Comtec Solar Systems Group Limited — Annual Report 2016

Jul 28, 2016

Sun East Technology (Holdings) Limited (Incorporated in Bermuda with limited liability) Stock Code: 365

	Page
Corporate Information	2
Chairman’s Statement	3
Management Discussion and Analysis	5
Corporate Governance Report	10
Five Year Financial Summary	21
Directors Profile	22
Report of the Directors	24
Independent Auditor’s Report	30
Consolidated Statement of Profit or Loss and Other Comprehensive Income	32
Consolidated Statement of Financial Position	33
Consolidated Statement of Changes in Equity	35
Consolidated Statement of Cash Flows	37
Notes to the Financial Statements	39
Expressed in Hong Kong dollars (“HK$”)

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Sun East Technology (Holdings) Limited 2016 Annual Report

Board of Directors

Executive Directors

Mr. QI Lian (Chairman) (appointed on 2 June 2016) Mr. XIA Yuan (Chief Executive Officer) (appointed on 2 June 2016)

Mr. BUT Tin Fu (resigned as the Chairman on 2 June 2016)

Mr. BUT Tin Hing Mr. LEUNG Cheong (resigned as the Chief Executive Officer on 2 June 2016) Mr. LEUNG Kuen, Ivan

Independent Non-executive Directors

Mr. SEE Tak Wah Prof. XU Yang Sheng Mr. LI Wanshou

Audit Committee

Mr. SEE Tak Wah (Chairman) Prof. XU Yang Sheng Mr. LI Wanshou

Remuneration Committee

Mr. QI Lian (appointed on 2 June 2016) Prof. XU Yang Sheng (Chairman) Mr. LI Wanshou Mr. BUT Tin Fu (resigned on 2 June 2016)

Nomination Committee

Mr. QI Lian (Chairman) (appointed on 2 June 2016) Mr. LI Wanshou (resigned as the Chairman on 2 June 2016) Mr. SEE Tak Wah Mr. LEUNG Kuen, Ivan (resigned on 2 June 2016)

Company Secretary

Mr. TSE Ka Yi

Principal Place of Business

Unit H, 1st Floor, Phase 4 Kwun Tong Industrial Centre Nos. 436-446 Kwun Tong Road Kwun Tong Kowloon Hong Kong

Principal Banker

DBS Bank (Hong Kong) Limited Units 1208-18 Miramar Tower 132-134 Nathan Road Tsimshatsui, Kowloon Hong Kong

Auditor

BDO Limited Certified Public Accountants 25th Floor, Wing On Centre 111 Connaught Road Central Hong Kong

Principal Share Registrar and Transfer Office

Codan Services Limited Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Hong Kong Branch Share Registrar and Transfer Office

Tricor Tengis Limited Level 22, Hopewell Centre 183 Queen’s Road East Hong Kong

Registered Office

Clarendon House 2 Church Street Hamilton HM 11 Bermuda

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Sun East Technology (Holdings) Limited 2016 Annual Report

Dear Shareholders,

On behalf of the Board of Directors of Sun East Technology (Holdings) Limited, I present the audited annual results of the Company and its subsidiaries (the “Group”) for the year ended 31 March 2016.

Business review

In the past year, the economy of China remained depressed and the recovery of developed countries in Europe and the United States was weaker than expected. The global consumer electronics market slowed down which limited the growth of the industry and resulted in more severe competition, affecting the electronic equipment manufacturing business of the Group. At the same time, as the rate hike cycle of US dollar has commenced, the exchange rate of Renminbi against US dollar depreciated continually, further eroding the operating profit of the Group.

Despite the complicated and difficult macroeconomic and market environment, the Group kept on optimizing and updating its products to enhance its integrated solution capability and customer service quality. The Group adopted more flexible marketing strategy, leveraging on its industry resources gained over years and its brand advantage, to proactively maintain the market share of its products.

Influenced by the rising labour cost and indicative government policies in China, the automation and logistics business experienced growth in the past few years. However, it is expected that the growth rate will be lowered in the coming years due to intensifying competition, the profit margin of the business decreased while the demand of working capital increased.

During the financial year, the Company introduced strategic investor Unis Technology Strategy Investment Limited (“Unis Tech”), a subsidiary of Tsinghua Unigroup Co., Ltd. (“Tsinghua Unigroup”), a leading hi-tech enterprise in China. In May 2016, Unis Tech completed the subscription of new shares and convertible bonds of the Company, and became the actual controller of the Company. Such arrangement optimized the capital structure of the Company and will have positive influence on its corporate governance and future business development.

Outlook

The coming year will be the beginning of the Group’s strategic transformation. The Group will increase investment in research and development in technology of hi-tech, high precision and intelligent equipments in manufacturing.

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Sun East Technology (Holdings) Limited 2016 Annual Report

The Group will increase effort in developing SMT equipment business, particularly in self-developing products. By increasing the investment in research and development, enhancing the production level, improving the sale strategy as well as controlling the operating cost, profit margin is expected to be maintained at a reasonable range.

Furthermore, with an increase in labor cost in China market, the production capacity has shown a sign of a shift to oversea market which includes not only the emerging markets, but also some developed countries such as the United States. Hence, except for the China market, the Group will as well actively expand its business to the oversea market and establish oversea sales channel.

The Group will focus on expanding the existing finance lease business. Negotiation with relevant parties have begun and such business is expected to become an important driver of business growth in the future.

After joining Tsinghua Unigroup, the Group will actively negotiate with Tsinghua Unigroup and its subsidiaries about the relevant resources and advantages owned by the parties to lead the Group to a new business direction through synergy effect.

While constantly strengthening its existing core business, the Group intends to strengthen its capital operation and actively explore investment opportunities along the industrial chain so as to establish new source of profit growth.

Appreciation

This financial year will be a key milestone of development of the Group. On behalf of the Board, I hereby express our gratitude for the support of our shareholders and partners and also for the effort and contribution of all the staff of the Group throughout the year. The Group will seize development opportunities and create better returns for shareholders.

QI Lian

Chairman

Hong Kong, 29 July 2016

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Sun East Technology (Holdings) Limited 2016 Annual Report

Business Review

Brand Production Equipment Business

Due to the slowdown in China economy, demand for SMT machines and semi-conductor has been reduced in the past half year comparing to the same period of last year. Following the introduction of the R&D subsidies program in Shenzhen, Guangdong, enterprise are encouraged to make capital investment to up-grade equipment and machineries, which we believe will boost the overall market demand. In addition, the Group has achieved breakthroughs in the research and development of new products, particularly for the function improvement and launching of new models of selective soldering and screen machine products, which we believe will improve our revenue growth over time.

The sales of SMT and welding related equipment amounted to approximately HK$491.7 million, representing a decrease of approximately 16.8% when compared to approximately HK$590.7 million in same period of last year. The gross profit margin was 13.2%, increase by 0.5% from last year 12.7%.

OEM Industry

With the increase of China’s production costs such as wages and raw materials, the profit of OEM business is slimmed. Compared with the corresponding period last year, sales decreased from approximately HK$61.0 million to HK$44.9 million.

Automated and Logistic Business

Continuing the good momentum of last year, the sales of automated and logistic business remain hot in the past twelve months. Compared with the corresponding period last year, sale amount increased by 2.0% from approximately HK$186.5 million to approximately HK$190.2 million. The gross profit ratio recorded at around 13.2%. As previously expected, domestic enterprises increased investment in automation and intelligent to reduce their reliance on labour, and as a result, the automated and logistic business achieved good development.

Outlook

The Group will continue to develop SMT, automation and logistic businesses. It will participate in market competition through a strategy of differentiation, and will stringently control the operating costs to maintain a reasonable profit margin range. To raise the levels of precision and artificial intelligence of its products, the Group will also invest in researches in high technology areas like high performance electric motors, vision systems and IMS systems.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Financial Review

Revenue and gross profit

Revenue of the Group reached approximately HK$727.0 million and represented a decrease of approximately HK$111.2 million and 13.3% when compared with approximately HK$838.2 million in last year. The downturn of sale amount was mainly due to the decrease in sales of SMT machine. It is because the price of SMT machine dropped. Sale turnover was pushed downward as competition in pricing and payment terms were getting more severe in the market place. In terms of other businesses, despite the Group’s strategy of small profit margin relative to sales quantity and its effort in lengthening the ageing of major clients specifically, the business was affected given the keen competition.

During the year under review, the gross profit ratio for the year was approximately 13.5%, representing a slightly surge of approximately 0.8%, as compared with last year approximately 12.7%. Improved gross margin was achieved as a result of tighter cost control and better product mix in the SMT line machineries distribution.

Other income and gains

During the year, the Group recorded other income and gains at approximately HK$18.3 million. The Group recorded recover of over-accrual of commission payable at approximately HK$3.9 million, gain from scrap materials at approximately HK$1.9 million and government grant at approximately HK$9.9 million.

Selling and distribution costs

During the year, the Group recorded selling and distribution costs at approximately HK$46.3 million and it represents 6.4% of the turnover when it was 7.6% in the same period last year. The decrease was the result of tighter control on selling expenses.

Administrative expenses

The management of the Group implemented various methods to control its administrative expenses including departmental cost budgeting and enhancement of the efficiency by reviewing manpower. During the year, the administrative expenses were approximately HK$59.0 million and it increased by approximately HK$3.2 million compared to last year approximately HK$55.8 million. Such increase was mainly due to the increase in the cost of legal expense for new share subscription.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Financial Review (Continued)

Other Expenses

Other expenses for the year under review amounted to approximately HK$13.1 million, representing an increase of approximately HK$6.2 million as compared with approximately HK$6.9 million in the same period last year. The increase was mainly exchange loss of approximately HK$10.3 million caused by RMB depreciation versus USD.

Finance costs

Finance costs for the year under review amounted to approximately HK$7.0 million, representing an increase of approximately HK$2.4 million, as compared with approximately HK$4.6 million in the same period last year. The increase mainly came from increase in bank and other borrowings during the year.

(Loss)/Profit for the period

As result of the foregoing, the loss attributable to owners of the Company for the year under review was approximately HK$8.4 million, representing a decrease of approximately HK$10.9 million, as compared with profit of approximately HK$2.5 million in corresponding year. The net loss margin was approximately 1.2% for the year under review as compared with approximately 0.3% profit margin in the same period last year.

EBITDA

The following table illustrates the Group’s EBITDA for the respective years. The Group’s EBITDA margin was 1.2% for the year under review as compared with 2.3% in corresponding period in 2015.

	Year ended 31 March 2016 2015 HK’000 HK’000
(Loss)/Profit for year attributable to owners of the Company Finance costs Income tax (credit)/expenses Depreciation and amortisation EBITDA	(8,436) 2,535 7,036 4,594 (433) 1,786 10,483 10,606
	8,650 19,521

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Sun East Technology (Holdings) Limited 2016 Annual Report

Financial Review (Continued)

Financial resource, liquidity and gearing ratio

During the past year, there was no material change in the Group’s treasury policy. As there were more and more projects taken by the automated and logistics business and the capital being invested was also increasing, the cash level was in reducing trend. As at 31 March 2016, the Group had sufficient cash and banking facilities from its main bankers to finance ongoing working capital requirements. The Group maintained high value of net current assets at approximately HK$168.6 million and healthy current ratio at 1.4 times. The total equity ratio attributable to the owners of the Company was calculated with reference to the total bank and other borrowings and finance lease liabilities (but discounted bank acceptance bills of approximately HK$16.1 million are not included) as at 31 March 2016. The gearing ratio of the Group was 39.9% (2015: 24.8%, the pledged deposit and bank borrowing under hedging purpose are excluded).

Working capital management

The Group continued to maintain a healthy financial position. As at 31 March 2016, the Group held cash and bank balances of approximately HK$71.9 million, which increased approximately HK$20.2 million from approximately HK$51.7 million at the beginning of the year. Meanwhile, the Group obtained bank loans of approximately HK$127.1 million (but discounted bank acceptance bills of approximately HK$16.1 million are not included). The group’s average inventory turnover days was approximately 80 days (2015: 71 days). The Group’s average debtors turnover days was approximately 178 days (2015: 139 days). The Group’s average creditors turnover days was approximately 100 days (2015: 84 days). The Group remains confident that the net cash position will improve further given continuing profitability and management’s continued focus on close working capital control.

Capital Expenditure on property, plant and equipment

Total capital expenditure for the year was approximately HK$0.9 million, out of which approximately HK$0.2 million was spent on the acquisition of machinery and equipment, HK$0.5 million on acquisition of furniture, fixture and leasehold improvement and HK$0.2 million on acquisition of motor vehicles.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Financial Review (Continued)

Charges on Group Assets

As at 31 March 2016, the Group’s banking facilities including its performance letter of guarantees, import/export loan, letter of credit, documentary credits, trust receipt and bank borrowings are secured by:

• (i) a first legal charge on certain of the Group’s leasehold land and buildings, which had an aggregate net carrying amount at the reporting date of HK$111.8 million (2015: HK$105.0 million);

• (ii) prepaid land lease payments approximately HK$8.9 million (2015: HK$8.1 million);

• (iii) bank pledged deposits approximately HK$4.6 million (2015: HK$2.9 million);

• (iv) trade receivables approximately HK$264.4 million (2015: Nil); and

• (v) corporate guarantees provided by the Company and its subsidiaries.

Employees and Remuneration Policies

As at 31 March 2016, the Group employed approximately 1,027 full time employees in the PRC and approximately 15 were in the Hong Kong office. The Group remunerates its employees based on the industry’s practice. In the PRC, the Group provides staff welfare and bonuses to its employees in accordance with the prevailing labour law. In Hong Kong, the Group provides staff benefits including pension scheme and performance related bonuses.

Purchase, Redemption or Sale of Listed Securities of the Company

Neither the Company, nor any of its subsidiaries purchased, redeemed or sold any of the Company’s listed securities during the year.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Corporate Governance Report

The Company acknowledges the importance of good corporate governance practices and procedures and regards a pre-eminent board of directors, sound internal controls and accountability to all shareholders as the core elements of its corporate governance principles. The Company endeavors to ensure that its businesses are conducted in accordance with rules and regulations, and applicable codes and standards. The Company has adopted the Code Provisions of the Corporate Governance Code (the “Code”) as set out in Appendix 14 to the Listing Rules.

The Board periodically reviews the corporate governance practices of the Company to ensure its continuous compliance with the Code. Save and except as hereinafter mentioned, the Company was in compliance with the Code for the year ended 31 March 2016 except for the derivations from the Code Provision A.4.1 and A.6.7 as set out below.

Code Provision A.4.1

Code Provision A.4.1 stipulates that non-executive directors should be appointed for a specific term and subject to re-election. The Company’s non-executive directors are not appointed for a specific term but are subject to retirement by rotation in accordance with the Company’s Bye-Laws. As such, the Board considers that sufficient measures have been taken to ensure that the Company’s corporate governance practices are comparable with those in the Code.

Code Provision A.6.7

Pursuant to the Code Provision A.6.7, all Directors of the Company should attend general meetings. However, one Executive Director and three Independent Non-executive Directors were absent from the annual general meeting held on 20 August 2015 due to other business commitments. To ensure compliance with the Code in the future, the Company has arranged and will continue to arrange to furnish all Directors with appropriate information on all general meetings and take all reasonable measures to arrange the schedule in such a cautious way that all Directors can attend the general meetings.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Model Code For Securities Transactions By Directors

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 of the Listing Rules as the code of conduct regarding securities transactions by Directors of the Company. Having made specific enquiry of all Directors, all Directors confirmed that they have complied with the required standard as set out in the Model Code for the year.

Board of Directors

The Board, headed by the Chairman, is responsible for the oversight of the management of the business and affairs of the Company with the objective of enhancing shareholder value. It is responsible for the formulation and the approval of the Group’s development and business strategies and policies, approval of annual budgets and business plans, recommendation of dividend, and supervision of management in accordance with the governing rules. The management of the Company is responsible for the day-to-day operations of the Group under the leadership of the Chief Executive Officer.

The Board of the Company comprises a total of nine Directors, with six Executive Directors and three Independent Non-executive Directors. More than one-third of the Board is Independent Non-executive Directors and not less than one of them have appropriate professional qualifications or accounting or related financial management expertise. The composition of the Board is shown on page 16 under the “Attendance Record at Meetings” in this report. Biographies of the Directors which include relationship among members of the Board are set out on pages 22 to 23 under the subject Directors Profile.

Each of the Independent Non-executive Directors has made an annual confirmation of independence pursuant to Rule 3.13 of the Listing Rules. The Board has assessed their independence and concluded that all the Independent Non-executive Directors are independent in accordance with the Listing Rules.

Directors are provided with complete, adequate explanation and information to enable them to make an informed decision or assessment of the Company’s performance, position and prospects and to discharge their duties and responsibilities on a timely basis. The Directors, to properly discharge their duties, are given access to independent professional advisers, when necessary, at the expense of the Company.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Board of Directors (Continued)

Regular Board meetings are scheduled to be held at approximately quarterly intervals for reviewing and approving the financial and operating performance, and considering and approving the overall strategies and policies of the Company.

Continuing Professional Development

The Directors have undergone satisfactory training throughout the year and provided the training record to the Company. During the year ended 31 March 2016, the training records of the Directors are set out below:

Directors	Corporate Governance/update on laws, rules and regulations
	Attend Seminars, Briefings and Read Materials conferences
Executive Directors Mr. QI Lian1 (Chairman) Mr. XIA Yuan2 (Chief Executive Officer) Mr. BUT Tin Fu3 Mr. BUT Tin Hing Mr. LEUNG Cheong4 Mr. LEUNG Kuen, Ivan Independent Non-executive Directors Mr. SEE Tak Wah Prof. XU Yang Sheng Mr. LI Wanshou	N/A N/A N/A N/A V V V V V V V V V V V V V V

Notes:

1. Mr. Qi Lian was appointed on 2 June 2016.

2. Mr. Xia Yuan was appointed on 2 June 2016.

3. Mr. But Tin Fu resigned as the Chairman on 2 June 2016.

4. Mr. Leung Cheong resigned as the Chief Executive Officer on 2 June 2016.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Board of Directors (Continued)

Directors’ and Officers’ insurance

The Company has arranged appropriate insurance cover in respect of potential legal actions against its Directors and Officers.

Chairman and Chief Executive Officer

Code provision A.2.1 stipulates that the role of Chairman and Chief Executive Officer should be separated. Mr. Qi Lian is the Chairman and Mr. Xia Yuan is the Chief Executive Officer of the Group since 2 June 2016.

Nomination Committee

The Company has established a nomination committee in accordance with the requirement of the CG Code for the purpose of reviewing the structure, size and composition of Board, identifying individuals suitably qualified to become Board members and assessing the independence of Independent Nonexecutive Directors. The committee currently comprises three members, namely Mr. Qi Lian (Chairman of the Committee), who is an Executive Director, Mr. See Tak Wah and Mr. Li Wanshou who are Independent Non-executive Directors.

The Nomination Committee met once during the year ended 31 March 2016 and the individual members’ attendance records are disclosed in the section “Attendance Record at Meetings” in this report.

The Nomination Committee has considered and consulted the Chairman of the Board the following proposals during the year ended 31 March 2016:

• (a) review on the structure of the Board of Directors of the Group;

• (b) review on Terms of Reference of the Nomination Committee;

• (c) assessment of the independence of Independent Non-executive Directors; and

• (d) identification of candidates suitably qualified to become Directors.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Board of Directors (Continued)

Remuneration Committee

The Company has a remuneration committee which was established in accordance with the requirements of the CG Code for the purpose of reviewing the remuneration policy and fixing the remuneration package for all Directors. The remuneration committee currently comprises three members, namely Prof. Xu Yang Sheng (Chairman of the Committee) and Mr. Li Wanshou who are Independent Non-executive Directors, and Mr. Qi Lian, who is an Executive Director.

The Remuneration Committee met once during the year ended 31 March 2016 and the individual members’ attendance records are disclosed in the section “Attendance Record at Meetings” in this report.

The Remuneration Committee has considered and consulted the Chairman of the Board the following proposals:

• (a) reviewed the annual salary of the Executive Directors for year ended 31 March 2016;

• (b) reviewed the monthly remuneration of Executive Directors; and

• (c) reviewed and approved the annual performance bonus schemes and the granting of discretionary bonus to both management and other employees of the Company;

The Remuneration Committee is to determine, with delegated responsibility, the remuneration packages of individual Executive Directors.

Further particulars in relation to Directors’ remuneration and the five individuals with highest emoluments as required to be disclosed pursuant to Appendix 16 to the Listing Rules are set out in note 9 to the financial statements.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Board of Directors (Continued)

Audit Committee

The existing Audit Committee comprises three Independent Non-executive Directors, namely, Mr. Li Wanshou, Mr. See Tak Wah (Chairman of the Committee) and Prof. Xu Yang Sheng.

The principal duties of the Audit Committee include the review of the financial reporting and internal control system of the Group, review of half-yearly and annual reports and accounts, review and monitor the appointment of the auditors and their independence, monitor compliance with statutory and listing requirements, and to engage independent legal or other advisers as it determines necessary.

During the year, two meetings were held. All members of the Audit Committee attended all the Audit Committee meetings.

In discharging its responsibility, the Audit Committee has performed the following work during the year:

• (i) reviewed the draft annual and interim financial statements and draft results announcements during the year; and

• (ii) reviewed, in conjunction with the auditor, the development of accounting standards and assessed their potential impacts on the Group’s financial statements.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Board of Directors (Continued)

Attendance Record at Meetings

The attendance record of each director at the Board Meetings, Audit Committee Meetings, Remuneration Committee Meetings, Nomination Committee Meetings and General Meeting during year ended 31 March 2016 is set out in the following table:

		Audit	Remuneration	Nomination	Annual
	Board	Committee	Committee	Committee	General
Directors	Meetings	Meetings	Meeting	Meeting	Meeting
Number of meetings held	4	2	1	1	1
Executive Directors
Mr.QI Lian1 (Chairman)	N/A	N/A	N/A	N/A	N/A
Mr.XIA Yuan2
(Chief Executive Officer)	N/A	N/A	N/A	N/A	N/A
Mr. BUT Tin Fu3	4/4	N/A	1/1	N/A	1/1
Mr. BUT Tin Hing	4/4	N/A	N/A	N/A	0/1
Mr. LEUNG Cheong4	4/4	N/A	N/A	N/A	1/1
Mr. LEUNG Kuen, Ivan	4/4	N/A	N/A	1/1	1/1
Independent Non-executive	Directors
Mr. SEE Tak Wah	4/4	2/2	N/A	1/1	0/1
Prof. XU Yang Sheng	2/4	2/2	1/1	N/A	0/1
Mr. LI Wanshou	2/4	2/2	1/1	1/1	0/1

Notes:

1. Mr. Qi Lian was appointed on 2 June 2016.

2. Mr. Xia Yuan was appointed on 2 June 2016.

3. Mr. But Tin Fu resigned as the Chairman on 2 June 2016.

4. Mr. Leung Cheong resigned as the Chief Executive Officer on 2 June 2016.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Auditor’s Remuneration

For the year ended 31 March 2016, the remuneration paid to the Company’s auditor, BDO Limited, is set out as follows:

Services rendered Fee paid/payable HK$’000	Services rendered Fee paid/payable HK$’000
Audit services Non-audit services	990 –
	990

Company Secretary

The Company Secretary, Mr. Tse Ka Yi, Gary, is an employee of the Company who has day-to-day knowledge of the Company’s affairs.

During the financial year, the Company Secretary has taken no less than 15 hours of relevant professional training.

Directors’ responsibility statement

The Directors acknowledge their responsibility for preparing financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the Group and of the Group’s results and its cash flows.

The Directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future and it is appropriate to adopt the going concern basis in preparing the financial statements.

Auditor’s responsibility statement

The auditor’s responsibilities on the consolidated financial statements of the Group is set out in the Independent Auditor’s Report on pages 30 to 31.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Internal Control

The Board is responsible for maintaining effective internal control systems of the Group. The Group’s system of internal control includes a defined management structure with limits of authority, is designed to evaluate the Group’s risk, achieve the division goals and business objectives, maintain proper accounting records for the provision of financial information for internal analysis or for publication, comply with relevant legislation and regulations.

During the year, the Directors had conducted a review of the effectiveness of the systems of internal control in respect of the financial, operational, compliance controls and risk management function of the Group.

Shareholders’ Rights

Procedures for Shareholders to convene a Special General Meeting (“SGM”)

Pursuant to the Company’s bye-laws and the Companies Act 1981 of Bermuda (“Companies Act”), registered Shareholders holding not less than one-tenth (10%) of the paid-up capital of the Company carrying the right of voting at general meetings of the Company (“SGM Requisitionists”) can deposit a written request to convene a SGM at the registered office of the Company (“Registered Office”), which is presently situated at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda. The SGM Requisitionists must state in their request(s) the purposes of the SGM and such request(s) must be signed by all the SGM Requisitionists and may consist of several documents in like form, each signed by one or more of the SGM Requisitionists.

The Share Registrars will verify the SGM Requisitionists’ particulars in the SGM Requisitionists’ request. Promptly after confirmation from the Share Registrars that the SGM Requisitionists’ request is in order, the Company Secretary will arrange with the Board to convene a SGM by serving sufficient notice to all the registered Shareholders in accordance with all the relevant statutory and regulatory requirements. On the contrary, if the SGM Requisitionists’ request is verified not in order, the SGM Requisitionists will be advised of the outcome and accordingly, a SGM will not be convened as requested.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Shareholders’ Rights (Continued)

Procedures for Shareholders to convene a Special General Meeting (“SGM”) (Continued)

The SGM Requisitionists, or any of them representing more than one half of the total voting rights of all of them, may themselves convene a SGM if within twenty-one (21) days of the deposit of the SGM Requisitionists’ request, the Board does not proceed duly to convene a SGM provided that any SGM so convened is held within three (3) months from the date of the original SGM Requisitionists’ request. A SGM so convened by the SGM Requisitionists shall be convened in the same manner, as nearly as possible, as that in which meetings are to be convened by the Company.

Procedures for shareholders to put forward proposals at a general meeting

Pursuant to the Companies Act, either any number of the registered Shareholders holding not less than one-twentieth (5%) of the paid-up capital of the Company carrying the right of voting at general meetings of the Company (“Requisitionists”), or not less than 100 of such registered Shareholders, can request the Company in writing to (a) give to Shareholders entitled to receive notice of the next general meeting notice of any resolution which may properly be moved and is intended to be moved at that meeting; and (b) circulate to Shareholders entitled to have notice of any general meeting any statement of not more than 1,000 words with respect to the matter referred to in any proposed resolution or the business to be dealt with at that meeting.

The requisition signed by all the Requisitionists may consist of several documents in like form, each signed by one or more of the Requisitionists; and it must be deposited at the Registered Office with a sum reasonably sufficient to meet the Company’s relevant expenses, not less than six (6) weeks before the meeting in case of a requisition requiring notice of a resolution or not less than one (1) week before the meeting in the case of any other requisition. Provided that if an AGM is called for a date six (6) weeks or less after the requisition has been deposited, the requisition though not deposited within the time required shall be deemed to have been properly deposited for the purposes thereof.

Procedures for shareholders to propose a person for election as a Director

As regards the procedures for proposing a person for election as a Director, please refer to the procedures made available under the Corporate Information, Corporate Governance section (Shareholders Communication Policy sub-section) of the Company’s website at www.suneasthk.com.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Shareholders’ Rights (Continued)

Procedures for directing shareholders’ enquiries to the Board

Shareholders may at any time send their enquiries and concerns to the Board in writing through the Company Secretary whose contact details are as follows:

The Company Secretary

Mr. Tse Ka Yi Unit H, 1st Floor, Phase 4, Kwun Tong Industrial Centre, Nos. 436-446 Kwun Tong Road, Kwun Tong, Kowloon, Hong Kong

Fax: (852) 2343 3120 Email: enquiry@suneasthk.com

Shareholders may also make enquiries with the Board at the general meetings of the Company.

Constitutional Documents

The Company’s constitutional documents have been posed on the Investor Relationship, Bye-laws of the Company’s website at www.suneasthk.com. There is no change in the constitutional documents of the Company during the year under review.

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Sun East Technology (Holdings) Limited 2016 Annual Report

A summary of the results and of the assets and liabilities of the Group for the last five financial years, as extracted from the published audited financial statements and restated/reclassified as appropriate, is set out below.

		Year ended 31	Year ended 31	March
	2016	2015	2014	2013	2012
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
RESULTS
Revenue	726,975	838,203	787,603	565,372	632,833
(Loss)/profit before income tax	(8,869)	4,321	12,796	9,391	17,110
Income tax credit/(expense)	433	(1,786)	(3,370)	(3,653)	(4,113)
(Loss)/profit for the year attributable
to owners of the Company	(8,436)	2,535	9,426	5,738	12,997
			As at 31 March
	2016	2015	2014	2013	2012
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
ASSETS AND LIABILITIES
TOTAL ASSETS	754,522	824,379	744,788	656,671	665,921
TOTAL LIABILITIES	(435,342)	(481,327)	(412,883)	(338,739)	(369,817)
	319,180	343,052	331,905	317,932	296,104

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Sun East Technology (Holdings) Limited 2016 Annual Report

Executive Directors

Mr. QI Lian, aged 48, is the Chairman of the Group, is responsible for overall strategic planning and management of the Group. He has over 24 years of experience in management, investment and strategic planning.

Mr. XIA Yuan, aged 35, is the Chief Executive Officer of the Group, is responsible for the daily operation and management of the Group. He has over 10 years of experience in Strategic planning, marketing and capital operations.

Mr. BUT Tin Fu, aged 58, is responsible for the management of the Group. He joined the Group in May 1987 and has over 29 years of experience in the electronics industry. He is a brother of Mr. But Tin Hing.

Mr. BUT Tin Hing, aged 60, is a Technical Director of the Group. He established the Group in 1984 and is responsible for the Group’s product development. Mr. But has over 32 years of experience in the electronics industry. He is a brother of Mr. But Tin Fu.

Mr. LEUNG Cheong, aged 55, is responsible for the sales and marketing of the Group in the PRC and Hong Kong. Mr. Leung joined the Group in May 1987 and has over 29 years of experience in the electronics industry. He is a brother of Mr. Leung Kuen, Ivan.

Mr. LEUNG Kuen, Ivan, aged 59, is the Marketing Director of the Group and is responsible for market research and development of production equipment and lines. He joined the Group in August 1991 and has over 25 year of experience in the mechanical engineering field. Mr. Leung holds a masters degree in precision engineering from the Hong Kong Polytechnic University. He is a brother of Mr. Leung Cheong.

Independent Non-executive Directors

Mr. LI Wanshou, aged 52, obtained PhD in Economics from China Academy of Social Sciences and PhD in Philosophy from Xi’an Jiaotong University. He is currently guest professor of Nankai University, part time professor at Shenzhen Graduate School, Chinese Academy of Social Sciences and deputy director of the Venture Capital Research Center at Fudan University.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Independent Non-executive Directors (Continued)

Prof. XU Yang Sheng, aged 58, graduated from the Zhejiang University in 1982 with a bachelor’s degree in mechanical engineering and a master degree in mechanical engineering therefrom in 1984. Prof. Xu obtained his doctorate degree from the University of Pennsylvania of the United States in 1989. From 1989 to 1997, he worked in Carnegie Mellon University in the United States. Prof. Xu is Professor of Automation and Computer-Aided Engineering of the Chinese University of Hong Kong. Prof. Xu is an Academician of Chinese Academy of Engineering, Academician of International Eurasian Academy of Sciences and fellow of Institute of Electrical and Electronics Engineers. Currently, Prof. Xu is President of The Chinese University of Hong Kong, Shenzhen.

Mr. SEE Tak Wah, aged 53, graduated from the Management School of Waikato University of New Zealand with a first class honour in Bachelor of Management Studies and is a member of the Institute of Chartered Accountants of New Zealand and an associate member of the Hong Kong Institute of Certified Public Accountants. Mr. See has over 25 years’ experience in financial and general management where he previously worked as the regional business controller of Nokia Mobile Phones Asia Pacific, the managing director of Nokia Mobile Phones Hong Kong, the chief operating officer of First Mobile Group Holdings Ltd and held key management position in the North Asia office of Philips and Siemens. On 29 June 2012, Mr. See retired from the office Independent Non-executive Director of Buildmore International Limited (stock code: HK00108). Mr. See at present is an Independent Non-executive Director of Chu Kong Petroleum And Natural Gas Steel Pipe Holdings Limited (Stock Code: HK01938). Save as disclosed, Mr. See does not have other directorship in any listed company within last 3 years.

23

Sun East Technology (Holdings) Limited 2016 Annual Report

The directors present their report and the audited financial statements of Sun East Technology (Holdings) Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) for the year ended 31 March 2016.

Principal Activities

The principal activity of the Company is investment holding. The principal activities of the subsidiaries comprise the design, manufacture and distribution of production lines and production equipment, and the distribution of brand name production equipment. There were no significant changes in the nature of the Group’s principal activities during the year.

Results and Dividends

The Group’s loss for the year ended 31 March 2016 and the state of affairs of the Company and the Group at that date are set out in the financial statements on pages 32 to 106.

The directors do not recommend the payment of a dividend for year ended 31 March 2016.

Summary Financial Information

A summary of the published results and assets and liabilities of the Group for the last five financial years, is set out on page 21.

Property, Plant and Equipment

Details of movements in the property, plant and equipment of the Group and the Company during the year is set out in note 13 to the financial statements.

Share Capital

Details of movements in the Company’s share capital during the year are set out in note 27 to the financial statements.

Reserves

Details of movements in the reserves of the Company and the Group during the year are set out in note 28(b) to the financial statements and in the consolidated statement of changes in equity, respectively.

24

Sun East Technology (Holdings) Limited 2016 Annual Report

Distributable Reserves

At 31 March 2016, the Company’s reserves available for distribution, calculated in accordance with the Companies Act 1981 of Bermuda, amounted to approximately HK$114,912,000. In addition, the Company’s share premium account, in the amount of approximately HK$87,728,000, may be distributed in the form of fully paid bonus shares.

Major Customers and Suppliers

In the year under review, aggregate sales attributable to the Group’s five largest customers were approximately 19% of the total sales for the year. Purchases from the Group’s five largest suppliers accounted for approximately 51% of total purchases for the year and purchases from the largest supplier included therein amounted to approximately 31%.

None of the directors of the Company or any of their associates or any shareholders (which, to the best knowledge of the directors, own more than 5% of the Company’s issued share capital) had any beneficial interest in any of the Group’s five largest suppliers during the year.

Directors

The directors of the Company:

Executive Directors

Mr. QI Lian (appointed on 2 June 2016)

Mr. XIA Yuan (appointed on 2 June 2016)

Mr. BUT Tin Fu

Mr. BUT Tin Hing

• Mr. LEUNG Cheong

• Mr. LEUNG Kuen, Ivan

Independent Non-executive Directors

Mr. SEE Tak Wah Prof. XU Yang Sheng

Mr. LI Wanshou*

• Members of the audit committee

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Sun East Technology (Holdings) Limited 2016 Annual Report

Directors (Continued)

In accordance with clauses 87 and 88 of the Company’s bye-laws, Prof. Xu Yang Sheng, Mr. Li Wanshou and Mr. See Tak Wah will retire by rotation and, being eligible, will offer themselves for re-election at the forthcoming annual general meeting.

The directors of the Company, including the Independent Non-executive Directors, are subject to retirement by rotation and re-election at the annual general meeting of the Company in accordance with the provisions of the Company’s bye-laws.

The Company has received annual confirmations of independence from all Independent Non-executive Directors and as at the date of this report still considers them to be independent.

Directors’ Biographies

Biographical details of the directors of the Company are set out on pages 22 to 23 of the annual report.

Directors’ Service Contracts

Mr. But Tin Fu, Mr. But Tin Hing, Mr. Leung Cheong and Mr. Leung Kuen, Ivan entered into a service contract with the Company for a term of three years commencing from 1 September 2000 which has continued thereafter until termination by three months’ notice in writing served by either party to the other.

Mr. Qi Lian and Mr. Xia Yuan have entered into a service contract with the Company for a term of three years commencing from 2 June 2016 which has continued thereafter until termination by three months’ notice in writing served by either party to the other.

Apart from the foregoing, no director proposed for re-election at the forthcoming annual general meeting has a service contract with the Company which is not determinable by the Company within one year without payment of compensation, other than statutory compensation.

Directors’ Interests in Contracts

No director had a material interest, either directly or indirectly, in any contract of significance to the business of the Group to which the Company or any of its subsidiaries was a party during the year.

26

Sun East Technology (Holdings) Limited 2016 Annual Report

Directors’ Interests in Shares and Underlying Shares

At 31 March 2016, the interests of the directors in the share capital of the Company or its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the “SFO”)), as recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO, or as otherwise notified to the Company and The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers, were as follows:

Long position in the shares

Number of the Approximate ordinary shares percentage of total Name of Directors beneficially held Capacity/ Nature shareholding %	Number of the Approximate ordinary shares percentage of total Name of Directors beneficially held Capacity/ Nature shareholding %
But Tin Fu (“BTF”) But Tin Hing (“BTH”) Leung Cheong (“LC”) Leung Kuen, Ivan (“LKI”)	45,746,000 Beneficial owner 8.71 1,050,000 Beneficial owner 0.20 220,605,840 Interest of controlled 42.02 corporation (Note)
	221,655,840 42.22
	2,252,280 Beneficial owner 0.43 4,536,520 Beneficial owner 0.86

Note:

BTH is the beneficial owner of 50% of the issued shares in Mind Seekers Investment Limited (“Mind Seekers”) and therefore BTH is deemed, or taken to be interested in the 220,605,840 Shares held by Mind Seekers for the purposes of the SFO. The entire issued share capital of Mind Seekers is beneficially owned by BTH, BTF, LC and LKI, as to 50%, 20%, 20% and 10% respectively.

Save as disclosed above, as at 31 March 2016, none of the directors had registered an interest or short position in the shares, underlying shares or debentures of the Company or any of its associated corporations that was required to be recorded pursuant to Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers.

27

Sun East Technology (Holdings) Limited 2016 Annual Report

Directors’ Rights to Acquire Shares or Debentures

At no time during the year were rights to acquire benefits by means of the acquisition of shares in or debentures of the Company granted to any director or their respective spouse or minor children, or were any such rights exercised by them; or was the Company, or any of its subsidiaries a party to any arrangement to enable the directors to acquire such rights in any other body corporate.

Substantial Shareholder’s Interest in Shares and Underlying

Shares

As at 31 March 2016, so far as is known to the Directors or chief executive of the Company, the following persons (other than the Directors or chief executive of the Company) had an interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO were as follow:

Long position in the shares

			Approximate
		Number of	percentage of
	Nature of	the ordinary	total
Name of Shareholder	interest	shares held	shareholding
			%
Substantial Shareholder
Mind Seekers	Beneficial owner	220,605,840	42.02

Save for the interests disclosed above, the directors are not aware of any person who had, directly or indirectly, registered an interest in the issued share capital and underlying shares of the Company that was required to be recorded under Section 336 of the SFO.

Purchase, Redemption or Sale of Listed Securities of the

Company

Neither the Company, nor any of its subsidiaries purchased, redeemed or sold any of the Company’s listed securities during the year.

28

Sun East Technology (Holdings) Limited 2016 Annual Report

Pre-emptive Rights

There are no provisions for pre-emptive rights under the Company’s bye-laws or the laws of Bermuda, being the jurisdiction in which the Company is incorporated, which would oblige the Company to offer new shares on a pro rata basis to existing shareholders.

Directors’ Remuneration

The directors’ fees are subject to shareholders’ approval at general meetings. Other emoluments are determined by the Company’s board of directors with reference to directors’ duties, responsibilities and performance and the results of the Group.

Sufficiency of Public Float

Based on information that is publicly available to the Company and within the knowledge of the directors, the directors confirmed that at least 25% of the Company’s total issued share capital was held by the public as at the date of this report.

Auditor

A resolution will be proposed at the forthcoming annual general meeting of the Company to re-appoint BDO as auditor of the Company.

ON BEHALF OF THE BOARD

QI Lian

Chairman

Hong Kong 29 June 2016

29

Sun East Technology (Holdings) Limited 2016 Annual Report

Independent Auditor’s Report

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==> picture [100 x 57] intentionally omitted <==

To the shareholders of Sun East Technology (Holdings) Limited 日東科技（控股）有限公司

(Incorporated in Bermuda with limited liability)

We have audited the consolidated financial statements of Sun East Technology (Holdings) Limited (the “Company”) and its subsidiaries (together the “Group”) set out on pages 32 to 106, which comprise the consolidated statement of financial position as at 31 March 2016, and the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Directors’ Responsibility for the Consolidated Financial Statements

The directors of the Company are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. This report is made solely to you, as a body, in accordance with Section 90 of the Bermuda Companies Act 1981, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

30

Sun East Technology (Holdings) Limited 2016 Annual Report

Independent Auditor’s Report

Auditor’s Responsibility (Continued)

We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 March 2016 and of its financial performance and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

BDO Limited

Certified Public Accountants Cheung Or Ping Practising Certificate Number: P05412

Hong Kong, 29 June 2016

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Sun East Technology (Holdings) Limited 2016 Annual Report

Consolidated Statement of Profi t or Loss and Other Comprehensive Income

For the year ended 31 March 2016

Notes	2016 2015 HK$’000 HK$’000
Revenue 6 Cost of sales Gross profit Other income and gains 6 Selling and distribution costs Administrative expenses Other expenses Finance costs 7 (Loss)/Profit before income tax 8 Income tax credit/(expense) 10 (Loss)/Profit for the year attributable to owners of the Company Other comprehensive income Items that will not be reclassified subsequently to profit or loss: Surplus on revaluation of properties held for own use 13 Deferred tax relating to revaluation surplus 26 Items that may be reclassified subsequently to profit or loss: Exchange (loss)/gain on translation of financial statements of foreign operations Other comprehensive income for the year, net of tax Total comprehensive income for the year attributable to owners of the Company (Loss)/Earnings per share for (loss)/profit attributable to owners of the Company 12 – Basic – Diluted	726,975 838,203 (628,705) (731,685)
	98,270 106,518 18,271 28,600 (46,276) (63,540) (59,007) (55,777) (13,091) (6,886) (7,036) (4,594)
	(8,869) 4,321 433 (1,786)
	(8,436) 2,535
	2,058 4,491 (314) 4,015 (17,180) 106
	(15,436) 8,612
	(23,872) 11,147
	HK(0.82) centsHK0.25 cents (restated) N/A N/A

32

Sun East Technology (Holdings) Limited 2016 Annual Report

Consolidated Statement of Financial Position

As at 31 March 2016

Notes	2016 2015 HK$’000 HK$’000
ASSETS AND LIABILITIES Non-current assets Property, plant and equipment 13 Prepaid land lease payments 14 Finance lease receivables 15 Current assets Inventories 17 Trade and bills receivables 18 Prepayments, deposits and other receivables Finance lease receivables 15 Derivative financial instruments 25 Tax reserve certificates Taxes recoverable Pledged and restricted deposits 19 Cash and bank balances 20 Current liabilities Trade and bills payables 21 Other payables and accruals Bank and other borrowings 22 Finance lease liabilities 23 Taxes payable Net current assets Total assets less current liabilities	151,892 167,349 10,275 11,181 1,776 –
	163,943 178,530 112,717 166,263 338,329 373,628 45,867 47,533 3,107 – 183 – 3,600 3,600 191 191 14,680 2,934 71,905 51,700
	590,579 645,849 166,194 178,612 80,633 150,769 143,219 105,447 98 93 31,871 33,263
	422,015 468,184
	168,564 177,665
	332,507 356,195

33

Sun East Technology (Holdings) Limited 2016 Annual Report

Consolidated Statement of Financial Position

As at 31 March 2016

Notes	2016 2015 HK$’000 HK$’000
Non-current liabilities Finance lease liabilities 23 Deferred tax liabilities 26 Net assets EQUITY Equity attributable to owners of the Company Share capital 27 Reserves 28(a) Total equity On behalf of the Board	164 262 13,163 12,881
	13,327 13,143
	319,180 343,052
	52,500 52,500 266,680 290,552
	319,180 343,052

XIA Yuan Director

BUT Tin Fu Director

34

Sun East Technology (Holdings) Limited 2016 Annual Report

Consolidated Statement of Changes in Equity

For the year ended 31 March 2016

	Attributable to owners of the Company
	Asset Statutory reserve Share Share Contributed revaluation Exchange and enterprise Retained capital premium surplus reserve reserve expansion funds profits Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (note 28(a)) (note 28(a))
Balance at 1 April 2014 Profit for the year Other comprehensive income: Surplus on revaluation on leasehold land and buildings Exchange gain on translation of financial statements of foreign operations Deferred tax relating to revaluation of leasehold land and buildings (note 26) Total comprehensive income for the year Appropriations to statutory reserve Balance at 31 March 2015	52,500 87,728 4,800 56,950 24,452 9,450 96,025 331,905 – – – – – – 2,535 2,535 – – – 4,491 – – – 4,491 – – – – 106 – – 106 – – – 4,015 – – – 4,015
	– – – 8,506 106 – 2,535 11,147
	– – – – – 495 (495) –
	52,500 87,728 4,800 65,456 24,558 9,945 98,065 343,052

35

Sun East Technology (Holdings) Limited 2016 Annual Report

Consolidated Statement of Changes in Equity

For the year ended 31 March 2016

	Attributable to owners of the Company
	Asset Statutory reserve Share Share Contributed revaluation Exchange and enterprise Retained capital premium surplus reserve reserve expansion funds profits Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (note 28(a)) (note 28(a))**
Balance at 1 April 2015 Loss for the year Other comprehensive income: Surplus on revaluation on leasehold land and buildings Exchange loss on translation of financial statements of foreign operations Deferred tax relating to revaluation of leasehold land and buildings (note 26) Total comprehensive income for the year Appropriations to statutory reserve Balance at 31 March 2016	52,500 87,728 4,800 65,456 24,558 9,945 98,065 343,052 – – – – – – (8,436) (8,436) – – – 2,058 – – – 2,058 – – – – (17,180) – – (17,180) – – – (314) – – – (314)
	– – – 1,744 (17,180) – (8,436) (23,872)
	– – – – – 1,280 (1,280) –
	52,500 87,728 4,800 67,200 7,378 11,225 88,349 319,180

• These reserve accounts comprise the consolidated reserves of HK$266,680,000 (2015: HK$290,552,000) in the consolidated statement of financial position.

36

Sun East Technology (Holdings) Limited 2016 Annual Report

Consolidated Statement of Cash Flows

For the year ended 31 March 2016

	2016 2015 HK$’000 HK$’000
Cash flows from operating activities (Loss)/Profit before income tax Adjustments for: Finance costs Interest income Depreciation Amortisation of prepaid land lease payments Fair value loss on derivative financial instruments Loss on disposal of property, plant and equipment Bad debts written off Impairment loss on trade receivables written back Provision for impairment of trade receivables Over-accrual of commission payables Write-back of inventories to net realisable value Write-off of property, plant and equipment Operating profit before working capital changes Decrease/(Increase) in inventories Decrease/(Increase) in trade and bills receivables Decrease/(Increase) in prepayments, deposits and other receivables (Decrease)/Increase in trade and bills payables (Decrease)/Increase in other payables and accruals Changes in derivative financial instruments Cash generated from/(used in) operations Interest paid Overseas taxes paid Net cash used in operating activities	(8,869) 4,321 7,036 4,594 (528) (2,971) 10,196 10,309 287 297 131 1,103 45 8 87 97 (353) (2,260) 1,373 6,749 (3,906) – (785) (788) – 40
	4,714 21,499 48,123 (46,174) 15,604 (111,543) 1,197 (25,598) (5,415) 22,230 (60,648) 6,496 (314) (1,112)
	3,261 (134,202) (7,022) (4,587) (991) (2,428)
	(4,752) (141,217)

37

Sun East Technology (Holdings) Limited 2016 Annual Report

Consolidated Statement of Cash Flows

For the year ended 31 March 2016

	2016 2015 HK$’000 HK$’000
Cash flows from investing activities Interest received Proceeds from disposal of property, plant and equipment Purchases of property, plant and equipment Payment of obligation of finance lease Capital element of finance lease receivables received Interest element of finance lease receivables Proceeds from available-for-sale financial assets (Increase)/Decrease in pledged and restricted deposits Net cash (used in)/generated from investing activities Cash flows from financing activities Proceeds from bank and other borrowings Repayment of bank borrowings Repayments of capital element of finance lease liabilities Interest element of finance lease payments Net cash generated from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year Effect of foreign exchange rate changes, net Cash and cash equivalents at end of the year	325 2,971 440 14 (876) (9,445) (8,494) – 3,611 – 203 – – 1,262 (12,288) 65,110
	(17,079) 59,912
	143,219 105,447 (99,148) (60,967) (93) (37) (14) (7)
	43,964 44,436
	22,133 (36,869) 51,700 88,525 (1,928) 44
	71,905 51,700

Major non-cash transactions

For the year ended 31 March 2015, the Group entered into finance lease arrangements in respect of property, plant and equipment with a total capital value at the inception of the leases of HK$392,000.

38

Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

1. General Information

Sun East Technology (Holdings) Limited (the “Company”) is a limited liability company incorporated and domiciled in Bermuda. Its registered office is located at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda and its principal place of business is located at Unit H, 1st Floor, Phase 4, Kwun Tong Industrial Centre, 436-446 Kwun Tong Road, Kwun Tong, Kowloon, Hong Kong. The Company’s shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

The principal activities of the Company is investment holding. The principal activities of the Company’s subsidiaries are set out in note 16 to the financial statements. The Company and its subsidiaries are collectively referred to as the “Group” hereafter. There were no significant changes in the operations during the year.

The financial statements for the year ended 31 March 2016 were approved for issue by the board of directors on 29 June 2016.

2. Summary of Significant Accounting Policies

2.1 Basis of preparation

The financial statements on pages 32 to 106 have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). The financial statements also include the applicable disclosure requirements of the Hong Kong Companies Ordinance and the Rules Governing the Listing of Securities on the Stock Exchange (“Listing Rules”).

The significant accounting policies that have been used in the preparation of these financial statements are summarised below. These policies have been consistently applied to all the years presented unless otherwise stated. The adoption of new and amended HKFRSs and the impacts on the Group’s financial statements, if any, are disclosed in note 3.

The financial statements have been prepared under historical cost convention except for land and buildings and derivative financial instruments, which are stated at their fair values. The measurement bases are fully described in the accounting policies below.

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Sun East Technology (Holdings) Limited 2016 Annual Report

31 March 2016

Notes to the Financial Statements

2. Summary of Significant Accounting Policies (Continued)

2.1 Basis of preparation (Continued)

It should be noted that accounting estimates and assumptions are used in preparation of the financial statements. Although these estimates are based on management’s best knowledge and judgment of current events and actions, actual results may ultimately differ from those estimates. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 4.

2.2 Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries. Inter-company transactions and balances between group companies together with unrealised profits are eliminated in full in preparing the consolidated financial statements. Unrealised losses area also eliminated unless the transaction provides evidence of impairment on the asset transferred, in which case the loss is recognised in profit or loss.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective dates of acquisition or up to the effective dates of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

Acquisition of subsidiaries or businesses is accounted for using the acquisition method. The cost of an acquisition is measured at the aggregate of the acquisition-date fair value of assets transferred, liabilities incurred and equity interests issued by the Group, as the acquirer. The identifiable assets acquired and liabilities assumed are principally measured at acquisitiondate fair value. The Group’s previously held equity interest in the acquiree is re-measured at acquisition-date fair value and the resulting gains or losses are recognised in profit or loss. The Group may elect, on a transaction-by-transaction basis, to measure the non-controlling interest either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs incurred are expensed.

40

Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

2. Summary of Significant Accounting Policies (Continued)

2.2 Basis of consolidation (Continued)

Any contingent consideration to be transferred by the acquirer is recognised at acquisitiondate fair value. Subsequent adjustments to consideration are recognised against goodwill only to the extent that they arise from new information obtained within the measurement period (a maximum of 12 months from the acquisition date) about the fair value at the acquisition date. All other subsequent adjustments to contingent consideration classified as an asset or a liability are recognised in profit or loss.

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

When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interest. Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for in the same manner as would be required if the relevant assets or liabilities were disposed of.

Subsequent to acquisition, the carrying amount of non-controlling interest is the amount of those interests at initial recognition plus the non-controlling interest’s share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interest having a deficit balance.

2.3 Subsidiaries

A subsidiary is an investee over which the Group is able to exercise control. The Group controls an investee if all three of the following elements are present: power over the investee, exposure, or rights, to variable returns from the investee, and the ability to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

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Sun East Technology (Holdings) Limited 2016 Annual Report

31 March 2016

Notes to the Financial Statements

2. Summary of Significant Accounting Policies (Continued)

2.3 Subsidiaries (Continued)

In the Company’s statement of financial position, subsidiaries are carried at cost less any impairment loss unless the subsidiary is held for sale or included in a disposal group. The results of subsidiaries are accounted for by the Company on the basis of dividends received and receivable at the reporting date. All dividends whether received out of the investee’s pre or post-acquisition profits are recognised in the Company’s profit or loss.

2.4 Foreign currency translation

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

In the individual financial statements of the consolidated entities, foreign currency transactions are translated into the functional currency of the individual entity using the exchange rates prevailing at the dates of the transactions. At the reporting date, monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rates ruling at that date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the reporting date retranslation of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined and are reported as part of the fair value gain or loss. Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.

In the consolidated financial statements, all individual financial statements of foreign operations, originally presented in a currency different from the Group’s presentation currency, have been converted into HK$. Assets and liabilities have been translated into HK$ at the closing rates at the reporting date. Income and expenses have been converted into the HK$ at the exchange rates ruling at the transaction dates, or at the average rates over the reporting period provided that the exchange rates do not fluctuate significantly. Any differences arising from this procedure have been dealt recognised in other comprehensive income and accumulated separately in the exchange reserve in equity.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

2. Summary of Significant Accounting Policies (Continued)

2.5 Borrowing costs

Borrowing costs incurred for acquisition, construction or production of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use. A qualifying asset is an asset which necessarily takes a substantial period of time to get ready for its intended use or sale. Other borrowing costs are expensed when incurred.

Borrowing costs are capitalised as part of the cost of a qualifying asset when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are being undertaken. Capitalisation of borrowing costs ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete.

2.6 Research and development costs

Costs associated with research activities are expensed in profit or loss as they occur. Costs that are directly attributable to development activities are recognised as intangible assets provided they meet the following recognition requirements:

• (i) demonstration of technical feasibility of the prospective product for internal use or sale;

• (ii) the Group has the intention to complete the development and use or sell the new products;

• (iii) the Group’s ability to use or sell the intangible asset is demonstrated;

• (iv) the intangible asset will generate probable economic benefits through internal use or sale;

• (v) sufficient technical, financial and other resources are available for completion; and

• (vi) the expenditure attributable to the intangible asset can be reliably measured.

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Sun East Technology (Holdings) Limited 2016 Annual Report

31 March 2016

Notes to the Financial Statements

2. Summary of Significant Accounting Policies (Continued)

2.6 Research and development costs (Continued)

Direct costs include employee costs incurred on development activities along with an appropriate portion of relevant overheads. The costs of development of internally generated software, products or knowhow that meet the above recognition criteria are recognised as intangible assets. They are subject to the same subsequent measurement method as acquired intangible assets.

All other development costs are expensed as incurred.

2.7 Property, plant and equipment

Leasehold land and buildings (where the fair value of the leasehold interest in the land and buildings cannot be measured separately at the inception of the lease and the building is not clearly held under an operating lease) are stated at revalued amounts, being fair value at the date of revaluation less subsequent accumulated depreciation and any subsequent impairment losses. Fair value is determined through appraisals by external professional valuers on a regular basis to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the reporting date. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. All other property, plant and equipment are stated at acquisition cost less accumulated depreciation and impairment losses.

Any surplus arising on revaluation of leasehold land and buildings is recognised in other comprehensive income and is accumulated in asset revaluation reserve in equity, unless the carrying amount of that asset has previously suffered a revaluation decrease or impairment loss as described in note 2.9. To the extent that any decrease has previously been recognised in profit or loss, a revaluation increase is credited to profit or loss with the remaining part of the increase dealt with in the other comprehensive income. A decrease in net carrying amount of leasehold land and buildings arising on revaluation is recognised in other comprehensive income to the extent of the revaluation surplus in asset revaluation reserve relating to the same asset and the remaining decrease is recognised in profit or loss.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

2. Summary of Significant Accounting Policies (Continued)

2.7 Property, plant and equipment (Continued)

Depreciation is provided to write off the cost or revalued amounts less their residual values over their estimated useful lives. Except for leasehold land and buildings which are depreciated on straight-line method, all other property, plant and equipment are depreciated on the reducing balance basis. The principal annual rates used for this purpose are as follows:

Leasehold land and buildings	The shorter of the lease terms and 22 years
Machinery and equipment	9% to 25%
Computer software	20%
Furniture, fixtures and leasehold improvements	18% to 25%
Motor vehicles	25%

The assets’ estimated residual values, depreciation methods and estimated useful lives are reviewed, and adjusted if appropriate, at each reporting date.

The gain or loss arising on retirement or disposal is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. Any revaluation surplus remaining in equity is transferred to retained profit on the disposal of leasehold land and buildings.

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

2.8 Prepaid land lease payments

Prepaid land lease payments represent up-front payments to acquire long term interest in the usage of the land. The payments are stated at cost less accumulated amortisation and any impairment loss. Amortisation is calculated on straight-line method to write off the up-front payments over the lease terms.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

2. Summary of Significant Accounting Policies (Continued)

2.9 Impairment of non-financial assets

Property, plant and equipment, prepaid land lease payments and interests in subsidiaries are subject to impairment testing. All assets are tested for impairment whenever there are indications that the asset’s carrying amount may not be recoverable.

An impairment loss is recognised as an expense immediately for the amount by which the asset’s carrying amount exceeds its recoverable amount unless the relevant asset is carried at a revalued amount under the Group’s accounting policy, in which case the impairment loss is treated as a revaluation decrease according to that policy (refer to note 2.7 for details). The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of time value of money and the risk specific to the asset.

For the purposes of assessing impairment, where an asset does not generate cash inflows largely independent from those from other assets, the recoverable amount is determined for the smallest group of assets that generate cash inflows independently (i.e. a cash-generating unit (“CGU”)). As a result, some assets are tested individually for impairment and some are tested at CGU level.

Impairment losses recognised for CGUs is charged pro rata to the assets in the CGU, except that the carrying value of an asset will not be reduced below its individual fair value less cost to sell, or value-in-use, if determinable.

An impairment loss is reversed if there has been a favorable change in the estimates used to determine the asset’s recoverable amount and only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

2. Summary of Significant Accounting Policies (Continued)

2.10 Related parties

• (a) A person or a close member of that person’s family is related to the Group if that person:

• (i) has control or joint control over the Group;

• (ii) has significant influence over the Group; or

• (iii) is a member of key management personnel of the Group or the Company’s parent.

• (b) An entity is related to the Group if any of the following conditions apply:

• (i) The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

• (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

• (iii) Both entities are joint ventures of the same third party.

• (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

• (v) The entity is a post-employment benefit plan for the benefit of the employees of the Group or an entity related to the Group.

• (vi) The entity is controlled or jointly controlled by a person identified in (a).

• (vii) A person identified in (a)(i) has significant influence over the entity or is a member of key management personnel of the entity (or of a parent of the entity).

• (viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the Group or to the Group’s parent.

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Sun East Technology (Holdings) Limited 2016 Annual Report

31 March 2016

Notes to the Financial Statements

2. Summary of Significant Accounting Policies (Continued)

2.10 Related parties (Continued)

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity and include:

• (i) that person’s children and spouse or domestic partner;

• (ii) children of that person’s spouse or domestic partner; and

• (iii) dependents of that person or that person’s spouse or domestic partner.

2.11 Leases

An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.

(i) Classification of assets leased to the Group

Assets that are held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as operating leases.

• (ii) Assets acquired under finance leases

Where the Group acquired the use of assets under finance leases, the amounts representing the fair value of the leased asset or, if lower, the present value of the minimum lease payments (“the initial value”), of such assets are included in property, plant and equipment and the corresponding liabilities, net of finance lease charges, are recorded as finance lease liabilities.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

2. Summary of Significant Accounting Policies (Continued)

2.11 Leases (Continued)

• (ii) Assets acquired under finance leases (Continued)

Subsequent accounting for assets held under finance lease agreements corresponds to those applied to comparable acquired assets. The corresponding finance lease liability is reduced by lease payments less finance lease charges.

Finance lease charges implicit in the lease payments are charged to profit or loss over the period of the leases so as to produce an approximately constant periodic rate of charge on the remaining balance of the obligations for each accounting period.

• (iii) Operating lease charges as the lessee

Where the Group has the right to use of assets held under operating leases, payments made under the leases are charged to profit or loss on straight-line method over the lease terms except where an alternative basis is more representative of the pattern of benefits to be derived from the leased assets. Lease incentives received are recognised in profit or loss as an integral part of the aggregate net lease payments made. Contingent rental are charged to profit or loss in the period in which they are incurred.

• (iv) Assets leased out under operating leases as the lessor

Assets leased out under operating leases are measured and presented according to the nature of the assets. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as the rental income.

Rental income receivable from operating leases is recognised in profit or loss on straightline method over the periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the use of the leased asset. Lease incentives granted are recognised in profit or loss as an integral part of the aggregate net lease payments receivable. Contingent rentals are recognised as income in the accounting period in which they are earned.

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Sun East Technology (Holdings) Limited 2016 Annual Report

31 March 2016

Notes to the Financial Statements

2. Summary of Significant Accounting Policies (Continued)

2.11 Leases (Continued)

• (v) Assets leased out under finance leases as the lessor

• Amounts due from lessees under finance leases are recorded as receivables at the amount of the Group’s net investment in the leases. The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income.

Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases.

2.12 Financial assets

The Group’s financial assets are classified into (1) loans and receivables and (2) financial assets at fair value through profit or loss. Management determines the classification of its financial assets at initial recognition depending on the purpose for which the financial assets were acquired and where allowed and appropriate, re-evaluates this designation at each reporting date.

All financial assets are recognised when, and only when, the Group becomes a party to the contractual provisions of the instrument. Regular way purchases and sales of financial assets are recognised on trade date. When financial assets are recognised initially, they are measured at fair value, plus, directly attributable transaction costs.

Derecognition of financial assets occurs when the contractual rights to receive cash flows from the receivables/investments expire or are transferred and substantially all of the risks and rewards of ownership have been transferred. At each reporting date, financial assets are reviewed to assess whether there is objective evidence of impairment. If any of such evidence exists, impairment loss is determined and recognised based on the classification of the financial asset.

50

Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

2. Summary of Significant Accounting Policies (Continued)

2.12 Financial assets (Continued)

(i) Financial assets at fair value through profit or loss Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments.

Subsequent to initial recognition, the financial assets included in this category are measured at fair value with changes in fair value recognised in profit or loss. Fair value is determined by reference to active market transactions or using a valuation technique where no active market exists. Fair value gain or loss does not include any dividend or interest earned on these financial assets.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. These are subsequently measured at amortised cost using the effective interest rate method, less any impairment losses. Amortised cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction cost.

At each reporting date, financial assets other than at fair value through profit or loss are reviewed to determine whether there is any objective evidence of impairment.

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Sun East Technology (Holdings) Limited 2016 Annual Report

31 March 2016

Notes to the Financial Statements

2. Summary of Significant Accounting Policies (Continued)

2.12 Financial assets (Continued)

Objective evidence of impairment of individual financial assets includes observable data that comes to the attention of the Group about one or more of the following loss events:

• significant financial difficulty of the debtor;

• a breach of contract, such as a default or delinquency in interest or principal payments;

• it becoming probable that the debtor will enter bankruptcy or other financial reorganisation;

• significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and

• a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

Financial assets carried at amortised cost

If there is objective evidence that an impairment loss on loans and receivables has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The amount of the loss is recognised in profit or loss of the period in which the impairment occurs.

If, in subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that it does not result in a carrying amount of the financial asset exceeding what the amortised cost would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in profit or loss of the period in which the reversal occurs.

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Sun East Technology (Holdings) Limited 2016 Annual Report

31 March 2016

Notes to the Financial Statements

2. Summary of Significant Accounting Policies (Continued)

2.12 Financial assets (Continued)

Financial assets carried at amortised cost (Continued)

For financial assets other than trade receivables that are stated at amortised cost, impairment losses are written off against the corresponding assets directly. Where the recovery of trade receivables is considered doubtful but not remote, the impairment losses for doubtful receivables are recorded using an allowance account. When the Group is satisfied that recovery of trade receivables is remote, the amount considered irrecoverable is written off against trade receivables directly and any amounts held in the allowance account in respect of that receivable are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss.

2.13 Inventories

Inventories are carried at the lower of cost and net realisable value. Cost is determined using the first-in, first-out basis, where work in progress and finished goods, comprise direct materials, direct labour and an appropriate proportion of overheads. Net realisable value is the estimated selling price in the ordinary course of business less the estimated cost of completion and applicable selling expenses.

2.14 Cash and cash equivalents

Cash and cash equivalents include cash at banks and in hand, time deposits with banks with original maturities of three months or less that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

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Sun East Technology (Holdings) Limited 2016 Annual Report

31 March 2016

Notes to the Financial Statements

2. Summary of Significant Accounting Policies (Continued)

2.15 Accounting for income taxes

Income tax for the year comprises current tax and deferred tax.

Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting period, that are unpaid at the reporting date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the year. All changes to current tax assets or liabilities are recognised as a component of tax expense in profit or loss.

Deferred tax is calculated using the liability method on temporary differences at the reporting date between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences, tax losses available to be carried forward as well as other unused tax credits, to the extent that it is probable that taxable profit, including existing taxable temporary differences, will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised.

Deferred tax assets and liabilities are not recognised if the temporary difference arises from initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither taxable nor accounting profit or loss.

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 differences and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax is calculated, without discounting, at tax rates that are expected to apply in the period the liability is settled or the asset realised, provided they are enacted or substantively enacted at the reporting date.

Changes in deferred tax assets or liabilities are recognised in profit or loss, or in other comprehensive income or directly in equity if they relate to items that are charged or credited to other comprehensive income or directly in equity.

54

Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

2. Summary of Significant Accounting Policies (Continued)

2.15 Accounting for income taxes (Continued)

Current tax assets and tax liabilities are presented in net if, and only if,

• (a) the Group has the legally enforceable right to set off the recognised amounts; and

• (b) intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

The Group presents deferred tax assets and deferred tax liabilities in net if, and only if,

• (a) the entity has a legally enforceable right to set off current tax assets against current tax liabilities; and

• (b) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:

• (i) the same taxable entity; or

• (ii) different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

2.16 Revenue recognition

Revenue comprises the fair value for the sale of goods and the use by others of the Group’s assets yielding interest and dividends, net of rebates and discounts. Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised as follows:

Sales of goods are recognised upon transfer of the significant risks and rewards of ownership to the customer. This is usually taken as the time when the goods are delivered and the customer has accepted the goods.

55

Sun East Technology (Holdings) Limited 2016 Annual Report

31 March 2016

Notes to the Financial Statements

2. Summary of Significant Accounting Policies (Continued)

2.16 Revenue recognition (Continued)

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

Rental income is recognised on a time-proportion basis over the lease terms.

2.17 Employee benefits

Defined contribution plan

Retirement benefits to employees are provided through defined contribution plans.

The Group operates a defined contribution retirement benefit plan (the “MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance, for all of its employees who are eligible to participate in the MPF Scheme. Contributions are made based on a percentage of the employees’ basic salaries.

The employees of the Group’s subsidiaries which operate in PRC are required to participate in a central pension scheme operated by the local municipal government. These subsidiaries are required to contribute a certain percentage of the payroll costs to the central pension scheme.

Contributions are recognised as an expense in profit or loss as employees render services during the year. The Group’s obligations under these plans are limited to the fixed percentage contributions payable.

Short-term employee benefits

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

Non-accumulating compensated absences such as sick leave and maternity leave are not recognised until the time of leave.

56

Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

2. Summary of Significant Accounting Policies (Continued)

2.18 Provisions and contingent liabilities

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

All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.

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

Contingent liabilities are recognised in the course of the allocation of purchase price to the assets and liabilities acquired in a business combination. They are initially measured at fair value at the date of acquisition and subsequently measured at the higher of the amount that would be recognised in a comparable provision as described above and the amount initially recognised less any accumulated amortisation, if appropriate.

2.19 Financial guarantees issued

A financial guarantee contract is a contract that requires the issuer (or guarantor) to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument.

Where the Group issues a financial guarantee, the fair value of the guarantee is initially recognised as deferred income within trade and other payables. Where consideration is received or receivable for the issuance of the guarantee, the consideration is recognised in accordance with the Group’s policies applicable to that category of asset. Where no such consideration is received or receivable, an immediate expense is recognised in profit or loss on initial recognition of any deferred income.

57

Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

2. Summary of Significant Accounting Policies (Continued)

2.19 Financial guarantees issued (Continued)

The amount of the guarantee initially recognised as deferred income is amortised in profit or loss over the term of the guarantee as income from financial guarantees issued. In addition, provisions are recognised if and when it becomes probable that the holder of the guarantee will call upon the Group under the guarantee and the amount of that claim on the Group is expected to exceed the current carrying amount i.e. the amount initially recognised less accumulated amortisation, where appropriate.

2.20 Financial liabilities

The Group’s financial liabilities include trade and bills payables, other payables and accruals, bank and other borrowings and finance lease liabilities.

Financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. All interest related charges are recognised in accordance with the Group’s accounting policy for borrowing costs (note 2.5).

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amount is recognised in profit or loss.

(i) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Financial liabilities are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the profit or loss over the period of the borrowings using the effective interest method.

Bank and other borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.

58

Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

2. Summary of Significant Accounting Policies (Continued)

2.20 Financial liabilities (Continued)

• (ii) Trade and bills payables, other payables and accruals

These are recognised initially at their fair value and subsequently measured at amortised cost, using the effective interest method.

• (iii) Finance lease liabilities

Finance lease liabilities are measured at initial value less the capital element of lease repayments (see note 2.11(ii)).

2.21 Share capital

Ordinary shares are classified as equity. Share capital is determined using the nominal value of shares that have been issued.

Any transaction costs associated with the issuing of shares are deducted from share premium reserve (net of any related income tax benefit) to the extent they are incremental costs directly attributable to the equity transaction.

2.22 Segment reporting

The Group identifies operating segments and prepares segment information based on the regular internal financial information reported to the Executive Directors for their decisions about resources allocation to the Group’s business components and for their review of the performance of those components. The business components in the internal financial information reported to the Executive Directors are determined following the Group’s major product lines.

Each of the operating segments is managed separately as each of the product lines requires different resources as well as marketing approaches. All inter-segment transfers are carried out at arm’s length prices.

59

Sun East Technology (Holdings) Limited 2016 Annual Report

31 March 2016

Notes to the Financial Statements

2. Summary of Significant Accounting Policies (Continued)

2.22 Segment reporting (Continued)

The measurement policies the Group uses for reporting segment results under HKFRS 8 are the same as those used in its financial statements prepared under HKFRSs, except that:

• rental income and rental costs;

• finance costs;

• income tax;

• corporate income and expenses which are not directly attributable to the business activities of any operating segment are not included in arriving at the operating results of the operating segment.

Segment assets include all assets but finance lease receivables, cash and bank balances, pledged and restricted deposits, tax recoverable, tax reserve certificates, operating cash and corporate assets which are not directly attributable to the business activities of any operating segment which primarily applies to the Group’s headquarter.

Segment liabilities include all liabilities but deferred tax liabilities and certain corporate liabilities. Corporate liabilities which are not directly attributable to the business activities of any operating segment and are not allocated to a segment, which primarily applies to the Group’s headquarters. Deferred tax liabilities are attributable to revaluation of leasehold land and buildings.

2.23 Government grants

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate. Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred income and are recognised in profit or loss on straight line method over the expected lives of the related assets.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

3. Adoption of New or Amended HKFRSs

During the year, the Group has adopted all the new and amended HKFRSs which are first effective for the reporting year and relevant to the Group. The adoption of these new and amended HKFRSs did not result in material changes to the Group’s accounting policies.

At the date of this report, certain new and amended HKFRSs have been published but are not yet effective, and have not been adopted early by the Group.

The Directors anticipate that all of the pronouncements will be adopted in the Group’s accounting policy for the first period beginning after the effective date of the pronouncement. The Directors are currently assessing the impact of the new and amended HKFRSs upon initial application. So far, the Directors have preliminarily concluded that the initial application of these HKFRSs will not result in material financial impact on the consolidated financial statements. Information on new and amended HKFRSs that are expected to have an impact on the Group’s accounting policies is provided below.

HKFRS 9 (2014) – Financial Instruments

The standard is effective for accounting periods beginning on or after 1 January 2018. HKFRS 9 introduces new requirements for the classification and measurement of financial assets. Debt instruments that are held within a business model whose objective is to hold assets in order to collect contractual cash flows (the business model test) and that have contractual terms that give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding (the contractual cash flow characteristics test) are generally measured at amortised cost. Debt instruments that meet the contractual cash flow characteristics test are measured at fair value through other comprehensive income if the objective of the entity’s business model is both to hold and collect the contractual cash flows and to sell the financial assets. Entities may make an irrevocable election at initial recognition to measure equity instruments that are not held for trading at fair value through other comprehensive income. All other debt and equity instruments are measured at fair value through profit or loss.

HKFRS 9 includes a new expected loss impairment model for all financial assets not measured at fair value through profit or loss replacing the incurred loss model in HKAS 39 and new general hedge accounting requirements to allow entities to better reflect their risk management activities in financial statements.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

3. Adoption of New or Amended HKFRSs (Continued)

HKFRS 9 (2014) – Financial Instruments (Continued)

HKFRS 9 carries forward the recognition, classification and measurement requirements for financial liabilities from HKAS 39, except for financial liabilities designated at fair value through profit or loss, where the amount of change in fair value attributable to change in credit risk of the liability is recognised in other comprehensive income unless that would create or enlarge an accounting mismatch. In addition, HKFRS 9 retains the requirements in HKAS 39 for de-recognition of financial assets and financial liabilities.

HKFRS 15 – Revenue from Contracts with Customers

The standard is effective for accounting periods beginning on or after 1 January 2018. The new standard establishes a single revenue recognition framework. The core principle of the framework is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. HKFRS 15 supersedes existing revenue recognition guidance including HKAS 18 Revenue, HKAS 11 Construction Contracts and related interpretations.

HKFRS 15 requires the application of a 5 steps approach to revenue recognition:

Step 1: Identify the contract(s) with a customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to each performance obligation

Step 5: Recognise revenue when each performance obligation is satisfied

HKFRS 15 includes specific guidance on particular revenue related topics that may change the current approach taken under HKFRS. The standard also significantly enhances the qualitative and quantitative disclosures related to revenue.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

3. Adoption of New or Amended HKFRSs (Continued)

HKFRS 16 – Leases

From the perspective as a lessee, under the existing standard, leases are classified as either finance lease or operating lease, resulting in different accounting treatment. Finance leases are required to be accounted for “On Balance Sheet” (i.e. lease asset and corresponding liabilities are recognised in the statement of financial position); while operating lease is accounted for “Off Balance Sheet” where no asset or liabilities are recognised and the lease expenses are recognised on a straight-line basis along the lease period. Under the new standard, “On Balance Sheet” accounting treatment is required for all leases, except for certain short-term leases and leases of low-value assets. The statement of financial position will be “inflated” by their rights and obligations relating to their existing operating leases. In addition, the recognition of operating lease expenses will change from the existing straight-line model to a “front-loaded” model as finance lease, i.e. during the initial period of the lease term, the lease expenses (asset depreciation plus interest) under the new standard are higher compared to the operating lease expenses recognised under the existing standard.

From the perspective as a lessor, the accounting stays almost the same. However, the HKICPA has updated the guidance on the definition of a lease, sub-lease, as well as the guidance on the combination and separation of contracts, lessors will also be affected by the new standard.

HKFRS 16 will be effective for accounting period beginning on 1 January 2019. The directors of the Company anticipate that the application of HKFRS 16 in the future will have impact on the amounts reported in respect of the Group’s consolidated financial statements. However, it is not practicable to provide a reasonable estimate of the effect of HKFRS 16 until the Group performs a detailed review.

Amendments to the Listing Rules

The Company has adopted the amendments to the Listing Rules relating to the disclosure of financial information with refer to the Hong Kong Companies Ordinance, Cap. 622, during the current financial year.

There is no impact on the Group’s financial position or financial performance, however, the amendments impact the presentation and disclosures in the consolidated financial statements. For example, the statement of financial position of the Company is now presented in the notes to the financial statements rather than as a primary statement and related notes to the statement of financial position of the Company are generally no longer presented.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

4. Critical Accounting Estimates and Judgments

Estimates and judgments are continually evaluated and are based on historical experiences and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

(i) Impairment of property, plant and equipment

Property, plant and equipment (note 13) is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The recoverable amounts of property, plant and equipment have been determined based on value-in-use calculations. These calculations and valuations require the use of judgments and estimates. The carrying amounts of property, plant and equipment of the Group as at 31 March 2016 were approximately HK$151,892,000 (2015: HK$167,349,000).

(ii) Impairment of trade and other receivables

The Group’s management determines impairment of trade and other receivables on a regular basis. This estimate is based on the credit history of its customers/borrowers and current market conditions. Management reassesses the impairment of receivables at the reporting date.

(iii) Income taxes

The Group is subject to income taxes in Hong Kong and Mainland China. Significant judgment is required in determining the amount of the provision for income taxes and the timing of payment of related taxes. The Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which the tax outcome is finalised.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

4. Critical Accounting Estimates and Judgments (Continued) (iv) Net realisable value of inventories

Net realisable value of inventories is the estimated selling price in the ordinary course of business, less estimated costs of completion and selling expenses. These estimates are based on the current market condition and the historical experience of selling products of similar nature. It could change significantly as a result of competitor actions in response to severe industry cycles. Management reassesses the estimations at the reporting date to ensure inventories are stated at the lower of cost and net realisable value.

(v) Fair value measurement

A number of assets and liabilities included in the Group’s financial statements require measurement at, and/or disclosure of, fair value.

The fair value measurement of the Group’s financial and non-financial assets and liabilities utilises market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorised into different levels based on how observable the inputs used in the valuation technique utilised are (the ‘fair value hierarchy’):

• Level 1: Quoted prices in active markets for identical items (unadjusted);

• Level 2: Observable direct or indirect inputs other than Level 1 inputs;

• Level 3: Unobservable inputs (i.e. not derived from market data).

The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect on the fair value measurement of the item. Transfers of items between levels are recognised in the period they occur.

The Group measures a number of items at fair value:

• Leasehold land and buildings (Note 13)

• Derivative financial instruments (Note 25)

For more detailed information in relation to the fair value measurement of the items above, please refer to the applicable notes.

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Sun East Technology (Holdings) Limited 2016 Annual Report

31 March 2016

Notes to the Financial Statements

5. Segment Information

The Executive Directors have identified the Group’s two product lines as reportable segments:

• (i) Production lines and – Design, manufacture and sale of production production equipment lines and production equipment

• (ii) Brand name production equipment

• Trading and distribution of brand name

• production equipment

	Production lines and Brand name production equipment production equipment Consolidated 2016 2015 2016 2015 2016 2015 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Segment revenue: Sales to external customers Other revenue – external Reportable segment revenue Reportable segment results Depreciation and amortisation Loss on disposal of property, plant and equipment Bad debts written off Provision for impairment of trade and bills receivables Write-back of inventories to net realisable value Write-off of property, plant and equipment Reportable segment assets Capital expenditure Reportable segment liabilities	384,060 416,103 342,915 422,100 726,975 838,203 9,938 11,829 7,996 13,463 17,934 25,292
	393,998 427,932 350,911 435,563 744,909 863,495
	18,649 12,149 (6,855) 5,085 11,794 17,234
	10,483 10,606 – – 10,483 10,606 45 8 – – 45 8 87 97 – – 87 97 1,373 6,749 – – 1,373 6,749 (785) (788) – – (785) (788) – 40 – – – 40 500,186 529,795 154,305 226,668 654,491 756,463 876 9,837 – – 876 9,837 196,256 273,528 47,434 54,043 243,690 327,571

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Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

5. Segment Information (Continued)

The totals presented for the Group’s operating segments reconcile to the Group’s key financial

figures as presented in the financial statements as follows:

	2016 2015 HK$’000 HK$’000
Reportable segment results Rental income Interest and other corporate income Corporate expenses Finance costs on bank and other borrowings (Loss)/Profit before income tax	11,794 17,234 12 17 325 3,291 (13,964) (11,627) (7,036) (4,594)
	(8,869) 4,321

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Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

5. Segment Information (Continued)

	2016 2015 HK$’000 HK$’000
Segment assets Production lines and production equipment Brand name production equipment Finance lease receivables Derivative financial instruments Tax reserve certificates Taxes recoverable Pledged and restricted deposits Cash and bank balances Other corporate assets Total assets Segment liabilities Production lines and production equipment Brand name production equipment Bank and other borrowings Finance lease liabilities Deferred tax liabilities Other corporate liabilities Total liabilities	500,186 529,795 154,305 226,668
	654,491 756,463 4,883 – 183 – 3,600 3,600 191 191 14,680 2,934 71,905 51,700 4,589 9,491
	754,522 824,379
	196,256 273,528 47,434 54,043
	243,690 327,571 143,219 105,447 262 355 13,163 12,881 35,008 35,073
	435,342 481,327

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Sun East Technology (Holdings) Limited 2016 Annual Report

31 March 2016

Notes to the Financial Statements

5. Segment Information (Continued)

The Group’s revenue from external customers and segment assets are divided into the following geographical areas:

	Non-current assets Revenue from (excluded finance external customers lease receivables) 2016 2015 2016 2015 HK$’000 HK$’000 HK$’000 HK$’000
Mainland China (domicile) Hong Kong Europe (principally Spain) Others (principally Japan)	703,957 804,221 136,698 152,269 7,202 9,242 25,469 26,261 10,301 13,000 – – 5,515 11,740 – –
	726,975 838,203 162,167 178,530

The geographical location of customers is based on the location at which the goods delivered. The geographical location of non-current assets is based on the physical location of the assets. The Company is an investment holding company where the Group has majority of its operation and workforce in Mainland China, and therefore, Mainland China is considered as the Group’s country of domicile for the purpose of the disclosures as required by HKFRS 8 “Operating Segments”.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

6. Revenue, Other Income and Gains

The Group’s turnover represents revenue from its principal activities, measured at the net invoiced value of goods sold, after allowances for returns and trade discounts during the year.

An analysis of revenue, other income and gains is as follows:

	2016 2015 HK$’000 HK$’000
Revenue – sale of goods Other income: Rental income Bank interest income Impairment loss on trade receivables written back Government grants Sales of scrap Discount received on the settlement of other payables Interest income from finance leases Over-accrual of commission payables Others Gains: Exchange gain, net Other income and gains*	726,975 838,203
	12 17 325 2,971 353 2,260 9,881 16,827 1,850 2,516 – 1,740 203 – 3,906 – 1,741 1,949
	18,271 28,280 – 320
	18,271 28,600

• Non-refundable government subsidies from the PRC government for subsidising the Group in conducting and launching projects relating to research and development activities, development of the high-tech operating system and imports of the high-tech equipments. There are no unfulfilled conditions or contingencies relating to these grants.

70

Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

7. Finance Costs

	2016 2015 HK$’000 HK$’000
Interest on bank and other borrowings, wholly repayable within one year Finance lease charges Total interest on financial liabilities stated at amortised cost	7,022 4,587 14 7
	7,036 4,594

8. (Loss)/Profit before Income Tax

(Loss)/Profit before Income Tax
	2016 2015 HK$’000 HK$’000
The Group’s (loss)/profit before income tax is arrived at after charging/(crediting): Cost of inventories sold – including write-back of inventories to net realisable value Depreciation on property, plant and equipment – Owned – Held under finance leases Fair value loss on derivative financial instruments Research and development costs Minimum lease payments under operating leases in respect of leasehold land and buildings Loss on disposal of property, plant and equipment Auditor’s remuneration Exchange loss/(gain), net Staff costs (including directors’ remuneration (note 9)) – Wages and salaries – Defined contribution scheme Amortisation of prepaid land lease payments Provision for impairment of trade and bills receivables Bad debts written off Write-off of property, plant and equipment	491,757 570,625 (785) (788) 10,106 10,279 90 30 131 1,103 6,299 6,128 3,304 2,652 45 8 990 950 10,349 (320) 118,624 130,687 9,794 8,913
	128,418 139,600 287 297 1,373 6,749 87 97 – 40

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Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

9. Directors’ Remuneration and Five Highest Paid Employees

Remuneration of the directors is disclosed as follows:

	2016 2015 HK$’000 HK$’000
Fees: Independent Non-executive Directors Other emoluments of Executive Directors: Salaries, allowances and benefits in kind Defined contribution scheme	432 432 7,140 7,362 72 72
	7,644 7,866

(a) Independent Non-executive Directors

The fees paid to Independent Non-executive Directors during the year were as follows:

	2016 2015 HK$’000 HK$’000
Mr. See Tak Wah Prof. Xu Yang Sheng Mr. Li Wanshou	144 144 144 144 144 144
	432 432

There were no other emoluments payable to the Independent Non-executive Directors during the year (2015: Nil).

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Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

9. Directors’ Remuneration and Five Highest Paid Employees

(Continued)

(b) Executive Directors

	Salaries, allowances Defined and benefits contribution Fees in kind scheme Total HK$’000 HK$’000 HK$’000 HK$’000
2016 Mr. QI Lian Mr. XIA Yuan Mr. BUT Tin Fu Mr. BUT Tin Hing Mr. LEUNG Cheong Mr. LEUNG Kuen, Ivan 2015 Mr. BUT Tin Fu Mr. BUT Tin Hing Mr. LEUNG Cheong Mr. LEUNG Kuen, Ivan	N/A N/A N/A N/A N/A N/A N/A N/A – 1,620 18 1,638 – 1,998 18 2,016 – 1,613 18 1,631 – 1,909 18 1,927
	– 7,140 72 7,212
	– 1,651 18 1,669 – 2,098 18 2,116 – 1,649 18 1,667 – 1,964 18 1,982
	– 7,362 72 7,434

There was no arrangement under which a director waived or agreed to waive any remuneration during the year.

There was no emolument paid by the Group to its directors as an inducement to join or upon joining the Group or as compensation for loss of office during the year.

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Sun East Technology (Holdings) Limited 2016 Annual Report

31 March 2016

Notes to the Financial Statements

9. Directors’ Remuneration and Five Highest Paid Employees

(Continued)

(c) Five highest paid employees

The five highest paid employees during the year included four (2015: four) directors, details of whose remuneration are reflected in the above analysis. The remuneration of the remaining one (2015: one) highest paid employee for the year, which fell within the emolument band of nil to HK$1,000,000 for each of the years ended 31 March 2016 and 2015, is set out as follows:

	2016 2015 HK$’000 HK$’000
Salary, allowances and benefits in kind Defined contribution scheme	643 611 18 –
	661 611

There was no emolument paid by the Group to these five highest individuals as an inducement to join or upon joining the Group or as compensation for loss of office during the year.

10. Income Tax (Credit)/Expense

	2016 2015 HK$’000 HK$’000
Current tax – Elsewhere – Tax for the year – Over-provision in prior year Deferred tax (note 26) Income tax (credit)/expense	1,257 1,810 (1,658) –
	(401) 1,810 (32) (24)
	(433) 1,786

No Hong Kong profits tax was provided as the Group did not generate any assessable profits arising from its operations in Hong Kong during the current and prior years. Taxes assessable in elsewhere have been calculated at the prevailing rates of tax based on existing legislation, interpretations and practices.

74

Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

10. Income Tax (Credit)/Expense (Continued)

The PRC enterprise income tax for foreign enterprises have been calculated on the estimated assessable profits for the year at 25% except that 日東電子科技（深圳）有限公司 and 日東電子發 展（深圳）有限公司 are granted the tax benefit for the National High-Tech Enterprise for three years starting from the year ended 31 December 2014. It is subject to income tax rate of 15%.

A reconciliation of the income tax (credit)/expense applicable to (loss)/profit before income tax using the statutory rates for the tax jurisdictions in which the Company and majority of its subsidiaries are domiciled to the income tax expense at the effective tax rates is as follows:

	2016 2015 HK$’000 HK$’000
(Loss)/Profit before income tax Tax at the statutory tax rates Non-taxable income Non-deductible expenses Unrecognised tax losses Tax loss utilised Others Over-provision in prior years Income tax (credit)/expense	(8,869) 4,321
	(1,520) 677 (461) (2,535) 1,552 2,023 1,858 953 (204) – – 668 (1,658) –
	(433) 1,786

11. Dividend

No dividend was paid or proposed during the year of 2016, nor has any dividend been proposed since the end of reporting period (2015: Nil).

75

Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

12. (Loss)/Earnings per Share

The calculation of basic (loss)/earnings per share is based on the loss for the year of approximately HK$8,436,000 (2015: profit of approximately HK$2,535,000) attributable to owners of the Company, and 1,023,750,000 (2015: 1,023,750,000 as restated) ordinary shares in issue during the year after the adjustment of the bonus elements in the shares issued under the share subscription completed subsequent to the reporting date but before the issuance of these financial statements, as set out in note 37.

The comparative figures for the basic earnings per share for the year ended 31 March 2015 are restated to take into account of the effect of the bonus elements arising from the above share subscription as if they had taken place since the beginning of the comparative period.

Diluted (loss)/earnings per share for the year ended 31 March 2016 and 2015 are not presented as there were no potential ordinary shares in issue during the year.

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Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

13. Property, Plant and Equipment

	Furniture, Leasehold Machinery fixtures and land and and leasehold Computer Motor buildings equipment improvements software vehicles Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
2016 At 1 April 2015 Cost or valuation Accumulated depreciation Net carrying amount Year ended 31 March 2016 Opening net carrying amount Additions Disposals Surplus on revaluation Depreciation Exchange realignment Closing carrying amount At 31 March 2016 Cost or valuation Accumulated depreciation Net carrying amount Analysis of cost or valuation: At cost At 2016 valuation	135,595 70,732 33,369 2,802 11,812 254,310 – (51,905) (28,146) (331) (6,579) (86,961)
	135,595 18,827 5,223 2,471 5,233 167,349
	135,595 18,827 5,223 2,471 5,233 167,349 – 152 526 – 198 876 – (155) (28) (302) – (485) 2,058 – – – – 2,058 (6,055) (1,686) (1,066) (348) (1,041) (10,196) (6,175) (1,003) (248) (126) (158) (7,710)
	125,423 16,135 4,407 1,695 4,232 151,892
	125,423 67,101 32,061 2,472 11,727 238,784 – (50,966) (27,654) (777) (7,495) (86,892)
	125,423 16,135 4,407 1,695 4,232 151,892
	– 67,101 32,061 2,472 11,727 113,361 125,423 – – – – 125,423
	125,423 67,101 32,061 2,472 11,727 238,784

77

Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

13. Property, Plant and Equipment (Continued)

	Furniture, Leasehold Machinery fixtures and land and and leasehold Computer Motor buildings equipment improvements software vehicles Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
2015 At 1 April 2014 Cost or valuation Accumulated depreciation Net carrying amount Year ended 31 March 2015 Opening net carrying amount Additions Disposal Write-off Surplus on revaluation Depreciation Exchange realignment Closing carrying amount At 31 March 2015 Cost or valuation Accumulated depreciation Net carrying amount Analysis of cost or valuation: At cost At 2015 valuation	134,418 69,770 31,752 1,668 10,644 248,252 – (50,060) (27,025) (141) (5,897) (83,123)
	134,418 19,710 4,727 1,527 4,747 165,129
	134,418 19,710 4,727 1,527 4,747 165,129 2,784 1,018 1,577 1,275 1,391 8,045 – – – – (22) (22) – (17) (22) – (1) (40) 4,491 – – – – 4,491 (6,140) (1,893) (1,061) (332) (883) (10,309) 42 9 2 1 1 55
	135,595 18,827 5,223 2,471 5,233 167,349
	135,595 70,732 33,369 2,802 11,812 254,310 – (51,905) (28,146) (331) (6,579) (86,961)
	135,595 18,827 5,223 2,471 5,233 167,349
	– 70,732 33,369 2,802 11,812 118,715 135,595 – – – – 135,595
	135,595 70,732 33,369 2,802 11,812 254,310

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Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

13. Property, Plant and Equipment (Continued)

The Group’s leasehold land and buildings situated in Hong Kong and Mainland China were revalued individually at the reporting date by RHL Appraisal Limited, independent professional qualified valuers, at fair value of HK$23,000,000 (2015: HK$23,720,000) on an open market basis and at fair value of HK$102,423,000 (2015: HK$111,875,000) on depreciated replacement cost/open market basis. Open market basis was estimated based on recent market transactions, which were then adjusted for specific conditions relating to the land and buildings. Depreciated replacement cost method was estimated on the current cost of replacement of the buildings and improvements less deductions for physical deterioration and all relevant forms of obsolescence and optimisation. Revaluation surplus of approximately HK$2,058,000 (2015: HK$4,491,000), resulting from the above valuations, during the year, have been credited to asset revaluation reserve. Deferred tax relating to the revaluation of leasehold land and buildings, of approximately HK$314,000 had been debited (2015: HK$4,015,000 had been credited) to asset revaluation reserve.

The fair value of land and buildings is a level 3 recurring fair value measurement. Significant unobservable inputs for these valuation approaches are as follows:

Significant unobservable inputs	Range
Open market basis
Premium/(Discount) on quality of properties	(27%) – 22% (2015: (24%) – 16%)
Depreciated replacement cost:
Cost of replacement	RMB1,000 – 2,200 (2015: RMB1,000 – 2,200)
	per square meter
Age adjustment	22.8% – 29.8% (2015: 20.5% – 27.7%)

Higher premiums or discounts for the quality of the Group’s properties compared to recent sales will result in corresponding higher or lower fair values. Higher cost of replacement and lower age adjustment will result in higher fair values.

There were no changes to the valuation techniques during the year. The fair value measurement is based on the above properties’ highest and best use, which does not differ from their actual use.

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Sun East Technology (Holdings) Limited 2016 Annual Report

31 March 2016

Notes to the Financial Statements

13. Property, Plant and Equipment (Continued)

Had these leasehold land and buildings been carried at historical cost less accumulated depreciation, their carrying amounts would have been approximately HK$61,479,000 (2015: HK$65,516,000).

The Group’s leasehold land and buildings are further analysed as follows:

	2016 2015 HK$’000 HK$’000
Long-term leases Mainland China Medium-term leases Hong Kong Mainland China	2,550 2,760 23,000 23,720 99,873 109,115
	125,423 135,595

As at 31 March 2016, certain of the Group’s leasehold land and buildings with net carrying amount of approximately HK$111,773,000 (2015: HK$104,959,000) were pledged to banks to secure the banking facilities granted to the Group (as detailed in notes 22 and 24 to the financial statements).

As at 31 March 2016, net carrying amount of property, plant and equipment of HK$377,000 (2015: HK$466,000) are held under finance lease.

80

Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

14. Prepaid Land Lease Payments

Prepaid Land Lease Payments
	2016 2015 HK$’000 HK$’000
Carrying amount at beginning of the year Additions Charged to profit or loss during the year Exchange realignment Carrying amount at end of the year Current portion included in prepayments, deposits and other receivables Non-current portion	11,474 9,973 – 1,792 (287) (297) (636) 6
	10,551 11,474
	(276) (293)
	10,275 11,181

Prepaid land lease payments of HK$8,907,000 (2015: HK$9,709,000) and HK$1,644,000 (2015: HK$1,765,000) are held under medium term leases and long term leases respectively and the balance relates to the land situated in Mainland China.

As at 31 March 2016, prepaid land lease payments with carrying amount of approximately HK$8,907,000 (2015: HK$8,068,000) were pledged to banks to secure the banking facilities granted to the Group (as detailed in note 22 and 24 to the financial statements).

15. Finance Lease Receivables

Finance Lease Receivables
	2016 2015 HK$’000 HK$’000
Current finance lease receivables Non-current finance lease receivables	3,107 – 1,776 –
	4,883 –

81

Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

15. Finance Lease Receivables (Continued)

The Group entered into finance lease arrangements for certain of its equipment. All leases are denominated in RMB. The average term of finance leases entered into is 2 years.

	Minimum lease payments 2016 2015 HK$’000 HK$’000	Present value of minimum lease payments 2016 2015 HK$’000 HK$’000
Amounts receivable under finance leases: Within one year In more than one year and not more than five years Less: unearned finance income Present value of minimum lease payments receivable Less: Amount due for settlement within 12 months (shown under current assets) Amount due for settlement after 12 months	3,696 – 1,874 –	3,107 – 1,776 –
	5,570 – (687) –	4,883 – n/a –
	4,883 –	4,883 – 3,107 –
		1,776 –

The interest rate inherent in the leases is fixed at the contract date for the entire lease term. The average effective interest rate contracted is approximately 15.11% (2015: Nil) per annum.

The finance lease receivables at the end of the reporting period are neither past due nor impaired.

82

Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

16. Particulars of Principal Subsidiaries

Particulars of the principal subsidiaries at 31 March 2016 are as follows:

		Nominal value	Percentage of	Percentage of
	Place of	of issued and	equity interest
	incorporation/	paid-up share/	attributable to
	registration and	registered	the Company
Name of company	operations	capital	Direct	Indirect	Principal activities
i-System Investment Company	British Virgin Islands	US$2,000	100	–	Investment holding
Limited	(“BVI”)
Sun East Electronic Equipment	Hong Kong	HK$5,000,000	–	100	Trading of machinery
Company Limited
Fureach Precision Limited	Hong Kong	HK$10,000	–	100	Trading of machinery
日東電子發展（深圳）有限公司#	Mainland China	HK$81,000,000	–	100	Manufacture and
					trading of machinery
Eastern Century Speed Inc.	BVI	US$1	–	100	Inactive
Frontier Precision System	Hong Kong	HK$10,000	–	100	Investment holding
Co., Ltd
Sun East Tech Development	Hong Kong	HK$10,000	–	100	Trading of machinery
Limited
天力精密系統（深圳）有限公司#	Mainland China	HK$15,300,000	–	100	Manufacture and
					trading of machinery
日東電子科技（深圳）有限公司#	Mainland China	HK$25,000,000	–	100	Manufacture and
					trading of machinery

83

Sun East Technology (Holdings) Limited 2016 Annual Report

Notes to the Financial Statements

31 March 2016

16. Particulars of Principal Subsidiaries (Continued)

		Nominal value	Percentage of
	Place of	of issued and	equity interest
	incorporation/	paid-up share/	attributable to
	registration and	registered	the Company
Name of company	operations	capital	Direct Indirect	Principal activities
日東自動化設備（上海）有限公司#	Mainland China	US$2,750,000	– 100	Inactive
富運精密設備（深圳）有限公司#	Mainland China	HK$10,000,000	– 100	Manufacture and
				trading of machinery

The above table lists the subsidiaries of the Company which, in the opinion of the directors, principally affected the results for the year or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

Registered as a wholly-owned foreign investment enterprise in Mainland China.

17. Inventories

	2016 2015 HK$’000 HK$’000
Raw materials Work in progress Finished goods	28,079 79,842 21,390 38,000 63,248 48,421
	112,717 166,263

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18. Trade and Bills Receivables

Ageing analysis of trade and bills receivables as at the reporting dates, based on the date of revenue recognition and net of provision, is as follows:

	2016 2015 HK$’000 HK$’000
Within 90 days 91 to 120 days 121 to 180 days 181 to 360 days Over 360 days	85,150 148,552 16,368 33,903 34,152 34,988 74,823 73,439 127,836 82,746
	338,329 373,628

Impairment losses in respect of trade and bills receivables are recorded using an allowance account unless the Group is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against trade and bills receivables directly. Movements in provision for impairment of trade and bills receivables are as follows:

	2016 2015 HK$’000 HK$’000
At beginning of the year Written-off Impairment loss recognised Impairment loss reversed Exchange realignment At end of the year	47,786 49,694 (2,135) (6,212) 1,373 6,749 (353) (2,260) (685) (185)
	45,986 47,786

The normal credit period granted by the Group to its customers, each of which has a maximum credit limit, ranges from 30 to 180 days (2015: 30 to 180 days).

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Notes to the Financial Statements

18. Trade and Bills Receivables (Continued)

The carrying value of trade and bills receivables is considered as reasonable approximation of its fair value. Impairment of trade and bills receivables is established when there is objective evidence that the Group is not able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtors and default or delinquency in payments are considered indicators that the trade and bills receivables are impaired. As at 31 March 2016, the Group had determined trade and bills receivables of approximately HK$45,986,000 (2015: HK$47,786,000) as impaired and as a result, impairment loss of HK$1,373,000 for the year ended 31 March 2016 (2015: HK$6,749,000) have been recognised. The impaired trade and bills receivables are mostly due from customers in the Group business-to-business market that encounter financial difficulties.

As at 31 March 2016, the Group’s trade receivables of HK$264,355,000 (2015: Nil) were collateralised against the banking facilities granted to the Group as set out in notes 22 and 24.

In addition, certain unimpaired trade and bills receivables are past due as at the reporting date. Ageing analysis of trade and bills receivables past due but not impaired is as follows:

	2016 2015 HK$’000 HK$’000
Neither past due nor impaired 1 to 30 days past due 31 to 90 days past due 91 to 270 days past due 271 to 360 days past due Over 360 days past due Total trade and bills receivables, net	222,921 225,179 11,376 13,552 11,983 58,232 52,293 59,989 8,133 7,278 31,623 9,398
	338,329 373,628

Trade receivables that were neither past due nor impaired related to a wide range of customers for whom there was no recent history of default.

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18. Trade and Bills Receivables (Continued)

Trade and bills receivables that were past due but not impaired related to a large number of diversified customers that had a good track record of credit with the Group. Based on past credit history, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered to be fully recoverable. The Group did not hold any collateral in respect of trade and bills receivables past due but not impaired.

For the years ended 31 March 2016 and 2015, the Group discounted part of its bills receivables with full recourse to financial institutions. In the event of default by the debtors, the Group was obliged to pay the financial institutions the amount in default. The Group was therefore exposed to the risks of credit losses and late payment in respect of the discounted bills receivables.

The discounting transactions do not meet the requirements in HKAS 39 for de-recognition of financial assets as the Group retains substantially all of the risks and rewards of ownership of the discounted bills receivables. As at 31 March 2016, bills receivables of approximately HK$16,126,000 (2015: HK$20,493,000) continued to be recognised in the Group’s financial statements even though they had been legally transferred to the financial institutions. The proceeds of the discounting transactions were included in bank and other borrowings until the bills receivables was expired or the Group settled any losses suffered by the financial institutions. As at 31 March 2016, the advances obtained from the financial institutions in respect of the unexpired discounted bills receivables included in bank and other borrowings amounted to approximately HK$16,126,000 (2015: HK$20,493,000) (note 22).

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19. Pledged and Restricted Deposits

	2016 2015 HK$’000 HK$’000
Pledged deposits Note (a) Restricted deposits Note (b)	4,550 2,934 10,130 –
	14,680 2,934

Notes:

• (a) The deposits are pledged to banks to secure the bank facilities granted to the Group (as detailed in notes 22 and 24 to the financial statements). These deposits earn interest at 0.35% (2015: 0.35% to 5.40%) per annum.

(b) Restricted deposits mainly represented as blocked deposits for certain litigations in the PRC. For the details, please refer to note 33.

20. Cash and Bank Balances

The cash and bank balances was summarised as follows:

	2016 2015 HK$’000 HK$’000
Cash at banks and in hand Total cash and cash equivalents	71,905 51,700
	71,905 51,700

At the reporting date, cash and bank balances of the Group denominated in RMB amounted to HK$49,706,000 (2015: HK$35,800,000). RMB is not freely convertible into other currencies. However, under Mainland China’s Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for other currencies through the banks authorised to conduct foreign exchange businesses.

Cash at bank earns interest at floating rates based on the daily bank deposits rates ranging between 0.01% and 0.35% (2015: 0.01% and 0.35%) per annum.

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21. Trade and Bills Payables

Ageing analysis of trade and bills payables as at the reporting dates, based on invoice date, is as

follows:

	2016 2015 HK$’000 HK$’000
Within 90 days 91 to 120 days Over 120 days	89,198 166,744 23,266 2,686 53,730 9,182
	166,194 178,612

Trade and bills payables are non-interest bearing and are normally settled within 90 to 270 days (2015: 90 to 180 days).

22. Bank and Other Borrowings

Bank and Other Borrowings
	2016 2015 HK$’000 HK$’000
Current portion – Secured bank loans due for repayment within one year (note i) – Asset-backed financing (note ii) – Unsecured bank loans due for repayment within one year	127,093 78,639 16,126 20,493 – 6,315
	143,219 105,447

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22. Bank and Other Borrowings (Continued)

Notes:

• (i) These bank borrowings are secured by the Group’s leasehold land and buildings (note 13), prepaid land lease payments (note 14), trade receivables (note 18), pledged deposits of USD200,000 (equivalent to HK$1,551,000) (note 19) and corporate guarantees provided by the Company and its subsidiaries (2015: secured by the Group’s leasehold land and buildings, prepaid land lease payments and corporate guarantees provided by the Company and its subsidiaries).

• (ii) The asset-backed financing represents the amount of financing obtained in factoring transactions which do not meet the de-recognition requirements in HKAS 39. The corresponding financial assets are included in bills receivables (note 18).

As at 31 March 2016 and 2015, all bank and other borrowings are due for repayment within one year.

The interest-bearing bank and other borrowings are carried at amortised cost.

As at 31 March 2016, the bank and other borrowings included bank and other loans of approximately USD2,556,000 and RMB103,531,000 (2015: USD1,998,000 and RMB71,227,000).

Effective interest rate of the bank and other borrowings ranged from 3.83% to 7.09% (2015: from 1.73% to 19.20%) per annum for the year.

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23. Finance Lease Liabilities

The Group leased certain of its motor vehicle under finance lease. The lease term is 4 years (2015: 4 years). Interest rates underlying all obligations under finance lease are fixed at respective contract dates at 2.35% (2015: 2.35%) per annum. No arrangements have been entered into for contingent rental payment.

	Minimum lease payments 2016 2015 HK$’000 HK$’000	Present value of minimum lease payments 2016 2015 HK$’000 HK$’000
Amounts payable under finance leases: Within one year In more than one year and not more than five years Less: future finance charges Present value of lease obligations Less: Amount due for settlement within 12 months (shown under current liabilities) Amount due for settlement after 12 months	107 107 170 277	98 93 164 262
	277 384 (15) (29)	262 355 N/A N/A
	262 355	262 355 (98) (93)
		164 262

The Group’s obligations under finance leases are secured by the lessor’s title to the leased assets.

Financial lease obligations are denominated in HKD.

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24. Banking Facilities

As at the reporting date, apart from the bank borrowings as stated in note 22 to the financial statement, the Group’s other banking facilities including performance letter of guarantees, import/ export loan, letter of credit, documentary credits and trust receipts are secured by pledged deposits of HK$2,999,000 (note 19) and corporate guarantees provided by the Company (note 30) and its subsidiaries (2015: pledged deposits of HK$2,934,000 and corporate guarantees provided by the Company and its subsidiaries).

The Group’s banking facilities amounting to HK$326,442,000 (2015: HK$226,290,000), of which approximately HK$151,997,000 (2015: HK$105,620,000) had been utilised as at the reporting date.

25. Derivative Financial Instruments

	2016 2015 HK$’000 HK$’000
Foreign exchange option (note)	183 –

Note:

The Group uses foreign exchange option to mitigate exchange rate exposure. The foreign exchange option is considered by management to be part of economic hedge arrangements but have not been formally designated as hedges in accordance with HKAS 39. The foreign exchange option was stated at fair value. The fair value of these contracts has been measured as described in note 34.

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26. Deferred Tax Liabilities

Movement in the Group’s deferred tax liabilities during the year is as follows:

Revaluation Accelerated of leasehold tax land and depreciation buildings Total HK$’000 HK$’000 HK$’000	Revaluation Accelerated of leasehold tax land and depreciation buildings Total HK$’000 HK$’000 HK$’000
At 1 April 2014 Deferred tax relating to revaluation of property, plant and equipment – Current year – Effect of changes in tax rate Charge to profit or loss (note 10) At 31 March 2015 and 1 April 2015 Deferred tax relating to revaluation of property, plant and equipment Charge to profit or loss (note 10) At 31 March 2016	316 16,604 16,920 – 711 711 – (4,726) (4,726) (24) – (24)
	292 12,589 12,881 – 314 314 (32) – (32)
	260 12,903 13,163

At 31 March 2016, the Group has tax losses of the subsidiaries operating in Hong Kong and Mainland China of approximately HK$25,030,000 and HK$33,352,000 (2015: HK$20,706,000 and HK$29,348,000) respectively.

Deferred tax asset in respect of unused tax losses has not been recognised in the financial statements due to the unpredictability of future profit streams against which the tax losses can be utilised. Tax losses of the subsidiaries operating in Mainland China can be carried forward for 5 years whereas those of the companies within the Group operating in Hong Kong will not expire under the current tax legislation.

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26. Deferred Tax Liabilities (Continued)

At the reporting date, deferred tax liabilities amounted to approximately HK$6,910,000 (2015: HK$5,979,000) in respect of aggregate amount of temporary differences associated with unremitted earnings of subsidiaries have not been recognised. No deferred tax liabilities have been recognised in respect of these differences because the Group is in a position to control the dividend policies of these subsidiaries and it is probable that such differences will not reverse in the foreseeable future. Such unremitted earnings for investments in subsidiaries amounted to HK$69,102,000 at 31 March 2016 (2015: HK$59,790,000).

There are no income tax consequences attaching to the payment of dividends by the Company to its shareholders.

27. Share Capital

Share Capital
	2016 2015 HK$’000 HK$’000
Authorised: 2,000,000,000 ordinary shares of HK$0.10 each Issued and fully paid: 525,000,000 ordinary shares of HK$0.10 each	200,000 200,000
	52,500 52,500

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28. Reserves

(a) Group

The amounts of the Group’s reserves and the movements therein for the current and previous years are presented in the consolidated statement of changes in equity on pages 35 to 36 of the financial statements.

The Group’s contributed surplus represents the difference between the nominal value of the shares of the subsidiaries acquired, over the nominal value of the Company’s shares issued in exchange therefor.

Statutory reserve and enterprise expansion funds

(i) Statutory reserve

In accordance with the relevant laws and regulations of the PRC and the articles of association of the Company, upon distributing the net profit of the Company each year, the Company is required to transfer 10% of its profit after tax, being prepared in accordance with the accounting regulations in the PRC, to the statutory surplus reserve until the reserve balance reaches 50% of the Company’s registered capital. Such reserve may be used to reduce any losses incurred by the Company or to be capitalised as paidup capital of the Company.

(ii) Enterprise expansion fund

Certain subsidiaries in the PRC are required to set up an enterprise expansion fund. Transfers to this fund are made at the discretion of the respective board of directors of the subsidiaries. This fund can only be utilised on capital items for the collective benefit of the subsidiaries employees. This fund is non-distributable other than on liquidation. The transfer to this fund must be made before distribution of a dividend to shareholders.

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28. Reserves (Continued)

(b) Company

	Retained profits/ Share Contributed (Accumulated premium surplus losses) Total HK$’000 HK$’000 HK$’000 HK$’000
At 1 April 2014 Total comprehensive income for the year At 31 March 2015 and 1 April 2015 Total comprehensive income for the year At 31 March 2016	87,728 115,468 1,926 205,122 – – (10) (10)
	87,728 115,468 1,916 205,112 – – (2,472) (2,472)
	87,728 115,468 (556) 202,640

The Company’s contributed surplus represents the excess of the then combined net asset value of the subsidiaries acquired over the nominal value of the Company’s shares issued in exchange therefor. Under the Companies Act 1981 of Bermuda, the Company may make distributions to its members out of its contributed surplus in certain circumstances.

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29. Holding Company Statement of Financial Position

Notes	2016 2015 HK$’000 HK$’000
ASSETS AND LIABILITIES Non-current assets Property, plant and equipment Interests in subsidiaries Current assets Due from subsidiaries Prepayments Cash and bank balances Current liabilities Due to a subsidiary Other payables and accruals Net current assets Net assets EQUITY Share capital 27 Reserves 28(b) Total equity	32 40 115,668 115,668
	115,700 115,708 144,140 145,758 591 290 772 139
	145,503 146,187 3,554 3,063 2,509 1,220
	6,063 4,283
	139,440 141,904
	255,140 257,612
	52,500 52,500 202,640 205,112
	255,140 257,612

On behalf of the directors

XIA Yuan But Tin Fu Director Director

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Notes to the Financial Statements

30. Financial Guarantee Contracts

The Company executed guarantees amounting to approximately HK$100,000,000 (2015: HK$100,000,000) with respect to the bank facilities granted to certain subsidiaries of the Group. Under the guarantees, the Company would be liable to pay the bank if the bank is unable to recover the loan. At the reporting date, no provision for the Company’s obligation under the guarantee contract has been made as the directors consider that it is not probable that the repayment of the loan would be in default.

31. Commitments

At the reporting date, the Group had the following outstanding commitments:

(a) Operating lease commitments – as lessee

The Group leases certain of its office premises or staff quarter under operating lease arrangements. Leases for these assets are negotiated for the terms ranging between one and three years (2015: one and three years).

At 31 March 2016, the Group had total future minimum lease payments under non-cancellable operating leases falling due as follows:

	2016 2015 HK$’000 HK$’000
Within one year In the second to fifth years, inclusive	1,673 1,313 1,334 92
	3,007 1,405

(b) Capital commitments

	2016 2015 HK$’000 HK$’000
Commitments for the acquisition of property, plant and equipment	– 100

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32. Related Party Transactions

Compensation of key management personnel of the Group

The remuneration of the directors and other members of key management during the year were as follows:

	2016 2015 HK$’000 HK$’000
Short term employee benefits Post-employment benefits	9,633 10,219 132 148
	9,765 10,367

The remuneration of the 4 (2015: 5) members of senior management (excluding directors) were within the emolument band of nil to HK$1,000,000 for each of the years ended 31 March 2016 and 2015.

Further details of directors’ emoluments are included in note 9 to the financial statements.

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33. Contingent Liabilities

The Group has contingent liabilities in respect of legal claims arising in the ordinary course of business.

During the year ended 31 March 2016, a subsidiary of the Group was in dispute with one of its customers in relation to the product quality. In 9 August 2015, the contractor instituted a proceeding against the subsidiary, to claim a compensation relating to the product quality dispute, totaling RMB8,500,000 (equivalent to approximately HK$10,130,000).

Provision amounted to RMB1,000,000 (equivalent to approximately HK$1,192,000) had been provided for in respect of the claims as at 31 March 2016. As management has determined, on the basis of external legal advice from the Group that it is not probable that these claims would result in an outflow of economic benefits exceeding the provisions made by the Group. The management believes that any resulting liabilities will not have a material adverse effect on the financial position, operating results and business of the Group.

According to the rulings made by the relevant courts, cash at bank totaling RMB8,500,000 (equivalent to approximately HK$10,130,000) of the subsidiary should be frozen or attached as set out in note 19.

As at 31 March 2016, the Group has no other significant contingencies except for the abovementioned contingencies.

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34. Summary of Financial Assets and Financial Liabilities by

Category

The following table shows the carrying amount and fair value of financial assets and liabilities:

	2016 2015 HK$’000 HK$’000
Financial assets Financial assets at fair value through profit or loss – held for trading – Derivative financial instruments Loans and receivables: – Trade and bills receivables – Other receivables – Finance lease receivables – Pledged and restricted deposits – Cash and bank balances Financial liabilities Financial liabilities measured at amortised cost: – Trade and bills payables – Finance lease liabilities – Other payables and accruals – Bank and other borrowings	183 – 338,329 373,628 28,840 12,090 4,883 – 14,680 2,934 71,905 51,700
	458,820 440,352
	166,194 178,612 262 355 48,319 62,222 143,219 105,447
	357,994 346,636

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34. Summary of Financial Assets and Financial Liabilities by

Category (Continued)

The following table provides an analysis of financial instruments carried at fair value by level of fair value hierarchy:

	Level 1 Level 2 Level 3 Total HK$’000 HK$’000 HK$’000 HK$’000
At 31 March 2016 Assets Foreign exchange option Net fair values	– 183 – 183
	– 183 – 183

Where derivatives are traded either on exchanges or liquid over-the-counter markets, the Group uses the closing price at the reporting date. As the derivatives entered into by the Group are not traded on active markets, the fair values of such contracts are estimated using a valuation technique that maximise the use of observable market inputs e.g. market currency (Level 2). All derivatives entered into by the Group are included in Level 2 and consist of foreign exchange option.

There were no financial assets or liabilities carried at fair value as at 31 March 2015.

35. Financial Risk Management

The Group does not have written risk management policies and guidelines. However, the directors meet periodically to analyse and formulate measures to manage the Group’s exposure to market risk (including principally changes in interest rates, and currency exchange rates), credit risk and liquidity risk. Generally, the Group employs conservative strategy regarding its risk management.

The Group’s principal financial instruments comprise cash and bank balances, pledged and restricted deposits, trade and bills receivables, other receivables, finance lease receivables, trade and bills payables, other payables and accruals, bank and other borrowings and finance lease liabilities. The most significant financial risks to which the Group is exposed are described below.

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35. Financial Risk Management (Continued)

Interest rate risk

The Group does not have material exposure to interest rate risk, as the Group has no financial assets and liabilities of material amounts with floating interest rates except for the deposits held in banks and certain bank and other borrowings. Cash at bank earn interest at floating rates based on the daily bank deposits rate during the year. The Group has not used any derivative contracts to hedge its exposure to interest rate risk. However, management monitors interest rate exposure and will consider hedging significant interest rate exposure should the need arise. Therefore, any change in the interest rate promulgated by banks from time to time is not considered to have significant impact to the Group.

A reasonably possible change in interest rate in the next twelve months is assessed, which could have immaterial change in the Group’s (loss)/profit after tax and retained profits. Changes in interest rates have no material impact on the Group’s other components of equity. The Group adopts centralised treasury policies in cash and financial management and focuses on reducing the Group’s overall interest expense.

The directors are of the opinion that the Group’s sensitivity to the change in interest rate is low.

Foreign currency risk

The Group has exposure to foreign currency risk as certain of its business transactions, assets and liabilities are denominated in US$, JPY and RMB. The Group currently does not have a foreign currency hedging policy in respect of other foreign currency transactions, assets and liabilities. The Group will monitor its foreign currency exposure closely and will consider hedging significant foreign currency exposure should the need arise.

As at 31 March 2016, if the RMB had weakened/strengthened 5% (2015: 1%) against HK$ and US$ with all other variables held constant, the Group’s loss for the year would have been HK$6,711,000 (2015: HK$2,801,000) higher/lower and retained profits would have been HK$6,711,000 (2015: HK$2,801,000) lower/higher, arising mainly as a result of the foreign exchange loss/gain on trade receivables denominated in RMB.

The sensitivity analysis included in the financial statements for the year ended 31 March 2015 had been prepared on the same basis.

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35. Financial Risk Management (Continued)

Credit risk

The Group’s exposure to credit risk is limited to the carrying amount of financial assets recognised at the reporting date.

The Group’s credit risk is primarily attributable to trade and bills receivables, other receivables, finance lease receivables, pledged and restricted deposits and cash and bank balances. Management has a credit policy and the exposures to credit risks are monitored on an ongoing basis.

In respect of trade and bills receivables and other receivables, individual credit evaluations are performed on all customers requiring credit over a certain amount. These evaluations focus on the customer’s past history of making payments when due and current ability to pay, and take into account information specific to the customer as well as pertaining to the economic environment in which the customer operates. Normally, the Group does not obtain collateral from customers.

The Group’s bank balances are all deposits with State-owned banks in Mainland China and major banks in Hong Kong.

Fair values

The fair values of the Group’s and the Company’s current financial assets and liabilities are not materially different from their carrying amounts because of the immediate or short term maturity of these financial instruments.

Liquidity risk

The Group’s objective is to ensure adequate funds to meet commitments associated with its financial liabilities. Cash flows are closely monitored on an ongoing basis. The Group will raise funds from the realisation of its assets if required.

The following table details the remaining contractual maturities at each of the reporting dates of the Group’s non-derivative financial liabilities, which are based on contractual undiscounted cash flows (including interest payment computed using contractual rates or, if floating, based on current rates at the reporting date) and the earliest date the Group may be required to pay.

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35. Financial Risk Management (Continued)

Liquidity risk (Continued)

	3 to 6 to 1 year to Less than less than less than less than 3 months 6 months 12 months 5 years HK$’000 HK$’000 HK$’000 HK$’000
At 31 March 2016 Non-derivative financial liabilities Trade and bills payables Other payables and accruals Bank and other borrowings Finance lease liabilities At 31 March 2015 Non-derivative financial liabilities Trade and bills payables Other payables and accruals Bank and other borrowings Finance lease liabilities	53,730 23,266 89,198 – 48,319 – – – 93,237 28,104 24,032 – 27 27 54 170
	195,313 51,397 113,284 170
	9,182 2,686 166,744 – 62,222 – – – 64,576 12,532 50,429 – 27 27 54 276
	136,007 15,245 217,227 276

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Notes to the Financial Statements

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36. Capital Management

The Group’s objectives when managing capital are:

• (a) to safeguard the Group’s ability to continue as a going concern, so that it continues to provide returns for shareholders and benefits for other stakeholders;

• (b) to support the Group’s stability and growth; and

• (c) to provide capital for the purpose of strengthening the Group’s risk management capability.

The Group actively and regularly reviews and manages its capital structure to ensure optimal capital structure and shareholder returns, taking into consideration the future capital requirements of the Group and capital efficiency, prevailing and projected profitability, projected operating cash flows, projected capital expenditures and projected strategic investment opportunities.

Management regards total equity as capital. The amount of capital as at 31 March 2016 and 2015 amounted to approximately HK$319,180,000 and HK$343,052,000 respectively which management considers as optimal having considered the projected capital expenditures and the projected strategic investment opportunities.

There is no change in the Group’s capital management policies and objectives during the year.

37. Events after the Reporting Date

On 30 May 2016, the Company issued 930,000,000 ordinary shares at a subscription price of HK$0.4 per share and convertible bonds with an aggregate principal amount of HK$148,000,000, which can be converted into 370,000,000 ordinary shares at a conversion price of HK$0.4 per share. The Company received gross proceeds in an aggregate amount of HK$520 million in cash.

Details of the subscription of new shares and convertible bonds are set out in the Company’s announcement dated 30 May 2016.

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