Kingwell Group Limited — M&A Activity 2009

Dec 15, 2009

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this composite document or the general offer contained herein, you should consult a licensed securities dealer or registered institution in securities, a bank manager, solicitor, professional accountant or other professional adviser.

If you have sold all your shares in Sinotronics Holdings Limited, you should at once hand this document and the accompanying forms to the purchaser or to the licensed securities dealer or registered institution in securities or other agent through whom the sale was effected for transmission to the purchaser.

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

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SINOTRONICS HOLDINGS LIMITED

華 翔 微 電 子 控 股 有 限 公 司 *

UNION DAY GROUP LIMITED

朝 聯 集 團 有 限 公 司

(Incorporated in the Cayman Islands with limited liability) (Incorporated in British Virgin Islands with limited liability)

(Stock Code: 1195)

COMPOSITE DOCUMENT RELATING TO MANDATORY CONDITIONAL GENERAL CASH OFFER

BY YU MING INVESTMENT MANAGEMENT LIMITED ON BEHALF OF UNION DAY GROUP LIMITED

FOR ALL ISSUED SHARES OF SINOTRONICS HOLDINGS LIMITED (OTHER THAN THOSE SHARES ALREADY OWNED OR AGREED TO BE ACQUIRED BY UNION DAY GROUP LIMITED AND PARTIES ACTING IN CONCERT WITH IT)

Financial adviser to Union Day Group Limited

==> picture [143 x 40] intentionally omitted <==

Independent financial adviser to the independent board committee and the independent shareholders of Sinotronics Holdings Limited

Pelican Securities Limited

A letter from the board of Sinotronics Holdings Limited is set out on pages 6 to 10 of this composite document. A letter from Yu Ming Investment Management Limited containing, among other things, details of the terms of the general offer is set out on pages 11 to 16 of this composite document.

A letter from the independent board committee of Sinotronics Holdings Limited to the independent shareholders of Sinotronics Holdings Limited is set out on page 17 of this composite document. A letter of advice from Pelican Securities Limited containing its opinion and advice to the independent board committee and independent shareholders of Sinotronics Holdings Limited is set out on pages 18 to 30 of this composite document.

The procedures for acceptance and settlement of the general offer are set out in Appendix I of this composite document and in the accompanying form of acceptance. Acceptances of the general offer for the shares of Sinotronics Holdings Limited must be received by Hong Kong Registrars Limited at Shops 1712–1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong by no later than 4:00 p.m. on Wednesday, 6th January, 2010, or such later time as Union Day Group Limited may determine and announce in accordance with the Hong Kong Code on Takeovers and Mergers.

• for identification purposes only

16th December, 2009

CONTENT

			Page
Expected timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from	the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Letter from	Yu Ming . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Letter from	the Independent Board Committee . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Letter from	Pelican Securities . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Appendix I	— Further terms of the General Offer	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	31
Appendix II	— Financial information of the Group	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	37
Appendix III — Statutory and general information		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	101

– i –

EXPECTED TIMETABLE

The timetable set out below is indicative only and any changes to the timetable will be announced by the Offeror.

General Offer opens for acceptances . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 16th December, 2009

Latest time and date for acceptance of

• the General Offer on the First

• Closing Date (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . .4:00 p.m. on Wednesday, 6th January, 2010

• First Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 6th January, 2010

Announcement on the results of the General Offer

• as at the First Closing Date to be posted

on the Stock Exchange’s website (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . not later than 7:00 p.m.

on Wednesday, 6th January, 2010

Latest date for posting of remittances for amounts

• due under the General Offer in respect of valid acceptances received on or before 4:00 p.m.

• on the First Closing Date (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 15th January, 2010

Notes:

1. The latest time for receipt of acceptances under the General Offer, which is conditional as to acceptances, will be 4:00 p.m. on Wednesday, 6th January, 2010 unless the Offeror revises or extends the General Offer in accordance with the Takeovers Code. The Offeror will issue an announcement on the Stock Exchange’s website by 7:00 p.m. on the First Closing Date, stating the results of the General Offer and whether the General Offer has been revised or extended, has expired or has become or even declared unconditional. In any announcement of an extension of the General Offer, either the next closing date must be stated or, if the General Offer is unconditional as to acceptance, a statement may be made that the General Offer will remain open until further notice. In any event, where the General Offer becomes or is declared unconditional, the General Offer will remain open for acceptance for not less than 14 days thereafter in accordance with the Takeovers Code.

2. Remittances in respect of the cash consideration (after deducting seller’s ad valorem stamp duty) payable for the Shares tendered under the General Offer will be posted to the Independent Shareholders accepting the General Offer by ordinary post at their own risk as soon as possible, but in any event within 10 days of the later of the date of receipt by the Registrar of duly completed acceptance, or the date when the General Offer becomes or is declared unconditional.

3. Acceptance of the General Offer shall be irrevocable and not be capable of being withdrawn, except permitted under the Takeovers Code. Please refer to paragraph headed ‘‘Right of Withdrawal’’ in Appendix I to this Composite Document for further information on the circumstances when the General Offer maybe granted a right of withdrawal.

All references to date and time contained in this Composite Document refer to Hong Kong time.

– ii –

DEFINITIONS

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

• ‘‘Accepting Shareholder(s)’’

shareholder(s) who accept(s) the General Offer pursuant to the terms set out in this Composite Document;

• ‘‘acting in concert’’

shall have the meaning set out in the Takeovers Code;

• ‘‘Action’’

the action by Deutsche Bank AG against the Company under the action number HCA 917 of 2009 in the High Court of Hong Kong, including the claim under the Writ;

• ‘‘Announcement Date’’ 25th November, 2009, being the date of the Joint Announcement;

• ‘‘associate(s)’’ shall have the meaning set out in the Takeovers Code;

• ‘‘Board’’ the board of directors of the Company;

‘‘business day’’ a day on which the Stock Exchange is open for the transaction of business;

‘‘CCASS’’ the Central Clearing and Settlement System established and operated by Hong Kong Securities Clearing Company Limited;

‘‘Company’’ Sinotronics Holdings Limited, a company incorporated in the Cayman Islands with limited liability and the shares of which are listed on the Main Board of the Stock Exchange;

• ‘‘Composite Document’’ this composite offer document jointly issued by the Company and the Offeror;

• ‘‘Director(s)’’ the director(s) of the Company;

• ‘‘Deed of Indemnity’’

the deed of indemnity dated 12th December, 2007 executed by Mr. Lin in favour of the Company in which Mr. Lin agreed to perform the interest payment obligation of the Company under the Swap Agreements and is obliged to indemnify the Company against all liabilities, claims, damages, costs and expenses which the Company may suffer by reason of his failure in performance of the said obligation;

‘‘Excluded Shareholder(s)’’ Overseas Shareholder(s) in respect of whom the Directors, based on legal advice, consider it necessary or expedient not to offer the Open Offer Shares on account either of the legal restrictions under the laws of the relevant place or the requirements of the relevant regulatory body or stock exchange in that place;

– 1 –

DEFINITIONS

• ‘‘Executive’’

• the executive director of the corporate finance division of the Securities and Futures Commission of Hong Kong or any of his delegates;

• ‘‘First Closing Date’’ Wednesday, 6th January, 2010, being the first closing date of the General Offer, which is 21 days after the date when the General Offer commences to open for acceptance;

• ‘‘Form(s) of Acceptance’’ the accompanying form(s) of acceptance and transfer in respect of the General Offer;

• ‘‘General Offer’’ the mandatory conditional general cash offer made by Yu Ming on behalf of the Offeror to acquire all the Shares other than those already owned or agreed to be acquired by the Offeror and parties acting in concert with it;

• ‘‘General Offer Price’’ the offer price of HK$0.18 under the General Offer;

• ‘‘General Offer Share(s)’’ issued Shares other than those already owned or agreed to be acquired by the Offeror and parties acting in concert with it during the Offer Period;

• ‘‘Group’’ the Company and its subsidiaries;

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

• ‘‘Independent Board Committee’’

• the independent board committee of the Company comprising Mr. Pan Chang Chi, Mr. Cai Xun Shan and Mr. Cheung Chuen in respect of the General Offer;

• ‘‘Independent Shareholder(s)’’

• Shareholder(s) other than the Offeror and parties acting in concert with it;

• ‘‘Interest Rate Swaps’’ the two 5-year interest rate swaps with a notional amount of HK$390,000,000 and US$100,000,000, the terms of which are set out in the Swap Agreements, involving semi-annual net exchange of interest payments between the Company and Deutsche Bank AG;

• ‘‘Joint Announcement’’ the joint announcement issued by the Company and the Offeror on 25th November, 2009 in respect of the General Offer;

• ‘‘Last Trading Day’’

• 20th November, 2009, being the last full trading day before trading of the Shares was suspended pending the publication of the Joint Announcement;

– 2 –

DEFINITIONS

• ‘‘Latest Practicable Date’’ 14th December, 2009, being the latest practicable date prior to the printing of this Composite Document for the purpose of ascertaining certain information contained in this Composite Document;

• ‘‘Listing Rules’’ The Rules Governing the Listing of Securities on the Stock Exchange;

• ‘‘Mr. Lin’’ Mr. Lin Wan Qaing, a former controlling Shareholder of the Company holding 230,131,780 Shares (representing approximately 41.17% of the issued share capital of the Company as at the Latest Practicable Date) prior to the completion of the Placing;

• ‘‘Offer Period’’ shall have the meaning set out in the Takeovers Code;

• ‘‘Offeror’’

• Union Day Group Limited, a company incorporated in the British Virgin Islands with limited liability, holding 230,131,780 Shares, representing approximately 41.17% of the issued share capital of the Company as at the Latest Practicable Date. Mr. Sze Ming Yee is the ultimate beneficial owner of the Offeror;

• ‘‘Open Offer’’

• the open offer announced by the Company on 17th November, 2009 on the basis of 1 Open Offer Share for every 2 Shares held by the Qualifying Shareholders on the Record Date;

• ‘‘Open Offer Announcement’’ the announcement of the Company dated 17th November, 2009 relating to, inter alia, the update on the Writ, resignation of executive Director and the Open Offer;

• ‘‘Open Offer Prospectus’’ the prospectus dated 8th December, 2009 issued by the Company in respect of the Open Offer;

• ‘‘Open Offer Share(s)’’ new Share(s) to be issued under the Open Offer;

• ‘‘Overseas Shareholder(s)’’

• Shareholder(s) whose addresses, as shown on the register of members of the Company on the Record Date, are outside Hong Kong;

• ‘‘party(ies) acting in concert’’ has the same meaning set out in the Takeovers Code;

• ‘‘Pelican Securities’’

• Pelican Securities Limited, a corporation licensed under the SFO to carry out regulated activities of type 1 (dealing in securities), type 4 (advising on securities) and type 6 (advising on corporate finance), being the independent financial adviser appointed to advise the Independent Board Committee and the Independent Shareholders in respect of the General Offer;

– 3 –

DEFINITIONS

• ‘‘Placing’’ the placing of 230,131,780 Shares to the Offeror by Mr. Lin which was completed on 23rd November, 2009;

• ‘‘PRC’’ the People’s Republic of China;

• ‘‘Qualifying Shareholders’’ the Shareholders whose names appear on the register of members of the Company on the Record Date, other than the Excluded Shareholder(s);

• ‘‘Record Date’’ 7th December, 2009, being the time and date by reference to which entitlements of the Qualifying Shareholders to subscribe for the Open Offer Shares are to be determined;

• ‘‘Registrar’’ Hong Kong Registrars Limited at Shops 1712–1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong;

• ‘‘Relevant Period’’ the period from 25th May, 2009, being the date falling six months before the date of the Joint Announcement up to and including the Latest Practicable Date;

• ‘‘RMB’’ Renminbi, the lawful currency of PRC;

• ‘‘Sale Shares’’ 230,131,780 Shares beneficially owned by Mr. Lin prior to the completion of the Placing;

• ‘‘Settlement Agreement’’ the settlement agreement dated 16th November, 2009 entered into by the Company, Deutsche Bank AG and one of the employees of Deutsche Bank AG against whom the Company lodged a counter claim;

• ‘‘SFO’’ the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong);

• ‘‘Share(s)’’ ordinary share(s) of HK$0.10 each in the share capital of the Company;

• ‘‘Shareholder(s)’’ holder(s) of the Share(s);

• ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited;

• ‘‘Sub-Underwriters’’ the Offeror and Mr. Zhan Hong Wei, sub-underwriting 169,482,500 Shares and 110,000,000 Shares under the Open Offer respectively. Mr. Zhan Hong Wei is a party acting in concert (with the meaning ascribed to it under the Takeovers Code) with the Offeror;

– 4 –

DEFINITIONS

• ‘‘Sub-underwriting Agreements’’ Sub-underwriting Agreements dated 16th November, 2009 entered into between the Underwriter and the Sub-Underwriters to subunderwrite the Open Offer Shares;

• ‘‘Swap Agreements’’ the structured interest rate swap agreements entered into by the Company with Deutsche Bank AG on 8th February, 2007 and 11th April, 2007 respectively;

• ‘‘Takeovers Code’’ the Hong Kong Code on Takeovers and Mergers;

• ‘‘Title Document(s)’’ the relevant Share certificate(s) and/or transfer receipt(s) and/or any document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof);

• ‘‘Underwriter’’ Upbest Securities Company Limited, a company incorporated in Hong Kong with limited liability and a corporation licensed under the SFO to carry out regulated activities of type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management);

• ‘‘Writ’’ the writ of summons dated 31st March, 2009 filed by Deutsche Bank AG as plaintiff and the Company as defendant in a claim arising from the Swap Agreements;

• ‘‘Yu Ming’’ Yu Ming Investment Management Limited, a company incorporated in Hong Kong with limited liability and a corporation licensed under the SFO to carry out regulated activities of type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management), being the financial adviser to the Offeror;

• ‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong; ‘‘%’’ per cent.

(The exchange rate used for the purpose of this Composite Document is at RMB1 = HK$1.1352)

– 5 –

LETTER FROM THE BOARD

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SINOTRONICS HOLDINGS LIMITED

華 翔 微 電 子 控 股 有 限 公 司[*]

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1195)

Executive Directors: Lin Wan Xin Xiang Song Hu Zhao Rui Tu Shuguang Chan Kin

Independent Non-Executive Directors: Pan Chang Chi Cai Xun Shan Cheung Chuen

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

Head office and principal place of business in Hong Kong: Room 1805, 18th Floor Harbour Centre 25 Harbour Road Wanchai Hong Kong

16th December, 2009

To the Independent Shareholders,

Dear Sir or Madam,

MANDATORY CONDITIONAL GENERAL CASH OFFER

BY YU MING INVESTMENT MANAGEMENT LIMITED ON BEHALF OF UNION DAY GROUP LIMITED

FOR ALL ISSUED SHARES OF SINOTRONICS HOLDINGS LIMITED (OTHER THAN THOSE SHARES ALREADY OWNED OR AGREED TO BE ACQUIRED BY

UNION DAY GROUP LIMITED AND PARTIES ACTING IN CONCERT WITH IT)

INTRODUCTION

On 25th November, 2009, the Offeror and the Company jointly announced that following completion of the Placing on 23rd November, 2009, the Offeror has become interested in 230,131,780 Shares, representing approximately 41.17% of the total issued share capital of the Company as at the Latest Practicable Date.

• for identification purposes only

– 6 –

LETTER FROM THE BOARD

Accordingly, the Offeror is required to make a mandatory conditional general cash offer for all the issued Shares other than those already owned or agreed to be acquired by the Offeror and parties acting in concert with it pursuant to Rule 26.1 of the Takeovers Code.

The purpose of this Composite Document is to provide you with, among other things, information about the Company, the terms of the General Offer, the letter from the Independent Board Committee containing its recommendation and advice to the Independent Shareholders and the letter from Pelican Securities containing its advice to the Independent Board Committee and the Independent Shareholders in respect of the General Offer.

MANDATORY CONDITIONAL GENERAL OFFER

Yu Ming, financial adviser to the Offeror, is making the General Offer on behalf of the Offeror in compliance with the Takeovers Code, on the following terms and subject to the conditions set out further below in Appendix I of this Composite Document and the accompanying Form of Acceptance:

For every General Offer Share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.18 in cash

The General Offer Price of HK$0.18 represents:

• (i) a discount of approximately 25.93% to the closing price of HK$0.243 per Share (adjusted as a result of the Open Offer) as quoted on the Stock Exchange on the Last Trading Day;

• (ii) a discount of approximately 37.35% to the average closing price of HK$0.287 per Share (adjusted as a result of the Open Offer) for the 10 trading days up to and including the Last Trading Day;

• (iii) a discount of approximately 40.46% to the average closing price of HK$0.302 per Share (adjusted as a result of the Open Offer) for the 30 trading days up to and including the Last Trading Day;

• (iv) a discount of approximately 61.29% to the closing price of HK$0.465 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and

• (v) a discount of approximately 86.05% to the audited consolidated net asset value per Share of approximately HK$1.29 as at 30th June, 2009 calculated based on the net asset value of the Company of RMB 634,465,000 (approximately HK$720,245,000) and 558,965,000 Shares in issue as at the date of the Latest Practicable Date.

Open Offer Shares

The Company has despatched the Open Offer Prospectus on 8th December, 2009 to implement the Open Offer on the basis of 1 Open Offer Share for every 2 Shares held by the Qualifying Shareholders on the Record Date. As at the Latest Practicable Date, the Company has 558,965,000 Shares in issue. The Open Offer is fully underwritten by the Underwriter and Sub-Underwriters.

The Offeror has undertaken to the Company that it will take up its entitlement under the Open Offer in full. Upon completion of the Open Offer, an additional 279,482,500 Open Offer Shares will be issued, amongst which 164,416,610 Shares will be subject to acceptance by the Qualifying Shareholders

– 7 –

LETTER FROM THE BOARD

save for Open Offer Shares the Offeror and parties acting in concert with it are entitled. It is expected that the Open Offer Shares will be issued before the completion of the General Offer. Therefore, the General Offer will be extended to the Open Offer Shares not held or agreed to be subscribed by the Offeror and parties acting in concert with it.

HIGHEST AND LOWEST SHARE PRICES

The highest and lowest closing prices of the Shares (adjusted as a result of the Open Offer) as quoted on the Stock Exchange during the Relevant Period were HK$0.5 on 4th December, 2009 and HK$0.243 on 20th November, 2009 respectively.

INFORMATION ON THE COMPANY

The Company was incorporated in the Cayman Islands with limited liability and engaged in the manufacturing and selling of PCBs, PCBs assembling products and providing mount technology processing service.

SHAREHOLDING STRUCTURE OF THE COMPANY

The Offeror has undertaken to the Company that it will take up its entitlement in full under the Open Offer. The Shareholding structure of the Company before and upon completion of the Open Offer and Shares to be subject to the General Offer will be as follows:

Shareholder The Offeror Sub-Underwriters (Note 1) Mr. Zhan Hong Wei The Offeror (Note 2) Subtotal of the Offeror and parties acting in concert with it Atlantis Investment Management Limited Other Shareholders Public subtotal Total Notes:	As at the Latest Practicable Date Shares % 230,131,780 41.17% — 0.00% — 0.00% 230,131,780 41.17% 45,000,000 8.05% 283,833,220 50.78% 328,833,220 58.83% 558,965,000 100.00%	Immediately After completion of the Open Offer (assuming all Open Offer Shares will be taken up by the Qualifying Shareholders) Shares % 345,197,670 41.17% — 0.00% — 0.00% 345,197,670 41.17% 67,500,000 8.05% 425,749,830 50.78% 493,249,830 58.83% 838,447,500 100.00%	Immediately after completion of the Open Offer (assuming no Open Offer Shares will be taken up by the Qualifying Shareholders other than the Offeror) Shares % 345,197,670 41.17% 110,000,000 13.12% 54,416,610 6.49% 509,614,280 60.78% 45,000,000 5.37% 283,833,220 39.22% 328,833,220 39.22% 838,447,500 100.00%	Immediately after completion of the Open Offer (assuming no Open Offer Shares will be taken up by the Qualifying Shareholders other than the Offeror) Shares % 345,197,670 41.17% 110,000,000 13.12% 54,416,610 6.49% 509,614,280 60.78% 45,000,000 5.37% 283,833,220 39.22% 328,833,220 39.22% 838,447,500 100.00%
				60.78%
				5.37% 39.22%
				39.22%
				100.00%

(1) The Offeror and Mr. Zhan Hong Wei are the Sub-Underwriters for the Open Offer on a fully underwritten basis. Mr. Zhan Hong Wei is a party acting in concert with the Offeror.

– 8 –

LETTER FROM THE BOARD

• (2) The sub-underwriting obligation of the Offeror under the Sub-underwriting Agreements for the Open Offer includes underwriting of 169,482,500 Open Offer Shares. Subsequent to the Sub-underwriting Agreements, Mr. Lin placed his entire shareholding to the Offeror. The Offeror has given irrevocable undertaking to the Company to take up all of its entitlement under the Open Offer. Upon deduction of the Offeror’s entitlement under the Open Offer as a Qualifying Shareholder, the underwriting obligation of the Offeror under the Sub-underwriting Agreement will be reduced to 54,416,610 Open Offer Shares.

As at the Latest Practicable Date, (i) other than the Shares, the Company does not have any other class of securities, outstanding options, derivatives, warrants or other securities which are convertible or exchangeable into Shares, and (ii) the Offeror and the parties acting in concert with it do not own or control any relevant securities (as defined under Note 4 to Rule 22 of the Takeovers Code) in the Company other than those disclosed above.

INTENTION OF THE OFFEROR ON THE GROUP

Your attentions is drawn to the paragraph headed ‘‘Offeror’s intention on the Group and the listing status’’ in the section headed ‘‘Letter from Yu Ming’’ on page 14 of this Composite Document. The Board has noted the intentions of the Offeror in respect of the Company and its employees and will cooperate with and support the Offeror on a reasonable basis for the smooth running of the business of the Group.

GENERAL

Pursuant to Rule 2.8 of the Takeovers Code, the Independent Board Committee shall comprise all non-executive directors of the Company who have no direct or indirect interest in the General Offer (other than as Shareholders).

Mr. Pan Chang Chi, Mr. Cai Xun Shan and Mr. Cheung Chuen, being independent non-executive Directors, have been appointed as members of the Independent Board Committee for consideration of and making of recommendations to the Independent Shareholders in respect of the terms of the General Offer. Pelican Securities has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the General Offer.

RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee set out on page 17 of this Composite Document which contains its recommendation to the Independent Shareholders in respect of the General Offer and the letter from Pelican Securities set out on pages 18 to 30 of this Composite Document which contains its advice to the Independent Board Committee and the Independent Shareholders in respect of the fairness and reasonableness of the General Offer, and the principal factors and reasons it has considered before arriving at its advice. You are also advised to read this Composite Document and the accompanying Form of Acceptance in respect of the acceptance and settlement procedures of the General Offer.

ADDITIONAL INFORMATION

In considering what action to take in connection with the General Offer, the Independent Shareholders should consider their own tax position and, if they are in doubt, they should consult their own professional advisers.

– 9 –

LETTER FROM THE BOARD

Your attention is also drawn to the information set out in other appendices to this Composite Document.

Yours faithfully For and on behalf of the Board SINOTRONICS HOLDINGS LIMITED Lin Wan Xin Chairman

– 10 –

LETTER FROM YU MING

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16th December, 2009

To the Independent Shareholders,

Dear Sir or Madam,

MANDATORY CONDITIONAL GENERAL CASH OFFER BY YU MING INVESTMENT MANAGEMENT LIMITED ON BEHALF OF UNION DAY GROUP LIMITED

FOR ALL ISSUED SHARES OF SINOTRONICS HOLDINGS LIMITED (OTHER THAN THOSE SHARES ALREADY OWNED OR AGREED TO BE ACQUIRED BY

UNION DAY GROUP LIMITED AND PARTIES ACTING IN CONCERT WITH IT)

INTRODUCTION

On 25th November, 2009, the Offeror and the Company jointly announced that following completion of the Placing on 23rd November, 2009, the Offeror has become interested in 230,131,780 Shares of the Company, representing approximately 41.17% of the total issued share capital of the Company as at the Latest Practicable Date.

Accordingly, the Offeror is required to make a mandatory conditional general cash offer for all the issued Shares other than those already owned or agreed to be acquired by the Offeror and parties acting in concert with it pursuant to Rule 26.1 of the Takeovers Code.

This letter sets out, amongst other things, the principal terms of the General Offer, together with the information on the Offeror and the Offeror’s intention regarding the Company. Further details of the General Offer are also set out in Appendix I to this Composite Document and the accompanying Form of Acceptance.

MANDATORY CONDITIONAL GENERAL OFFER

We are making the General Offer on behalf of the Offeror in compliance with the Takeovers Code, on the following terms and subject to the conditions set out below and in Appendix I of this Composite Document together with the accompanying Form of Acceptance:

For every General Offer Share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.18 in cash

The General Offer Price of HK$0.18 represents:

• (i) a discount of approximately 25.93% to the closing price of HK$0.243 per Share (adjusted as a result of the Open Offer) as quoted on the Stock Exchange on the Last Trading Day;

– 11 –

LETTER FROM YU MING

• (ii) a discount of approximately 37.35% to the average closing price of HK$0.287 per Share (adjusted as a result of the Open Offer) for the 10 trading days up to and including the Last Trading Day;

• (iii) a discount of approximately 40.46% to the average closing price of HK$0.302 per Share (adjusted as a result of the Open Offer) for the 30 trading days up to and including the Last Trading Day;

• (iv) a discount of approximately 61.29% to the closing price of HK$0.465 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and

• (v) a discount of approximately 86.05% to the audited consolidated net asset value per Share of approximately HK$1.29 as at 30th June, 2009 calculated based on the net asset value of the Company of RMB 634,465,000 (approximately HK$720,245,000) and 558,965,000 Shares in issue as at the date of the Latest Practicable Date.

Value of the General Offer

Based on 328,833,220 General Offer Shares as at the Latest Practicable Date, the total consideration of the General Offer amounts to approximately HK$59,189,980. Based on 493,249,830 General Offer Shares upon completion of the Open Offer, which is on a fully underwritten basis, the total consideration of the General Offer amounts to approximately HK$88,784,970.

Confirmation of financial resources

The Offeror and parties acting in concert with it will use their internal resources to implement the General Offer. Yu Ming is satisfied that sufficient financial resources are available to the Offeror and parties acting in concert with it for the full implementation of the General Offer.

Condition of the General Offer

The General Offer will be subject to the Offeror having received acceptances in respect of voting rights which, together with voting rights acquired or agreed to be acquired by it and parties acting in concert with it before or during the General Offer, will result in the Offeror and parties acting in concert with it holding more than 50% of the voting rights in the Company as at the First Closing Date.

As set out in the ‘‘Letter from the Board’’, assuming none of the Qualifying Shareholders takes up their respective entitlement under the Open Offer, the Offeror and parties acting in concert with it will hold, as a result of the sub-underwriting obligation under the Sub-Underwriting Agreements, approximately 60.78% of the total issued share capital of the Company, in which case the General Offer will become unconditional. Separate announcement will be made by the Company in this respect in due course.

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LETTER FROM YU MING

Effect of accepting the General Offer

By accepting the General Offer, the Independent Shareholders will sell their Shares fully-paid and free from all liens, charges, encumbrances, rights of pre-emption and any other third party rights of any nature and together with all rights attached to them or subsequently becoming attached to them (for the General Offer Shares, including all dividends and distributions declared, on or after the Announcement Date).

Payment

Payment in cash in respect of the acceptances of the General Offer will be made within 10 days of the date on which the relevant documents of title are received by the Offeror to render each such acceptance complete and valid or when the General Offer has become or declared unconditional, whichever is the later.

Stamp Duty

Seller’s ad valorem stamp duty for the Shares arising in connection with acceptances of the General Offer payable by the relevant Shareholders at the rate of HK$1 for every HK$1,000 or part thereof of the market value of the Shares to be acquired by the Offeror under the General Offer or the consideration payable by the Offeror in respect of relevant acceptances of the General Offer, whichever is the higher, will be deducted from the cash amount due to such Shareholders under the General Offer.

Other Arrangements

There has been no arrangement in relation to the Shares which might be material to the General Offer. There has been no agreement or arrangements to which the Offeror is a party which relate to the circumstances in which it may or may not invoke or seek to invoke a precondition or a condition to the General Offer.

Overseas Shareholders

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

INFORMATION ON THE OFFEROR

The Offeror is a company incorporated in the British Virgin Islands with limited liability on 9th January, 2008. The Offeror is wholly and beneficially owned by Mr. Sze Ming Yee. The Offeror has not carried out any business other than the acquisition of the Sale Shares. Mr. Sze Ming Yee has more than 15 years experience in property development and investment and is currently engaged in property

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LETTER FROM YU MING

development primarily in the PRC and primarily in Wenzhou. He also invests in securities in the PRC. He is a postgraduate student of Zhejiang University. Mr. Sze has acquainted Mr. Zhan Hong Wei, one of the Sub-Underwriters and a party acting in concert with the Offeror, through normal business contacts.

Other than the Placing and the Sub-underwriting Agreements for the Open Offer, the Offeror and parties acting in concert with it have not (i) dealt in the Shares during the Relevant Period, (ii) entered into any contracts in relation to the outstanding derivatives in respect of securities in the Company, (iii) received an irrevocable commitment to accept or reject the General Offer; (iv) borrowed or lent any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company.

Compulsory Acquisition

The Offeror and parties acting in concert with it do not intend to exercise any right which may be available to them to acquire compulsorily any outstanding issued Shares not acquired under the General Offer after the close of the General Offer.

OFFEROR’S INTENTION ON THE GROUP AND THE LISTING STATUS

The Offeror intends that the Group will continue its existing principal activities after the close of the General Offer. Given the competitive environment in the electronic manufacturing services sector, and the losses of the Group in the year ended 30th June, 2009, the Offeror’s initial review suggests the need of cost cutting, increase in expenditure in new product development, and investment in efficiency improvement amongst the manufacturing facilities. Upon completion of the General Offer, the Offeror will conduct a detailed review of the Group’s business operation for future long-term development and commercial justification.

Mr. Lin Wan Xin has offered to resign as chairman of the Company upon close of the General Offer, but will remain as an executive director of the Company.

The Offeror intends to appoint two executive Directors to the Board upon close of the General Offer.

Save for the above, the Offeror has no intention to introduce significant change to the existing management and directorship of the Company (including the continued employment of employees and any redeployment of the fixed assets of the Group). The Company will make further announcement in respect of resignation or appointment of Directors in due course.

The Offeror intends to maintain the listing of the Shares on the Stock Exchange.

If, upon closing of the General Offer, less than 25% of the Shares are held by the public or if the Stock Exchange believes that (i) a false market exists or may exist in the Shares; or (ii) there are insufficient Shares in public hands to maintain an orderly market, then the Stock Exchange may exercise its discretion to suspend trading in the Shares. In this connection, it should be noted that upon closing of the General Offer, there may be insufficient public float for the Shares and, therefore, trading in the Shares may be suspended until a sufficient level of public float is restored.

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LETTER FROM YU MING

If the public float requirement is not met, the directors of the Offeror and the new directors to be appointed to the Board will jointly and severally undertake to the Stock Exchange to take appropriate steps to restore the public float in the Shares.

PROCEDURES FOR ACCEPTANCES OF THE GENERAL OFFER

To accept the General Offer, the Accepting Shareholders should complete the accompanying Form of Acceptance in accordance with the instructions printed thereon.

The completed Form of Acceptance should then be forwarded, together with the relevant Title Documents for not less than the number of the Shares in respect of which you intend to tender under the General Offer, by post or by hand, to the Registrar at Shops 1712–1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong in an envelope marked ‘‘Sinotronics General Offer’’ as soon as possible after the receipt of this Composite Document but in any event not later than 4:00 p.m. on the First Closing Date.

No acknowledgement of receipt of any Forms of Acceptance and the Title Documents will be given.

Your attention is drawn to the Appendix I to this Composite Document and the accompanying Form of Acceptance.

SETTLEMENT OF THE GENERAL OFFER

Provided that the accompanying Form of Acceptance for the Shares, together with the relevant Title Documents, are valid, complete and in good order and have been received by the Registrar by no later than 4:00 p.m. on the First Closing Date as required by Rule 30.2 of the Takeovers Code, a cheque for the amount due to each of the Accepting Shareholders in respect of the Shares tendered under the General Offer, less seller’s ad valorem stamp duty payable by them, will be despatched to the Accepting Shareholders by ordinary post at their own risk within 10 days from the date of receipt of all relevant documents which render such acceptance complete and valid are received by the Registrar or the date when the General Offer becomes or is declared unconditional, whichever is the later.

The consideration to which any Accepting Shareholder is entitled under the General Offer will be paid by the Offeror in full in accordance with the terms of the General Offer set out in this Composite Document (including its appendices) and the accompanying Forms of Acceptance without regard to any lien, right of set-off, counterclaim or other analogous right to which the Offeror may otherwise be, or claim to be, entitled against such Accepting Shareholder. Detailed terms of the General Offer are also set out in the section headed ‘‘Appendix I — Further Terms of the General Offer’’ in this Composite Document.

GENERAL

To ensure equality of treatment of all Shareholders, those Shareholders who hold the Shares as nominee for more than one beneficial owner should, as far as practicable, treat the holding of each beneficial owner separately. In order for the beneficial owner of the Shares, whose investments are registered in the names of nominees, to accept the General Offer, it is essential that they provide instructions to their nominees of their intentions with regard to the General Offer.

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LETTER FROM YU MING

All documents and remittances will be sent to the Independent Shareholders by ordinary post at their own risk. These documents and remittances will be sent to them at their respective addresses as they appear in the register of members, in case of joint holders whose name appear first in the said register of members, unless otherwise specified in the accompanying Forms of Acceptance completed, returned and received by the Registrar. None of the Offeror, the parties acting in concert with the Offeror, Yu Ming, the Company, Pelican Securities, the Registrar or any of their respective directors, officers, associates, agents or any other person involved in the General Offer will be responsible for any loss or delay in transmission of such documents and remittances or any other liabilities that may arise as a result thereof.

Independent Shareholders are recommended to consult their own professional advisers if they are in any doubt as to the taxation and implications of accepting the General Offer in respect of their Shares.

ADDITIONAL INFORMATION

Independent Shareholders are advised to read carefully the ‘‘Letter from the Independent Board Committee’’ and the ‘‘Letter from Pelican Securities’’ as contained in this Composite Document before deciding whether or not to accept the General Offer.

Your attention is also drawn to the further terms of the General Offer, the additional information set out in the appendices to this Composite Document and the accompanying Form of Acceptance.

Yours faithfully For and on behalf of YU MING INVESTMENT MANAGEMENT LIMITED Lee Wa Lun, Warren Director

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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SINOTRONICS HOLDINGS LIMITED 華 翔 微 電 子 控 股 有 限 公 司[*]

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1195)

16th December, 2009

To the Independent Shareholders,

Dear Sir and Madam,

MANDATORY CONDITIONAL GENERAL CASH OFFER BY YU MING INVESTMENT MANAGEMENT LIMITED ON BEHALF OF UNION DAY GROUP LIMITED

FOR ALL ISSUED SHARES OF SINOTRONICS HOLDINGS LIMITED (OTHER THAN THOSE SHARES ALREADY OWNED OR AGREED TO BE ACQUIRED BY

UNION DAY GROUP LIMITED AND PARTIES ACTING IN CONCERT WITH IT)

We have been appointed by the Board to form an Independent Board Committee to consider the terms of the General Offer and to make recommendations to the Independent Shareholders in connection with the General Offer, details of which are set out in the ‘‘Letter from the Board’’ in the composite document dated 16th December, 2009 (the ‘‘Composite Document’’) of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as defined in the Composite Document unless the context otherwise requires.

Pelican Securities has been appointed as the independent financial adviser to advise us and the Independent Shareholders in respect of the terms of the General Offer.

We wish to draw your attention to the ‘‘Letter from Yu Ming’’ set out on pages 11 to 16 of the Composite Document which contains, inter alia, information about the General Offer, and the letter of advice from Pelican Securities set out on pages 18 to 30 of the Composite Document which contains its advice in respect of the terms of the General Offer.

Having taken into account the advice of Pelican Securities, we consider that the terms of the General Offer are not fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders not to accept the General Offer.

Yours faithfully,

INDEPENDENT BOARD COMMITTEE

SINOTRONICS HOLDINGS LIMITED

Pan Chang Chi Cai Xun Shan

Cheung Chuen

• for identification purposes only

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LETTER FROM PELICAN SECURITIES

The following is the text of a letter of advice from Pelican Securities to the Independent Board Committee and the Independent Shareholders in respect of the General Offer for inclusion in this Composite Document.

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16th December, 2009

The Independent Board Committee and the Independent Shareholders

Sinotronics Holdings Limited

Room 1805, 18/F Harbour Centre 25 Harbour Road Wanchai Hong Kong

Dear Sirs,

MANDATORY CONDITIONAL GENERAL CASH OFFER BY YU MING INVESTMENT MANAGEMENT LIMITED ON BEHALF OF UNION DAY GROUP LIMITED FOR ALL ISSUED SHARES OF SINOTRONICS HOLDINGS LIMITED (OTHER THAN THOSE SHARES ALREADY OWNED OR AGREED TO BE ACQUIRED BY UNION DAY GROUP LIMITED AND PARTIES ACTING IN CONCERT WITH IT)

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the General Offer. The details of the General Offer, among other things, are set out in the letter from the Board contained in the Composite Document (the ‘‘Letter from the Board’’), of which this letter forms part. Capitalized terms used in this letter shall have the same meanings as those defined in the Composite Document unless the context requires otherwise.

The Independent Board Committee comprising all the independent non-executive Directors, namely Mr. Pan Chang Chi, Mr. Cai Xun Shan and Mr. Cheung Chuen, has been established to advise the Independent Shareholders as to whether the General Offer is fair and reasonable. The appointment of Pelican Securities as the independent financial adviser in respect of the General Offer has been approved by the Independent Board Committee.

In formulating our opinion to the Independent Board Committee and the Independent Shareholders, we have relied on the statements, information, opinions and representations contained or referred to in the Composite Document and the information and representations as provided to us by the Directors, the Company and its management. We have assumed that all information and representations that have been

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LETTER FROM PELICAN SECURITIES

provided by the Directors, for which they are solely and wholly responsible, are true and accurate at the time when they were made and continue to be so as at the date of the Composite Document. We have also assumed that all statements of belief, opinion, expectation and intention made by the Directors in the Composite Document were reasonably made after due enquiry and careful consideration. We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy and completeness of the information and facts contained in the Composite Document, or the reasonableness of the opinions expressed by the Company, its management and/or the Directors, the Offeror, its management and/or its directors, which have been provided to us. We consider that we have taken sufficient and necessary steps on which to form a reasonable basis and an informed view for our opinion.

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

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent verification of the information included in the Composite Document and provided to us by the Directors and the management of the Group nor have we conducted any form of in-depth investigation into the business and affairs or the future prospects of the Group. We have not considered the tax implications on the Independent Shareholders of acceptance of the General Offer since these depend on their individual circumstances. In particular, the Independent Shareholders who are residents overseas or subject to overseas taxes or Hong Kong taxation on securities dealings should consider their own tax position and, if in any doubt, should consult their own professional advisers.

Lastly, where information in this letter has been extracted from published or otherwise publicly available sources, the sole responsibility of Pelican Securities is to ensure that such information has been correctly and fairly presented and reproduced from the relevant sources.

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LETTER FROM PELICAN SECURITIES

PRINCIPAL FACTORS TAKEN INTO CONSIDERATION

In formulating our opinion in respect of the General Offer to the Independent Board Committee and the Independent Shareholders, we have considered the following principal factors and reasons:

1. Background to and Terms of the General Offer

The Joint Announcement dated 25th November, 2009 stated that the Board had been informed by Mr. Lin, the former controlling Shareholder of the Company prior to the completion of the Placing, that he had placed his entire shareholding in the Company of 230,131,780 Shares, representing approximately 41.17% of the total issued share capital of the Company as at the Latest Practicable Date, to the Offeror at the placing price of HK$0.18 per Share. Completion of the Placing took place on 23rd November, 2009.

Immediately upon completion of the Placing as stated in the Joint Announcement, the Offeror holds 230,131,780 Shares, representing approximately 41.17% of the total issued share capital of the Company as at the Latest Practicable Date. Pursuant to Rule 26.1 of the Takeovers Code, the Offeror is required to make a mandatory conditional general offer in cash for all the issued Shares other than those already owned or agreed to be acquired by the Offeror and parties acting in concert with it.

Yu Ming, financial adviser to the Offeror, is making the General Offer on behalf of the Offeror in compliance with the Takeovers Code, on the following basis:

For every General Offer Share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.18 in cash

Further details of the terms and conditions of the General Offer, including the procedures for acceptance, are set out in the letter from Yu Ming and Appendix I to the Composite Document.

2. Operating Performance of the Group

(a) Financial Performance of the Group

The Group is principally engaged in the manufacturing and sales of rigid printed circuit boards (‘‘rigid PCBs’’) and flexible printed circuit boards (‘‘FPCBs’’), as well as providing printed circuit board assembly (‘‘PCBA’’) and surface mounting technology (‘‘SMT’’) processing services. Its products have a broad range of applications in items such as mobile communication devices, consumer digital devices, automotive and medical devices.

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LETTER FROM PELICAN SECURITIES

The following consolidated results of the Group are extracts from the annual reports of the Company for the three years ended 30th June, 2009:

	For the year ended	For the year ended	For the year ended	For the year ended	For the year ended	For the year ended	For the year ended	For the year ended	For the year ended
	30th June, 2009			30th June,	2008		30th June,	2007
	(audited)			(audited)			(audited)
	RMB’000		(%)	RMB’000		(%)	RMB’000		(%)
Turnover by segments
Rigid PCBs	235,865		74%	367,599		65%	391,025		56%
FPCBs	67,248		21%	116,524		21%	150,249		22%
PCBA	4,953		2%	59,481		10%	133,536		19%
SMT processing services	8,874		3%	20,713		4%	21,126		3%
Total turnover	316,940	100%		564,317	100%		695,936	100%
Gross profit	46,247			171,969			219,044
Segment (loss)/profit from
operations
Rigid PCBs	(194,942)			125,388			159,549
FPCBs	(49,516)			8,120			30,614
PCBA	(45,221)			(1,542)			14,205
SMT processing services	(81,023)			(537)			2,247
Unallocated operating income
and expenses	(12,953)			(13,826)			(14,698)
Total segment (loss)/profit
from operations	(383,655)			117,603			191,917
(Loss)/profit attributable to
the Shareholders	(360,202)			11,179			115,085
Basic (loss)/earnings per
Share	(64) cents			2 cents			21 cents
		As at			As at			As at
	30th June,		2009	30th June,		2008	30th June,		2007
		(audited)			(audited)			(audited)
		RMB’000			RMB’000			RMB’000
Non-current assets		375,945			436,410			390,930
Current assets		840,722			1,131,908			1,102,883
Current liabilities		559,341			589,019			467,068
Non-current liabilities		22,861			53,166			139,958
Net-current assets/
(liabilities)		281,381			542,889			635,815
Shareholders’ equity		634,465			926,133			886,787

Source: Annual reports of the Company

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LETTER FROM PELICAN SECURITIES

Financial year ended 30th June, 2008 versus financial year ended 30th June, 2007

The Group’s turnover for the year ended 30th June, 2008 amounted to approximately RMB564.3 million, representing a decrease of approximately 18.9% as compared to the amount of approximately RMB695.9 million for the year ended 30th June, 2007. In particular, the turnover of rigid PCBs recorded an amount of approximately RMB367.6 million as compared to approximately RMB391.0 million for the year ended 30th June, 2007, representing a decrease of approximately 6.0%. The turnover of FPCBs and PCBA recorded amounts of approximately RMB116.5 million and RMB59.5 million as compared to approximately RMB150.2 million and RMB133.5 million respectively for the year ended 30th June, 2007, representing decrease of approximately 22.4% and 55.4% respectively. The decrease in turnover of the Group was mainly due to the downturn in demand for consumer electronic products, leading to the decrease in sales of FPCBs and provision of PCBA services.

The Group’s gross profit for the year ended 30th June, 2008 amounted to approximately RMB172.0 million, representing a decrease of approximately 21.5% from approximately RMB219.0 million for the year ended 30th June, 2007. The decrease in overall gross profit margin was attributable to the increase in raw material price and product mix. The Group recorded an operating profit of approximately RMB117.6 million for the year ended 30th June, 2008, representing a decrease of approximately 38.7% from approximately RMB191.9 million for the year ended 30th June, 2007. The decrease in operating profit was mainly due to the increase in staff cost, exchange loss, impairment loss of trade receivable and loss on change in fair value of buildings held for own use.

Due to the worsening turnover, gross profit margin and operating profit during the year, the profit attributable to equity Shareholders of the Company was approximately RMB11.2 million for the year ended 30th June, 2008, representing a substantial decrease of 90.3% as compared to the amount of approximately RMB115.1 million for the year ended 30th June, 2007. The basic earnings per Share of the Company for the year ended 30th June, 2008 was approximately RMB2 cents as compared to approximately RMB21 cents for the year ended 30th June, 2007.

Financial year ended 30th June, 2009 versus financial year ended 30th June, 2008

The turnover of the Group for the year ended 30th June, 2009 fell by approximately 43.8% to approximately RMB316.9 million as compared to approximately RMB564.3 million for the year ended 30th June, 2008. In particular, the turnover of rigid PCBs recorded an amount of approximately RMB235.9 million as compared to approximately RMB367.6 million for the year ended 30th June, 2008, representing a decrease of approximately 35.8%. The turnover of FPCBs and PCBA recorded amounts of approximately RMB67.2 million and RMB5.0 million as compared to approximately RMB116.5 million and RMB59.5 million respectively for the year ended 30th June, 2008, representing decrease of approximately 42.3% and 91.6% respectively. The decrease in turnover of the Group was mainly attributable to the decline in sales orders and unit selling prices of the Group’s products resulting from the global economic downturn. In particular, sales from the Group’s top ten customers dropped by over 50% as compared with the previous financial year.

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LETTER FROM PELICAN SECURITIES

For the year ended 30th June, 2009, the Group recorded a gross profit of approximately RMB46.2 million, representing a decrease of approximately 73.1% from approximately RMB172.0 million for the year ended 30th June, 2008. The decrease in gross profit was mainly due to a significant drop in demand for the Group’s PCBs and related products under the prevailing market environment. The Group also recorded an operating loss of approximately RMB383.7 million as compared to an operating profit of approximately RMB117.6 million for the year ended 30th June, 2008. The operating loss was attributable to the impairment of non-current assets as well as trade and other receivables.

Due to global financial crisis, the turnover and gross profit of the Group has deteriorated by a percentage of 43.8% and 73.1% respectively. As a result, the Group recorded a loss attributable to equity Shareholders of the Company for the year ended 30th June, 2009 of approximately RMB360.2 million, as compared to a profit of approximately RMB11.2 million for the year ended 30th June, 2008. In addition, the Group recorded a basic loss per Share of approximately RMB64 cents for the year ended 30th June, 2009, as compared to a basic earnings per Share was RMB2 cents for the year ended 30th June, 2008.

Financial position of the Group for the three years ended 30th June, 2009

In respect to the financial position of the Group as illustrated in the table above, the Group recorded net current assets of approximately RMB635.8 million as at 30th June, 2007, which decreased to approximately RMB542.9 million as at 30th June, 2008 and further worsened to approximately RMB281.4 million as at 30th June, 2009. The decrease in the net current assets as at 30th June, 2007 and 2008 was mainly due to the increase of short-term bank loans from approximately RMB146.5 million as at 30th June, 2007 to RMB253.8 million as at 30th June, 2008. The further decrease in the net current assets as at 30th June, 2008 and 2009 was mainly attributable to the decrease of cash and cash equivalents from approximately RMB880.4 million to RMB648.5 million and trade and other receivables from approximately RMB201.8 million to RMB94.1 million.

Despite the decrease of the net current assets as at 30th June, 2007 and 2008, the net assets of the Group increased slightly from approximately RMB886.8 million to RMB926.1 million, which mainly due to the increase in cash and bank balances during the year. The net assets of the Group as at 30th June, 2009 decreased to approximately RMB634.5 million, which was mainly due to the worsening turnover and the operating loss of the Group during the year, resulting from the global economic downturn.

(b) Future prospect of the Group

As mentioned in the published annual report of the Company for the year ended 30th June, 2009 (the ‘‘2009 Annual Report’’), the electronics industry has been seriously suffered during the global financial crisis and the market for the electronics products has worsened from January to June 2009 due to the fall in demand followed by a decline in average selling prices. As the Board believes that the average selling prices will not be able to rebound quickly to generate higher margins in the near future, it still expects a relatively challenging operating environment in the coming year.

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LETTER FROM PELICAN SECURITIES

According to the printed circuit report released by Prismark Partners, an electronics industry consulting firm, on 10th February, 2009, the turnover of the global electronics systems market is expected to decline by more than 12% in 2009, which represents the largest single-year decline ever. In particular, according to the news released by EETimes, a global source for news, design and product information of electronics industry, on 3rd November, 2009, the analyst of iSuppli, a market research and consulting firm specialized in the electronics value chain, stated that the pricing for the PCB in the second quarter of 2009 is expected to fall to approximately 15.3 cents per square inch, approximately 8.4% down from approximately 16.7 cents in October 2008. As mentioned in the 2009 Annual Report, sales within the PRC (excluding Hong Kong and Taiwan) have been the largest geographical segment for the Group. According to the forecast of the business research & consulting firm, Frost & Sullivan, even though the PRC market demand for the PCB products would decrease by approximately 18.2% as compared to that of previous year, such demand would resume gradually in the year 2010 due to the readjustment and development measures for the electronics products as implemented by the PRC government and the rebound of the consumer confidence index. Therefore, we concur with the view of the Directors that the electronics industry in 2009 has been seriously suffered as a result of the global financial crisis. However, we are of the view that there have been signs for improvements in the PRC market demand for the PCB products, but caution should still be kept for the future performance of the Group as uncertainty may still exist in the operating environment in the coming year for the Group.

In addition, according to the October 2009 Issue of World Economic Outlook published by International Monetary Fund, there have been signs of a stabilizing US economy while the PRC government has significantly relaxed its monetary policy in order to sustain economic growth during the first half of 2009. In particular, there are incipient signs of a stabilization of activity in the United States such as a recovery in consumer demand, increased housing sales and a rebound in the stock market in the United States and of recovery in China such as an increase in industrial production, acceleration of credit supply, and sharp gains in government spending, as according to the 2009 mid-term outlook report published by the World Bank Group. As mentioned in the 2009 Annual Report, the Directors stated that the Group will operate with a defensive approach by focusing on rigid PCBs to generate growth as well as continuing to diversify the application of FPCB products and extend the production line of SMT processing services. In addition, the Group will continue to implement cost control measures and to improve operational efficiency and is endeavored to explore opportunities that could maximise returns for its Shareholders. The Directors therefore considers there may be possibilities of investing significant amount in new business projects should it consider appropriate to its future development.

As stated in the Open Offer Announcement of the Company dated 17th November, 2009, the Company entered into the Settlement Agreement with Deutsche Bank AG for the settlement of the Writ and that Mr. Lin, the former controlling Shareholder of the Company prior to the completion of the Placing, intended to place part or all of the Sale Shares in order to finance his payment obligation under the Deed of Indemnity in light of the Settlement Agreement. As stated in the Joint Announcement, the Board was informed by Mr. Lin subsequent to the Open Offer Announcement that he placed the Sale Shares, being his entire shareholding in the Company of 230,131,780 Shares, representing approximately 41.17% of the total issued share capital of the Company as at the Latest Practicable Date, to the Offeror at the placing price of HK$0.18 per Share. The completion of the Placing took place on 23rd November, 2009. As referred to in the section of the ‘‘Information of the Offeror and its intention on the Group’’ of this letter, the Offeror intends that

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LETTER FROM PELICAN SECURITIES

the Group will continue its existing principal activities after the close of the General Offer. Mr. Lin Wan Xin has offered to resign as chairman of the Company upon close of the General Offer, but will remain as an executive Director of the Company. In addition, the Offeror intends to appoint two executive Directors to the Board upon close of the General Offer. Given the competitive environment in the electronic manufacturing services sector, and the loss of the Group in the year ended 30th June, 2009, the initial review of the Offeror suggests the need of cost cutting, increase in expenditure in new product development, and investment in efficiency improvement amongst the manufacturing facilities. Upon completion of the General Offer, the Offeror will conduct a detailed review of the Group’s business operation for future long-term development and commercial justification. Apart from the above, the Offeror has no intention to introduce significant change to the existing management and directorship of the Company (including the continued employment of employees and any redeployment of the fixed assets of the Group). We are therefore of the view that the Group will continue its efforts in improving its operational efficiency and exploring profitable business opportunities.

3. Share Price Performance and Liquidity

(a) Historical market price of the Shares

Prior to the commencement of dealings in the Shares on an ex-entitlement basis in respect of the Open Offer on 2nd December, 2009, dealings in the Shares was on a cum-entitlement basis. When comparing the General Offer Price with the historical Share price performance, we have made reference to the adjusted closing price of the Shares prior to 2nd December, 2009 and closing price of the Shares afterwards obtained from the website of the Stock Exchange (the ‘‘Adjusted Closing Price’’).

The following chart depicts the daily Adjusted Closing Prices of the Shares from 25th November, 2008 (approximately 12 months prior to the date of the Joint Announcement) up to the Latest Practicable Date (the ‘‘Review Period’’):

==> picture [354 x 175] intentionally omitted <==

Source: Stock Exchange of Hong Kong

– 25 –

LETTER FROM PELICAN SECURITIES

During the Review Period, the Adjusted Closing Price of the Shares ranged from HK$0.15 to HK$0.50. The Adjusted Closing Price of the Shares had been above the General Offer Price from 28th November, 2008 to 13th March, 2009 and had fallen below or been close to the General Offer Price for the short period from 16th March, 2009 to 14th April, 2009. Since then, the Adjusted Closing Price of the Shares had exceeded the General Offer Price. It had risen to HK$0.337 on 25th November, 2009, immediately following the release of the Joint Announcement in relation to the completion of the Placing and the General Offer. The average of the Adjusted Closing Prices of the Shares during the Review Period was approximately HK$0.28 and the General Offer Price represents a discount of approximately 35.7% to such average price.

In general, the General Offer Price represents a discount to the Adjusted Closing Prices of the Shares during most of the time in the Review Period as reference to the chart above and a discount of approximately 35.7% to the average Adjusted Closing Prices during the Review Period.

(b) Liquidity of the Shares

The following table sets out the total trading volume and the average daily trading volume per month and the respective percentages of the average daily trading volume compared with the average total issued Shares and the average number of Shares held by the public from November 2008 up to the Latest Practicable Date:

			% of average	% of average	% of average
	Total	Average	daily trading		daily trading
	monthly	daily		volume to	volume to
	trading	trading	average total		average
	volume	volume	issued Shares		public float
	(million	(million		(%)	(%)
	shares)	shares)		(Note 1)	(Note 2)
2008
November	3.55	0.27		0.04%	0.07%
December	2.00	0.17		0.02%	0.04%
2009
January	0.99	0.14		0.02%	0.04%
February	2.43	0.17		0.02%	0.05%
March	10.06	0.67		0.09%	0.17%
April	33.72	1.87		0.26%	0.49%
May	15.95	0.84		0.12%	0.22%
June	28.63	1.30		0.18%	0.34%
July	10.03	0.50		0.07%	0.13%
August	12.52	0.78		0.11%	0.20%
September	10.26	0.57		0.08%	0.15%
October	28.82	1.60		0.22%	0.42%
November	549.31	34.33		4.71%	8.74%
December (up to Latest
Practicable Date)	279.47	27.95		3.83%	8.96%

Source: Bloomberg

– 26 –

LETTER FROM PELICAN SECURITIES

Notes:

1. Calculated based on the average of the number of issued Shares in each month during the Review Period obtained from Bloomberg.

2. Calculated based on the average of the number of Shares held by the public in each month during the Review Period obtained from Bloomberg.

As illustrated above, during the period from November 2008 to October 2009, the average daily trading volume of the Shares as a percentage of the average total issued Shares ranged from 0.02% to 0.26%; while the average daily trading volume of the Shares as a percentage of the average total number of Shares held by the public ranged from 0.04% to 0.49%. With the Joint Announcement dated 25th November, 2009 in relation to the Completion of the Placing and the General Offer, the average daily trading volume of the Shares as a percentage of the average total issued Shares and a percentage of the average total number of Shares held by the public increased to 4.71% and 8.74% respectively in the month of November 2009.

We are of the view that the liquidity of the Shares during the past 12-month period, excluding the recent months of November and December 2009, was relatively low and there may not be sufficient liquidity in the Shares for the Shareholders to dispose of their Shares in the open market within a short period of time if the same trading pattern of the Shares persists. Given the low liquidity of the Shares, we consider that the General Offer provides an opportunity for Independent Shareholders who are not optimistic about the future business prospects of the Group and wish to realize their investments in the Company within a short period of time. However, Independent Shareholders who are optimistic about the future business prospects of the Group should not accept the General Offer since the General Offer Price represents a discount to the Adjusted Closing Prices of the Shares during most of the time in the past 12 months.

(c) Comparison of the General Offer Price with the market price and NAV per Share

The General Offer Price of HK$0.18 represents:

• (i) a discount of approximately 25.93% to the Adjusted Closing Price of HK$0.243 per Share as quoted on the Stock Exchange on the Last Trading Day;

• (ii) a discount of approximately 37.35% to the average Adjusted Closing Price of HK$0.287 per Share for the 10 trading days up to and including the Last Trading Day;

• (iii) a discount of approximately 40.46% to the average Adjusted Closing Price of HK$0.302 per Share for the 30 trading days up to and including the Last Trading Day;

• (iv) a discount of approximately 43.52% to the average Adjusted Closing Price of HK$0.319 per Share for the 90 trading days up to and including the Last Trading Day;

• (v) a discount of approximately 35.62% to the average Adjusted Closing Price of HK$0.280 per Share for the 180 trading days up to and including the Last Trading Day;

• (vi) a discount of approximately 61.29% to the Adjusted Closing Price of the Shares of HK$0.465 each as quoted on the Stock Exchange on the Latest Practicable Date; and

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LETTER FROM PELICAN SECURITIES

• (vii) a discount of approximately 86.05% to the audited consolidated net asset value per Share of approximately HK$1.29 as at 30th June, 2009 calculated based on the net asset value of the Company of RMB634,465,000 (approximately HK$720,245,000) and 558,965,000 Shares in issue as at the Latest Practicable Date.

4. Valuation of the General Offer Price

(a) Open Offer Price

The Company has despatched the Open Offer Prospectus on 8th December, 2009 to implement the Open Offer on the basis of 1 Open Offer Share for every 2 Shares held by the Qualifying Shareholders on the Record Date at the subscription price of HK$0.18. The General Offer Price is equivalent to the subscription price of the Open Offer.

(b) Net asset value

The General Offer Price represents a discount of approximately 86.05% to the audited consolidated net asset value per Share of approximately HK$1.29 as at 30th June, 2009 calculated based on the net asset value of the Company of RMB634,465,000 (approximately HK$720,245,000) and 558,965,000 Shares in issue as at the Latest Practicable Date.

(c) Comparison with mandatory cash offers

In forming our opinion on the General Offer Price, we have considered the commonly adopted comparable approaches, namely price-to-earnings approach, dividends approach and net assets approach. However, given that the Group recorded a loss for the year ended 30th June, 2009 and the Company had not declared any dividend to the Shareholders during the year ended 30th June, 2009, we consider that the price-to-earnings approach and the dividends approach are not applicable for assessing the value of the Group.

In analyzing the fairness and reasonableness of the General Offer Price, we have not identified any company listed on the main board of the Stock Exchange with similar market capitalization and from similar industry as the Company that has made mandatory cash offer in the Review Period and therefore we have reviewed all mandatory cash offers made by companies listed on the main board of the Stock Exchange since 25th November, 2008 (approximately 12 months prior to the date of the Joint Announcement) up to the date of the Joint Announcement (the ‘‘Comparable Offers’’). However, as we note that the companies from the Comparable Offers are in different industries, we are of the opinion that the comparison to the Comparable Offers is limited and will not be taken into consideration in the assessment of the General Offer Price.

5. Information of the Offeror and its intention on the Group

As mentioned in the letter from Yu Ming in the Composite Document (‘‘Letter from Yu Ming’’), the Offeror is a company incorporated in the British Virgin Islands with limited liability on 9th January, 2008. The Offeror is wholly and beneficially owned by Mr. Sze Ming Yee. The Offeror has not carried out any business other than the acquisition of the Sale Shares.

– 28 –

LETTER FROM PELICAN SECURITIES

As mentioned in the Letter from Yu Ming, the Offeror intends that the Group will continue its existing principal activities after the close of the General Offer. Given the competitive environment in the electronic manufacturing services sector, and the loss of the Group in the year ended 30th June, 2009, the Offeror’s initial review suggests the need of cost cutting, increase in expenditure in new product development, and investment in efficiency improvement amongst the manufacturing facilities. Upon completion of the General Offer, the Offeror will conduct a detailed review of the Group’s business operation for future long-term development and commercial justification.

The Board currently comprises eight Directors. As mentioned in the Letter from Yu Ming, Mr. Lin Wan Xin has offered to resign as chairman of the Company upon close of the General Offer, but will remain as an executive director of the Company. In addition, the Offeror intends to appoint two executive Directors to the Board upon close of the General Offer.

Save for the above, the Offeror has no intention to introduce significant change to the existing management and directorship of the Company (including the continued employment of employees and any redeployment of the fixed assets of the Group).

6. Maintaining the listing status of the Company

As mentioned in the Letter of Yu Ming, the Offeror intends to maintain the listing status of the Shares on the Stock Exchange. The director of the Offeror and the new directors to be appointed to the Board will jointly and severally undertake to the Stock Exchange to take appropriate steps to restore the public float in the Shares if the public float requirement is not met.

Although it is the intention of the Offeror to maintain the listing status of the Shares on the Stock Exchange, Independent Shareholders should note that there are certain requirements on the minimum public float of the Shares under the Listing Rules. Failure to maintain a sufficient level of public float upon completion of the General Offer may result in suspension in dealings in the Shares even if the condition of the General Offer as stated in the Letter from Yu Ming is fulfilled.

RECOMMENDATIONS

Having considered the principal factors discussed above and, in particular the following,

• (i) despite the loss reported in the 2009 Annual Report due to the global financial crisis, there have been signs of economic recovery and the Directors advise that the Group will continue to implement cost control measures and to improve operational efficiency and is endeavored to explore opportunities that could maximise returns for its Shareholders in the future;

• (ii) the General Offer Price represents a discount to the Adjusted Closing Prices of the Shares during most of the time in the past 12 months and a discount of approximately 35.7% to the average Adjusted Closing Prices during the Review Period; and

• (iii) the General Offer Price represents a considerable discount of approximately 86.05% to the NAV per Share,

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LETTER FROM PELICAN SECURITIES

on balance, we consider the General Offer Price is not attractive and therefore the terms of the General Offer are not fair and reasonable. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders not to accept the General Offer.

However, given the relatively low trading volume of the Shares prior to the Joint Announcement, the Independent Shareholders who hold a large block of Shares may not be able to realise their Shares in full without creating pressure on the market price of the Shares. Independent Shareholders, in particular for those Independent Shareholders who hold a large block of the Shares, may consider to take advantage of this opportunity to realise all or part of their Shares at the General Offer Price.

The Independent Shareholders are also be reminded that in the event that there is less than 25% of the Shares are held by the public (within the meaning of the Listing Rules) upon the close of the General Offer, the insufficient public float may result in temporary suspension in the trading of the Shares on the Stock Exchange.

Yours faithfully, For and on behalf of Pelican Securities Limited Charles Li Director and CEO

– 30 –

FURTHER TERMS OF THE GENERAL OFFER

APPENDIX I

PROCEDURES FOR ACCEPTANCE OF THE GENERAL OFFER

(A) General Offer

• (a) If the Title Document(s) in respect of your Share(s) is/are in your name, and you wish to accept the General Offer whether in full or in respect of part of your holding(s) of your Shares, you must send the accompanying Form of Acceptance duly completed together with the relevant Title Document(s) to the Registrar no later than 4:00 p.m. on Wednesday, 6th January, 2010.

• (b) If the Title Document(s) in respect of your Shares is/are in the name of a nominee company or a name other than your own, and you wish to accept the General Offer in respect of your Shares, whether in full or in part, you must either:

• (i) lodge your Title Document(s) with the nominee company, or other nominees, with instructions authorising it to accept the General Offer on your behalf and requesting it to deliver the duly completed Form of Acceptance, together with the relevant Title Document(s) to the Registrar; or

• (ii) arrange for the Shares to be registered in your name by the Company through the Registrar, and deliver the duly completed Form of Acceptance, together with the relevant Title Document(s) to the Registrar; or

• (iii) if your Shares are lodged with your licensed securities dealer/custodian bank through CCASS, instruct your licensed securities dealer/custodian bank to authorize HKSCC Nominees Limited to accept the General Offer on your behalf on or before the deadline set by HKSCC Nominees Limited. In order to meet the deadline set by HKSCC Nominees Limited, you should check with your licensed securities dealer/custodian bank for the timing on processing of your instruction, and submit your instruction to your licensed securities dealer/custodian bank as required by them; or

• (iv) if your Shares are lodged with your investor participant’s account with CCASS, provide your instruction via the CCASS Phone System or CCASS Internet System on or before the deadline set by HKSCC Nominees Limited.

• (c) If the Title Document(s) in respect of your Shares is/are not readily available and/or is/are lost (as the case may be) and you wish to accept the General Offer in respect of your Shares, the accompanying Form of Acceptance should nevertheless be completed and delivered to the Registrar together with a letter stating that you have lost one or more of your Title Document(s) or that it is/they are not readily available. If you find such document(s) or if it/ they become(s) available, the relevant Title Document(s) should be forwarded to the Registrar as soon as possible thereafter. If you have lost your Share certificate, you should also write to the Registrar to request for a form of letter of indemnity which, when completed in accordance with the instructions given therein, should be returned to the Registrar.

• (d) If you have lodged transfer(s) of any of your Shares for registration in your name and have not yet received your Share certificate, and you wish to accept the General Offer in respect of your Shares, you should nevertheless complete the accompanying Form of Acceptance and

– 31 –

FURTHER TERMS OF THE GENERAL OFFER

APPENDIX I

deliver it to the Registrar together with the transfer receipt(s) duly signed by yourself. Such action will be deemed to be an irrevocable authority to Yu Ming and/or the Offeror or their respective agent(s) to collect from the Company or the Registrar on your behalf the relevant Share certificate when issued and to deliver such Share certificate to the Registrar and to authorize and instruct the Registrar to hold such Share certificate, subject to the terms and conditions of the General Offer, as if it was/they were delivered to the Registrar with the accompanying Form of Acceptance.

• (e) An acceptance may not be counted as valid unless:

• (i) the accompanying Form of Acceptance, together with the relevant Title Document(s), have been received by the Registrar on or before 4:00 p.m. on Wednesday, 6th January, 2010 (or such later time and/or date as the Offeror may determine and announce in accordance with the Takeovers Code) and the Registrar has recorded that the Form of Acceptance and any relevant documents required below have been so received; and

• (ii) the accompanying Form of Acceptance is duly completed and is:

  1. accompanied by the relevant Title Document(s) and, if the Share certificate is/are not in your name, such other documents (e.g. a duly stamped transfer of the relevant Share(s) in blank or in your favour executed by the registered holder) in order to establish your right to become the registered holder of the relevant Share(s); or

  2. from a registered Shareholder or his personal representatives (but only up to the amount of the registered holding and only to the extent that the acceptance relating to the Share(s) which is/are not taken into account under any other subparagraph of this paragraph (ii); or

  3. certified by the Registrar or the Stock Exchange.

If the Form of Acceptance is executed by a person other than the registered Shareholder, appropriate documentary evidence of authority (e.g. grant of probate or certified copy of a power of attorney) to the satisfaction of the Registrar must be produced.

• (f) No acknowledgment of receipt of any Form of Acceptance or Title Document(s) will be given.

• (g) If the General Offer is withdrawn or lapses, the Offeror shall, as soon as possible but in any event within 10 days thereof, return by ordinary post, at the risk of the accepting Independent Shareholder(s), the Share certificate(s) lodged with the Form of Acceptance to the relevant accepting Independent Shareholder(s).

• (h) The address of the Registrar, Hong Kong Registrars Limited, is at Shops 1712–1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong.

– 32 –

FURTHER TERMS OF THE GENERAL OFFER

APPENDIX I

ACCEPTANCE PERIOD AND REVISIONS

• (a) Unless the General Offer has previously been revised or extended or have previously become or been declared unconditional, all acceptances of the General Offer must be received by the Registrar by no later than 4:00 p.m. on Wednesday, 6th January, 2010, being the First Closing Date. In accordance with Rule 15.3 of the Takeovers Code, where the General Offer becomes or is declared unconditional, it should remain open for acceptance for not less than 14 days thereafter. If the next closing date is not stated in the announcement announcing that the General Offer has become unconditional, at least 14 days’ notice in writing must be given before the General Offer is closed to those Independent Shareholders who have not accepted the General Offer. The Offeror will make an announcement as and when the General Offer becomes or is declared unconditional.

• (b) If the General Offer is extended or revised, the announcement of such extension or revision will state the next closing date and the General Offer will remain open for acceptance for a period of not less than 14 days from the posting of the written notification of the extension or revision to the Independent Shareholders and, unless previously extended or revised, shall be closed on the subsequent closing date. If the Offeror revises the terms of the General Offer, all Independent Shareholders, whether or not they have already accepted the General Offer, will be entitled to accept the revised General Offer under the revised terms. The benefit of any revision of the General Offer will be available to any Independent Shareholder who has/have previously accepted the General Offer. The execution by or on behalf of any Independent Shareholder who has previously accepted the General Offer of any Form of Acceptance shall be deemed to constitute acceptance of the revised General Offer unless such holder becomes entitled to withdraw his acceptance and duly does so.

• (c) The Offeror may introduce new conditions to be attached to any revision to the terms of the General Offer, or any subsequent revision thereof but only to the extent necessary to implement the revised General Offer and subject to the consent of the Executive.

• (d) In order to be valid, acceptances must be received by the Registrar in accordance with the instructions printed on the relevant Form of Acceptance by no later than 4:00 p.m. on the First Closing Date, unless the General Offer is extended or revised.

• (e) If the closing date of the General Offer is extended, any reference in this Composite Document and in the Form of Acceptance to the closing date shall, except where the context otherwise requires, be deemed to refer to the closing date of the General Offer as so extended.

– 33 –

FURTHER TERMS OF THE GENERAL OFFER

APPENDIX I

ANNOUNCEMENTS

• (a) By 6:00 p.m. on Wednesday, 6th January, 2010, which is the First Closing Date (or such later time and/or date as the Executive may in exceptional circumstances permit), the Offeror must inform the Executive and the Stock Exchange of its intention in relation to the revision, extension, expiry or unconditionality of the General Offer. The Offeror shall publish an announcement on the Stock Exchange’s website by 7:00 p.m. on the First Closing Date stating the results of the General Offer and whether the General Offer has been revised, extended, has expired or has become or been declared unconditional. The announcement must state the following:

• (i) the total number of Shares and rights over Shares for which acceptances of the General Offer have been received;

• (ii) the total number of Shares and rights over Shares held, controlled or directed by the Offeror, its ultimate beneficial owner and parties acting in concert with any of them before the General Offer period; and

• (iii) the total number of Shares and rights over Shares acquired or agreed to be acquired during the General Offer period by the Offeror, its ultimate beneficial owner and parties acting in concert with any of them.

The announcement must include details of any relevant securities (as defined under Note 4 to Rule 22 of the Takeovers Code) in the Company which the Offeror or any person acting in concert with it has borrowed or lent, save for any borrowed Shares which have been either on-lent or sold. The announcement must also specify the percentages of the issued share capital of the Company and the percentages of the voting rights of the Company represented by these numbers of the Shares.

• (b) As required under the Takeovers Code, any announcement in relation to the General Offer, in respect of which the Executive has confirmed that it has no further comments thereon, will be made in accordance with the requirements of the Listing Rules.

RIGHT OF WITHDRAWAL

Acceptances of the General Offer tendered by the Independent Shareholders shall be irrevocable and cannot be withdrawn except (i) in circumstances set out in Rule 19.2 of the Takeovers Code, which provides that if the Offeror is unable to comply with any of the requirements of Rule 19 of the Takeovers Code, the Executive may require that the Independent Shareholders be granted a right of withdrawal, on terms acceptable to the Executive, until such requirements can be met; and (ii) in compliance with Rule 17 of the Takeovers Code which provides that an acceptor shall be entitled to withdraw his acceptance within 21 days from the First Closing Date, if the General Offer has not by then become unconditional as to acceptances.

SETTLEMENT

Provided that the Form of Acceptance and relevant Title Document(s) are in complete and good order and have been received by the Registrar by not later than 4:00 p.m. on the First Closing Date or such later time and/or date as the Offeror may determine and announce in accordance with the Takeovers Code, a cheque for the amount due to each of the Independent Shareholders in respect of the

– 34 –

FURTHER TERMS OF THE GENERAL OFFER

APPENDIX I

Shares tendered by them under the General Offer less the related seller’s ad valorem stamp duty will be despatched to each of them to their addresses specified on the Form of Acceptance by ordinary post and/ or by hand (as the case may be) at their own risk as soon as possible but in any event within 10 days of the date on which all the requisite documents as referred to in the above paragraph headed ‘‘Procedures for Acceptance of the General Offer’’ in this appendix are received by the Registrar to render such acceptance complete and valid, or the date when the General Offer becomes or is declared unconditional, whichever is the later.

Settlement of the consideration to which any accepting Independent Shareholder is entitled under the General Offer will be implemented in full in accordance with the terms of the General Offer (save with respect to payment of ad valorem stamp duty) without regard to any lien, right of set-off, counterclaim, or other analogous right to which the Offeror may otherwise be, or claim to be, entitled against such Independent Shareholder.

OVERSEAS SHAREHOLDERS

The making of the General Offer to Overseas Shareholders may be prohibited or affected according to the laws of the relevant jurisdictions. Overseas Shareholders should inform themselves about and observe any applicable legal requirements. It is the responsibility of any Overseas Shareholder wishing to accept the General Offer to satisfy himself or herself or itself as to the full observance of the laws and regulatory requirements of the relevant jurisdiction in connection therewith, including the obtaining of any governmental, exchange control or other consents which may be required and the compliance with other necessary formalities or legal requirements. Acceptances of the General Offer by any such person will constitute a warranty by such person that such person is permitted under all applicable laws to accept the General Offer and any revision thereof, and such acceptance shall be valid and binding in accordance with all applicable laws. Such Overseas Shareholders should consult their professional advisers as to whether they require any governmental, exchange control or other consents or need to comply with any other applicable legal requirements to enable them to accept the General Offer.

STAMP DUTY

Seller’s ad valorem stamp duty arising in connection with acceptances of the General Offer amounting to HK$1.00 for every HK$1,000 or part thereof of the greater of (i) the consideration payable by the Offeror in respect of the relevant acceptance; and (ii) the market value of the Shares, whichever is higher, will be payable by the Independent Shareholders who accept the General Offer and will be deducted from the consideration payable to such Independent Shareholders upon the General Offer becoming unconditional. The Offeror will pay the buyer’s ad valorem duty on its own behalf and the seller’s ad valorem stamp duty on behalf of the accepting Independent Shareholders in respect of the Shares accepted under the General Offer.

TAXATION

Independent Shareholders are recommended to consult their own professional advisers if they are in any doubt as to the taxation implications of their acceptance of the General Offer. It is emphasized that none of the Company, the Offeror, its ultimate beneficial owner and parties acting in concert with any of them, Yu Ming, Pelican Securities, the Registrar or any of their respective directors or any persons involved in the General Offer accepts responsibility for any taxation effects on, or liabilities of, any person or persons as a result of their acceptance of the General Offer.

– 35 –

FURTHER TERMS OF THE GENERAL OFFER

APPENDIX I

GENERAL

• (a) Acceptance of the General Offer by any person or persons will be deemed to constitute a warranty by such person or persons to the Offeror and Yu Ming that the Shares acquired under the General Offer are sold by any such person or persons free from all liens, charges, options, claims, equities, adverse interests, third party rights or encumbrances whatsoever and together with all rights attaching thereto, including, without limitation the rights to receive dividends and distributions declared, if any, on or after the Announcement Date.

• (b) All communications, notices, Form of Acceptance, Title Document(s) and remittances to be delivered by or sent to or from the Independent Shareholders will be delivered by or sent to or from them, or their respective agents, through ordinary post at their own risk, and none of the Company, the Offeror, Yu Ming, Pelican Securities, the Registrar nor other parties involved in the General Offer or any of their respective agents, accepts any liability for any loss in postage or any other liabilities that may arise as a result thereof.

• (c) The provisions set out in the Form of Acceptance form part of the terms of the General Offer.

• (d) The accidental omission to despatch this document and/or the Form of Acceptance or any of them to any person to whom the General Offer is made will not invalidate the General Offer in any way.

• (e) The General Offer and all acceptances will be governed by and construed in accordance with the laws of Hong Kong. The General Offer is made in accordance with the Takeovers Code.

• (f) Due execution of the Form of Acceptance will constitute an authority to the Offeror, Yu Ming or such person or persons as the Offeror may direct, to complete and execute any document on behalf of the person or persons accepting the General Offer and to do any other act that may be necessary or expedient for the purposes of vesting in the Offeror, or such person or persons as they may direct the Shares in respect of which such person or persons has/have accepted the General Offer.

• (g) References to the General Offer in this Composite Document and in the Form of Acceptance shall include any extension and/or revision thereof.

• (h) The English text of this Composite Document and the accompanying Form of Acceptance shall prevail over their respective Chinese text in case of inconsistency.

– 36 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

1. SUMMARY OF FINANCIAL INFORMATION

The following summary of the financial information (the ‘‘Financial Information’’) has been extracted from the audited consolidated financial statements of the Group for each of the three years ended 30th June, 2009, 2008 and 2007 in the respective annual reports of the Company. The auditors of the Company expressed unqualified opinions on those financial statements in their reports for each of the three years ended 30th June, 2009, 2008 and 2007 respectively. There were no extraordinary/ exceptional items for the 3 years ended 30th June, 2009, 2008 and 2007 respectively.

Consolidated Income Statement

Turnover Cost of sales Gross profit Other revenue Other net (loss)/income Distribution costs Administrative expenses Repair and maintenance costs Other operating expenses Impairment of non-current assets (Loss)/profit from operations Finance costs (Loss)/profit before taxation Income tax (Loss)/profit for the year Attributable to: Equity shareholders of the Company Minority interests (Loss)/profit for the year	2009 RMB’000 316,940 (270,693) 46,247 5,002 (95,248) (16,278) (30,500) (9,720) (820) (282,338) (383,655) (19,866) (403,521) 43,319 (360,202) (360,202) — (360,202)	Year ended 2008 RMB’000 564,317 (392,348) 171,969 8,991 (8,124) (7,051) (41,882) — (6,300) — 117,603 (81,833) 35,770 (24,591) 11,179 11,179 — 11,179	2007 RMB’000 695,936 (476,892) 219,044 8,061 8,623 (7,827) (34,102) — (1,882) — 191,917 (49,962) 141,955 (23,695) 118,260 115,085 3,175 118,260

– 37 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Dividends payable to equity shareholders of the Company attributable to the year: Final dividend proposed after the balance sheet date (Loss)/earnings per share Basic Diluted Dividends per share	2009 RMB’000 — (64) cents (64) cents —	Year ended 2008 RMB’000 1,977 2 cents 2 cents HK$0.004	2007 RMB’000 18,838
			21 cents
			20 cents
			HK$0.035

– 38 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Consolidated Balance Sheet

Non-current assets Property, plant and equipment Interests in leasehold land held for own use under operating lease Purchase deposits of property, plant and equipment Purchase deposits of leasehold land Deferred tax assets Current assets Trading securities Inventories Trade and other receivables Amount due from the controlling shareholder Fixed deposits Pledged deposits Cash and cash equivalents Current liabilities Trade and other payables Bank loans Obligations under finance leases Taxation Derivative financial instruments Other financial liabilities Net current assets Total assets less current liabilities	30th June, 2009 RMB’000 290,472 18,143 9,580 — 57,750 375,945 1,570 25,997 94,068 61,975 — 8,662 648,450 840,722 143,926 250,972 — — — 164,443 559,341 281,381 657,326	30th June, 2008 RMB’000 390,299 18,643 25,321 — 2,147 436,410 — 45,459 201,776 — — 4,307 880,366 1,131,908 162,810 253,822 2,591 4,729 165,067 — 589,019 542,889 979,299	30th June, 2007 RMB’000 358,242 17,159 11,557 1,916 2,056
			390,930
			— 36,100 262,691 — 75,660 — 728,432
			1,102,883
			159,815 146,498 3,059 6,416 151,280 —
			467,068
			635,815
			1,026,745

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Non-current liabilities Bank loans Obligations under finance leases Other long term payable Deferred tax liabilities NET ASSETS Capital and reserves Share capital Reserves TOTAL EQUITY	30th June, 2009 RMB’000 16,000 — — 6,861 22,861 634,465 58,661 575,804 634,465	30th June, 2008 RMB’000 30,000 510 16,089 6,567 53,166 926,133 58,661 867,472 926,133	30th June, 2007 RMB’000 136,539 3,419 — —
			139,958
			886,787
			58,123 828,664
			886,787

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE YEAR ENDED 30TH JUNE, 2009

Set out below is the audited consolidated income statement, consolidated balance sheet, consolidated cash flow statement and consolidated statement of changes in equity of the Group, and the balance sheet of the Company together with the notes to the financial statements of the Group as extracted from pages 32 to 97 of the annual report of the Company for the year ended 30th June, 2009.

Consolidated Income Statement

for the year ended 30th June, 2009 (Expressed in Renminbi)

Note Turnover 3 Cost of sales Gross profit Other revenue 4 Other net loss 4 Distribution costs Administrative expenses Repair and maintenance costs 5(d) Other operating expenses Impairment of non-current assets 13(a) (Loss)/profit from operations Finance costs 5(a) (Loss)/profit before taxation 5 Income tax 6(a) (Loss)/profit for the year attributable to equity shareholders of the Company Dividends payable to equity shareholders of the Company attributable to the year: 10 Final dividend proposed after the balance sheet date (Loss)/earnings per share 11 Basic Diluted	2009 RMB’000 316,940 (270,693) 46,247 5,002 (95,248) (16,278) (30,500) (9,720) (820) (282,338) (383,655) (19,866) (403,521) 43,319 (360,202) — (64) cents (64) cents	2008 RMB’000 564,317 (392,348) 171,969 8,991 (8,124) (7,051) (41,882) — (6,300) — 117,603 (81,833) 35,770 (24,591) 11,179 1,977 2 cents 2 cents

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Consolidated Balance Sheet

at 30th June, 2009 (Expressed in Renminbi)

Note Non-current assets Property, plant and equipment 13(a) Interests in leasehold land held for own use under operating lease 14 Deposits for the purchase of property, plant and equipment Deferred tax assets 24(b) Current assets Trading securities 16 Inventories 17 Trade and other receivables 18 Amount due from the controlling shareholder (the ‘‘CS’’) 27 Pledged deposits 20 Cash and cash equivalents 20 Current liabilities Trade and other payables 21 Bank loans 22 Obligations under finance leases 23 Taxation 24(a) Derivative financial instruments 25 Other financial liabilities 26 Net current assets Total assets less current liabilities	2009 RMB’000 290,472 18,143 9,580 57,750 375,945 1,570 25,997 94,068 61,975 8,662 648,450 840,722 143,926 250,972 — — — 164,443 559,341 281,381 657,326	2008 RMB’000 390,299 18,643 25,321 2,147
		436,410
		— 45,459 201,776 — 4,307 880,366
		1,131,908
		162,810 253,822 2,591 4,729 165,067 —
		589,019
		542,889
		979,299

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Note Non-current liabilities Bank loans 22 Obligations under finance leases 23 Amount due to the CS 27 Deferred tax liabilities 24(b) NET ASSETS Capital and reserves 28(a) Share capital Reserves TOTAL EQUITY	2009 RMB’000 16,000 — — 6,861 22,861 634,465 58,661 575,804 634,465	2008 RMB’000 30,000 510 16,089 6,567
		53,166
		926,133
		58,661 867,472
		926,133

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Balance Sheet

at 30th June, 2009 (Expressed in Renminbi)

Note Non-current assets Property, plant and equipment 13(b) Investments in subsidiaries 15 Current assets Other receivables 18 Amount due from the CS 27 Cash and cash equivalents 20 Current liabilities Other payables 21 Bank loans 22 Derivative financial instruments 25 Other financial liabilities 26 Net current assets Total assets less current liabilities Non-current liabilities Amount due to the CS 27 NET ASSETS Capital and reserves 28(b) Share capital Reserves TOTAL EQUITY	2009 RMB’000 13 93,975 93,988 206,930 61,975 1,175 270,080 78,735 26,388 — 164,443 269,566 514 94,502 — 94,502 58,661 35,841 94,502	2008 RMB’000 13 93,975
		93,988
		427,231 — 8,475
		435,706
		14,337 99,022 165,067 —
		278,426
		157,280
		251,268
		16,089
		235,179
		58,661 176,518
		235,179

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Consolidated Statement of Changes in Equity

for the year ended 30th June, 2009 (Expressed in Renminbi)

Note Total equity at 1st July, 2008/2007 Net (loss)/income for the year recognised directly in equity: Exchange differences on translation of financial statements of operations outside the People’s Republic of China (the ‘‘PRC’’) 28(a) Surplus on revaluation of buildings held for own use, net of deferred tax 28(a) Impairment of buildings held for own use, net of deferred tax 28(a) Net (loss)/profit for the year Total recognised income and expense for the year Movements in equity arising from capital transactions: Issue of shares upon exercise of subscription rights attached to convertible bonds 28(a) Issue of shares under share option scheme 28(a) Shares repurchased and cancelled — par value 28(a) — premium paid 28(a) Fair value adjustment of amount due to the CS 28(a) Contributions by the CS upon termination of derivative financial instruments 28(a) Dividends declared or approved during the year 28(a) Total equity at 30th June, 2009/2008	2009 RMB’000 926,133 (689) — (10,536) (11,225) (360,202) (371,427) — — — — 561 81,167 81,728 (1,969) 634,465	2008 RMB’000 886,787 26,611 10,397 — 37,008 11,179 48,187 1,841 4,352 (19) (123) 3,272 — 9,323 (18,164) 926,133

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Consolidated Cash Flow Statement

for the year ended 30th June, 2009 (Expressed in Renminbi)

Note Operating activities (Loss)/profit before taxation Adjustments for: — Loss/(gain) on disposal of property, plant and equipment — Depreciation — Amortisation of interest in leasehold land held for own use under operating leases — Interest on bank borrowings — Interest on other financial liabilities — Interest on amount due to the CS — Interest element of finance leases — Interest income — Impairment of trade and other receivables — Impairment of non-current assets — Reversal of impairment of trade and other receivables — Fair value adjustments on derivative financial instruments — Loss on termination of derivative financial instruments — Deficit on revaluation of buildings held for own use — Net realised and unrealised gains on trading securities — Foreign exchange loss Operating profit before changes in working capital Decrease/(increase) in inventories Decrease in trade and other receivables (Decrease)/increase in trade and other payables Cash generated from operations Tax paid — PRC enterprise income tax paid Net cash generated from operating activities	2009 RMB’000 (403,521) 31,940 36,431 500 16,902 1,351 288 86 (4,782) 68,162 282,338 (5,258) — 1,087 — (70) 681 26,135 19,462 43,962 (15,896) 73,663 (13,515) 60,148	2008 RMB’000 35,770 (17) 24,435 479 20,997 — 175 327 (8,608) 3,339 — (330) 60,334 — 4,533 — 3,801 145,235 (9,359) 57,820 1,656 195,352 (23,054) 172,298

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Note Investing activities Increase in deposits for the purchase of property, plant and equipment Payments for the purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Payment for the purchase of trading securities Interest received Decrease in fixed deposits with maturity over three months at acquisition Net cash (used in)/generated from investing activities Financing activities Proceeds from new bank loans Repayment for bank loans Increase in pledged deposits Payment for derivative financial instruments Capital element of finance lease rentals paid Interest element of finance lease rentals paid (Decrease)/increase in amount due to a director Financial assistance from the CS Proceeds from shares issued under the share option scheme Proceeds from shares issued upon exercise of subscription rights attached to the convertible bonds Payment for repurchase of shares Interest paid Dividends paid Net cash used in financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at 1st July, 2008/2007 Effect of foreign exchange rate changes Cash and cash equivalents at 30th June, 2009/2008 20	2009 RMB’000 (21,557) (227,401) — (1,500) 4,782 — (245,676) 215,585 (232,568) (4,355) (3,434) (3,104) (86) (2,298) 3,434 — — — (17,580) (1,969) (46,375) (231,903) 880,366 (13) 648,450	2008 RMB’000 (13,764) (45,972) 76 — 8,608 72,392 21,340 164,800 (152,983) (4,307) (30,931) (2,927) (327) 795 20,072 4,352 1,841 (142) (20,997) (18,164) (38,918) 154,720 728,432 (2,786) 880,366

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

1. SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance

These financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (‘‘HKFRSs’’), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (‘‘HKASs’’) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (‘‘HKICPA’’), accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. These financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’). A summary of the significant accounting policies adopted by the Company and its subsidiaries (together referred to as the ‘‘Group’’) is set out below.

(b) Basis of preparation of the financial statements

The consolidated financial statements of the Company for the year ended 30th June, 2009 comprise the Company and its subsidiaries.

The functional currencies of the Company and its subsidiaries in the PRC are Hong Kong dollars and Renminbi (‘‘RMB’’) respectively. For the purpose of presenting the consolidated financial statements, the Group has adopted RMB as its presentation currency. The measurement basis used in the preparation of the financial statements is the historical cost basis except as set out in the accounting policies below.

The preparation of financial statements in conformity with HKFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

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

Judgements made by management in the application of HKFRSs that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 34.

(c) Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account.

An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group balances and transactions and any unrealised profits arising from intra-group transactions are eliminated in full in preparing the consolidated financial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment.

In the Company’s balance sheet, an investment in a subsidiary is stated at cost less impairment losses (see note 1(i)).

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(d) Trading securities

Investments in equity securities are initially stated at fair value, which is their transaction price unless fair value can be more reliably estimated using valuation techniques whose variables include only data from observable markets. Cost includes attributable transaction costs.

Investments in securities held for trading are classified as current assets. Any attributable transaction costs are recognised in profit or loss as incurred. At each balance sheet date the fair value is remeasured, with any resultant gain or loss being recognised in profit or loss. The net gain or loss recognised in profit or loss does not include any dividends or interest earned on these investments as these are recognised in accordance with the policies set out in notes 1(r)(iii) and (iv).

(e) Derivative financial instruments

Derivative financial instruments are recognised initially at fair value. At each balance sheet date the fair value is remeasured. The gain or loss on remeasurement to fair value is charged immediately to profit or loss.

(f) Property, plant and equipment

• (i) Property, plant and equipment is carried in the balance sheet on the following bases:

• buildings held for own use are stated in the balance sheet at revalued amount less accumulated depreciation (see note 1(h)) and impairment losses (see note 1(i)). The cost of self-constructed buildings includes the cost of materials, direct labour, the initial estimates, where relevant, of the cost of dismantling and removing the items and restoring the site on which they are located, and an appropriate proportion of production overheads and borrowing costs (see note 1(t));

• other items of plant and equipment are stated in the balance sheets at cost less accumulated depreciation (see note 1(h)) and impairment losses (see note 1(i)); and

• construction-in-progress represents buildings under construction and machinery pending installation and is stated at cost, which includes construction expenditure incurred, cost of machinery and other direct costs capitalised during the construction and installation period.

• (ii) Revaluations of buildings held for own use are performed with sufficient regularity to ensure that the carrying amount of these assets does not differ materially from that which would be determined using fair values at the balance sheet date.

• (iii) Changes arising on the revaluation of buildings held for own use are generally dealt with in reserves. The only exceptions are as follows:

• when a deficit arises on revaluation, it will be charged to profit or loss to the extent that it exceeds the amount held in the reserve in respect of that same asset immediately prior to the revaluation; and

• when a surplus arises on revaluation, it will be credited to profit or loss to the extent that a deficit on revaluation in respect of that same asset had previously been charged to profit or loss.

• (iv) Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or loss on the date of retirement or disposal. Any related revaluation surplus is transferred from the revaluation reserve to retained profits.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(g) Leased assets

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, except that land held for own use under an operating lease, the fair value of which cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as being held under a finance lease, unless the building is also clearly held under an operating lease. For these purposes, the inception of the lease is the time that the lease was first entered into by the Group, or taken over from the previous lessee.

(ii) Assets acquired under finance leases

Where the Group acquires 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, of such assets are included in property, plant and equipment and the corresponding liabilities, net of finance charges, are recorded as obligations under finance leases. Depreciation is provided at rates which write off the cost or valuation of the assets over the term of the relevant lease or, where it is likely the Group will obtain ownership of the asset, the life of the asset, as set out in note 1(h). Impairment losses are accounted for in accordance with the accounting policy as set out in note 1(i). Finance 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. Contingent rentals are charged to profit or loss in the accounting period in which they are incurred.

(iii) Operating lease charges

Where the Group has the use of assets held under operating leases, payments made under the leases are charged to profit or loss in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognised in profit or loss as an integral part of the aggregate net lease payments made. Contingent rentals are charged to profit or loss in the accounting period in which they are incurred.

The cost of acquiring land held under an operating lease is amortised on a straight-line basis over the period of the lease term.

(h) Depreciation

• (i) No depreciation is provided on construction-in-progress until it is available for use.

• (ii) Depreciation is calculated to write off the cost or valuation of items of property, plant and equipment, less their estimated residual value, if any, using the straight-line method over their estimated useful lives as follows:

• buildings held for own use situated on leasehold land are depreciated over the shorter of the unexpired term of lease and their estimated useful lives, being 25 years from the date of completion.

—	Machinery	10 years
—	Fixture, furniture and equipment	5 years
—	Motor vehicles	5 years

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Where parts of an item of property, plant and equipment have different useful lives, the cost or valuation of the item is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reviewed annually.

• (i) Impairment of assets

• (i) Impairment of trade and other receivables

Trade and other current receivables that are stated at cost or amortised cost are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. Objective evidence of impairment 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; and

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

If any such evidence exists, the impairment loss is determined and recognised as follows:

• For trade and other current receivables and other financial assets carried at amortised cost, the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material. This assessment is made collectively where financial assets carried at amortised cost share similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group.

If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not result in the asset’s carrying amount exceeding that which would have been determined had no impairment loss been recognised in prior years.

• For other current receivables and other financial assets carried at cost, the impairment loss is measured as the difference between the carrying amount of the financial asset and the estimated recoverable amount.

Impairment losses are written off against the corresponding assets directly, except for impairment losses recognised in respect of trade receivables and bills receivable included within trade and other receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade receivables and bills receivable directly and any amounts held in the allowance account relating to that debt 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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

• (ii) Impairment of other assets

Internal and external sources of information are reviewed at each balance sheet date to identify indications that the following assets may be impaired or an impairment loss previously recognised no longer exists or may have decreased:

property, plant and equipment;

• interests in leasehold land classified as being held under operating lease; and

• investments in subsidiaries.

If any such indication exists, the asset’s recoverable amount is estimated.

• Calculation of recoverable amount

The recoverable amount of an asset is the greater of its net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

• Recognition of impairment losses

An impairment loss is recognised in profit or loss whenever the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amount of the assets in the unit (or group of units) on a pro rata basis.

• Reversals of impairment losses

An impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount.

A reversal of an impairment loss is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognised.

• (iii) Interim financial reporting and impairment

Under the Listing Rules, the Group is required to prepare an interim financial report in compliance with HKAS 34, Interim financial reporting, in respect of the first six months of the financial year. At the end of the interim period, the Group applies the same impairment testing, recognition, and reversal criteria as it would at the end of the financial year (see notes 1(i)(i) and (ii)).

(j) Inventories

Inventories are carried at the lower of cost and net realisable value.

Cost is calculated using the weighted average cost formula and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

(k) Trade and other receivables

Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost less allowance for impairment of doubtful debts (see note 1(i)), except where the receivables are interest-free loans made to related parties without any fixed repayment terms or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less allowance for impairment of doubtful debts.

(l) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are also included as a component of cash and cash equivalents for the purpose of the consolidated cash flow statement.

(m) Interest-bearing borrowings

Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between the amount initially recognised and redemption value being recognised in profit or loss over the period of the borrowings, together with any interest and fees payable, using the effective interest method.

(n) Trade and other payables

Trade and other payables are initially recognised at fair value. Except for financial guarantee liabilities measured in accordance with note 1(q)(i), trade and other payables are subsequently stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

(o) Employee benefits

(i) Short term employee benefits and contributions to defined contribution retirement plans

Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and the cost of non-monetary benefits are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

(ii) Share-based payments

The fair value of share options granted to employees is recognised as an employee cost with a corresponding increase in a capital reserve within equity. The fair value is measured at the grant date using the Black-ScholesMerton Option Pricing Model, taking into account the terms and conditions upon which the options were granted. Where the employees have to meet vesting conditions before becoming unconditionally entitled to the share options, the total estimated fair value of the share options is spread over the vesting period, taking into account the probability that the options will vest.

During the vesting period, the number of share options that is expected to vest is reviewed. Any adjustment to the cumulative fair value recognised in prior years is charged/credited to the profit or loss for the year of the review, unless the original employee expenses qualify for recognition as an asset, with a corresponding adjustment to the capital reserve. On vesting date, the amount recognised as an expense is adjusted to reflect the actual number of options that vest (with a corresponding adjustment to the capital reserve) except where forfeiture is only due to not

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

achieving vesting conditions that relate to the market price of the Company’s shares. The equity amount is recognised in the capital reserve until either the option is exercised (when it is transferred to the share premium account) or the option expires (when it is released directly to retained profits).

(p) Income tax

Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognised in profit or loss except to the extent that they relate to items recognised directly in equity, in which case they are recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

Apart from certain limited exceptions, all deferred tax liabilities and all deferred tax assets, to the extent that it is probable that future taxable profits will be available against which the asset can be utilised, are recognised. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilised.

The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising from the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination), and temporary differences relating to investments in subsidiaries to the extent that, in the case of taxable differences, the Group controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future.

The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax assets and liabilities are not discounted.

The carrying amount of a deferred tax asset is reviewed at each balance sheet date and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be utilised. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available.

Additional income taxes that arise from the distribution of dividends are recognised when the liability to pay the related dividends is recognised.

Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities if the Company or the Group has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met:

• in the case of current tax assets and liabilities, the Company or the Group intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously; or

• in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either:

• the same taxable entity; or

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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

(q) Financial guarantees issued, provisions and contingent liabilities

(i) Financial guarantees issued

Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments to reimburse the beneficiary of the guarantee (the ‘‘holder’’) for a loss the holder 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 (being the transaction price, unless the fair value can otherwise be reliably estimated) 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.

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 in accordance with note 1(q)(ii) if and when (i) it becomes probable that the holder of the guarantee will call upon the Group under the guarantee, and (ii) the amount of that claim on the Group is expected to exceed the amount currently carried in trade and other payables in respect of that guarantee i.e. the amount initially recognised, less accumulated amortisation.

(ii) Other provisions and contingent liabilities

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

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 future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(r) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. 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 in profit or loss as follows:

(i) Sale of goods

Revenue arising from the sale of goods is recognised when the customer has accepted the goods and the related risks and rewards of ownership, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably and there is no continuing management involvement with the goods. Revenue excludes value-added tax or other sales taxes and is stated after deduction of any trade discounts.

(ii) Processing service income

Processing service income is recognised when services are rendered.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

• (iii) Interest income

Interest income is recognised as it accrues using the effective interest method.

• (iv) Dividend income

Dividend income is recognised when the shareholder’s right to receive payment is established.

(s) Translation of foreign currencies

Foreign currency transactions during the year are translated at the foreign exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rates ruling at the balance sheet date. Exchange gains and losses are recognised in profit or loss.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the foreign exchange rates ruling at the transaction dates. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated using the foreign exchange rates ruling at the dates the fair value was determined.

The results of operations outside the PRC are translated into Renminbi at the exchange rates approximating the foreign exchange rates ruling at the dates of transactions. Balance sheet items are translated into Renminbi at the foreign exchange rates ruling at the balance sheet date. The resulting exchange differences are recognised directly in a separate component of equity.

On disposal of an operation outside the PRC, the cumulative amount of the exchange differences recognised in equity which relate to that foreign operation is included in the calculation of the profit or loss on disposal.

(t) Borrowing costs

Borrowing costs are expensed in profit or loss in the period in which they are incurred, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to get ready for its intended use or sale.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences 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 in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or complete.

(u) Dividends

Dividends are recognised as a liability in the period in which they are declared.

(v) Contributions by shareholders

Contributions made by shareholders of the Company to the Group which the Group has no obligation to repay are recognised directly in the capital contribution reserve within equity.

(w) Related parties

For the purposes of these financial statements, a party is considered to be related to the Group if:

• (i) the party has the ability, directly or indirectly through one or more intermediaries, to control the Group or exercise significant influence over the Group in making financial and operating policy decisions, or has joint control over the Group;

• (ii) the Group and the party are subject to common control;

• (iii) the party is an associate of the Group or a joint venture in which the Group is a venturer;

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

• (iv) the party is a member of key management personnel of the Group or the Group’s parent, or a close family member of such an individual, or is an entity under the control, joint control or significant influence of such individuals;

• (v) the party is a close family member of a party referred to in (i) or is an entity under the control, joint control or significant influence of such individuals; or

• (vi) the party is a post-employment benefit plan which is for the benefit of employees of the Group or of any entity that is a related party of the Group.

Close family members of an individual are those family members who may be expected to influence, or be influenced by, that individual in their dealings with the entity.

(x) Segment reporting

A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

In accordance with the Group’s internal financial reporting system, the Group has chosen business segment information as the primary reporting format and geographic segment information as the secondary reporting format for the purposes of these financial statements.

Segment revenue, expenses, results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis to that segment. For example, segment assets may include inventories, trade receivables and property, plant and equipment. Segment revenue, expenses, assets, and liabilities are determined before intra-group balances and intra-group transactions are eliminated as part of the consolidation process, except to the extent that such intra-group balances and transactions are between group enterprises within a single segment. Inter-segment pricing is based on similar terms as those available to other external parties.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets (both tangible and intangible) that are expected to be used for more than one period.

Unallocated items mainly comprise financial and corporate assets, derivative financial instruments, interest-bearing loans, borrowings, tax balances, corporate and financing expenses.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

2. NEW AND REVISED HKFRSS EFFECTIVE FOR ACCOUNTING PERIODS BEGINNING ON OR AFTER 1ST JULY, 2008

The HKICPA has issued a number of new Interpretations and an amendment to HKFRSs that are first effective for the current accounting period of the Group and the Company. However, none of these developments are relevant to the Group’s or the Company’s operations.

The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period (see note 37).

3. TURNOVER

The Company acts as an investment holding company and the Group is principally engaged in the manufacture and sale of printed circuit boards (‘‘PCBs’’) and PCBs assembling products and the provision for surface mount technology (‘‘SMT’’) processing services.

Turnover represents the sales value of goods supplied to customers, which excludes value-added tax and is stated after deduction of all goods returns and trade discounts, and service income from SMT processing services. The amount of each significant category of revenue recognised in turnover during the year is as follows:

Sales of PCBs Sales of PCBs assembling products SMT processing service income OTHER REVENUE AND OTHER NET LOSS Other revenue Interest income Sundry income Other net loss Reversal of impairment of trade and other receivables Impairment of trade and other receivables (Loss)/gain on disposal of property, plant and equipment Exchange loss Net realised and unrealised gains on trading securities Others	2009 RMB’000 303,113 4,953 8,874 316,940 2009 RMB’000 4,782 220 5,002 5,258 (68,162) (31,940) (465) 70 (9) (95,248)	2008 RMB’000 484,123 59,481 20,713
		564,317
		2008 RMB’000 8,608 383
		8,991
		330 (3,339 17 (5,081 — (51
		(8,124

4. OTHER REVENUE AND OTHER NET LOSS

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

5. (LOSS)/PROFIT BEFORE TAXATION

(Loss)/profit before taxation is arrived at after charging/(crediting):

(a) Finance costs: Interest on bank loans wholly repayable within five years Finance charges on obligations under finance leases Interest on other financial liabilities Interest on amount due to the CS Fair value adjustments on derivative financial instruments Loss on termination of derivative financial instruments Other borrowing costs Total borrowing costs Less: Borrowing costs capitalised into construction-in-progress* (b) Staff costs:# Salaries, wages and other benefits Contributions to defined contribution retirement plans (c) Other items: Cost of inventories# Amortisation of interest in leasehold land held for own use under operating lease# Depreciation# — owned fixed assets — assets held for use under finance leases Operating lease rentals for premises# Auditors’ remuneration Deficit on revaluation of buildings held for own use	2009 RMB’000 17,580 86 1,351 288 — 1,087 152 20,544 (678) 19,866 31,307 11,452 42,759 270,693 500 35,696 735 1,462 2,639 —	2008 RMB’000 22,729 327 — 175 60,334 — —
		83,565 (1,732
		81,833
		36,664 12,972
		49,636
		392,348 479 20,766 3,669 1,772 2,832 4,533

• The borrowing costs have been capitalised at rates of 6.05%–7.65% (2008: 6.01%–6.10%) per annum.

Cost of inventories includes RMB67,231,000 (2008: RMB57,369,000) relating to staff costs, depreciation expenses, operating lease charges and amortisation of interest in leasehold land held for own use under operating lease, which amount is also included in the respective total amounts disclosed separately above or in note 5(b) for each of these types of expenses.

(d) Repair and maintenance costs

During the year ended 30th June, 2009, the building and underground infrastructure of one of the company’s subsidiaries, Shuangxiang (Fujian) Electronics Limited (‘‘Shuangxiang’’), located in the coastal area of Mawei, Fuzhou City of Fujian Province in the PRC, were damaged by land subsidence and repair and maintenance costs totalling RMB9,720,000 were incurred to restore the building and underground infrastructure to their original condition.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

6. INCOME TAX IN THE CONSOLIDATED INCOME STATEMENT

• (a) Taxation in the consolidated income statement represents:

Current tax Provision for PRC enterprise income tax Deferred tax Origination and reversal of temporary differences Effect of change in tax rate in the PRC	2009 RMB’000 8,786 (52,105) — (52,105) (43,319)	2008 RMB’000 21,367
		2,908 316
		3,224
		24,591

Notes:

(i) Overseas income tax

The Company is incorporated in the Cayman Islands and is exempted from taxation in the Cayman Islands until 2019. The Company’s subsidiaries in the British Virgin Islands (‘‘BVI’’) are incorporated under the International Business Companies Acts of the British Virgin Islands and, accordingly, are exempt from British Virgin Islands income taxes.

(ii) Hong Kong profits tax

No provision for Hong Kong profits tax has been made as the Group did not generate any income subject to Hong Kong profits tax during the years presented.

• (iii) PRC enterprise income tax

The Company’s subsidiaries in the PRC are subject to PRC enterprise income tax. Pursuant to the income tax rules and regulations of the PRC, the provision for PRC enterprise income tax of the Group is calculated based on the following rates:

	Note	2009	2008
Fujian Fuqiang Delicate Circuit Plate Co., Ltd. (‘‘Fuqiang’’)	(1)	20%	18%
Gemini Electronics (Huizhou) Co., Ltd (‘‘Gemini’’)	(2)	10%	9%
Shuangxiang	(2)	10%	9%
Fuqing Haichuang Electron Technology Co., Ltd. (‘‘Haichuang’’)	(3)	N/A	N/A

Notes:

• (1) As Fuqiang is located in an economic and technological development zone, it is entitled to enjoy a reduced tax rate of 20% (2008: 18%) in 2009. The details are explained below.

• (2) In 2009, Gemini and Shuangxiang are subject to PRC enterprise income tax at a reduced rate of 10% (2008: 9%). The details are explained below.

• (3) Pursuant to the income tax rules and regulations in the PRC, Haichuang is not subject to PRC enterprise income tax as it did not commence business during the years presented.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

On 16th March, 2007, the Fifth Plenary Session of the Tenth National People’s Congress promulgated the Corporate Income Tax Law of the PRC (the ‘‘New Tax Law’’), which became effective on 1st January, 2008. Further, the State Council released the Implementation Rules to the Corporate Income Tax Law (the ‘‘Implementation Rules’’) on 6th December, 2007, and Notice on the Implementation Rules of the Grandfathering Relief under the Corporate Income Tax Law (Guo Fa 2007 No. 39) (‘‘Notice 39’’) on 26th December, 2007.

According to the New Tax Law, effective on 1st January, 2008, the standard income tax rate for PRC enterprises is reduced from 33% to 25%. Further, according to the Notice 39, for enterprises located in economic and technological development zones which had previously enjoyed a reduced tax rate of 15%, the tax rate will gradually increase to 25% during a 5-year transition period according to the following schedule: 18% in 2008, 20% in 2009, 22% in 2010, 24% in 2011 and 25% in 2012 (the ‘‘five-year transition rate’’).

Furthermore, as production-oriented foreign investment enterprises (‘‘FIEs’’), Gemini and Shuangxiang had kick started their Tax Holiday (‘‘Tax Holiday’’) under the old PRC Foreign Enterprise Income Tax (‘‘FEIT’’) regime in 2006. As such, the companies were exempted from FEIT in 2006 and 2007. According to Notice 39, the unexpired Tax Holiday enjoyed by FIEs established before 16th March, 2007 is allowed to continue after implementation of New Tax Law on 1st January, 2008 until expiry of the Tax Holiday. As such, the applicable enterprise income tax rate of Gemini and Shuangxiang is 9% (50% of 18%) in year 2008; 10% (50% of 20%) in year 2009; 11% (50% of 22%) in year 2010; 24% (Tax Holiday will expire) in year 2011 and 25% thereafter.

The deferred tax assets/liabilities of subsidiaries in the PRC are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Under the New Tax Law and Implementation Rules starting from 1st January, 2008, dividends distributed by the PRC subsidiaries to their foreign holding investors are subject to withholding income tax at 10%, subject to reduction under double-taxation arrangements (‘‘DTA’’). Since the holding companies of the PRC subsidiaries are incorporated in the BVI, which currently has not entered into a DTA with China, dividends distributed by the PRC subsidiaries would be subject to withholding tax at 10%. Dividends receivable by the Group from subsidiaries in the PRC in respect of their undistributed profits accumulated up to 31st December, 2007 are exempted from withholding tax.

(b) Reconciliation between tax (benefit)/expense and accounting (loss)/profit at applicable tax rates:

(Loss)/profit before taxation Notional tax on (loss)/profit before taxation, calculated at the rates applicable to profits in the jurisdictions concerned Tax effect of non-deductible expenses Tax effect of non-taxable income Tax effect of differential tax rates Tax effect of temporary differences and tax losses not recognised Effect of change in tax rate on the deferred tax balances Actual tax (benefit)/expense	2009 RMB’000 (403,521) (79,368) 4,417 (422) (9,142) 41,196 — (43,319)	2008 RMB’000 35,770
		10,579 15,214 (218 (1,300 — 316
		24,591

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

7. DIRECTORS’ REMUNERATION

Directors’ remuneration disclosed pursuant to the Listing Rules is as follows:

Executive directors: Lin Wan Qaing Lin Wan Xin Xiang Song Hu Zhao Rui Tong Yiu On (resigned on 7th November, 2008) Liu Zhao Cai (resigned on 7th February, 2009) Independent non- executive directors: Pan Chang Chi Cai Xun Shan Cheung Chuen	Directors’ fees 2009 2008 RMB’000 RMB’000 — — — — — — — — — — — — 106 60 106 60 106 87 318 207	Salaries and other emoluments 2009 2008 RMB’000 RMB’000 424 760 316 297 317 346 236 361 216 557 236 458 — — — — — — 1,745 2,779	Retirement scheme contributions 2009 2008 RMB’000 RMB’000 12 13 — — — — — — 4 11 — — — — — — — — 16 24	Total 2009 2008 RMB’000 RMB’000 436 773 316 297 317 346 236 361 220 568 236 458 106 60 106 60 106 87 2,079 3,010	Total 2009 2008 RMB’000 RMB’000 436 773 316 297 317 346 236 361 220 568 236 458 106 60 106 60 106 87 2,079 3,010
					3,010

8. INDIVIDUALS WITH HIGHEST EMOLUMENTS

Of the five individuals with the highest emoluments, four (2008: five) are directors whose emoluments are disclosed in note 7. The aggregate of the emoluments in respect of the other one (2008: Nil) individual are as follows:

Salaries and other emoluments Retirement scheme contributions	2009 RMB’000 289 7 296	2008 RMB’000 — —
		—

The emoluments of the one (2008: Nil) individual with the highest emoluments are within the following band:

RMB Nil–500,000	2009 Number of individuals 1	2008 Number of individuals —

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

9. LOSS ATTRIBUTABLE TO EQUITY SHAREHOLDERS OF THE COMPANY

The consolidated (loss)/profit attributable to equity shareholders of the Company includes a loss of approximately RMB16,844,000 (2008: RMB79,445,000) which has been dealt with in the financial statements of the Company.

Reconciliation of the above amount to the Company’s loss for the year:

Amount of loss attributable to equity shareholders dealt with in the Company’s financial statements Final dividends from subsidiaries attributable to the profits of the previous financial year, approved and paid during the year Impairment loss on amounts due from subsidiaries Company’s loss for the year (note 28(b))	2009 RMB’000 (16,844) — (203,137) (219,981)	2008 RMB’000 (79,445 27,843 —
		(51,602

1. DIVIDENDS

2. (a) Dividends payable to equity shareholders of the Company attributable to the year

	2009	2008
	RMB’000	RMB’000
Final dividend proposed after the balance sheet date of HK$ nil (equivalent to
RMB nil) per ordinary share (2008: HK$0.004 (equivalent to approximately
RMB0.003536) per ordinary share)	—	1,977
The final dividend proposed after the balance sheet date of 2008 was not recognised as a liability at 30th June, 2008.

• (b) Dividends payable to equity shareholders of the Company attributable to the previous financial year, approved and paid during the year

Final dividend of HK$0.004 (equivalent to approximately RMB0.003) per ordinary share (2008: HK$0.035 (equivalent to approximately RMB0.0325) per ordinary share) in respect of the previous financial year, approved and paid during the year	2009 RMB’000 1,969	2008 RMB’000 18,164

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

11. (LOSS)/EARNINGS PER SHARE

(a) Basic (loss)/earnings per share

The calculation of basic (loss)/earnings per share is based on the loss attributable to equity shareholders of the Company of RMB360,202,000 (2008: profit of RMB11,179,000) and the weighted average number of 558,965,000 (2008: 558,332,000) ordinary shares in issue during the year, calculated as follows:

Weighted average number of ordinary shares

Issued ordinary shares at 1st July, 2008/2007 Effect of share options exercised Effect of exercise of subscription rights attached to convertible bonds Effect of shares repurchased Weighted average number of ordinary shares at 30th June, 2009/2008	2009 ’000 558,965 — — — 558,965	2008 ’000 553,169 3,789 1,408 (34
		558,332

(b) Diluted (loss)/earnings per share

The diluted loss per share for the year ended 30th June, 2009 is the same as the basic loss per share as the potential ordinary shares are anti-dilutive.

The calculation of diluted earnings per share for the year ended 30th June, 2008 was based on the profit attributable to equity shareholders of the Company of RMB11,179,000 and the weighted average number of 560,339,000 ordinary shares in issue during the year after adjusting for the effect of all dilutive potential shares, calculated as follows:

Weighted average number of ordinary shares (diluted)

Weighted average number of ordinary shares at 30th June Effect of deemed issue of ordinary shares under the Company’s share option scheme for nil consideration per share (note 30) Weighted average number of ordinary shares (diluted) at 30th June	2009 ’000 558,965 — 558,965	2008 ’000 558,332 2,007
		560,339

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

12. SEGMENT REPORTING

Segment information is presented in respect of the Group’s business and geographical segments. Business segment information is chosen as the primary reporting format because this is more relevant to the Group’s internal financial reporting.

(a) Business segments

The Group comprises the following main business segments:

PCBs : the manufacture and sale of PCBs

PCBs assembling products : the manufacture and sale of PCBs assembling products SMT processing : the provision for service mount technology processing services

Revenue from external customers Inter-segment revenue Total Segment result Unallocated operating income and expenses (Loss)/profit from operations Finance costs Taxation (Loss)/profit after taxation Depreciation and amortisation for the year Impairment of non-current assets Segment assets Segment liabilities Capital expenditure incurred during the year	PC 2009 RMB’000 303,113 —	Bs 2008 RMB’000 484,123 —	PCBs assembling products SMT processing 2009 2008 2009 2008 RMB’000 RMB’000 RMB’000 RMB’000 4,953 59,481 8,874 20,713 — — — — 4,953 59,481 8,874 20,713 (45,221) (1,542) (81,023) (537) 3,461 4,336 6,200 1,510 37,941 — 67,980 — 60,678 226,868 108,716 79,003 12,697 51,600 22,749 17,969 6,323 10,366 11,328 3,610	PCBs assembling products SMT processing 2009 2008 2009 2008 RMB’000 RMB’000 RMB’000 RMB’000 4,953 59,481 8,874 20,713 — — — — 4,953 59,481 8,874 20,713 (45,221) (1,542) (81,023) (537) 3,461 4,336 6,200 1,510 37,941 — 67,980 — 60,678 226,868 108,716 79,003 12,697 51,600 22,749 17,969 6,323 10,366 11,328 3,610	PCBs assembling products SMT processing 2009 2008 2009 2008 RMB’000 RMB’000 RMB’000 RMB’000 4,953 59,481 8,874 20,713 — — — — 4,953 59,481 8,874 20,713 (45,221) (1,542) (81,023) (537) 3,461 4,336 6,200 1,510 37,941 — 67,980 — 60,678 226,868 108,716 79,003 12,697 51,600 22,749 17,969 6,323 10,366 11,328 3,610	PCBs assembling products SMT processing 2009 2008 2009 2008 RMB’000 RMB’000 RMB’000 RMB’000 4,953 59,481 8,874 20,713 — — — — 4,953 59,481 8,874 20,713 (45,221) (1,542) (81,023) (537) 3,461 4,336 6,200 1,510 37,941 — 67,980 — 60,678 226,868 108,716 79,003 12,697 51,600 22,749 17,969 6,323 10,366 11,328 3,610	Inter-segment elimination Unallo 2009 2008 2009 RMB’000 RMB’000 RMB’000 — — — — — — — — — — — 11 — — — (162,640) (60,248) 122,049 (162,640) (60,248) 446,623 — — 46	Inter-segment elimination Unallo 2009 2008 2009 RMB’000 RMB’000 RMB’000 — — — — — — — — — — — 11 — — — (162,640) (60,248) 122,049 (162,640) (60,248) 446,623 — — 46	Unallo 2009 RMB’000 — —	cated 2008 RMB’000 — —	Consol 2009 RMB’000 316,940 —	idated 2008 RMB’000 564,317 —
	303,113	484,123	4,953	59,481	8,874	20,713	—	—	—	—	316,940	564,317
	(244,458) 27,259	133,508 19,060				(537) 1,510	—	—	11	8
											36,931	24,914
	190,157	—	37,941	—	67,980	—	—	—	—	—	296,078	—
	1,087,864	1,310,894	60,678	226,868	108,716	79,003				11,801	1,216,667	1,568,318
	262,773	143,612	12,697	51,600	22,749	17,969				489,252	582,202	642,185
	209,627	35,409	6,323	10,366	11,328	3,610	—	—	46	21	227,324	49,406

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(b) Geographical segments

In presenting information on the basis of geographical segments, segment revenue is based on geographical location of customers. Segment assets and capital expenditure are based on the geographical location of the assets.

The Group’s business is principally managed in the PRC, and the Group’s customers are mainly located in the PRC (excluding Hong Kong and Taiwan), Australia and Germany.

Segment revenue — PRC, excluding Hong Kong and Taiwan — Hong Kong — Australia — Germany — Malaysia — USA — Others Total revenue from external customers	The Group 2009 2008 RMB’000 RMB’000 225,210 444,687 40,457 40,064 29,048 37,131 5,619 7,595 2,308 3,154 1,013 1,186 13,285 30,500 316,940 564,317	The Group 2009 2008 RMB’000 RMB’000 225,210 444,687 40,457 40,064 29,048 37,131 5,619 7,595 2,308 3,154 1,013 1,186 13,285 30,500 316,940 564,317
		564,317

All segment assets and related capital expenditure incurred during the year are located in the PRC (excluding Hong Kong and Taiwan) as at 30th June, 2009 and 2008.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

13. PROPERTY, PLANT AND EQUIPMENT

(a) The Group

Year 2007/2008

Cost or valuation: At 1st July, 2007 Additions Disposals Transfer to fixed assets Fair value adjustment — Surplus — Deficit Less: Elimination of accumulated depreciation Exchange adjustments At 30th June, 2008 Representing: Cost Valuation Accumulated depreciation: At 1st July, 2007 Depreciation charge for the year Written back on disposals Elimination on revaluation Exchange adjustments At 30th June, 2008 Net book value: At 30th June, 2008	Buildings held for own use RMB’000 136,830 6,293 — 106,201 13,648 (4,533) (9,299) — 249,140 — 249,140 249,140 — 9,299 — (9,299) — — 249,140	Machinery RMB’000 184,807 20,768 (15) — — — — — 205,560 205,560 — 205,560 74,660 13,664 (6) — — 88,318 117,242	Fixture, furniture and equipment RMB’000 8,101 1,623 (11) — — — — (40) 9,673 9,673 — 9,673 4,254 1,122 (2) — (35) 5,339 4,334	Motor vehicles RMB’000 4,665 2,118 (418) — — — — — 6,365 6,365 — 6,365 3,448 350 (377) — — 3,421 2,944	Construction- in-progress RMB’000 106,201 16,639 — (106,201) — — — — 16,639 16,639 — 16,639 — — — — — — 16,639	Total RMB’000 440,604 47,441 (444 — 13,648 (4,533 (9,299 (40
						487,377
						238,237 249,140
						487,377
						82,362 24,435 (385 (9,299 (35
						97,078
						390,299

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Year 2008/2009

Cost or valuation: At 1st July, 2008 Additions Disposals Transfer to fixed assets Exchange adjustments At 30th June, 2009 Representing: Cost Valuation Accumulated depreciation and impairment losses: At 1st July, 2008 Depreciation charge for the year Impairment losses Written back on disposals Exchange adjustments At 30th June, 2009 Net book value: At 30th June, 2009	Buildings held for own use RMB’000 249,140 — (30,501) 20,501 — 239,140 — 239,140 239,140 — 11,904 111,156 (1,305) — 121,755 117,385	Machinery RMB’000 205,560 54,592 (14,613) — — 245,539 245,539 — 245,539 88,318 16,100 56,180 (12,213) — 148,385 97,154	Fixture, furniture and equipment RMB’000 9,673 294 (405) 95,787 1 105,350 105,350 — 105,350 5,339 7,811 32,229 (360) 1 45,020 60,330	Motor vehicles RMB’000 6,365 173 — — — 6,538 6,538 — 6,538 3,421 616 1,792 — — 5,829 709	Construction- in-progress RMB’000 16,639 172,265 (299) (116,288) — 72,317 72,317 — 72,317 — — 57,423 — — 57,423 14,894	Total RMB’000 487,377 227,324 (45,818 — 1
						668,884
						429,744 239,140
						668,884
						97,078 36,431 258,780 (13,878 1
						378,412
						290,472

The construction-in-progress at 30th June, 2009 primarily relates to the additional production premises and facilities of subsidiaries in the PRC.

Impairment loss

During the year, the Group experienced a significant drop in demand for its PCBs and related products under the prevailing market environment and consequently recorded operating losses. The directors considered that the existence of the above conditions indicated that non-current assets of the Group’s operating subsidiaries in the PRC may be impaired. In view of this, the directors prepared a cash flow projection to estimate the recoverable amount of these assets.

The estimates of recoverable amount were determined based on a value in use calculation using cash flow projections based on the five-year financial forecast approved by the directors, and a pre-tax discount rate.

Cash flows beyond the five-year period had been extrapolated using a zero growth rate to cover the remaining useful lives of related non-current assets.

Key assumptions used for the value in use calculation:

Sales volume growth rate	9%–37%
Gross contribution rate	7%–37%
Pre-tax discount rate	13.87%–15.05%

The directors determined the growth rate and gross contribution rate based on the expectation for market development.

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The directors concluded that it is appropriate to recognise an impairment losses of RMB296,078,000 against these non-current assets, details of which are as follows:

Note Property, plant and equipment 13(a) Deposits for the purchase of property, plant and equipment Charged to profit or loss Charged to building valuation reserve	The Group 2009 RMB’000 258,780 37,298
	296,078
	282,338 13,740
	296,078

(b) The Company

Cost: At 1st July, 2008/2007 and 30th June, 2009/2008 Accumulated depreciation: At 1st July, 2008/2007 Depreciation charge for the year At 30th June, 2009/2008 Net book value: At 30th June, 2009/2008	Fixture, furniture and equipment 2009 2008 RMB’000 RMB’000 125 125 112 112 — — 112 112 13 13	Fixture, furniture and equipment 2009 2008 RMB’000 RMB’000 125 125 112 112 — — 112 112 13 13
		112 —
		112
		13

• (c) All the Group’s buildings are located in the PRC. At 30th June, 2008, the Group’s buildings were revalued by an independent firm of surveyors, Ample Appraisal Limited who has among their staff Professional Member of Hong Kong Institute of Surveyors and Professional Member of Royal Institution of Chartered Surveyors, with recent experience in the location and category of property being valued, on a depreciated replacement cost basis.

• (d) The Group leased certain machinery under finance leases for two to four years. At the end of the lease term the Group had the option to purchase the machineries at a price deemed to be a bargain purchase option. None of the leases included contingent rentals. The Group did not have any assets held under finance lease as at 30th June, 2009.

At 30th June, 2008, the net book value of machinery of the Group held under finance leases was RMB28,028,000.

• (e) Had the buildings held for own use of the Group been carried at cost less accumulated depreciation, the carrying amount would have been RMB218,747,000 (2008: RMB240,359,000).

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14. INTERESTS IN LEASEHOLD LAND HELD FOR OWN USE UNDER OPERATING LEASE

The analysis of the net book value of leasehold land held for own use under operating leases is as follows:

Outside Hong Kong — medium-term leases	The Group 2009 2008 RMB’000 RMB’000 18,143 18,643

15. INVESTMENTS IN SUBSIDIARIES

				The	Company
				2009	2008
				RMB’000	RMB’000
Unlisted	shares,	at	cost	93,975	93,975

Details of the subsidiaries as at 30th June, 2009 were as follows:

Name of company Place of incorporation and/ or operation Particulars of issued and fully paid up capital Superford Holding Limited (‘‘Superford’’) BVI/Hong Kong 10,001 shares of US$1 each Artic Hong Kong Limited Hong Kong 2 shares of HK$1 each Dynamic Fortune Technology Limited BVI/Hong Kong 100 shares of US$1 each China Electronic Holdings Limited Hong Kong 2 shares of HK$1 each Tempest Trading Limited (‘‘Tempest’’) BVI/Hong Kong 1 share of US$1 each Winrise International Limited (‘‘Winrise’’) BVI/Hong Kong 100 shares of US$1 each Herowin Limited (‘‘Herowin’’) BVI/ Hong Kong 100 shares of US$1 each Fuqiang PRC RMB109,652,300 Gemini PRC US$10,760,000 Shuangxiang PRC US$14,201,738 Haichuang PRC US$8,951,100

Proportion of ownership interest Group’s effective interest Held by the Company Held by a subsidiary Principal activities 100% 100% — Investment holding 100% 100% — Provision of administrative services to the Group 100% 100% — Investment holding 100% 100% — Not yet commenced business 100% 100% — Investment holding 100% 100% — Investment holding 100% 100% — Investment holding 100% — 100% Manufacturing and trading of PCBs 100% — 100% Manufacturing and trading of PCBs 100% — 100% Manufacturing and trading of PCBs assembling products and provision for SMT processing services 100% — 100% Not yet commenced business

• Registered under the laws of the PRC as a foreign investment enterprise.

The shares of certain subsidiaries were pledged as part of the security against financing facilities granted to the Company. The total net asset value of these subsidiaries as at 30th June, 2009 is disclosed in note 22(ii).

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16. TRADING SECURITIES

Equity securities listed outside Hong Kong, at fair value	The Group 2009 2008 RMB’000 RMB’000 1,570 —

17. INVENTORIES

Raw materials Work-in-progress Finished goods	The Group 2009 2008 RMB’000 RMB’000 16,131 23,659 5,046 7,094 4,820 14,706 25,997 45,459	The Group 2009 2008 RMB’000 RMB’000 16,131 23,659 5,046 7,094 4,820 14,706 25,997 45,459
		45,459

The analysis of the amount of inventories recognised as an expense is as follows:

Carrying amount of inventories sold Write down of inventories Reversal of write-down of inventories	The Group 2009 2008 RMB’000 RMB’000 275,866 384,428 1,327 8,000 (6,500) (80 270,693 392,348	The Group 2009 2008 RMB’000 RMB’000 275,866 384,428 1,327 8,000 (6,500) (80 270,693 392,348
		392,348

18. TRADE AND OTHER RECEIVABLES

Bills receivable Trade receivables Less: allowance for doubtful debts Amounts due from subsidiaries Rental and other deposits Advances to directors (note 19) Advances to employees Prepayments Others Less: impairment losses	The Group 2009 2008 RMB’000 RMB’000 13,810 644 143,508 203,686 (69,895) (11,206) 87,423 193,124 — — 436 511 381 161 808 854 2,478 2,657 2,542 4,469 — — 94,068 201,776	The Company 2009 2008 RMB’000 RMB’000 — — — — — — — — 410,067 427,231 — — — — — — — — — — (203,137) — 206,930 427,231	The Company 2009 2008 RMB’000 RMB’000 — — — — — — — — 410,067 427,231 — — — — — — — — — — (203,137) — 206,930 427,231
			— 427,231 — — — — — —
			427,231

The amounts due from subsidiaries are unsecured, interest-free and repayable on demand.

All of the trade and other receivables, apart from rental and other deposits, are expected to be recovered within one year.

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(a) Ageing analysis

Included in trade and other receivables are trade receivables and bills receivable (net of allowance for doubtful debts) with the following ageing analysis as of the balance sheet date:

Current Less than 1 month past due 1 to 3 months past due More than 3 months but less than 12 months past due More than 12 months but less than 2 years past due Amount past due	The Group 2009 2008 RMB’000 RMB’000 76,229 157,862 2,543 24,065 1,583 7,678 6,948 3,519 120 — 11,194 35,262 87,423 193,124	The Group 2009 2008 RMB’000 RMB’000 76,229 157,862 2,543 24,065 1,583 7,678 6,948 3,519 120 — 11,194 35,262 87,423 193,124
		24,065 7,678 3,519 —
		35,262
		193,124

The Group’s credit policy is set out in note 31(a).

(b) Impairment of trade receivables and bills receivable

Impairment losses in respect of trade receivables and bills receivable 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 receivables and bills receivable directly (see note 1(i)(i)).

The movement in the allowance for doubtful debts during the year is as follows:

At 1st July, 2008/2007 Impairment loss recognised Write-back of impairment losses Uncollectible amounts written off At 30th June, 2009/2008	The Group 2009 2008 RMB’000 RMB’000 11,206 7,878 68,021 3,328 (5,258) — (4,074) — 69,895 11,206	The Group 2009 2008 RMB’000 RMB’000 11,206 7,878 68,021 3,328 (5,258) — (4,074) — 69,895 11,206
		11,206

At 30th June, 2009, the Group’s trade receivables and bills receivable of RMB70,484,000 (2008: RMB13,594,000) were individually determined to be impaired. The individually impaired receivables related to customers that were in financial difficulties and management assessed that only a portion of the receivables is expected to be recovered. Consequently, specific allowances for doubtful debts of RMB69,895,000 (2008: RMB11,206,000) were recognised. The Group does not hold any collateral over these balances.

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(c) Trade receivables and bills receivable that are not impaired

The ageing analysis of trade receivables and bills receivable that are neither individually nor collectively considered to be impaired are as follows:

Neither past due nor impaired Less than 1 month past due 1 to 3 months past due More than 3 months but less than 12 months past due	The Group 2009 2008 RMB’000 RMB’000 76,145 156,909 2,544 24,004 1,409 7,665 6,736 2,158 10,689 33,827 86,834 190,736	The Group 2009 2008 RMB’000 RMB’000 76,145 156,909 2,544 24,004 1,409 7,665 6,736 2,158 10,689 33,827 86,834 190,736
		24,004 7,665 2,158
		33,827
		190,736

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

Receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Group. Based on past experience, 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 fully recoverable. The Group does not hold any collateral over these balances.

19. ADVANCE TO DIRECTORS

Advances to directors of the Company disclosed pursuant to section 161B of the Hong Kong Companies Ordinance are as follows:

Name of borrower	Mr Lin Wan Xin	Mr Hu Zhao Rui	Mr Lin Wan Qaing
Position	Chairman	Director	Director
Terms of the loan
— duration and repayment terms	Repayable on demand	Repayable on demand	Repayable on demand
— interest rate	Interest free	Interest free	Interest free
— security	None	None	None
Balance of the loan
— at 1st July, 2007	RMB158,790	RMB2,000	—
— at 30th June, 2008 and 1st July, 2008	RMB58,790	RMB102,000	—
— at 30th June, 2009	RMB278,790	RMB102,000	—
Maximum balance outstanding
— during 2008/09	RMB278,790	RMB102,000	RMB4,277,879
— during 2007/08	RMB158,790	RMB102,000	—

There was no amount due but unpaid, nor any provision made against the principal amount of these loans at 30th June, 2008 and 2009.

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20. CASH AND CASH EQUIVALENTS

Deposits with banks Cash at bank and in hand Less: Pledged deposits	The Group 2009 2008 RMB’000 RMB’000 8,662 5,324 648,450 879,349 657,112 884,673 (8,662) (4,307) 648,450 880,366	The Company 2009 2008 RMB’000 RMB’000 — 1,017 1,175 7,458 1,175 8,475 — — 1,175 8,475	The Company 2009 2008 RMB’000 RMB’000 — 1,017 1,175 7,458 1,175 8,475 — — 1,175 8,475
			8,475 —
			8,475

Pledged deposits mainly represent the amounts pledged to the banks to secure bills payable of the Group.

At 30th June, 2009, cash and cash equivalents of RMB655,202,000 (2008: RMB875,458,000) of the Group were subject to exchange controls in the PRC.

21. TRADE AND OTHER PAYABLES

Trade payables Bills payable Other payables and accruals Other tax payable Payables for the purchase of property, plant and equipment Staff welfare payable Utilities and rentals payable Amounts due to subsidiaries Amount due to a director	The Group 2009 2008 RMB’000 RMB’000 58,875 87,490 17,323 14,351 14,591 14,839 3,692 4,942 5,739 4,511 38,482 29,175 2,802 2,795 — — 2,422 4,707 143,926 162,810	The Company 2009 2008 RMB’000 RMB’000 — — — — 2,744 4,493 — — — — — — — — 71,057 5,097 4,934 4,747 78,735 14,337	The Company 2009 2008 RMB’000 RMB’000 — — — — 2,744 4,493 — — — — — — — — 71,057 5,097 4,934 4,747 78,735 14,337
			14,337

Amount due to a director is unsecured, non-interest bearing and has no fixed terms of repayment.

Included in trade and other payables are trade payables and bills payable with the following ageing analysis as of the balance sheet date:

Due within 6 months or on demand	The Group 2009 2008 RMB’000 RMB’000 76,198 101,841

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22. BANK LOANS

At 30th June, 2009, the bank loans were repayable as follows:

Within 1 year or on demand After 1 year but within 2 years After 2 years but within 5 years	The Group 2009 2008 RMB’000 RMB’000 250,972 253,822 4,000 30,000 12,000 — 266,972 283,822	The Company 2009 2008 RMB’000 RMB’000 26,388 99,022 — — — — 26,388 99,022	The Company 2009 2008 RMB’000 RMB’000 26,388 99,022 — — — — 26,388 99,022
			99,022

At 30th June, 2009, the bank loans were secured as follows:

Secured by leasehold land and buildings held for own use (note (i)) Secured by shares (note (ii)) Secured by bills receivable (note (iii)) Secured by land and buildings of a third party (note (iv)) Unsecured (note (vii))	The Group 2009 2008 RMB’000 RMB’000 78,000 77,000 26,388 99,022 10,785 — 54,000 — 97,799 107,800 266,972 283,822	The Company 2009 2008 RMB’000 RMB’000 — — 26,388 99,022 — — — — — — 26,388 99,022	The Company 2009 2008 RMB’000 RMB’000 — — 26,388 99,022 — — — — — — 26,388 99,022
			99,022

Notes:

• (i) At 30th June, 2009, certain interest in leasehold land held for own use under operating lease and buildings held for own use of RMB132,271,000 (2008: RMB169,907,000) were pledged to banks for bank loans totalling RMB78,000,000 (2008: RMB77,000,000) granted to the Group.

• (ii) As at 30th June, 2009, a bank loan with outstanding principal amount of US$4,000,000 (equivalent to RMB27,509,000) (2008: US$15,000,000 (equivalent to RMB102,852,000)) granted to the Company was secured by the entire equity interest in Superford, Tempest, Winrise and Herowin (the ‘‘BVI subsidiaries’’). The BVI subsidiaries are the immediate holding companies of Fuqiang, Gemini, Shuangxiang and Haichuang, respectively (the ‘‘PRC subsidiaries’’). The PRC subsidiaries are the operating subsidiaries of the Group. Total net asset value of the BVI and PRC subsidiaries as at 30th June, 2009 was approximately RMB474,166,000 (2008: RMB822,590,000).

• (iii) The Group’s discounted bills with recourse have been accounted for as collateralised bank advances. The discounted bills receivable and the related proceeds received from discounting banks are included in the Group’s ‘‘Bills receivable’’ and ‘‘Bank loans’’ as at the balance sheet date.

• (iv) As at 30th June, 2009, bank loans totalling RMB54,000,000 (2008: RMB Nil) granted to the Group were secured by land and buildings of an unrelated individual, Zhou Hong Mei. The directors have confirmed that this individual is not related to the Group.

• (v) At 30th June, 2009, the Group did not have any undrawn committed borrowing facilities (2008: RMB Nil).

• (vi) At 30th June, 2008, the Company had breached one of the covenants of a bank loan amounting to RMB99,022,000, which required the Group to maintain its consolidated profits before interest expenses, tax on income and profits, tax credits, depreciation, amortisation, exceptional items and any extraordinary items (‘‘EBITDA’’) at not less than seven times the Group’s interest expenses. Included in the amount utilised was RMB60,254,000 which, in accordance with the terms of the banking facility, was scheduled to be repaid after one year from the balance sheet date, but was

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APPENDIX II

classified as current liabilities in the consolidated and company balance sheets as at 30th June, 2008 as the Company did not have an unconditional right at the balance sheet date to defer settlement for at least the next twelve months as a result of the breach of that covenant.

The Company signed a Waiver Agreement with the bank in December 2008 (the ‘‘Waiver Agreement’’), allowing the Company to repay the loan under a revised schedule and settle the outstanding amount in terms of instalments from January 2009 to October 2009. However, at 30th June, 2009, the Company breached one of the conditions imposed under the Waiver Agreement that restricted the Group’s capital expenditure at a ceiling of US$1,000,000 (equivalent to approximately RMB6,877,000). At 30th June, 2009, the outstanding principal amount of the bank loan was US$4,000,000 (equivalent to approximately RMB27,509,000). Subsequent to the balance sheet date, the Company defaulted on payment of the monthly instalment of US$1,000,000 (equivalent to approximately RMB6,877,000) due in August 2009. After discussion with the bank, the Company settled US$700,000 (equivalent to approximately RMB4,814,000) in September 2009. The directors are currently in discussion with the bank for a revised repayment schedule to have the remaining balance of the bank loan fully settled by 31st December, 2009.

Other than the above, none of the covenants relating to drawn down facilities had been breached as at 30th June, 2009 (2008: RMB Nil). Further details of the Group’s management of liquidity risk are set out in note 31(b).

• (vii) A corporate guarantee has been issued by the Company in respect of bank loans of RMB83,800,000 (2008: RMB83,800,000) granted to subsidiaries. As at the balance sheet date, the directors do not consider it probable that a claim will be made against the Company under the guarantee. The maximum liability of the Company at the balance sheet date under the guarantee issued amounted to RMB83,800,000 (2008: RMB83,800,000). The Company has not recognised any deferred income in respect of the guarantee as the fair value of such guarantee cannot be reliably measured and the transaction price was nil.

23. OBLIGATIONS UNDER FINANCE LEASES

At 30th June, 2009, the obligations under finance leases were repayable as follows:

Within 1 year After 1 year but within 2 years	Present value of the minimum lease payments RMB’000 — — —	2009 Interest expense relating to future periods RMB’000 — — —	The Group Total minimum lease payments Present value of the minimum lease payments RMB’000 RMB’000 — 2,591 — 510 — 3,101	2008 Interest expense relating to future periods RMB’000 150 9 159	Total minimum lease payments RMB’000 2,741
					519
					3,260

1. INCOME TAX IN THE BALANCE SHEET

2. (a) Current taxation in the balance sheet represents:

Provision for PRC enterprise income tax for the year PRC enterprise income tax paid relating to the current year	The Group 2009 2008 RMB’000 RMB’000 8,786 21,367 (8,786) (16,638 — 4,729	The Group 2009 2008 RMB’000 RMB’000 8,786 21,367 (8,786) (16,638 — 4,729
		4,729

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(b) Deferred tax (assets)/liabilities recognised:

The components of deferred tax (assets)/liabilities recognised in the consolidated balance sheet and the movements during the year are as follows:

General provision RMB’000 Deferred tax arising from: At 1st July, 2007 (1,716) (Credited)/charged to profit or loss (676) Charged to reserves — At 30th June, 2008 (2,392) At 1st July, 2008 (2,392) Charged/(credited) to profit or loss 2,392 Credited to reserves — At 30th June, 2009 — Net deferred tax assets recognised on the balance sheet Net deferred tax liabilities recognised on the balance sheet		The Group
		Withholding tax on undistributed profits of PRC subsidiaries RMB’000 — 5,280 — 5,280 5,280 1,581 — 6,861

(c) Deferred tax assets not recognised:

At 30th June, 2009, the Group had not recognised deferred tax assets in respect of tax losses and other deductible temporary differences of approximately RMB15,168,000 (2008: RMB52,000) and RMB196,784,000 (2008: RMB Nil) respectively as it was not probable that future taxable profits against which the losses could be utilised would be available in the relevant tax jurisdiction and entity. The tax losses will expire within five years.

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25. DERIVATIVE FINANCIAL INSTRUMENTS

As at 1st July, 2008/2007 Payments made during the year Change in fair value Loss on termination Exchange adjustments Derecognition upon termination (note 26) Structured interest rate swaps as at 30th June, 2009/2008	The Group and the Company 2009 2008 RMB’000 RMB’000 165,067 151,280 (3,434) (30,931 — 60,334 1,087 — 372 (15,616 (163,092) — — 165,067	The Group and the Company 2009 2008 RMB’000 RMB’000 165,067 151,280 (3,434) (30,931 — 60,334 1,087 — 372 (15,616 (163,092) — — 165,067
		165,067

During the year ended 30th June, 2007, the Company entered into two structured interest rate swaps (the ‘‘Swaps’’) with maturity in 2012 with a commercial bank (the ‘‘Bank’’), under which total upfront payments (the ‘‘Upfront Payments’’) of approximately RMB113,490,000 were received at the inception of the Swap Agreements and were initially recognised as derivative financial liabilities in the balance sheet. The Swap Agreements were remeasured at fair value as provided and estimated by Deutsche Bank AG using a valuation technique based on certain assumptions at each balance sheet date.

The Swap Agreements are structured and packaged utilising a combination of different financial instruments. These may include but were not limited to cash instruments, futures and forward instruments, options instruments and other types of derivatives. The fair value of the Swap Agreements at each balance sheet date, besides taking into account the expected cashflows of the Swap Agreements, also took into consideration the aggregate market value of the different underlying financial instruments on that particular valuation date. In addition, factors such as the forward interest rates, interest rate volatility, the yield curve, the shape of the yield curve, the level of an index published on Bloomberg and other market data which Deutsche Bank AG believed to be appropriate at the time of calculating the fair value, affected the final valuation of the Swap Agreements. During the year ended 30th June, 2008, a loss on change in fair value of RMB60,334,000 was recognised in profit or loss.

Key terms of the interest rate swaps are summarised as follows:

	Swap 1	Swap 2
Notional amounts:	HK$390,000,000	US$100,000,000
Upfront Payments:	HK$39,000,000	US$10,000,000
Effective date:	14th February, 2007	19th April, 2007
Maturity date:	14th February, 2012	19th April, 2012
Bank pays:		8% (semi-annually)
— First six months	7% (semi-annually)
— Thereafter	7%* N/D (semi-annually)
	(Note (i))
The Company pays:	9% (semi-annually)	First six months: 10% (semi-annually)
		Thereafter: 10%–5* (Index YoY Return-1%)
		Coupon capped at 13% and floored
		at 0% (semi-annually) (Note (ii))

Notes:

• (i) N equals the number of business days in the Observation Period (each such date a ‘‘Reference Date’’) for which Reference Rate 1 minus Reference Rate 2** is greater than or equal to 0%.

D equals the actual number of business days in such Observation Period.

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For purpose of calculating ‘‘N’’ for each Observation Period, the Reference Rate 1 and Reference Rate 2 shall be observed on each Reference Date during such Observation Period (each such date an ‘‘Observation Date’’).

• Observation Period means each period beginning from and including the day which is five business days prior to the previous payment date (or the effective date in the case of the first six months), to but excluding the day that is six business days prior to the next following payment date.

• ** Reference Rate 1 means the HKD-Swap Rate published by the International Swaps and Derivatives Association, Inc. with a designated maturity of ten years.

• *** Reference Rate 2 means the HKD-Swap Rate published by the International Swaps and Derivatives Association, Inc. with a designated maturity of two years.

• (ii) Index means the Deutsche Bank Pan-Asian Forward Rate Bias Index (the ‘‘Index’’) as published on Bloomberg.

Index YoY Return is the closing level of the Index five business days prior to the end of the relevant coupon payment period/closing level of the Index five business days prior to the coupon payment date which is two coupon payment periods prior to the relevant coupon payment (or effective date in cash of the second coupon payment period) — 1.

In accordance with the terms and conditions of the Swap Agreements, the Group was required to settle with Deutsche Bank AG semi-annually on a net basis. During the year ended 30th June, 2009, the Group made payments of approximately RMB3,434,000 (2008: RMB30,931,000) to Deutsche Bank AG, of which RMB3,434,000 (2008: RMB20,072,000) was financed by the controlling shareholder of the Company. The details of the financial assistance from the controlling shareholder are disclosed in note 27.

On 12th November, 2008, the Swap Agreements were early terminated by Deutsche Bank AG as a result of the Company not paying the interest payment under the Swap 2 on the due date in October 2008 and the Company received a statement of demand dated 13th November, 2008 for an early termination amount (the ‘‘Termination Amount’’) of US$23,714,693 (equivalent to approximately RMB163,092,000) and a loss of RMB1,087,000 was recognised upon termination of the Swap Agreements on the same date. Subsequently, Deutsche Bank AG filed a claim at the High Court of Hong Kong against the Company, details of which are set out in note 33. The Termination Amount remained unsettled with Deutsche Bank AG as at 30th June, 2009 and is included under ‘‘Other financial liabilities’’ (see note 26) in the balance sheet as at that date.

26. OTHER FINANCIAL LIABILITIES

Upon early termination of Swaps on 12th November, 2008 (note(i)) Accrued interest (note(ii)) At 30th June, 2009	The Group and the Company 2009 RMB’000 163,092 1,351
	164,443

Notes:

• (i) The balance represents the Termination Amount demanded by Deutsche Bank AG as a result of the early termination of the Swap Agreements by Deutsche Bank AG (see note 25).

• (ii) Interest is accrued on the Termination Amount for the period from 12th November, 2008 to 30th June, 2009 at a rate per annum equal to the cost to Deutsche Bank AG if it were to fund the relevant amount plus 1% per annum in accordance with the ISDA 2002 Master Agreement of the Swap Agreements. The directors used the overnight USD London Interbank Offered Rates plus 1% per annum to estimate the accrued interest.

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27. AMOUNT DUE FROM/(TO) THE CS

Amount due from the CS — current assets Amount due to the CS — non-current liabilities	The Group and the Company 2009 2008 RMB’000 RMB’000 61,975 — — (16,089	The Group and the Company 2009 2008 RMB’000 RMB’000 61,975 — — (16,089
		(16,089

In order to minimise speculation on the financial exposure of the Company under the Swap Agreements, on 12th December, 2007, Mr Lin Wan Qaing, the CS and a director of the Company, executed a deed of indemnity (the ‘‘Deed’’) providing interestfree and unsecured financial assistance to the Company in respect of its interest payment obligations in connection with the Swap Agreements to the extent as follows:

• in respect of each payment period, payment by the CS will be limited to the amount payable by the Company to Deutsche Bank AG after netting off the amount payable by Deutsche Bank AG to the Company, if any;

• in case the Company receives amount from Deutsche Bank AG after netting off the amount payable by the Company to Deutsche Bank AG and the amount payable by Deutsche Bank AG, the Company will keep such amount received from Deutsche Bank AG; and

• at the maturity date of the Swap Agreements, the Company shall reimburse the CS such amount of sum(s) paid by the CS to the Company under the Deed to the extent of the amount of the Cash Inflow (as defined as the aggregate amount of the payments of approximately RMB113,490,000 received at the inception of the Swap Agreements (‘‘Upfront Payments’’) as disclosed in note 25 and the amount received from Deutsche Bank AG), and for the avoidance of doubt, if the Cash Inflow exceeds the aggregate amount of sums actually paid by the CS to the Company under the Deed, the Company will only be required to reimburse the CS such amount equivalent to the sum actually paid by the CS to the Company under the Deed.

In addition, under the Deed, the CS shall indemnify and at all times keep the Company fully indemnified against all liabilities, claims, damages, costs and expenses which the Company may suffer, incur or sustain by reason of the CS’s failure in his performance of obligations under the Deed.

As a result of the arrangement under the Deed, given the CS is assuming the obligations of the Company and the Company is required to reimburse the CS to the extent of the Cash Inflow, if the Company is eventually liable to pay more than it receives from Deutsche Bank AG (i.e. the Company makes a loss), the maximum future cash outflows of the Company under the Swap Agreements will be contained at the amount of the Upfront Payments. If however, the aggregate receivables by the Company from Deutsche Bank AG is greater than the payables by the Company to Deutsche Bank AG (i.e. the Company makes a gain), this would mean that the amount actually paid out by the CS is less than the amount received by the Company, the Company will still be entitled to keep the difference (i.e. net amount received) since the Company is only required to reimburse the CS such amount equivalent to the sum actually paid by the CS to the Company under the Deed.

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The movements during the year are as follows:

As at 1st July, 2008/2007 Payments made by the CS to Deutsche Bank AG during the year Fair value adjustment of amount due to the CS (note (i)) Interest on amount due to the CS (note (i)) Contributions by the CS upon termination (note (ii)) Exchange adjustments As at 30th June, 2009/2008	The Group and the Company 2009 2008 RMB’000 RMB’000 (16,089) — (3,434) (20,072) 561 3,272 (288) (175) 81,167 — 58 886 61,975 (16,089)

Notes:

• (i) In accordance with the accounting policies set out in notes 1(m) and (v), the amount of financial assistance received is initially recognised at fair value, as the indemnified amounts were expected to be settled upon original maturity dates of the Swap Agreements in 2012. During the year ended 30th June, 2009, a total amount of RMB561,000 (2008: RMB3,272,000), being the difference between the fair value based on expected cash flows and the nominal amount of cash received by the Company was recognised as a capital contribution by the CS in the capital contribution reserve within equity. The financial assistance is subsequently stated at amortised cost and the related interest expense calculated using the effective interest method has been recognised in profit or loss.

• (ii) According to the Deed, the CS is obligated to indemnify the Company the semi-annual interest payments made after the execution of the indemnity, the early termination amount, the interest accrued subsequent to termination and all related costs incurred thereon, while the Company will be required to reimburse the CS such amount equivalent to the sum actually paid by the CS to the Company under the Deed to the extent of the amount of the Company’s Cash Inflow from Deutsche Bank AG.

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28. CAPITAL AND RESERVES

(a) The Group

At 1st July, 2007 Exchange difference on translation of financial statements of operations outside PRC Surplus on revaluation of buildings held for own use, net of deferred tax Issue of shares upon exercise of subscription rights attached to the convertible bonds Issue of shares under the share option scheme Purchase and cancellation of own shares — par value paid — premium paid — transfer between reserves Fair value adjustment of amount due to the CS Dividend approved in respect of the previous year (note 10(b)) Profit for the year Appropriations to statutory reserve At 30th June, 2008 At 1st July, 2008 Exchange difference on translation of financial statements of operations outside PRC Realisation of surplus on revaluation of buildings held for own use upon disposal, net of deferred tax Impairment of buildings held for own use, net of deferred tax Fair value adjustment of amount due to the CS Contributions by the CS upon termination of derivative financial instruments Dividend approved in respect of the previous year (note 10(b)) Loss for the year Lapse of share options At 30th June, 2009	Share capital RMB’000 58,123 — — 186 371 (19) — — — — — — 58,661 58,661 — — — — — — — — 58,661	Share premium RMB’000 244,971 — — 1,655 4,107 — (123) (19) — (10,780) — — 239,811 239,811 — — — — — (1,969) — — 237,842	Share-based compensation reserve (note (i)) RMB’000 3,209 — — — (126) — — — — — — — 3,083 3,083 — — — — — — — (337) 2,746	Statutory reserve (note (ii)) RMB’000 3,440 — — — — — — — — — — 10,834 14,274 14,274 — — — — — — — — 14,274	Capital reserve (note (iii)) RMB’000 63,947 — — — — — — — — — — — 63,947 63,947 — — — — — — — — 63,947	Exchange reserve (note (iv)) RMB’000 2,001 26,611 — — — — — — — — — — 28,612 28,612 (689) — — — — — — — 27,923	Building valuation reserve (note (v)) RMB’000 4,030 — 10,397 — — — — — — — — — 14,427 14,427 — (3,891) (10,536) — — — — — —	Capital contribution reserve (note (vi)) RMB’000 — — — — — — — — 3,272 — — — 3,272 3,272 — — — 561 81,167 — — — 85,000	Capital redemption reserve (note (viii)) RMB’000 — — — — — — — 19 — — — — 19 19 — — — — — — — — 19	Retained profits RMB’000 507,066 — — — — — — — — (7,384) 11,179 (10,834) 500,027 500,027 — 3,891 — — — — (360,202) 337 144,053	Total equity RMB’000 886,787 26,611 10,397 1,841 4,352 (19 (123 — 3,272 (18,164 11,179 —
											926,133
											926,133 (689 — (10,536 561 81,167 (1,969 (360,202 —
											634,465

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(b) The Company

At 1st July, 2007 Exchange difference on translation of financial statements of the Company into RMB Issue of shares upon exercise of subscription rights attached to the convertible bonds Issue of shares under the share option scheme Purchase and cancellation of own shares — par value paid — premium paid — transfer between reserves Fair value adjustment of amount due to the CS Dividend approved in respect of the previous year (note 10(b)) Loss for the year At 30th June, 2008 At 1st July, 2008 Exchange difference on translation of financial statements of the Company into RMB Fair value adjustment of amount due to the CS Contributions by the CS upon termination of derivative financial instruments Lapse of share options Dividend approved in respect of the previous year (note 10(b)) Loss for the year At 30th June, 2009	Share capital RMB’000 58,123 — 186 371 (19) — — — — — 58,661 58,661 — — — — — — 58,661	Share premium RMB’000 244,971 — 1,655 4,107 — (123) (19) — (10,780) — 239,811 239,811 — — — — (1,969) — 237,842	Share-based compensation reserve (note (i)) RMB’000 3,209 — — (126) — — — — — — 3,083 3,083 — — — (337) — — 2,746	Exchange reserve (note (iv)) RMB’000 (3,697) 24,999 — — — — — — — — 21,302 21,302 (455) — — — — — 20,847	Contributed surplus (note (vii)) RMB’000 10,009 (2,625) — — — — — — (7,384) — — — — — — — — — —	Capital contribution reserve (note (vi)) RMB’000 — — — — — — — 3,272 — — 3,272 3,272 — 561 81,167 — — — 85,000	Capital redemption reserve (note (viii)) RMB’000 — — — — — — 19 — — — 19 19 — — — — — — 19	Accumulated losses RMB’000 (39,367) — — — — — — — — (51,602) (90,969) (90,969) — — — 337 — (219,981) (310,613)	Total RMB’000 273,248 22,374 1,841 4,352 (19 (123 — 3,272 (18,164 (51,602
									235,179
									235,179 (455 561 81,167 — (1,969 (219,981
									94,502

Notes:

• (i) Share-based compensation reserve represents the value of share options granted to the option holders which give them the right to subscribe for ordinary shares of the Company (note 30).

• (ii) According to the relevant rules and regulations in the PRC, Gemini, Shuangxiang, Fuqiang and Haichuang are required to appropriate 10% of their after-tax profit (after offsetting prior year losses), based on the PRC statutory financial statements prepared in accordance with the relevant accounting principles and financial regulations applicable to foreign investment enterprises in the PRC, to a general reserve fund until the balance of the reserve reaches 50% of their respective registered capital. Thereafter, any further appropriations can be made at the directors’ discretion. The general reserve fund can be utilised to offset losses, or be utilised for issuance of bonus shares on condition that the general reserve fund shall be maintained at a minimum of 25% of the registered capital after such issuance.

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• (iii) The capital reserve of the Group represents:

• (a) capital reserve of a subsidiary;

• (b) the difference between the nominal value of the ordinary shares issued by the Company and the aggregate of the share capital and share premium of a subsidiary acquired through an exchange of shares pursuant to the Group reorganisation in 2001; and

• (c) the amount of non-controlling interest as at acquisition date in excess of the fair value of the consideration paid directly recognised in equity.

• (iv) The exchange reserve comprises all foreign exchange differences arising from the translation of the financial statements of operations outside the PRC. The reserve is dealt with in accordance with the accounting policy set out in note 1(s).

• (v) The revaluation reserve has been set up and is dealt with in accordance with the accounting policies adopted for buildings in note 1(f)(ii).

• (vi) The capital contribution reserve represents the difference between the fair value of the interest-free financial assistance provided by the controlling shareholder of the Company (see note 27) initially recognised in the financial statements and the nominal amount of cash received/receivable by the Group.

• (vii) The contributed surplus of the Company represents the difference between the nominal value of the ordinary shares issued by the Company and the net asset value of subsidiaries acquired through an exchange of shares pursuant to the Group reorganisation in 2001.

• (viii) The capital redemption reserve represents the nominal value of the shares repurchased which has been paid out of the distributable reserves of the Company.

Under the Companies Law (Revised) of the Cayman Islands, share premium and contributed surplus are distributable to shareholders, subject to the condition that the Company cannot declare or pay a dividend, or make a distribution out of share premium and contributed surplus if (i) it is, or would after the payment be, unable to pay its liabilities as they become due, or (ii) the realisable value of its assets would thereby be less than the aggregate of its liabilities and its issued share capital account.

As at 30th June, 2009, the Company’s reserves available for distribution to shareholders amounted to RMB Nil (2008: RMB173,227,000) computed in accordance with the Companies Law (Revised) of the Cayman Islands and the Company’s articles of association.

• (c) Authorised and issued share capital

Authorised: Ordinary shares of HK$0.10 each Ordinary shares issued and fully paid: At 1st July Issue of shares upon exercise of subscription rights attached to the convertible bonds Issue of shares under the share option scheme Shares repurchased At 30th June	The Group and the Company 2009 2008 Number of shares Amount Number of shares Amount ’000 RMB’000 ’000 RMB’000 1,000,000 106,000 1,000,000 106,000 558,965 58,661 553,169 58,123 — — 2,000 186 — — 4,000 371 — — (204) (19) 558,965 58,661 558,965 58,661
	2009 Number of shares Amount ’000 RMB’000 1,000,000 106,000 558,965 58,661 — — — — — — 558,965 58,661

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The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All ordinary shares rank equally with regard to the Company’s residual assets.

(i) Repurchase of own shares

The Company did not repurchase any of its own shares during the year ended 30th June, 2009.

During the year ended 30th June, 2008, the Company repurchased its own ordinary shares on The Stock Exchange of Hong Kong Limited as follows:

Month/year April 2008 May 2008	Number of shares repurchased 200,000 4,000 204,000	Price paid per share HK$ 0.75 0.74	Lowest price paid per share HK$ — —	Aggregate price paid RMB’000 139 3
				142

The repurchased shares were cancelled and accordingly the issued share capital of the Company was reduced by the nominal value of these shares. Pursuant to section 37(4) of the Companies Law (2007 Revision) of the Cayman Islands, an amount equivalent to the par value of the shares cancelled of RMB19,000 was transferred from the distributable reserves to the capital redemption reserve. The premium paid on the repurchase of the shares of RMB123,000 was charged to share premium.

(ii) Shares issued under the share option scheme

During the year ended 30th June, 2008, options were exercised to subscribe for 4,000,000 ordinary shares in the Company at a consideration of RMB4,352,000 of which RMB371,000 was credited to share capital and the balance of RMB3,981,000 was credited to the share premium account. RMB126,000 has been transferred from the capital reserve to the share premium account in accordance with policy set out in note 1(o)(ii).

• (iii) Shares issued upon exercise of subscription rights attached to the convertible bonds

As at 30th June, 2008, all subscription rights attached to the convertible bonds had expired.

(d) Capital management

The Group’s primary objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, by pricing products and services commensurately with the level of risk and by securing access to finance at a reasonable cost.

The Group actively and regularly reviews and manages its capital structure to maintain a balance between the higher shareholder returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions.

The Group monitors its capital structure on the basis of a net debt-to-capital ratio. For this purpose the Group defines net debt as total debt (which includes bank loans, obligations under finance leases, trade and other payables, derivative financial instruments and other long term payable) less cash and cash equivalents. Capital comprises all components of equity.

It is the Group’s strategy to keep the net debt-to-capital ratio at a reasonable level. In order to maintain or adjust the ratio, the Group may adjust the amount of dividends paid to shareholders, issue new shares, return capital to shareholders, raise new debt financing or sell assets to reduce debt.

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The net debt-to-capital ratio at 30th June, 2009 and 2008 was as follows:

Note Bank loans 22 Obligations under finance leases 23 Trade and other payables 21 Derivative financial instruments 25 Amount due to the CS 27 Other financial liabilities 26 Total debt Less: Cash and cash equivalents 20 Net (cash)/debt Total equity 28 Net debt-to-capital ratio	The Group 2009 2008 RMB’000 RMB’000 266,972 283,822 — 3,101 143,926 162,810 — 165,067 — 16,089 164,443 — 575,341 630,889 (648,450) (880,366) (73,109) (249,477) 634,465 926,133 N/A N/A	The Company 2009 2008 RMB’000 RMB’000 26,388 99,022 — — 78,735 14,337 — 165,067 — 16,089 164,443 — 269,566 294,515 (1,175) (8,475) 268,391 286,040 94,502 235,179 284% 122%

As imposed by a bank loan agreement between a bank and the Company, the Group is required to maintain a ratio of ‘‘consolidated gross borrowings’’ to ‘‘equity’’ not exceeding 100%. For the purpose of this capital requirement, ‘‘consolidated gross borrowings’’ is defined as the aggregate of secured and unsecured financial indebtedness of the Group, and ‘‘equity’’ is defined as the aggregate of the amount paid up or credited as paid up on the issued share capital (other than any redeemable share capital) of the Company.

Other than the above, neither the Company nor any of its subsidiaries were subject to externally imposed capital requirements in either the current or prior year.

29. EMPLOYEE RETIREMENT BENEFITS

Hong Kong

The Group operates a Mandatory Provident Fund Scheme (the ‘‘MPF Scheme’’) under the Hong Kong Mandatory Provident Fund Schemes Ordinance for employees employed under the jurisdiction of the Hong Kong Employment Ordinance. The MPF Scheme is a defined contribution retirement scheme administered by independent trustees. Under the MPF Scheme, the employer and its employees are each required to make contributions to the MPF Scheme at 5% of the employees’ relevant income, subject to a cap of monthly relevant income of HK$20,000. Contributions to the MPF Scheme vest immediately.

PRC, other than Hong Kong

The PRC subsidiaries of the Group participates in a mandatory central pension scheme organised by the PRC government for certain of its employees, the assets of which are held separately from those of the Group. Contributions made are based on a percentage of the eligible employees’ salaries and are charged to profit or loss as they became payable, in accordance with the rules of the scheme. The employers’ contributions vest fully once they are made. Under this scheme, retirement benefits of existing and retired employees are payable by the relevant scheme administrators and the Group has no further obligations beyond the annual contributions.

The Group does not have any other pension schemes for its employees in respect of the subsidiaries outside Hong Kong and PRC. In the opinion of the directors of the Company, the Group did not have any significant liabilities beyond the above contributions in respect of the retirement benefits of its employees.

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30. EQUITY SETTLED SHARE-BASED TRANSACTIONS

The Company adopted a share option scheme for a period of 10 years commencing from 9th January, 2003. Under the terms of this scheme, the exercise price of options will be determined by the board of directors of the Company and should not be less than the highest of (i) the nominal value of the Company’s ordinary shares, (ii) the closing price of the ordinary shares on the Main Board of the Stock Exchange on the date of grant and (iii) the average closing price of the ordinary shares on the Main Board of the Stock Exchange for the five business days immediately preceding the date of grant. The options vest immediately at the date of grant and are then exercisable within a period of three years. Each option gives the holder the right to subscribe for one ordinary share in the Company.

• (a) The terms and conditions of the grants that existed during the years are as follows, whereby all options are settled by physical delivery of shares:

Options granted to employees: — on 4th September, 2006 Options granted to directors: — on 4th September, 2006 Total share options	Number of instruments Vesting conditions Contractual life of options 5,500,000 Immediate at the date of grant 3 years 6,500,000 Immediate at the date of grant 3 years 12,000,000

• (b) The number and weighted average exercise prices of share options are as follows:

Outstanding at 1st July, 2008/2007 Exercised during the year Lapsed during the year Outstanding at 30th June, 2009/2008 Exercisable at 30th June, 2009/2008	2009 Weighted average exercise price Number of options HK$1.038 12,000,000 — — HK$1.038 (1,500,000) HK$1.038 10,500,000 10,500,000	2008 Weighted average exercise price Number of options HK$1.072 16,000,000 HK$1.172 (4,000,000 — — HK$1.038 12,000,000 12,000,000	2008 Weighted average exercise price Number of options HK$1.072 16,000,000 HK$1.172 (4,000,000 — — HK$1.038 12,000,000 12,000,000
			12,000,000
			12,000,000

No share option was exercised during the year. The weighted average share price at the date of exercise for shares options exercised during the year ended 30th June, 2008 was RMB1.604.

The options outstanding at 30th June, 2009 had an exercise price of RMB1.038 (2008: RMB1.038) and a weighted average remaining contractual life of 0.17 years (2008: 1.17 years).

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APPENDIX II

(c) Fair value of share options and assumptions

The fair value of services received in return for share options granted is measured by reference to the fair value of share options granted. The estimate of the fair value of the services received was measured based on Black-Scholes-Merton Option Pricing Model as follows:

	Options granted on
	4th September, 2006
Fair value at measurement date	HK$0.2554
Exercise price	HK$1.038
Risk free rate	3.933%
Nature of the share options	Call
Expected life	3 years
Expected volatility	37.659%
Expected dividend yield	2.590%

The expected volatility is based on the historical share price of the Company over the 260 trading days immediately before the valuation date. Changes in the subjective input assumptions could materially affect the fair value estimate.

The above calculation is based on the assumption that there is no material difference between the expected volatility over the whole life of the options and the historical volatility of the ordinary shares as set out above.

31. FINANCIAL INSTRUMENTS

Exposure to credit, liquidity, interest rate and currency risks arises in the normal course of the Group’s business. The Group is also exposed to equity price risk arising from its equity investments in other entities. These risks are limited by the Group’s financial management policies and practices described below.

(a) Credit risk

The Group’s credit risk is primarily attributable to deposits with banks and trade and other receivables. Management has a credit policy in place and the exposures to these credit risks are monitored on an ongoing basis.

The major concentration of credit risk arises from exposures to deposits placed in financial institutions operating in one geographical region, the PRC. The Group only places deposits with the major financial institutions in the PRC.

The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheets.

Except for the financial guarantees given by the Company as set out in note 22(vii), the Company does not provide any other guarantees which would expose the Company to credit risk. The maximum exposure to credit risk in respect of these financial guarantees at the balance sheet date is disclosed in note 22(vii).

For year ended 30th June, 2009, the largest and the five largest customers of the Group in aggregate accounted for approximately 15% (2008: 12%) and 44% (2008: 41%) respectively of the Group’s total sales. At 30th June, 2009, approximately 26% (2008: 1%) and 46% (2008: 36%) of trade receivables was due from the largest and the five largest customers. As a result, a termination of the relationship or a reduction in orders from the five largest customers would have a material impact on the Group’s results of operations and financial condition. Credit evaluations are performed on all customers requiring credit over a certain amount. Normally, these receivables are due within 90 days to 180 days from the date of billing and the Group does not obtain collateral from customers.

(b) Liquidity risk

Individual operating entities within the Group are responsible for their own cash management, including the short term investment of surplus cash and the raising of loans to cover expected cash requirements, subject to approval by the Company’s board when the borrowings exceed certain predetermined levels of authority. The Group regularly monitors

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

current and expected liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term.

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

The Group

Bank loans Trade and other payables Other financial liabilities Bank loans Obligations under finance leases Trade and other payables Amount due to the CS			2009
	Carrying amount RMB’000 266,972 143,926 164,443 575,341	Total contractual undiscounted cash flow RMB’000 276,202 143,926 164,443 584,571	Within 1 year or on demand RMB’000 258,687 143,926 164,443 567,056 2008	More than 1 year but less than 2 years RMB’000 4,937 — — 4,937	More than 2 years but less than 5 years RMB’000 12,578 — —
					12,578
	Carrying amount RMB’000 283,822 3,101 162,810 16,089 465,822	Total contractual undiscounted cash flow RMB’000 295,793 3,260 162,810 19,361 481,224	Within 1 year or on demand RMB’000 264,757 2,741 162,810 — 430,308	More than 1 year but less than 2 years RMB’000 31,036 519 — — 31,555	More than 2 years but less than 5 years RMB’000 — — — 19,361
					19,361

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APPENDIX II

The Company

Bank loans Other payables Other financial liabilities			2009
	Carrying amount RMB’000 26,388 78,735 164,443 269,566	Total contractual undiscounted cash flow RMB’000 26,629 78,735 164,443 269,807	Within 1 year or on demand RMB’000 26,629 78,735 164,443 269,807	More than 1 year but less than 2 years RMB’000 — — — —	More than 2 years but less than 5 years RMB’000 — — —
					—

Bank loans Other payables Amount due to the CS			2008
	Carrying amount RMB’000 99,022 14,337 16,089 129,448	Total contractual undiscounted cash flow RMB’000 103,478 14,337 19,361 137,176	Within 1 year or on demand RMB’000 103,478 14,337 — 117,815	More than 1 year but less than 2 years RMB’000 — — — —	More than 2 years but less than 5 years RMB’000 — — 19,361
					19,361

For the years ended 30th June, 2008 and 2009, under the Deed executed by the CS (see note 27), the Group’s liquidity risk arising from the Swap Agreements (see note 25) and the early termination of the Swap Agreements (see note 26) was fully covered.

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(c) Interest rate risk

The Group’s interest rate risk arises primarily from bank loans. Bank loans issued at variable rates and at fixed rates expose the Group to cash flow interest rate risk and fair value interest rate risk respectively. The Group’s interest rate profile of the non-derivative financial instruments as monitored by management is set out in (i) below.

(i) Interest rate profile

The following table details the interest rate profile of the Group’s and the Company’s net borrowings (being interest-bearing borrowings less cash and cash equivalents and pledged deposits) at the balance sheet date.

Net fixed rate borrowings: Bank loans Net variable rate borrowings: Obligations under finance leases Bank loans Other financial liabilities Less: Pledged deposits Less: Cash and cash equivalents Total net (deposits)/ borrowings Net fixed rate borrowings as a percentage of total net borrowings	The Group 2009 2008 Effective interest rate Effective interest rate % RMB’000 % RMB’000 5.35 115,584 8.19 53,800 — — 4.77 3,101 5.15 151,388 6.15 230,022 1.28 164,443 — — 0.36 (8,662) 0.72 (4,307) 0.36 (648,450) 0.72 (880,366) (341,281) (651,550) (225,697) (597,750) N/A N/A	The Company	The Company
		2009 2008 Effective interest rate Effective interest rate % RMB’000 % RMB’000 — — — — — — — — 2.72 26,388 4.50 99,022 1.28 164,443 — — — — — — 0.01 (1,175) 0.36 (8,475 189,656 90,547 189,656 90,547 0% 0%
			— 99,022 — — (8,475
			90,547
			90,547
			0%

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APPENDIX II

(ii) Sensitivity analysis

The Group’s sensitivity to interest rate risk at each balance sheet date with all other variables were held constant is as follows:

(Decrease)/increase in loss for the year (2008: (increase)/decrease in profit for the year) if interest rates has been 100 basis points higher: — for net variable rate borrowings — for the Swap Agreements (note 25) (Increase)/decrease in loss for the year (2008: (increase)/decrease in profit for the year) if interest rates has been 100 basis points lower: — for net variable rate borrowings — for the Swap Agreements (note 25)	2009 RMB’000 (1,363) — (1,363) 1,363 — 1,363	2008 RMB’000 (1,960) 3,352 1,392 1,960 96 2,056

The sensitivity analysis above has been determined assuming that the change in interest rates had occurred at the balance sheet date and had been applied to the exposure to interest rate risk for both derivative and nonderivative financial instruments in existence at that date. The analysis has been performed on the same basis for 2008.

For the year ended 30th June, 2008, apart from the changes in interest rate, the fair value of the Swap Agreements would be significantly affected by the applicable interest rate curve, the applicable interest rate curve projections, the volatility and correlation of applicable interest rate market and the market expectations of the forward rates of the underlying composites. It is not practicable without undue delay and cost to estimate how profit of the Group would have been affected by changes in each of these risk variable that were reasonably possible as at 30th June, 2008. However, it is reasonably expected that such effects on profit or loss of the Group would be significant. As disclosed in note 25, the Swap Agreements were terminated during the year ended 30th June, 2009.

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(d) Currency risk

• (i) The Group is exposed to currency risk primarily through sales and purchases and certain financial assets and liabilities that are denominated in a currency other than the functional currency of the operations to which they relate. The currencies giving rise to this risk are primarily Euros, United States Dollars and Hong Kong Dollars.

• (ii) Exposure to currency risk

The following table details the Group’s and the Company’s exposure at the balance sheet date to currency risk arising from recognised assets or liabilities denominated in a currency other than the functional currency of the entity to which they relate.

The Group

Trade and other receivables Amount due from the CS Cash and cash equivalents Trade and other payables Bank loans Other financial liabilities Amount due to the CS Overall net exposure		2009	Hong Kong Dollars ’000 1,998 — 125 (1,756) — — — 367		2008
	United States Dollars ’000 3,223 13,911 331 (327) (3,837) (23,911) — (10,610)	Euros ’000 326 — 30 (45) — — — 311		United States Dollars ’000 3,438 — 772 (398) (14,431) — (1,924) (12,543)	Euros ’000 294 — 79 (45) — — — 328	Hong Kong Dollars ’000 2,131 — 603 (1,640 — — —
						1,094

The Company

Trade and other receivables Amount due from the CS Cash and cash equivalents Bank loans Other financial liabilities Amount due to the CS Overall net exposure		2009	Hong Kong Dollars ’000 — — — — — — —		2008
	United States Dollars ’000 — 13,911 103 (3,837) (23,911) — (13,734)	Euros ’000 — — — — — — —		United States Dollars ’000 — — 206 (14,431) — (1,924) (16,149)	Euros ’000 — — — — — — —	Hong Kong Dollars ’000 — — — — — —
						—

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(iii) Sensitivity analysis

The following table indicates the instantaneous change in the Group’s (loss)/profit after taxation (and retained profits) and other components of consolidated equity that would arise if foreign exchange rates to which the Group has significant exposure at the balance sheet date had changed at that date, assuming all other risk variables remained constant.

The Group

United States Dollars Euros Hong Kong Dollars	2009 Increase/ (decrease) in foreign exchange rates Effect on loss after taxation and retained profits Effect on other components of equity RMB’000 RMB’000 10% (1,776) — (10)% 1,776 — 10% 240 — (10)% (240) — 10% 44 — (10)% (44) —	2008
		Increase/ (decrease) in foreign exchange rates Effect on profit after taxation and retained profits Effect on other components of equity RMB’000 RMB’000 10% (2,059) — (10)% 2,059 — 10% 291 — (10)% (291) — 10% 99 — (10)% (99) —

Results of the analysis as presented in the above table represent an aggregation of the instantaneous effects on each of the Group entities’ (loss)/profit after taxation and equity measured in the respective functional currencies, translated into Renminbi at the exchange rates ruling at the balance sheet date for presentation purposes.

The sensitivity analysis assumes that the change in foreign exchange rates had been applied to re-measure those financial instruments held by the Group which expose the Group to foreign currency risk at the balance sheet date, including inter-company payables and receivables within the Group which are denominated in a currency other than the functional currencies of the lender or the borrower. The analysis excludes differences that would result from the translation of the financial statements of operations outside the PRC into the Group’s presentation currency. The analysis has been performed on the same basis for 2008.

(e) Equity price risk

The Group is exposed to equity price changes arising from equity investments classified as trading securities which are listed (see note 16).

The Group’s listed investments are two mutual funds listed on the Shenzhen Stock Exchange and the Shanghai Stock Exchange respectively. The management monitors regularly the performance of the investments against expectation, as well as the Group’s liquidity needs.

(f) Fair values

The non-trade balances between the Company and its subsidiaries and the advances to directors are unsecured, interest-free and repayable on demand. The amount receivable from the CS at 30th June, 2009 is unsecured, interest-free and has no fixed terms of repayment. Given these terms, it is not meaningful to disclose their fair values.

All other significant financial assets and liabilities are carried at amounts not materially different from their fair values as at 30th June, 2009 and 2008.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(g) Reliance on major suppliers

For year ended 30th June, 2009, the largest and the five largest suppliers of the Group in aggregate accounted for approximately 14% (2008: 12%) and 41% (2008: 55%) respectively of the Group’s total purchases, evidencing a significant reliance on the Group’s largest supplier for the year ended 30th June, 2009. The Group maintains several vendors for each major supply in order to diversify its vendor base. During the years ended 30th June, 2009 and 2008, the Group had not encountered any material disruption of supply of raw materials and components used in the Group’s manufacture of PCBs.

32. COMMITMENTS

• (a) Capital commitments outstanding at 30th June, 2009 not provided for in the financial statements were as follows:

Contracted for Authorised but not contracted for	The Group 2009 2008 RMB’000 RMB’000 62,559 35,393 43,296 52,978 105,855 88,371	The Group 2009 2008 RMB’000 RMB’000 62,559 35,393 43,296 52,978 105,855 88,371
		88,371

• (b) At 30th June, 2009, the total future minimum lease payments in respect of buildings under non-cancellable operating leases are payable as follows:

Within 1 year After 1 year but within 5 years	The Group 2009 2008 RMB’000 RMB’000 461 1,441 120 430 581 1,871	The Company 2009 2008 RMB’000 RMB’000 — — — — — —	The Company 2009 2008 RMB’000 RMB’000 — — — — — —
			—

The Group leases a number of properties under operating leases. The leases typically run for an initial period of two to five years, with an option to renew each lease upon expiry when all terms are renegotiated. None of the leases includes contingent rentals.

• (c) At 30th June, 2009, a subsidiary of the Company is required to inject capital of RMB88,438,000 (2008: RMB37,389,000) into a wholly owned subsidiary of that subsidiary in the PRC.

33. CONTINGENT LIABILITIES

On 10th November, 2008, Deutsche Bank AG served a notice to the Company to early terminate the Swap Agreements effective on 12th November, 2008 as a result of the Company not paying the interest payment under the Swap 2 on the due date in October 2008. In addition, the Company received a statement dated 13th November, 2008 from Deutsche Bank AG requesting a payment of US$23,714,693 (equivalent to approximately RMB163,092,000) in total as a result of the early termination of the Swap Agreements. Deutsche Bank AG will in due course claim under the indemnity of their reasonable out-of-pocket expenses including legal fees, execution fees and stamp duty, incurred by reason of the enforcement and protection of their rights under the master agreement of the Swap Agreements or by reason of the early termination entered thereunder, including but not limited to costs of collection.

In March 2009, the Company received a Writ of Summons (‘‘the Writ’’) issued by Deutsche Bank AG as plaintiff, with the Company named as defendant, in a claim arising from the Swap Agreements.

In the Writ, the plaintiff claims against the Company for:

• (a) Damages in the liquidated sum of US$23,714,693;

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

• (b) Interest on the said sum of US$23,714,693 at the contractual rate;

• (c) Further or alternatively, interest at such rate and for such period as the Court thinks fit under sections 48 and 49 of the High Court Ordinance (Cap 4);

• (d) Further or other relief; and

• (e) Costs.

After consultation with external legal counsel in June 2009, the Company filed a defence and counterclaim against Deutsche Bank AG and an employee of Deutsche Bank AG to rescind the Swap Agreements transactions for the reason that it had been misrepresented in the true risks associated with the Swap Agreements. The directors have been advised by their external legal counsel that the case will not be concluded in a short period of time and that the outcome is uncertain. Based on the available information to date, the directors are of the opinion that no provision for legal or other related costs is required as at 30th June, 2009.

In addition, under the Deed, the CS undertakes to perform the interest payment obligation of the Company under the Swap Agreements as disclosed in note 27 and is obligated to indemnify the Company against all liabilities, claims, damages, costs and expenses which the Company may suffer by reason of the CS’s failure in performance of the said obligations. Accordingly, the CS will honour his obligation to indemnify the Company should the Company be found liable to Deutsche Bank AG’s claim.

34. ACCOUNTING ESTIMATES AND JUDGMENTS

Key sources of estimation uncertainty

The method, estimates and judgements the directors use in applying the Group’s accounting policies have a significant impact on the Group’s financial position and operating results. Notes 25 and 30 contain information about the assumptions and their risk factors relating to fair value of the Swap Agreements and share options granted. Other key sources of estimation uncertainty are as follows:

Impairment of assets

The Group reviews the carrying amounts of the assets at each balance sheet date to determine whether there is objective evidence of impairment. When indication of impairment is identified, management prepares a discounted future cash flow to assess the differences between the carrying amount and value in use and provide for impairment losses, if appropriate. Any change in the assumptions adopted in the cash flow forecasts would increase or decrease in the provision for impairment losses and affect the net asset value of the Group and the Company.

Impairment losses for bad and doubtful debts are assessed and provided based on the management’s regular review of ageing analysis and evaluation of collectibility. A considerable level of judgement is exercised when assessing the credit worthiness and past collection history of each individual customer.

An increase or decrease in the above impairment loss would affect the results of the Group and the Company in future years.

Write-down of inventories

The Group reviews the carrying amounts of the inventories at each balance sheet date to determine whether the inventories are carried at the lower of cost and net realisable value in accordance with accounting policy as set out in note 1(j). Management estimates the net realisable value based on the current market situation and historical experience for similar inventories. Any change in the assumptions would increase or decrease the amount of inventories write-down or the related reversals of write-down made in prior years and affect the Group’s net asset value.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Valuation of buildings held for own use

Buildings held for own use are stated at their revalued amount less accumulated depreciation and impairment losses. Revaluations are performed regularly. As disclosed in note 13(c), as at 30th June, 2008 the buildings held for own use were revalued by independent professional valuers on an open market value basis. Such valuations are based on certain assumptions, which are subject to uncertainty and might materially differ from the actual results. Any increase or decrease in the valuations would affect the net asset value and the results of the Group in future years.

Recognition of deferred tax assets

Recognition of deferred tax assets, which principally relates to deductible temporary differences and tax losses, depends on whether it is probable that future taxable profits or taxable temporary differences will be available against which deferred tax assets can be utilised. In cases where the actual future taxable profits or taxable temporary differences generated are less than expected, a reversal of deferred tax assets may arise, which will be recognised in profit or loss for the period in which such a reversal takes place.

Depreciation

Depreciation is calculated to write off the cost of items of property, plant and equipment, less their estimated residual value, if any, using the straight-line method over their estimated useful lives. The Group reviews the estimated useful lives and residual values of the assets annually in order to determine the amount of depreciation expense to be recorded during any reporting period. The useful lives and residual values are based on the Group’s historical experience with similar assets and taking into account anticipated technological changes. The depreciation expense for future periods is adjusted if there are significant changes from previous estimates.

35. MATERIAL RELATED PARTY TRANSACTIONS

In addition to the transactions and balances disclosed elsewhere in these financial statements, the Group entered into the following material related party transactions:

Note Lease rental charged by He Yu Zhu (i) Remuneration for key management personnel (ii) — short-term employee benefits	The Group 2009 2008 RMB’000 RMB’000 277 277 3,563 4,024

Notes:

• (i) During the year, the Group entered into a lease arrangement with Ms He Yu Zhu, the spouse of Mr Lin Wan Qaing who is the controlling shareholder and a director of the Company, for leasing of an office premises in Fuzhou, the PRC. Office rentals are payable at a pre-determined amount per month by reference to market rates in accordance with the terms of the tenancy agreement signed by the Group and Ms He Yu Zhu.

• (ii) Remuneration for key management personnel includes amounts paid to the Company’s directors as disclosed in note 7. Total remuneration is included in staff costs (see note 5(b)).

36. POST BALANCE SHEET EVENT

After the restoration which was completed during the year as disclosed in notes 5(d) to the financial statements, the building and underground infrastructure of one of the Company’s subsidiaries, Shuangxiang, was damaged again by land subsidence subsequent to the balance sheet date. Up to the date of issue of these financial statements, the directors confirm that the damage did not affect the business operations of Shuangxiang and repair and maintenance work is expected to be performed and accounted for in the financial statements in future periods. At the date of issue of these financial statements, the directors are unable to estimate reliably the costs to be incurred as the Group has not yet concluded with the relevant professionals on how to carry out the restoration.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

37. POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE YEAR ENDED 30TH JUNE, 2009

Up to the date of issue of these financial statements, the HKICPA has issued a number of amendments, new standards and interpretations which are not yet effective for the year ended 30th June, 2009 and which have not been adopted in these financial statements.

The Group is in the process of making an assessment of what the impact of these amendments, new standards and new interpretations is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to result in a restatement of the Group’s or the Company’s results of operations and financial position.

In addition, the following developments are expected to result in amended disclosures in the financial statements including restatement of comparative amounts in the first period of adoption:

		Effective for accounting periods
		beginning on or after
HKFRS 8	Operating segments	1st January, 2009
Revised HKAS 1	Presentation of financial statements	1st January, 2009
Amendments to HKFRS 7	Financial instruments: Disclosures	1st July, 2009
	— improving disclosures about
	financial instruments
Amendments to HKAS 27	Consolidated and separate	1st July, 2009
	financial statements

3. INDEBTEDNESS STATEMENT

Borrowings

At the close of business on 31st October, 2009, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this Composite Document, the Group had total bank borrowings of RMB246,241,673. Details of the total borrowings are summarised below:

Secured bank loans — guaranteed — unguaranteed Unsecured bank loans — guaranteed — unguaranteed Total bank borrowings	The Group RMB’000 54,000 87,442
	141,442
	37,000 67,800
	104,800
	246,242

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Interest in certain leasehold land held for own use under operating lease and buildings held for own use of the Group and equity interest of certain subsidiaries of the Company were secured for bank loans.

Other financial liabilities

At the close of business on 31st October, 2009, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this Composite Document, the Group had other financial liabilities of RMB165,001,025. The balance represents the amount demanded by Deutsche Bank AG and the interest accrued thereon for the period from 12th November, 2008 to 31st October, 2009 as a result of the early termination of the Interest Rate Swaps by Deutsche Bank AG.

Contingent liabilities

On 10th November, 2008, Deutsche Bank AG served a notice to the Company to early terminate the Swap Agreements effective on 12th November, 2008 as a result of the Company not paying the interest payment under one of the Swap Agreements on the due date in October 2008. In addition, the Company received a statement dated 13th November, 2008 from Deutsche Bank AG requesting a payment of US$23,714,693 (equivalent to approximately RMB163,092,000) in total as a result of the early termination of the Swap Agreements. Deutsche Bank AG will in due course claim under the indemnity of their reasonable out-of-pocket expenses including legal fees, execution fees and stamp duty, incurred by reason of the enforcement and protection of their rights under the master agreement of the Swap Agreements or by reason of the early termination entered thereunder, including but not limited to costs of collection.

In March 2009, the Company received the Writ issued by Deutsche Bank AG as plaintiff, with the Company named as defendant, in a claim arising from the Swap Agreements.

In the Writ, the plaintiff claims against the Company for:

• (a) Damages in the liquidated sum of US$23,714,693;

• (b) Interest on the said sum of US$23,714,693 at the contractual rate;

• (c) Further or alternatively, interest at such rate and for such period as the Court thinks fit under sections 48 and 49 of the High Court Ordinance (Cap 4);

• (d) Further or other relief; and

• (e) Costs.

After consultation with external legal counsel in June 2009, the Company filed a defence and counterclaim against Deutsche Bank AG and an employee of Deutsche Bank AG to rescind the Swap Agreements transactions for the reason that it had been misrepresented in the true risks associated with the Swap Agreements. The Directors have been advised by their external legal counsel that the case will not be concluded in a short period of time and that the outcome is uncertain.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

In addition, under the Deed of Indemnify, Mr. Lin undertakes to perform the interest payment obligation of the Company under the Swap Agreements as disclosed in note 27 to the financial statements as set out in this Appendix II and is obligated to indemnify the Company against all liabilities, claims, damages, costs and expenses which the Company may suffer by reason of Mr. Lin’s failure in performance of the said obligations. Accordingly, Mr. Lin will honour his obligation to indemnify the Company should the Company be found liable to Deutsche Bank AG’s claim.

As disclosed in the Open Offer Announcement, the Company entered into the Settlement Agreement on 16th November, 2009 with Deutsche Bank AG for settlement of the Action. Under the Settlement Agreement, the Company is obliged to pay less than US$23,714,693 (equivalent to approximately HK$184,974,605), as full and final settlement of the Action, of which Mr. Lin is obliged to pay HK$29.2 million to the Company for settlement of his obligation under the Deed of Indemnity. Based on the available information up to the Latest Practicable Date, the Directors are of the opinion that no provision for legal or other related costs is required as at 31st October, 2009. Please also refer to the paragraph headed ‘‘8. Litigation’’ in Appendix III of this Composite Document.

Disclaimers

Save as aforesaid and apart from intra-group liabilities and normal trade payables arising from the ordinary course of business of the Group in the approximate sum of RMB66.6 million as at 31st October, 2009, the Group did not have any loan capital issued or agreed to be issued, bank overdrafts, debt securities issued and outstanding, and authorized or otherwise created but unissued and term loans or other borrowings, indebtedness in the nature of borrowings, liabilities under acceptance (other than normal trade bills) or acceptance credits, debentures, mortgages, charges, finance lease or hire purchase commitments, which are either guaranteed, unguaranteed, secured or unsecured, guarantees or other material contingent liabilities outstanding at the close of business on 31st October, 2009.

Save as disclosed above relating to the settlement of the Action between the Company and Deutsche Bank AG, the Directors have confirmed that there have been no material changes in the indebtedness and contingent liabilities of the Group since 31st October, 2009, up to and including the Latest Practicable Date.

4. MATERIAL CHANGE

As at the Latest Practicable Date, the Directors are not aware of any material change in the financial or trading position or outlook of the Group since 30th June, 2009, the date to which the latest published audited financial statements of the Group were made up.

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STATUTORY AND GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

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

As at the date of this Composite Document, the directors of the Offeror consist of Mr. Sze Ming Yee and Ms. Xu Yue Yue. The directors of the Offeror jointly and severally accept full responsibility for the accuracy of information contained in this Composite Document (other than those relating to the Company) and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in this Composite Document (other than those expressed by the Company) have been arrived at after due and careful consideration and there are no other facts not contained in this Composite Document (other than those relating to the Company) the omission of which would make any statement in the Composite Document misleading.

2. SHARE CAPITAL

a. Shares

The authorised and issued Shares of the Company as at the Latest Practicable Date were as follows:

Authorised	HK$
1,000,000,000 Shares as at the Latest Practicable Date	100,000,000
Issued and fully paid or credited as fully paid
558,965,000 Shares as at the Latest Practicable Date	55,896,500
New shares to be issued under the Open Offer
279,582,500 Open Offer Shares	27,958,250
Total number of Shares issued and to be issued upon completion of the	Open Offer
838,547,500 Shares	83,854,750

All the issued Shares rank pari passu with each other in all respects including the rights as to voting, dividends and return of capital.

No new Share was issued since 30th June, 2009, the date to which the latest audited financial statements of the Company were made up, and up to the Latest Practicable Date.

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STATUTORY AND GENERAL INFORMATION

APPENDIX III

b. Options

Since 30th June, 2009, the date to which the latest audited financial statements of the Company were made up, and up to the Latest Practicable Date, no share options were exercised and no Shares had been issued due to the exercise of share options of the Company. As at the Latest Practicable Date, no share options of the Company exercisable were outstanding.

Saved as disclosed above, the Company does not have other class of securities, outstanding options, derivatives, warrants or other securities which are convertible or exchangeable into Shares.

3. MARKET PRICES

The table below shows the closing prices per Share on the Stock Exchange on (i) the Latest Practicable Date; (ii) 20th November, 2009, being the Last Trading Day, adjusted as a result of the Open Offer; and (iii) the last trading days of each of the calendar months during the Relevant Period, adjusted as a result of the Open Offer.

Date	Closing Price
	HK$
29th May, 2009	0.277
30th June, 2009	0.303
31st July, 2009	0.330
31st August, 2009	0.327
30th September, 2009	0.327
30th October, 2009	0.287
Last Trading Day	0.243
30th November, 2009	0.460
Latest Practicable Date	0.465

The highest and lowest closing price per share (adjusted as a result of the Open Offer) as quoted on the Stock Exchange during the Relevant Period were HK$0.5 per Share on 4th December, 2009, and HK$0.243 per Share on 20th November, 2009 respectively.

4. DISCLOSURE OF INTERESTS AND DEALINGS

• a. As at the Latest Practicable Date, the interests of the substantial Shareholders in the Company are as follows:

		Number of	% of total
Name of Shareholders	Capacity	Shares	issued Shares
The Offeror (Note 1)	Beneficial owner	399,614,280	71.49
Sze Ming Yee (Note 1)	Interest of controlled	399,614,280	71.49
	corporation
Zhan Hongwei (Note 2)	Beneficial owner	110,000,000	19.68
Upbest Securities Company	Other	279,482,500	50.00
Limited (Note 3)
Atlantis Investment Management	Investment Manager	45,000,000	8.05
Limited

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STATUTORY AND GENERAL INFORMATION

APPENDIX III

• Note 1: The Offeror is wholly owned by Sze Ming Yee, who is also a director of the Offeror. The Offeror holds 230,131,780 Shares and in addition is also deemed to be interested in 169,482,500 Shares by virtue of its entering into the Sub-Underwriting Agreement with Upbest Securities Company Limited on 16th November, 2009 to sub-underwrite 169,482,500 Open Offer Shares.

• Note 2: Zhan Hongwei is deemed to be interested in 110,000,000 Shares by virtue of its entering into the SubUnderwriting Agreement with Upbest Securities Company Limited on 16th November, 2009 to subunderwrite 110,000,000 Open Offer Shares.

• Note 3: Upbest Securities Company Limited is deemed to be interested in 279,482,500 Shares by virtue of its entering into an underwriting agreement with the Company on 16th November, 2009 to fully underwrite 279,482,500 Open Offer Shares.

Save for the interests or long positions set out above, the Offeror and parties acting in concert with it did not own or control any Shares and relevant securities (as defined under Note 4 to Rule 22 of the Takeovers Code) of the Company.

• b. During the Relevant Period, save as the acquisition of the Sale Shares by the Offeror from Mr. Lin, none of the Offeror and parties acting in concert with it had dealt in any Shares and relevant securities (as defined under Note 4 to Rule 22 of the Takeovers Code) of the Company.

• c. Save as the interest of Mr. Sze Ming Yee, the ultimate beneficial owner and a director of the Offeror, as disclosed above, none of the Offeror’s directors own or control any Shares and relevant securities (as defined under Note 4 to Rule 22 of the Takeovers Code) of the Company.

• d. Save as the acquisition of the Sale Shares from Mr. Lin by the Offeror, in which Mr. Sze Ming Yee is the ultimate beneficial owner and a director of the Offeror, none of the Offeror’s directors had dealt in any Shares and relevant securities (as defined under Note 4 to Rule 22 of the Takeovers Code) of the Company during the Relevant Period.

• e. As at the Latest Practicable Date, the Company was not interested in any relevant securities (as defined under Note 4 to Rule 22 of the Takeovers Code) of the Offeror.

• f. During the Relevant Period, the Company had not dealt in any relevant securities (as defined under Note 4 to Rule 22 of the Takeovers Code) of the Offeror.

• g. As at the Latest Practicable Date, none of the Directors was interested in any relevant securities (as defined under Note 4 to Rule 22 of the Takeovers Code) of the Offeror and in the Company.

• h. During the Relevant Period, none of the directors of the Company had dealt in any relevant securities (as defined under Note 4 to Rule 22 of the Takeovers Code) of the Offeror.

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STATUTORY AND GENERAL INFORMATION

APPENDIX III

• i. Save as disclosed below, none of the directors of the Company had dealt in Shares and the relevant securities (as defined under Note 4 to Rule 22 of the Takeovers Code) of the Company during the Relevant Period:

				Number of	% of total
Name of	Date of grant		Exercise	underlying	issued	Nature of
director	of options	Exercise period	price	Shares	Shares	transaction
			(HK$)
Hu Zhao Rui	4th September,	4th September, 2006	1.038	1,000,000	0.18	Lapse of share
	2006	to 3rd September,				options
		2009
Lin Wan Xin	4th September,	4th September, 2006	1.038	1,000,000	0.18	Lapse of share
	2006	to 3rd September,				options
		2009
Xiang Song	4th September,	4th September, 2006	1.038	1,500,000	0.27	Lapse of share
	2006	to 3rd September,				options
		2009

No option money had been paid for the share options in the table above.

• j. As at the Latest Practicable Date, none of the subsidiaries of the Company, pension fund of the Company or any of its subsidiaries, or advisers to the Company as specified in class (2) of the definition of associate under the Takeovers Code (but excluding exempt principal traders) had any shareholdings in the Company. During the Relevant Period, none of the parties referred to in this paragraph had dealt in the relevant securities (as defined under Note 4 to Rule 22 of the Takeovers Code) of the Company.

• k. As at the Latest Practicable Date, no fund manager (other than exempt fund managers) connected with the Company managing on a discretionary basis had any shareholdings in the Company. During the Relevant Period, no fund manager (other than exempt fund managers) connected with the Company managing on a discretionary basis had dealt in the relevant securities (as defined under Note 4 to Rule 22 of the Takeovers Code) of the Company.

5. OTHER ARRANGEMENTS

• a. As at the Latest Practicable Date, no person has irrevocably committed to accept or reject the General Offer.

• b. As at the Latest Practicable Date, none of the Directors have any interest in the Shares. As such, none of the Directors are concerned with whether to accept or reject the General Offer in respect of their own beneficial shareholdings.

• c. No relevant securities (as defined under Note 4 to Rule 22 of the Takeovers Code) of the Company to be acquired in pursuance of the General Offer will be transferred, charged or pledged to any other persons.

• d. There is no arrangement of the kind referred to in Note 8 of Rule 22 of the Takeovers Code which existed between the Offeror or any party acting in concert with it or associates of the Offeror and any other person.

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APPENDIX III

• e. There is no arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code between the Company or any person who is an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of associate under the Takeovers Code and any other person.

• f. During the Relevant Period, none of the Offeror and parties acting in concert with it, the Company or the Directors have borrowed or lent any relevant securities (as defined under Note 4 to Rule 22 of the Takeovers Code) of the Company.

• g. There is no agreement, arrangement or understanding (including any compensation arrangement) between the Offeror or any party acting in concert with it and any of the existing or recent directors of the Company or any existing or recent Shareholders having any connection with or dependence upon the General Offer.

• h. There is no agreement or arrangement between any Director and any other person which is conditional on or dependent upon the outcome of the General Offer or otherwise connected with the General Offer.

• i. No benefit will be given to any Director as compensation for loss of office or otherwise in connection with the General Offer.

• j. There is no agreement or arrangement to which the Offeror is a party which relate to the circumstances in which it may or may not invoke or seek to invoke a condition to the General Offer.

• k. There is no material contract entered into by the Offeror in which any Director has a material personal interest.

6. DIRECTORS’ SERVICE CONTRACTS

• a. Each of Mr. Tu Shuguang and Mr. Chan Kin entered into a service contract with the Company on 25th September, 2009 for a term of three years from 25th September, 2009 until 24th September, 2012, with a fixed term of one year commencing on 25th September, 2009, which may be terminated by the Company or by the relevant Director giving to the other party not less than six months’ prior written notice after the expiration of the said fixed term. Under the terms of these service contracts, each of Mr. Tu Shuguang and Mr. Chan Kin is entitled to a fixed monthly salary of HK$20,000 and a discretionary year end bonus to be determined annually by the Board in its absolute discretion with reference to the Group’s performance and profitability.

• b. Save as disclosed in paragraph 6(a) of this Appendix III above, as at the Latest Practicable Date, none of the Directors had any service contracts in force with the Company, its subsidiaries or associated companies which (i) had been entered into or amended within six months before the commencement of the Offer Period (including both continuous and fixed term contracts); (ii) or are continuous contracts with a notice period of twelve months or more; or (iii) are fixed term contracts with more than twelve months to run irrespective of the notice period.

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STATUTORY AND GENERAL INFORMATION

APPENDIX III

7. MATERIAL CONTRACTS

Save as disclosed below, none of the members of the Group entered into any material contracts, not being contracts entered into in the ordinary course of business carried on or intended to be carried on by the Group, after the date 2 years before the commencement of the Offer Period:

• a. The underwriting agreement dated 16th November, 2009 entered into between the Company and the Underwriter in relation to the Open Offer, pursuant to which the Underwriter agreed to underwrite 279,482,500 Open Offer Shares to be issued at HK$0.18 each by the Company under the Open Offer and the Company agreed to pay the Underwriter a commission on the basis of 2.5% of the aggregate amount underwritten, which is estimated to be approximately HK$1.26 million.

• b. The irrevocable undertaking dated 20th November, 2009 by the Offeror and parties acting in concert with it to the Company that they will take up all their respective entitlements under the Open Offer, being 115,065,890 Open Offer Shares.

• c. The Settlement Agreement.

8. LITIGATION

As disclosed in the announcement of the Company dated 2nd April, 2009, on 31st March, 2009, the Company received the Writ filed by Deutsche Bank AG against the Company claiming the early termination amount in respect of the interest rate swaps set out in the Swap Agreements.

As further disclosed in the Open Offer Announcement, the Company entered into the Settlement Agreement with Deutsche Bank AG on 16th November, 2009 for the settlement of the Action and the Company proposes to apply the proceeds from the Open Offer to settle payment liable under the Settlement Agreement.

Save as disclosed above, as at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration of material importance and no litigation or claim of material importance known to the Directors to be pending or threatened against any member of the Group.

9. CONSENTS

Yu Ming and Pelican Securities have given and have not withdrawn their written consent to the issue of this Composite Document with the inclusion herein of their letters and/or opinions, and references to their names, letters or opinion in the form and context in which they respectively appear.

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10. GENERAL

• a. The registered address of the Offeror is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.

• b. The registered office of Yu Ming is Room 1801, 18th Floor, Allied Kajima Building, 138 Gloucester Road, Wanchai, Hong Kong.

• c. The registered office of Pelican Securities is Unit 1502, Cosco Tower, 183 Queen’s Road Central, Sheung Wan, Hong Kong.

• d. The directors of the Offeror are Mr. Sze Ming Yee and Ms. Xu Yueyue.

• e. The principal members of the concert group of the Offeror includes Mr. Sze Ming Yee, being the ultimate beneficial owner of the Offeror, whose address is 3/F, Tung Nam Mansion, 67A Waterloo Road, Homantin, Kowloon, Hong Kong; and Mr. Zhan Hong Wei, one of the Subunderwriters to the Open Offer and a party acting in concert with the Offeror, whose address is 2102, Block 6, Wanke Jinse Jiayuan, Futian District, Shenzhen, Guangdong Province, PRC (廣東省深圳市福田區萬科金色家園6棟2102號).

• f. The English text of this Composite Document and the Form of Acceptance shall prevail over the Chinese text.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours on any weekday (public holidays excepted) at (i) the head office and principal place of business of the Company at Room 1805, 18/F, Harbour Centre, 25 Harbour Road, Wanchai, Hong Kong; (ii) on the website of the Securities and Futures Commission of Hong Kong (http://www.sfc.hk); and (iii) the website of the Company at http://www.sinotronics.com.cn when the General Offer remains open for acceptance:

• a. the memorandum and articles of association of the Company;

• b. the memorandum and articles of association of the Offeror;

• c. the letter from the Board, the text of which is set out on pages 6 to 10 of this Composite Document;

• d. the letter from Yu Ming, the text of which is set out on pages 11 to 16 of this Composite Document;

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• e. the letter of recommendation from Independent Board Committee, the text of which is set out on page 17 of this Composite Document;

• f. the letter of advice from Pelican Securities, the text of which is set out on pages 18 to 30 of this Composite Document;

• g. the annual reports of the Company for the year ended 30th June, 2009 and 30th June, 2008 respectively;

• h. the material contracts referred to in the paragraph 7 ‘‘Material Contracts’’ in this appendix; and

• i. the letters of consent referred to in the paragraph 9 ‘‘Consents’’ in this appendix.

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