACQUISITION OF INTEREST IN JV COMPANY

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

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A letter from the Board is set out on pages 7 to 31 of this circular.

A letter from the Independent Board Committee to the Independent Shareholders is set out on page 32 of this circular, and a letter from Ample Capital, the independent financial adviser, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 33 to 46 of this circular.

A notice convening the extraordinary general meeting of the Company to be held at 31/F, Aitken Vanson Centre, 61 Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong on 10 May 2010 at 2:00 p.m. is set out on pages 152 and 155 of this circular.

Whether or not you are able to attend the extraordinary general meeting, you are requested to complete and return the accompanying proxy form in accordance with the instructions printed thereon and return the same to the branch share registrar of the Company in Hong Kong, Tricor Investor Services Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the extraordinary general meeting or any adjournment thereof (as the case may be). Completion and return of the proxy form shall not preclude you from attending and voting at the extraordinary general meeting or any adjourned thereof should you so desire.

For identification purpose only

22 April 2010

	Pages
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . .	32
Letter from Ample Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	33
Appendix I – Financial Information of the Group . . . . . . . . . . . . . . . . . .	47
Appendix II – Management Discussion and Analysis. . . . . . . . . . . . . . . . .	102
Appendix III – Unaudited Pro Forma Financial Information . . . . . . . . . .	105
Appendix IV – Valuation Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	109
Appendix V – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	142
Notice of Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	152

– i –

DEFINITIONS

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

“Acquisition”
acquisition of the 19% equity interest in the JV Company by the Company through TC (BVI) from Mr. Zhu at the consideration of HK$28,400,000, which shall be settled partly by the issuance and allotment of the Consideration Shares (as to HK$18,400,000) and partly by cash (as to HK$10,000,000)
“Agreements”
Investment Co-operation Agreement as supplemented by the 1[st] Supplemental Agreement and 2[nd] Supplemental Agreement
“Assessed Value”
the value of the 19% equity interest in the JV Company to be assessed in accordance with the terms of the Agreements
“associates”
have the same meaning ascribed to it under the Listing Rules
“Board”
the board of Directors
“Company”

TC Interconnect Holdings Limited (stock code: 515), a company incorporated in the Cayman Islands with limited liability, the Shares of which are listed on the Main Board of the Stock Exchange

“Conditions Precedent for Acquisition”

conditions precedent to the Acquisition as provided under the Agreements

“Conditions Precedent for JV Formation”
conditions precedent to the formation of the JV Company (including the Injection and Subscription) as provided under the Agreements
“Conditions Precedent for Purchase”
Conditions precedent to the Purchase as provided under the Agreements
“connected person”

has the meaning ascribed to it under the Listing Rules

– 1 –

DEFINITIONS

“Consideration Shares”

such number of Shares (equivalent to the aggregate amount of HK$18,400,000) to be allotted and issued by the Company to Mr. Zhu pursuant to the Agreements, which shall form part of the consideration of the Acquisition

“Directors” the directors of the Company
“Dongfang” (Orient OptoSemiconductors Corp.)*, a limited company incorporated under the laws of the PRC
“EGM”
an extraordinary general meeting of the Company to be convened and held at 31/F, Aitken Vanson Centre, 61 Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong on 10 May 2010 for the Shareholders to consider, and if thought fit, approve, amongst other thing, the Agreements, the formation of the JV Company (including the Injection and Subscription), the Purchase, the Acquisition and the transactions as contemplated under the Agreements, the overall mechanism of the Grant of Options and Buy-Back pursuant to the Agreements and the issuance and allotment of the Consideration Shares by the Company
“Executive”
Executive Director of the Corporate Finance Division of the Securities and Future Commission of Hong Kong or any of his delegates
“Group”
the Company and its subsidiaries including TC (BVI)
“Hong Kong”
the Hong Kong Special Administrative Region of the PRC
“Hong Kong Companies Companies Ordinance (Chapter 32 of the Laws of Hong Ordinance” Kong)
“Independent Board Committee”
the committee of independent non-executive Directors comprising Mr. Cheung Sui Wing, Darius, Ms. Ho Man Kay and Mr. Wong Siu Fai, Albert

– 2 –

DEFINITIONS

“Independent Financial Adviser” or “Ample Capital”
“Independent Shareholders”
“Independent Third Parties”
“Injection and Subscription”
“Investment Co-operation Agreement”
Ample Capital Limited, the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Purchase, the Acquisition, the issuance and allotment of the Consideration Shares by the Company, which is a licensed corporation to carry out type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO
all Shareholders except (a) Mr. Zhu, together with his associates; (b) Dongfang together with its associate (c) Shareholders who are involved in or interested in the transactions as contemplated under the Agreements (including but not limited to the formation of the JV Company (including the Injection and Subscription), the Purchase and the Acquisition); and (d) Shareholders who are required to abstain from voting at the EGM under the Listing Rules
person(s) or company(ies) and their respective ultimate beneficial owner(s) which, to the best of the knowledge, information and belief of the Directors having made all reasonable enquiries, are third parties independent of and not connected with any director, chief executive or substantial shareholders of the Company and its subsidiaries or any of their respective associates
the injection of RMB50,000,000 in cash by TC (BVI) into the JV Company established by Dongfang and Mr. Zhu for the subscription of an equity interest equivalent to 51% in the JV Company

a formal and legally binding investment co-operation framework agreement dated 18 January 2010 entered into between Dongfang, TC (BVI), Mr. Zhu and the Company in relation to the formation of the JV Company and the Acquisition

– 3 –

DEFINITIONS

“JV Company”
“Latest Practicable Date”
“LED”
“LED Street Light Related Fixed Assets”
“Listing Committee”
“Listing Rules”
“MOU”
“Mr. Zhu”
“Net Profit”
“PCB(s)”
a joint venture company (with limited liability) to be established under the laws of the PRC and to be held by Dongfang, TC (BVI) and Mr. Zhu pursuant to the Agreements, which shall carry out the operation and management of energy saving projects and LED lighting and the sale and marketing of LED lighting and other energy saving products
16 April 2010, being the latest practicable date prior to the printing of the circular for ascertaining certain information in this circular
light-emitting diode
certain fixed assets to be injected into and sold to the JV Company by Dongfang, which shall include but not limited to production lines for LED street lights, production and packaging facilities for high power LED lightings, quality-checking facilities and office facilities
has the meaning ascribed to it under the Listing Rules
the Rules Governing the Listing of Securities on the Stock Exchange
the non-legally binding memorandum of understanding entered into between TC (BVI), Dongfang and Mr. Zhu on 28 September 2009 in relation to the formation of the JV Company and the Acquisition
Mr. Zhu Jianqin ( ), a shareholder and director of Dongfang
the net profit after tax of the JV Company for a particular calendar financial year
printed circuit board(s)

– 4 –

DEFINITIONS

“Purchase” purchase of all those LED Street Light Related Fixed Assets and LED-related intellectual properties held by Dongfang (other than those which are to be injected/ transferred to the JV Company by Dongfang as contribution of additional capital into the JV Company) of a value of RMB8,000,000 by the JV Company from Dongfang at the consideration of RMB8,000,000 which shall be settled in cash

“PRC” the People’s Republic of China which, for the purpose of this announcement, excludes Hong Kong, Macau and Taiwan
“SFO” the Securities Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“Shareholders” shareholders of the Company
“Share(s)” ordinary share(s) of HK$0.1 each in the share capital of the Company
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“substantial shareholder(s)” has the meaning ascribed to it under the Listing Rules
“1[st] Supplemental Agreement”
the supplemental agreement dated 18 January 2010 entered into between Dongfang, TC (BVI), Mr. Zhu and the Company for the purpose of amending certain terms of the Investment Co-operation Agreement
“2[nd] Supplemental Agreement”
the 2[nd] supplemental agreement dated 21 April 2010 entered into between Dongfang, TC (BVI), Mr. Zhu and the Company for the purpose of amending/clarifying certain terms of the Investment Co-operation Agreement and the 1[st] Supplemental Agreement
“TC (BVI)”
TC (BVI) Limited, a company incorporated in the British Virgin Islands, which is a wholly owned subsidiary of the Company
“HK$” Hong Kong dollars, the lawful currency of Hong Kong from time to time

– 5 –

DEFINITIONS

“RMB” Renminbi, the lawful currency of the PRC “%” per cent

For the purpose of this circular, the exchange rate of RMB1.00 = HK$1.14 has been used, where applicable, for purposes of illustration only and does not constitute a representation that any amounts have been, could have been or may be exchanged, as this or any other rates.

– 6 –

LETTER FROM THE BOARD

TC INTERCONNECT HOLDINGS LIMITED

*

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 515)

Website: www.tatchun.com

Executive Directors: Yeung Hoi Shan Pak Shek Kuen

Non-executive Directors: Li Jinxia Yeung Tai Hoi Cheung Kwok Ping

Independent non-executive Directors: Cheung Sui Wing, Darius Ho Man Kay Wong Siu Fai, Albert

Registered office: Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Principal place of business in Hong Kong: 31/F, Aitken Vanson Centre 61 Hoi Yuen Road Kwun Tong, Kowloon Hong Kong

22 April 2010

To the Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTIONS FORMATION OF JV COMPANY, THE PURCHASE OF ASSETS BY THE JV COMPANY FROM ITS EQUITY HOLDER AND THE ACQUISITION OF INTEREST IN JV COMPANY

A. INTRODUCTION

Reference is made to the announcement made by the Company on 28 September 2009 in relation to the non-legally binding MOU entered into among TC (BVI), Dongfang and Mr. Zhu for the proposed establishment of the JV Company.

* For identification purpose only

– 7 –

LETTER FROM THE BOARD

On 18 January 2010, the Board announced that the Company entered into the Investment Co-operation Agreement and the 1[st] Supplemental Agreement with Dongfang, Mr. Zhu and TC (BVI), pursuant to which, (i) subject to the fulfillment of the Conditions Precedent for JV Formation, Dongfang, Mr. Zhu and TC (BVI) agreed to jointly establish the JV Company (which is initially to be held as to 30% by Dongfang, 19% by Mr. Zhu and 51% by TC (BVI)) to carry out the operation and management of energy saving projects and LED lighting and the sale and marketing of LED lighting and other energy saving products; and (ii) subject to the fulfillment of the Conditions Precedent for Acquisition, the Company agreed to acquire from Mr. Zhu the 19% equity interest in the JV Company held by Mr. Zhu at the consideration of HK$28,400,000, which shall be satisfied partly by cash (as to HK$10,000,000) and partly by way of issuance and allotment of the Consideration Shares (as to HK$18,400,000).

On 21 April 2010, the Board further announced that the Company entered into the 2[nd] Supplemental Agreement with Dongfang, Mr. Zhu and TC (BVI) to amend/clarify certain terms under the Investment Co-operation Agreement and the 1[st] Supplemental Agreement. The 2[nd] Supplemental Agreement clarifies the steps involved in the formation of the JV Company, which include, firstly, that Dongfang and Mr. Zhu would jointly set up the JV Company and then TC (BVI) and Dongfang would inject further capital into the JV Company such that upon completion of the capital injection, TC (BVI), Dongfang and Mr. Zhu would respectively be interested in 51%, 30% and 19% equity interests in the JV Company. The 2[nd] Supplemental Agreement also provides that at the same time of the said capital injection and subject to the fulfillment of the Conditions Precedent for Purchase on or before 20 May 2010 (or such other date as Dongfang, the JV Company and the Company may agree), the JV Company would complete the Purchase. The 2[nd] Supplemental Agreement also extended the deadline for fulfillment of the Conditions Precedent for JV Formation and Conditions Precedent for Acquisition from 10 April 2010 to 20 May 2010 (or such other date as the relevant parties to the Agreements may agree) and set the deadline for completion of the formation of the JV Company (including the Injection and Subscription) and/or the Purchase and/or the Acquisition to be on or before 31 May 2010 (or such other date as the relevant parties to the Agreement may agree).

The Directors confirm that the reason why the transaction was structured in the way as provided in the 2[nd] Supplemental Agreement (that is to set up the JV Company by Dongfang and Mr. Zhu first and then for TC (BVI) and Dongfang to inject further capital into the JV Company such that upon completion of the capital injection, TC (BVI), Dongfang and Mr. Zhu would respectively be interested in 51%, 30% and 19% equity interests in the JV Company) is that as advised by DeHeng Law Offices, Shenzhen Office ( ), the PRC legal adviser of the Company, under the PRC law (i.e. PRC Law on Sino-Foreign Equity Joint Ventures ( ) and the Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors ( )), it is not permissible for a Chinese natural person to be a shareholder of a Sino-Foreign joint venture company unless such Chinese natural person was originally a shareholder of a domestic company, and such domestic company subsequently changed to a Sino-Foreign joint venture company. To deal with this restriction, the parties to the Agreements decided to set up the JV Company (as a domestic enterprise), and to subsequently convert such

– 8 –

LETTER FROM THE BOARD

JV Company into a Sino-Foreign joint venture company by inviting TC (BVI) to inject further capital into the JV Company. The Board believes that the steps involved will (i) facilitate the Company to acquire a total of 70% equity interest in the JV Company by contribution of a combination of cash and shares issued by the Company; and (ii) avoid the unnecessary costs and time incurred for transferring the LED-related intellectual properties held by Mr. Zhu into Dongfang.

As at the Latest Practicable Date, to the best of the knowledge, information and belief of the Directors having made all reasonable enquiries, each of Dongfang and Mr. Zhu and their respective ultimate beneficial owners are Independent Third Parties.

Immediately after the establishment of the JV Company and the injection of additional capital by Dongfang and TC (BVI) pursuant to the Agreements, Mr. Zhu will hold the aforementioned 19% equity interest in the JV Company and, as a result, Mr. Zhu will become a connected person of the Company.

Likewise, upon establishment of the JV Company and the injection of additional capital by Dongfang and TC (BVI) pursuant to the Agreements, Dongfang, TC (BVI) and Mr. Zhu will become the equity holders of the JV Company, and Dongfang will hold a 30% equity interest in the JV Company. As a result, Dongfang will become a connected person of the Company.

The Independent Board Committee comprising all the independent non-executive Directors, namely Mr. Cheung Sui Wing, Darius, Ms. Ho Man Kay and Mr. Wong Siu Fai, Albert, has been established to advise the Independent Shareholders in respect of the Purchase, the Acquisition and the issuance and allotment of the Consideration Shares by the Company.

Ample Capital, the independent financial adviser, has been appointed to advise the Independent Board Committee and Independent Shareholders as to whether or not the terms of the Purchase, the Acquisition and the issuance and allotment of the Consideration Shares by the Company are fair and reasonable and in the interest of the Company and its Shareholders as a whole so far as the Company and its Independent Shareholders are concerned.

The purpose of this circular is:

(a) to provide the Shareholders with details of the Agreements, the transactions as contemplated under the Agreements (including the formation of the JV Company (including the Injection and Subscription), the Purchase and the Acquisition);
(b) to set out the recommendation of the Independent Board Committee in respect of the Purchase, the Acquisition and the issuance and allotment of the Consideration Shares by the Company, and to recommend the Independent Shareholders to vote for or against the resolutions approving the Purchase, the Acquisition and the issuance and allotment of the Consideration Shares by the Company by poll at the EGM;

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LETTER FROM THE BOARD

(c) to set out the opinion of Ample Capital, the independent financial adviser of the Company, in respect of the Purchase, the Acquisition and the issuance and allotment of the Consideration Shares by the Company, addressed to the Independent Board Committee and the Independent Shareholders, and to recommend the Independent Shareholders to vote for or against the resolutions approving the Purchase, the Acquisition and the issuance and allotment of the Consideration Shares by the Company by poll at the EGM;
(d) to give the Shareholders the notice of the EGM to be convened to consider, and if thought fit, to approve, amongst other things, (i) the Agreements; (ii) the formation of the JV Company (including the Injection and Subscription); (iii) the Purchase, (in respect of which Dongfang, being a proposed substantial shareholder of the JV Company, together with its associates, and all parties involved in or interested in the transactions as contemplated under the Agreements (including but not limited to the formation of the JV Company (including the Injection and Subscription), the Purchase and the Acquisition) are required to abstain from voting); (iv) the Acquisition (in respect of which Mr. Zhu, being a proposed substantial shareholder of the JV Company, together with his associates, and all parties involved in or interested in the transactions as contemplated under the Agreements (including but not limited to the formation of the JV Company (including the Injection and Subscription), the Purchase and the Acquisition) are required to abstain from voting); (v) the transactions as contemplated under the Agreements; (vi) the overall mechanism of the Grant of Options and Buy-Back pursuant to the Agreements; and (vii) the issuance and allotment of the Consideration Shares by the Company (in respect of which Mr. Zhu, being a proposed substantial shareholder of the JV Company, together with his associates, and all parties involved in or interested in the transactions as contemplated under the Agreements (including but not limited to the formation of the JV Company (including the Injection and Subscription), the Purchase and the Acquisition) are required to abstain from voting); and
(e) other disclosure requirements under the Listing Rules.

– 10 –

LETTER FROM THE BOARD

B. AGREEMENTS

Date of the Investment Co-operation Agreement and the 1[st] Supplemental Agreement

18 January 2010

Date of the 2[nd] Supplemental Agreement

21 April 2010

Parties to the Agreements

(a) Dongfang;
(b) TC (BVI), a wholly-owned subsidiary of the Company;
(c) Mr. Zhu; and
(d) the Company.

As at the date of this as at the Latest Practicable Date to the best of knowledge, information and belief of the Directors having made all reasonable enquiries, each of parties (a) and (c) and their respectively ultimate beneficial owners are Independent Third Parties.

Immediately after the establishment of the JV Company and the injection of additional capital by Dongfang and TC (BVI) pursuant to the Agreements, Mr. Zhu will hold the aforementioned 19% equity interest in the JV Company, as a result of which Mr. Zhu will become a connected person of the Company.

Effect of the Agreements

The terms of the Agreements shall prevail over those in the MOU if there is any inconsistency between them.

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LETTER FROM THE BOARD

Formation of the JV Company

Pursuant to the Agreements, Dongfang and Mr. Zhu would jointly set up the JV Company with an initial registered capital of RMB26,627,451, of which Dongfang would inject RMB8,000,000 in cash into the JV Company to subscribe for 30% equity interest and Mr. Zhu would inject RMB18,627,451 into the JV Company by way of transfer to the JV Company of the ownership of all the LED-related intellectual properties held by him (the assessed value of such intellectual properties is RMB25,715,000 (equivalent to approximately HK$29,315,100) and the value in excess of RMB18,627,451 being the amount of capital injected by Mr. Zhu (namely RMB7,087,549) shall be transferred into the capital reserve account of the JV Company) to subscribe for 70% equity interest in the JV Company. Pursuant to the Agreements, if the final assessed value of the LED-related intellectual properties is lower than RMB18,627,451, Mr. Zhu would pay the shortfall in cash.

The Directors confirm that, at the time of negotiating the terms of setting up the JV Company, it was the intention of the parties to the Agreements that Dongfang should make the investment into the JV Company by way of injection of the LED Street Light Related Fixed Assets and the transfer to the JV Company of the ownership of all the LED-related intellectual properties held by Dongfang, and that no cash was intended to be injected by Dongfang into the JV Company.

However, as advised by DeHeng Law Offices, Shenzhen Office ( ), the PRC legal adviser of the Company, under PRC law (i.e. PRC Corporation Law (“ ”), the shareholders’ contribution in cash for a newly formed company should not be less than 30% of the company’s registered capital. To comply with the above requirement, Dongfang agreed to subscribe for 30% of the equity interest by injection of RMB8,000,000 in cash at the time when the JV Company was initially set up, and then recover such amount of cash injected (i.e. RMB8,000,000) through the Purchase i.e. by way of sale to the JV Company for all the remaining LED Street Light Related Fixed Assets and LED-related intellectual properties held by Dongfang at RMB8,000,000 after the formation of the JV Company and the capital injection made by Dongfang and TC (BVI) into the JV Company.

According to the PRC laws, the value of the LED-related intellectual properties to be injected by Mr. Zhu upon formation of the JV Company has to be assessed by a valuer. Pursuant to the valuation report dated 31 March 2010 issued by Shenzhen Yongming Assets Appraisal Office ( ) being a qualified valuer in the PRC who has neither present nor prospective interests in the Company nor the value reported and who is independent of the Company and its connected person(s) at the date of the valuation report, the assessed value of the said LED-related intellectual properties to be injected by Mr. Zhu is RMB25,715,000. Immediately upon formation of the JV Company by Dongfang and Mr. Zhu, TC (BVI) would subscribe for the equity interest in the JV Company by injection of RMB50,000,000 in cash into the JV Company, while Dongfang would subscribe for a further equity interest in the JV Company by injecting into the JV Company RMB21,411,765 through injection of part of the LED Street Light Related Fixed Assets and transferring to the JV Company of the ownership of part of the

– 12 –

LETTER FROM THE BOARD

LED-related intellectual properties held by Dongfang such that TC (BVI), Dongfang and Mr. Zhu would respectively be interested in 51%, 30% and 19% equity interests in the JV Company. Immediately after the injection of additional capital by TC (BVI) and Dongfang above, the registered capital of the JV Company would be increased from RMB26,627,451 to RMB98,039,216 and the JV Company would be held as to 51% by TC (BVI), 30% by Dongfang and 19% by Mr. Zhu.

Each of TC (BVI), Dongfang and Mr. Zhu shall complete the capital injection on or before 31 May 2010 (or such other date as the parties to the Agreements may agree).

According to the laws of the PRC on Chinese-Foreign Equity Joint Ventures, it is not necessary to perform a valuation on the non-cash assets to be injected into the JV Company subsequent to the formation of the JV Company by Dongfang. The value of such assets shall be determined by all equity holders of the JV Company (i.e. by TC (BVI), Dongfang and Mr. Zhu) and the assessed value is RMB21,411,765.

The type and amount of the contribution to be injected by each of TC (BVI), Dongfang and Mr. Zhu were negotiated between the parties on an arm’s length basis with reference to the due diligence work performed by the Company and as a result of negotiations between all parties to the Agreements.

The registered capital of the JV Company shall be RMB98,039,216 upon completion of the capital injection by Dongfang and TC (BVI) after formation of the JV Company.

Conditions Precedent for JV Formation

The formation of the JV Company (including the Injection and Subscription) shall be conditional upon the fulfillment of the following conditions on or before 20 May 2010 (or such other date as the parties to the Agreements may agree):

(a) compliance by Dongfang, Mr. Zhu and TC (BVI) with all applicable laws, rules and regulations (including but not limited to the Listing Rules) in relation to the formation of the JV Company (including the Injection and Subscription);
(b) the absence of any laws, rules and regulation (including but not limited to the Listing Rules) which would prohibit the parties to the Agreements from setting up of the JV Company (including the Injection and Subscription);
(c) the Shareholders approving the Agreements, the formation of the JV Company (including the Injection and Subscription) and the transactions as contemplated under the Agreements (excluding the Purchase and the Acquisition); and
(d) the Shareholders approving the overall mechanism of the Grant of Options pursuant to the Agreements.

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LETTER FROM THE BOARD

Shareholding structure after the formation of the JV Company and injection of additional capital by Dongfang and TC (BVI) but prior to the Acquisition

After the formation of the JV Company and injection of additional capital by Dongfang and TC (BVI) but prior to the Acquisition, the JV Company will be owned as to 51% by TC (BVI), 30% by Dongfang and 19% by Mr. Zhu.

Scope of business of the JV Company

The scope of business of the JV Company includes carrying out the operation and management of energy saving projects and LED lighting and the sale and marketing of LED lighting and other energy saving products.

Board of directors and management of the JV Company

The board of directors of the JV Company shall comprise five directors of which three directors will be appointed by TC (BVI) while two directors will be appointed by Dongfang.

The chairman and the chief financial officer of the JV Company will be nominated by TC (BVI). The general manager of the JV Company will be appointed by Dongfang.

The Purchase of the LED Street Light Related Fixed Asset and LED related intellectual properties from Dongfang

Upon establishment of the JV Company and injection of additional capital by Dongfang and TC (BVI) pursuant to the Agreements, Dongfang, TC (BVI) and Mr. Zhu will become the equity holders of the JV Company, and Dongfang will hold a 30% equity interest in the JV Company. As a result, Dongfang will become a connected person of the Company. At the same time of the said capital injection by Dongfang and TC (BVI), the JV Company would purchase from Dongfang for a consideration of RMB8,000,000, to be settled in cash all those LED Street Light Related Fixed Asset and LED-related intellectual properties then held by Dongfang (apart from those which are to be injected/ transferred to the JV Company by Dongfang as contribution of additional capital into the JV Company) of a value of RMB8,000,000.

A valuation by DTZ Debenham Tie Leung Limited, a qualified Hong Kong valuer who has neither present nor prospective interests in the Company nor the value reported and who is independent of the Company and its connected person(s) at the date of the valuation reports which is 22 April 2010, on the value of the LED Street Light Related Fixed Asset and LED-related intellectual properties respectively to be purchased by JV Company from Dongfang as aforesaid has been conducted and the total assessed value of such assets and intellectual properties is approximately HK$10,296,936. The relevant valuation reports are set out in Appendix IV hereof.

The original purchase cost of the said LED Street Light Related Fixed Assets and the LED-related intellectual properties is RMB15,376,000.

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LETTER FROM THE BOARD

The consideration for the Purchase was determined after arm’s length negotiation between the parties to the Agreements.

Conditions Precedent to the Purchase

The Purchase shall be conditional upon the fulfillment of the following conditions on or before 20 May 2010 (or such other date as Dongfang, the JV Company and the Company may agree):

(a) compliance by Dongfang, the JV Company and the Company with all applicable laws, rules and regulation (including but not limited to the Listing Rules) in relation to the Purchase;
(b) the absence of any law, rules and regulation (including but not limited to the Listing Rules) which would prohibit Dongfang, the JV Company and the Company from completing the Purchase; and
(c) the Independent Shareholders approving the Agreements and the Purchase.

The Acquisition from Mr. Zhu of his 19% equity interest in the JV Company

Immediately after the establishment of the JV Company and the injection of additional capital by Dongfang and TC (BVI), Mr. Zhu will hold a 19% equity interest in the JV Company and, as a result, Mr. Zhu will become a connected person of the Company. Subsequent to the formation of the JV Company, the capital injection by Dongfang and TC (BVI) and completion of the Purchase, the Company shall acquire from Mr. Zhu the aforementioned 19% equity interest in the JV Company then held by Mr. Zhu and such equity interest shall be held and registered in the name of TC (BVI).

Upon completion of the Purchase and the Acquisition, a 70% equity interest in the JV Company will be held by TC (BVI), while a 30% equity interest will be held by Dongfang. Pursuant to the Agreements, any tax payable for the transfer of such 19% equity interest to TC (BVI) by Mr. Zhu shall be borne by Mr. Zhu.

A valuation by DTZ Debenham Tie Leung Limited, a qualified Hong Kong valuer who has neither present nor prospective interests in the Company nor the value reported and who is independent of the Company and its connected person(s) at the date of the valuation report which is 22 April 2010, to assist in determining the Assessed Value on such 19% equity interest in the JV Company to be acquired by the Company has been performed in accordance with the terms of the Agreements. Under the PRC laws, the consideration for the Acquisition shall not be substantially less than the Assessed Value. Pursuant to the Agreements, the consideration for the Acquisition shall be fixed at HK$28,400,000 and will not be subject to any adjustment even if the Assessed Value is higher.

The original purchase cost of such 19% equity interest to Mr. Zhu shall be the contributions made to the JV Company pursuant to the Agreements (i.e. the contribution

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LETTER FROM THE BOARD

made by way of transfer to the JV Company of the ownership of all the LED-related intellectual properties held by Mr. Zhu) which assessed value is RMB25,715,000 (equivalent to approximately HK$29,315,100).

The agreed consideration for the Acquisition shall be HK$28,400,000, which shall be satisfied partly by way of payment of cash (as to HK$10,000,000) and partly by way of issuance and allotment of the Consideration Shares (as to HK$18,400,000) at the higher price per Share of (a) 85% of the average closing price per Share as quoted on the Stock Exchange for the last five consecutive trading days immediately before the Agreements were executed on 18 January 2010; or (b) 85% of the closing price per Share on 18 January 2010. Payment of the consideration for the Acquisition including issuance of the Consideration Shares shall be settled/completed on or before 31 May 2010 (or such later date as TC (BVI), Mr. Zhu and the Company may agree).

According to the above basis, the issue price for the Consideration Shares shall be HK$1.2155 per Share and 15,137,803 Consideration Shares, representing 5.22% of the total issued share capital of the Company as at the Latest Practicable Date, will be issued in settlement of part of the consideration for the Acquisition.

The consideration for the Acquisition was determined after arm’s length negotiation between the parties to the Agreements with reference to, among other things, the valuation of the LED Street Light Related Fixed Assets and the LED-related intellectual properties held by the JV Company (including the LED-related intellectual properties held by Mr. Zhu) conducted by the said Hong Kong valuer, DTZ Debenham Tie Leung Limited, and the estimation of the future business and revenues to be generated by the JV Company in the first nine years of its operation. According to the said valuation report which is set out in Appendix IV hereof, the value of the entire JV Company is HK$153,142,977.

The Company has agreed to pay HK$28,400,000 to acquire the 19% equity interest of the JV Company from Mr. Zhu because part of the consideration for the Acquisition is to be settled by the Consideration Shares to be allotted and issued by the Company, and the liquidity of the Consideration Shares is less than cash. In addition, the Board considers that the Acquisition is on normal commercial terms because:

(a) the assessed value of the LED-related intellectual properties held by Mr. Zhu is RMB25,715,000 (equivalent to approximately HK$29,315,100), while the consideration (i.e. HK$28,400,000) for the Company to acquire 19% is slightly lower than the aforesaid assessed value;
(b) in addition to the registered capital, the Company has a capital reserve account and other assets; and
(c) the consideration for the Acquisition was based on the valuations of the LED Street Light Related Fixed Assets and LED-related intellectual properties held by the JV Company, and the estimation of the future business and revenues to be generated by the JV Company in the first nine years of its operation.

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LETTER FROM THE BOARD

The Consideration Shares shall be issued as fully paid and shall rank pari passu in all respects with the Shares then in issue and an application will be made by the Company to the Stock Exchange for the listing of and permission to deal in the Consideration Shares. Approval from the Independent Shareholders will be obtained for the issuance and allotment of the Consideration Shares by the Company.

The shareholding structure of the Company as at the Latest Practicable Date and immediately after the issuance and allotment of the Consideration Shares is set out as follows:

			Immediately
			after the
			issuance and
	As at the date		allotment of
	of the Latest		the
Substantial	Practicable		Consideration
shareholders	Date	Percentage	Shares	Percentage
Yeung Hoi Shan	179,000,000	61.72%	179,000,000	58.66%
Public	111,032,000	38.28%	111,032,000	36.38%
Mr. Zhu	–	–	15,137,803	4.96%

	290,032,000	100.00%	305,169,803	100.00%

Immediately after the issuance and allotment of the Consideration Shares, the shareholding of Mr. Yeung Hoi Shan in the Company will be diluted from 61.72% to 58.66%. Despite the dilution as a result of the issuance and allotment of the Consideration Shares, the issuance and allotment of the Consideration Shares will not result in a change of control of the Company.

Conditions Precedent to the Acquisition

The Acquisition shall be conditional upon the fulfillment of the following conditions on or before 20 May 2010 (or such later date as TC (BVI), Mr. Zhu and the Company may agree):

(a) compliance by Mr. Zhu, TC (BVI) and the Company with all applicable laws, rules and regulation (including but not limited to the Listing Rules) in relation to the Acquisition;
(b) the absence of any law, rules and regulation (including but not limited to the Listing Rules) which would prohibit Mr. Zhu, TC (BVI) and the Company from completing the Acquisition and the issuance and allotment of the Consideration Shares;
(c) the Independent Shareholders approving the Agreements and the Acquisition;
(d) the Independent Shareholders approving the issuance and allotment of the Consideration Shares by the Company; and
(e) the granting of the approval from the Listing Committee for the listing of and permission to deal in the Consideration Shares.

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LETTER FROM THE BOARD

Details of the LED Street Light Related Fixed Assets and the LED-related intellectual properties held by Dongfang and Mr. Zhu

Set out below are the LED Street Light Related Fixed Assets and the LED-related intellectual properties held by Dongfang, which will be injected into the JV Company as contribution for subscription of further capital in the JV Company, and sold to the JV Company at the consideration of RMB8,000,000.

		Application		No of
Nature	Type	(Patent) No.	Description	items
Fixed assets	Production and packaging			60
	machines
Fixed assets	Moulding machines			42
Fixed assets	R&D machines			28
Fixed assets	Quality-checking machines			36
Fixed assets	Office equipment			140
IP	A kind of semiconductor	200520061782.6	Being an innovative and	1
	lighting		practical semiconductor
			lighting product, it can
			promptly release thermal
			energy arising from
			working circuit boards,
			accordingly, to
			effectively prevent the
			occurrence of dewing.
IP	A kind of color-control	200520121237.1	This innovative and	1
	equipment for LED		practical product solves
	lighting string		deficiency in installation
			technology, and provides
			a color-control
			equipment for LED
			lighting string featuring
			effective reduction of
			data quantity transmitted
			through transmission
			medium, with a simple
			and convenient structure
			and easy for
			commercialization.

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LETTER FROM THE BOARD

		Application		No of
Nature	Type	(Patent) No.	Description	items
IP	A kind of LED surface	200620013475.5	This innovative and	1
	lighting equipment		practical product offers a
			LED surface lighting
			equipment, by which the
			lighting face will be
			used fully and light
			source could be
			changed.
IP	A kind of assembled strip	200620055966.6	This innovative and	1
	lamp		practical product offers
			an assembled strip lamp,
			which is assembled by
			the strip lamps of pre-
			fixed length. This strip
			lamp can be shaped to
			various bends,
			applicable for quantity
			production and
			convenient for
			maintenance and
			replacement.

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LETTER FROM THE BOARD

LED-related intellectual properties held by Mr. Zhu, which will be injected into the JV Company at the time of formation of the JV Company

Application No of Nature Type (Patent) No. Description items IP A kind of envelope for high200610061225.3 The invention is made to 1 powered semiconductor abstract thermal energy lighting components arising from working high-powered LED, by adoption of an active cooling method realized by electricity refrigeration technology by use of semiconductor temperature difference, based on passive thermal elimination offered by thermal sink or pipe of high-powered LED. This invention is also a breakthrough for thermal transmission between LED chip and thermal sink, which produces high-powered semiconductor lighting components with better and more stable function in thermal elimination, and higher efficiency in lighting.

Nature

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LETTER FROM THE BOARD

		Application		No of
Nature	Type	(Patent) No.	Description	items
IP	A kind of high-powered LED	200710074813.5	The invention is made to	1
	lighting component		provide a high-powered
			LED component aiming
			at solving deficiency in
			top layer thermal
			elimination technology
			of the existing high-
			powered LED
			components, with which
			thermal energy arising
			from top layer of high-
			powered LED
			components could be
			eliminated efficiently.
			Another aim of this
			invention is to form a
			lens available for
			controlling light path.
IP	A kind of LED lighting	200710075026.2	A LED lighting component	1
	component		to improve layout of
			phosphor powder on
			surface of LED is
			addressed by this
			invention, to solve
			problems such as
			influence on lighting
			effect, alteration of color
			parameter, alteration of
			space luminous intensity
			layout and Ra value of
			color temperature which
			originate from coating
			methods.

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LETTER FROM THE BOARD

		Application		No of
Nature	Type	(Patent) No.	Description	items
IP	A kind of high-powered	200620014277.0	The innovative and	1
	semiconductor lighting		practical product offers a
	assembly		high-powered
			semiconductor lighting
			assembly with an active
			thermal-abstraction
			device, to enhance
			lighting efficiency and
			life of service through
			lowering down junction
			temperature of high-
			powered lighting chip by
			active thermal
			abstraction.
IP	Ferrofluid LED lamp	200820146837.7	This innovative and	1
			practical product offers a
			ferrofluid LED lamp
			which is equipped with
			function of controlling
			stream of magnetic
			liquid in empty pipes by
			conducting available-for-
			control electromagnetic
			force over such pipes,
			thus to eliminate the
			thermal arising from
			LED chips of such
			lamps.
IP	Aluminium nitride lighting	200920135718.6	This innovative and	1
	component with porcelain		practical product offers
	basic plate		an aluminium nitride
			lighting component with
			porcelain basic plate,
			with which no hole
			metallization is required
			on aluminium nitride
			with porcelain basic
			plate, in simpler
			craftwork and lower
			cost.

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LETTER FROM THE BOARD

		Application		No of
Nature	Type	(Patent) No.	Description	items
IP	Thermal dissipation equipment	200920135717.1	This innovative and	1
	for high-powered LED		practical product offers a
	lamps		thermal dissipation
			equipment for high-
			powered LED lamps,
			with which, thermal
			energy arising from
			working high-powered
			LED could be actively
			abstracted, with high
			thermal dissipation
			efficiency and wide
			application.
IP	LED street lamp	200920131450.9	This innovative and	1
			practical product offers a
			LED street lamp
			featuring with well
			thermal dissipation and
			low-cost of maintenance,
			with which, LED light
			sources, power supply
			sources and controllers
			could be changed more
			conveniently.
IP	LED street lamp	200930165945.9	This patent belongs to	1
			appearance designing
			patent.

Completion of the formation of the JV Company (including the Injection and Subscription), the Purchase and the Acquisition

Pursuant to the Agreement, completion of the formation of the JV Company (including the Injection and Subscription) and/or the Purchase and/or the Acquisition shall take place on or before 31 May 2010 (or such other date as the relevant parties to the Agreements may agree) subject to the fulfillment of the relevant Conditions Precedent for JV Formation, Conditions Precedent for Purchase and Conditions Precedent for Acquisition.

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LETTER FROM THE BOARD

After completion of the formation of the JV Company (including the Injection and Subscription), the Purchase and the Acquisition under the Agreements, the Company shall be interested in a 70% equity interest in the JV Company through TC (BVI). The aggregate of the remuneration payable to and benefits in kind receivable by the Directors of the Company will not be varied in consequence of the formation of the JV Company (including the Injection and Subscription), the Purchase and the Acquisition.

The profit sharing ratio on the profit/loss of the JV Company immediately after completion of the formation of JV Company, the Injection and Subscription as well as the injection of capital by Dongfang will be in proportion to the equity held by the then equity holders, namely 51% as to TC (BVI), 30% as to Dongfang and 19% as to Mr. Zhu. Whereas the profit sharing ratio on the profit/loss of the JV Company immediately following completion of the Acquisition would be 70% as to TC (BVI) and 30% as to Dongfang.

Financial effect of the formation of the JV Company (including the Injection and Subscription), the Purchase and the Acquisition

After formation of the JV Company (including the Injection and the Subscription) and upon completion of the Purchase and the Acquisition, the JV Company will become an indirect non-wholly owned subsidiary of the Company. The total investment amount of the JV Company to be invested by TC (BVI) shall be approximately HK$85,400,000, out of which approximately HK$67,000,000 is to be invested by the injection of cash into the JV Company, and approximately HK$18,400,000 is to be invested by the issuance and allotment of the Consideration Shares for settlement of the consideration for the acquisition of the aforementioned 19% equity interest in the JV Company from Mr. Zhu. The cash portion of the investment will be supported by the working capital of the Group and, upon utilization of the working capital, there will be approximately the same level of increase in the liabilities for the Group. As the JV Company is a newly formed business, its earnings will depend on its business and operations results in the future upon its commencement of business after the formation of the JV Company (including the Injection and Subscription), the Purchase and the Acquisition. Please refer to Appendix III – Unaudited Pro Forma Financial Information for the effect on the working capital and the liabilities of the Group.

Appointment of Mr. Zhu as the executive Director

Subject to due compliance with the Listing Rules and the relevant laws, rules and regulation, Mr. Zhu will be proposed to be appointed as an executive Director upon completion of the Purchase, the Acquisition and the issuance and allotment of the Consideration Shares, and will be responsible for the operation and development of the LED lighting business of the Company. The Company will make the necessary announcement in compliance with the Listing Rules upon such appointment.

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LETTER FROM THE BOARD

Buy-Back

To avoid dilution of the Consideration Shares, the Company has agreed that the Company shall not during the 2 years after completion of the transactions as contemplated under the Agreements allot and issue such number of additional Shares which in aggregate shall constitute more than 30% of the total issued share capital of the Company. If the Company fails to comply with the above requirement, pursuant to the Agreements, Mr. Zhu shall then be entitled to request the Company to buy back (the “ Buy-Back ”) the Consideration Shares at the price of which such Consideration Shares are issued. The performance of the Buy-Back shall be subject to the due compliance with the relevant requirements under the Listing Rules, the Code on Takeovers and Mergers and Share Repurchases, and the relevant laws, rules and regulations. Before the Buy-Back is exercised, the Company will make the necessary announcement and circular, obtain the Shareholders’ approval for the Buy-Back and obtain the approval from the Executive (if necessary) in compliance with the Listing Rules and the Code on Takeovers and Mergers and Share Repurchases.

Share incentive scheme

As an incentive for better performance of the management team led by Mr. Zhu, it is proposed that the following share option scheme (the “ Scheme ”) will be granted within the first three years since commencement of business of the JV Company (the “ Grant of Options ”):

(a) if the Net Profit of the JV Company within the first, second and third calendar financial year after its commencement of business is not less than RMB15,000,000, RMB20,000,000 and RMB30,000,000 respectively, then in respect of such calendar financial year where the corresponding targeted amount of Net Profit is achieved, TC (BVI) shall procure the JV Company to issue the options to Mr. Zhu (or any person nominated by him). The value of such options shall be equivalent to 10% of the Net Profit of the respective calendar financial year; and
(b) if the Net Profit falls within the range of RMB8,000,000 to RMB15,000,000 in respect of the first calendar financial year, RMB10,000,000 to RMB20,000,000 in respect of the second calendar financial year and RMB15,000,000 to RMB30,000,000 in respect of the third calendar financial year, then in respect of such calendar financial year where the Net Profit falls into the relevant range, the options of the JV Company to be issued to Mr. Zhu (or any person nominated by him) shall be equivalent to 1% to 5% of the Net Profit of that calendar financial year depending on the actual amount of the Net Profit.

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LETTER FROM THE BOARD

The actual Grant of Options will depend on the financial performance of the JV Company in the next three calendar financial years. In addition, the performance of the Grant of Options shall be subject to due compliance with the relevant requirements under the Listing Rules and the relevant laws, rules and regulations. As Mr. Zhu will become an executive Director, the Grant of Options to Mr. Zhu will constitute a connected transaction of the Company under Chapter 14A of the Listing Rules. The Company will make the necessary announcement and circular, and obtain the Shareholders’ approval for the actual Grant of Options to Mr. Zhu (if necessary) in compliance with the Listing Rules. In addition, the Company will also make the necessary announcement and circular, and obtain the Shareholders’ approval for the actual Grant of Options (to grantee(s) other than Mr. Zhu) (if necessary) in compliance with the Listing Rules and the relevant laws, rules and regulations.

It is the present intention of the Board that at the time when the Net Profit of the JV Company attains the specified targets as described above, share options of the JV Company will, subject to due compliance with the relevant requirements under the Listing Rules and the relevant laws, rules and regulations, be issued within 3 months after the end of the relevant calendar financial year.

It is also the present intention of the Board that the terms of the share options to be granted (if it grants such options at all) shall be as follows:

(a) the share options of the JV Company shall be exercised within 3 years from the date of grant.
(b) the exercise price of the share options shall be determined in accordance with the formula of “Net Worth/Number Of Shares”

where:

“Net Worth” means the net worth of the JV Company as at the financial year end date of that particular calendar financial year when the Net Profit reaches the targeted amount/range; and

“Number Of Shares” means the number of issued shares of the JV Company as at the financial year end date of that particular calendar financial year when the Net Profit reaches the targeted amount/range.

(c) upon the exercise of the share options of JV Company granted under the Scheme, the JV Company shall issue and allot new additional shares for such grantee.

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LETTER FROM THE BOARD

C. REASONS FOR ENTERING INTO THE TRANSACTIONS

The Directors believe that there is considerable business potential for energy saving products, in general, and the LED lighting business, in particular, in the PRC and it is the intention of the Company to explore suitable business and new investment opportunities for the Group by forming a joint venture company with appropriate partners.

According to a report issued by www.askci.com[1] , the PRC is considered to be the largest LED road lamp consumer market and accounts for approximately 50% of the market share globally. The Ministry of Housing and Urban-Rural Development of the PRC announced a plan for a urban green lighting project in 2006 and pursuant to such green lighting project the PRC government has been promoting the use of high efficiency and energy saving lighting systems in public facilities, hotels, and commercial buildings. In 2009, the Ministry of Science and Technology of the PRC, pursuant to its document GuoKeFaGao (2009) no. 189[2] , further kicked off the “Ten Thousand LED lights in Ten Cities” project to promote high-powered LED lights in selected cities on a pilot basis. It is anticipated that by 2010, over 2 million LED lamps will be in use in the 21 pilot cities, which include Shenzhen and Dongguan in Guangdong province, Yangzhou in Jiangsu province and Chengdu and Mianyang in Sichuan province, and large scale promotion for using high-powered LED lights will be activated upon the success of such programme.

The Directors believe that the formation of the JV Company (including the Injection and Subscription), the Purchase and the Acquisition will further diversify the product range of the Group, improve its products’ structure and enhance its anti-risk capability and profitability.

The Directors (including the independent non-executive Directors) believe that the terms and conditions of the Agreements, the formation of the JV (including the Injection and Subscription), the Purchase and the Acquisition are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole.

D. INFORMATION ON THE GROUP

The Group is principally engaged in the manufacturing and trading in printed circuit boards in Hong Kong and the PRC and its products are widely applied to consumer electronics, computer and computer peripherals, communication equipments and automotive electronics. The Group currently supplies printed circuit boards to companies such as Toshiba, Philips, Sharp, Hitachi, Panasonic, Samsung, Jabil, Osram, Thomson and TCL, and it has established business relationships with over 270 customers in the PRC, the United States, Europe, Japan, Korea, Hong Kong and Singapore.

1 www.askci.com ( ) is a commercial research and business intelligent agency incorporated in the PRC. To the best knowledge of the Directors, such research and business intelligence information have been widely quoted by Chinese newspapers and news agencies and web-sites.

2 GuokeFaGao ( ) (2009) no. 189 is an article issued by The Ministry of Science and Technology of the People’s Republic of China, which the Company retrieved such document from its website www.most.gov.cn.

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LETTER FROM THE BOARD

E. INFORMATION ON DONGFANG

F. INFORMATION ON MR. ZHU

Mr. Zhu Jianqin, aged 36, whose residential address is at 18E, Block 2, No.6017 Shennan Avenue, Shenzhen City, the PRC, will be appointed as the executive Director upon completion of the Acquisition. Mr. Zhu is a co-founder of Dongfang and he is an expertise in LED control systems and has over fifteen years of working experience in electronics industry. Prior to the Latest Practicable Date, Mr. Zhu did not hold (i) any positions in the Company or other member of the Group; (ii) any current and past directorships in other listed public companies in the last three years. In addition, as at the Latest Practicable Date, Mr. Zhu has no relationship with any director or senior manager of the Group, and is not a director or employee of a company which has an interest or short 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.

G. INFORMATION ON THE JV COMPANY

The JV Company shall be a company to be incorporated under the laws of the PRC with limited liability.

The JV Company will carry out the operation and management of energy saving projects and LED lighting and the sale and marketing of LED lighting and other energy saving products. The total investment amount of the JV Company to be injected by TC (BVI) shall be approximately HK$85,400,000, while the registered capital of the JV Company shall be RMB98,039,216 upon injection of additional capital by Dongfang and TC (BVI) after formation of the JV Company (including the Injection and Subscription).

H. LISTING RULES IMPLICATIONS

As the applicable percentage ratios (as defined in the Listing Rules) in respect of the formation of the JV Company (including the Injection and Subscription), the Purchase and the Acquisition are likely to be greater than 25% but less than 100%, the formation of the JV Company (including the Injection and Subscription), the Purchase and the Acquisition will constitute a major transaction for the Company under Chapter 14 of the Listing Rules and consequently are subject to notification, publication and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

Upon establishment of the JV Company and injection of additional capital by Dongfang and TC (BVI) pursuant to the Agreements, Dongfang, TC (BVI) and Mr. Zhu will become the equity holders of the JV Company, and Dongfang will hold a 30% equity interest in the JV Company. As a result, Dongfang will become a connected person of the Company. As such, the Purchase shall constitute a connected transaction of the Company under Chapter 14A of the Listing Rules and is subject to the reporting, announcement and the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

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LETTER FROM THE BOARD

Immediately after the establishment of the JV Company and the capital injection by Dongfang and TC (BVI), Mr. Zhu will hold a 19% equity interest in the JV Company and as a result, Mr. Zhu will become a connected person of the Company. As such, the Acquisition of the aforementioned 19% equity interest in the JV Company from Mr. Zhu by the Company shall constitute a connected transaction of the Company under Chapter 14A of the Listing Rules. Accordingly, the Acquisition is subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Application will be made to the Stock Exchange for the listing of and permission to deal in the Consideration Shares.

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities.

I. EGM

The notice convening the EGM to be held at 2:00 p.m. on 10 May 2010 at 31/F, Aitken Vanson Centre, 61 Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong, at which ordinary resolutions will be proposed to approve by way of poll in relation to, among other thing, (i) the Agreements; (ii) the formation of the JV Company (including the Injection and Subscription); (iii) the Purchase, (at which Dongfang, being a proposed substantial shareholder of the JV Company, together with its associates, and all parties involved in or interested in the transactions as contemplated under the Agreements (including but not limited to the formation of the JV Company (including the Injection and Subscription), the Purchase and the Acquisition) are required to abstain from voting); (iv) the Acquisition (at which Mr. Zhu, being a proposed substantial shareholder of the JV Company, together with his associates, and all parties involved in or interested in the transactions as contemplated under the Agreements (including but not limited to the formation of the JV Company (including the Injection and Subscription), the Purchase and the Acquisition) are required to abstain from voting); (v) the transactions as contemplated under the Agreements; (vi) the overall mechanism of the Grant of Options and Buy-Back pursuant to the Agreements (at which Mr. Zhu, being a proposed substantial shareholder of the JV Company, together with his associates, and all parties involved in or interested in the transactions as contemplated under the Agreements (including but not limited to the formation of the JV Company (including the Injection and Subscription), the Purchase and the Acquisition) are required to abstain from voting); and (vii) the issuance and allotment of the Consideration Shares by the Company (at which Mr. Zhu, being a proposed substantial shareholder of the JV Company, together with his associates, and all parties involved in or interested in the transactions as contemplated under the Agreements (including but not limited to the formation of the JV Company (including the Injection and Subscription), the Purchase and the Acquisition) are required to abstain from voting), is set out on pages 152 to 155 of this circular. Shareholders (or their proxies) will vote by poll in the EGM.

Mr. Zhu and Dongfang, being proposed substantial shareholder of the JV Company, together with their associates, and all parties involved in or interested in the transactions as contemplated under the Agreements (including but not limited to the formation of the JV Company (including the Injection and Subscription), the Purchase and the Acquisition) are required to abstain from voting with respect to the resolutions for approving the Purchase, the Acquisition, the issuance and allotment of the Consideration Shares by the Company and the overall mechanism of the Grant of Options and Buy-Back pursuant to the Agreements.

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LETTER FROM THE BOARD

A proxy form for use by the Shareholders at the EGM is enclosed. Whether or not you are able to attend the extraordinary general meeting, you are requested to complete and return the accompanying proxy form in accordance with the instructions printed thereon and return the same to the branch share registrar of the Company in Hong Kong, Tricor Investor Services Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the extraordinary general meeting or any adjournment thereof (as the case may be). Such proxy form for use at the EGM is also published on the website of the Stock Exchange (www.hkex.com.hk). Completion and return of the proxy form shall not preclude you from attending and voting at the extraordinary general meeting or any adjourned thereof should you so desire.

J. RECOMMENDATIONS

Your attention is drawn to the letter from the Independent Board Committee as set out on page 32 of this circular. Independent Shareholders are urged to read carefully the opinion of Ample Capital and the advice of the Independent Board Committee before making the voting decision.

Having considered the reasons above, we consider that the terms of the Purchase, the Acquisition and the issuance and allotment of the Consideration Shares by the Company are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole so far as the Company and its Independent Shareholders are concerned, and recommend the Independent Shareholders and/or the Shareholders to vote in favour of the resolutions to be proposed at the EGM in respect of the Purchase, the Acquisition and the issuance and allotment of the Consideration Shares by the Company.

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LETTER FROM THE BOARD

In addition, the Directors (including the independent non-executive Directors) consider that the terms of the Agreements are fair and reasonable and the formation of the JV Company (including the Injection and Subscription), the transactions as contemplated under the Agreements and the overall mechanism of the Grant of Option pursuant to the Agreements are in the interests of the Company and the shareholders of the Company as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of the resolution to be proposed at the EGM in respect of the terms of the Agreement, the formation of the JV Company (including the Injection and Subscription), the transactions as contemplated under the Agreements and the overall mechanism of the Grant of Option pursuant to the Agreements.

Yours faithfully, For and on behalf of the Board TC Interconnect Holdings Limited Yeung Hoi Shan Chairman

– 31 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

TC INTERCONNECT HOLDINGS LIMITED

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 515)

Website: www.tatchun.com

22 April 2010

To the Independent Shareholders

Dear Sir/Madam,

CONNECTED TRANSACTIONS

We refer to the circular of the Company dated 22 April 2010 (the “ Circular ”) of which this letter forms a part. Unless the context requires otherwise, capitalized terms used herein shall have the same meanings as given to them in the section headed “Definitions” of the Circular.

We have been appointed by the Board as the Independent Board Committee to advise the Independent Shareholders as to whether or not the terms of the Purchase, the Acquisition and the issuance and allotment of the Consideration Shares by the Company are fair and reasonable and in the interests of the Company and its Shareholders as a whole so far as the Company and the Independent Shareholders are concerned.

Having considered the principal reasons and factors considered by, and the advice of, Ample Capital as set out in its letter of advice, we are of the opinion that the terms of the Purchase, the Acquisition and the issuance and allotment of the Consideration Shares by the Company are on normal commercial terms, fair and reasonable and in the interests of the Company and its Shareholders as a whole so far as the Company and the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolutions to be proposed at the EGM to approve, inter alia, the Purchase, the Acquisition and the issuance and allotment of the Consideration Shares by the Company.

Independent Board Committee Cheung Sui Wing, Darius Ho Man Kay Wong Siu Fai, Albert Independent non-executive Directors

* For identification purpose only

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LETTER FROM AMPLE CAPITAL

The following is the full text of a letter of advice from Ample Capital to the Independent Board Committee and the Independent Shareholders in relation to the terms of certain aspects of the formation of the JV Company, the Purchase and the Acquisition which has been prepared for the purpose of inclusion in this circular.

==> picture [136 x 52] intentionally omitted <==

Ample Capital Limited Unit A, 14th Floor Two Chinachem Plaza 135 Des Voeux Road Central Hong Kong

22 April 2010

To the Independent Board Committee and the Independent Shareholders of TC Interconnect Holdings Limited

Dear Sirs,

MAJOR AND CONNECTED TRANSACTION FORMATION OF JV COMPANY, THE ACQUISITION OF INTEREST IN JV COMPANY AND THE PURCHASE OF ASSETS BY THE JV COMPANY FROM ITS EQUITY HOLDER

INTRODUCTION

We refer to our engagement by the Company to advise the Independent Board Committee and the Independent Shareholders in respect of the formation of the JV Company, the Purchase and the Acquisition, the particulars of which have been set out in a circular to the Shareholders dated 22 April 2010 (the “ Circular ”) and in which this letter is reproduced. Unless the context requires otherwise, terms used in this letter shall have the same meanings as given to them in the Circular.

Ample Capital has been appointed as the independent financial adviser to the Independent Board Committee and the Independent Shareholders to give our recommendation as to whether the formation of the JV Company, the Acquisition and the Purchase are fair and reasonable so far as the Independent Shareholders are concerned. Details of the reasons for the formation of the JV Company, the proposed Acquisition and the Purchase are set out in the section headed “Letter from the Board” in the Circular.

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LETTER FROM AMPLE CAPITAL

On 18 January 2010, the Company entered into the Investment Co-operation Agreement and the 1[st] Supplemental Agreement with Dongfang, Mr. Zhu and TC (BVI), pursuant to which, (i) subject to the fulfillment of the Conditions Precedent for JV Formation, Dongfang, Mr. Zhu and TC (BVI) agreed to jointly establish the JV Company (which is initially to be held as to 30% by Dongfang, 19% by Mr. Zhu and 51% by TC (BVI)) to carry out the operation and management of energy saving projects and LED lighting and the sale and marketing of LED lighting and other energy saving products; and (ii) subject to the fulfillment of the Conditions Precedent for Acquisition, the Company agreed to acquire from Mr. Zhu the 19% equity interest in the JV Company held by Mr. Zhu at the consideration of HK$28,400,000, which shall be satisfied partly by cash (as to HK$10,000,000) and partly by way of issuance and allotment of the Consideration Shares (as to HK$18,400,000).

On 21 April 2010, the Company entered into the 2[nd] Supplemental Agreement with Dongfang, Mr. Zhu and TC (BVI) to amend/clarify certain terms under the Investment Co-operation Agreement and the 1[st] Supplemental Agreement. The 2[nd] Supplemental Agreement clarifies the steps involved in the formation of the JV Company, which include, firstly, that Dongfang and Mr. Zhu would jointly set up the JV Company and then TC (BVI) and Dongfang would inject further capital into the JV Company such that upon completion of the capital injection, TC (BVI), Dongfang and Mr. Zhu would respectively be interested in 51%, 30% and 19% equity interests in the JV Company. The 2[nd] Supplemental Agreement also provides that at the same time of the said capital injection and subject to the fulfillment of the Conditions Precedent for Purchase on or before 20 May 2010 (or such other date as Dongfang, the JV Company and the Company may agree), the JV Company would complete the Purchase.

As the applicable percentage ratios (as defined in the Listing Rules) in respect of the formation of the JV Company (including the Injection and Subscription), and the Acquisition and the Purchase are likely to be greater than 25% but less than 100%, the formation of the JV Company (including the Injection and Subscription), and the Acquisition and the Purchase will constitute a major transaction for the Company under Chapter 14 of the Listing Rules. Immediately after the establishment of the JV Company and the capital injection by Dongfang and TC (BVI), Mr. Zhu will hold the 19% equity interest in the JV Company, and as a result, Mr. Zhu will become a connected person of the Company. As such, the Acquisition of the aforementioned 19% equity interest in the JV Company from Mr. Zhu by the Company shall constitute a connected transaction of the Company under Chapter 14A of the Listing Rules.

Mr. Zhu, being a proposed substantial shareholder of the JV Company together with his associates, and all parties involved in or interested in the transactions as contemplated under the Agreements (including but not limited to the formation of the JV Company (including the Injection and Subscription), and the Acquisition and the Purchase) are required to abstain from voting with respect to the resolutions for approving the formation of the JV Company, the Acquisition and the issuance and allotment of the Consideration Shares by the Company and the Purchase.

In formulating our opinion, we have relied on the accuracy of the information and representations contained in this circular and the information and representations provided to us by the Directors and management of the Group and have assumed that all information and

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LETTER FROM AMPLE CAPITAL

representations made by the Group and the Directors were true, accurate and complete at the time they were made and continue to be so as at the date of the Circular. We consider that we have obtained from the Company all of the necessary information on which to form a reasonable basis for our opinion. We have also assumed that all statements of belief, opinion and intention made by the Directors in this circular were reasonably made after due enquiry. We have no reason to suspect that any material facts have been omitted or withheld from the information contained or opinions expressed in this circular nor to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors. We have not, however, conducted an independent in-depth investigation into the affairs of the Group nor have we carried out any independent verification of the information supplied.

PRINCIPAL FACTORS CONSIDERED

In arriving at our opinion in relation to the formation of the JV Company, the Acquisition and the Purchase, we have taken into consideration the following factors:

1. Background information

The Company is principally engaged in manufacturing and trading of a broad range of PCBs including single sided PCBs, double-sided PCBs and multi-sided PCBs of up to 12 layers. Its products are widely applied to consumer electronics, computer and computer peripherals, communication equipments and automotive electronics.

Set out below is selected unaudited key financial information as extracted from the Group’s interim report for the six months ended 30 June 2009 (the “ Interim Report ”):

	Six months ended	Six months ended	Six months ended
	30 June
	2009		2008
	HK$’000		HK$’000
	(unaudited)		(unaudited)

Turnover	331,460		397,536
Net profit attributable to Shareholders	9,757		13,534
		As at
	30 June 2009		31 December 2008
	HK$’000		HK$’000
	(unaudited)		(audited)

Total assets	896,531		925,576
Total liabilities	552,472		589,859
Net assets	344,059		335,717

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LETTER FROM AMPLE CAPITAL

We note that the Company recorded a consolidated turnover of approximately HK$331,460,000 for the six months ended 30 June 2009, representing an approximately 16.6% decrease when compared with the consolidated turnover of approximately HK$397,536,000 recorded during the six months ended 30 June 2008. The Company recorded the net profit attributable to Shareholders of approximately HK$9,757,000, representing a decrease of approximately 27.9% compared with last corresponding period. As at 30 June 2009, the Company had consolidated total assets, total liabilities and net assets of approximately HK$896,531,000, HK$552,472,000 and HK$344,059,000 respectively.

2. Information on Dongfang, the JV Company and Mr. Zhu

Dongfang, a company with limited liability established in the PRC in 2003, operates in the complete value chain in LED lighting systems, including manufacturing, packaging and installation of LED lighting systems. Dongfang’s operation is mainly overseen by Mr. Zhu. The JV Company shall be a company to be incorporated under the laws of the PRC with limited liability. The JV Company will carry out the operation and management of energy saving projects and LED lighting and the sale and marketing of LED lighting and other energy saving products. The total investment amount of the JV Company to be injected by TC (BVI) shall be approximately HK$85,400,000, while the registered capital of the JV Company shall be RMB98,039,216 upon injection of additional capital by Dongfang and TC (BVI) after formation of the JV Company (including the Injection and Subscription).

3. Reasons for and benefits of the transactions

As stated in the Letter from the Board, the Directors believe that there is considerable business potential for energy saving products and LED lighting business in the PRC and it is the intention of the Company to explore suitable business and new investment opportunities for the Group by forming a joint venture company with appropriate partners. The Directors believe that the formation of the JV Company (including the Injection and Subscription), the Acquisition and the Purchase will further diversify the product range of the Group, improve its products’ structure and enhance its anti-risk ability and profitability. Besides, as stated in the Interim Report, the Board takes an open view to explore high growth and potential projects in order to broaden the income stream and increase shareholders’ value.

Overview of the LED light market

According to the LED light market research conducted by LEDinside announced on 25 November 2009 during the 2009 LED forum held in Taiwan, the global demand for LED lighting will continue to grow, especially after a wide variety of product technologies have been developed, the overall product cost has been lowered and the luminous efficacy enhanced, which gradually empowers LED lighting to step onto the general lighting stage. LEDs are becoming more widely used as the main light source. LEDinside is an independent third party of the Company. It offers extensive research information on LED and covers the technology development, market trend, and financial information of the global and regional LED industry. We also noted that aforementioned

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LETTER FROM AMPLE CAPITAL

research results have been widely quoted by various organizations and news agencies, including Taiwan News ( ), alibaba.com.cn ( ) and etc. Thus, we are of the view that LEDinside is reliable and representative in the LED industry.

==> picture [283 x 275] intentionally omitted <==

Source: http://www.ledinside.com

As illustrated in the chart, the market penetration rate of LED light source is expected to reach 3.7% in 2010 and the compound annual growth rate between 2009 and 2013 is estimated at 32%.

In light of the aforesaid positive future outlook of the LED Lighting business, we concur with the Directors’ view that the formation of the JV Company, the Purchase, and the Acquisition, which allows the Group to tap into the said business in the PRC is in the interests of the Company and the Shareholders as a whole.

4. Formation of the JV Company

As stated in the Letter from the Board, Dongfang and Mr. Zhu would jointly set up the JV Company with an initial registered capital of RMB26,627,451, of which Dongfang would inject RMB8,000,000 in cash into the JV Company to subscribe for 30% equity interest and Mr. Zhu would inject RMB18,627,451 into the JV Company by way of transfer to the JV Company of the ownership of all the LED-related intellectual properties held by him to subscribe for 70% equity interest in the JV Company.

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LETTER FROM AMPLE CAPITAL

As advised by Deheng Law Firm Shenzhen Office ( ), the PRC legal adviser of the Company, under PRC law, the shareholders’ contribution in cash for a newly formed company should not be less than 30% of the company’s registered capital. To comply with the above requirement (the “ Legal Requirement 1 ”), Dongfang agreed to subscribe for 30% of the equity interest by injection of RMB8,000,000 in cash at the time when the JV Company was initially set up, and then recover such amount of cash injected (i.e. RMB8,000,000) through the Purchase. Meanwhile, according to under the PRC law (i.e. PRC Law on Sino-Foreign Equity Joint Ventures ( ) and the Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors ( )), it is not permissible for a Chinese natural person to be a shareholder of a Sino-Foreign joint venture company unless such Chinese natural person was originally a shareholder of a domestic company (the “ Legal Requirement 2 ”), and such domestic company subsequently changed to a Sino-Foreign joint venture company. To deal with this restriction, the parties to the Agreements decided to set up the JV Company (as a domestic enterprise), and to subsequently convert such JV Company into a Sino-Foreign joint venture company by inviting TC (BVI) to inject further capital into the JV Company. Accordingly, we are of the view that the formation of the JV Company is fair and reasonable.

Immediately upon formation of the JV Company by Dongfang and Mr. Zhu, TC (BVI) would subscribe for the equity interest in the JV Company by injection of RMB50,000,000 in cash into the JV Company, while Dongfang would subscribe for a further equity interest in the JV Company by injecting into the JV Company RMB21,411,765 through injection of part of the LED Street Light Related Fixed Assets and transferring to the JV Company of the ownership of part of the LED-related intellectual properties held by Dongfang such that TC (BVI), Dongfang and Mr. Zhu would respectively be interested in 51%, 30% and 19% equity interests in the JV Company. Immediately after the injection of additional capital by TC (BVI) and Dongfang above, the registered capital of the JV Company would be increased from RMB26,627,451 to RMB98,039,216 and the JV Company would be held as to 51% by TC (BVI), 30% by Dongfang and 19% by Mr. Zhu.

We note that the type and amount of the contribution to be injected by each of TC (BVI), Dongfang and Mr. Zhu were negotiated between the parties on an arm’s length basis with reference to the due diligence work performed by the Company and as a result of negotiations between all parties to the Agreements. The Directors also confirmed that both Dongfang and its ultimate beneficial owners and Mr. Zhu are third parties independent of and not connected with the Company and its connected persons (as defined in the Listing Rules) when the Agreements were signed. Based on above, we do not see any incentive of the Company to negotiate terms that are unfavorable to itself or the Group for the benefits of Dongfang and Mr. Zhu.

In addition, after the formation of the JV Company (including the Injection and the Subscription), but before the Acquisition and the Purchase, the JV Company will hold 51.0% attributable interest in the JV Company and thus JV Company will become an indirect non-wholly owned subsidiary of the Company. The board of directors of the JV Company shall comprise five directors of which three directors will be appointed by TC (BVI) while two

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LETTER FROM AMPLE CAPITAL

directors will be appointed by Dongfang. Thus, the Company will control the board and the management of the JV Company and the formation of the JV Company would have a positive impact on the future earnings of the Group as the Company will be able to fully consolidate the financial results of the JV Company into its consolidated financial statements. We consider that such arrangement is in the interest of the Company and the Shareholders. Accordingly, we are of the view that the formation of the JV Company and the capital injection made by Dongfang and TC (BVI) into the JV Company is fair and reasonable.

5. Terms of the Purchase

As stated in the Letter from the Board, to comply with the Legal Requirement 1, Dongfang agreed to subscribe for 30% of the equity interest by injection of RMB8,000,000 in cash at the time when the JV Company was initially set up, and then recover such amount of cash injected (i.e. RMB8,000,000) through the Purchase i.e. by way of sale to the JV Company for all the remaining LED Street Light Related Fixed Assets and LED-related intellectual properties held by Dongfang at RMB8,000,000 (equivalent to approximately HK$9,120,000) after the formation of the JV Company and the capital injection made by Dongfang and TC (BVI) into the JV Company. Therefore, the Purchase is an essential component of formation of the JV Company.

As learnt from the valuation report for LED Street Light Related Fixed Assets (the “ Fixed Assets Valuation Report ”) and the valuation report for LED-related intellectual properties (the “ IP Valuation Report ”) issued by DTZ Debenham Tie Leung Limited (the “ Valuer ”), an independent valuer to the Company, set out in Appendix IV to the Circular, the LED Street Light Related Fixed Asset and LED-related intellectual properties have a total market value of HK$10,296,936 as at 22 April 2010. The consideration for the Purchase (the “ Purchase Consideration ”) represents a discount of approximately 11.43% to the valuation on those LED Street Light Related Fixed Asset and LED-related intellectual properties. We understand from the Fixed Assets Valuation Report that the valuation on the LED Street Light Related Fixed Asset has been made by adopting a sales comparison approach with reference to sale prices of the comparable. We noted that the sales comparison approach was the primary basis upon which the assets were appraised. Due to the specialized nature of some of the machinery, second hand market data was not always available from which to draw value conclusions. In these instances, the cost approach was given some consideration. We consider that this methodology is consistent with market practice and the underlying basis for the valuation of the LED Street Light Related Fixed Asset is fair and reasonable.

On the other hand, we understand from the IP Valuation Report that the valuation on the LED-related intellectual properties has been made by adopting a discounted cash flow approach (the “ DCF Approach ”). We noted that the DCF approach attempts to determine the value of the LED-related intellectual properties by computing the present value of cash flows, attributable to that piece of intellectual properties, over the useful life of the asset. We consider that this methodology is consistent with market practice and the underlying basis for the valuation of the LED-related intellectual properties is fair and reasonable. We consider that the Purchase will not have material impact to the earnings, net asset value and the cashflow of the Group upon completion of the Purchase. Having considered the above valuation, we are of the view that the Purchase Consideration is fair and reasonable and in interests of the Company and the Shareholders as a whole.

– 39 –

LETTER FROM AMPLE CAPITAL

6. Terms of the Acquisition

The Consideration

As discuss with the management of the Company, the consideration for the Acquisition (the “ Acquisition Consideration ”) was determined after arm’s length negotiation between the parties to the Agreements with reference to, among other things, the valuation of the 19% equity interest in the JV Company conducted by the Valuer and the estimation of the future business and revenues to be generated by the JV Company in the first nine years of its operation.

According to the valuation report for the 19% equity interest in the JV Company prepared by the Valuer (the “ JV Company Valuation Report ”), the market value of the 19% equity interest in the JV Company (“ JV Company Valuation ”) as at 22 April 2010 was approximately HK$29,097,166. The Acquisition Consideration represented a discount of approximately 2.40% to the JV Company Valuation. Such discount to the JV Company Valuation was agreed between the Company and Mr. Zhu.

In order to assess the fairness and reasonableness of the Acquisition Consideration, we have reviewed the JV Company Valuation Report on the methodologies adopted and assumptions made in arriving at the JV Company Valuation. We understand the JV Company Valuation was based on the financial projection of the JV Company. As stated in the JV Company Valuation Report, the Valuer has considered three appraisal approaches commonly used in valuing the business of a company, namely market approach, cost approach and the income approach. In determining the value of the JV Company, the Valuer determined income approach to be the most appropriate method to assess the profitability of the JV Company and based on the DCF Approach to calculate the net present value of the JV Company. For assumption of the appropriate discount rate, the Valuer considered the cost of equity of the capital asset pricing model to be an appropriate model for the estimation of the cost of capital of the JV Company with reference to the LED industry.

We have discussed with the management of the Company and reviewed the basis and assumptions in arriving the JV Company Valuation, the rationale of adopting the income approach as well as the valuation methodology, we consider that valuation assumptions and methodology are fair and reasonable.

Further, we note that the original purchase cost of such 19% equity interest to Mr. Zhu shall be the contributions made to the JV Company pursuant to the Agreements (i.e. the contribution made by way of transfer to the JV Company of the ownership of all the LED-related intellectual properties held by Mr. Zhu) which assessed value is RMB25,715,000 (equivalent to approximately HK$29,315,100). The Acquisition Consideration represented a discount of approximately 3.12% to the original purchase cost of such 19% equity interest to Mr. Zhu.

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LETTER FROM AMPLE CAPITAL

After taking into account (i) the Acquisition Consideration is at discount to the JV Company Valuation and (ii) the Acquisition Consideration represented a discount of approximately 3.12% to the original purchase cost of such 19% equity interest to Mr. Zhu and (iii) the business prospect of the LED lighting market, we are of the view that the Acquisition Consideration is fair and reasonable so far as the Independent Shareholders are concerned and is in the interests of the Company and the Shareholders as a whole.

The Consideration Shares

(a) 85% of the average closing price per Share as quoted on the Stock Exchange for the last five consecutive trading days immediately before the Agreements are executed on 18 January 2010; or
(b) 85% of the closing price per Share on 18 January 2010. Consideration Shares will then be issued by the Company for the settlement of the Acquisition, and such consideration shall be settled on or before 30 April 2010 (or such later date as TC (BVI), Mr. Zhu and the Company may agree).

According to the above basis, the issue price for the Consideration Shares (the “ Issue Price ”) shall be HK$1.2155 per Share and 15,137,803 Consideration Shares, representing 5.22% of the total issued share capital of the Company as at the Latest Practicable Date will be issued for part settlement of the consideration for the Acquisition Consideration.

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LETTER FROM AMPLE CAPITAL

Historical trends of the Shares on the Stock Exchange

We set out below the historical closing price per Share of the Shares on the Stock Exchange during the 12-month period up to 18 January 2010, being the last full trading day before the release of the Announcement (the “ Review Period ”).

==> picture [287 x 177] intentionally omitted <==

Source: http://www.hkex.com.hk/

As illustrated above, the Shares closed on the Stock Exchange within a range from a low of HK$0.27 per share to a high of HK$1.67. The average closing price per Share during the year ended on the Last Trading Day was approximately HK$0.802 per Share. The Issue Price represents a premium of 51.6% over such average closing price.

Comparative analysis

In assessing the fairness of the Acquisition Consideration, we have identified and reviewed, on a best effort basis, the price-to-earnings (“ P/E ”) and the price-to-book ratio (“ P/B ”) of all the companies listed on the main board of the Stock Exchange which are principally engaged in manufacture and sale of PCBs as at the Last Trading Day (the “ Issue Price Comparables ”).

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LETTER FROM AMPLE CAPITAL

Name of company (stock code)	P/E	P/B
	times	times
Sinotronics Holdings Ltd. (1195)	N/A	0.82
Daisho Microline Holdings Ltd. (567)	N/A	0.70
Same Time Holdings Ltd. (451)	7.59	0.41
HannStar Board International Holdings Ltd.
(667)	7.36	1.30
Nam Hing Holdings Ltd. (986)	N/A	11.09
Topsearch International (Holdings) Ltd.
(2323)	N/A	0.35
Meadville Holdings Ltd. (3313)	14.69	2.13
Maximum:	14.69	11.09
Minimum:	7.36	0.35
Mean:	9.88	2.40
The Company (515)	10.48	0.87
Source: Stock Exchange

From the analysis set out above, we note that there are only three profitable Issue Price Comparables and the P/E of the Issue Price Comparables ranged from a low of about 7.36 times to a high of about 14.69 times with the average P/E being approximately 9.88 times. We note that P/E of the Issue Price of approximately 10.48 times (i) falls within the range of the Comparables and (ii) is above the average figure of the Issue Price Comparables. As for the P/B, the Issue Price Comparables ranged from a low of about 0.35 times to a high of about 11.09 times with the average P/B being approximately 2.4 times. We note that the P/B of the Issue Price of approximately 0.87 times (i) falls within the range of the Issue Price Comparables; (ii) is below the average figure of the Issue Price Comparables; and (iii) is higher than 4 of the 7 Issue Price Comparables.

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LETTER FROM AMPLE CAPITAL

Dilution on the shareholding of the existing Shareholders

We set out below the shareholding structures of the Company as at the Latest Practicable Date and immediately after the issuance and allotment of the Consideration Shares (assuming that there is no change in the issued share capital of the Company other than the issue of the Consideration Shares between the Latest Practicable Date and immediately after the issuance and allotment of the Consideration Shares.

			Immediately after
			the issuance and
	As at the date of		allotment of the
Substantial	the Latest		Consideration
shareholders	Practicable Date	%	Shares	%
Yeung Hoi Shan	179,000,000	61.72%	179,000,000	58.66%
Public	110,032,000	38.28%	111,032,000	36.38%
Mr. Zhu	–	–	15,137,803	4.96%

	290,032,000	100.00%	305,169,803	100.00%

As at the Latest Practicable Date, the public Shareholders (i.e. Shareholders other than Mr. Zhu and parties acting in concert with it) held an aggregate of 110,032,000 Shares, representing approximately 38.28% of the Company’s issued share capital. As demonstrated above, the shareholding of the public Shareholders would decrease to approximately 36.38% immediately after the issuance and allotment of the Consideration Shares, representing a dilution of approximately 4.96%. Having considered the factors discussed in section 3 of this letter, we are of the view that the dilution to shareholding is acceptable.

Having considered that (i) the Acquisition Consideration was arrived at after arm’s length negotiation between the Company and the Mr. Zhu and the basis in determining the Acquisition Consideration; (ii) the Acquisition Consideration is at a 2.40% discount to the JV Company Valuation; the P/E of the Issue Price is above the average figure of the Issue Price Comparables, and P/B of the Issue Price is higher than 4 of the 7 Issue Price Comparables. We consider the Acquisition Consideration to be fair and reasonable so far as the Company and the Independent Shareholders are concerned.

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LETTER FROM AMPLE CAPITAL

7. Possible financial effects of the Acquisition

Following completion of the Acquisition, the Company’s equity interests in JV Company will increase from 51% to 70%, and its financial results will continue to be consolidated into the group accounts of the Company.

Effect on earnings

In light of the possible business prospect of the JV Company attributable to the Group, the Directors expected that the Acquisition would have a positive impact on the future earnings of the Group as the Company will be able to fully consolidate the financial results of the JV Company into its consolidated financial statements.

Effect on net asset value

Set out in Appendix III to this circular is the unaudited pro forma consolidated financial information of the Group as larged by the Acquisition (the “ Enlarged Group ”), the consolidated net asset value of the Enlarged Group would be reduced by approximately 2.5% from approximately HK$406,903,000 to approximately HK$396,903,000. We consider that the net asset value of the Enlarged Group will not be materially affected immediately upon completion of the Acquisition.

Cash flow

With reference to the unaudited pro forma consolidated financial information as set out in Appendix III, the Group had bank balances, deposits and cash of approximately HK$30,906,000. The Group should have sufficient funds to settle the Acquisition Consideration in the amount of HK$10,000,000. As such, the Directors considered that the Acquisition would not tighten the cash flow of the Group.

CONCLUSION

Having considered the above principal factors and in particular:

the Acquisition is in line with the Group’s business development strategy;
the process of the formation of the JV Company is in compliance with the Legal Requirement 1 and Requirement 2;
the Purchase Consideration represents a discount of approximately 11.43% to the valuation on those LED Street Light Related Fixed Asset and LED-related intellectual properties;
the Acquisition Consideration of HK$28,400,000 represents (i) a discount of approximately 2.40% to the JV Company Valuation and (ii) a discount of approximately 3.12% to the original purchase cost of 19% equity interest to Mr. Zhu; and

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LETTER FROM AMPLE CAPITAL

there will not be material adverse financial effects on the Group immediately upon completion of the formation of the JV Company, the Purchase and the Acquisition.

we are of the opinion that the terms of the formation of the JV Company, the Purchase and the Acquisition are fair and reasonable and in the interests of the Company and the Shareholders as a whole. In addition, we consider that the formation of the JV Company, the Purchase and the Acquisition are on normal commercial terms and in the ordinary and usual course of business of the Group. Accordingly, we would recommend (1) the Independent Board Committee to advise the Independent Shareholders and (2) the Independent Shareholders, to vote in favor of the ordinary resolution to approve the formation of the JV Company, the Purchase and the Acquisition at the EGM.

Yours faithfully, For and on behalf of Ample Capital Limited H. W. Tang President

– 46 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. SUMMARY OF FINANCIAL INFORMATION

A summary of the published results and of the assets and liabilities of the Group for the six months ended 30 June 2009 and the three years ended 31 December 2008, as extracted from the interim report and annual reports of the Company for the respective periods, is set out below.

	For the six
	months
	ended
Results	30 June	For the year ended 31 December
	2009	2008	2007	2006
	HK$’000	HK$’000	HK$’000	HK$’000
	(unaudited)	(audited)	(audited)	(audited)
Revenue	331,460	838,870	740,968	613,156
Profit before tax	11,104	31,491	70,599	48,327
Income tax expense	(1,347)	(3,770)	(10,565)	(9,229)
Profit for the year	9,757	27,721	60,034	39,098
Dividends	–	12,000	14,000	–
Basic earnings per share	HK4.07 cents	HK$0.12	HK$0.25	HK$0.18
	As at
Assets and Liabilities	30 June	As at 31 December
	2009	2008	2007	2006
	HK$’000	HK$’000	HK$’000	HK$’000
	(unaudited)	(audited)	(audited)	(audited)
Total assets	896,531	925,576	921,151	692,799
Total liabilities	(552,472)	(589,859)	(612,671)	(450,943)
Shareholders’ funds	344,059	335,717	308,480	241,856

– 47 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. AUDITED FINANCIAL INFORMATION FOR THE YEAR ENDED 31 DECEMBER 2008

The following is the reproduction of the audited consolidated financial statements of the Group for the financial years ended 31 December 2007 and 2008, together with the relevant notes to the consolidated financial statements, contained on pages 27 to 77 of the annual report of the Company for the year ended 31 December 2008.

Consolidated Income Statement

For the year ended 31 December 2008

		2008	2007
	Notes	HK$’000	HK$’000
Turnover	6	838,870	740,968
Cost of sales		(729,980)	(596,157)
Gross profit		108,890	144,811
Other income	6	25,823	28,099
Other gains and losses	6	(1,480)	(485)
Selling and distribution expenses		(30,080)	(30,205)
Administrative expenses		(53,674)	(54,438)
Finance costs	7	(17,988)	(17,183)
Profit before tax		31,491	70,599
Income tax expense	8	(3,770)	(10,565)
Profit for the year	9	27,721	60,034


Dividends	12	12,000	14,000


Basic earnings per share	13	HK$0.12	HK$0.25

– 48 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Balance Sheet

At 31 December 2008

Notes Non-current assets Investment properties 14 Property, plant and equipment 15 Prepaid lease payments – non-current portion 16 Deposit paid for acquisition of property, plant and equipment Current assets Inventories 17 Prepaid lease payments – current portion 16 Trade and other receivables 18 Bills receivable 18 Amount due from a related company 19 Tax recoverable Investment designated as at fair value through profit or loss 20 Derivative financial instruments 21 Restricted bank deposits 22 Bank balances, deposits and cash 22 Current liabilities Trade and other payables 23 Bills payable 23 Taxation payable Bank and other borrowings – due within one year 24 Obligations under finance leases – due within one year 25 Net current (liabilities) assets Total assets less current liabilities	2008 HK$’000 3,100 460,456 23,150 4,704 491,410 90,453 615 247,289 4,768 – 2,190 9,349 1,301 18,373 59,828 434,166 230,261 39,995 16,718 177,962 43,492 508,428 (74,262) 417,148	2007 HK$’000 3,500 454,898 30,822 6,984 496,204 88,933 781 244,873 6,017 13,680 – – – – 70,663 424,947 198,610 24,333 18,716 143,899 39,008 424,566 381 496,585

– 49 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

		2008	2007
	Notes	HK$’000	HK$’000
Non-current liabilities
Bank and other borrowings
– due after one year	24	8,000	119,161
Obligations under finance leases
– due after one year	25	41,316	59,663
Amount due to a shareholder	26	20,627	–
Deferred tax liabilities	27	11,488	9,281

		81,431	188,105

Net assets		335,717	308,480


Capital and reserves
Share capital	28	24,000	24,000
Reserves		311,717	284,480

Total equity		335,717	308,480

The consolidated financial statements on pages 51 to 89 were approved and authorised for issue by the Board of Directors on 22 April 2009 and are signed on its behalf by:

Yeung Hoi Shan Director

Pak Shek Kuen

Director

– 50 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Changes in Equity

For the year ended 31 December 2008

At 1 January 2007 Surplus on revaluation of properties Deferred tax liabilities arising from revaluation of properties Net income recognised directly in equity Profit for the year Total recognised income for the year Dividends paid Recognition of equity-settled share based payment Transfer Subtotal At 31 December 2007 and 1 January 2008 Surplus on revaluation of properties Deferred tax liabilities arising from revaluation of properties Net income recognised directly in equity Profit for the year Total recognised income for the year	Share capital HK$’000 (Note 28) 24,000 – – – – – – – – – 24,000 – – – – –	Share premium R HK$’000 30,609 – – – – – – – – – 30,609 – – – – –	evaluation reserve HK$’000 – 23,402 (6,029) 17,373 – 17,373 – – – – 17,373 8,385 (2,097) 6,288 – 6,288	The People’s Republic of China (the “PRC”) statutory reserve HK$’000 (Note 29) 2,290 – – – – – – – 1,214 1,214 3,504 – – – – –	Special reserve HK$’000 (Note 29) 1,156 – – – – – – – – – 1,156 – – – – –	Share options reserve co HK$’000 – – – – – – – 3,217 – 3,217 3,217 – – – – –	Capital ntribution reserve HK$’000 (Note 29) – – – – – – – – – – – – – – – –	Exchange reserve Ac HK$’000 79 – – – – – – – – – 79 – – – – –	cumulated profits HK$’000 183,722 – – – 60,034 60,034 (14,000) – (1,214) (15,214) 228,542 – – – 27,721 27,721	Total equity HK$’000 241,856 23,402 (6,029) 17,373 60,034 77,407 (14,000) 3,217 – (10,783) 308,480 8,385 (2,097) 6,288 27,721 34,009

– 51 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

					The
					People’s
					Republic
					of China
					(the
					“PRC”)		Share		Capital
	Share	Share	Revaluation		statutory	Special	options	contribution		Exchange	Accumulated		Total
	capital	premium		reserve	reserve	reserve	reserve		reserve	reserve		profits	equity
	HK$’000	HK$’000		HK$’000	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000		HK$’000	HK$’000
	(Note 28)				(Note 29)	(Note 29)			(Note 29)
Dividends paid	–	–		–	–	–	–		–	–		(12,000)	(12,000)
Deemed capital
contribution from
a shareholder	–	–		–	–	–	–		1,830	–		–	1,830
Recognition of
equity-settled
share based
payment	–	–		–	–	–	3,398		–	–		–	3,398
Release upon lapse
of vested share
options	–	–		–	–	–	(467)		–	–		467	–
Transfer	–	–		–	42	–	–		–	–		(42)	–

Subtotal	–	–		–	42	–	2,931		1,830	–		(11,575)	(6,772)

At 31 December
2008	24,000	30,609		23,661	3,546	1,156	6,148		1,830	79		244,688	335,717

– 52 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Cash Flow Statement

For the year ended 31 December 2008

	2008	2007
	HK$’000	HK$’000
OPERATING ACTIVITIES
Profit before tax	31,491	70,599
Adjustments for:
Share options expense	3,398	3,217
Impairment loss recognised in respect of trade
receivables	10,793	2,789
Allowance for inventory obsolescence	950	–
Release of prepaid lease payments	740	1,031
Depreciation of property, plant and equipment	48,299	30,031
Finance costs	17,988	17,183
Gain on disposal of property interests	(13,428)	(6,224)
Gain on disposal of other property, plant and
equipment	(111)	–
Fair value changes on derivative financial
instruments	(2,504)	–
Fair value changes on investment properties	400	(500)
Interest income	(186)	(368)
PRC tax refund on capital investment in subsidiaries	–	(1,620)
Operating cash flow before movements in working
capital	97,830	116,138
Increase in inventories	(2,470)	(21,013)
(Increase) decrease in trade and other receivables	(13,209)	17,074
Decrease (increase) in bills receivable	1,249	(3,566)
Increase in derivative financial instruments	1,203	–
Increase in trade and other payables	30,871	398
Increase in bills payable	15,662	5,831
Cash generated from operations	131,136	114,862
Hong Kong Profits Tax (paid) refund	(6,510)	1,714
PRC Enterprise Income Tax paid	(1,338)	(6,560)
NET CASH FROM OPERATING ACTIVITIES	123,288	110,016

INVESTING ACTIVITIES
Purchase of property, plant and equipment	(26,470)	(106,748)
Increase in restricted bank deposits	(18,373)	–
Purchase of investment designated as at fair value
through profit or loss	(9,349)	–
Proceeds from disposal of property interests	22,159	720
Interest received	186	368
Proceeds from disposal of other property, plant and
equipment	111	–
Decrease in pledged bank deposits	–	8,767
PRC tax refund on capital investment in subsidiaries	–	1,620

– 53 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

	2008	2007
	HK$’000	HK$’000
NET CASH USED IN INVESTING ACTIVITIES	(31,736)	(95,273)
FINANCING ACTIVITIES
Repayment of bank and other borrowings	(672,745)	(399,012)
Repayment of obligations under finance leases	(50,601)	(30,814)
Interest paid	(17,988)	(17,183)
Dividends paid	(12,000)	(14,000)
Bank and other borrowings raised	595,647	481,071
Advance from a shareholder	22,457	–
Inception of obligations under finance leases	19,163	–
Repayment from a related company	13,680	–
NET CASH (USED IN) FROM FINANCING
ACTIVITIES	(102,387)	20,062
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS	(10,835)	34,805
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR	70,663	35,858

CASH AND CASH EQUIVALENTS AT END OF
YEAR, represented by bank balances, deposits
and cash	59,828	70,663

– 54 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to the Consolidated Financial Statements

For the year ended 31 December 2008

1. GENERAL

The Company was incorporated and registered as an exempted company with limited liability in the Cayman Islands on 12 November 2004. Its shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). The addresses of the registered office and principal place of business of the Company are disclosed in the introduction to the annual report.

The consolidated financial statements are presented in Hong Kong dollars (“HK$”), which is also the functional currency of the Company.

The Company acts as an investment holding company. The activities of its principal subsidiaries are set out in note 40.

2. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

In preparing the consolidated financial statements, the directors of the Company have given careful consideration to the future liquidity of the Group in light of the fact that its current liabilities exceeded its current assets by HK$74,262,000 as at 31 December 2008. As at 31 December 2008, certain loan covenants were breached by the Group and the non-current portion of these loans amounting to HK$65,000,000 was reclassified as a current liability. The Group has agreed with the lenders of these bank loans to early settle the outstanding principal balances of these loans of HK$85,000,000 by utilising the available funds and facilities of the Group. The outstanding balances were fully settled on 14 April 2009. As at 31 December 2008, the Group has unutilised banking facilities of approximately HK$161,767,000, the majority of which are to due in the coming year. The directors believe that these banking facilities will be able to be renewed in the coming year when they expire.

The directors are of the opinion that, taking into account of the internally generated funds of the Group and the present available banking facilities, the Group has sufficient working capital for its present requirements for the next twelve months from the date of this report. Accordingly, the consolidated financial statements have been prepared on a going concern basis.

3. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”)

In the current year, the Group has applied the following amendments and interpretations (“new HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) which are or have become effective.

Hong Kong Accounting Standard	Reclassification of Financial Assets
(“HKAS”) 39 & HKFRS 7 (Amendments)
Hong Kong (International Financial	HKFRS 2: Group and Treasury Share Transactions
Reporting Interpretations Committee)
– Interpretations (“HK(IFRIC) – Int”) 11
HK(IFRIC) – Int 12	Service Concession Arrangements
HK(IFRIC) – Int 14	HKAS 19 – The Limit on a Defined Benefit Asset,
	Minimum Funding Requirements and their Interaction

The adoption of the new HKFRSs had no material effect on how the results and financial position for the current or prior financial years have been prepared and presented. Accordingly, no prior year adjustment has been required.

– 55 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group has not early applied the following new and revised standards, amendments or interpretations that have been issued but are not yet effective.

HKFRSs (Amendments) Improvements to HKFRSs[1] HKAS 1 (Revised) Presentation of Financial Statements[2] HKAS 23 (Revised) Borrowing Costs[2] HKAS 27 (Revised) Consolidated and Separate Financial Statements[3] HKAS 32 & 1 (Amendments) Puttable Financial Instruments and Obligations Arising on Liquidation[2] HKAS 39 (Amendment) Eligible Hedged Items[3] HKFRS 1 & HKAS 27 (Amendments) Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate[2] HKFRS 2 (Amendment) Vesting Conditions and Cancellations[2] HKFRS 3 (Revised) Business Combinations[3] HKFRS 7 (Amendment) Improvement Disclosures about Financial Instruments[2] HKFRS 8 Operating Segments[2] HK(IFRIC) – Int 9 & HKAS 39 Embedded Derivatives[4] (Amendments) HK(IFRIC) – Int 13 Customer Loyalty Programmes[5] HK(IFRIC) – Int 15 Agreements for the Construction of Real Estate[2] HK(IFRIC) – Int 16 Hedges of a Net Investment in a Foreign Operation[6] HK(IFRIC) – Int 17 Distribution of Non-cash Assets to Owners[3] HK(IFRIC) – Int 18 Transfers of Assets from Customers[7]

1 Effective for annual periods beginning on or after 1 January 2009 except for the amendments to HKFRS 5, effective for annual periods beginning on or after 1 July 2009
2 Effective for annual periods beginning on or after 1 January 2009
3 Effective for annual periods beginning on or after 1 July 2009
4 Effective for annual periods ending on or after 30 June 2009
5 Effective for annual periods beginning on or after 1 July 2008
6 Effective for annual periods beginning on or after 1 October 2008
7 Effective for transfers on or after 1 July 2009

The application of HKFRS 3 (Revised) may affect the Group’s accounting for business combination for which the acquisition date is on or after1 January 2010. HKAS 27 (Revised) will affect the accounting treatment for changes in the Group’s ownership interest in a subsidiary. The directors of the Company anticipate that the application of the other new and revised standards, amendments or interpretations will have no material impact on the results and the financial position of the Group.

4. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared on the historical cost basis except for investment properties, buildings and certain financial instruments, which are measured at fair values or revalued amounts, as explained in the accounting policies set out below.

The consolidated financial statements have been prepared in accordance with HKFRSs issued by the HKICPA. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange and by the Hong Kong Companies Ordinance.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

A uniform set of accounting policies is adopted by those entities.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Business combination under common control

The consolidated financial statements incorporate the financial statement items of the combining entities or businesses in which the common control combination occurs as if they had been consolidated from the date when the combining entities or businesses first came under the control of the controlling party.

– 56 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The net assets of the combining entities or businesses are consolidated using the existing book values from the controlling parties’ perspective. No amount is recognised in respect of goodwill or excess of acquirer’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination, to the extent of the continuation of the controlling party’s interest.

The consolidated income statement includes the results of each of the combining entities or businesses from the earliest date presented or since the date when the combining entities or businesses first came under the common control, where this is a shorter period, regardless of the date of the common control combination.

The comparative amounts in the consolidated financial statements are presented as if the entities or businesses had been consolidated at the previous balance sheet date or when they first came under common control, whichever is shorter.

Revenue recognition

Revenue is measured at the fair values of the consideration received or receivable and represents amounts receivable for goods sold in the normal course of business, net of discounts, value-added tax and other sales related taxes.

Revenue from sales of goods is recognised when the goods are delivered and title has been passed.

Interest income from a financial asset is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to the asset’s net carrying amount.

Investment properties

Investment properties are properties held to earn rentals and for capital appropriation.

On initial recognition, investment properties are measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are measured at their fair values using the fair value model. Gains or losses arising from changes in the fair value of investment properties are included in profit or loss for the period in which they arise.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use or no future economic benefits are expected from its disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated income statement in the year in which the item is derecognised.

Property, plant and equipment

Property, plant and equipment, excluding buildings and construction in progress, are stated at cost less subsequent accumulated depreciation and accumulated impairment losses.

Buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the consolidated balance sheet at their revalued amounts, being the fair value at the date of revaluation less any subsequent accumulated depreciation and any subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date.

Any revaluation increase arising on revaluation of buildings is credited to the revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised as an expense, in which case the increase is credited to the consolidated income statement to the extent of the decrease previously charged. A decrease in net carrying amount arising on revaluation of an asset is dealt with as an expense to the extent that it exceeds the balance, if any, on the revaluation reserve relating to a previous revaluation of that asset. On the subsequent sale or retirement of a revalued asset, the attributable revaluation surplus is transferred to accumulated profits.

Depreciation is provided to write off the cost or revaluated amount of items of property, plant and equipment other than construction in progress over their estimated useful lives and after taking into account of their estimated residual value, using the straight line method.

– 57 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Construction in progress includes property, plant and equipment in the course of construction for production or for its own use purposes. Construction in progress is carried at cost less any recognised impairment loss. Construction in progress is classified to the appropriate category of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

Assets held under finance leases are depreciated over their estimated useful lives on the same basis as owned assets.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the consolidated income statement in the year in which the item is derecognised.

Prepaid lease payments

The up-front payments to acquire leasehold land interests are accounted for as operating leases and released over the lease term on a straight line basis, except for those that are classified and accounted for as investment properties under the fair value model.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the first-in, first-out method.

Impairment losses on non-financial assets

At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount under another standard, in which case the impairment loss is treated as a revaluation decrease under that standard.

Where an impairment loss subsequently reverses, the carrying amount of the asset 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 had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount under another standard, in which case the reversal of the impairment loss is treated as a revaluation increase under that standard.

Financial instruments

Financial assets and financial liabilities are recognised on the balance sheet when a group entity becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

The Group’s financial assets are classified into fair value through profit or loss (“FVTPL”) and loans and receivables. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

– 58 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period.

Interest income is recognised on an effective interest basis for debt instruments.

Financial assets at fair value through profit or loss

Financial assets at FVTPL of the Group include investment designated as FVTPL on initial recognition.

At each balance sheet date subsequent to initial recognition, financial assets at FVTPL are measured at fair value, with changes in fair value recognised directly in profit or loss in the period in which they arise.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. At each balance sheet date subsequent to initial recognition, loans and receivables (including trade and other receivables, bills receivable, amount due from a related company, restricted bank deposits and bank balances, deposits and cash) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment loss on financial assets below).

Impairment of loans and receivables

Loans and receivables are assessed for indicators of impairment at each balance sheet date. Loans and receivables are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition, the estimated future cash flows have been affected.

The objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty;
default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

Trade receivables, that are assessed not to be impaired individually, are subsequently assessed for impairment as a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 30 days to 150 days, observable changes in national or local economic conditions that correlate with default on receivables.

An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the loans and receivables’ carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate.

The carrying amount of the loans and receivables is reduced by the impairment loss directly with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

If, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment losses was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the loans and receivables at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

– 59 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Financial liabilities and equity

Financial liabilities and equity instruments issued by a group entity are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities. The Group’s financial liabilities are generally classified into financial liabilities at FVTPL and other financial liabilities.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

Interest expense is recognised on an effective interest basis.

Financial liabilities at fair value through profit or loss

Financial liabilities at FVTPL of the Group include derivatives that are not designated and effective as a hedging instrument.

At each balance sheet date subsequent to initial recognition, financial liabilities at FVTPL are measured at fair value, with changes in fair value recognised directly in profit or loss in the period in which they arise.

Other financial liabilities

Other financial liabilities including trade and other payables, bills payable, amount due to a shareholder, bank and other borrowings and obligations under finance leases are subsequently measured at amortised cost, using the effective interest method.

Equity instruments

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

costs.

Derivative financial instruments

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. The resulting gain or loss is recognised in profit or loss immediately.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Group has transferred substantially all the risks and rewards of ownership of the financial assets. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised directly in equity 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 and payable is recognised in profit or loss.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

– 60 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group as lessor

Rental income from operating leases is recognised in the consolidated income statement on a straight line basis over the term of the relevant lease.

The Group as lessee

Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit or loss.

Rentals payable under operating leases are charged to profit or loss on a straight line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are recognised as a reduction of rental expense over the lease term on a straight line basis.

Share-based payment transactions

Equity-settled share-based payment transactions

The fair value of services received determined by reference to the fair value of share options granted at the grant date is expensed on a straight line basis over the vesting period, with a corresponding increase in equity (share options reserve).

At each balance sheet date, the Group revises its estimates of the number of options that are expected to ultimately vest. The impact of the revision of the estimates during the vesting period, if any, is recognised in profit or loss, with a corresponding adjustment to share options reserve.

At the time when the share options are exercised, the amount previously recognised in share options reserve will be transferred to share premium. When the share options are forfeited after the vesting date or are still not exercised at the expiry date, the amount previously recognised in share options reserve will be transferred to accumulated profits.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes 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 balance sheet date.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax base used in the computation of taxable profit, and is accounted for using the balance sheet liability method. 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 can be utilised.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, 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 each balance sheet date 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. Deferred tax is charged or credited in profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

– 61 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in respective functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are re-translated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are re-translated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not re-translated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profit or loss in the period in which they arise. Exchange differences arising on the re-translation of non-monetary items carried at fair value are included in profit or loss for the period except for exchange differences arising on the re-translation of non-monetary items in respect of which gains and losses are recognised directly in equity, in which cases, the exchange differences are also recognised directly in equity.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, are capitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases when 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.

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

Retirement benefits costs

Payments to the Mandatory Provident Fund Scheme and the state-managed retirement benefit schemes are charged as expenses when employees have rendered service entitling them to the contributions.

5. CRITICAL ACCOUNTING JUDGMENT AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are described in note 4, the directors of the Company are required to make judgments estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The following is the critical judgment that the directors have made in the process of applying the entity’s accounting policies and that have the most significant effect on the amounts recognised in consolidated financial statements.

Estimate impairment of trade receivables

When there is objective evidence of impairment loss, the Group takes into consideration the estimation of future cash flows. The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). Where the actual future cash flows are less than expected, a material impairment loss may arise. As at 31 December 2008, the carrying amount of trade receivables is HK$219,392,000 (2007: HK$231,960,000). Details of movements of allowance for trade receivables are disclosed in note 18.

– 62 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6. REVENUE/OTHER INCOME/OTHER GAINS AND LOSSES

Revenue represents the gross amounts received and receivable for goods sold, net of discounts, value-added tax and other sales related taxes, by the Group to outside customers during the year.

Analysis of the Group’s revenue is as follow:

	2008	2007
	HK$’000	HK$’000
Sales of goods	838,870	740,968


Other income
– Bank interest income	186	368
– Rental income generated from investment properties	568	540
– Sales of scrap materials	23,433	24,431
– PRC tax refund on capital investment in subsidiaries	–	1,620
– Others	1,636	1,140


	25,823	28,099


Other gains and losses
– Impairment loss recognised on trade receivables	(10,793)	(2,789)
– Net foreign exchange loss	(6,330)	(4,420)
– Fair value changes on investment properties	(400)	500
– Fair value changes of derivative financial instruments	2,504	–
– Gain on disposal of property interest (note)	13,428	6,224
– Gain on disposal of other property, plant and equipment	111	–


	(1,480)	(485)

Note: During the year ended 31 December 2008, the property interest represented a land use right. During the year ended 31 December 2007, the property interest represented a property in Hong Kong, in which the building element was recognised as property, plant and equipment while the land element was recognised as prepaid lease payments.

7. FINANCE COSTS

	2008	2007
	HK$’000	HK$’000
Interest on:
– bank and other borrowings wholly repayable within
five years	13,116	13,234
– obligations under finance leases	4,872	3,949


	17,988	17,183

– 63 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

8. INCOME TAX EXPENSE

	2008	2007
	HK$’000	HK$’000
The charge comprises:
Hong Kong Profits Tax
Current year	–	2,098
Underprovision	–	57
	–	2,155

PRC Enterprises Income Tax (“EIT”)
Current year	5,460	7,470
Overprovision	(1,800)	–
	3,660	7,470

	3,660	9,625
Deferred tax (note 27)
Current year	296	940
Attributable to a change in tax rate	(186)	–
	110	940

	3,770	10,565

On 26 June 2008, the Hong Kong Legislative Council passed the Revenue Bill 2008 which reduced corporate profits tax rate from 17.5% to 16.5% effective from the year of assessment 2008/2009. Therefore, Hong Kong Profits Tax is calculated at 16.5% (2007: 17.5%) of the estimated assessable profit for the year.

During the year ended 31 December 2008, no provision for Hong Kong Profits Tax has been made in the consolidated financial statements as the Group has no assessable profit for the year.

On 16 March 2007, the PRC promulgated the Law of the PRC on Enterprise Income Tax (the “New Law”) by Order No. 63 of the President of the PRC. On 6 December 2007, the State Council of the PRC issued Implementation Regulation of the New Law. Under the New Law and Implementation Regulation, the Enterprise Income Tax rate of the Group’s subsidiaries in the PRC was reduced from 27% to 25% from 1 January 2008 onwards.

Pursuant to the relevant laws and regulations in the PRC, Zhongshan Tat Chun PCB Company Limited (“Zhongshan PCB”) and Guangdong Tat Chun Electric Technology Company Limited (“Guangdong Tat Chun”) are entitled to an exemption from the PRC Foreign Enterprise Income Tax (“FEIT”) for the first two years commencing from its first profit-making year of operation, and thereafter, these PRC subsidiaries will be entitled to a 50% relief from the PRC FEIT for the following three years (“Tax Holiday”). Under the New Law, the reduced tax rate for the 50% relief from the PRC FEIT is 12.5%. After the expiry of the tax relief period, Zhongshan PCB and Guangdong Tat Chun are subject to an income tax rate of 25%. The first profit-making year of operation of Zhongshan PCB and Guangdong Tat Chun was 2004 and 2008 respectively.

– 64 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The income tax expense for the year can be reconciled to the profit per consolidated income statement as follows:

		2008	2007
		HK$’000	HK$’000
	Profit before tax	31,491	70,599


	Tax rate applicable to the major operations of the Group	25%	27%
	Tax at the applicable rate	7,873	19,061
	Tax effect of expenses not deductible for tax purpose	4,415	2,208
	Tax effect of income not taxable for tax purpose	(28)	(1,524)
	Tax effect of tax losses/temporary difference not recognised	2,968	768
	Tax effect of Tax Holiday of subsidiaries	(10,828)	(3,723)
	Tax effect of change in tax rate	(186)	–
	Tax effect of different tax rates of operations/entities
	operating in other jurisdiction	1,356	(6,282)
	Overprovision of PRC EIT	(1,800)	–
	Underprovision of Hong Kong Profits Tax in previous year	–	57
	Income tax expense	3,770	10,565


9.	PROFIT FOR THE YEAR
		2008	2007
		HK$’000	HK$’000
	Profit for the year has been arrived at after charging:
	Employee benefits expenses, including directors’ remuneration	104,917	79,366
	Retirement benefits schemes contributions	3,617	2,690

	Total employee expenses	108,534	82,056
	Allowance for inventory obsolescence	950	–
	Auditor’s remuneration	1,458	1,355
	Cost of inventories recognised as an expense	729,030	596,157
	Depreciation of property, plant and equipment	48,299	30,031
	Release of prepaid lease payments	740	1,031

– 65 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

10. DIRECTORS’ EMOLUMENTS

The emoluments paid or payable to each of the directors were as follows:

2008

		Yeung
		Hoi						Li				Cheung						Wong
		Shan		Wong		Pak		Jinxia		Yeung		Sui		Cheung		Ho		Siu
		(“Mr.		Wing		Shek	(“Madam			Tai		Wing		Kwok		Man		Fai,
		Yeung”)		Choi*		Kuen		Li”)		Hoi		Darius		Ping		Kay		Albert		Total
	HK$’000		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000
Directors’ emoluments:
– Fees		–		–		–		93		84		84		84		126		84		555
– Salaries and other benefits		2,275		1,680		1,225		–		–		–		–		–		–		5,180
– Share-based payments		594		594		594		296		59		59		–		59		59		2,314
– Retirement benefits
scheme contributions		12		12		12		–		–		–		–		–		–		36

Total emoluments		2,881		2,286		1,831		389		143		143		84		185		143		8,085

2007
												Cheung						Wong
				Wong		Pak				Yeung		Sui		Cheung		Ho		Siu
		Mr.		Wing		Shek		Madam		Tai		Wing,		Kwok		Man		Fai,
		Yeung		Choi*		Kuen		Li		Hoi		Darius		Ping		Kay		Albert		Total
	HK$’000		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000
Directors’ emoluments:
– Fees		–		–		–		83		83		83		83		125		83		540
– Salaries and other benefits		2,289		1,660		1,073		–		–		–		–		–		–		5,022
– Share-based payments		424		424		424		212		42		42		–		42		42		1,652
– Bonus (Note)		161		–		169		–		–		–		–		–		–		330
– Retirement benefits
scheme contributions		12		12		12		–		–		–		–		–		–		36

Total emoluments		2,886		2,096		1,678		295		125		125		83		167		125		7,580

Mr. Wong Wing Choi resigned as an executive director on 23 January 2009.

Note: The bonus was determined based on individual performance.

During the year ended 31 December 2007, the Group provided rent-free accommodation to Mr. Yeung and the annual rateable value of the properties involved, which were owned by the Group, was approximately HK$351,000. The properties was disposed of by the Group to Mr. Yeung at a consideration of HK$14,400,000 on 24 December 2007 (Note 38). No rent-free accommodation was provided to Mr. Yeung during the year ended 31 December 2008.

– 66 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

11. EMPLOYEES’ EMOLUMENTS

Of the five individuals with the highest emoluments in the Group for the year, three (2007: three) were the directors of the Company whose emoluments are included in the disclosures in note 10 above. The emoluments of the remaining two (2007: two) individuals were as follows:

	2008	2007
	HK$’000	HK$’000
Salaries and other benefits	1,473	1,434
Share-based payments	386	222
Bonus	–	48
Retirement benefits schemes contributions	24	24

	1,883	1,728

The aggregate emoluments of remaining two highest paid individuals during the year did not exceed the bands of HK$1,000,000.

During the year, no emoluments were paid by the Group to any of the directors or the five highest paid individuals (including directors and employees) as an inducement to join or upon joining the Group or as compensation for loss of office. None of the directors has waived any emoluments during the year.

12. DIVIDENDS

	2008	2007
	HK$’000	HK$’000
Dividends recognised as distribution during the year:
2007 Final dividend of HK5 cents per share
(2007: 2006 Final dividend of HK3.33 cent per share)	12,000	8,000
No interim dividend for 2008
(2007: 2007 Interim dividend of HK2.5 cents per share)	–	6,000
	12,000	14,000

The directors recommend the payment of a final dividend of HK1 cent per share for the year ended 31 December 2008 to the shareholders whose names appear on the register of members on 26 May 2009 amounting to approximately HK$2,400,000.

13. EARNINGS PER SHARE

The calculation of the basic earnings per share for the year is based on the following data:

	2008	2007
	HK$’000	HK$’000
Profit for the year and earnings for the purposes of basic
earnings per share	27,721	60,034


Weighted average number of shares for the purposes of
basic earnings per share	240,000,000	240,000,000

No diluted earnings per share has been presented because the exercise price of share options granted by the Company is higher than the Company’s market share price.

– 67 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

14. INVESTMENT PROPERTIES

	HK$’000
At 1 January 2007	3,000
Fair value changes recognised in the consolidated income statement	500
At 31 December 2007 and 1 January 2008	3,500
Fair value changes recognised in the consolidated income statement	(400)
At 31 December 2008	3,100

The fair value of the Group’s investment properties at 31 December 2008 and 2007 has been arrived at on the basis of a valuation carried out at that date by DTZ Debenham Tie Leung Limited, an independent qualified professional valuers not connected with the Group. DTZ Debenham Tie Leung Limited are members of the Institute of Valuers, and have appropriate qualifications and recent experience in the valuation of properties in the relevant locations. The valuation was arrived at by reference to recent market evidence of transaction prices for similar properties in the same locations and conditions.

The property interests held under operating leases to earn rentals or for capital appreciation purposes are measured using the fair value model and are classified and accounted for as investment properties.

The carrying value of investment properties shown above are situated in Hong Kong held under medium term lease.

15. PROPERTY, PLANT AND EQUIPMENT

	Construction			Furniture
	in		Plant and	and	Motor	Office		Leasehold
	progress	Buildings	machinery	fixtures	vehicles	equipment	improvements		Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000
COST OR VALUATION
At 1 January 2007	610	114,980	193,199	2,233	3,365	4,687		27,297	346,371
Additions	24,377	4,591	111,517	1,080	2,045	3,170		44,752	191,532
Surplus on revaluation	–	16,283	–	–	–	–		–	16,283
Disposals	–	(1,763)	–	–	–	–		(318)	(2,081)
Transfer	(22,087)	–	–	–	–	–		22,087	–

At 31 December 2007
and 1 January 2008	2,900	134,091	304,716	3,313	5,410	7,857		93,818	552,105
Additions	2,496	–	36,821	334	285	1,110		5,279	46,325
Surplus on revaluation	–	5,116	–	–	–	–		–	5,116
Disposals	–	(853)	–	–	(1,025)	–		–	(1,878)
Transfer	(1,518)	–	–	–	–	–		1,518	–

At 31 December 2008	3,878	138,354	341,537	3,647	4,670	8,967		100,615	601,668

Comprising:
At cost	3,878	–	341,537	3,647	4,670	8,967		100,615	463,314
At valuation – 2008	–	138,354	–	–	–	–		–	138,354

	3,878	138,354	341,537	3,647	4,670	8,967		100,615	601,668

– 68 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

	Construction			Furniture
	in		Plant and	and	Motor	Office		Leasehold
	progress	Buildings	machinery	fixtures	vehicles	equipment	improvements		Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000
DEPRECIATION AND
AMORTISATION
At 1 January 2007	–	5,119	55,531	606	2,177	2,365		9,088	74,886
Provided for the year	–	2,400	22,046	284	656	1,023		3,622	30,031
Elimination on
revaluation	–	(7,119)	–	–	–	–		–	(7,119)
Elimination on disposals	–	(400)	–	–	–	–		(191)	(591)

At 31 December 2007
and 1 January 2008	–	–	77,577	890	2,833	3,388		12,519	97,207
Provided for the year	–	3,269	32,562	453	729	1,342		9,944	48,299
Elimination on
revaluation	–	(3,269)	–	–	–	–		–	(3,269)
Elimination on disposals	–	–	–	–	(1,025)	–		–	(1,025)

At 31 December 2008	–	–	110,139	1,343	2,537	4,730		22,463	141,212

CARRYING VALUES
At 31 December 2008	3,878	138,354	231,398	2,304	2,133	4,237		78,152	460,456


At 31 December 2007	2,900	134,091	227,139	2,423	2,577	4,469		81,299	454,898

The above items of property, plant and equipment, other than construction in progress, are depreciated on a straight line method at the following rates per annum:

Buildings	Over the remaining term of lease
Leasehold improvements	Over the shorter of term of lease or 10%
Plant and machinery	10%
Furniture and fixtures	10%
Motor vehicles	18%
Office equipment	18%

The carrying value of the Group’s buildings and construction in progress comprises shown above are situated in the PRC under medium term leases.

The Group obtained the formal building certificates for its buildings during the year.

As at 31 December 2007, the building certificate of one of the buildings owned by the Group amounting to approximately HK$45,393,000 had not been obtained. The directors believe that the absence of official certificates did not impair the value of the relevant properties of the Group.

As at 31 December 2008, the carrying values of the Group’s plant and machinery and motor vehicles include amounts of approximately HK$143,190,000 and HK$1,036,000 (2007: HK$142,870,000 and HK$1,368,000) respectively in respect of assets held under finance leases.

As at 31 December 2008, the buildings of the Group were valued by DTZ Debenham Tie Leung Limited, on an open market basis by DTZ Debenham Tie Leung Limited, an independent qualified professional valuers not connected with the Group. DTZ Debenham Tie Leung Limited are members of the Institute of Valuers, and have appropriate qualifications and recent experience in the valuation of properties in the relevant locations. The buildings were valued at depreciated replacement cost approach.

If buildings had not been revalued, they would have been included in these consolidated financial statements at historical cost less accumulated depreciation of approximately HK$108,328,000 (2007: HK$110,689,000).

– 69 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

16. PREPAID LEASE PAYMENTS

The Group’s prepaid lease payments comprise:

	2008	2007
	HK$’000	HK$’000
Leasehold land in the PRC under medium term leases	23,765	31,603


Analysed for reporting purposes as:
Non-current assets	23,150	30,822
Current assets	615	781

	23,765	31,603

The prepaid lease payments are charged to the consolidated income statement over the respective term of the lease on a straight line basis.

As at 31 December 2007, the land use right certificate amounting to approximately HK$18,197,000 was not obtained. The directors believed that the absence of official certificates did not impair the value of the relevant properties of the Group. The Group obtained the formal land use right certificates for its leasehold land during the year ended 31 December 2008.

17. INVENTORIES

	2008	2007
	HK$’000	HK$’000
Raw materials	41,231	40,428
Work in progress	21,042	13,732
Finished goods	28,180	34,773
	90,453	88,933

18. TRADE, BILLS AND OTHER RECEIVABLES

(a) Trade and other receivables

		2008	2007
		HK$’000	HK$’000
Trade	receivables	241,185	242,960
Less:	Allowance for doubtful debts	(21,793)	(11,000)

Total	trade receivables, net of allowance	219,392	231,960
Other	receivables and prepayments	27,897	12,913
		247,289	244,873

– 70 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group generally allows an average credit period of 30 days to 150 days to its trade customers. The following is an aged analysis of trade receivables net of allowance for doubtful debts at the reporting date:

	2008	2007
	HK$’000	HK$’000
0 – 30 days	63,142	58,854
31 – 60 days	64,683	62,141
61 – 90 days	47,629	51,410
91 – 180 days	42,148	58,487
Over 180 days	1,790	1,068
	219,392	231,960

Before accepting any new customer, the Group will evaluate the potential customer’s credit risk and defines credit limits by customer. Limits and scoring attributed to customers are reviewed once a year. Majority of the trade receivables that are neither past due nor impaired have no default payment history.

Included in the Group’s trade receivable balance are debtors with an aggregate carrying amount of HK$73,259,000 (2007: HK$63,772,000) which are past due for which the Group has not provided for impairment loss.

These receivables relate to a number of independent customers that have a good track record with the Group. The management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit risk and the balances are still considered fully recoverable. The Group does not hold any collateral over these balances.

Ageing of trade receivables which are past due but not impaired:

	2008	2007
	HK$’000	HK$’000
31 – 60 days	10,821	13,951
61 – 90 days	31,062	11,251
91 – 180 days	29,586	37,502
Over 180 days	1,790	1,068
Total	73,259	63,772

The Group has provided fully for all receivables over 365 days because historical experience is such that receivables that are past due beyond 365 days are generally not recoverable.

Movement in the allowance for doubtful debts:

	2008	2007
	HK$’000	HK$’000
Balance at beginning of the year	11,000	8,211
Impairment losses recognised on receivables	10,793	2,789
Balance at end of the year	21,793	11,000

Included in the allowance for doubtful debts are individually impaired trade receivables with an aggregate balance of approximately HK$21,793,000 (2007: HK$11,000,000) which have been in severe financial difficulties. The Group does not hold any collateral over these balances.

– 71 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Bills receivable

The aged analysis of bills receivable is as follows:

	2008	2007
	HK$’000	HK$’000
0 – 30 days	122	59
31 – 60 days	2,382	3,258
61 – 90 days	1,952	2,207
91 – 180 days	312	493
	4,768	6,017

The trade, bills and other receivables that are denominated in currencies other than the functional currencies of the relevant group entities are set out below:

	2008	2007
	HK$’000	HK$’000
United States dollars (“US$”)	180,625	203,195
Renminbi (“RMB”)	43,187	20,000

	223,812	223,195

19. AMOUNT DUE FROM A RELATED COMPANY

The amount due from Illumination Limited, a company owned by Mr. Yeung, represented the consideration receivable on disposal of a property interest during the year ended 31 December 2007 and was settled in February 2008.

The related company’s account disclosed pursuant to section 161B of the Hong Kong Companies Ordinance is as follows:

				Maximum
				amount
		Balance at	Balance at	outstanding
		31 December	1 January	during the
Director	Terms of loan	2008	2008	year
		HK$’000	HK$’000	HK$’000
Mr. Yeung (Director)	Unsecured and interest free	–	13,680	13,680

20. INVESTMENT DESIGNATED AS AT FAIR VALUE THROUGH PROFIT OR LOSS

The balance represented an unlisted commodity linked note issued by a financial institution with principal amount of US$1,200,000 that matured on 3 April 2009. The redemption amount at maturity date was calculated by a predetermined formula based on the copper price on that date with a maximum loss capped at 5% of the principal amount. The fair value of the commodity note is determined by the directors of the Company by the reference to the expected future price of copper.

The note was redeemed on maturity date at approximately HK$8,890,000, resulting a loss of HK$470,000 on redemption.

– 72 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

21. DERIVATIVE FINANCIAL INSTRUMENTS

Major terms of foreign currency forward contracts as at 31 December 2008 are as below:

Aggregate notional amount	Maturity	Forward exchange rates
US$7,060,000	From January 2009 to June 2009	Sell US$/buy RMB at
		6.3510 to 6.6060

The fair values of forward contracts are determined based on the difference between the market forward rates at the balance sheet date for the remaining duration of the outstanding contracts and their contracted forward rates and discounted using an appropriate discount rate to take account of the time value of money.

All of the Group’s derivative financial instruments are denominated in US dollars which is other than the functional currency of the respective group entities.

22. RESTRICTED BANK DEPOSITS/BANK BALANCES, DEPOSITS AND CASH

	2008	2007
	HK$’000	HK$’000
Restricted bank deposits	18,373	–


Bank deposits	15,628	–
Bank balances and cash	44,200	70,663

	59,828	70,663

Restricted bank deposits, bank balances and deposits carry interest at market interest rates ranging from 0.28% to 1.90% (2007: 0.25% to 1.05%) per annum.

The restricted bank deposits, bank balances, deposits and cash that are denominated in currencies other than the functional currencies of the relevant group entities are set out below:

	2008	2007
	HK$’000	HK$’000
US$	10,777	27,278
RMB	35,580	21,317

	46,357	48,595

– 73 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

23. TRADE, BILLS AND OTHER PAYABLES

(a) Trade and other payables

The aged analysis of trade payables is as follows:

	2008	2007
	HK$’000	HK$’000
0 – 30 days	22,453	29,720
31 – 60 days	20,705	29,320
61 – 90 days	48,553	46,774
91 – 180 days	101,450	46,754
Over 180 days	7,046	3,411
	200,207	155,979
Other payables and accruals	30,054	42,631
	230,261	198,610

The credit period on purchases of goods ranged from 90 days to 120 days. The Group has financial risk management policies in place to ensure that all payables are settled within the credit timeframe.

(b) Bills payable

The aged analysis of bills payable is as follows:

	2008	2007
	HK$’000	HK$’000
0 – 30 days	32,125	1,604
31 – 60 days	3,695	4,566
61 – 90 days	2,872	6,685
91 – 180 days	1,303	11,478
	39,995	24,333

The trade, bills and other payables that are denominated in currencies other than the functional currencies of the relevant group entities are set out below:

	2008	2007
	HK$’000	HK$’000
US$	8,945	56,992
RMB	158,155	57,300

	167,100	114,292

– 74 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

24. BANK AND OTHER BORROWINGS

	2008	2007
	HK$’000	HK$’000
Bank loans	162,519	202,004
Trust receipt loans	23,443	61,056
	185,962	263,060


Analysed as:
Secured	69,161	130,000
Unsecured	116,801	133,060

	185,962	263,060


Carrying amount repayable:
On demand or within one year	177,962	143,899
More than one year, but not exceeding two years	4,000	119,161
More than two years, but not exceeding five years	4,000	–
	185,962	263,060
Less: Amounts due within one year shown
under current liabilities	(177,962)	(143,899)

	8,000	119,161

The bank loans were secured by assets of the Group as disclosed in note 36.

As at 31 December 2008, in respect of bank loans with carrying amounts of approximately HK$84,161,000 as at that date, the Group breached certain financial covenants as stipulated in the banking facilities letters entered into by the Group, which are primarily related to the working capital ratio and gearing ratio. On discovery of the breach, the directors of the Company informed the lenders and commenced a renegotiation of the terms of the loans with the relevant bankers. At the balance sheet date, as the lenders have not yet agreed to waive their right to demand immediate payment, the non-current portion of these loans amounting to HK$65,000,000 has been classified as a current liability in the consolidated financial statements. The Group agreed with the lenders of the bank loans to early settle the outstanding principal balance of these loans of HK$85,000,000 by utilising the available funds and facilities of the Group. The outstanding balances were fully settled on 14 April 2009.

The above borrowings that are denominated in currencies other than the functional currencies of the relevant group entities are set out below:

	2008	2007
	HK$’000	HK$’000
US$	26,782	–
RMB	11,364	–

	38,146	–

As at 31 December 2008, the balances of fixed-rate borrowings and variable-rate borrowings are HK$11,364,000 (2007: nil) and HK$174,598,000 (2007: HK$263,060,000) respectively.

The contractual interest rates of variable-rate bank loans are Hong Kong Inter-bank Offered Rate (“HIBOR”) plus 1.30% to 2.25% (2007: HIBOR plus 1.50% to 2.50%) per annum. Interest is repricing every year.

– 75 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The ranges of interest rates on the Group’s borrowings are as follows:

	2008	2007
Effective interest rate:
Fixed-rate borrowings	5.58%	N/A
Variable-rate borrowings	2.77% to 6.25%	4.65% to 6.90%

25. OBLIGATIONS UNDER FINANCE LEASES

			Present value of	Present value of
	Minimum lease	payments	minimum lease payments
	2008	2007	2008	2007
	HK$’000	HK$’000	HK$’000	HK$’000
Amounts payable under
finance leases:
Within one year	45,991	43,903	43,492	39,008
In the second year	31,585	36,920	30,758	34,257
In the third year	9,962	21,893	9,827	21,132
In the fourth year	736	4,192	731	4,093
In the fifth year	–	184	–	181
	88,274	107,092	84,808	98,671
Less: Future finance charges	(3,466)	(8,421)	N/A	N/A
Present value of lease obligations	84,808	98,671	84,808	98,671

Less: Amount due within one year
shown under current
liabilities			(43,492)	(39,008)

Amount due after one year			41,316	59,663

The Group has leased certain of its plant and machinery and motor vehicles under finance leases. The average lease term is two years and the contractual interest rates for the year are HIBOR plus 1.50% to 2% (2007: HIBOR plus 1.88% to 2%) per annum. For the year ended 31 December 2008, the contractual interest rates ranged from 2.97% to 5.97% (2007: 4.63% to 7.12%) per annum and the average effective interest rate was 5.31% (2007: 6.50%) per annum. All leases are denominated in functional currency of respective group entities and no arrangement has been entered into for contingent rental payments.

During the year ended 31 December 2008, the Group entered into finance lease arrangements of approximately HK$36,738,000 (2007: HK$80,663,000), in which an amount of approximately HK$19,163,000 (2007: nil) was related to property, plant and equipment acquired in previous years.

The obligations under finance leases are secured by the lessor’s charge over the leased assets.

Certain obligations under finance leases are secured by the corporate guarantees provided by the Company and subsidiaries of the Company.

– 76 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

26. AMOUNT DUE TO A SHAREHOLDER

The balance is unsecured, interest-free and repayable on 29 June 2010. The amount was initially recognised at fair value of approximately HK$20,627,000, determined using cash flows discounted at an effective interest rate of 5.8% per annum. The difference of approximately HK$1,830,000 between the nominal value and the fair value of the amount on its inception date was recognised as a deemed capital contribution from a shareholder.

The amount due to a shareholder that is denominated in currencies other than the functional currencies of the relevant group entities are set out below:

	2008	2007
	HK$’000	HK$’000
RMB	14,657	–

27. DEFERRED TAX LIABILITIES

The followings are the major deferred tax liabilities recognised and movements thereon during the current and prior years:

	Accelerated
	tax	Revaluation of
	depreciation	properties	Total
	HK$’000	HK$’000	HK$’000
At 1 January 2007	2,312	–	2,312
Charge to consolidated income statement
for the year	940	–	940
Charge to equity for the year	–	6,029	6,029
At 31 December 2007 and 1 January 2008	3,252	6,029	9,281
Charge to consolidated income statement
for the year	296	–	296
Charge to equity for the year	–	2,097	2,097
Effect of changes in tax rate	(186)	–	(186)
At 31 December 2008	3,362	8,126	11,488

At 31 December 2008, the Group had unused tax losses of approximately HK$3,135,000 (2007: HK$2,941,000) available for offset against future assessable profits in Hong Kong. No deferred tax asset has been recognised in respect of such losses due to the unpredictability of future profit streams. The tax loss can be carried forward indefinitely.

At 31 December 2008, the Group has deductible temporary differences associated with specific provision on trade receivables and inventories of approximately HK$22,743,000 (2007: HK$11,000,000). No deferred tax asset has been recognised of such deductible temporary difference as it is uncertain that taxable profit will be available against which the deductible temporary differences can be utilised.

Under the New Law of the PRC, withholding tax is imposed on dividends declared in respect of profits earned by the PRC subsidiaries from 1 January 2008 onwards. Deferred taxation has not been provided for in the consolidated financial statements in respect of temporary differences attributable to undistributed retained profits earned by the PRC subsidiaries, as the Group is able to control the quantum and timing of the distribution.

At the balance sheet date, the aggregate amount of undistributed earnings of the Group’s PRC subsidiaries in respect of which the Group has not provided for dividend withholding tax was approximately HK$51,821,000 (2007: 0).

– 77 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

28. SHARE CAPITAL

	Number of shares	Nominal value
		HK$’000
Ordinary shares of HK$0.1 each
Authorised:
At 1 January 2007, 31 December 2007 and
31 December 2008	2,000,000,000	200,000


Issued and fully paid:
At 1 January 2007, 31 December 2007 and
31 December 2008	240,000,000	24,000

29. RESERVES

(a) PRC statutory reserve

As stipulated by the relevant PRC laws and regulations, certain subsidiaries of the Company in the PRC shall set aside certain percent of their net profit after taxation prepared in accordance with generally accepted accounting policies in the PRC for the PRC statutory reserve (except where the reserve balance has reached 50% of the paid-up capital of the respective enterprises). The reserve can only be used, upon approval by the board of directors of respective enterprises and by relevant authority, to offset accumulated losses or increase capital.

(b) Special reserve

The special reserve represents the difference between the nominal value of the share capital issued by the Company and the nominal value of the share capital of subsidiaries acquired pursuant to the Group reorganisation (details refer to prospectus dated 12 June 2006).

(c) Capital contribution reserve

The capital contribution reserve represents a fair value adjustment on non-current interest-free loan from a shareholder.

30. SHARE OPTION SCHEME

On 5 June 2006, a share option scheme (the “Share Option Scheme”) was adopted by a resolution in writing by the sole shareholder. The purposes of the Share Option Scheme are to attract and retain best available personnel to provide additional incentive to employees, directors, consultants, and advisers of the Group and to promote the success of the business of the Group. The directors may, at their discretion, offer any employee (whether full-time or part-time), director, consultant or adviser of the Group options to subscribe for new shares at a price and terms set out in the Share Option Scheme.

The exercise price of the share options is determined, at the discretion of the directors, and must be at least the higher of:

(a) the average of the closing price of the shares on the Stock Exchange as stated in the Stock Exchange’s daily quotation sheets for the five business days immediately preceding the date of grant of the share options;
(b) the closing price of the shares on the Stock Exchange as stated in the Stock Exchange’s daily quotations sheet on the date of grant of the share options; and
(c) the nominal value of the shares of the Company.

– 78 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The maximum number of shares in respect of which options may be granted under the Share Option Scheme when aggregated with the maximum number of shares in respect of which options may be granted under any other scheme involving the issue or grant of options over shares or other securities by the Group shall not exceed 10% of the issued share capital on 22 June 2006 (such 10% limit representing 24,000,000 shares).

No option may be granted to any one person such that the total number of shares issued and to be issued upon the exercise of options granted and to be granted to that person in any 12-month period up to the date of the latest grant exceeds 1% of the issued share capital from time to time, unless the approval of the shareholders is obtained. Options granted to substantial shareholders or independent non-executive directors in excess of 0.1% of the Company’s share capital or with a value in excess of HK$5,000,000 must be approved in advance by the Company’s shareholders.

The amount payable on acceptance of an option is HK$1.

The following table discloses the details of the Company’s share options and movements for both years:

							Outstanding	Outstanding	Outstanding
								at
						31 December
	Balance at		Granted	Forfeited			2007 and at			Granted		Forfeited			Balance at
	1 January		during the	during the			1	January		during the		during the		31 December
	2007		year	year				2008		year		year			2008
Directors		–	7,800		–			7,800			–		–		7,800
Other employees		–	7,760	(1,780)				5,980			–	(1,180)			4,800
		–	15,560	(1,780)				13,780			–	(1,180)			12,600


Exercisable at
the end of
the year									–						6,304

The exercise price per share is HK$1.52.

The options were granted on 3 July 2007 and will be expired on 2 July 2011. The closing price of the Company’s share immediately before the date on which the options were granted was HK$1.50.

Options are exercisable subject to (i) up to 40% of the options are exercisable a year after the date of grant; (ii) up to 70% of the options are exercisable two years after the date of grant and (iii) all the remaining options are exercisable three years after the date grant.

No share options are granted during the year. The total fair value of the share options granted in 2007 was HK$10,313,000. With reference to the vesting period attached to the respective share options, the Group recognised share-based payment expenses as follows:

	2008	2007
	HK$’000	HK$’000
Directors’ emoluments	2,314	1,652
Other staff costs	1,084	1,565

	3,398	3,217

– 79 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The fair values of the share options granted during the year ended 31 December 2007 were calculated using the Binominal Model (the “Model”). The inputs into the model were as follows:

	3 July 2007
Exercise price	HK$1.52
Share price on date of grant	HK$1.52
Expected volatility	58.24%
Expected life	4 years
Risk-free rate	4.18%
Expected dividend yield	2.19%

The model is one of the commonly used models to estimate the fair value of the share options which involves assumptions and variables based on the management’s best estimates. Such fair value varies when different assumptions, which are necessarily subjective, and variables are used.

Expected volatility was determined by using the annualised historical volatility of the Company’s share price over the previous twelve months. The expected life used in the model is based on management’s best estimate.

31. CAPITAL RISK MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from prior year.

The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 24, and equity attributable to equity holders as disclosed in the consolidated statement of changes in equity.

The directors of the Company review the capital structure regularly. As part of this review, the directors consider the cost of capital and the risks associates with each class of capital. Based on recommendations of the directors, the Group will balance its overall capital structure through the payment of dividends and issue of new shares or debt or the redemption of existing debt.

32. FINANCIAL INSTRUMENTS

a. Categories of financial instruments

	2008	2007
	HK$’000	HK$’000
Financial assets
Designated as at FVTPL	9,349	–
Derivative financial instruments	1,301	–
Loans and receivables
(including cash and cash equivalents)	303,735	327,930
Financial liabilities
Amortised cost	532,780	544,171

b. Financial risk management objectives and polices

The Group’s major financial instruments include trade and other receivables, bills receivable, amount due from a related company, investment designated as at FVTPL, derivative financial instruments, restricted bank deposits, bank balances, deposits and cash, trade and other payables, bills payable, amount due to a shareholder, bank and other borrowings and obligations under finance leases. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments include market risk (currency risk and interest rate risk), credit risk and liquidity risk. The policies on how to initiate these risks are set out below. Management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

– 80 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Market risk

(i) Currency risk

The Group operates in Hong Kong (“HK”) and the PRC with most of the transactions denominated and settled in US$, HK$ and RMB. In order to mitigate the currency risk, the Group has entered into forward currency contracts to partially hedge US$ against RMB. Details of the contracts are set out in note 21. The Group continues reviewing the effectiveness of these instruments and the underlying strategies in monitoring currency risk.

The carrying amounts of the monetary assets and liabilities that are denominated in currencies other than the functional currencies of relevant group entities at the reporting date are as follow:

	2008	2007
	HK$’000	HK$’000
Assets
US$	202,052	230,473
RMB	78,767	41,317


Liabilities
US$	35,727	56,992
RMB	184,176	57,300

Sensitivity analysis

The Group’s currency risk is mainly concentrated on the fluctuation of US$ and RMB. Since HK$ is pegged to US$, the Group does not expect any significant movement in US$/HK$ exchange rate. If the HK$ weakened by 10% against RMB, the Group’s post-tax profit for the year ended 31 December 2008 would decrease by HK$7,906,000 (2007: HK$1,167,000). If the HK$ strengthened by 10% against RMB, there would be an equal and opposite impact on the profit for the year.

For the outstanding derivative financial instruments, the market bid and ask forward exchange rate of US$ against RMB had been 10% higher/lower, profit for the year ended 31 December 2008 would decrease/increase by approximately HK$499,000.

In management’s opinion, the sensitivity analysis is not necessarily representative of the inherent market risk as the pricing model used in determining the fair value of the derivatives is interdependent.

(ii) Interest rate risk

The Group is exposed to fair value interest rate risk in relation to fixed-rate bank borrowings (see note 24 for details of these borrowings). The Group aims at keeping borrowings at variable rates. In order to achieve this result, the Group negotiated with the banks and entered into various revolving loans such that interest rates associated with the loans are more or less variable. In this regard, the directors of the Company consider that the Group’s fair value interest rate risk is minimal.

The Group is also exposed to cash flow interest rate risk in relation to its restricted bank deposits, bank balances and deposits (see note 22 for details) and its variable-rate bank borrowings and obligations under finance leases (see notes 24 and 25 for details of these borrowings and leases). It is the Group’s policy to keep its borrowings and leases at floating rate of interests so as to minimise the fair value interest rate risk. Management will also consider hedging significant interest rate exposure should the needs arise.

The Group’s exposures to interest rates on financial liabilities are detailed in the liquidity risk management section of this note. The Group’s cash flow interest rate risk is mainly concentrated on the fluctuation of HIBOR arising from the Group’s Hong Kong dollar denominated borrowings.

– 81 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Sensitivity analysis

Since restricted bank deposits, bank balances and deposits are in short maturity date and in current accounts, the Group does not expect any significant impact due to movement in interest rates.

The sensitivity analyses below have been determined based on the exposure to interest rates for floating-rate bank borrowings and obligations under finance leases at the balance sheet date. The analysis is prepared assuming the financial instruments outstanding at the balance sheet date were outstanding for the whole year. A 120 basis points (2007: 100 basis points) increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

The management adjusted the sensitivity rate from 100 basis points to 120 basis points for assessing interest rate risk after considering the impact of the volatile financial market conditions after the third quarter of 2008.

If interest rates had been 120 basis points (2007: 100 basis points) higher/lower and all other variables were held constant, the Group’s post-tax profit for the year ended 31 December 2008 would decrease/increase by HK$2,335,000 (2007: decrease/increase by HK$2,641,000). This is mainly attributable to the Group’s exposure to interest rates on its variable-rate bank borrowings.

The Group’s sensitivity to interest rates has decreased during the current year mainly due to the decrease in variable rate debt instruments.

Credit risk

As at 31 December 2008, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognised financial assets as stated in the consolidated balance sheet.

The Group has concentration of credit risk on certain individual customers. At the balance sheet date, the five largest receivable balances accounted for approximately 36.2% of the trade receivables and the largest trade receivable attributable to the Group’s trade receivables was approximately 11.4% of the Group’s total trade receivables. The Group seeks to minimise its risk by dealing with counterparties which have good credit history.

In order to minimise the credit risk, management of the Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced.

The credit risk on restricted bank deposits, bank balances and deposits and investment designated as at fair value through profit or loss are limited because the counterparts are banks with high reputation.

Liquidity risk

In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group’s operations and mitigate the effects of fluctuations in cash flows.

The Group has net current liabilities of approximately HK$74,262,000 (2007: net current assets HK$381,000) as at 31 December 2008. The Group has sufficient funds to finance its current working capital requirements taking into account of the existing banking facilities and cashflows from operations.

– 82 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group relies on bank borrowings as a significant source of liquidity. As at December 2008, certain loan covenants were breached by the Group and the non-current portion of the loans amounting to HK$65,000,000 was reclassified as a current liability. Details are set out in note 2. As at 31 December 2008, the Group has available unutilised banking facilities of approximately HK$162 million (2007: HK$145 million). The directors are of the opinion that the Group will be able to renew the banking facilities granted by the banks and the Group expects to have adequate funding to finance its operations and capital expenditure.

The following table details the Group’s remaining contractual maturity for its financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both principal and interest cash outflows.

	Weighted	Weighted
	average							Total
	effective		Within			Over	undiscounted		Carrying
	interest rate		1 year	1-2 years	2-3 years	3 years		cash flow	amount
	%		HK$’000	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000
2008
Trade and other
payables		–	201,388	–	–	–		201,388	201,388
Bills payable		–	39,995	–	–	–		39,995	39,995
Amount due to a
shareholder	5.80%		–	22,457	–	–		22,457	20,627
Obligations under
finance leases	5.31%		45,991	31,585	9,962	736		88,274	84,808
Bank and other
borrowings
– fixed rate	5.58%		11,998	–	–	–		11,998	11,364
– variable rate	5.80%		176,261	4,232	4,477	–		184,970	174,598

			475,633	58,274	14,439	736		549,082	532,780


2007
Trade and other
payables		–	158,107	–	–	–		158,107	158,107
Bills payable		–	24,333	–	–	–		24,333	24,333
Obligations under
finance leases	6.50%		43,903	36,920	21,893	4,376		107,092	98,671
Bank and other
borrowings
– variable rate	5.60%		151,957	125,834	–	–		277,791	263,060

			378,300	162,754	21,893	4,376		567,323	544,171

c. Fair value

The fair value of financial assets and financial liabilities are determined as follows:

the fair value of financial assets (excluding derivative instruments) with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market bid prices respectively;
the fair value of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis, using prices or rates from observable current market transactions and dealer quotes for similar instruments;

The directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost on the consolidated financial statements approximate to their fair values.

– 83 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

33. MAJOR NON-CASH TRANSACTION

During the year, the Company entered into finance lease arrangements in respect of assets with a total capital value at the inception of the leases of approximately HK$17,575,000 (2007: HK$80,663,000).

34. OPERATING LEASES

(a) Operating lease commitments

The Group as lessee

Minimum lease payments paid under operating leases

	2008	2007
	HK$’000	HK$’000
Premises	845	854

At the balance sheet date, the Group had commitments for future minimum lease payments under non-cancellable operating leases in respect of rented premises which fall due as follows:

	2008	2007
	HK$’000	HK$’000
Within one year	781	778
In the second year	504	755
In the third year	–	504
	1,285	2,037

Operating lease payments represent rentals payable by the Group for certain of its offices and warehouse. Leases are negotiated for an average term of two years with fixed rental.

(b) Operating lease arrangements

The Group as lessor

Property rental income earned during the year was approximately HK$568,000 (2007: HK$540,000). The outgoings of the rental income were approximately HK$42,000 (2007: HK$51,000).

At the balance sheet date, the Group had contracted with tenants for the following future minimum lease payments in respect of its investment properties:

	2008	2007
	HK$’000	HK$’000
Within one year	250	208
In the second to fifth year inclusive	83	–
	333	208

The properties held have committed tenants for an average terms ranging from one to two years.

– 84 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

35. CAPITAL COMMITMENT

	2008	2007
	HK$’000	HK$’000
Capital expenditure in respect of acquisition of property, plant
and equipment contracted for but not provided in the
consolidated financial statements	15,815	23,057

36. PLEDGE OF ASSETS

As at 31 December 2008, the equity interests of two PRC subsidiaries with net asset values of approximately HK$380,254,000 (2007: HK$353,553,000) were pledged to banks to secure general banking facilities granted to the Group.

37. RETIREMENT BENEFITS SCHEMES

The Group operates a Mandatory Provident Fund (“MPF”) Scheme for all qualifying employees in Hong Kong. The MPF Scheme is registered with the MPF Authority under the MPF Schemes Ordinance. The assets of the MPF Scheme are held separately from those of the Group in funds under the control of an independent trustee. Under the rules of the MPF Scheme, the employers and their employees are each required to make contributions to the MPF Scheme at a rate specified in the rules. The only obligation of the Group with respect to the MPF Scheme is to make the required contributions under the MPF Scheme. The Group contributes 5% of relevant payroll costs to the scheme, which contribution is matched by employees and capped at HK$1,000 per month. No forfeited contribution is available to reduce the contribution payable in the future years.

The retirement benefits scheme contributions arising from the MPF Scheme charged to the income statement represent contributions payable to the funds by the Group at rates specified in the rules of the MPF Scheme.

The employees employed by the entities in the PRC are members of the state-managed retirement benefits schemes operated by the PRC government. The PRC entities are required to contribute a certain percentage of their payroll to the retirement benefits schemes to fund the benefits. The only obligation of the Group with respect to the retirement benefits schemes operated by the PRC government is to make the required contributions under the schemes.

38. RELATED PARTY DISCLOSURES

Details of transactions between the Group and other related parties are disclosed below:

(a) The remuneration of directors (representing key management) during the year are set out in note 10.
(b) During the year ended 31 December 2008, Mr. Yeung, being the substantial shareholder and executive director of the Company, advanced an amount of approximately HK$22,457,000 to the Group for the purpose of financing the daily operation of the Group. The amount was unsecured, interest-free and repayable on 29 June 2010.
(c) As at 31 December 2007, the Group’s bank loan amounting to HK$6,082,000 was secured by a property owned by Mr. Yeung. During the year ended 31 December 2008, the bank loan was repaid and the property owned by Mr. Yeung was discharged.
(d) During the year ended 31 December 2007, the Group disposed of a property interest in HK to Illumination Limited, a company owned by Mr. Yeung, the substantial shareholder and an executive director of the Company, at a consideration of HK$14,400,000. Such property was used and occupied by Mr. Yeung as a director’s quarter. Having regard to the then property market in Hong Kong, the directors considered that the disposal represented a good opportunity to realise a gain for the disposal. The terms of the sales and purchase agreement were arrived at arm’s length negotiations and are on normal commercial terms.

– 85 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

39. SEGMENTAL INFORMATION

Business segments

For management purposes, the Group is currently organised into the following three business divisions:

Principal activities are manufacturing and trading of:

Single-sided printed circuit board (“PCB”) (“Single-sided”)
Double-sided PCB (“Double-sided”)
Multi-layered PCB (“Multi-layered”)

These divisions are the basis on which the Group reports its primary segment information.

Segment information about these businesses is presented below:

	2008	2007
	HK$’000	HK$’000
TURNOVER – external sales
Single-sided	199,836	173,076
Double-sided	309,102	410,488
Multi-layered	329,932	157,404
Total	838,870	740,968


	2008	2007
	HK$’000	HK$’000
RESULT
Segment result
– single-sided	3,618	8,213
– double-sided	21,886	60,334
– multi-layered	14,928	20,574
	40,432	89,121
Unallocated income	18,433	10,392
Unallocated expenses	(9,386)	(11,731)
Finance costs	(17,988)	(17,183)

Profit before tax	31,491	70,599
Income tax expense	(3,770)	(10,565)
Profit for the year	27,721	60,034

– 86 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED BALANCE SHEET

	2008	2007
	HK$’000	HK$’000
ASSETS
Segment assets
– single-sided	120,562	120,294
– double-sided	228,365	281,250
– multi-layered	458,991	388,797
	807,918	790,341
Unallocated corporate assets	117,658	130,810
Consolidated total assets	925,576	921,151


LIABILITIES
Segment liabilities
– single-sided	62,805	58,854
– double-sided	97,146	139,586
– multi-layered	104,874	53,525
	264,825	251,965
Unallocated corporate liabilities	325,034	360,706
Consolidated total liabilities	589,859	612,671


OTHER INFORMATION
	2008	2007
	HK$’000	HK$’000
Capital additions
– single-sided	–	1,047
– double-sided	1,243	2,196
– multi-layered	43,170	179,957
– unallocated	1,912	8,332

	46,325	191,532


Depreciation of property, plant and equipment
– single-sided	3,229	3,390
– double-sided	13,251	10,034
– multi-layered	26,170	9,235
– unallocated	5,649	7,372

	48,299	30,031


Impairment loss recognised in respect of trade receivables
– single-sided	2,571	651
– double-sided	3,977	1,545
– multi-layered	4,245	593
	10,793	2,789

– 87 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

	2008	2007
	HK$’000	HK$’000
Allowance for inventory obsolescence
– single-sided	181	–
– double-sided	485	–
– multi-layered	284	–
	950	–

Geographical segments

The Group’s operations are located in HK and the PRC.

The following table provides an analysis of the Group’s sales by geographical market, irrespective of the origin of the goods.

	Sales revenue by	Sales revenue by
	geographical market
	2008	2007
	HK$’000	HK$’000
Asia:
Taiwan	234,513	4,655
HK	219,148	460,809
The PRC (excluding HK and Taiwan)	110,897	81,249
Japan	52,928	1,130
Other Asian regions	43,882	69,835
Europe	147,839	99,909
Others	29,663	23,381

	838,870	740,968

The following is an analysis of the carrying amount of segment assets and additions to property, plant and equipment, analysed by the geographical area in which the assets are located:

	Carrying	amount	of	Additions	to property,
	segment	assets		plant and equipment
	2008		2007	2008	2007
	HK$’000	HK$’000		HK$’000	HK$’000
HK	225,311		257,014	35	2,952
The PRC (excluding HK
and Taiwan)	582,607		533,327	46,290	188,580

	807,918		790,341	46,325	191,532

– 88 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

40. PRINCIPAL SUBSIDIARIES OF THE COMPANY

Particulars of the Company’s wholly-owned principal subsidiaries at 31 December 2008 and 2007 are set out below:

==> picture [397 x 278] intentionally omitted <==

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

||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|Proportion|of|
|Issued|and|fully|nominal|value|of|
|Place|and|paid|share|issued|share|capital/|
|incorporation/|capital/|paid|up|capital|held|
|Name|of|subsidiary|operation|Registered|capital|by|the|Company|Principal|activities|
|Directly|Indirectly|
|Pacific|Leader|Development|HK|Ordinary|shares|100%|–|Investment|holding|
|Limited|HK$10,000|
|Tat|Chun|PCB|Company|Limited|HK|Ordinary|shares|100%|–|Trading|of|printed|
|HK$600,000|circuit|boards|
|Zhongshan|Electric|Company|The|PRC|Registered|capital|–|100%|Manufacturing|and|
|Limited|(Note)|HK$36,600,000|trading|of|printed|
|circuit|boards|
|Zhongshan|PCB|(Note)|The|PRC|Registered|capital|–|100%|Manufacturing|and|
|HK$140,000,000|trading|of|printed|
|circuit|boards|
|Guangdong|Tat|Chun|(Note)|The|PRC|Registered|capital|100%|–|Manufacturing|and|
|HK$250,000,000|trading|of|printed|
|circuit|boards|

----- End of picture text -----

None of the subsidiaries had any debt securities outstanding at the end of the year, or at any time during the year.

The above table includes the subsidiaries of the Company which, in the opinion of the directors, principally affected the results or net assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

Note: The companies are wholly foreign-owned enterprises established in the PRC.

– 89 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 30 JUNE 2009

The following is the reproduction of the unaudited condensed consolidated financial statements of the Group for the six months ended 30 June 2009, together with the relevant notes to the condensed consolidated financial statements, contained on pages 4 to 18 of the interim report of the Company for the six months ended 30 June 2008.

Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2009

		For the six months	For the six months	For the six months	For the six months
		ended	30 June
		2009			2008
	Notes	HK$’000		HK$’000
		(unaudited)		(unaudited)
Turnover	3	331,460		397,536
Cost of sales		(283,490)		(334,483)
Gross profit		47,970			63,053
Other income		8,960			11,514
Other gains and losses		(4,061)			(8,139)
Selling and distribution expenses		(14,642)		(14,044)
Administrative expenses		(21,124)		(27,105)
Finance costs		(5,999)			(9,160)
Profit before tax		11,104			16,119
Income tax expense	4	(1,347)			(2,585)
Profit for the period	5	9,757			13,534


Earnings per share	7
– Basic (HK cents)		4.07			5.64


– Diluted (HK cents)		4.07			5.57

– 90 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Condensed Consolidated Statement of Financial Position

At 30 June 2009

		30 June	31 December
		2009	2008
	Notes	HK$’000	HK$’000
		(unaudited)	(audited)
Non-current assets
Investment properties	8	3,100	3,100
Property, plant and equipment	8	455,396	460,456
Prepaid lease payments
– non-current portion		22,843	23,150
Deposit paid for acquisition of property, plant
and equipment		2,330	4,704
		483,669	491,410

Current assets
Inventories		111,794	90,453
Prepaid lease payments
– current portion		615	615
Trade and other receivables	9	224,261	247,289
Bills receivable	9	5,550	4,768
Tax recoverable		2,940	2,190
Investment designated as at fair value through
profit or loss	10	–	9,349
Derivative financial instruments	11	782	1,301
Pledged bank deposits		24,619	–
Restricted bank deposits		11,395	18,373
Bank balances, deposits and cash		30,906	59,828
		412,862	434,166

Current liabilities
Trade and other payables	12	205,129	230,261
Bills payable	12	53,359	39,995
Taxation payable		13,575	16,718
Bank and other borrowings
– due within one year	13	169,926	177,962
Obligations under finance leases
– due within one year		43,864	43,492
		485,853	508,428

Net current liabilities		(72,991)	(74,262)
Total assets less current liabilities		410,678	417,148

– 91 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

		30 June	31 December
		2009	2008
	Notes	HK$’000	HK$’000
		(unaudited)	(audited)
Non-current liabilities
Bank and other borrowings
– due after one year	13	6,224	8,000
Obligations under finance leases
– due after one year		28,306	41,316
Amount due to a shareholder		20,531	20,627
Deferred tax liabilities		11,558	11,488

		66,619	81,431

Net assets		344,059	335,717


Capital and reserves
Share capital		24,000	24,000
Reserves		320,059	311,717

Total equity		344,059	335,717

– 92 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2009

					The
					People’s
					Republic
					of China		Share		Capital
	Share	Share	Revaluation		statutory	Special	options	contribution		Exchange	Accumulated		Total
	capital	premium		reserve	reserve	reserve	reserve		reserve	reserve		profits	equity
	HK$’000	HK$’000		HK$’000	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000		HK$’000	HK$’000
									(Note)
At 1 January 2008 (audited)	24,000	30,609		17,373	3,504	1,156	3,217		–	79		228,542	308,480
Profit for the period and
total comprehensive
income for the period	–	–		–	–	–	–		–	–		13,534	13,534
Recognition of equity-settled
share-based payments	–	–		–	–	–	2,647		–	–		–	2,647
Release of deferred tax
liabilities	–	–		60	–	–	–		–	–		–	60
Dividend paid	–	–		–	–	–	–		–	–		(12,000)	(12,000)
At 30 June 2008 (unaudited)	24,000	30,609		17,433	3,504	1,156	5,864		–	79		230,076	312,721

Profit for the period	–	–		–	–	–	–		–	–		14,187	14,187
Surplus on revaluation of
properties	–	–		8,385	–	–	–		–	–		–	8,385
Deferred tax liabilities
arising from revaluation of
properties	–	–		(2,157)	–	–	–		–	–		–	(2,157)
Total comprehensive income
for the period	–	–		6,228	–	–	–		–	–		14,187	20,415
Deemed capital contribution
from a shareholder	–	–		–	–	–	–		1,830	–		–	1,830
Recognition of equity-settled
share based payment	–	–		–	–	–	751		–	–		–	751
Release upon forfeiture of
vested share options	–	–		–	–	–	(467)		–	–		467	–
Transfer	–	–		–	42	–	–		–	–		(42)	–

At 31 December 2008 and at
1 January 2009 (audited)	24,000	30,609		23,661	3,546	1,156	6,148		1,830	79		244,688	335,717
Profit for the period and
total comprehensive
income for the period	–	–		–	–	–	–		–	–		9,757	9,757
Dividends paid	–	–		–	–	–	–		–	–		(2,400)	(2,400)
Release of deferred tax
liabilities	–	–		104	–	–	–		–	–		–	104
Deemed capital contribution
from a shareholder	–	–		–	–	–	–		706	–		–	706
Recognition of equity-settled
share based payment	–	–		–	–	–	175		–	–		–	175
Release upon forfeiture of
vested share options	–	–		–	–	–	(680)		–	–		680	–
At 30 June 2009 (unaudited)	24,000	30,609		23,765	3,546	1,156	5,643		2,536	79		252,725	344,059

Note: Capital contribution reserve represents a fair value adjustment on non-current interest-free loan from a shareholder. The shareholder’s loan was extended for seven months under the same terms and repayable on 31 January 2011.

– 93 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Condensed Consolidated Statement of Cash Flows

For the six months ended 30 June 2009

	For the	six months
	ended 30 June
	2009	2008
	HK$’000	HK$’000
	(unaudited)	(unaudited)
Net cash from (used in) operating activities	27,984	(10,601)
Net cash (used in) from investing activities
Increase in pledged bank deposits	(24,619)	–
Purchase of property, plant and equipment	(7,417)	(5,178)
Proceeds from disposal of investment designated at
fair value through profit or loss	8,890	–
Other investing cash flows	7,431	9,098
Repayment from a related party	–	13,680
	(15,715)	17,600
Net cash used in financing activities
Repayment of bank and other borrowings	(211,660)	(322,878)
Repayment of obligations under finance leases	(22,980)	(27,349)
Interest expense	(5,999)	(9,160)
Dividend paid	(2,400)	(12,000)
Borrowings raised	201,848	334,788
	(41,191)	(36,599)
Net decrease in cash and cash equivalents	(28,922)	(29,600)
Cash and cash equivalents at 1 January	59,828	70,663
Cash and cash equivalents at 30 June represented by
bank balances, deposits and cash	30,906	41,063

– 94 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2009

1. BASIS OF PREPARATION

The condensed consolidated financial statements have been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and with Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

In preparing the condensed consolidated financial statements, the directors of the Company have given careful consideration to the future liquidity of the Group in light of the fact that its current liabilities exceeded its current assets by HK$72,991,000 as at 30 June 2009. As at 30 June 2009, certain loan covenants were breached by the Group, all these loans amounting to HK$11,275,000 were included in current liabilities. At the date of report, the Group has reached an agreement in principle with one of the lenders for not demanding immediate payment of bank loan in connection with the breach of loan covenants and pending for written confirmation from the lender. The Group has agreed with the other lender to early settle the loan balance (see note 13). As at 30 June 2009, the Group has unutilised banking facilities of approximately HK$115,672,000, the majority of which are subsequently renewed.

The directors are of the opinion that, taken into account of the internally generated funds of the Group and the present available banking facilities, the Group has sufficient working capital for it present requirements for the next twelve months from the date of this report. Accordingly, the condensed consolidated financial statements have been prepared on a going concern basis.

2. PRINCIPAL ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared on the historical cost basis, except for investment properties, buildings and certain financial instruments, which are measured at fair values or revalued amounts, as appropriate.

The accounting policies used in the condensed consolidated financial statements are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 31 December 2008.

In the current interim period, the Group has applied, for the first time, a number of new and revised standards, amendments and interpretations (“new and revised HKFRSs”) issued by the HKICPA, which are effective for the Group’s financial year beginning on 1 January 2009.

Hong Kong Accounting Standard (“HKAS”) 1 (Revised 2007) “Presentation of Financial Statement” has introduced a number of terminology changes, including revised titles for the condensed consolidated financial statements, an introduction of condensed consolidated statement of comprehensive income and has resulted in a number of changes in presentation and disclosure.

HKFRS 8 “ Operating Segments ” is a disclosure standard that requires the identification of operating segments to be performed on the same basis as financial information that is reported internally for the purpose of allocating resources between segments and assessing their performance. The predecessor standard, HKAS 14 “ Segment Reporting ”, required the identification of two sets of segments (business and geographical) using a risks and returns approach. In the past, the Group’s reporting format was business segments. The application of HKFRS 8 has not resulted in a redesignation of the Group’s reportable segments as compared with the reportable segments determined in accordance with HKAS 14 (see note 3).

The adoption of the new and revised HKFRSs has had no material effect on the reported results and financial position of the Group for the current or prior accounting periods. Accordingly, no prior period adjustment has been recognised.

– 95 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group has not early applied the following new and revised standards, amendments or interpretations that have been issued but are not yet effective.

HKFRSs (Amendments) Amendment to HKFRS 5 as part of Improvements to HKFRSs issued in 2008[1] HKFRSs (Amendments) Improvements to HKFRSs issued in 2009[2] HKAS 27 (Revised 2008) Consolidated and Separate Financial Statements[1] HKAS 39 (Amendment) Eligible Hedged Items[1] HKFRS 1 (Amendment) Additional Exemptions for First-time Adopters[3] HKFRS 2 (Amendment) Group Cash-settled Share-based Payment Transactions[3] HKFRS 3 (Revised 2008) Business Combinations[1] Hong Kong (IFRIC) Interpretation Distributions of Non-cash Assets to Owners[1] (“HK(IFRIC) – Int”) 17 HK(IFRIC) – Int 18 Transfers of Assets from Customers[4]

1 Effective for annual periods beginning on or after 1 July 2009
2 Amendments that are effective for annual periods beginning on or after 1 July 2009 or 1 January 2010, as appropriate
3 Effective for annual periods beginning on or after 1 January 2010 4 Effective for transfers on or after 1 July 2009

The adoption of HKFRS 3 (Revised 2008) may affect the Group’s accounting for business combination for which the acquisition date is on or after 1 January 2010. HKAS 27 (Revised 2008) will affect the accounting treatment for changes in the Group’s ownership interest in a subsidiary. The directors of the Company anticipate that, the application of the other new or revised standards, amendments or interpretations will have no material impact on the results and financial position of the Group.

3. SEGMENT INFORMATION

The Group has adopted HKFRS 8 “ Operating Segments ” with effect from 1 January 2009. HKFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker being Chief Executive Officer of the Group in order to allocate resources to segments and to assess their performance. In contrast, the predecessor standard HKAS 14 “ Segment Reporting ” required an entity to identity two sets of segments (business and geographical), using a risks and returns approach, with the entity’s “system of internal financial reporting to key management personnel” serving only as the starting point for the identification of such segments.

In the past, the Group’s reporting format was business segments. The application of HKFRS 8 has not resulted in a redesignation of the Group’s reportable segments as compared with the primary reportable segments determined in accordance with HKAS 14, nor has the adoption of HKFRS 8 changed the basis of measurement of segment profit. The Group determines its operating segment based on the reports reviewed by the chief operating decision maker for making strategic decisions. The reports are prepared by products and by aggregating similar economic characteristic, three reporting segments were presented. Summarised details of each of the three reporting segments are as follows:

Manufacturing and trading of Single-sided printed circuit boards (“PCB”) (“Single-sided”)
Manufacturing and trading of Double-sided PCB (“Double-sided”)
Manufacturing and trading of Multi-layered PCB (“Multi-layered”)

– 96 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The following is an analysis of the Group’s turnover and results by operating segment for the periods under review:

	Six months	ended 30 June
	2009	2008
	HK$’000	HK$’000
	(unaudited)	(unaudited)
Turnover – external sales
Single-sided	86,673	94,057
Double-sided	96,527	150,071
Multi-layered	148,260	153,408
Total	331,460	397,536


Segment profit
Single-sided	4,024	4,385
Double-sided	2,969	22,108
Multi-layered	11,363	4,726
	18,356	31,219
Other income	1,187	1,413
Central administrative costs	(3,566)	(6,342)
Changes in fair value of investment designated at fair value through
profit or loss	(459)	–
Changes in fair value of derivative financial instruments	1,585	(1,011)
Finance costs	(5,999)	(9,160)

Profit before tax	11,104	16,119
Income tax expense	(1,347)	(2,585)
Profit for the period	9,757	13,534

Segment profit represents the profit earned by each segment after allocation of selling and administrative staff cost with reference to turnover and without allocation of other income, central administrative costs (mainly including audit fee and depreciation of property, plant and equipment for administrative purpose), changes in fair value of investment designated through profit or loss, changes in fair value of derivative financial instruments and finance costs. This is the measure reported to the Group’s Chief Executive Officer for the purposes of resource allocation and performance assessment.

4. INCOME TAX EXPENSE

	Six months	ended 30 June
	2009	2008
	HK$’000	HK$’000
	(unaudited)	(unaudited)
The charge comprises:
Enterprise Income Tax in other regions of the People’s Republic of
China (the “PRC”)	1,173	2,645
Deferred tax	174	(60)

	1,347	2,585

– 97 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Hong Kong Profits Tax is calculated at 16.5% (six months ended 30 June 2008: 16.5%) of the estimated assessable profit for the six months ended 30 June 2009. No provision for Hong Kong Profits Tax has been made as there was no assessable profit for both periods.

PRC Enterprise Income Tax is calculated at the applicable rates relevant to the PRC subsidiaries.

Deferred taxation has not been provided for the condensed consolidated financial statements in respect of the temporary differences attributable to the undistributed retained profits amounting to approximately HK$79,549,000 (31 December 2008: HK$51,821,000) earned by the subsidiaries, as the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

5. PROFIT FOR THE PERIOD

Profit for the period has been arrived at after charging (crediting):

	Six months	ended 30 June
	2009	2008
	HK$’000	HK$’000
	(unaudited)	(unaudited)
Directors emoluments	2,284	4,527
Other staff costs	41,526	43,454
Equity-settled share-based payment expenses other than directors	194	986
Total staff costs	44,004	48,967
Depreciation and amortisation	25,501	24,135
Impairment loss recognised on trade receivables	986	2,552
Changes in fair value of investment designated at fair value through
profit or loss	459	–
Changes in fair value of derivative financial instruments	(1,585)	1,011
Reversal of impairment loss recognised on trade receivables	(856)	(199)
Interest income	(453)	(132)

6. DIVIDENDS

During the period, a dividend of HK1 cent per share amounting to HK$2,400,000 (six months ended 30 June 2008: 2007 final dividend of HK5 cents per share amounting to HK$12,000,000) per share was paid to the shareholders as the final dividend for 2008.

The Board did not recommend the payment of an interim dividend for the both periods.

7. EARNINGS PER SHARE

The calculation of the basic earnings per share attributable to the owners of the Company is based on the profit for the period attributable to the owners of the Company of approximately HK$9,757,000 (six months ended 30 June 2008: HK$13,534,000) and on 240,000,000 (six months ended 30 June 2008: 240,000,000) ordinary shares in issue during the period.

For the period ended 30 June 2009, no dilutive earnings per share has been presented because the exercise price of share options granted by the Company is higher than the Company’s market price. For the six months ended 30 June 2008, the calculation of the diluted earnings per share attributable to the owners of the Company was based on the profit for the period attributable to the owners of the Company of approximately HK$13,534,000 and the weighted average number of approximately 242,849,000 ordinary shares which take into consideration of outstanding share options granted by the Company as at 30 June 2008.

8. MOVEMENTS IN INVESTMENT PROPERTIES AND PROPERTY, PLANT AND EQUIPMENT

At 30 June 2009, the directors considered that the carrying amount of the Group’s investment properties and buildings do not differ significantly from that which would be determined using fair values at the reporting date. Consequently, no fair value adjustment or revaluation surplus or deficit has been recognised in the current period.

– 98 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

During the six months ended 30 June 2009, the Group spent approximately HK$20,133,000 (six months ended 30 June 2008: HK$35,863,000) on acquisition of property, plant and equipment, of which approximately HK$10,342,000 (six months ended 30 June 2008: HK$27,883,000) was acquired under finance leases.

9. TRADE, BILLS AND OTHER RECEIVABLES

(a) Trade and other receivables

	30 June	31 December
	2009	2008
	HK$’000	HK$’000
	(unaudited)	(audited)
0 – 30 days	57,575	63,142
31 – 60 days	53,433	64,683
61 – 90 days	39,073	47,629
91 – 180 days	42,141	42,148
Over 180 days	1,678	1,790
	193,900	219,392
Deposits, prepayments and other receivables	30,361	27,897
	224,261	247,289

(b) Bills receivable

The aged analysis of bills receivable is as follows:

	30 June	31 December
	2009	2008
	HK$’000	HK$’000
	(unaudited)	(audited)
0 – 30 days	–	122
31 – 60 days	5,090	2,382
61 – 90 days	–	1,952
91 – 180 days	460	312
	5,550	4,768

10. INVESTMENT DESIGNATED AS AT FAIR VALUE THROUGH PROFIT OR LOSS

At 31 December 2008, the balance represented an unlisted commodity linked note issued by a financial institution with a principal amount of US$1,200,000. The unlisted commodity linked note was redeemed at maturity on 3 April 2009 at approximately HK$8,890,000, resulting in a loss of approximately HK$459,000. The redemption amount at maturity date was calculated by a predetermined formula based on copper price on that date.

11. DERIVATIVE FINANCIAL INSTRUMENTS

At 30 June 2009, the Group has outstanding forward contracts entered into during the period to manage its exchange rate risk. The fair value of the forward contracts are determined based on the difference between the market forward rates at the reporting date for the remaining duration of the outstanding contracts and their contracted forward rates and discounted using an approximate discount rate to take account of the time value of money.

– 99 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

12. TRADE, BILLS AND OTHER PAYABLES

(a) Trade and other payables

The aged analysis of trade payables, presented based on the invoice date, is as follows:

	30 June	31 December
	2009	2008
	HK$’000	HK$’000
	(unaudited)	(audited)
0 – 30 days	34,952	22,453
31 – 60 days	32,979	20,705
61 – 90 days	28,759	48,553
91 – 180 days	58,589	101,450
Over 180 days	14,063	7,046
	169,342	200,207
Other payables and accruals	35,787	30,054
	205,129	230,261

(b) Bills payable

The aged analysis of bills payable is as follows:

	30 June	31 December
	2009	2008
	HK$’000	HK$’000
	(unaudited)	(audited)
0 – 30 days	48,141	32,125
31 – 60 days	3,154	3,695
61 – 90 days	884	2,872
91 – 180 days	1,180	1,303
	53,359	39,995

13. BANK AND OTHER BORROWINGS

During the period, the Group obtained new bank loans amounting to approximately HK$201,848,000 (six months ended 30 June 2008: HK$334,788,000). The new loans bear interest ranging from 0.73% to 5.84% (six months ended 30 June 2008: 4.00% to 6.04%) per annum and are payable within one year. The proceeds are used to finance the operations of the Group.

As at 30 June 2009, in respect of bank loans with carrying amounts of approximately HK$11,275,000 (30 June 2008: HK$175,000,000) as at that date, the Group breached certain financial covenants as stipulated in the banking facilities letters entered into by the Group, which are primarily related to net asset value and working capital ratio. On discovery of the breach, the directors of the Company informed the lenders and commenced a renegotiation of the terms of the loans with relevant bankers. At the reporting date, the lenders have not yet agreed to waive their right to demand immediate payment. All these loans were included in current liabilities in the condensed consolidated financial statements for the six months ended 30 June 2009. The Group agreed with one of the lenders to early settle the loan balance of approximately HK$520,000 on 17 September 2009. At the date of report, the Group has reached an agreement in principle with the other lender of the remaining loan balance of approximately HK$10,755,000 not to demand immediate payment from the Group and repayment terms of these loans are the same as if there is no breach of financial covenants. The Group is pending for written confirmation from the lender in relation to the waiver.

– 100 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

14. SHARE OPTION SCHEME

The Company has a share option scheme for the eligible employees of the Group. Details of the share options outstanding during the current period are as follows:

	Number of
	share options
Outstanding at the beginning of the period	12,600,000
Forfeited during the period	(2,600,000)
Outstanding at the end of the period	10,000,000

15. CAPITAL COMMITMENTS

At 30 June 2009, the Group had commitments of approximately HK$8,971,000 (31 December 2008: HK$15,815,000) in respect of the acquisition of property, plant and equipment contracted for but not provided in the condensed consolidated financial statements.

16. PLEDGE OF ASSETS

As at 30 June 2009, the equity interests of two PRC subsidiaries with an aggregate net asset values of approximately HK$378,502,000 (31 December 2008: HK$380,254,000), certain property, plant and equipment with aggregate carrying amount of approximately HK$23,583,000 (31 December 2008: nil), and certain bank deposits with carrying amount of approximately HK$24,619,000 (31 December 2008: nil), were pledged to banks to secure short-term bank borrowings granted to the Group.

Subsequent to the reporting date, the equity interests of two PRC subsidiaries were discharged and released from the banks.

– 101 –

MANAGEMENT DISCUSSION AND ANALYSIS

APPENDIX II

Business Review

The Group is principally engaged in manufacturing and trading of broad range of PCBs including single-sided PCBs, double-sided PCBs and multi-layered PCBs of up to 12 layers.

The products in the three categories are mainly applied in relation to consumer electronics, computers and computer peripherals, and communications equipment. For the six months period ended 30 June 2009, application wise, consumer electronics continued to contribute the highest turnover accounting for approximately 52.0% of the Group’s turnover. High end multi-layered PCBs remained the core product of the Group, accounting for 44.7% of turnover. During the period, the Group successfully expanded its business in the automotive and multimedia markets. After securing TS16949 certification two years ago and capitalizing on the quantum growth of the market, the Group has gradually developed long term business with some major global players in the automotive electronics industry, including Clarion, Flextronics Automotive, Lite-On Group and TRW. Concurrently, the Group has also established a foothold in supplying to some key worldwide OEM customers in the multimedia products area, for example, Arcelik, MSI, Panasonic, Philips and Sony.

Financial Review

For the six months ended 30 June 2009, the Group’s turnover amounted to approximately HK$331.5 million, representing a decrease of 16.6% as compared to approximately HK$397.5 million for the corresponding period last year. During this period, the Group’s gross profit decreased by 23.9% to approximately HK$48.0 million compared to the corresponding period the previous year. The Group’s gross profit margin dropped to approximately 14.5%. The decrease in gross profit was mainly attributable to under-utilisation of the Group’s existing production capacities particularly in the first quarter of the year due to decrease in demand for PCB. Profit attributable to shareholders was approximately HK$9.8 million, (2008: HK$13.5 million), representing a decrease of 27.9% compared to the corresponding period the previous year.

Liquidity and Capital Resources

As at 30 June 2009, the Group had total assets of approximately HK$896.5 million (31 December 2008: HK$925.6 million) and interest-bearing borrowings of approximately HK$248.3 million (31 December 2008: HK$270.8 million), representing a gearing ratio, defined as interest-bearing borrowings over total assets, of approximately 27.7% (31 December 2008: 29.3%). The Group’s net current liabilities of approximately HK$73.0 million (31 December 2008: HK$74.3 million) consisted of current assets of approximately HK$413.0 million (31 December 2008: HK$434.2 million) and current liabilities of approximately HK$485.9 million (31 December 2008: HK$508.4 million), representing a current ratio of approximately 0.85 (31 December 2008: 0.85). As at 30 June 2009, the Group had cash and bank balances of approximately HK$66.9 million (31 December 2008: HK$78.2 million).

– 102 –

MANAGEMENT DISCUSSION AND ANALYSIS

APPENDIX II

Human Resources

As at 30 June 2009, the Group employed a total of approximately 3,362 employees (31 December 2008: 2,676), including approximately 3,332 employees in its Zhongshan production site and approximately 30 employees in its Hong Kong office.

The Group’s remuneration policy is reviewed regularly, with reference to the legal framework, market conditions and the performance of the Group and individual staff. The remuneration policy and remuneration packages of the executive Directors and members of the senior management are also reviewed by the remuneration committee. The Group may also grant share options and discretionary bonuses to eligible employees based on the performance of the Group and individuals. Under the Group’s remuneration policy, employees are rewarded in line with the market rate in compliance with statutory requirements of all jurisdictions where it operates. The Group also holds regular training programmes and also encourages staffs to attend training courses and seminars that are related directly and indirectly to the Group’s business.

Foreign Currency Exposure

The Group operates in Hong Kong and the PRC with most of the transactions denominated and settled in Hong Kong dollars, United States dollars and RMB. However, foreign currencies, mainly United States Dollars and RMB are required to settle the Group’s costs and expenses on plant and equipment. The Group will use forward contracts to hedge its foreign currency exposure if it considers the risk to be significant.

Outlook

In 2009, due to the tough business environment of PCB industry, the Group consolidated its business focus, and the capital expenditure for expansion of the Group’s existing production capacity was put on hold until further analysis of market situation in the coming year. In view of the Group’s existing customer relationships and the prospects of upcoming projects, the management maintained an optimistic view on its business prospects in 2010. The Group is confident to achieve a bigger market share and improve its profitability through optimization of production facilities, consistent cost control measures and comprehensive sales and marketing networks.

On the other hand, the Board takes an open view to explore high growth and potential projects in order to broaden the income stream and increase shareholders’ value. The Group realizes the business potential of energy saving products and the LED lighting business in terms of market scale and government commitment, and has sought an opportunity to have a move in the LED lighting business in conjunction with Dongfang and Mr. Zhu. Upon the formation of the JV Company (including the Injection and Subscription), the Purchase and Acquisition, the Group will further diversify the product range of the Group, improve its products’ structure and enhance its anti-risk ability and profitability.

– 103 –

MANAGEMENT DISCUSSION AND ANALYSIS

APPENDIX II

The Directors believe, upon the commencement of LED business, the JV Company will be technology-driven and ready to tap the high growth road lamp replacement market in China. The JV Company will operate in the complete value chain in LED lighting systems, i.e. R&D, manufacture, LED packaging and installation of LED lighting systems, including decorative lights and high power lights. Since the signing of the non-legally binding memorandum of understanding dated 28 September 2009 in relation to the formation of the JV Company and the Acquisition and during the course of the formation of the JV Company, the Group and Dongfang have already made significant efforts to start up certain LED lighting business negotiations and arrangements, with encouraging prospects so far. As a starting point, the JV Company will focus its business in cities such as Yangzhou of Jiangsu Province, Chengdu of Sichuan Province, and Foshan, Shenzhen and Guangzhou of Guangdong Province.

To signify a milestone for the Group’s urban LED lighting business, the Company has established a landmark foothold in Yangzhou, Jiangsu Province in order to tap the eastern China market by signing a memorandum of understanding on 19 November 2009 with the management committee of Yangzhou Economic Development Zone. The Company has also signed an agreement with the management committee of the South West Airport Economic Development Zone in Shuangliu County, Chengdu, Sichuan Province on 30 December 2009 to kick off another key project to develop the LED lighting business in south-western China. The Group is pleased to execute its LED business as planned and by kicking off the urban LED lamp market in Yangzhou and Chengdu the Group’s confidence to tap the high potential of LED market in the PRC has been enhanced. The Group plans to establish footholds in different regions in order to explore markets nearby.

– 104 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX III

(A) UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE GROUP

The unaudited pro forma statement of assets and liabilities of the Group as at 30 June 2009 (the “Unaudited Pro Forma Financial Information”) has been prepared by the Directors in accordance with Paragraph 4.29 of the Listing Rules to illustrate the effect of the proposed formation of a joint venture company (“JV Company”), the purchase of assets by the JV Company from its equity holder (the “Purchase”) and the acquisition of interest in the JV Company (the “Acquisition”) (hereinafter collectively referred to as the “Proposed Transactions”) on the assets and liabilities of the Group as if the Proposed Transactions had taken place on 30 June 2009.

The Unaudited Pro Forma Financial Information is prepared for illustrative purposes only and, because of its nature, it may not give a true picture of the financial position of the Group as at 30 June 2009 or at any future date.

The Unaudited Pro Forma Financial Information is prepared based on the unaudited condensed consolidated statement of financial position of the Group as at 30 June 2009, extracted from the interim report of the Group for the six months ended 30 June 2009 as set out in Appendix I to this circular, with pro forma adjustments described below:

			Unaudited pro
			forma		Unaudited pro		Unaudited pro
	Unaudited		statement of		forma		forma
	statement of		assets and		statement of		statement of
	assets and		liabilities of		assets and		assets and
	liabilities of		the Group		liabilities of		liabilities of
	the Group as		after the		the Group		the Group
	at 30 June	Pro Forma	formation of	Pro Forma	after the	Pro Forma	after the
	2009	Adjustment	JV Company	Adjustment	Purchase	Adjustment	Acquisition
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
	Note 1	Note 2		Note 3		Note 4
Non-current assets
Investment properties	3,100		3,100		3,100		3,100
Property, plant and equipment	455,396	11,110	466,506	6,019	472,525		472,525
Prepaid lease payments –
non-current portion	22,843		22,843		22,843		22,843
Intangible assets	–	42,614	42,614	3,101	45,715		45,715
Deposits paid for acquisition
of property, plant and
equipment	2,330		2,330		2,330		2,330

	483,669		537,393		546,513		546,513

Current assets
Inventories	111,794		111,794		111,794		111,794
Prepaid lease payments
– current portion	615		615		615		615
Trade and other receivables	224,261		224,261		224,261		224,261
Bills receivable	5,550		5,550		5,550		5,550
Tax recoverable	2,940		2,940		2,940		2,940
Derivative financial
Instruments	782		782		782		782
Pledged bank deposits	24,619		24,619		24,619		24,619
Restricted bank deposits	11,395		11,395		11,395		11,395
Bank balances, deposits
and cash	30,906	9,120	40,026	(9,120)	30,906	(10,000)	20,906

	412,862		421,982		412,862		402,862

– 105 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION

			Unaudited pro
			forma		Unaudited pro		Unaudited pro
	Unaudited		statement of		forma		forma
	statement of		assets and		statement of		statement of
	assets and		liabilities of		assets and		assets and
	liabilities of		the Group		liabilities of		liabilities of
	the Group as		after the		the Group		the Group
	at 30 June	Pro Forma	formation of	Pro Forma	after the	Pro Forma	after the
	2009	Adjustment	JV Company	Adjustment	Purchase	Adjustment	Acquisition
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
	Note 1	Note 2		Note 3		Note 4
Current liabilities
Trade and other payables	205,129		205,129		205,129		205,129
Bills payable	53,359		53,359		53,359		53,359
Taxation payable	13,575		13,575		13,575		13,575
Bank and other borrowings
– due within one year	169,926		169,926		169,926		169,926
Obligations under finance
leases – due within one
year	43,864		43,864		43,864		43,864

	485,853		485,853		485,853		485,853

Net current liabilities	(72,991)		(63,871)		(72,991)		(82,991)

Total assets less current
liabilities	410,678		473,522		473,522		463,522

Non-current liabilities
Bank and other borrowings
– due after one year	6,224		6,224		6,224		6,224
Obligations under finance
leases – due after one year	28,306		28,306		28,306		28,306
Amount due to a shareholder	20,531		20,531		20,531		20,531
Deferred tax liabilities	11,558		11,558		11,558		11,558

	66,619		66,619		66,619		66,619

Net assets	344,059		406,903		406,903		396,903

Notes to the unaudited pro forma statement of assets and liabilities:

The figures are extracted from the unaudited condensed consolidated statement of financial position as at 30 June 2009, as set out in the published interim report of the Company for the six months ended 30 June 2009.
Pursuant to the Agreements, among Dongfang, Mr. Zhu and the Group, a JV Company would be established and held as to 51% by the Group by injection of cash in the sum of HK$57 million (equivalent to approximately RMB50 million). The adjustment represented the injection into the JV Company by Dongfang of property, plant and equipment and intellectual properties at agreed amounts of approximately HK$11.1 million and HK$13.3 million (equivalent to approximately RMB9.7 million and RMB11.7 million) and cash of approximately HK$9.1 million (equivalent to approximately RMB8 million) and injection into the JV Company by Mr. Zhu of intellectual properties of approximately HK$29.3 million (equivalent to approximately RMB25.7 million determined based on valuation carried out by a qualified valuer in the PRC), in exchange of a total of 49% equity interest in the JV Company, which represented the minority interest of the Group.
Pursuant to the Agreements, the JV Company would purchase property, plant and equipment and intellectual properties from Dongfang payable by cash at an aggregate amount of approximately HK$9.1 million (equivalent to RMB8 million).
The adjustment represented the Group’s acquisition of 19% equity interest in the JV Company from Mr. Zhu at an aggregate consideration of approximately HK$28.4 million to be satisfied partly by cash payment of HK$10 million and partly by way of issuance and allotment of the Company’s shares (equivalent to the aggregate amount of approximately HK$18.4 million) pursuant to the Agreements.
The amounts expressed in Renminbi have been translated at a prevailing exchange rate of 1.14 to Hong Kong dollar as at 18 January 2010, the date of the Investment Co-operation Agreement.

– 106 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX III

(B) ACCOUNTANT’S REPORT ON UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE GROUP

The following is the full text of a report received from the reporting accountants, Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this Circular:

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TO THE DIRECTORS OF TC INTERCONNECT HOLDINGS LIMITED

We report on the unaudited pro forma financial information of TC Interconnect Holdings Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”), which has been prepared by the directors of the Company for illustrative purposes only, to provide information about how the proposed formation of a joint venture company (“JV Company”), the purchase of assets by the JV Company from its equity holder (the “Purchase”) and acquisition of interest in the JV Company (the “Acquisition”) (hereinafter collectively referred to as the “Proposed Transactions”) might have affected the financial information presented, for inclusion in Appendix III of the circular dated 22 April 2010 (the “Circular”). The basis of preparation of the unaudited pro forma financial information is set out on pages 105 and 106 to the Circular.

Respective responsibilities of directors of the Company and reporting accountants

It is the responsibility solely of the directors of the Company to prepare the unaudited pro forma financial information in accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to the Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants.

It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 of the Listing Rules, on the unaudited pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

Basis of opinion

We conducted our engagement in accordance with the Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants. Our work consisted primarily of comparing the unadjusted financial information with source documents, considering the evidence supporting the adjustments and discussing the unaudited pro forma financial information with the directors of the Company. This engagement did not involve independent examination of any of the underlying financial information.

– 107 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX III

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the unaudited pro forma financial information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purpose of the unaudited pro forma financial information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

The unaudited pro forma financial information is for illustrative purpose only, based on the judgments and assumptions of the directors of the Company, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in future and may not be indicative of the financial position of the Group as at 30 June 2009 or any future date.

Opinion

In our opinion:

a. the unaudited pro forma financial information has been properly compiled by the directors of the Company on the basis stated;
b. such basis is consistent with the accounting policies of the Group so far as such policies relate to the Proposed Transactions; and
c. the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong 22 April 2010

– 108 –

VALUATION REPORTS

APPENDIX IV

22 April 2010

VALUATION OF 100% EQUITY INTEREST IN A JOINT VENTURE COMPANY

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The Directors TC Interconnect Holdings Limited 31/F, Aitken Vanson Centre, 61 Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong

Dear Sir or Madam,

Re: Valuation of 100% equity interest in a joint venture company

We refer to the instructions from TC Interconnect Holdings Limited (the “Company”) to conduct a valuation on a fair value basis for 100% equity interest (the “Relevant Interest”) in a joint venture company (the “JV Company”) formed by the Company, Mr. Zhu Jianqin (“Mr. Zhu”) and Orient Opto-Semiconductors Corporation as at 18 January 2010 (“Valuation Date”).

The purpose of this report is to express an independent opinion on the fair value of the Relevant Interest of the JV Company for inclusion in a circular of the Company only. We confirm that we have made relevant investigations, enquiry and obtained such further information, as we consider necessary for the purpose of providing our opinion.

BASIS OF VALUATION

Our valuation is based on going concern premise and conducted on a fair value basis.

For the purpose of this valuation, fair value is defined as following:

“the estimated amount for which an asset should exchange between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

BACKGROUND INFORMATION

On 18 January 2010, the Company has announced that it has entered into an Investment Co-operation Agreement and a Supplemental Agreement (jointly referred as “JV Agreement”) with Mr. Zhu and Dongfang to jointly establish a joint-venture company (“JV Company”).

– 109 –

VALUATION REPORTS

APPENDIX IV

The JV Company is principally engaged in the business of operation and management of energy saving projects, the sale and marketing of LED lighting and other energy saving projects.

Pursuant to the conditions precedent to the formation of the JV Company (Clause 1) under the JV Agreement, the Company shall subscribe for 51% equity interest in the JV Company by way of injection of cash in the sum of RMB50,000,000, Dongfang shall subscribe for 30% equity interest in the JV Company by way of injection of the LED street light related intellectual properties and other LED-related intellectual properties held by Dongfang, and Mr. Zhu shall subscribe for 19% equity interest in the JV Company by way of transfer to the JV Company of the ownership of all the LED-related intellectual properties held by Mr. Zhu.

Furthermore, subject to the conditions precedent to the acquisition of the JV Company interest (Clause 2) under the JV Agreement, the Company has agreed to acquire from Mr. Zhu the 19% of the Relevant Interest in the JV Company held by Mr. Zhu at a consideration of HK$28,400,000, which shall be satisfied partly by cash (as to HK$10,000,000) and partly by way of issuance and allotment of the ordinary shares of the Company (as to HK$18,400,000).

Upon completion of the acquisition, a 70% of the Relevant Interest will be held by the Company while 30% of the Relevant Interest will be held by Dongfang.

– 110 –

VALUATION REPORTS

APPENDIX IV

The relevant information of the Intellectual Properties (“IP”) is listed underneath:

			Application	Date of	Certificate
No.	Name of the IP	Inventor	Number	Application	No.
IP Held by Mr. Zhu
1	A kind of envelope for high-	Mr. Zhu	200610061225.3	19/06/2006	–
	powered semiconductor lighting
	components
2	A kind of high-powered LED	Mr. Zhu	200710074813.5	04/06/2007	–
	lighting component
3	A kind of LED lighting component	Mr. Zhu	200710075026.2	13/06/2007	–
4	A kind of high-powered	Mr. Zhu	200620014277.0	14/06/2006	927875
	semiconductor lighting assembly
5	Ferrofluid LED lamp	Mr. Zhu	200820146837.7	25/08/2008	1251246
6	Aluminum nitride lighting	Mr. Zhu	200920135718.6	13/03/2009	–
	component with porcelain basic
	plate
7	Thermal dissipation equipment for	Mr. Zhu	200920135717.1	13/03/2009	–
	high-powered LED lamps
8	LED street lamp	Mr. Zhu	200920131450.9	14/05/2009	–
9	LED street lamp	Mr. Zhu	200930165945.9	14/05/2009	–
IP Held by Dongfang
10	A kind of colour-control equipment	Mr. Zhu	200520121237.1	28/12/2005	889313
	for LED lighting string
11	A kind of LED surface lighting	Mr. Zhu	200620013475.5	02/05/2007	896609
	equipment
12	A kind of semiconductor lighting	Mr. Zhu	200520061782.6	26/07/2005	818941

SOURCE OF INFORMATION

Our investigation includes the discussion with the management and shareholder representatives of the Company, collecting as well as information of the JV Company history, operations and prospects of the business. We requested and received detailed information about the JV Company in order to conduct a detailed review and to make an impartial and independent valuation for the Relevant Interest.

While we are not in a position to audit the operational and financial data provided by the Company, we have no reason to doubt the truth and accuracy of the information provided to us which is material to the valuation. We have not carried out independent verification on any of the information provided to us by the Company. We have assumed that the data obtained in the course of the valuation, along with the opinions and representations provided to us by the Company are prepared with reasonable care and diligence and we were also advised that no material facts have been omitted from the information supplied.

For the purpose of our valuation, we were relied on the business plan, financial forecast and operation information in respect of the JV Company provided by the management of the Company.

The valuation required the consideration of all pertinent factors affecting the economic benefits of the JV Company, IP and the abilities to generate future investment returns. The factors considered in the valuation included, but were not limited to the following:

– 111 –

VALUATION REPORTS

APPENDIX IV

The history of the Dongfang and the JV Company;
The nature of business of the Dongfang and the JV Company;
The financial conditions of Dongfang and the JV Company;
The terms and conditions of the contract and agreements of Dongfang and the JV Company;
The planned operating conditions of the JV Company including the production, marketing and sales of LED street light products;
The economic condition and the industry outlook in general;
The specific economic environment and competition for the JV Company; and
The financial and business risks of the JV Company.

Due to the changing environment, a number of assumptions have to be established in order to sufficiently support our concluded opinion of values of the Relevant Interest of the JV Company. The major assumptions adopted in our valuations are:

The expected productivity of the JV Company is projected according to management forecast;
The expected operating cost of the JV Company is projected according to management forecast;
The expected growth rate of revenue and cost is projected according to management forecast;
The expected growth in price of products of the JV Company is projected according to management forecast;
There will be no major changes in the current taxation law in the jurisdiction where the Company currently operates or will operate which will materially affect the revenues, that the rates of tax payable remain unchanged and that all applicable laws and regulations will be complied with;
The financial projections in respect of the JV Company have been prepared on a reasonable basis, reflecting estimates that have been arrived at after due and careful consideration by the management of the Company;
Allowance for appropriate discount on the lack of marketability;
The information provided by the Company is true and accurate; and

– 112 –

VALUATION REPORTS

APPENDIX IV

Economic condition will not deviate significantly from economic forecasts.

We were provided with the financial statements of Dongfang for financial 2007 to 2009 and financial projections of the JV Company by the Company. After discussing with the management and reviewing relevant market data, certain adjustments and assumptions have been made in the financial forecast to arrive the valuation conclusion.

A financial projection from 2010 to 2018 is provided by the Company. Adjustments made and assumptions taken are as follows:

The maximum current annual production capacity of the JV Company is about 77,500 LED lighting products. As per management discussion, RMB10,000,000 and RMB16,000,000 will be invested in year 2010 and 2015 respectively to extend the production capacity to meet to expected demand. Upon the completion of the expansion in 2010 and 2015, the maximum annual production capacity will be extended to 160,000 and 240,000 respectively;
Starting from 2015, various IP held by the JV Company will end gradually. It is assumed that the terms of IP will be renewed for perpetuity;
The revenue grows at the same rate as various cost of production;
Repair and maintenance fee is assumed at 3% of total revenue per annum;
The cost of goods sold is assumed at 63% of total revenue per annum;
The business tax rate is assumed to be 1.8% of total revenue per annum;
The adopted useful life of fixed asset is 10 years and the adopted depreciable life is 10 years;
There are no non-operating incomes;
Capital expenditure on expansion in 2010 and 2015 will be fully funded by cash;
Apart from the capital expenditure on expansion in 2010 and 2015, there is no other capital expenditure, as the repair and maintenance expense captures the capital expenditure need;
The account receivable days, inventory turnover days, other receivables days, account payable days, trade and bills payable days and tax payable days are assumed equal to the respective average figures of Dongfang for financial year 2007 to 2009;
The cash balance as at the Valuation Date is adjusted to RMB50,000,000 which is equal to the cash injection from the Company as per the JV Agreement;

– 113 –

VALUATION REPORTS

APPENDIX IV

The terminal growth rate is assumed to be 3%;
The working capital is assumed to be fully recoverable in the terminal year; and
The terminal value is determined at 2019.

LIMITING CONDITIONS

Our opinion of the value of the Relevant Interest in this report is valid only for the stated purpose and only for the effective date of the appraisal. No responsibility is taken for any changes in the market conditions and no obligation is assumed to revise this report to reflect events or change of government policy or conditions, which may occur subsequent to the date hereof.

Our conclusions assume continuation of prudent management policies over whatever period of time is reasonable and necessary to maintain the character and integrity of the assets appraised. Management is assumed to be competent, and the ownership to be in responsible hands, unless otherwise noted in this report. The quality of the business management can have a direct effect on the viability and value of the business.

We have also assumed that there are no hidden or unexpected conditions associated with the businesses that might adversely affect the reported values. Although gathered from reliable source, no guarantee is made nor liabilities assumed for the accuracy of any data, opinions, or estimates identified as being furnished by others, which have been incorporated this valuation and analysis.

Further, we have no responsibility or obligation to update this report for events or circumstances occurring subsequent to the date of this report.

No opinion is intended to be expressed for matters which require legal or other specialized expertise or knowledge, beyond that customarily employed by appraisers.

Any decision to purchase, sell or transfer any interest in the JV Company shall be the owners’ sole responsibility, as well as the structure to be utilized and the price to be accepted. The selection of the price to be accepted requires consideration of factors beyond the information we will provide or have provided. An actual transaction involving the subject business might be concluded at a higher value or at a lower value, depending upon the circumstances of the transaction and the business, and the knowledge and motivations of the buyers and sellers at that time.

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APPENDIX IV

We have relied upon the representations of the owners and management concerning the useful conditions of all hard assets used in the business, and any other assets or liabilities except as specifically stated in this report. We have not attempted to confirm whether or not all assets of the business are free and clear of liens and encumbrances, or that the JV Company has good title to all assets.

This valuation is based upon data, conditions, hypotheses and assumption stated herein and as presented to us by management, upon which we relied.

In all matters that may be potentially challenged by a Court or others, we do not take any responsibility for the degree of reasonableness of contrary positions that others may choose to take, nor for the costs or fees that may be incurred in the defense of our recommendations against such challenge(s). We will, however, retain our supporting work papers for your matter(s), and will be available to assist in active defense of our professional positions taken, at our then current rates, plus direct actual expenses and according to our then standard professional agreement.

VALUATION DISCUSSION AND APPROACH TO VALUATION

In determining the fair market value of Relevant Interest of the JV Company, we have considered three traditional valuation approaches: the Asset Approach (or the Cost Approach), the Income Approach and the Market Approach. Practitioners differ on the classification of specific valuation methods within these three classes; however, it is generally agreed that all valuation methods can be described either as a form of one of these approaches or as a hybrid of two or more of these approaches.

Asset Approach (Cost Approach)

The Asset Approach, sometimes referred to as the Cost Approach, is an asset-oriented approach rather than a market-oriented approach which is not assuming to value to business in an ongoing basis. Each component of a business is valued separately, and then summed up to derive the total value of the business.

The appraiser estimates value, using this approach, by estimating the cost of duplicating or replacing the individual elements of the business being appraised, item by item, asset by asset.

The tangible assets of the business are typically valued using this approach. In many instances, it cannot be used alone as many businesses also have intangible value as well, to which this approach cannot usually be applied.

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APPENDIX IV

Income Approach

The Income Approach, sometimes referred to as the investment value approach, is an income-oriented approach rather than an asset or market-oriented approach. This approach assumes that an investor could invest in a project or a company with similar investment characteristics, although not necessarily the same business.

The computations using the Income Approach generally determine that the value of the business is equal to the expected future income of the business discounted by a required rate of return. This involves the principle of capitalization. In general, capitalization is merely the process of dividing the estimate of future income by the required (risk factored) rate of return.

Since estimating the future income of a business is speculative, historical data is generally used as a starting point in several of the acceptable methods under the premise that history will repeat itself.

Market Approach

Market Approach is used to estimate value through analysis of recent transaction. Market-based approaches often used to provide an indication of the value of the entire stockholders’ equity or a partial interest therein, or the value of the entire invested capital (debt and equity). When used for these purposes, the market approach requires the selection of appropriate guideline companies (publicly traded or private companies); the determination of market value ratios for the guideline companies based on the market price or selling price of the security or business compared to various parameters, such as earnings, cash flow, sales and book value; the selection of appropriate market value ratios for the subject company based on a comparison of the subject company to the guideline companies; and the determination of applicable premiums and discounts based on any differences in ownership percent, ownership rights, business ownership form, or marketability between the subject company and the guideline companies. In our valuation, we have considered the following ratios of comparable companies with proper adjustment made.

• Price-to-book Ratio (P/B)

Price-to-book ratio provides a relatively stable, intuitive measure of value which can be compared to the market price. Given reasonably consistent accounting standards across firms, price-book value ratios can be compared across similar firms for signs of under- or over-valuation. Even firms with negative earnings, which cannot be valued using P/E ratio, can be evaluated using P/B ratios.

• Price-to-earnings Ratio (P/E)

The price-to-earnings ratio is an intuitively appealing statistic that relates the price paid to current earnings. It is simple to compute for most stocks, and is widely available, making comparisons across stocks simple and it is a proxy for a number of other characteristics of the firm including risk and growth. Using the P/E ratio is a way to avoid having to be explicit about their assumptions on risk, growth and payout ratios.

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APPENDIX IV

EV-to-Sales Ratio (EV/Sales)

EV/Sales is calculated from EV (Enterprise Value) divided by sales. Valuations based on sales rather than profits implicitly assume that a company will be able to return to “normal” margins, or that it will be taken-over by someone who can restore normal margins. Therefore it needs to be treated with caution and investors need to assess the real odds of a return to “business as usual”: e.g., achieving the same margins as the peers against its EV/sales is being measured. Using EV/sales implicitly assumes that margins are not normal, as otherwise a profit based ratio would be preferable.

• EV-to-EBITDA Ratio (EV/EBITDA)

EV/EBITDA is calculated from EV (Enterprise Value) divided by EBITDA (Earnings before Interest, Tax, Depreciation and Amortization). Such ratio is generally used to value shares by assuming that debt, which has a verifiable market value, is worth its market value. Other debt may be assumed to be worth its book value (the amount shown in the accounts). Alternatively, it is valued in line with the company’s traded debt (for example, with the same risk premium as the most similar traded debt). Equity can then be assumed to be worth EV less the value of the debt. EV/EBITDA is used to look at the value of the business in EV terms. It does not break this value down into the value of the debt and the value of the equity.

In our valuation, we have adopted the Income Approach to arrive the value of the Relevant Interest in the JV Company which takes into account the future growth potential and business nature of the JV Company.

Free Cash Flow to Firm

Cash flows that flow into the firm in the form of revenues as it sells its product and cash flows out as the firm pays its cash to support its operation such as paying the operating expenses and selling expenses. The firm takes the cash left over and makes short-term investments in working capital such as inventory and receivables and long term investment such as capital expenditure, property, plant and equipment. The cash remain is available to pay to the firms’ investors: bondholders and common shareholders. The pile of the remaining cash is Free Cash Flow to Firm (FCFF) . The definition of FCFF is the cash available to all of the firm’s investors, including stockholders and bondholders, after the firm buys and sells products, provides services, pays its cash operating expenses, and makes short- and long-term investments.

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APPENDIX IV

The valuation is based on FCFF and the major parameters are discussed below:

Discount Rate

As no debt is utilized by the JV Company, the discount rate is the required return on equity. The required return on equity (or cost of equity) was developed using Capital Asset Pricing Model (“CAPM”). The CAPM states that an investor requires excess returns to compensate for systematic risks and but which provides no excess return which may be needed to compensate for other risks. Under the CAPM, the required rate of return is the sum of the risk-free rate, the equity risk premium and other risk premium. The list of parameters for the calculation of discount rate is provided underneath:

Parameter		Note
Risk Free Rate	3.69%	The Yield of China 10 Years Bond
Market Risk Premium	4.60%	Long-term average risk premium of
		Shanghai A-Share Index
Unleveraged Beta	1.004	Median of Comparable Companies
Industry Premium and	5.18%	Industry Risk Premium (1.19%, SIC
Size Premium		Code 364) and Size Premium (3.99%)
		with reference to Ibbotson SBBI 2009
		Valuation Yearbook published by
		Morningstar
Cost of Equity	13.48%

Lack of Marketability Discount

We adopt a lack of marketability discount of 30% to compensate for difficulty of selling the shares of the JV Company that are not traded in any stock exchange, compared with those of the peer companies that are traded publicly in their respective stock exchange market.

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APPENDIX IV

SENSITIVITY ANALYSIS

A sensitivity analysis is a technique used to determine how different values of an independent variable will impact a particular dependent variable (i.e. the market value or fair value of the subject asset) under a given set of assumption.

In applying the sensitivity analysis, the percentage changes in the fair value of the Relevant Interest arising from respective increases/decreases of 1% and 2% in the discount rate and long term growth rate were determined. The results of the sensitivity analysis were as follows:

Change in Discount Rate	Applied Discount Rate	Change in fair value
(%)	(%)	(%)
-2%	11.48%	+19.9%
-1%	12.48%	+8.9%
0%	13.48%	–
+1%	14.48%	-7.3%
+2%	15.48%	-13.4%
Change in Long Term	Applied Long Term
Growth Rate	Growth Rate	Change in fair value
(%)	(%)	(%)
-2%	1.0%	-3.4%
-1%	2.0%	-1.8%
0%	3.0%	–
+1%	4.0%	+2.2%
+2%	5.0%	+5.0%

CONCLUSION

For your reference, on the basis of the information made available to us, the fair value of the Relevant Interest as at 18 January 2010 was in sum of HK$153,142,977 (HONG KONG DOLLARS ONE HUNDRED AND FIFTY-THREE MILLION ONE HUNDRED AND FORTY-TWO THOUSAND AND NINE HUNDRED AND SEVENTY-SEVEN) and the breakdown of the fair value of the Relevant Interest was summarized in the following table:

	Fair Value
	(HK$)
Relevant Interest before marketability discount	218,775,681
Marketability Discount	30%
Relevant Interest after marketability discount	153,142,977
19% of the Relevant Interest held by Mr. Zhu	29,097,166

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APPENDIX IV

VALUATION REPORTS

The conclusion of value was based on generally accepted valuation procedures and practices that rely extensively on the use of numerous assumptions and the consideration of many uncertainties, not all of which can be easily quantified or ascertained and they may or may not be realized While we have exercised our professional judgment in the appraisal, you are advised to consider with caution the nature of such assumptions which are disclosed in this report and to exercise caution when interpreting this report.

We hereby certify that we have neither present nor prospective interests in the Company or the value reported.

For and on behalf of

DTZ Debenham Tie Leung Limited K.B. Wong

Registered Business Valuer registered with the Hong Kong Business Valuation Forum,

M.H.K.I.S., M.R.I.C.S Director Valuation & Advisory Services

Note: Mr. K.B. Wong is a Registered Professional Surveyor as well as a Registered Business Valuer who has over 20 years of experiences in valuation in PRC and Hong Kong.

Philip K.C. Tse Msc, M.H.K.I.S., M.R.I.C.S., CFA, FRM Assistant Manager Valuation & Advisory Services

Note: Mr. Philip Tse is a charterholder of Chartered Financial Analyst, as well as a Certified Financial Risk Manager who has about 5 years of experiences in valuation in PRC and Hong Kong.

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APPENDIX IV

Date: 22 April 2010

Private & Confidential

TC Interconnect Holdings Limited 31/F, Aitken Vanson Centre, 61 Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong Dear Sirs,

Re: Plant & Machinery Valuation Report

We refer to your instructions for us to value certain Plant & Machinery (the “Machinery”) as at 23 March 2010 (the “effective date”) of Orient Opto-semiconductors Corporation (“Dongfang”) in the People’s Republic of China.

We would like to report as follows:

VALUATION SUMMARY

Orient Opto-semiconductors Corporation

		Fair Market
Effective Date: 23 March 2010		Value
		(RMB)
Machinery
Orient Opto-semiconductors Corporation
Last Date of Inspection: 23 March 2010		5,849,000
	Total:	5,849,000

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APPENDIX IV

The narrative appraisal report that follows sets forth the identification of the plant and machinery appraised, pertinent facts relative to the data considered, the reasoning leading to the conclusions, the results of the investigation and analysis, and the assumptions and limiting conditions.

Neither the whole nor any part of this valuation report nor any reference thereto may be included in any document, circular or statement without our written approval of the form and context in which it will appear.

Finally and in accordance with our standard practice, we must state that this valuation report is for the use only of the party to whom it is addressed and no responsibility is accepted to any third party for the whole or any part of its contents.

Yours faithfully,

For and on behalf of

DTZ Debenham Tie Leung Limited K.B. Wong

Registered Professional Surveyor (GP) Registered China Real Estate Appraiser

M.H.K.I.S., M.R.I.C.S Director Valuation & Advisory Services

Note: Mr. K.B. Wong is a Registered Professional Surveyor as well as a Registered Business Valuer who has over 20 years of experiences in valuation in PRC and Hong Kong.

Philip K.C. Tse

Msc, M.H.K.I.S., M.R.I.C.S., CFA, FRM Assistant Manager Valuation & Advisory Services

Note: Mr. Philip Tse is a charterholder of Chartered Financial Analyst, as well as a Certified Financial Risk Manager who has about 5 years of experiences in valuation in PRC and Hong Kong.

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APPENDIX IV

Identification of the Machinery

The Machinery appraised in this report belonging to Orient Opto-semiconductors Corporation is located at 5th Floor, Block 2, Industrial Area, Cha Guang Village, Sha He Xi Road and 5th Floor, Block A6, Dong Fang Jian Fu Yu Sheng Industrial Area, Xi Xiang Street, Bao An District, Shenzhen, Guangdong Province, People’s Republic of China. A detailed listing of the Machinery is included in this report.

SCOPE OF WORK AND LIMITATIONS

In performing the valuation, we, have relied to a considerable extent on the information and opinion provided by Dongfang and Equipnet Asia Pacific Ltd., which is an independent equipment and machinery consultant.

Purpose of the Appraisal and Definition(s) of Value

The purpose of the appraisal is to gather data relevant to the assets and provide an evaluation that estimates the Fair Market Value of the assets as of the effective date. DTZ and EAP defines the Fair Market Value as follows:

Fair Market Value

The estimated amount which an asset should exchange between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

Use of the Appraisal

DTZ and EAP have been authorized and contracted to conduct the appraisal of the Machinery owned by Orient Opto-semiconductors Corporation. The intended use of the report is to provide the TC Interconnect Holdings Limited with the documentation necessary for public circulation purpose.

Effective Date of the Appraisal

The effective date of the appraisal is 23 March 2010. This is the date DTZ and EAP personnel completed the inspection of the assets.

Methodology

There are three basic valuation methods that are used to derive an indication of the value of the assets. These methods include the cost approach, sales comparison approach, and income approach to value.

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Cost Approach

“A set of procedures in which an appraiser derives a value indication by estimating the current cost to reproduce or replace the personal property, deducting for all accrued depreciation.”

Sales Comparison Approach

“A set of procedures in which an appraiser derives a value indication by comparing the personal property being appraised to similar assets that have been sold recently, applying appropriate units of comparison, and making adjustments based on the elements of comparison to the sale prices of the comparable.”

Income Capitalization Approach

“A set of procedures in which an appraiser derives a value indication for incomeproducing personal property by converting anticipated benefits into value. This conversion is accomplished either by: (1) capitalizing a single year’s income expectancy or an annual average of several years’ income expectancies at a market derived capitalization rate or capitalization rate that reflects a specified income pattern, return on investment, and change in value of the investment; or (2) discounting the annual cash flows for the holding period and the reversion at a specified yield rate.”

The sales comparison approach was the primary basis upon which the assets were appraised. Due to the specialized nature of some of the machinery, second hand market data was not always available from which to draw value conclusions. In these instances, the cost approach was given some consideration.

The income approach was not utilized. This approach gives consideration to incomegenerating criteria, and is very limited in its application to the appraisal of machinery & equipment on a piecemeal basis. This is due to the difficulty in determining what portion of the total income and expense stream of a given plant would be attributable to a specific piece of equipment. This type of analysis is outside the scope of this appraisal.

Extent of the Data Collection Process

On 8 & 23 March 2010, DTZ and EAP personnel inspected the Machinery. A variety of data relating to the assets was requested and gathered during the inspection of the facility and, in some cases, additional information was subsequently requested.

The appraisal does not include an evaluation of any dedicated software. The value of purchased repair parts or replacement parts has not been considered. No product line-dedicated tooling or computer software is evaluated in this report.

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APPENDIX IV

The evaluation included consideration of transactions involving sales of similar assets, as well as their availability on second hand market. The overall condition and quality of the assets were also considered. Research may have included but was not limited to EAP’s database, conversations with original equipment manufacturers, manufacturers’ representatives, used machinery and equipment dealers, auctioneers and liquidators, and other knowledgeable industry sources. Supply and demand factors, the overall condition of the market, and the number of potential purchasers in the market for similar assets were discussed.

Statement of Ownership

DTZ and EAP are providing an appraisal of only the owned assets. Assets that Management of the Company indicated are leased or not owned have been excluded from the appraisal.

It is recommended that any parties considering a secured interest in the assets independently confirm the ownership interest and determine what potential impact any encumbrances may have on their marketability and ultimate value.

DTZ and EAP have assumed that TC Interconnect Holdings Limited and its representatives have accurately represented the ownership interest in all of the personal property, and have not conducted any search to determine the ownership. A search of this type is outside the scope of this appraisal assignment.

General Condition of the Assets

The general condition of the assets was considered to be fairly maintained. In some instances, machinery was not in operation at the time of inspection. It has been assumed that all of the equipment is in working order, unless otherwise specifically indicated.

Any condition statements that appear in the detailed listing of the assets are based on general observations only. It is important to note that these observations are the result of visual inspections only, and that it is impossible to judge the condition of the assets without relying on the accuracy of the representations made by Management.

Environmental Considerations

No allowance has been made nor has any consideration been given to the impact, if any, of environmental or safety issues that would have an effect on the salability and/or use of the equipment. Furthermore, compliance or non-compliance with regulatory agencies that may have jurisdiction in these areas has not been considered.

It should be clearly understood that both of DTZ and EAP are not an environmental consulting firm and are not qualified to test for hazardous substances or conditions. Furthermore, both of DTZ and EAP are not qualified to identify or evaluate occupational safety hazards. It is recommended that any parties with an interest in the assets contract with a qualified consulting firm to conduct any studies deemed necessary to ensure that any issues are properly addressed.

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APPENDIX IV

Effective Life of Assets

Average life span of these assets is generally in the region between 7-12 years with proper operation of the equipment and average maintenance.

Asset List

Orient Opto-semiconductors Corporation

		Orient Opto-semiconductors Corporation	Fair
Item		Machine Descriptions	Market
#	Qty.	Effective Date: 23 March 2010.	Value
			(RMB)
1	1	STARSPEC Light Ports Integrating Sphere	40,000.00
2	1	STARSPEC High Power LED Light Color / Intensity Analyzer	120,000.00
		Dia. ~20cm
3	1	STARSPEC LED Light Color / Intensity Analyzer	50,000.00
		Dia. ~14cm
4	1	STARSPEC “SSP6612” LED Light / Color /Electric	40,000.00
		Parameter Tester
5	1	ASM “AB339” Gold Wire Bonding Machine	250,000.00
		S/N 33925-195 Year 2000
		Made in Singapore
6	1	ASM “Eaglelo AP-LP” Assembly Automation Bonding	500,000.00
		Machine
7	1	MUSASHI ENG. INC. “ML-5000XII” Precision Dispensing	30,000.00
		Machine S/N X5210006402
8	3	Assorted Stereomicroscope	6,000.00
9	1	WETEL “WT-2330” Serial Ultrasound Gold Ball	25,000.00
		Bonding Machine
		S/N 06072318
10	1	WETEL “WT-2102” Serial Ultrasound Gold Ball Bonding	25,000.00
		Machine
11	1	REK “6800” Ionizing Air Blower	2,000.00
12	2	“SH2002” Die Stretching Machine	40,000.00
13	1	ANODE Built-in Tester	20,000.00
14	1	ZHENGXIONG Manual Plastic Film Sealing Machine	8,000.00
15	1	DAZHENG “PS-A305D” DC Power Supply	2,000.00
16	1	OHAUS Electronic Scale	2,000.00
17	1	EBOX Humidity Control Cabinet	1,000.00
		0.4m x 0.4m x 0.4m
18	1	RONSHEN “BCD-138T” Double Door Refrigerator	1,000.00
19	3	MODIANJINGJI MDJJ Triple Door Optoelectronics Oven	300,000.00

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APPENDIX IV

		Orient Opto-semiconductors Corporation		Fair
Item		Machine Descriptions		Market
#	Qty.	Effective Date: 23 March 2010.		Value
				(RMB)
20	1	MODIANJINGJI MDJJ Vacuum Bubble Removing		40,000.00
		Machine, c/w: “2x-15” Vacuum Pump
		S/N 999 Year 2009
21	1	“V-F200” Solder Tester		4,000.00
22	1	Solder Tester		20,000.00
23	1	DONGGUAN LAN DIAN “300” Epoxy Filling Machine		20,000.00
24	1	VTA “V-2000A” Solder Machine		5,000.00
		S/N 031119006 Year 2006
25	1	YILIHJ “WSE-200B” Electrical Welding Machine		3,000.00
26	1	JINDING “MQD3213” Belt Sander		1,000.00
27	1	JINDING “Z4113” Drilling Machine		2,000.00
		Model JXZ-250-4
28	1	“AS-406” Belt Sander		1,000.00
		S/N 495623 Year 1999
29	1	Electrical Saw		2,000.00
30	1	JUCAI “AW9008” Air Compressor		40,000.00
		S/N JC0906307N Year 2009
		Cap. 250L
31	1	DF Compressed Air Dryer		15,000.00
		c/w: Air Tank 0.5m (dia.) x 1.2m (h)
32	1	Compact Air Compressor		3,000.00
33	1	VTA “V-2” Knife Sharpener		1,000.00
		S/N 070518 Year 2007
34	1	HUANG XIANG “3SCIXE75/400-90” Intelligent		50,000.00
		Compensation Power Saving Device
35	1	UPS System		400,000.00
36	1	YAMAHA “YV100-XG” Chip Shooter		800,000.00
		S/N Y114380, Year 2005
37	1	DONG SHAN “DM-4FA” LED Life Test Aging Line		600,000.00
38	1	Tools & Dies: Approximately 39 sets of assorted Tools	and	2,280,000.00
		Dies (located in Huizhou, not inspected)
39	1	Allowance for Office Furniture & Equipment, comprising:		100,000.00
		Office Desks, Chairs, Partitonings, Computers, Fax,
		Notebooks and Printers etc.

			Total:	5,849,000.00

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APPENDIX IV

Certification Of Value – Machinery

It is hereby certified that:

the statements of fact contained in this report are true and correct.
the analyses, opinions, and conclusions set forth in this report are limited only by the assumptions and limiting conditions (imposed by the terms of the assignment or by the undersigned) set forth by this report, and are our personal, unbiased, professional analyses, opinions, and conclusions.
this appraisal report has been made in conformity with and is subject to the requirements of the Royal Institute of Chartered Surveyors (“RICS”) and in accordance with the RICS Appraisal and Valuation Manual (“Red Book”), the Uniform Standards of Professional Appraisal Practice (“USPAP”) adopted by the Appraisal Standards Board of the Appraisal Foundation, and the Principles of Appraisal Practice and Code of Ethics of the American Society of Appraisers and/or The Association of the Machinery and Equipment Appraisers.
DTZ and EAP have no present or contemplated future interest in the property nor any personal interest or bias in the subject matter or the parties involved.
the engagement of DTZ and EAP in this assignment was not contingent upon developing or reporting predetermined results.
neither the appraisal assignment nor the amount of the fee is contingent upon developing or reporting a predetermined value, requested minimum value, a direction in the value that favors the cause of the client, a specific valuation, the approval of a loan, the amount of the value estimates or attainment of a stipulated result, nor is our compensation contingent upon an action or event resulting from the analyses, opinions, or conclusions in, or the use of, this report, or the occurrence of a subsequent event directly related to the intended use of this appraisal.
the appraiser(s) disclaim knowledge as to the appraised asset(s) operability, historical performance, and/or the existence of any hidden, latent, or undisclosed defects.
any statement(s) of condition are the result of visual inspection only and should not be construed as an opinion of operability or utility.

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APPENDIX IV

Assumptions and Limiting Conditions

This appraisal report has been made with the following general assumptions and limiting conditions.

The personal property is appraised free and clear of any or all liens or encumbrances unless otherwise stated. Title to the property is assumed to be good and marketable unless otherwise indicated.
It is assumed that all of the personal property included in the appraisal is owned by the company appraised. DTZ and EAP have relied upon management to identify any equipment that is leased or owned by parties unrelated to the appraisal.
The information furnished by others is believed to be reliable. However, no warranty is given for its accuracy. Every reasonable attempt has been made to verify such information.
It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined, and considered in the appraisal report.
The value estimates submitted are based upon the definition of value stated in the body of the report.
Possession of this report, or a copy thereof, does not carry with it the right of publication. It may not be used for any purpose by any person other than the party to whom it is addressed without the written consent of that party and, in any event, only with proper written qualification and only in its entirety.
DTZ and Equipnet Asia Pacific Ltd. reserves the right to recall all copies of this report to correct any error or omission.
The appraiser, by reason of this appraisal, is not required to give further consultation, testimony, or be in attendance in court with reference to the property in question unless arrangements have been made previously.
Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraiser, or the firm with which the appraiser is connected) shall be disseminated to the public through advertising, public relations, news, sales, or other media without the prior written consent and approval of the appraiser.
The maximum liability of DTZ and EAP for the breach of any obligation in connection with this engagement or the Report, and for any and all damages of any type or nature (whether in contract or in tort, and whether compensatory,

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APPENDIX IV

consequential or punitive in nature) sustained or claimed by TC Interconnect Holdings Limited or any other person or entity in connection with this engagement or the Report, shall be limited to the fee actually received by DTZ and EAP under the engagement letter. In no event or circumstance shall DTZ and EAP have any liability to TC Interconnect Holdings Limited or any other person or entity in excess of the fee actually paid to and received by EAP under the engagement letter.

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APPENDIX IV

22 April 2010

VALUATION OF 1 INTELLECTUAL PROPERTY HELD BY ORIENT OPTO-SEMICONDUCTORS CORPORATION

==> picture [55 x 71] intentionally omitted <==

The Directors TC Interconnect Holdings Limited 31/F, Aitken Vanson Centre, 61 Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong

Dear Sirs,

Re: Valuation of 1 Intellectual Property of Orient Opto-Semiconductors Corporation

We refer to the instructions from TC Interconnect Holdings Limited (the “Company”), we have conducted valuation on a fair value basis for the Intellectual Property (the “IP”) held by Orient Opto-Semiconductors Corporation (“Dongfang”) as at 18 January 2010 (“Valuation Date”).

The purpose of this report is to express an independent opinion on the fair value of the IP for the purpose of inclusion in a circular of the Company. We confirm that we have made relevant investigations, enquiry and obtained such further information, as we consider necessary for the purpose of providing our opinion.

BASIS OF VALUATION

Our valuation is based on going concern premise and conducted on a fair value basis.

For the purpose of this valuation, fair value is defined as following:

BACKGROUND INFORMATION

On 18 January 2010, the Company has announced that the Company has entered into an Investment Co-operation Agreement and a Supplemental Agreement (jointly referred as “JV Agreement”) with Mr. Zhu and Dongfang to jointly establish a joint-venture company (“JV Company”).

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APPENDIX IV

The JV Company is principally engaged in the business of operation and management of energy saving projects, the sale and marketing of LED lighting and other energy saving projects.

Furthermore, upon establishment of the JV Company and injection of additional capital by Dongfang and the Company, the JV Company would purchase from Dongfang at RMB8,000,000 which is to be settled in cash for all those LED Street Light Related Fixed Asset and a LED-related Intellectual held by Dongfang (apart from those which are to be injected/ transferred to the JV Company as contribution of additional capital into the JV Company).

The IP held by Dongfang is the production technology of a kind of assembled strip lamp. According to the information provided, the IP is registered in State Intellectual Property Office of The People’s Republic of China under the registration number 200620055966.6. The innovative and practical product offers an assembled strip lamp, which is assembled by the strip lamps of prefixed length. This strip lamp can be shaped to various bends, applicable for quantity production and convenient for maintenance and replacement.

SCOPE OF WORK AND LIMITATIONS

Our investigation includes the discussion with the management and shareholder representatives of the Company as well as collecting the information of the JV Company history, operations and prospects of the business. We requested and received detailed information about the JV Company in order to conduct a detailed review and to make an impartial and independent valuation for the IP.

For the purpose of our valuation, we were relied on the business plan, financial forecast and operation information in respect of the JV Company and the contribution ratio of the IP provided by the management of the Company.

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VALUATION REPORTS

APPENDIX IV

The history of the Dongfang and the JV Company;
The nature of business of the Dongfang and the JV Company;
The financial conditions of Dongfang and the JV Company;
The terms and conditions of the contract and agreements of Dongfang and the JV Company;
The planned operating conditions of the JV Company including the production, marketing and sales of LED street light products;
The economic condition and the industry outlook in general;
The specific economic environment and competition for the JV Company; and
The financial and business risks of the JV Company.

Due to the changing environment, a number of assumptions have to be established in order to sufficiently support our concluded opinion of values of the IP of the JV Company. The major assumptions adopted in our valuations are:

The expected productivity of the JV Company is projected according to management forecast;
The expected operating cost of the JV Company is projected according to management forecast;
The expected growth rate of revenue and cost is projected according to management forecast;
The expected growth in price of products of the JV Company is projected according to management forecast;
There will be no major changes in the current taxation law in the jurisdiction where the Company currently operates or will operate which will materially affect the revenues, that the rates of tax payable remain unchanged and that all applicable laws and regulations will be complied with;
The financial projections in respect of the JV Company have been prepared on a reasonable basis, reflecting estimates that have been arrived at after due and careful consideration by the management of the Company;

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VALUATION REPORTS

APPENDIX IV

The information provided by the Company is true and accurate; and
Economic condition will not deviate significantly from economic forecasts.

A financial projection from 2010 to 2018 is provided by the Company. Adjustments made and assumptions taken are as follows:

The maximum current annual production capacity of the JV Company is about 77,500 LED lighting products. As per management discussion, expansion is planned in year 2010 and 2015 to extend the production capacity to meet to expected demand. Upon the completion of the expansion in 2010 and 2015, the maximum annual production capacity will be extended to 160,000 and 240,000 respectively;
Starting from 2015, various IP hold by the JV Company will ended gradually. It is assumed that the terms of IP will be renewed for perpetuity;
The revenue grows at the same rate as various cost of production;
Repair and maintenance fee is assumed at 3% of total revenue per annum;
The cost of goods sold is assumed at 63% of total revenue per annum;
The business tax rate is assumed to be 1.8% of total revenue per annum;
There are no non-operating incomes;
The repair and maintenance expense captures the capital expenditure need; and
The profit contribution rate (royalty rate) is assumed to be 1.5% according to management forecast.

LIMITING CONDITIONS

Our opinion of the value of the IP in this report is valid only for the stated purpose and only for the effective date of the appraisal. No responsibility is taken for any changes in the market conditions and no obligation is assumed to revise this report to reflect events or change of government policy or conditions, which may occur subsequent to the date hereof.

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APPENDIX IV

VALUATION REPORTS

Further, we have no responsibility or obligation to update this report for events or circumstances occurring subsequent to the date of this report.

No opinion is intended to be expressed for matters which require legal or other specialized expertise or knowledge, beyond that customarily employed by appraisers.

This valuation is based upon data, conditions, hypotheses and assumption stated herein and as presented to us by management, upon which we relied.

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VALUATION REPORTS

APPENDIX IV

VALUATION DISCUSSION AND APPROACH TO VALUATION

The selection of valuation approach is based on the quantity and quality of the information provided, accessibility to available data, supply of relevant market transactions, type and nature of asset, purpose and objective of the valuation as well as professional judgement and technical expertise. In our valuation, we have adopted discounted cash flow (DCF) approach to arrive the value of the IP which takes into account the future growth potential and specific issues of the IP.

Intellectual property shares many of the characteristics associated with real and personal property. The most noticeable difference between intellectual property and other forms of property is that intellectual property is intangible.

The DCF approach attempts to determine the value of the IP by computing the present value of cash flows, attributable to that piece of IP, over the useful life of the asset. Unlike an enterprise DCF valuation, terminal values are rarely used, as the useful life of an intellectual property is typically a finite period of time.

Profit attributable to that piece of IP is forecasted for the useful life of the intellectual property and the discount rate is the company’s market based rate of return assuming that the company’s business risk is equivalent to the intellectual property under consideration.

CONCLUSION

For your reference, on the basis of the information made available to us, the fair value of the IP as at 18 January 2010 was in sum of HK$3,629,076 (HONG KONG DOLLARS THREE MILLION SIX HUNDRED AND TWENTY-NINE THOUSAND AND SEVENTYSIX) .

The conclusion of value was based on generally accepted valuation procedures and practices that rely extensively on the use of numerous assumptions and the consideration of many uncertainties, not all of which can be easily quantified or ascertained and they may or may not be realised. While we have exercised our professional judgment in the appraisal, you are advised to consider with caution the nature of such assumptions which are disclosed in this report and to exercise caution when interpreting this report.

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VALUATION REPORTS

APPENDIX IV

We hereby certify that we have neither present nor prospective interests in the Company or the value reported.

For and on behalf of DTZ Debenham Tie Leung Limited

K.B. Wong

Registered Business Valuer registered with the Hong Kong Business Valuation Forum,

M.H.K.I.S., M.R.I.C.S Director

Valuation & Advisory Services

Note: Mr. K.B. Wong is a Registered Professional Surveyor as well as a Registered Business Valuer who has over 20 years of experiences in valuation in PRC and Hong Kong.

Philip K.C. Tse

Msc, M.H.K.I.S., M.R.I.C.S., CFA, FRM Assistant Manager Valuation & Advisory Services

Note: Mr. Philip Tse is a charterholder of Chartered Financial Analyst, as well as a Certified Financial Risk Manager who has about 5 years of experiences in valuation in PRC and Hong Kong.

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VALUATION REPORTS

APPENDIX IV

Set out below are the texts of letters in connection with the forecast underlying the valuation on the entire joint venture company as at 18 January 2010 which is considered as a profit forecast under Rule 14.62(1) of the Listing Rules, received from Deloitte Touche Tohmatsu, the reporting accountants and SBI E2-Capital (HK) Limited, the financial adviser, for the purpose of inclusion in this circular.

1. LETTER FROM THE REPORTING ACCOUNTANTS

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ACCOUNTANTS’ REPORT ON CALCULATIONS OF DISCOUNTED FUTURE ESTIMATED CASH FLOWS IN CONNECTION WITH THE VALUATION OF 100% EQUITY INTEREST IN A JOINT VENTURE COMPANY (THE “JV COMPANY”)

TO THE DIRECTORS OF TC INTERCONNECT HOLDINGS LIMITED

We have examined the calculations of the discounted future estimated cash flows on which the valuation prepared by DTZ Debenham Tie Leung Limited dated 22 April 2010, of 100% equity interest in the JV Company as at 18 January 2010 (the “Valuation”) is based. The Valuation based on the discounted future estimated cash flows is regarded as a profit forecast under Rule 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and will be included in a circular dated 22 April 2010 to be issued by TC Interconnect Holdings Limited (the “Company”) in connection with the proposed formation of the JV Company, purchase of assets by the JV Company from its equity holder and the acquisition of interest by the Company in the JV Company (the “Circular”).

Directors’ responsibility for the discounted future estimated cash flows

The directors of the Company are responsible for the preparation of the discounted future estimated cash flows in accordance with the bases and assumptions determined by the directors as set out in the Appendix IV of the Circular (the “Assumptions”). This responsibility includes carrying out appropriate procedures relevant to the preparation of the discounted future estimated cash flows for the Valuation and applying an appropriate basis of preparation; and making estimates that are reasonable in the circumstances.

Reporting accountants’ responsibility

It is our responsibility to form an opinion on the arithmetical accuracy of the calculations of the discounted future estimated cash flows on which the Valuation is based and to report solely to you, as a body, as required by Rule 14.62(2) of the Listing Rules, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

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APPENDIX IV

VALUATION REPORTS

Our engagement was conducted in accordance with the Hong Kong Standard on Assurance Engagements 3000 “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” issued by the Hong Kong Institute of Certified Public Accountants. This standard requires that we comply with ethical requirements and plan and perform the assurance engagement to obtain reasonable assurance on whether the discounted future estimated cash flows, so far as the calculations are concerned, have been properly compiled in accordance with the Assumptions. Our work does not constitute any valuation of the JV Company or the assets to be purchased by the JV Company.

Because the Valuation relates to discounted future estimated cash flows, no accounting policies of the Company have been adopted in its preparation. The Assumptions include hypothetical assumptions about future events and management actions which cannot be confirmed and verified in the same way as past results and these may or may not occur. Even if the events and actions anticipated do occur, actual results are still likely to be different from the Valuation and the variation may be material. Accordingly, we have not reviewed, considered or conducted any work on the reasonableness and the validity of the Assumptions and do not express any opinion whatsoever thereon.

Opinion

Based on the foregoing, in our opinion, the discounted future estimated cash flows, so far as the calculations are concerned, have been properly compiled, in all material respects, in accordance with the Assumptions.

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong 22 April 2010

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VALUATION REPORTS

APPENDIX IV

2. LETTER FROM THE FINANCIAL ADVISER

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Unit A2, 32/F, United Centre 95 Queensway Hong Kong

22 April 2010

The Board of Directors TC Interconnect Holdings Limited 31/F, Aitken Vanson Centre, 61 Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong

Dear Sirs,

We refer to the valuation report dated 22 April 2010 prepared by DTZ Debenham Tie Leung Limited (the “Valuer”) in respect of the fair value of the entire joint venture company (the “JV Company”) (the “Valuation Report”). The Valuation Report has been set out in Appendix IV to the circular of TC Interconnect Holdings Limited (the “Company”) dated 22 April 2010 (the “Circular”).

As set out in Appendix IV to the Circular, the Valuation Report including the basis of valuation and assumptions and the projections, of which the directors of the Company (the “Directors”) are solely responsible, has been prepared based on the discounted future estimated cash flows of the JV Company and its business as at 18 January 2010 made by the Valuer and reviewed by the Directors (the “Projections”).

We have discussed with the management of the Company and the Valuer the information and the documents which formed part of the basis and assumptions in the Valuation Report upon which the Projections have been made. We have also discussed with Mr. Zhu about his view on the Projections and the prospects for the LED street lighting market in the PRC. We have also considered the letter dated 22 April 2010 issued by Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong addressed to the Directors, regarding whether the Valuation Report was compiled properly so far as the calculations are concerned.

On the basis of the valuation and assumptions adopted by the Valuer and the arithmetical accuracy of the calculations with respect to the Projections examined by Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong, we are of the view that the Projections, for which the Directors are solely responsible, has been made after due and careful enquiry by the Directors.

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VALUATION REPORTS

APPENDIX IV

The purpose of this letter in connection with the Projections is solely for the strict compliance under Rule 14.62(3) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. We, however, express no opinion in this letter on how closely the actual results of the JV Company eventually will correspond to the Projections.

Yours faithfully, For and on behalf of SBI E2-Capital (HK) Limited Tsui Kin Wing Director

– 141 –

GENERAL INFORMATION

APPENDIX V

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular, and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

2. SHARE CAPITAL OF THE COMPANY

Information about the authorized and issued share capital of the Company are as follows:

As at the Latest Practicable Date

Authorised:		HK$
2,000,000,000	Shares as at the Latest Practicable Date	200,000,000.00
Issued and fully paid:
290,032,000	Shares as at the Latest Practicable Date	29,003,200.00
Upon completion of the Acquisition
Authorised:		HK$
2,000,000,000	Shares as at the Latest Practicable Date	200,000,000.00
Issued and fully paid:
290,032,000	Shares as at the Latest Practicable Date	29,003,200.00
15,137,803	Consideration Shares to be issued	1,513,780.30

Total number of issued Shares immediately after the allotment
and issuance	of the Consideration Shares is 305,169,803 Shares	30,516,980.30

All the Shares rank pari passu in all aspects, including all rights as to dividend, voting and interests in the share capital of the Company.

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GENERAL INFORMATION

APPENDIX V

3. INDEBTEDNESS STATEMENT

As at the close of business on 28 February 2010, being the latest practicable date for the purpose of preparing this indebtedness statement, the Group had outstanding bank and other borrowings of approximately HK$244 million including trust receipt loan of approximately HK$55 million. Among these bank and other borrowings, an amount of approximately HK$154 million was secured by a charge on certain property, plant and equipment with an aggregate carrying amount of approximately HK$221 million, land use rights of approximately HK$22 million and pledged bank deposits with an aggregate carrying amount of approximately HK$88 million. The Group also had restricted bank deposits with an aggregate carrying amount of approximately HK$13 million to secure certain bills payable arising from normal trade. In addition, the Group had outstanding at that date obligations under finance leases of approximately HK$41 million and amount due to a shareholder of approximately HK$21 million.

Save as aforesaid or as otherwise disclosed herein, apart from intra-group liabilities, the Group did not have outstanding, as at the close of business on 28 February 2010, any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans, borrowings or indebtedness, liabilities under acceptances or acceptable credits, debentures, mortgages, charges, hire purchases commitments, guarantees or other contingent liabilities.

4. WORKING CAPITAL

The Directors, after due and careful enquiry, are of the opinion that upon completion of the formation of the JV Company, the Purchase and the Acquisition and after taking into account the present available resources and the existing available banking facilities, the Group has sufficient working capital for its present requirements and for at least the next twelve months from the date of this circular in the absence of unforeseen circumstances.

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GENERAL INFORMATION

APPENDIX V

5. DISCLOSURE OF INTERESTS

(a) Directors’ and chief executives’ interests and short positions in the shares, underlying shares and debentures

As at the Latest Practicable Date, so far as is known to any Director or chief executive of the Company, the following persons had interests or short positions in the shares, underlying shares or debentures of the Company or any associated corporation (within the meaning of Part XV of the SFO) which (a) are 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 the SFO); or (b) are required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange:

Long positions in Shares

					Percentage
	Number of Shares held and nature of			interest	to issued
	Personal	Corporate	Family		share
Name of director	Interest	Interest	Interest	Total	capital
Yeung Hoi Shan	179,000,000	–	–	179,000,000	61.72%
Pak Shek Kuen	100,000	−	−	100,000	0.03%
Cheung Kwok Ping	60,000	−	−	60,000	0.02%
Cheung Sui Wing	60,000	−	−	60,000	0.02%
Ho Man Kay	60,000	−	−	60,000	0.02%
Wong Siu Fai,
Albert	60,000	−	−	60,000	0.02%

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GENERAL INFORMATION

APPENDIX V

Long positions in the underlying shares of equity derivatives

Pursuant to the written resolutions passed by all Shareholders on 5 June 2006, the Company, among others, adopted a share option scheme (the “ Share Option Scheme ”), certain executive, non-executive and independent non-executive Directors were granted share options of the Company, details of which are as follows:

				Share options
				outstanding as
				at the Latest	Percentage to
		Exercise	Exercise period	Practicable	issued share
Name	Date of grant	price	(both dates inclusive)	Date	capital
*Executive*
*Directors*
Yeung Hoi Shan	3 July 2007	HK$1.52	3 July 2008 to	2,000,000	0.690%
			2 July 2011
Yeung Hoi Shan	29 September 2009	HK$1.07	29 September 2009 to 28	2,400,000	0.827%
			September 2015
Pak Shek Kuen	3 July 2007	HK$1.52	3 July 2008 to	2,000,000	0.690%
			2 July 2011
Pak Shek Kuen	29 September 2009	HK$1.07	29 September 2009 to 28	1,900,000	0.655%
			September 2015
*Non-executive*
*Directors*
Li Jinxia	3 July 2007	HK$1.52	3 July 2008 to	1,000,000	0.345%
			2 July 2011
Li Jinxia	29 September 2009	HK$1.07	29 September 2009 to 28	1,000,000	0.345%
			September 2015
Yeung Tai Hoi	3 July 2007	HK$1.52	3 July 2008 to	200,000	0.069%
			2 July 2011
Yeung Tai Hoi	29 September 2009	HK$1.07	29 September 2009 to 28	200,000	0.069%
			September 2015
Cheung Kwok	29 September 2009	HK$1.07	29 September 2009 to 28	140,000	0.048%
Ping			September 2015
*Independent*
*non-executive*
*Directors*
Cheung Sui Wing,	3 July 2007	HK$1.52	3 July 2008 to	200,000	0.069%
Darius			2 July 2011
Cheung Sui Wing,	29 September 2009	HK$1.07	29 September 2009 to 28	140,000	0.048%
Darius			September 2015
Wong Siu Fai,	3 July 2007	HK$1.52	3 July 2008 to	200,000	0.069%
Albert			2 July 2011
Wong Siu Fai,	29 September 2009	HK$1.07	29 September 2009 to 28	140,000	0.048%
Albert			September 2015
Ho Man Kay	3 July 2007	HK$1.52	3 July 2008 to	200,000	0.069%
			2 July 2011
Ho Man Kay	29 September 2009	HK$1.07	29 September 2009 to 28	140,000	0.048%
			September 2015

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GENERAL INFORMATION

APPENDIX V

Directors’ rights to acquire Shares

Apart from as disclosed under the paragraph headed “Directors’ and chief executives’ interests and short positions in the shares and underlying shares” above and the share option scheme disclosures, at no time during the period from 1 January 2010 to the Latest Practicable Date were rights to acquire benefits by means of the acquisition of Shares in the Company granted to any Director or their respective spouse or children under 18 years of age, or were any such rights exercised by them; or was the Company, or any of its holding companies and subsidiaries a party to any arrangement to enable the Directors to acquire such rights in any other body corporate.

Save as disclosed above, so far as is known to any Director or chief executive of the Company, none of the person had interests or short positions in the shares, underlying shares or debentures of the Company or any associated corporation (within the meaning of Part XV of the SFO) which (a) are 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 the SFO); or (b) are required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange.

(b) Interests of substantial Shareholders

As at the Latest Practicable Date, so far as is known to any Director or chief executive of the Company, the following persons (other than a director or chief executive of the Company) had interests or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is, 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 meeting of any other members of the Group:

Long positions in Shares

Substantial Shareholders

Number of Shares held and nature of interest

						Percentage
						to issued
		Personal	Corporate	Family		share
Name	Notes	Interest	Interest	Interest	Total	capital
Zhao Man Qi	(1)	–	–	179,000,000	179,000,000	61.72%

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GENERAL INFORMATION

APPENDIX V

Long positions in the underlying shares of equity derivatives

				Number of
	Nature of		Kind of	underlying
Name	interest	Notes	underlying share	shares
Zhao Man Qi	Family	(1)	Share options	4,400,000

Note:

(1) Ms. Zhao Man Qi is the spouse of Mr. Yeung Hoi Shan. By virtue of the SFO, Ms. Zhao Man Qi is deemed to be interested in the shares and the share options held by Mr. Yeung Hoi Shan.

Save as disclosed above, as at the Latest Practicable Date, so far as is known to the directors or chief executive of the Company, no person had interest or short position in the shares or the underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was, 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 meeting of any other members of the Group.

(c) Other interests

Deloitte Touche Tohmatsu, Ample Capital and DTZ Debenham Tie Leung Limited did not have any shareholdings of any members of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group as at the Latest Practicable Date.

6. LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or claims of material importance and the Directors are not aware of any litigation or claims of material importance pending or threatened against any member of the Group.

7. EXPERTS’ CONSENT

Each of Deloitte Touche Tohmatsu, Ample Capital and DTZ Debenham Tie Leung Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter and/or references to its name in the form and context in which it appears.

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GENERAL INFORMATION

APPENDIX V

8. EXPERTS AND THEIR DISCLOSURE OF INTEREST

The following are the qualification of the experts who have given opinions or advice which are contained in this circular:

Name Qualifications

Deloitte Touche Tohmatsu Certified Public Accountants Ample Capital a licensed corporation permitted to carry out type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO

DTZ Debenham Tie Leung a qualified Hong Kong valuer Limited

As at the Latest Practicable Date, each of Deloitte Touche Tohmatsu, Ample Capital and DTZ Debenham Tie Leung Limited does not have any shareholding, directly or indirectly, in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, each of Deloitte Touche Tohmatsu, Ample Capital and DTZ Debenham Tie Leung Limited does not have any direct or indirect interests in any assets which had been since 31 December 2008 (being the date of which the latest published audited consolidated financial statements of the Group were made up) acquired or disposed of by, or leased to or by any member of the Group, or are proposed to be acquired or disposed of by or leased to or by any member of the Group.

9. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors or proposed Directors had any existing or proposed service contracts with any member of the Group other than contracts expiring or determinable by the Group within one year without payment of compensation (other than statutory compensation).

10. DIRECTORS’ INTERESTS IN CONTRACT AND ASSETS

On 29 December 2008, the Company entered into an agreement with Mr. Yeung Hoi Shan, being the executive Director and substantial shareholder of the Company, to advance an amount of approximately HK$22,457,000 to the Group for the purpose of financing the daily operation of the Group (the “ Advance ”). The amount is unsecured, interest-free and repayable on 29 June 2010. The Advance has been extended on 22 June 2009 for seven months under the same terms and repayable on 31 January 2011.

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GENERAL INFORMATION

APPENDIX V

The Advance constituted an exempted connected transaction for the Company under Rule 14A.65(4) of the Listing Rules.

Save for the Advance and the Acquisition,

(i) There is no contract or arrangement entered into by any member of the Group subsisting at the Latest Practicable Date in which any Director is materially interested and which is significant in relation to the business of the Group; and
(ii) None of the Directors or proposed Director or Deloitte Touche Tohmatsu or Ample Capital or DTZ Debenham Tie Leung Limited has, or has had, any direct or indirect interest in any assets which have been acquired or disposed of by or leased to, or which are proposed to be acquired or disposed of or leased to, any members of the Group since 31 December 2008, the date to which the latest published audited financial statements of the Group was made up.

11. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors or their respective associates has any interest in a business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

12. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business) were entered into by the members of the Group within two years immediately preceding the Latest Practicable Date, which are or may be material:

(a) the sale and purchase agreement dated 10 October 2008 entered into between (Zhongshan Tatchun PCB Company Limited), a wholly-
owned subsidiary of the Company (the “ Vendor ”) and (Lu Hou Nan) (the “ Purchaser ”) in relation to the sale and purchase of a piece of land for industrial use and situated at (Gaoping Village), (Sanjiao Town), Zhongshan City, Guangdong, the PRC under Certificate for the Use of State-owned Land Certificate No. ZFGY(2008) 040696 at the total consideration of RMB19,500,000;
(b) the conditional placing and subscription agreement dated 21 January 2010 entered into between KGI Capital Asia Limited, Mr. Yeung Hoi Shan and the Company pursuant to which, KGI Capital Asia Limited acts as the placing agent in relation to the subscription and placing of 48,000,000 Shares;

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GENERAL INFORMATION

APPENDIX V

(c) the Investment Co-operation Agreement;
(d) the 1[st] Supplemental Agreement; and
(e) the 2[nd] Supplemental Agreement.

13. NO MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2008, the date to which the latest published audited accounts of the Group were made up.

14. FINANCIAL AND TRADING PROSPECTS

In 2009, due to tough business environment of PCB industry, the Group consolidated its business focus, and the capital expenditure for expansion of the Group’s existing production capacity was on hold until further analysis of market situation in the coming year. In view of the Group’s existing customer relationships and the prospects of upcoming projects, the management maintained an optimistic view on its business prospects in 2010. The Group is confident to achieve a bigger market share and improve its profitability through optimization of production facilities, consistent cost control measures and comprehensive sales and marketing networks.

On the other hand, the Board takes an open view to explore high growth and potential projects in order to broaden the Group’s income stream and increase shareholders’ value. The Company realizes the business potential of energy saving products and the LED lighting business. Upon the formation of the JV Company (including the Injection and Subscription), the Purchase and the Acquisition, the Group will further diversify the product range of the Group, improve its products’ structure and enhance its anti-risk ability and profitability.

15. GENERAL

(a) The secretary and qualified accountant of the Company is Mr. Pak Shek Kuen, who is a fellow member of the Hong Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants;
(b) The registered office of the Company is situate at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands. The head office and principal place of business of the Company is situate at 31/F, Aitken Vanson Centre, 61 Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong;
(c) The share registrar and transfer office of the Company is Tricor Investor Services Limited of 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong; and
(d) In the event of any inconsistency, the English text of this circular shall prevail over the Chinese text.

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GENERAL INFORMATION

APPENDIX V

16. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the principal place of business of the Company in Hong Kong, 31/F, Aitken Vanson Centre, 61 Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong during normal business hours on any business day (except public holidays) as from the date of this circular up to and including the date of the EGM:

(a) the memorandum and articles of association of the Company;
(b) letter from the Independent Board Committee dated 22 April 2010;
(c) letter from Ample Capital dated 22 April 2010;
(d) unaudited pro forma financial information, the text of which is set out in Appendix III to this circular;
(e) all material contracts referred to in the section headed “Material Contracts” in this appendix including but not limited to the Investment Co-operation Agreement, the 1[st] Supplemental Agreement and the 2[nd] Supplemental Agreement;
(f) the written consents referred to in paragraph headed “Experts’ Consent” in this appendix;
(g) the annual reports of the Company for the three financial years ended 31 December 2008;
(h) the interim report of the Company for the six months ended 30 June 2009;
(i) the valuation report on the LED-related intellectual properties to be injected by Mr. Zhu upon formation of the JV Company issued by Shenzhen Yongming Assets Appraisal Office ( );
(j) the valuation reports on the LED Street Light Related Fixed Assets and the LED-related intellectual properties respectively to be purchased by the JV Company from Dongfang under the Purchase issued by DTZ Debenham Tie Leung Limited;
(k) the valuation report on the JV Company as a whole issued by DTZ Debenham Tie Leung Limited;
(l) the comfort letters issued by Deloitte Touche Tohmatsu and SBI E2-Capital (HK) Limited; and
(m) this Circular.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

TC INTERCONNECT HOLDINGS LIMITED

*

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 515)

Website: www.tatchun.com

NOTICE IS HEREBY GIVEN that an extraordinary meeting of TC Interconnect Holdings Limited (the “ Company ”) will be held at 31/F, Aitken Vanson Centre, 61 Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong on 10 May 2010 at 2:00 p.m. for the purposes of considering and, if thought fit, passing the following resolutions (with or without modifications) as ordinary resolution of the Company:

ORDINARY RESOLUTIONS

“(1) THAT

(a) the terms and conditions of the investment co-operation agreement and the 1[st] supplemental agreement thereof both dated 18 January 2010 and the 2[nd] supplemental agreement dated 21 April 2010 (the “ Agreements ”) entered into by the Company, TC (BVI) Limited, a wholly-owned subsidiary of the Company, (“ TC(BVI) ”), (Orient Opto-Semiconductors Corp.) (“ Dongfang ”) and Mr. Zhu Jianqin (“ Mr. Zhu ”), pursuant to which TC(BVI), Dongfang and Mr. Zhu shall acquire and jointly hold the equity interest in a joint venture company with limited liability in the People’s Republic of China (the “ JV Company ”), as described in the circular of the Company dated 22 April 2010 (the “ Circular ”) (copies of the Agreements and the Circular having been produced to the meeting marked “ A ” and “ B* ” respectively and signed by the chairman of the meeting for the purposes of identification) be and are hereby approved, confirmed and ratified;
(b) the formation of the JV Company (the “ Formation of the JV Company ”) including TC(BVI)’s injection of RMB50,000,000 in cash as its capital contribution (the “ Injection ”) to the JV Company, be and are hereby approved, confirmed and ratified;
(c) the transactions as contemplated under the Agreements (excluding the Purchase and the Acquisition as defined hereunder) be and are hereby approved, confirmed and ratified;
(d) the overall mechanism of the possible grant of share options by the JV Company subject to the conditions and pursuant to the terms of the Agreements (the
For identification purpose only

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NOTICE OF EXTRAORDINARY GENERAL MEETING

“ Proposed Grant of the Options ”) as described in the Circular be and are hereby approved, confirmed and ratified;

(e) any director of the Company (the “ Director ”) be and is herby generally and unconditionally authorized to sign the Agreements for and on behalf of the Company together with such amendments, alterations or deletions as he/she may in his/her absolute discretion think necessary and appropriate whose signature thereto shall be conclusive evidence of his/her approval to such amendments, alterations or deletions, and any one Director be and is hereby authorized to do all such acts and things, to sign and execute all such further documents for and on behalf of the Company by hand, or in case of execution of documents under seal, to do so in the manner as stipulated in the memorandum and articles of association of the Company and for such purposes as the Directors see fit or consider necessary, desirable or expedient to give effect to or in connection with Agreements and the transaction as contemplated under the Agreements including but not limited to the Formation of the JV Company, the Injection and the Proposed Grant of the Options under the Agreements.”

“(2) THAT

(a) the purchase (the “ Purchase ”) by the JV Company from Dongfang of certain fixed assets and intellectual properties including production lines for LED street lights, production and packaging facilities for high power LED lightings, quality-checking facilities and office facilities held by Dongfang at a value of RMB8,000,000 pursuant to the terms of the Agreements as described in the Circular be and are hereby confirmed and approved;
(b) the acquisition (the “ Acquisition ”) by the Company of 19% equity interest in the JV Company then held by Mr. Zhu upon establishment of the JV Company and the payment of HK$28,400,000 as consideration for the said acquisition by the Company which shall be satisfied partly by way of payment of cash as to HK$10,000,000 and partly by way of issuance and allotment of shares of the Company as to HK$18,400,000 (“ Consideration Shares ”), pursuant to the terms of the Agreements as described in the Circular be and are hereby confirmed and approved;
(c) the proposed appointment of Mr. Zhu (the “ Appointment ”) as the executive director of the Company subject to the conditions and pursuant to the terms of the Agreements as described in the Circular be and is hereby approved;
(d) the overall mechanism for the possible buy back of the Consideration Shares upon occurrence of certain event under and pursuant to the terms of the Agreements (the “ Proposed Buy-Back ”) as described in the Circular be and is hereby approved;

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NOTICE OF EXTRAORDINARY GENERAL MEETING

(e) any Director be and is herby generally and unconditionally authorized to do all such acts and things, to sign and execute all such further documents for and on behalf of the Company by hand, or in case of execution of documents under seal, to do so in the manner as stipulated in the memorandum and articles of association of the Company and for such purposes as the Directors see fit or consider necessary, desirable or expedient to give effect to or in connection with the Purchase, the Acquisition, the Appointment and the Proposed Buy-Back under the Agreements.”

“(3) THAT

subject to and conditional upon (a) the passing of the resolutions numbered 2 above; and (b) the granting by the Listing Committee of the Stock Exchange of the listing of, and permission to deal in the Consideration Shares (as defined in the Circular), the Directors be and are hereby generally and specifically authorized to allot and issue up to 15,137,803 Consideration Shares of HK$0.1 each in the share capital of the Company (the “ Specific Mandate ”) upon completion of the Acquisition for partial settlement of the consideration for the Acquisition, and any one of the Directors be and is hereby generally and unconditionally authorized to allot and issue the Consideration Shares pursuant to and in accordance with the terms and conditions of the Agreements under the Specific Mandate and to do all such acts and things, to sign and execute all such further documents for and on behalf of the Company by hand, or in case of execution of documents under seal, to do so in the manner as stipulated in the memorandum and articles of association of the Company and for such purposes as the Directors see fit or considers necessary, desirable or expedient in connection with the issue of the Consideration Shares.”

By order of the Board of TC Interconnect Holdings Limited Yeung Hoi Shan Chairman

Hong Kong, 22 April 2010

Principal place of business in Hong Kong Registered office: 31/F, Aitken Vanson Centre Cricket Squire 61 Hoi Yuen Road Hutchins Drive Kwun Tong P.O. Box 2681 Kowloon, Hong Kong Grand Cayman KY1-1111 Cayman Islands

Notes:

(1) A member of the Company entitled to attend and vote at the meeting convened by the above notice is entitled to appoint another person(s) as his/her proxy to attend and vote instead of him/her. In the case of a recognized clearing house, it may authorise such person(s) as it thinks fit to act as its representative(s) at the meeting and vote in its stead. A proxy need not be a member of the Company.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

(2) In order to be valid, the proxy form together with a power of attorney or other authority, if any, under which it is signed, or a certified copy of such power of attorney or authority must be deposited at the branch share registrars of the Company in Hong Kong, Tricor Investor Services Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for the holding the meeting or any adjournment thereof (as the case may be).
(3) Completion and return of the proxy form shall not preclude a member of the Company from attending and voting in person at the meeting or any adjournment thereof if he so wishes. In such event, the instrument appointing a proxy shall be deemed to have been revoked.
(4) Where there are joint holders of any share, any one of such holders may vote at the meeting either personally or by proxy in respect of such shares as if he/she were solely entitled to vote; but if more than one of such joint holders be present at the meeting in person or by proxy, then the one of such holders whose name stands first on the register of members in respect of such share shall alone be entitled to vote in respect thereof.

As at the date hereof, the executive Directors are Mr. Yeung Hoi Shan and Mr. Pak Shek Kuen, the non-executive Directors are Madam Li Jinxia, Mr. Yeung Tai Hoi and Mr. Cheung Kwok Ping, and the independent non-executive Directors are Mr. Cheung Sui Wing, Darius, Ms. Ho Man Kay and Mr. Wong Siu Fai, Albert.

– 155 –

AI assistant

China Silver Technology Holdings Limited — Proxy Solicitation & Information Statement 2010

49264_rns_2010-04-21_a83ddf27-9f0f-40b1-863f-4bcbe74a5068.pdf

TC INTERCONNECT HOLDINGS LIMITED

MAJOR AND CONNECTED TRANSACTIONS FORMATION OF JV COMPANY, THE PURCHASE OF ASSETS BY THE JV COMPANY FROM ITS EQUITY HOLDER AND THE ACQUISITION OF INTEREST IN JV COMPANY

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

TC INTERCONNECT HOLDINGS LIMITED

*

MAJOR AND CONNECTED TRANSACTIONS FORMATION OF JV COMPANY, THE PURCHASE OF ASSETS BY THE JV COMPANY FROM ITS EQUITY HOLDER AND THE ACQUISITION OF INTEREST IN JV COMPANY

A. INTRODUCTION

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

B. AGREEMENTS

Date of the Investment Co-operation Agreement and the 1[st] Supplemental Agreement

Date of the 2[nd] Supplemental Agreement

Parties to the Agreements

Effect of the Agreements

Formation of the JV Company

Conditions Precedent for JV Formation

Shareholding structure after the formation of the JV Company and injection of additional capital by Dongfang and TC (BVI) but prior to the Acquisition

Scope of business of the JV Company

Board of directors and management of the JV Company

The Purchase of the LED Street Light Related Fixed Asset and LED related intellectual properties from Dongfang

Conditions Precedent to the Purchase

The Acquisition from Mr. Zhu of his 19% equity interest in the JV Company

Conditions Precedent to the Acquisition

Details of the LED Street Light Related Fixed Assets and the LED-related intellectual properties held by Dongfang and Mr. Zhu

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Nature

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Completion of the formation of the JV Company (including the Injection and Subscription), the Purchase and the Acquisition

Financial effect of the formation of the JV Company (including the Injection and Subscription), the Purchase and the Acquisition

Appointment of Mr. Zhu as the executive Director

Buy-Back

Share incentive scheme

LETTER FROM THE BOARD

C. REASONS FOR ENTERING INTO THE TRANSACTIONS

D. INFORMATION ON THE GROUP

E. INFORMATION ON DONGFANG

F. INFORMATION ON MR. ZHU

G. INFORMATION ON THE JV COMPANY

H. LISTING RULES IMPLICATIONS

I. EGM

J. RECOMMENDATIONS

LETTER FROM THE BOARD

TC INTERCONNECT HOLDINGS LIMITED

CONNECTED TRANSACTIONS

MAJOR AND CONNECTED TRANSACTION FORMATION OF JV COMPANY, THE ACQUISITION OF INTEREST IN JV COMPANY AND THE PURCHASE OF ASSETS BY THE JV COMPANY FROM ITS EQUITY HOLDER

INTRODUCTION

LETTER FROM AMPLE CAPITAL

LETTER FROM AMPLE CAPITAL

PRINCIPAL FACTORS CONSIDERED

1. Background information

2. Information on Dongfang, the JV Company and Mr. Zhu

3. Reasons for and benefits of the transactions

Overview of the LED light market

4. Formation of the JV Company

5. Terms of the Purchase

6. Terms of the Acquisition

The Consideration

The Consideration Shares

Comparative analysis

Dilution on the shareholding of the existing Shareholders

7. Possible financial effects of the Acquisition

Effect on earnings

Effect on net asset value

Cash flow

CONCLUSION

1. SUMMARY OF FINANCIAL INFORMATION

2. AUDITED FINANCIAL INFORMATION FOR THE YEAR ENDED 31 DECEMBER 2008

Consolidated Income Statement

China Silver Technology Holdings Limited Proxy Solicitation & Information Statement 2010